European Commission's guidance on Article 17 of new Copyright Directive - more of a hindrance than a help?

As we reported on 7 June 2021 in our previous blog - New Copyright Directive implementation deadline has arrived and Article 17 guidance published at the eleventh hour, in a very last minute move, the European Commission published its long-awaited guidance on the much-discussed and controversial Article 17 (which sets out a new liability regime for online platforms for users' content) of the European Directive on Copyright in the Digital Single Market ((EU) 2019/790) (DSM Directive).

The guidance, in the form of a Communication, was issued on 4 June 2021, just three days before the implementation deadline of 7 June 2021, and at a time when only the Netherlands, Hungary and Germany appear to have fully implemented the DSM Directive. This is no great surprise given the delay in publication of the guidance, coupled with Brexit, a worldwide pandemic and a significant pending CJEU ruling. So whilst some Member States have completed, many more still have work to do.
Alongside its Communication, the European Commission also published a helpful Q&A on the new copyright rules in general.
 
As a reminder, because the UK left the EU on 31 Jan 2020 and the transition period ended on 31 December 2020 before the implementation deadline, the UK was not required to implement the DSM Directive and in January 2020, the UK confirmed that it would not implement. Therefore, once it is fully implemented by each Member State, the copyright position in the EU will be different to the UK. This will mean businesses will need to comply with different copyright regimes if trading between the EU and UK and UK businesses operating in the EU will have to adhere to the DSM Directive.
 

Article 17 – a re-cap

 Article 17 introduces the significant change of placing primary liability on "online-content sharing service providers" (OCSSPs) for the upload of copyright-protected works by users of their platforms. Under this article, OCSSPs need to seek authorisation (in the form of licensing agreements) from rightsholders in order to host the copyright works or, in the absence of any authorisation, they must comply with the requirements under Article 17(4) in order to avoid liability. Article 17(4) states that where no authorisation is granted, OCSSPs are liable unless they can demonstrate that they have:
 
(a) Made best efforts to obtain authorisation; and
(b) Made, in accordance with high industry standards of professional diligence, best efforts to prevent the availability of specific works for which the rightsholder has provided relevant and necessary information; and in any event
(c) Acted expeditiously on receipt of notice from the rightsholder to disable access or remove content and made best efforts to prevent their future uploads.
 
These "best effort" obligations imposed on OCSSPs by Article 17(4)(b) and (c) are likely to require the use of automated filtering technology (even though not directly specified by the DSM Directive). That, in turn, has led to significant concerns that that could result in widespread over-blocking of legitimate content (e.g. content covered by exceptions such as quotation, criticism and review, caricature, parody and pastiche (all of which are allowed under Article 17(7)) uploaded by users, interfering with users’ fundamental freedoms, for example, the right to freedom of expression and information.
 
Therefore, under Article 17(10) of the DSM Directive, the European Commission was required to cooperate with Member States, to 'organise stakeholder dialogues to discuss best practices for cooperation between online content-sharing service providers and rightsholders' as to how Article 17 would operate in practice.  The Commission organised six stakeholder dialogue meetings between October 2019 and February 2020, followed by a targeted written consultation and finally the guidance was published on 4 June 2021.
 

The guidance

General
 
The guidance states that its aim "is to support a correct and coherent transposition and application of Article 17 across the Member States, paying particular attention to the need to ensure an appropriate balance between the different fundamental rights of users and rightholders". It is also hoped that the guidance will help market players to better comply with national legislations implementing Article 17.
 
The Communication is detailed, consisting of 27 pages of guidance. It is divided into seven sections comprising: (I) Introduction; (II) A specific copyright authorisation and liability regime; (III); Service providers covered; (IV); Article 17(1) and (2) authorisations (V); Article 17(4) specific liability mechanisms (VI); Safeguards for legitimate uses of content and complaint and redress mechanisms; and (VII) Transparency and information obligations.
 
Much in the guidance mirrors the provisions in Article 17 or the Recitals, but there are some quite significant new aspects which have been included in the final guidance which did not feature in the previous draft, and have caused quite a stir.
 

Weight of the guidance

The guidance is "soft law" and it emphasises that it is not legally binding. Settled case law dictates that guidance of this sort is not enforceable before national courts but it could be the subject of a referral to the CJEU. National courts may also take the guidance into consideration to resolve any disputes because of the direct effect of non-binding law. 
 

Key takeaways

Lex specialis
 
Article 17 is a lex specialis (in other words, it is a special law/right governing this specific subject matter) to Article 3 (communication to the public right) of the InfoSoc Directive 2001/29/EC and Article 14 (hosting defence) of The E-Commerce Directive 2000/31/EC. It does not introduce a new communication to the pubic right under EU copyright law. Rather, "it fully and specifically regulates the act of ‘communication to the public’ in the limited circumstances covered by this provision ‘for the purposes of this Directive'". It does not prevent online operators from benefitting from Article 14 of the E-Commerce Directive, if not caught by Article 17.
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Member States have to specifically implement this provision rather than relying simply on their national implementation of Article 3 of the InfoSoc Directive.
 

Service providers covered

The guidance and Recital 63 state that a case-by-case assessment is required in order to determine which OCSSPs fall within the scope of Article 17. The definition of an OCSSP must be consistent in the Member States and there is no scope to widen or reduce the definition set out in Article 2(6) of the DSM Directive.
 
In order to fall within the definition of an OCSSP and the scope of the regime in Article 17, a service provider must cumulatively meet each requirement of the definition (i.e. must be an information society service, which has as its main or one of its main purposes: to store and give the public access to a large amount of copyright-protected works or other subject matter uploaded by its users, which it organises and promotes for profit-making purposes).
 
The guidance suggests that the ‘main purpose’ or ‘one of the main purposes’ of the information society service should be understood to be the (or one of the) chief or predominant functions/roles of the service provider.
 
The concept of ‘store’ refers to content storage that is more than temporary.
 
As regards ‘large amount’, the guidance specifically states that Member States are not allowed to quantify what makes up a "large amount" when defining OCSSPs. In practice, it means that it will be for national courts, not legislation, to determine whether the amount of content in question is ‘large’ or not, based on all the facts. This would also apply to Article 15 (the new Press Publishers' right) for example when determining ‘very short extracts’.  Member States cannot define what that is – it must be determined on a case by case basis taking into account various factors.
 
The profit making purpose has to be linked to the profits made from the organisation and promotion of the content uploaded by the users in a manner to attract a wider audience, for example, but not exclusively, by placing advertisement next to the content uploaded by their users. The simple fact of receiving a fee from the users to cover the operating costs of hosting their content or soliciting donations from the public, should not be considered as such as an indication of profit-making purpose.
 
The guidance reiterates Recital 62 of the DSM Directive and the importance of taking care when assessing whether a service provider falls within the Article 17 definition…"service providers, whose main purpose is not to enable users to upload and share a large amount of copyright-protected content with the purpose of obtaining profit from that activity, are not covered by the definition. Where the online content-sharing service provider provides more than one service, care should be taken to consider each service separately to determine which service providers fall within the scope of Article 17 or not".
 
So the upshot of the guidance is that an online service provider must carefully consider whether they fit within the definition and are therefore subject to this liability regime. 
 

Authorisation

A few points on authorisation which is required under Article 17(1) when OCSSPs give the public access to copyright-protected content uploaded by users on their platforms:
 

• There is no definition of authorisation and the DSM Directive does not prescribe how it may be obtained from rightsholders. Member States can therefore opt for different authorisation models in order to ‘foster the development of the licensing market’, one of the main aims of Article 17.
• Member States are encouraged to establish voluntary mechanisms to facilitate agreements between rightsholders and service providers.
• Member States may rely on individual and voluntary collective licensing solutions.
• Authorisation obtained by OCSSPs extends to acts carried out by users which are for a non-commercial purpose or generate non-significant revenues.
• Authorisation to users to upload content should be deemed to also constitute authorisation to the online content-sharing service provider.
• Rightsholders should not be obliged to give authorisation of their works.

 

Best efforts

The guidance sets out various points in relation to OCSSPs fulfilling their best effort obligations in Article 17(4):
 

• The obligation on service providers to use "best efforts" to obtain authorisation and remove unauthorised content should be made subject to the principle of proportionality, taking into account various factors such as the type, the audience and size of the service, the availability and cost of suitable technological measures and how prevalent the relevant type of content is on the service provider's website. The proportionality point is particularly important to protect OCSSPs’ freedom to conduct a business.
• The notion of ‘best efforts’ is not defined and no reference is made to national law, hence it is an autonomous notion of EU law and it should be transposed by the Member States in accordance with the guidance and interpreted in light of the aim and the objectives of Article 17.
• The guidance reiterates that the application of Article 17(4) should not lead to any general monitoring and must not affect legitimate uses (e.g. uses covered by copyright exceptions).

 

Filtering

One of the key problems which the guidance was expected to resolve was that of OCSSPs' practical need to use automated content recognition to filter out infringing uploads in order to comply with Article 17(4), whilst not preventing the upload of non-infringing content in accordance with Article 17(7). Interestingly, the guidance recognises that automated filtering tools are a popular technological solution used to comply with Article 17(4) as they can identify uploads which match "specific files provided by rightholders". However, the guidance does stress that such technology cannot tell if a work is legitimate or not. Such technological tools could therefore be over zealous in their blocking of legitimate uploads which leads to conflict with Article 17(7).
 

Manifestly infringing uploads

Therefore, in order to attempt to solve this problem, ensure compliance with Article 17(7) and allow legitimate uses, including uses under exceptions and limitations, the guidance states that when an upload matches a specific file provided by rightsholders, automated blocking should be limited to "manifestly infringing uploads“.
 
When deciding if an upload is "manifestly infringing", the guidance says to look at the blocking instructions from rightholders. Other relevant criteria include the "length/size of the identified content used in the upload, the proportion of the matching/identified content in relation to the entire upload (e.g. whether the matched content is used in isolation or in combination with other content) and the level of modification of the work (e.g. whether the upload matches only in part the identified content because it has been modified by the user)".
 
The guidance indicates that exact matches of entire works or of significant proportions of a work should normally be considered manifestly infringing (e.g. when the recording of a whole song is used as background in a user created video). This would also be the case for uploads of an original work, which has simply been technically altered/distorted to avoid its identification (like in the case of adding an outside frame to the picture or flipping it by 180°).
 

Non-manifestly infringing uploads

Uploads with are not manifestly infringing, will not be caught by automated blocking tools and should go online, "subject to an ex post human review when rightholders oppose by sending a notice". This is deemed a "reasonable practical standard to determine whether an upload should be blocked or go online, and to ensure the respect for Article 17(7) taking into account the existing limitations of technology".
 
Content which has been significantly modified in a creative manner (such as a meme) "would generally not be manifestly infringing" (because it may be covered by the parody exception).
 
Another example of uploads which should generally not be considered manifestly infringing are those including short extracts which represent a small proportion of the entire work identified by rightholders (such use may be covered by the quotation exception). This could be the case of a user-generated video including an extract of a feature film or an extract of a song.
 

Earmarking

So far so good - it seems users’ interests are protected because only manifestly infringing content is blocked at source and other content can go up and will be reviewed by a human after it has been posted if a rightsholder contests its publication. BUT beware of an exception to this rule which seems to allow rightsholders to circumvent this principle.  
 
The guidance introduces a new concept, not seen in previous drafts, which is the ability for rightsholders to earmark "specific content which is protected by copyright and related rights, the unauthorised online availability of which could cause significant economic harm to them".
 
There is a lack of specificity in the guidance about what constitutes "significant economic harm" and "could cause" is similarly vague but the guidance does highlight that this rule could apply to content that is "particularly time sensitive (e.g. pre-released music or films or highlights of recent broadcasts of sports events)". This earmarked content must be subject to "particular care and diligence in the application of [the OCSSPs'] best efforts obligations before uploading content" in accordance with Article 17(4). The guidance suggests that this "may include, when proportionate and where possible, practicable, a rapid ex ante human review by online content-sharing service providers of the uploads containing such earmarked content identified by an automated content recognition tool". This obligation for a rapid human review before upload places a significant burden on the OCSSPs to monitor what could be a great amount of content.
 
This aspect of the guidance is concerning as it is essentially an override to the copyright exceptions and safeguards laid down in Article 17.
 

Comment

Perhaps unsurprisingly, this late 'earmarking' addition to the guidance has led to a significant backlash. It has been described as a loophole which goes against the limitations on automatic blocking of uploads that are not manifestly infringing. Criticism has been aimed at the lack of consultation of stakeholders in the introduction of this policy. The Commission is accused of having reacted to pressure from rightsholders and in doing so, introduced a requirement for general monitoring through the ex ante (after the event) human review.  However, as the guidance is not legally binding, Member States are still free to implement the legislation into their national laws within the boundaries of the DSM Directive itself and the Charter, without necessarily adhering to the more controversial aspects of the guidance.
 
In any case, the guidance may well be amended following an upcoming ruling in case C-401/19, in which the Polish Government has asked the CJEU to annul parts of Article 17 (in particular Article 17(4)(b) and (c)), on the basis that they violate the right to freedom of expression and information granted under Article 11 of the Charter. They see these provisions as a form of censorship. The Advocate General delayed giving his Opinion (due on 22 April 2021) until after this guidance was published and it is now expected on 15 July 2021, with the judgment to follow later in the year or early 2022. The guidance itself recognises the significance of the judgment, stating that it will have implications for the implementation of the Article and that the "guidance may need to be reviewed following that judgment".
 
So it may be that the guidance is updated following the outcome of this Polish challenge and it is perhaps no wonder that many Member States have yet to implement, with the validity of Article 17 in doubt.
 
 With special thanks to trainee, Sophia Steiger, for her contribution to this blog.