European Parliament approves the DSM Copyright Directive Proposal

In yesterday’s session, the European Parliament approved the proposed Directive on Copyright in the Digital Single Market [see our previous comments here, here, and a more detailed position paper, here]. MEPs voted 438-226 with 39 abstentions.

Here is the text passed – a compromise solution that slightly changes from the previous version rejected by the European Parliament back in July.

Among the most controversial provisions:

  • the text and data mining (TDM) exception has been confirmed in its original structure (limited to research organizations). The new version adds an optional additional TDM exception (Article 3a) that applies in favor of lawful users except such TDM usage has been expressly reserved by the right holder.
  • the ancillary right for press publishers (art. 11) has been slightly amended:

1. Member States shall provide publishers of press publications with the rights provided for in Article 2 and Article 3(2) of Directive 2001/29/EC so that they may obtain fair and proportionate remuneration for the digital use of  their press publications by information society service providers.

1a. The rights referred to in paragraph 1 shall not prevent legitimate private and non-commercial use of press publications by individual users.

[…]

2a. The rights referred to in paragraph 1 shall not extend to mere hyperlinks which are accompanied by individual words.

4. The rights referred to in paragraph 1 shall expire 5 years after the publication of the press publication. This term shall be calculated from the first day of January of the year following the date of publication. The right referred to in paragraph 1 shall not apply with retroactive effect.

Recital 33 specifies that “the protection shall also not extend to factual information which is reported in journalistic articles from a press publication and will therefore not prevent anyone from reporting such factual information”. This seems a bit in contrast with the provision of 2a that allows reporting only “individual words”.

  • As regards article 13, filtering obligations have been only apparently removed, since in case right holders are not happy to license their contents, UGC platforms shall cooperate to block such contents

1. Without prejudice to Article 3(1) and (2) of Directive 2001/29/EC, online content sharing service providers perform an act of communication to the public.  They shall therefore conclude fair and appropriate licensing agreements with right holders.

2. Licensing agreements which are concluded by online content sharing service providers with right holders for the acts of communication referred to in paragraph 1, shall cover the liability for works uploaded by the users of such online content sharing services in line with the terms and conditions set out in the licensing agreement, provided that such users do not act for commercial purposes.

2a. Member States shall provide that where right holders do not wish to conclude licensing agreements, online content sharing service providers and right holders shall cooperate in good faith in order to ensure that unauthorised protected works or other subject matter are not available on their services. Cooperation between online content service providers and right holders shall not lead to preventing the availability of non-infringing works or other protected subject matter, including those covered by an exception or limitation to copyright. […]

Article 2(4b) sets out a very complex definition of the UGC platforms affected, taking into account the CJEU case law: “‘online content sharing service provider’ means a provider of an information society service one of the main purposes of which is to store and give access to the public to a significant amount of copyright protected works or other protected subject-matter uploaded by its users, which the service optimises and promotes for profit making purposes“. Recital 37a adds that this is “including amongst others displaying, tagging, curating, sequencing, the uploaded works or other subject-matter, irrespective of the means used therefor, and therefore act in an active way.” It then excludes from the definition of online content sharing service providers microenterprises and small sized enterprises, as well as service non-commercial providers such as online encyclopaedia or providers of online services where the content is uploaded with the authorisation of all right holders concerned, such as educational or scientific repositories.

Article 12a protecting sport event organizers has been introduced at a later stage (with no impact assessment).

This compromized version shows some slight improvements, despite the original defects of the Proposal still remain unsolved. Now the trilogue negotiations amongst the Parliament, the Council and the Commission will start.

Francesco Banterle

 

The Court of Appeal of Milan and the active role of the ISP in selling infringing services via the e-marketplaces White Pages and Yellow Pages

The liability of the Internet Service Providers (ISPs) is still an unsettled area of the case law both at European and national level, with a lot of recent cases that deal with ISPs and the unauthorized online distribution of audio-visual contents (see CJEU case C-610/15 and Court of Appeal of Rome – case Break Media – and Court of Turin – case Delta TV). Anyway, there is also another side of the case law on the liability of ISPs that deals with the selling of goods and services which infringe IP rights via e-marketplace (the leading case of the CJEU is case C-324/09 L’Oréal Vs eBay). In a recent decision, the Court of Appeal of Milan (here) shed light on the joint liability of the ISP and the professional users of its services.

The case at stake is based on the alleged infringement of the trademarks of some major manufacturers of domestic appliance (Electrolux, Candy, Ariston, Bosch, Hoover, Smeg and others, collectively the “Claimants”) by the company ABB, with others (the “Defendant”) via some adverts on the Italianonline’s websites White Pages and Yellow Pages. ABB offered maintenance and support services for domestic appliances – on the White Pages and Yellow Pages edited by Italiaonline – using the ABB’s registered trademarks “Boschexpert”, “Candyexpert”, Aristonexpert” and so on. The Court of Milan in first instance held that ABB’s trademarks were void and found ABB liable of trademark infringement and unfair competition against the manufacturers, since the consumers were misled by the use of ABB’s trademarks on the real origin of the support and maintenance services. Italiaonline has been found jointly liable of such IP violations and both ABB and Italiaonline have been ordered to jointly pay damages to the Claimants. Italiaonline reached a settlement with the Claimants while ABB appealed the Court’s ruling of first instance.

The Court of Appeal of Milan has confirmed the ruling of the Court of first instance in terms of determination of the illicit conduct and quantification of the damages but has clarified the position of Italiaonline as ISP whose electronic means have been use for committing an IPR infringement. Indeed, in the first instance Italiaonline has been fully indemnified by ABB since ABB had a preeminent role in the illicit conduct. This seemed to ABB inconsistent, since Italiaonline has been declared jointly liable for the same illicit conduct. According to ABB, Italiaonline as a technical ISP is the sole responsible of the search engine for the adverts on the websites White Pages and Yellow Pages, which results are misleading and determining confusion to the consumers.

According to the Court of Appeal, Italianonline’s websites can be considered Information Society Services pursuant to E-commerce Directive (despite the fact the White Pages and the Yellow Pages are published both in paper and in electronic form). This leads to the fact that Italianonline can be considered a host provider pursuant to Article 14 of the E-Commerce Directive for the websites White Pages and Yellow Pages, since it technically hosts on such websites the adverts of its professional clients, such as ABB. More in detail, in this case the ISP cannot invoke the safe harbour provision pursuant to Article 14 of the E-Commerce Directive due to its active role for the third-party adverts in return for payment, where Italiaonline does not merely technically process third party adverts but also edits promotional messages coupled with the third-party adverts and identifies the key-words for its search engine. While playing this active role – according to the Court of Appeals – the ISP is responsible for lack of control and for not having expeditiously removed the infringing adverts after the notices of the Claimants (the earliest ones dated 2003).

With regards to the relation between the infringing activity of ABB and the cooperation of Italialonline, the Court of Appeal found that, even if jointly liable, ABB had effectively a preeminent role in terms of relevance and wilfulness of the conduct and that the joint liability must be evaluated according to Article 2055 of the Italian Civil Code, pursuant to which, where two or more parties are held jointly liable, the party paying the damages can recover from the other parties the pro quota of damages attributable to the level of wilfulness and to the consequences of the conduct of the other parties (so called, right of recourse). The request raised by Italianoneline for indemnification of the damages determined by ABB is considered by the Court of Appeal as a right of recourse aimed at clarifying the pro quota  of responsibility of Italiaonline. The right of recourse is applicable pro quota also to ABB as party paying the damages. In light of this interpretation, the Court of Appeal awarded also to ABB a recourse against Italiaonline equal to the 30% of damages to be paid to the Claimants.

This precedent seems of interest because the Court of Appeal of Milan, while making clear application of the principles set forth by the Court of Justice in the leading European case law L’Oréal Vs eBay (an e-marketplace cannot invoke the safe harbour provisions under E-Commerce Directive if it plays an active role by optimizing and promoting the selling of infringing products or services), has even moved forward by clarifying a possible criterion for the attribution of responsibility between professional users and e-marketplaces. It would be of interest verifying whether the same approach could be adopted by other foreign jurisdictions, since the regime of joint responsibility under tort law seems to be matter of domestic jurisdiction.

Gianluca Campus

Court of Appeal of Milan, case No.  1076/2014, 14 December 2016, Italiaonline Spa Vs ABB Srl and Others (President of the Court: Hon. A.M. Vigorelli; Judge-Rapporteur Hon. F. Fiecconi)

The partial remedies introduced by the EU Commission’s Proposal for a Directive on copyright in the Digital Single Market of 14 September 2016

InfoSoc’s unbalanced approach has been only partially – very partially – remedied by the Proposal for a Directive on copyright in the Digital Single Market of 14 September 2016 (here). Let us go through its main tenets.

  1. New mandatory exceptions

The Proposal envisages the extension of the range of mandatory exceptions to:

  1. “reproductions and extractions made by research organizations in order to carry out text and data mining…for the purpose of scientific research” (Art. 3);
  2. “the digital use of works…for the sole purpose of illustration for teaching, to the extent justified by the non-commercial purpose…” (Art. 4, dictating further restrictive conditions for the enjoyment of the exception; emphasis added);
  3. making copies, by cultural heritage institutions, of works permanently in their collections, for the sole purpose of preservation of such works (Art. 5).

These extensions deserve approval, of course, as they ‘upgrade’ to mandatory exceptions that InfoSoc provides as discretionary (Art. 5,2.c, e, and 3,a). But their impact is weakened by their persistent subjection – as all other exceptions and limitations foreseen by InfoSoc – to the barrier of the (in)famous three-step test which allows the copyright holder to oppose in judiciary sitting the actual enjoyment of the exceptions. Moreover, they are equally subject to the criterion of ‘strict interpretation’, also dictated by InfoSoc (confirmed by Art. 6 of the Proposal). Thus, for example, the ‘new’ exceptions under a), b) and c) would not allow either the market exploitation by research organizations of the fruits (reports) of their work, or the chance of Universities and other teaching institutions to edit and publish texts assembling lessons and other fruits of their educational activities.

Now, in all the cases where the public interest to spread culture and information may marry with economic exploitation (at times, however, non lucrative in proper sense: cultural heritage institutions, for instance, are bound to invest their incomes in institutional activities), wouldn’t be wiser – and truly consistent with the proclaimed aim to enhance the diffusion of culture and information – to adopt a mechanism of open paying access, instead than across-the board holding fast to the excludent paradigm?

The Max Planck Institute (MPI) went further and affirmed that data mining exception should apply also to commercial uses “as far as concerns content to which the persons performing the mining have lawful access” (see MPI position paper available here). Data mining relates to new analysis techniques to process large amounts of data, particularly to identify correlations and trends, which can be helpful in different sectors (health, marketing, IoT, etc.). In this regards, as acknowledged by Recital 8 “text and data mining may involve acts protected by copyright and/or by the sui generis database right, notably the reproduction of works or other subject-matter and/or the extraction of contents from a database”. Therefore, a general data mining exception would limit copyright and database rights. In this regard, the MPI says instead that data mining should be regarded as a normal use of a work, not requiring further authorization once a lawful access to the work is obtained. On the contrary, the new exception should be extended to cover data mining for research purposes even in cases of unauthorized access to protected works, i.e. research organizations should be able to carry out data mining without having to acquire access to the protected works.

We agree on that view. We however add that, in light of the concurring collective interests, data mining for commercial purposes should not in any case be subject to exclusive rights but rather to a regime of open paying access: business entities should be able to carry out data mining without having to acquire a general access to the protected works but rather by paying a reasonable fee/compensation.

  1. Use of out-of-commerce works by cultural heritage institutions

The Proposal provides for non-exclusive licences stipulated by collective management organizations with cultural heritage institutions for the digitisation, distribution communication and making available to the public of out-of-commerce works whose copyright belongs also to right holders not represented by the collective management organization – and this with cross-border effect (Arts 7-8).

The mechanism that empowers cultural institutions to (store and also) publish works ‘out-of-commerce’ is quite precarious, as the rightholders “may at any time object to their works…be deemed to be out of commerce and exclude the application of the licence to their works” (Art. 7,1.c). And this, without any obligation to resume the publication of the ‘forgotten’ works. As matter of fact, in its weakness, the new regime apparently amounts to a tentative compromise solution with the principle, recently re-stated by the CJEU in interpreting InfoSoc, whereby collecting societies cannot by their own initiative (i.e. substituting themselves to authors) authorize cultural institutions to digitise, store, communicate and make available to the public out-of-commerce works (CJEU, 11 November 2016, case C-301/15, Soulier and Doke).

  1. New rights on press publications against digital uses

The Proposal introduces (Art. 11) a new right, lasting 20 years, in favour of newspapers and magazines publishers to bar third parties (except the authors of the articles) from unauthorized extraction and online exploitation of even short, even very short (‘snippets’), parts of published articles.

This provision represents a ‘hardened’ version of the German Copyright Law which – possibly on the blueprint of an ancient jurisprudence of French origin – instead condoned the extraction and use of ‘imperceptible thefts’ (‘larcins imperceptibles’).

This right is commonly labelled “ancillary”: in truth it is a straight copyright (albeit with a reduced term) since it simply confirms the faculty of copyright holders’ (newspapers and magazine publishers) to grant or deny the authorization to exploit derivative works. Excerpts are indeed ‘reductions’, typically derivative works (hence included in the provision of Art. 12 of Berne Convention): works ultimately similar to the ‘condensed (sic.) books’ traditionally published by the American magazine Reader’s Digest. And the extreme brevity of the extracted text does not per se deny – particularly considering the typical ultra-synthetic mode of today’s digital communications – that the ‘snippet’ can well feature an ‘informational product’ as such apt to be sold and/or draw advertising revenues. Thus subtracted to the publishers of the original article.

However, the basic weakness of the new provision consists, again, in shaping a straight excluding right (just grazed by the research/teaching exception), i.e. remaining stuck to a proprietary approach to facts-assembling (are we introducing copyright on information and facts?). Which (contrast with Feist’s liberal inspiration aside) represents an objective factor of slowdown of the circulation of culture and information.

Once again, wouldn’t it have been wiser to adopt an ‘open paying access’ scheme in dealing with (derivative) commercial journalistic uses of copyrighted materials? For example by sharing part of the actual incomes generated by the derivative uses, if any.

In sum, the trumpet-announced ‘new copyright for the digital age’ is still fundamentally the old closed monad, just renovated with a few narrow windows. This indeed seems the solution adopted also for User Generated Contents (“UGCs”).

  1. Mandatory cooperation between ISPs and copyright holders on UGCs

The Proposal (Art. 13) tries to regulate UGC platforms. It imposes ISPs to “take measures to ensure the functioning of agreements concluded with rightholders for the use of their works or other subject-matter or to prevent the availability on their services of works or other subject-matter identified by rightholders through the cooperation with the service providers”.

As regard the imposition of agreements concluded with rightholders for the use of their works the Proposal is justified as it compensate copyright holders by placing on ISPs the burden of the unauthorised use of protected works on UGC platforms (which ISPs monetize), possibly by sharing part of advertising revenues.

However, the Proposal raises some concerns as it seems – again – dictated exclusively by the tentative of expanding the copyright scope. First, it is not coordinated with E-Commerce Directive and its safe harbour provisions: who are the ISPs concerned? What about “passive” ISPs and the ban of monitoring obligations on the net? In fact, a general obligation to prevent the availability on their services of works or other subject-matter identified by rightholders through the cooperation with the service providers should be imposed exclusively on “active” providers and should be carefully intended as a exception of the net neutrality principle.

Second, albeit the copyright scope is extended over the e-commerce safe harbours, there is no attempt to expand and adapt the existing framework of copyright exceptions to the online environment. And this despite the fragmented and restrictive implementation of InfoSoc’s exceptions list. This is particularly the case of those exceptions that could better fit online uses, i.e., quotation right (Infosoc Art. 5,3.d), parody (Art. 5,3.k) and incidental inclusion of works in other materials (Art. 5,3.i). In most cases restrictively transposed into national laws (where implemented). In other words, the formalized obligation to monitor UGC platforms is not balanced by any legal tools to safeguard new fair uses deserving areas of freedom. Additionally, online monitoring programs used by copyright holders – that would in fact be supported by the Proposal – can difficulty distinguish “fair” uses. Thus, it should have been advisable at least imposing to Member States to fully transpose all InfoSoc exceptions without reducing their scope. With no need to recall what already observed about the three-step test and the need of adapting it as a balancing criterion rather than an exclusive restrictive mechanism.

  1. Fair remuneration in contracts of authors and performers

An innovation that deserves full approval is instead the modified regime of contractual relations authors-publishers that allows the former to request not only an improvement of the level of royalties previously agreed upon, but also (read Art. 14.1 and 2, in functional connection with Art. 15), a fair share of the revenues from the ‘other’ sources of income, i.e. advertising, commercial offers, public representations, etc. In case of disagreement, the dispute author/publisher might be entrusted to ADR (Art. 16).

Realistically, though, the chances to achieve such revisions will depend on general agreements stipulated by collecting societies and publishers’ associations – ultimately, by said societies and the major ‘platforms’.

However, this provision is of high systemic relevance, as it allows alterations of the contractually agreed balance of the parties’ interests beyond the classical boundary of exceptional/unforeseeable new supervening circumstances of dramatic economic impact. And, above all, it fills a manifest lacuna of the InfoSoc Directive, which, as hinted above, is missed: the chance of a regulatory support of new ‘business models’ of dissemination of the works associated with the advent of the Internet and digital technology. Models often characterized by no payment obligation for the user for the enjoyment of single works disseminated online, and where the commercial revenues stem in whole or in part from advertising and the sale of various services and other similar sources. Hence, InfoSoc failed also to defend the legitimate rights of authors to obtain their slice of the pie of these other commercial revenues however stemming from the exploitation, direct or indirect, of their works – especially vis-à-vis ‘free’ online distribution models.

The Court of Rome reintroduces the notion of “active hosting provider”: new uncertainties on the ISP liability rules

By a decision published on 27 April 2016, the Court of Rome held TMFT Enterprises LLC- Break Media (“Break Media“) liable for copyright infringement for the unauthorized streaming of audiovisual content owned by Reti Televisive Italiane S.p.A. (“RTI“).

Break Media argued that it was a passive hosting provider because it merely stored information at the request of a recipient of its service. Pursuant to Article 14 of the E-Commerce Directive 2000/31/CE, as implemented in Italy by Legislative Decree 70/2003, hosting providers are not liable for stored information if they are unaware of its illegal nature. Moreover they are not required to remove illegal content unless ordered to do so by the competent public authorities.

Further, the provider outlined that the notice sent by RTI was generic, failing to report the location (URL) where the infringing content were placed. Therefore, it imposed no legal obligation to inform the competent authorities under Article 17 of the Directive and no liability for contributory copyright infringement could be found.

In addressing the hosting provider’s arguments, the Court of Rome found the website owner to be liable.

In line with the previous Italian case law (cf. Court of Rome, October 20 2011, VVBcom.Limited and Choopa LLC; Court of Milan May 19 2011, RTI v Yahoo! Italia and Court of Milano, January 20 2011, RTI v ItaliaOnline Srl) the Court of Rome applied the distinction between active and passive hosting providers, based on the analysis of the activities performed by the entity in question.

The decision held that if a hosting provider is directly involved in the website’s operations by allowing users to upload videos and other content, it is deemed to manage the information and content that its users provide. In this case, the ISP would be regarded as an active hosting provider, subject to a duty to remove illicit content if so requested by the rights’ holder.

On the contrary, if a hosting provider merely provides storage and connectivity to specific websites, and plays no active role in managing information online, it should be regarded as a passive hosting provider, which is not jointly liable with website owner for copyright infringement unless it fails to comply with a removal order issued by the competent administrative or judicial authorities or is aware of the illicit nature of the content on the hosted website and fail to alert the competent authorities.

According to the Court, Break Media was an “active hosting” of media content. Indeed, the activity of Break Media was not limited to the activation of technical procedures for enabling the content to be loaded to the platform (“passive hosting”), but provided a complex service of advertising exploitation of the content.

As a result, the liability exemptions established by Article 14 of the E-Commerce Directive were not applicable.

Although RTI’s notice demanding the removal of the infringing materials from the platform did not identify the specific location of the content to be removed, the defendant was effectively aware of the infringing nature of the content. This knolwedge was deemed enough in order to affirm the provider’s liability.

Based on the above, the Court condemned the provider to pay damages for € 115,000, approximately corresponding to € 1.300 for each minute of unauthorized publication.

Reintroducing principles affirmed by the aforementioned case law, the current decision distanced from the decision of the European Court of Justice on the SABAM case (24 November 2011 in Case C‑70/10, Scarlet Extended SA v. SABAM et al.) according to which national authorities are prohibited from adopting measures which would require an ISP to carry out general monitoring of the information that it transmits on its network.

Based on the SABAM jurisprudence, the Court of Appeal of Milan, January 7 2015, overturning the Court of Milan first instance decision in the case RTI v. Yahoo! Italia, took the view that the distinction between ‘active’ and ‘passive’ hosting providers should be regarded as misleading, being envisaged in neither the E-Commerce Directive nor in the Italian implementing Legislative Decree 70/2003. Consequently the fact that an ISP provides for services to organize contents published by its users should not change its role.

The issue provides matter of clarification for the Supreme Court.

For further comments look at the interesting analysis carried out by Maria Letizia Bixio on dimt.it

Jacopo Ciani

Court of Rome, 27 April 2016, Reti Televisive Italiane S.p.A. v. TMFT Enterprises LLC- Break Media

The Court of Appeal of Milan declares Yahoo! video-sharing platform a passive hosting provider under the E-Commerce Directive

In its recent decision on a debated case (full text in Italian here), the Court of Appeal of Milan clarified that Yahoo! video-sharing platform (no longer active) shall be considered a passive hosting provider and may benefit of the ISP limited liability regime under the E-Commerce Directive.

The Court overruled the first instance decision and extended the safe harbour provisions also to “evolved” hosting services: adopting advanced automated functionalities for hosting third parties’ contents is not enough to be qualified as an “active” provider. Additionally, ISPs may be held liable exclusively if they do not activate after receiving a detailed take down notice. Finally, the decision excluded the possibility to impose general filtering obligations on ISPs.

The Court stressed the need to adopt a reasonable interpretation of these principles with the aim of preserving areas of freedom on Internet and updating legal definitions to technological developments. As affirmed by the ECJ (see decisions Telekabel, Netlog, Scarlett, etc.), the ISP discipline must seek a fair balance among opposite interests: provision of new online services, copyright protection, and individual fundamental rights (e.g., privacy and freedom of expression). Copyright protection is not an absolute right and its enforcement shall be measured in light of a “proportionality” principle.

Thus, this decision further aligns the Italian case law to the ECJ interpretation. A step forward for the harmonization of the EU national courts’ case-law.

Francesco Banterle

Court of Appeal of Milan, decision No. 29/2015, 7 January 2015, Yahoo! Italia S.r.l. and Yahoo! Inc. v. RTI (Reti Televisive Italiane) S.p.a.