On 14 September 2016, the European Commission published its communication unveiling a proposed Directive on Copyright in the Digital Single Market. You can read our bitesize summary of the proposals here, and our views on two of the key proposals made by the Commission (the creation of an ‘ancillary right’ for news publishers, and the creation of a monitoring obligation for video sharing platforms) here.

The draft Directive also contains two proposals which aim to provide artists and authors with mechanisms so that they receive ‘fair remuneration’ for their content:
• Article 14 requires Member States to ensure that authors and performers receive regular and sufficient information from those who publish their works about the revenues which have been generated and the remuneration which is due. This is intended to provide ‘transparency in every sector’.

• Article 15 requires Member States to provide authors and performers with a ‘contract adjustment mechanism’ so that they can request additional remuneration if it transpires that the remuneration which they originally agreed was too low in the light of the subsequent revenue which the publisher has generated.
These proposals are borne from the Commission’s belief that those in the creative industries are not always paid fairly for their content, and that the means by which publishers make money in a digital environment creates an opportunity for that situation to be corrected.

The proposals, however, give rise to various questions, such as: How extensive will the information sharing obligation under Article 14 be? What is an ‘appropriate level’ of transparency? What is a ‘not significant’ contribution by an author or performer (in which case a Member State may decide that the obligation to provide transparent information does not apply)? Who will assess a performer’s request to adjust a contract that they entered into with a publisher? What is a ‘disproportionately low’ level of remuneration which needs to be corrected? More generally, what impact does the contract adjustment mechanism have on the certainty which parties to a contract usually expect to have once it is signed?

Drawing parallels with existing provisions in IP law

It is possible to see some parallels between the contract adjustment provision envisaged in Article 15 of the draft Directive and existing provisions of patent law which provide that employee inventors are entitled to ‘compensation’ (i.e. above their agreed salary) in the event that they invent something which is of ‘outstanding benefit’ to the employer.

Employee compensation is an aspect of patent law which is not harmonised across the EU. In the UK, there are very few instances in which employees have shown that the ‘outstanding benefit’ threshold has been met. Equivalent legislation in Germany, on the other hand, is relied on by employees with greater frequency and success.

The manner in which Article 15 of the Copyright Directive is implemented may also vary between EU Member States. Given the parallels drawn above with equivalent patent legislation it might be expected that jurisdictions such as Germany may take a more interventionist, artist and author-friendly approach than jurisdictions such as the UK (if the Directive is ever implemented into UK law).

Can artists and publishers contract out of the provisions?

The draft Directive is silent on whether artists and publishers will be able to contract out of the Article 14 and 15 obligations of transparency and contract adjustment.

However, it seems likely that national implementing legislation will exclude this possibility, as the recitals of the Directive make clear that one of the objectives is to correct the weaker negotiating position which authors and artists often find themselves in, relative to publishers. Preventing parties contracting out of these obligations would mirror the provisions for employee compensation under the patent law, which have effect regardless of anything agreed between employer and employee.

Resolving disputes which arise

As illustrated by the many unanswered questions set out in the introduction to this article, there are likely to be initial difficulties encountered by authors/artists wishing to enforce their rights, particularly given the extent of the information which publishers are likely to be asked to disclose in order for the author/artist to be able to properly determine whether they have been paid too little under their contract.

Publishers will presumably be asked to provide information that they would consider to be sensitive, such as how many visits a particular webpage has received, how much they have been paid by advertisers for ad impressions and/or clicks, and how often visits to a particular webpage are monetized in other ways (such as by selling visitors products or subscriptions for paid-for services).

The recitals of the draft Directive suggest that Member States should provide alternative dispute resolution procedures to address claims which arise, and it seems likely that disputes within the UK regarding these provision could fall within the remit of the Copyright Tribunal. Parties should therefore have a (relatively) low-cost forum in which they can resolve disputes.

What about Brexit?

The UK is likely to have left the EU by the time the new Copyright Directive is required to be transposed into Member States’ national laws.

The Directive is likely to be incorporated into the EEA Agreement, so in the (now unlikely) event that the UK joins the EEA after it leaves the EU it would need to adopt the new regime.

If the UK does not join the EEA then the relevance of the provisions to UK artists/authors and publishers is less clear. From the current draft it is not certain whether the obligations imposed on publishers apply regardless of the nationality of the author/artist whose work they have exploited. If the Directive is implemented by Member States so that these obligations apply regardless of the nationality of the author/artist (which seems likely), then it follows that:
1. the new provisions would be relevant to UK artists and authors to the extent that they produce content which is distributed by EU-based publishers.

2. UK publishers (who would not have to comply with the obligations if the Directive is not implemented into English law post-Brexit) and other non-EU publishers, would potentially be at an advantage over their EU competitors because it could (potentially) be more expensive for publishers in the EU to exploit works, given the risk that contracts will later be adjusted in favour of artists/authors.
You can read more about the implications of Brexit here