Kluwer Copyright Blog

Copyright case: Pyrotechnics Management, Inc. v. XFX Pyrotechnics LLC, USA

The digital codes were created for functional purposes and were put together under purely mechanical rules.

The digital codes sent by a pyrotechnics control system were not entitled to protection under the Copyright Act because they were no more than “an inevitable system dictated by the logic” of the setup, the U.S. Court of Appeals for the Third Circuit has held. The court, reversing a preliminary injunction in favor of the fireworks company and remanding with orders to dismiss the case, held that the digital codes were neither expressive nor original (Pyrotechnics Management, Inc. v. XFX Pyrotechnics LLC, June 29, 2022, Fisher, R).

Case date: 29 June 2022
Case number: No. 21-1695
Court: United States Court of Appeals, Third Circuit

A full summary of this case has been published on Kluwer IP Law.

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Council adopts conclusions on research assessment and implementation of open science

Photo by National Cancer Institute on Unsplash

The Council of the EU has recently adopted conclusions on research assessment and implementation of open science (the ‘conclusions’).

Adopted in June 2022, the three areas covered by the conclusions are: (I) Reform of research assessment systems in Europe; (II) European approach and capacities for academic publishing and scholarly communication; and (III) Development of multilingualism for European scholarly publications.

In drawing up the conclusions, the Council acknowledges, inter alia, that in order to accelerate the implementation and the impact of Open Science policies and practices across Europe, action has to be taken to move towards a renewed approach to research assessment, including incentive and reward schemes. Further, it underlines that it is in the interest of European citizens and the European economy to ensure a transparent and competitive market that enables private companies, including small and medium-sized enterprises (SMEs), as well as publicly funded organisations such as universities, research organisations and learned societies, to contribute to, and benefit from, a shared research knowledge system.

The conclusions consider that the authors of research publications or their institutions should retain sufficient IPRs to ensure open access, leading to broader dissemination, valorisation and reuse of results improving the fair balance of the publishing business models. In addition, data and bibliographic databases used for research assessment should, in principle, be openly accessible, while tools and technical systems should enable transparency. It also stresses that subscription fees as well as open access publication fees when applied, should be transparent and commensurate with the publication services.

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Copyright case: Unicolors, Inc., Petitioner v. H&M Hennes & Mauritz, L.P., USA

Three dissenters would have dismissed the case as improvidently granted because the petitioner appeared to address different issues in its brief from its petition for review.

An inaccuracy in a copyright registration application that results from a mistake—whether of fact or of law; that is, lack of factual or legal knowledge of the inaccuracy on the part of the applicant—will not render the registration invalid, a divided Supreme Court has held in an opinion authored by Justice Breyer. Because Section 411 of the Copyright Act makes registration of a copyright a prerequisite to bringing an infringement suit, works that are the subject of registrations invalidated due to inaccuracies in filings could not be enforced in court. This decision essentially makes it easier for rightsholders to go forward with IP enforcement actions. Justice Thomas, joined by Justices Alito and Gorsuch, dissented, stating that he would have dismissed the writ of certiorari as improvidently granted (Unicolors, Inc., Petitioner v. H&M Hennes & Mauritz, L.P., February 24, 2022, Breyer, S.).

Case date: 24 February 2022
Case number: No. 20-915
Court: Supreme Court of the United States

A full summary of this case has been published on Kluwer IP Law.

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Comment of the European Copyright Society Addressing Selected Aspects of the Implementation of Articles 3 to 7 of Directive (EU) 2019/790 on Copyright in the Digital Single Market

Source: European Copyright Society

Almost 3 years after the adoption of the Digital Single Market (Directive (EU) 2019/790) (CDSM Directive), its transposition by the Member States (MS) has proved to be a significant challenge. During a fervent period of failed timely implementation efforts on many fronts (see here), MS need to be vigilant and ensure that the delicate balances expressed in the text of the Directive take the form of efficient and workable legislative provisions.

Against this background, the European Copyright Society (ECS) issued on May 2022 a comment addressing selected aspects of the implementation of  the new mandatory exceptions of Articles 3 to 7 of the Directive (drafted by Jonathan Griffiths, Tatiana Synodinou and Raquel Xalabarder).

Exceptions and limitations ensure that copyright law operates compatibly with fundamental constitutional norms, including freedom of information and expression, freedom of arts and sciences and freedom to conduct a business. They also allow vital space for other general interests, including competition and technological and economic development.

In this context, the ECS welcomes the European legislature’s efforts to extend and update the existing regime of exceptions and limitations to promote cross-border uses and ensure that the system functions more effectively in today’s technological environment. However, while the introduction of the exceptions and limitations established under Articles 3-6 represents an important step in the right direction, it remains a modest one.

In order to give real substance to the new mandatory exceptions, MS need to take into account the nature of the new exceptions established under Articles 3-6, which grant a mandatory minimum level of freedom for users.

Accordingly, the discretion of the MS to shape national provisions within the parameters drawn by the acquis ought to be highly circumscribed. Beyond situations in which the provisions make explicit reference to implementation choices, Member States should be wary of imposing specific restrictive conditions at national level.

Furthermore, the CDSM Directive does not prevent MS from allowing greater scope for exempted use, as long as such use is covered elsewhere in the acquis. This is explicitly indicated in Article 25 of the Directive. In several situations, MS can make valuable use of that flexibility.

Specifically, attention should be given to the following:

 

Text and Data Mining (Articles 3 & 4)

The condition of “lawful access” for the enjoyment of the TDM exceptions needs to be understood flexibly and in a manner fully compliant with fundamental rights.  “Lawful” should not mean “authorised by rightholders” only. In the case of content that is freely available on the net without technical restrictions, no liability for TDM activities shall arise for mining unlawful “sources”.

It should be clear that the uses covered by the TDM research exception shall not be subject to compensation and that the exception cannot be neutralized by the application of TPMs. MS are strongly encouraged to establish efficient, transparent and quick procedures for the reporting and the secure removal of such TPMs.

MS should take steps to ensure that prior contracts do not render the TDM exception useless; for example, by providing that prior subscription contracts must be adjusted to accommodate the principle of non-compensation for non-profit scientific research within a reasonable period after the implementation of the Directive.

The imposition of a compensation system should also be avoided also in the context of the broader TDM exception under Article 4, since it would significantly jeopardise the effectiveness of that provision, which is already de facto compromised by the opt-out mechanism available to rightholders. The opt-out clauses should be constructed in a way that ensures that reservations are clear, transparent, precise, easily identifiable, and expressed in unambiguous terms.

The principles posed by the ‘Open Data Directive’ should be understood as restricting the freedom of public sector bodies falling within the scope of the Directive 2019/1024 to opt-out of the data mining exception.

 

Digital and Cross-Border Teaching Activities (Article 5)

Article 5 introduces a mandatory “exception or limitation” for digital and cross-border teaching activities.

MS have a leeway in implementing the exception and they may even set aside this mandatory provision (“as regards specific uses or types of works” when “suitable licences authorising the acts … and covering the needs and specificities of educational establishments are easily available on the market.)” The possibility of derogation opens MS up to further national lobbying that may ultimately endanger the unifying goal pursued by a mandatory exception and limitation.

MS should be vigilant that the public interest and the harmonizing goal sought by Article 5 is duly satisfied. Any restrictions regarding the scope of Article 5 should only be implemented as necessary “in a balanced manner” and in relation to specific categories of work.

National legislators should revise the pre-existing exceptions and limitations stemming from Article 5 of the InfoSoc Directive (Directive 2001/29/EC) to secure the coherent and seamless exemption of works for teaching purposes, regardless of the means (digital or otherwise) employed, thus avoiding an unnatural accumulation of different sets of provisions regulating digital and analogue teaching uses.

Online cross-border teaching uses “shall be deemed to occur solely in the Member State where the educational establishment is established.” This “legal fiction” is meant to link these activities to one body of applicable law only; a single applicable law that remains decisive because, despite the mandatory nature of Article 5, national exceptions and limitations for digital and online teaching uses will remain foreseeably different in scope and conditions across the EU.

 

 

Preservation of Cultural Heritage (Article 6)

Article 6 provides a mandatory exception permitting cultural heritage institutions to make copies of works, or other subject-matter, for the purposes of preservation. Cultural heritage institutions play a vital role in protecting our history and in promoting our culture.

National provisions have sometimes placed inappropriate limits on the preservation activities of cultural heritage institutions; for example, by excluding the reproduction of online works or works held on licence, by precluding digital reproduction or by permitting otherwise infringing acts in exceptional circumstances only. The introduction of a mandatory exception, protected against contractual over-ride, is therefore to be welcomed.

As the preservation activities of cultural heritage institutions present little or no risk to the legitimate interests of rightholders, the exception under Article 6 should not be interpreted narrowly by courts or national legislatures.

The concept of “cultural heritage institution” should be interpreted broadly as covering local and regional, as well as national, institutions, and private and commercial, as well as public, organisations, in so far as their activities are directed at the preservation of works and other subject-matter.

Furthermore, it seems entirely unnecessary for the activities of cultural heritage institutions to be hampered by TPMs. It is particularly important for MS to implement Article 6(4) of the Information Society Directive, as it applies to such activities, in a manner that is both balanced and efficient and which does not allow rightholder intransigence or delay to hinder the preservation purpose.

The new exception must also be read alongside existing (non-mandatory) provisions in the EU copyright acquis granting MS a broader power to introduce exceptions and limitations for the benefit of cultural heritage institutions. The implementation should not result in the curtailment of existing exceptions and limitations for cultural heritage institutions in national law.

The European Copyright Society (ECS) was founded in January 2012 by academics with the aim of creating a platform for critical and independent scholarly thinking on European Copyright Law. It has published numerous opinions on the interpretation and development of copyright law in the European Union. The Society is not funded, nor has been instructed, by any particular stakeholders. All ECS opinions are archived here: https://europeancopyrightsociety.org/how-the-ecs-works/ecs-opinions/.

 

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NFTs and Copyright: Some Burning Issues

Image by Riki32 via Pixabay

The last couple of years has seen the emergence of Non-Fungible Tokens (NFTs) as an important medium for the creation, sale and collection of art, with numerous instances of big money purchases of NFTs. NFTs began as a sub-culture of sorts for artists to sell work in a digitised format, but they are now increasingly becoming mainstream, with many major businesses and fashion houses creating their own NFT projects.

The popularity of NFTs has also led to an increase in disputes amongst competing parties aiming to cash in on potentially large profits. For instance, production house Miramax has sued Quentin Tarantino for creating the ‘Tarantino NFT Collection’, a project created by the famous director in partnership with SCRT Labs. The project includes NFTs associated with the handwritten version of the script of the film Pulp Fiction, along with exclusive commentary from Tarantino. Similarly, Bigverse, a platform that aids the creation and sale of NFTs, was successfully sued in China for its contribution in the unauthorised sale of an NFT related to a cartoon depicting a chubby tiger receiving a vaccine from the cartoon series known as ‘Fat Tiger’.

Since the underlying asset in NFTs is primarily art, disputes in relation to NFTs bring up interesting questions pertaining to copyright law, the answers to which have the potential to shape the evolution and growth of NFTs as a medium to create, distribute and collect art. In this post, we briefly explore issues related to copyright infringement, intermediaries’ liability and remedies from the perspective of the general principles of copyright law (for previous analyses of NFTs and copyright on this blog, see here).

 

The Right to Create and Sell NFTs

The question is whether the creation and sale of NFTs is included in any of the exclusive rights provided to the copyright owner. If it is included, then the NFT can only be created by the owner or a party to whom the owner has granted such authority. In this context, we discuss the process of minting an NFT and whether it violates the communication to the public right, reproduction right and distribution right of copyright owners.

The creation or ‘minting’ of an NFT involves the creation of a digital token that is encoded with the underlying work that the NFT is associated with. The NFT may be encoded in one of two ways: either by the creation of an alpha-numeric signature, or ‘hash’, by passing the underlying work through an algorithm or by including an URL that contains the underlying work. Once minted, an NFT is available on the blockchain for the public to view. Significantly, the vast majority of NFTs do not include a copy of the underlying work ‘as is’, but rather, only include the alpha-numeric signature or URL that is associated with the underlying work, although some low-resolution artwork is stored on the blockchain with the NFT.

 

The communication to the public right

The communication to the public right includes the right to make available to the public the work by electronic transmission in such a way that members of the public may access it from a place and at a time individually chosen by them. In the context of NFTs that include the URL containing the underlying work, commentators have argued that the communication right of the owner is violated. We would agree with this view because once an NFT is minted, the URL is available on the blockchain for the public to see and can be accessed at any time of an individual’s choosing.

 

The reproduction right

The reproduction right includes the right to prevent the copying of the underlying work in any manner. Commentators have argued that since NFTs do not include a copy of the work, but rather only include the associated ‘hash’ or URL, the reproduction right is not violated by the creation of an NFT. While this cannot be disputed in the context of NFTs that contain URLs, it is arguable that since the process of creation of a ‘hash’ is deterministic (that is, a given work and algorithm will always create a definite alpha-numeric code), the ‘hash’ constitutes a translation of the underlying artistic work and would be covered in the reproduction right of the copyright owner. An analogy may be drawn to a case decided before the Supreme Court of Canada, in which it was held that the copying of code originally written in assembly language (which is expressed in the form of text) as hexadecimal code (expressed in the form of alphanumeric code) violated the reproduction right of the copyright owner. While it is not clear what position courts will take on this issue in any given jurisdiction, if a ‘hash’ is not considered to be a reproduction of the underlying work, it may lead to the odd conclusion that the right to create NFTs containing URLs belongs to the copyright owner, while the right to create NFTs containing the ‘hash’ does not.

 

The distribution right

The distribution right includes the right to issue copies of the work to the public. The distribution right is, however, limited by the principle of exhaustion, which provides that a copyright owner’s right to control copies of their work is ‘exhausted’ on its first sale by the copyright owner or with their consent. Thus, if the underlying work has been put in circulation with the authority of the copyright owner, then the distribution right is exhausted and further sales by third parties do not violate this right.

It is worth noting that in jurisdictions such as the EU, the principle of exhaustion has lost some of its relevance in the context of digital works after the decision of the Court of Justice of the European Union (CJEU) in Tom Kabinet. In this case the CJEU noted that the principle of exhaustion applies differently to works released digitally and works released through physical carriers such as books or CDs. The court made this distinction because, amongst other things, the principle of exhaustion extinguishes the copyright owner’s right to distribute a particular copy of the work or the ‘container’ of the work, rather than the work itself. Since no such ‘container’ exists in the digital context, a secondary sale would only involve the transfer of the underlying work and therefore, the principle of exhaustion would not apply. Rather, the CJEU noted that making ‘secondary copies’ of digital works available for permanent download would be better covered by the communication to the public right, which is not subject to the principle of exhaustion. Consequently, the principle of exhaustion is rendered moot in the digital context.

In the context of NFTs, since the underlying work is created and circulated digitally, tokenising and selling it as an NFT would not violate the distribution right, and may be more properly dealt with, especially in jurisdictions such as the EU, under the communication to the public right.

 

Liability of NFT Platforms

The marketplace for NFTs is supported by various platforms or intermediaries, such as OpenSea, that allow users to mint, purchase and sell NFTs online (see e.g. here). If it is found that NFTs infringe the rights of copyright owners, it is relevant to consider whether platforms that aid and assist in the minting and sale of NFTs should also be liable for copyright infringement.

In most jurisdictions, the liability of intermediaries is typically determined by one or any combination of the following approaches: (i) the ‘awareness’ or ‘actual knowledge’ approach; (ii) the notice-and-takedown approach; and (iii) the more burdensome ‘active role’ approach. In the context of copyright law, the ‘actual knowledge’ approach imposes liability on intermediaries only if they are found to have actual knowledge of the infringing act. The notice-and-takedown approach only places responsibility on intermediaries if they continue to host infringing content in relation to which they have received a notice for takedown. The ‘active role’ approach places responsibility for infringing acts on all intermediaries that play an active role in organising content; that is, only those intermediaries that play a passive role in hosting content (however defined under applicable law) are disclaimed from liability for infringing acts on their platform. In determining the liability of intermediaries, the terms of service may also play an important role (see, for e.g. the terms of service of OpenSea).

The Bigverse case before the Hangzhou Internet Court in China is here relevant. The NFT platform Bigverse was held liable for copyright infringement in a situation where a third party used the platform to mint and sell an NFT without the authorisation of the copyright owner. The court provided several reasons for taking the active role approach, noting that: (i) NFT platforms charge fees for minting and selling NFTs and must therefore ensure that these activities are lawful; (ii) platforms have significant control over the digital works and possesses the ability to review and monitor the IP without incurring additional cost; i.e. during the minting process, platforms only request that the user submits the picture of the NFT artwork, name, introduction, description, tags etc., and can add proof of IP ownership to this list (this may still be potentially problematic in jurisdictions where registration of copyright is not mandatory); (iii) ensuring that NFTs are created with requisite authority is important for the NFT eco-system; and (iv) once on the blockchain, it is difficult to remove an NFT when compared with infringing copies on the internet (although it must be noted that the underlying work does not reside on the blockchain – what is there is just a reference to it).

It remains to be seen what approach different jurisdictions will take in the context of holding NFT platforms liable for the illegal activities of users, which will inevitably have a significant impact on future NFT-related activity.

 

Remedies

NFTs pose an interesting challenge at the remedy stage as well, owing to the underlying blockchain technology. In typical cases where the infringing copies are in physical form, the infringing copies are seized and destroyed. In cases where infringing copies are found on the Internet, jurisprudence has developed in various jurisdictions to take down websites that contain infringing copies and other websites that facilitate the creation or access to infringing copies. However, with an NFT, neither the owner of the NFT, nor the platform can ‘destroy’ the NFT.

The issue of destruction arose in the Bigverse case, where the Chinese court noted that an NFT can be made redundant by sending it to an ‘eater address’ or ‘burn address’, which exists on the blockchain. While this does not destroy the NFT in a way that is comparable to physical destruction, it renders the NFT unusable. This is because once sent to the eater address, the NFT cannot be transferred further; i.e., the act of sending an NFT to an eater address is irreversible. It must be noted, however, while NFTs are not considered infringing copies and therefore could not be targeted, it could still be possible to target servers where infringing copies of the work are hosted.

 

Conclusion

The emergence of NFTs has been disruptive to the world of art. While NFTs have now slowly been adopted in the mainstream and have evolved into a more familiar product with time, there continue to exist legal and regulatory uncertainties around them.

As we have just seen, one set of legal uncertainties arises from questions of copyright law. This has led to litigation in several jurisdictions and has also recently prompted two members of the US Senate’s intellectual property subcommittee to request that the US Patent and Trademark Office (USPTO) collaborate to study the impact of NFTs on intellectual property rights.

We have discussed three copyright law questions that have arisen in the context of NFTs, illustrated by examples of specific jurisdictions. The first of these is the question of who has the right to create and sell NFTs. This issue is perhaps the most significant as it will ultimately determine who can profit from NFTs. If courts determine that the right to create and sell NFTs falls within the exclusive rights of the copyright owner, it will bring clarity to a number of NFT disputes.

The second question discussed is the liability of intermediaries. This is significant, because the level of liability placed on intermediaries in the context of copyright infringement will impact the ease with which NFTs can be minted and sold on NFT platforms, which will in turn affect the number of NFTs that are minted and sold online.

The final question discussed here pertains to remedies available to copyright owners if it is found that the creation or sale of an NFT has violated their exclusive rights. This issue is also significant to copyright owners and will impact the protection and enforcement strategy they adopt for their works.

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A concerned look on the new copyright teaching exceptions

Photo by Thomas Park on Unsplash

Nelson Mandela said that “Education is the most powerful weapon to change the world”, but is it powerful enough to change copyright? A long-standing debate has been going on regarding the supporting, or rather, hindering role of copyright rules in educational settings.

Recent developments shed new hope. With Article 5 of the CDSM Directive, the EU legislator introduced a new mandatory copyright exception for the use of protected works for educational purposes. The new exception is intended specifically for digital and cross-border teaching activities, something that gained major relevance also due to the outbreak of the COVID-19 pandemic (for a previous analysis, see here).

In the process of transposition of the CDSM Directive, Member States have the opportunity to review their national legal frameworks and make educational copyright exceptions more modern and more effective. In fact, implementing Article 5 CDSM Directive is not trivial. The new provision diverges in some crucial aspects from the already existing “illustration for teaching” exception (ex Article 5(3)(a) InfoSoc Directive) as well as from other knowledge-oriented provisions such as private study (ex Article 5(3)(n) InfoSoc Directive) or public lending (ex Article 6 Rental Directive).

Ideally, these copyright exceptions should benefit from cohesive legal regimes, capable of consistently achieving the pursued objectives of the law. However, this seems to be hardly ever the case. In several Member States, questions remain regarding overlaps and uncertainties on the permitted uses of protected works by hand of teachers and students.

The introduction of a new EU digital teaching exception has renewed the attention towards such legal inconsistencies. Copyright scholars and experts used the occasion to take a second look into the legal designs embraced by national legislators across Europe. Recently, two articles have been published that critically analyse educational copyright exceptions in light of the new legislative developments.

Priora/Jütte/Mezei put together an analysis of Article 5 CDSM Directive based on a broad perspective that focuses on the purpose behind the education exceptions, namely the public interest in access to knowledge. They draw a comparative study between Hungary, Germany, and Italy and their diverging transposition models, reaching the conclusion that Article 5 only partially achieves its intended goals.

They illustrate that Hungary was the first Member State to implement Article 5 CDSM Directive, even before transposing the remainder of the Directive, as a response to new and urgent digital teaching needs during the COVID-19 pandemic. The new copyright exception introduced in the country followed the wording of the Directive closely and also updated existing educational exceptions. A new “teaching-alike” exception was also introduced, which allows for a broad use of some protected works in the course of activities for scientific dissemination of knowledge, by any person, even beyond the scope of institutional education.

Differently, the German transposition of Article 5, which followed track in May 2021, generously exercised the margin of discretion for the licensing option left to national legislators by the EU Directive. If before this new exception German law provided for a teaching exception that could not be applied to certain uses, now any use falls within the scope of the digital teaching exception as long as licenses are not easily available on the market. According to the authors, the German transposition is likely to benefit end-users, compared to the InfoSoc-inspired teaching exception.

The paper looks also at the Italian transposition of Article 5, which came last in November 2021. After the ambitious intention by the Italian Government of a more systemic reform of the existing copyright exceptions for quotation and teaching uses, the final transposition merely introduced an additional provision specifically regulating uses for digital teaching activities. The licensing carve-out option is exercised only regarding sheet music and educational materials, with the authors noting that such regulatory design may actually reduce end-users’ rights due to an inadequate systematization of the existing national provisions.

In another recent and relevant article, Lazarova analyses the Bulgarian experience with Article 5 CDSM Directive, pointing out how the country has “fallen into all the traps” of the EU provision, thus becoming a particularly meaningful case study. In the Bulgarian transposition proposal, the Government opted for the introduction of a new copyright exception for digital uses of works in educational institutions, while maintaining a broad educational exception from the InfoSoc Directive. This proposal expressly states that the new provision does not affect the application of the former. However, Lazarova points out, this will likely lead to enforcement issues due to the partial overlap of the two regimes and competing systems of conflict-of-law rules. The author identifies two misconceptions that have negatively influenced the legislative process, i.e. a general feeling by the Bulgarian legislator that the pre-existing copyright teaching exception did not cover digital uses, and the assumption that cross-border uses of works were previously not allowed.

In light of the insights shared by both doctrinal analyses, the attempt made by Article 5 CDSM Directive to modernize copyright rules to facilitate educational activities turns out to be too little. By limiting itself to the creation of a new exception just for digital and cross-border teaching activities, it can be said that the EU legislator conveyed to to the national Parliaments the idea of a minor, additional change to be made, rather than a big step forward in effectively harmonizing rules and practices.

Ideally, CDSM Directive should have been used to rethink the EU legal framework on teaching exceptions in its entirety. The choice of a narrower intervention created a dual system of regulation that, as both Lazarova and Priora et al highlight, met the objectives of facilitating digital and cross-border activities per se, but also “opened a Pandora’s box that has released a number of other curses”.

As a result, fragmentation persists, the scope and beneficiaries of national implementations are different, new legal overlaps arise and so does legal uncertainty. Simply put, the flexibility intended to facilitate uses of protected works at schools and universities ends up being one of the main reasons why the exception fails to foster quality – analogue and digital – education in the EU. A concerning example in this respect is the licensing carve-out model set in Article 5, thought to facilitate the implementation of the new exception in those Member States where licensing practices already existed. Scholars and experts are pointing out that this will likely, instead, reduce users’ freedoms under the new or pre-existing educational exceptions. Likewise, this feature does not seem to contribute to achieve the goal of harmonization.

It is common to point out how the optional nature of most of the InfoSoc copyright exceptions led to a problematic lack of harmonization within the EU, regarding user rights. While such argument is still valid, the experience of Article 5 CDSM Directive teaches us that mandatory exceptions per se are not a synonym of harmonization, either. When the mandatory component of an exception refers solely to the mere existence of the provision, while allowing its substance to be susceptible of significant derogation, legal approximation and certainty can hardly be achieved.

In light of these growing focus and mature doctrinal reflections on copyright in the teaching and learning world, the CDSM Directive is arguably a missed opportunity for the EU. While copyright experts can understand how and why such complex legal framework has come to existence, teachers, students, and citizens will likely have a hard time to correctly interpret the applicable rules and understand why there is no single, coherent, and accessible regime regulating their uses of protected materials for educational and study purposes in a growing digital learning era.

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Copyright case: Monsarrat v. Newman, USA

A defamation claim, too, was precluded by the Communications Decency Act.

A federal district court in Boston correctly found that the manager of a neighborhood forum could not expose himself to defamation and copyright infringement claims by merely migrating the forum from one web platform to another, the U.S. Court of Appeals for the First Circuit has held. The court, stepping into a bitter personal dispute between members of the online forum, found that the defamation claim was barred by the Communications Decency Act while the copyright infringement claim was precluded by the fair use privilege (Monsarrat v. Newman, March 10, 2022, Stearns, R.).

Case date: 10 March 2022
Case number: No. 21-1146
Court: United States Court of Appeals, First Circuit

A full summary of this case has been published on Kluwer IP Law.

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Why do only fools and horses write original material? UK court finds copyright infringement of ‘Del Boy’ character

Photo by PJ Gal-Szabo on Unsplash

Introduction

The Intellectual Property Enterprise Court (IPEC), part of the English High Court, has ruled that copyright subsists in the character of Derek ‘Del Boy’ Trotter and that a character can be protected as a literary work under the UK’s closed list of copyright works ([2022] EWHC 1379 IPEC). That copyright was found to have been infringed by the creators of an ‘interactive dining experience’ which used Del Boy and the other main characters from ‘Only Fools and Horses’, one of the most successful British TV comedies of the 1980s and 1990s.

The case is the first time a character has been found to be a protectable work under UK copyright law. It sets out a two-stage test for establishing that a character is a protectable work, following Cofemel, and looks at the rarely relied on fair dealing exceptions of parody and pastiche.

Background

The case concerned the show Only Fools and Horses (‘OFAH’), a BBC TV comedy originally broadcast between 1981 – 1991 and written by John Sullivan. The claimant was a company controlled and owned by the family of John Sullivan, who died in 2011. The aim of the company was to exploit the IP rights held by John Sullivan in connection with OFAH. Shazam had entered into merchandising agreements with the BBC and launched ‘Only Fools and Horses – The Musical’ (The OFAH Musical) in early 2019.

In 2018, the defendants set up ‘Only Fools The (cushty) Dining Experience’ (‘OFDE’) in which actors adopted the appearance, mannerisms and catchphrases of the original OFAH characters. The characters acted out a pub quiz scene, which had not appeared in the show itself, while customers enjoyed a three-course meal.

The defendants did not seek approval from the claimant in relation to the OFDE and, as a result, in 2019 the claimant sued the defendants for copyright infringement and passing off. In 2020, the case was moved from the High Court to the IPEC due to the defendant’s inability to afford a High Court case.

The Works

The claimant alleged that copyright subsisted in each script, the body of scripts (including the “imaginary world” and characters that the body of work encapsulated) and, unusually, the character of Del Boy. The Judge confirmed that each script was a copyright work and would be classed as a dramatic work, following the Court of Appeal decision in Martin v Kogan.

The Judge held that the body of scripts would not constitute a separate work, as it was not intended to be performed in a continuous manner and the body of scripts was nothing more than a compilation of separate works. In doing so, the Judge rejected the claimant’s submission that there had been intellectual creation in the development of the OFAH ‘world’ itself.

On the possibility of copyright subsisting in the character Del Boy, the Judge explained: “There is surprisingly little discussion in English case law or commentary on whether (and if so in what circumstance) copyright might subsist in a character from a dramatic or literary work”. As such, the Judge applied the ‘two-stage test’ laid down by the Court of Justice of the EU in its Cofemel judgment:  first, whether the character was original subject matter and, second, whether the character could be identifiable with sufficient precision and objectivity.

On the first point, the Judge held that the character Del Boy was an original creation by John Sullivan for a number of reasons:

the character was based on Sullivan’s lived experience growing up in South London in the 50s and 60s;
the character of Del Boy was not a “stock character or cliché” but instead a “fully rounded character” with a detailed backstory, including his complex relationship with his brother;
Del Boy’s use of mangled French to appear sophisticated added to the originality of the character;
Del Boy’s catch phrases, mannerisms and optimistic nature all formed part of his unique character; and
while each characteristic in isolation may not be distinctive, it was the particular combination of those parts that made the character of Del Boy distinctive.

On the second limb, the Judge found that the descriptions of the Del Boy character included in the OFAH scripts meant that the features of Del Boy that made up his character were “precisely and objectively discernible in the Scripts” and could be separated from the performance of the actor David Jason, who played Del Boy in the original OFAH show. As a result, both stages of the test had been satisfied and it was held that copyright did subsist in the character of Del Boy. The Judge confirmed that the character would be covered by the concept of a literary work in the closed list of protected English works without any strained interpretation of the Copyright, Designs and Patents Act 1988 (‘CDPA’).

This is the first time that a fictional character has been found to be protected in the UK as a copyright work. It is noteworthy for a number of reasons.

First, it is another example (following Response Clothing, which we covered here) of the UK courts grappling with the potentially very wide ramifications for copyright subsistence which flow from the two-stage test set out by the CJEU in Cofemel. This decision highlights the broadening in scope of copyright, and the increasing difficulties which UK courts are likely to face when squeezing a claimant’s work into the closed list of protected works provided for in the domestic legislation.

Second, it gives rise to a whole host of questions. The first part of the Cofemel test requires originality, but will all ‘fully formed’ fictional characters benefit from protection, or did Del Boy meet a higher threshold? What about those characters who have some original catchphrases and a distinct personality and backstory, but then also a large dose of cliché? The second part of the Cofemel test requires the work (in this case the character) to be “identifiable with sufficient precision and objectivity”, and the court held this to be satisfied by virtue of the scripts for OFAH. But at what point in the scripts was the Del Boy character sufficiently formed to satisfy this requirement, given that OFAH had 64 episodes plus Christmas specials, released between 1981 and 2001.

The Infringement

After finding that copyright subsisted in the characters and scripts, the Judge found that there was substantial copying of the character Del Boy in the OFDE script and performance, including the character’s iconic catch phrases and involvement in dodgy dealings, with evidence showing that the aim of the OFDE was to create a “pitch-perfect” live version of the Del Boy character. In relation to the OFAH scripts, the Judge found that there were a great deal of commonalities between the OFAH and OFDE scripts, which were a result of “extensive indirect copying from the scripts”.

The Defences

The defendants attempted to rely on the defence of fair dealing, set out in Section 30A CDPA, in particular for the purposes of parody and pastiche. This provision was inserted into UK law in 2014, and has its origins in Article 5(3)(k) of the InfoSoc Directive. Whilst the parody exception has attracted much commentary, this is the first time that the defence has been tested by a UK court.

The Judge considered the natural meaning of the words ‘parody’ and ‘pastiche’, as well as academic commentary and the CJEU jurisprudence (in particular Deckmyn and Pelham). He confirmed that a parody must be in itself an expression of mockery or humour. It had to express an opinion about something (either the original work or something else) and not merely be an imitation. It was clear that the OFDE was not a parody as its aim was not to mock OFAH or a third party, and any humour in the OFDE was derived from the borrowed material. The parody defence therefore did not apply.

To qualify as pastiche a work should imitate the style of another work, or compile a number of styles, while being different to the original work. The OFDE did not imitate the style of OFAH, and instead took the whole character population and backstory and recreated them. As such, OFDE was held to be more a recreation or adaption than a work of pastiche.

In any event, the Judge found that the defendants were not eligible to rely on the exceptions, as each defence was subject to the ‘fair dealing’ requirement, which is derived from Article 5(5) of the InfoSoc Directive. The defendants had not been engaged in fair dealings for the purpose of Section 30A CDPA. As the owners of the rights, the claimant was entitled to control how their copyrights were used, therefore, the existence of the OFDE without permission from the claimant unreasonably prejudiced the legitimate interests of the claimant. In addition, the OFAH works had been copied for the purpose of commercial exploitation, which was likely to affect the sales of tickets for The OFAH Musical.

Passing Off

In addition, the Judge held that the OFDE amounted to passing off, on the basis that Shazam owned goodwill in the name ‘Only Fools and Horses’ as well as the leading characters such as ‘Del Boy’, and that a significant number of people would be deceived into thinking that OFDE was an authorised ‘spin off’ from the TV programme.

Conclusion

As mentioned above, this case shines a light on the issues associated with the UK’s closed list of copyright works, which makes applying EU law concepts of copyright difficult. This problem is only likely to intensify as claimants bring copyright claims for ever broader types of work.  The decision that a character can be protected by copyright law is certainly a novel one for UK practitioners although, as the judgment noted, it is an outcome which is apparently consistent with the position taken in Germany (Pippi Longstocking) and the USA (Sherlock Holmes).

The court’s application of the parody and pastiche defences was less surprising, but no less interesting given how rare it is for these defences in particular to be tested in the courts.

It will be fascinating to see if the defendants have the appetite for an appeal, as this judgment certainly raises issues which one would expect to be of interest to the Court of Appeal.

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EU copyright law round up – second trimester of 2022

Photo by Markus Spiske on Unsplash

Welcome to the second trimester of the 2022 round up of EU copyright law!

We started this rubric back in 2021. In this series, we update readers every three months on developments in EU copyright law. This includes Court of Justice (CJEU) and General Court judgments, Advocate Generals’ (AG) opinions, and important policy developments. You can read the previous round-ups here.

 

CJEU judgments and AG Opinions

 

Polish challenge of Article 17 CDSM, C-401/19

This is perhaps one of the most awaited judgemnts in the history of EU copyright law. On 26 April 2022, the CJEU finally derlivered its judgment, the main focus of which was the Polish challenge of Article 17 of the CDSM Directive. The CJEU upheld the provision, subject to its interpretation in light of fundamental rights. You can read up on the various aspects of the judgment here, here, here, here, here, here,  here and here.

 

CDSM Directive implementation

 

The implementation of the CDSM Directive is still far from over, despite the fact that the implementation deadline passed more than a year ago – on 7 June 2021. Many Member States missed the deadline, so in May 2022 the Commission issued reasoned opinions to 13 of them.

If you are interested in tracking the implementation process, we recommend you check CREATe’s resource page (in partnership with the reCreating Europe project), as well as the COMMUNIA tracker.

 

 

Policy

 

European Parliament, Report on AI in the Digital Age

In the beginning of April, the European Parliament published a report on AI in the Digital Age. The report, prepared by the very well-known to the copyright audience Mr Axel Voss, stresses the importance of harmonisation and clear and transparent enforcement of IPRs. Focusing on SMEs, the report highlits that IP protection among these remains low. In addition, in order to help EU companies protect their AI with IP rights, the EU’s position as a global standard-setter should be strengthened.

 

European Commission and European Parliament, Digital Services Act (DSA)

An agreement was reached in April 2022 between the European Parliament and EU Member States on the Digital Services Act, which was followed by an endorsement by the Parliament’s Internal Market Committee later in June 2022 and (although strictly not in this second trimester) the final text was approved on 5 July. Together with the Digital Markets Act, the DSA is now expected to be put to final vote in a plenary session in the beginning of July 2022. Read more here, as well as here for further background on the DSA and the Opinion of the European Copyright Society (generally on the topic, see here).

 

European Parliament, Study on IPR and the use of open data and data sharing initiatives by public and private actors

In May 2022, the European Parliament published a study on IPRs and the impact on data access, portability and re-use. The study focuses more narrowly on the Computer Programs Directive, the Database Directive and the Trade Secrets Directive with a view to enhancing interoperability.

 

Council of the EU, Data Governance Act

Altough not strictly about copyright, readers may be interested to know that in May 2022, the Council approved the Data Governance Act, which has as its main goal the promotion of availability of data and building a trustworthy environment to facilitate their use for research and the creation of innovative new services and products.

 

Council of the EU, Conclusions on research assessment and implementation of open science

Published in May 2022, the conclusions consider that the authors of research publications or their institutions should retain sufficient IPRs to ensure open access, leading to broader dissemination, valorisation and reuse of results improving the fair balance of the publishing business models. In addition, data and bibliographic databases used for research assessment should, in principle, be openly accessible, while tools and technical systems should enable transparency.

 

CISAC, Annual Report

The international body representing authors and composers published its 2022 Annual Report. While the report outlines CISAC’s legislative lobbying actions in several countries to promote stronger laws protecting creators and rightsholders, it also pinpoints growing digital royalties and stronger laws safeguarding creators’ rights as top priorities.

 

EU Intellectual Property Office, 2022 IP Youth Scoreboard

The EUIPO’s 2022 EU-wide survey on the perception of IP among young Europeans confirms previous trends of purchasing fake products – in the last 12 months, 37% of young people bought one or several fake products intentionally.

 

Max Plack Institute for Innovation and Competition, Position Statement on the EU Data Act

The Max Planck Institute for Innovation and Competition has published a Position Statement welcoming the EU Commission’s initiative on the EU Data Act and provides a comprehensive analysis of the proposed rules. Read more here.

 

European Commission, Staff Working Document on the Portability Regulation

In June, the Commission published a report on the application of the Portability Regulation, according to which paid online content services are obliged to provide at no extra cost cross-border portability to subscribers when they travel or visit temporarily other Member States. The report establishes that the new rules have been functioning well for all parties involved. It states that the Regulation’s impact on copyright licencing practices (introducing cross-border portability clauses into their existing agreements) was very marginal and did not lead to any significant costs.

 

United States Copyright Office, Copyright Protections for Press Publishers

Following public consultations and roundtables with stakeholders such as authors, publishers, internet platforms, libraries and users’ groups, the US Copyright Office has recommended against the introduction of a new press publishers right for the online publications (along the lines of Article 15 CDSM Directive). The Office emphasizes that ancillary copyright protections have not been shown to be necessary in light of publishers’ existing rights, and would likely be ineffective so long as publishers depend on news aggregators for discoverability. Moreover, to the extent that any ancillary copyright protections would lack traditional copyright limitations and exceptions, they would raise significant policy and Constitutional concerns.

 

UK Intellectual Property Office, Response to public consultation on IP and AI

Following a public consultation that closed in the beginning of this year (see here and here), the UK IP Office has now published its response. With respect to the UK computer-generated provision under s.9(3) of the Copyright Designs and Patents Act 1988, in view of the early stages of the current developents on AI-generated creative output, the government has decided to make no changes to this provision. As for the text and data mining exception, the government has decided to introduce a new copyright and database right exception which allows text and data mining for any purpose. Stay tuned for a detailed comment on the blog on this front in the coming weeks.

 

Coming soon and latest referrals

Despite the fact that the CJEU judgment in the Polish challenge to Article 17 of the CDSM Directive is already out, there are still some interesting preliminary references to the CJEU to look out for in the new year: RTL Television (Case C-716/20) regarding cable retransmission in hotel rooms, Gemeinde Bodman-Ludwigshafen (C-256/21) and Ametic (C-263/21) on the InfoSoc Directive’s sanctions and private copying, AKM (C-290/21) on communication to the public by satellite broadcasting, Ocilion (C-426/21) on communication to the public and the private copying exception, Castorama Polska (C-628/21) on copyright enforcement and Blue Air Aviation (C-775/21) on communication to the public on airplanes.

On the copyright/trade mark front at the EUIPO, a case on the registrability of the marks ‘ANIMAL FARM’ and ‘1984’ is still pending before the EUIPO’s Grand Board of Appeal. The copyright in these two titles expired at the beginning of 2021.

Stay tuned!

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Global Digital Encounter 21: The Metaverse as a Challenge to Classical IP

Image by mohamed Hassan from Pixabay

This year we have seen an influx of educational events dedicated to everything digital. In particular, non-fungible tokens (NFTs), crypto and metaverse have dominated our infospace.

June was no exception. Last Wednesday, Fide (a legal-economic think-tank) held the latest in their series of Global Digital Encounters (GDE) – an online panel discussion focusing on the metaverse and IP with some of the leading experts in digital laws.

Professor Laurant Manderieux (Bocconi University) gave an opening speech, setting the tone for the upcoming discussion, and then presented the panel of experts, which turned out to be very diverse: Dr Andres Guadamuz (Reader in Intellectual Property Law at the University of Sussex and the Editor in Chief of the Journal of World Intellectual Property), Gregor Pryor (Partner at international law firm, Reed Smith), and, assuming the role of the event’s moderator, Dr Michaela MacDonald (Lecturer at the School of Electronic Engineering and Computer Science, Queen Mary University of London, and video games law scholar).

Panel discussion

The first topic up for discussion by the panel was the actual definition of the metaverse. It is clear that there are many definitions and it was generally difficult to settle on one for something that had been “hyped” so much, noted Dr Guadamuz. However, overall, we can agree that metaverse means some sort of a virtual reality space. Some people see metaverse as the Oasis from “Ready Player One”, but this is not really the case. The current market figures do not support the thesis that metaverse is virtual reality (VR) per se. VR is currently still more of a niche. People are just not using the technology as yet. Therefore, it makes more sense to speak about metaverse in broad terms for now. We could, therefore, define metaverse as any persistent virtual space where a user can participate by form of an avatar.

Mr Pryor added that generally people exist in the metaverse when they spend more than half of their time online. Although VR headsets themselves are still a very niche product, a virtual world is the one where users can interact and conduct activities as if they were in real world (this includes user entertainment, online shopping, etc.). So, we can say that many of us already exist in the metaverse.

On the definition of metaverse, Dr Macdonald summarised that a metaverse is an immersive ubiquitous experience, in which a user can participate from various devices, which is also interoperable and scalable. On the issue of connectivity, a very important feature of metaverse, she explained that connectivity in the metaverse means experiencing the same space together, which, at present, is not always easy to deliver.

The next question for the panel discussion was on the main players in the metaverse.

Mr Pryor quickly named the obvious big one – Meta (formerly Facebook). Other big players included: Unreal Engine, Unity, Decentraland, Sandbox, Roadblocks and even Minecraft. At present, there are multiple virtual worlds, not all of which are hyper-realistic but they are all interoperable. At the moment there are separate walled gardens and not one big metaverse.

According to Dr Guadamuz, the main metaverse companies can be divided into three groups: (1) games companies and social media giants (creating private metaverses that are closed and wall guarded); (2) open metaverse developers (providing open-source decentralised standards); and (3) independent developers with some basic funding (e.g., Web3 developers).

The discussion then turned to the role of IP law and rights in the metaverse.

Dr Macdonald expressed the view that the concept of metaverse itself is going to further exacerbate the issues we are already experiencing in other digital environments. Dr Guadamuz felt that the 2007 discussions were being reopened again. Property rights were completely dependent on the type of players in the metaverse. For example, private companies and game companies (with the exception of Second Life) own everything and bind their users with end-user licence agreements (EULAs). Then, there is a second version of property ownership, as seen in the Second Life – virtual goods created by users, which belong to them. The third approach offered by Web3, blockchain and NFTs is where the users own everything they create and are able to licence and trade their virtual goods.

The concept of property ownership in the metaverse coexisting with traditional models was addressed by Mr Pryor, who highlighted the acute problem of ownership of NFTs. If NFTs continue to be as popular as they currently are the regulators will certainly interfere and try to protect users. NFTs could potentially enable ownership but this is yet to be seen.

The next topic in the discussion was user protection in the metaverse.

Dr Guadamuz thought that the scope of protection in the metaverse was going to be the same as the protections that already exist, which are solid and tested. Courts understand the environment. Companies should start thinking about protecting their brands in the metaverse. For instance, purchasing blockchain domain names now to avoid cybersquatting in the future.

The panel considered whether tech solutions could replace or complement the current legal norms and to what extent. Using the example of NFTs, how can the technology be used meaningfully and it be made clear that it does not solve problems of digital ownership and digital exhaustion? Mr Pryor was sceptical about the legislative initiatives and said that change needed to come from commerce, not the legislators. Dr Guadamuz highlighted that there was currently not a lot of regulation and what existed was not geared well. Current technological solutions include smart contracts and decentralised autonomous organisations (DAOs) but they arguably do not provide an operational tool for the metaverse. DAOs have a lot of inherent issues. There are also problems with smart contracts – contract theft, errors in the code etc. Companies are, therefore, relying more on the old law. Although NFTs and smart contracts have a future, we have to recognise there are certain limits to them.

Dr Macdonald sought the other panellists’ opinions with regard to people’s ability to learn from past experiences and mistakes in terms of developing digital spaces in a way that empowers users and does not grant too much power to private companies. Both panellists were hopeful and optimistic. Mr Pryor’s view was that regulation of the metaverse in the current realities was not going to be such a quantum leap as it was with the Second Life, which would make the implementation of new laws much easier. Dr Guadamuz added that companies already had some form of experience with content moderation. There has been a lot of investment from the global tech companies in content moderation. Although the current technological solutions are not perfect, they do work, and content moderation is going to be one of the biggest issues in the metaverse.

Questions from the audience

The audience raised many interesting questions, covering topics such as trademarks for virtual goods, property title in the blockchain, and IP infringement in the context of NFTs in light of the most recent High Court decision that recognised NFTs as property.

Particularly intriguing was a discussion around the conflict between the digital space and the real world. Mr Pryor explained that in the US there was currently a lot of fuss as to whether one avatar assaulting another avatar constituted an assault of a real-life person. Also, questions like “Can your avatar be murdered?” are starting to emerge and there will be more of these.

Dr Guadamuz likened EULAs to a constitution of the metaverse space. In Second Life there was an attempt to bring external property laws into that metaverse. Those included property rights over the virtual plots of land in the Second Life. At the moment, private companies can do as they please and be the Lords of their own digital countries.

The same question has been asked for the video games industry, noted Dr Macdonald – the maker of the game effectively makes the rules and there is no remedy in the real world. Now we are living through the next level of immersive experience. The argument that everything takes place in a fantasy land not connected to the real world does not work any longer. We shall see more cases on platform liability, as platforms will have to comply with the users’ property ownership claims.

Conclusion

The panel’s discussion concluded with the final remarks that there would be more encounters with the metaverse in future. The topic is, indeed, so wide that an hour-long discussion, although very fruitful, can barely even scratch its surface.

Additional reading prepared by the speakers can be found here: https://thinkfide.com/global-digital-encounters/references-global-digital-encounters/

The Speakers’ bios can be found here: https://thinkfide.com/global-digital-encounters/gde-21-the-metaverse-as-a-challenge-to-classical-ip/

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Internal Market Committee endorses agreement on Digital Services Act

Photo by Paul Felberbauer on Unsplash

Last month, the Internal Market Committee of the European Parliament endorsed the provisional agreement previously reached with EU governments on the Digital Services Act (DSA). The DSA, together with its sister proposal on the Digital Markets Act (DMA), sets standards for a safer and more open digital space for users and a level playing field for companies. The background to the DSA and the opinion of the European Copyright Society on the initial proposal are discussed in an earlier post (here).

Under the new rules, online platforms – such as social media and marketplaces – will have to take measures to protect their users from illegal content, goods and services. Users will be empowered to report illegal content online and platforms will have to act quickly, while respecting fundamental rights, including the freedom of expression and data protection. Very large online platforms and search engines will have to comply with even stricter obligations to protect users from illegal content and goods.

Penalties for non-compliance can reach up to 6% of platforms’ worldwide turnover.

Both the Digital Services Act and Digital Markets Act are expected to be put for a final vote in Parliament later this month. The DSA Regulation will enter into force 20 days after its publication in the EU Official Journal and the provisions will start to apply fifteen months thereafter.

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A Closer Insight into Copyright related Issues in the Position Statement of the Max Planck Institute for Innovation and Competition on the Commission’s Proposal for a Data Act

Image by Pete Linforth from Pixabay

Introduction

On 23 February 2022, the European Commission (EC) published a Proposal for a ‘Regulation on harmonised rules on fair access to and use of data (Data Act)’. This legal instrument will horizontally set rules applicable to the relationship between manufacturers and users of Internet of Things (IoT) devices. The Data Act Proposal assigns users of IoT products and related services a new right to access and share the data generated by their use, with the aim to ‘ensure fairness in the digital environment, stimulate a competitive data market, open opportunities for data-driven innovation and make data available for all’, as the EC stated in the accompanying press release.

The Max Planck Institute for Innovation and Competition (the Institute) has published a Position Statement that welcomes this initiative and provides a comprehensive analysis of the proposed rules. The Institute acknowledges that the Data Act Proposal seeks to strike a balance between promoting access to and sharing of IoT data and protecting other conflicting rights. However, the tension between the new rules introduced by the Data Act Proposal and potential intellectual property protection, including copyright protection, will require further coordination efforts. This post focuses on selected copyright and related rights matters that the Institute details in its Position Statement.

1.  Key coordination issues

The Data Act Proposal explicitly addresses the relationship between the new right to access and share IoT data and the sui generis database right provided for in Article 7 of Directive 96/9/EC. Article 35 Data Act Proposal stipulates that the sui generis right ‘does not apply’ to databases containing data obtained from or generated by the use of IoT devices. While the Institute ‘agrees that there is a need for excluding the applicability of the sui generis right where it conflicts with the exercise of the IoT data access and use right’ (para 257) , it highlights that ‘there is still room for optimising the text concerning Article 35’ (para 258). The Institute explains in detail how this provision should be interpreted and how it could be improved.

Surprisingly, the Data Act Proposal does not address at all potential conflicts between the new set of rules on the one side, and copyright and related rights on the other. There are however a number of reasons why the issue should have been considered. First, some IoT data could qualify for copyright or, more likely, related rights protection: e.g. photographs made automatically by cameras attached to planes or satellites (para 274). Second, some creative databases could at least in principle qualify for copyright protection, thus bringing about coordination problems with the new right of access and use, especially in light of the very definition of ‘data’ under Article 2 Data Act Proposal, which includes ‘any compilation’ of ‘acts, facts or information, including in the form of sound, visual or audio-visual recording’. This means that even an entire database may constitute the subject of the data access and use right under Article 4 of the Data Act Proposal. If such database were protected by copyright, the two regimes would enter into direct conflict, just as in the case of a sui generis protected database (para 271). Third, Article 11 Data Act Proposal allows the data holder to make use of technical protection measures (TPMs), which are additional means to enable and safeguard de facto data control. The rule ‘seems in general appropriate’ (para 118). However, it should be clarified that TPMs should not be used as a means to prevent [not only access to data, but also] interoperability of the data which the data holder is under an obligation to make available’ (para 118). Fourth, ‘[a]nother fundamental issue is potential copyright protection for software elements that may hinder interoperability.’ (paras 223-225). This is a crucial problem, which is analysed in the MPI Position Statement, and also reported in more detail below.

 

2.  Infrastructural perspective

One of the Proposal’s objectives is to foster data availability, facilitating the uptake of data-driven markets. To achieve this, the Commission envisages in the Data Act Proposal the creation of interoperable Common European Data Spaces. In Chapter VIII, Article 28(1), the Proposal includes technical requirements directed at data space operators to facilitate access to data. In this regard, it references application programming interfaces (APIs) as one example of the technical means to achieve data access as per Article 28(1)(c). However, the Data Act Proposal does not provide any guidance regarding the applicability of APIs and the possible conflict that might exist if intellectual property (IP) rights such as copyright and patents protect these APIs (on copyright protection for APIs in the EU, see Case C-406/10 SAS Institute (paras 29-46)). The Institute considers that the existence of these IP rights might put at risk the whole interoperability concept of the Common European Data Spaces. The Institute, therefore, recommends that Article 28 of the Data Act Proposal should anticipate solutions to this tension between potential IP protection of APIs and the need to provide access to data (para 223). Furthermore, ‘Article 28(1)(c) is not the only place where the legislature could address this tension. Future intellectual property legislation could clarify, narrow or even exclude the availability of IP protection of APIs to favour dynamic competition’ (para 224).

 

3.  Final considerations and the way forward to facilitate data-driven innovation

Besides the problems of coordinating the new right to access and share IoT data with existing IP rights, the Position Statement also poses a fundamental question: whether ‘the proposed IoT data access and data sharing regime can be used as an efficient means to make IoT data more broadly available to enhance data-driven innovation in any given context’ (para 333). The Data Act Proposal overlooks the existence of two different types of innovation. On the one hand is innovation which offers an added value to existing products or services, e.g. repairing. This type of innovation might foster competition in aftermarkets and could benefit in principle from the new right as designed in the Data Act Proposal. On the other hand, there is a broader type of data-based innovation concerning new services and products in areas unrelated to the IoT products initially purchased by the user (para 333). This type includes, for example, ‘AI analytics and advanced data-driven services’ (Impact Assessment Report, at 23). In this area, the Data Act Proposal would not be truly effective since the IoT access right is based only on a user-centred approach and thus does not provide access to aggregated data (para 333). The Institute considers that promoting data accessibility and availability at an individual user level is not enough for AI data-driven innovation, which requires access to aggregated data for the purpose of machine learning (ML) training (para 335). In this perspective, likely ‘the Data Act will not be the last piece of the puzzle that the EU legislature will add to the legal framework for the digital economy’ (para 5).

For more details on these aspects and many others, have a look at the full Position Statement, here.

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