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Industrial Policy gone wrong: The Copyright in the Digital Single Market Directive

Posted on    by Martin Kretschmer

Industrial Policy gone wrong: The Copyright in the Digital Single Market Directive

By 14 February 2019March 18th, 2021No Comments

Timeline of Copyright in the Digital Single Market Directive (click image for full size)

Yesterday morning, before the agreement reached in the trilogue between Commission, Parliament and Council, I gave an interview to Wired on Article 13. What we know about the final text from the representation in the press release by the Parliament’s rapporteur Axel Voss, hides the uncomfortable truth that copyright law has been used as a tool of industrial policy that will benefit quite narrow interests. The objectives of achieving a Digital Single Market and of support for creatives and journalists (which carry wide support) gloss over interventions that lack an evidence base.

Chris Stokel-Walker’s questions:

– Why is Article 13 so troublesome?
– What do you say to those who say it’s necessary?
– What is your reaction to this week’s trilogue negotiation meetings, and your thoughts on the changes to the wording of the law happening right now?
– What exactly is it about the renegotiations going on this week that makes Article 13 worse than already feared?

Martin Kretschmer’s response:

Article 13 is industrial policy targeted at a very narrow sector. It responds chiefly to concerns by parts of the music industry about the licensing deals or revenue sharing offered by Google’s YouTube platform. This has been termed, in an effective but misleading rhetoric, the ‘value gap’.

In order to improve the music industry’s bargaining power, Art. 13 attempts to overturn the liability regime established under the e-commerce Directive (2000/31/EC) for content sharing platforms. Under Art. 14 of the e-commerce Directive, hosting providers enjoy a safe harbour for infringing content uploaded to their service until they obtain knowledge.

The jurisprudence of the European Court of Justice has interpreted this as ‘constructive knowledge’, that means a service provider can become liable not only by notification, but also by conduct that requires knowledge of infringing content, such as optimizing. And it is quite clear that aspects of YouTube’s offering (such as the use of ContentID, the recommendation function, the placing of targeted advertising) are close to making the company directly liable for copyright infringement. A case on this point is currently pending before the Court of Justice as a reference from the highest German federal court BGH (13 September 2018 – I ZR 140/15 – YouTube).

The trouble with Art. 13 is that a misguided industrial policy has become an ideological battle about controlling US multinationals, and protecting European culture. The debate has become insulated from evidence. We have done our best to supply independent academic research over the last two years.

There is increasing knowledge about how the current notice-and-takedown system operates, and about harmful effects to market entry and user innovation from removing the safe harbour. In particular, it will lead to the default use of problematic filtering technology.

The response from the legislator has been (and this applies to both Axel Voss’ position adopted by the European Parliament, and to the positions adopted by the member states in the Council of the European Union) to change the liability regime anyway, and then offer specific carve outs for services or activities that will be harmed.

In rapporteur Voss’ draft, the category of ‘online content sharing service provider’ (who no longer benefit from the safe harbour of the e-commerce Directive) will exempt microenterprises and small-sized enterprises, non profit encyclopaedias (read: Wikipedia), some educational or scientific repositories, cloud services for individual use which do not provide direct access to the public (read: Dropbox), open source software developing platforms (read: GitHub), and online market places (read: eBay).

This is bad law making, as it is not future proof. But at this late stage, with the entry of a new French minister, Franck Riester, who had been responsible for the controversial Hadopi (graduated response) law under a previous government, even these carve outs have become contested.

Big politics has entered the copyright negotiations. There was a direct phone call between Macron and Merkel, and Merkel as German chancellor with so-called ‘Richtlinienkompetenz’ (authority for overall direction of policy) has overruled the position against upload filters that was agreed in her coalition agreement with the social democrats. (As justice minister, social democrat Katerina Barley is responsible for copyright in the German government.)

The Franco-German agreement that fed into the latest Council negotiation mandate obtained by Romania last Friday (8 February, Romania is leading the negotiations for the Council as current presidency) limited the carve out for SMEs to small start-ups for 3 years. France also wants to prescribe that they have to enter negotiations if they are offered a licence.

My assessment overall is that the most problematic aspects of the Copyright in the Digital Single Market Directive are due to misguided and poorly evidenced industrial policy. This diagnosis applies not only to Art. 13 but also to Art. 11, the new exclusive right for press publishers. Both articles have little relation to the Digital Single Market objective.

Liability for service providers that claim a ‘false’ safe harbour even though they have close knowledge of their users and the content they upload (arguably YouTube) would have been resolved by the European Court of Justice anyway, leading to a harmonized outcome without collateral damage to service innovation and user rights. Articles 11 and 13 will damage the Digital Single Market.