Thursday, 29 December 2016

Intermediary IP injunctions: what are the EU implications of the UK experience?

Is there gift more memorable
than a blocking injunction?
What has been the most significant IP development in the UK this year? 

From a policy standpoint (and in the aftermath of the Brexit referendum) the answer is probably the decision of UK Government to ratify the Unified Patent Court Agreement [here]

From a practical perspective, however, also considering the increasing number of IP infringements occurring online [this is a general trend: see here, at p 33] the most significant domestic development in my opinion has been the judgment of the Court of Appeal of England and Wales in Cartier [hereherehere], which upheld the 2014 decision of Arnold J [here and here], and confirmed that  owners of IP rights other than copyright can seek injunctions against intermediaries to block access to website where counterfeits are available.

The UK framework

UK Government implemented Article 8(3) of the InfoSoc Directive into UK law by inserting s97A into the Copyright, Designs and Patents Act 1988 (CDPA). Since the landmark decision of Arnold J in Newzbin 2 [here] - the High Court of England and Wales has ordered to block access to more than five hundred website [here], with applications being filed by an increasingly diverse group of copyright owners, including film studios, record labels record, publishers, and the Football Association Premier League.

Unlike Article 8(3) of the InfoSoc Directive, UK Government did not take any specific steps to transpose the third sentence of Article 11 of the Enforcement Directive into its own national law. 

In his 2009 decision in L’Oréal Arnold J concluded that, despite lack of an express implementation, the High Court of England and Wales had power under s37(1) of the Senior Courts Act 1981 (SCA, formerly known as the Supreme Court Act 1981) to grant an injunction against an intermediary whose services had been used by third parties to infringe an IP right (specifically: a registered trade mark), to the extent that this is what the third sentence in Article 11 of the Enforcement Directive requires.

In the aftermath of the UK decision in L’Oréal it remained however unclear whether s37(1) SCA could be used to obtain a particular type of injunction, ie an injunction against an intermediary to block access to a website where content that infringes IP rights other than copyright can be found.

The Cartier decisions

Possibly unsurprisingly (considering the previous stance of Arnold J in L’Oréal), the High Court of England and Wales (again, Arnold J) answered this question in the affirmative in its 2014 decision in Cartier.

The "entirely correct" [para 35] decision of Arnold J was confirmed in appeal. The Court of Appeal judgment contains however the dissent of Briggs LJ on the issue of costs [since the Newzbin 2 decision, the practice in the UK has been that rightholders bear the costs of application of an injunction, while the ISPs to which the resulting injunction is addressed are responsible for the implementation costs]. In particular, the cost burden attributable to the implementation of a particular blocking order should fall upon the rightholder making the application for it. 

According to Briggs LJ, the reason is a domestic one. It is true that both the Enforcement Directive and the InfoSoc directives provide that rightholders should have the possibility of applying for an injunction against an intermediary who either carries a third party's infringement of a protected work in a network (in copyright cases) or whose services are being used by a third party to infringe the rightholder's industrial property right (in relation to trade marks). In both cases the conditions and modalities relating to such injunctions, or the conditions and procedures relating to such injunctions should be left to the national law of the Member States. 

In the UK, however, courts have jurisdiction as per s37(1) SCA, and this in substance reflects an originally unfettered jurisdiction exercised by the Court of Chancery on equitable principles. In the case of orders against innocent third parties, the law has evolved so to ensure that a standard condition or 'modality' for the grant of an injunction is that the cost reasonably incurred by the innocent respondent should be reimbursed by the applicant.  

Ehm ...
A new article

Overall, the decisions of the High Court and the Court of Appeal of England and Wales in Cartier prompt a more thorough discussion around the role of intermediaries in an online context, including with regard to the effectiveness of remedies other than blocking orders and responsibility for bearing the costs of injunctions. 

These issues are also currently under discussion at the EU level, both in the context of the EU Commission’s Digital Single Market Strategy (DSMS) as first unveiled in mid-2015 and case law of the Court of Justice of the European Union (CJEU).

If you are interested in all these topics, you can find a more detailed discussion in this article [a pre-edited version is available on SSRN herethat I have derived from a presentation at a recent conference held in Berlin, and that is going to be published soon in GRUR International.

My contribution intends to provide an overview of EU and UK experiences, and highlight certain trends that have emerged from relevant case law. The article is composed of four parts. The first part reviews CJEU case law in the area of intermediary injunctions, and attempts to sum up the resulting key findings. The second part considers relevant case law of UK courts in the area of blocking injunctions, and reviews the approaches taken in respect of copyright and trade marks. The third part discusses two principal issues emerged from the UK experience (the possible expansion of blocking injunctions to different areas and intermediaries, and the responsibility for the costs of injunctions), and considers whether – lacking an unambiguous legislative framework – the parallel evolution at the CJEU level may provide interpretative guidance. The fourth part highlights the terms of the current EU policy debate: notwithstanding EU harmonization efforts in the area of IP enforcement, the main finding is that there are significant gaps in the resulting framework. This prompts the question whether, under the DSMS umbrella, the EU should merely reform the current enforcement framework or, together with this, also push the boundaries of harmonization further.

What are the main implications of the UK experience?

Overall, from the discussion of the UK scenario, three main threads emerge.

First, the availability of injunctions against intermediaries has proved a successful remedy in the hands of rightholders. Even more so, according to Arnold J a particular type of intermediary injunction, ie blocking injunctions, does not current have any alternatives that are more effective. In this sense, the relevance of two major developments is self-apparent: first, the CJEU confirming the compatibility of this measure with the EU legal order (UPC Telekabel) and, secondly, the Court of Appeal of England and Wales upholding the analysis of Arnold J that also trade mark owners can avail themselves of this tool.

Secondly, the UK experience demonstrates how – despite the EU harmonization efforts in the area of IP enforcement – there remain significant lacunae in the resulting framework (the issue of costs being an example), not to mention the fact that certain key provisions, eg the third sentence in Article 11 of the Enforcement Directive, have not been transposed fully or tout court into certain national IP regimes.

All this leads to a third, final point: should the EU merely reform the existing EU enforcement framework without pushing the boundaries of harmonization further, or should – instead – more harmonization be provided?

Consultation after consultation,
what does the future hold?
The DSMS debate

In light of the responses to the consultation on the review of the enforcement framework, as well as dissenting views on key aspects like costs, it is submitted that this question should be addressed at the EU level, even before any specific proposals are tabled [note that a review of the IP enforcement framework is expected in the first half of 2017].

This is particularly – albeit not only – so in a cross-border context. Although cross-border injunctions are currently said to be more frequent in respect to direct infringers rather than intermediaries, one of the principal obstacles that rightholders have flagged is the diverging substantive scope of injunctions in different Member States, as well as costs of injunctions.  Intermediaries have instead expressed the view that the implementation of injunctions impacts on their operations primarily in terms of additional costs, staff and technical infrastructure but might also result in adjusting the service offer.

At the time of adopting the Enforcement Directive, EU legislature stressed how disparities between the systems of the Member States as regards the means of enforcing IP rights are prejudicial to the proper functioning of the internal market, make it impossible to ensure that IP rights enjoy an equivalent level of protection throughout the EU, and also lead to a weakening of substantive IP law.

Overall, if the rationale underlying the Enforcement Directive still holds valid today, then any reform discourse should start from the awareness of how, despite harmonizing efforts, the current legislative framework has significant shortcomings that courts – whether at the EU or UK levels – have been called to overcome.

[Originally published on The IPKat on 29 December 2016]

Saturday, 24 December 2016

Kat-awards day!
With the holidays on us and end of the year quickly approaching, it seems about time to think of what has been and what will be next in the constantly exciting world of copyright.

Over the past three years [hereherehere], I have reviewed [in a completely arbitrary and EU-obsessed fashion, of course] the copyright year, and award a number of [symbolic] prizes to the most relevant developments occurred during that year. 

Once again, it seems that in 2016 Europe has been a never-a-dull-moment kind of place copyright-wise, with a couple of notable exceptions.

So here we go:

Most important copyright decision

"GS Mediafor sure!" many would say. Although the latest instalment [Katposts herefrom the Court of Justice of the European Union (CJEU) in its own linking&copyright saga is an important one with significant implications, it does not get the prize. 

The reason is that thee is another decision, again a CJEU one, that - on the one hand - has possibly attracted less attention than GS Media - but that - on the other hand - appears to have more systematic, deeper, consequences for the overall copyright architecture in Europe.

It is the November decision in Soulier [here and here], in which the CJEU ruled that national legislation [in that case, it was the 2012 French loi on out-of-print books] that vests ab initio third parties, eg approved collecting societies, and NOT authors with the right to authorise the making of acts restricted by copyright is incompatible with EU law. 

The late Marc Soulier
Although the body of the decision contains some significant nuances, Soulier is important because, together with the earlier CJEU decisions in Reprobel [here - but Article 12 in the proposed Directive on copyright in the Digital Single Market appears to have the mission to 'erase' it] and VOB [here], represents a very strong application of the so called author principle.

First, despite contrasting hints in the past in which the CJEU appeared to employ the terms 'authors' and 'rightholders' interchangeably, the Court reinforced the idea that who the InfoSoc Directive intends to grant a 'high level of protection' to is authors.

Secondly, although not referring explicitly to the notion of EU preemption [on which see also here], the CJEU fully embraced it. In this sense, there is no gap between the CJEU judgment and the Opinion of Advocate General (AG) Wathelet [here], who dismissed the view that the national legislation at issue would not affect the protection of copyright because it simply constitutes an arrangement for managing certain rights which the InfoSoc Directive does not preclude. What matters - for both the CJEU and the AG - is whether authors have had the possibility to express their individual consent regarding uses of their works. 

Overall, Soulier calls for a more thorough scrutiny of national legislations, and the way in which authors are able (or instead removed from the possibility) to consent to future uses of their works, or at least be in a position to receive - individually - all relevant information. 

Ultimately, the CJEU appears to have brought (for the time being) authors back to the central stage.

Most important piece of legislation

Not much seems to have happened in the legislative sphere this year, as Governments have been busy consulting [see, eg, Singapore], receiving proposals [see, eg, Australia], or handling situations other than copyright reform ...

All in all, the main driver of legislative change - or, at least, proposals for a change - has been the European Commission. 

In particular, its proposed [so not an actual piece of legislation] directive on copyright in the Digital Single Market is noteworthy for the innovations that it contains, including:

  • a new neighbouring right for press publishers (Article 11) [hereherehere];
  • new obligations for certain types of hosting providers (Article 13) to address the so called 'value gap' [hereherehere];
  • an attempt to forget unwanted CJEU case law (Article 12);
  • new mandatory exceptions (Articles 3-6).
A heated debate has ensued regarding some of the proposed provisions ... so the next few months promise to be - to say the least - interesting.

Copyright person of the year

Following a (concerning) period in which Advocates General were rather absent from the CJEU copyright scene [which prompted this little j'accuse], it is now a relief to see not only that they are back in action but also produce thought-provoking opinions.

This year's prize goes indeed to an Advocate General: AG Maciej Szpunar [who, incidentally, will be also one of the two keynote speakers at the forthcoming JIPLP copyright conference in London]

Advocate General Szpunar
The reason is that in his 2016 opinions, eg the one in VOB [hereand that in Hotel Edelweiss [here], AG Szpunar has given a central role in copyright to the general principle known as "dynamic interpretation of the provisions of law, which is capable of adapting the wording thereof to the changing conditions in fact and thus allowing the objective sought by those provisions to be attained." [para 35 of Hotel Edelweiss]

This principle, among other things, has been central to his determination (later confirmed by the CJEU) that libraries should be allowed under EU law to lend, not only physical books in their collections, but also electronic ones.

The need to frame copyright within a dynamic view of its surrounding environment is not a new one: for instance, Recital 5 in the InfoSoc Directive makes it clear that the law on copyright and related rights should be adapted and supplemented to respond adequately to economic realities such as new forms of exploitation. Yet, AG Szpunar has shown in his opinions how to use this interpretative principle constructively, substantially and intelligently, and not - as some policy-/lawmakers tend instead to do at times - as an empty refrain.

The next opinion of AG Szpunar? It will be released on 19 January: stay tuned!

Grab them by the value!
Most important unresolved issue

There is nothing new here: it is still the same problem that has existed as long as copyright itself, ie the relationship between restricted uses, and uses that do not require permission from the copyright owners (exceptions, defences, limitations, free uses ...).

Over the past year, however, we have seen this discussion resurfacing with renewed significance: 

  • in Europe, the Commission's proposed directive calls for the introduction of new, mandatory copyright exceptions, whose ambition and scope - in my view - are however limited; in addition, the value gap proposal in Article 13 might have restrictive effects on both hosting providers' freedom to conduct business and users' freedom of expression and privacy;
  • in Australia, the Productivity Commission has just submitted a report to the Government advocating a number of changes to that country's IP regime. Among other things, the report submits that Australian copyright law should move from a closed system of exceptions to an open-ended fair use approach;
  • in the US the record industry has recently sent a letter to PEOTUS Trump [reported on The 1709 Blog], calling for action on the so called 'value grab' [not a joke - but who was the music executive who made the deliberate choice to call the 'value gap' 'grab' with someone like Trump himself?]
We will see in 2017 whether any of these discussions lead somewhere.

Most important policy issue for 2017

In my view there are two top issues.

First, it will be important to see whether and to what extent the European Parliament and the Council will alter the copyright proposals advanced by the European Commission. The EU experience is likely to have spill-over effects outside Europe [as the 'value grab' discussion in the US demonstrates], so the debate that will unfold before EU institutions will be likely followed closely in Europe, but also outside it.

Britt Dekker for Playboy
Secondly, 2017 is also likely to be the year when UK Government triggers the now famous Article 50. At the moment what 'Brexit' means is not entirely clear, and for copyright it will be vital to understand whether the UK intends to remain in the European Economic Area or not [see here for an early take].

Most important copyright-protected work

Here there is little doubt.

The most important copyright works of the year are TV personality Britt Dekker's photographs for the Dutch edition of Playboy

Clearly of great economic importance, the leaked photographs have prompted litigation between Sanoma (the publisher of Playboy) and GS Media all the way up from the Amsterdam District Court to the Dutch Supreme Court and from there to the CJEU [see here for more background information]

The CJEU has tried to provide some guidance on how to tackle linking to unlicensed content through its GS Media decision, but the last word on linking has hardly been told yet. 

Well, while waiting for the next linking case, enjoy the holidays and thanks for all your support, feedback, comments, criticism, information and materials provided this year!

[Originally published on The IPKat on 24 December 2016]

Thursday, 8 December 2016

Mediaplayers and streaming: AG Campos Sánchez-Bordona in Filmspeler proposes broad interpretation of notion of 'indispensable intervention'

A little more than a year ago this blog reported that a new reference for a preliminary ruling to the Court of Justice of the European Union (CJEU) had been filed by the Rechtbank Midden-Nederland (District Court, Central Netherlands, Netherlands). 


This reference [Stichting Brein v Jack Frederik Wullems, acting under the name of Filmspeler, C-527/15] had arisen in the context of litigation between Dutch anti-piracy organisation Stichting Brein and Jack Frederik Wullems over the sale, by the latter and through - among other things - his site, of various models of a multimedia player under the name ‘filmspeler’. 

Filmspeler is a player for connecting a source of image and/or sound signals to a television screen. If the multimedia player is connected to the internet, on the one hand, and to a user’s screen (for example, a television screen), on the other, the user is able to stream the image and the sound from a web portal or website.

Among other things, Wullems installed add-ons [over which he had no influence] containing hyperlinks which, if clicked, would redirect the user to streaming websites, controlled by third parties, on which films, television series and (live) sporting events could be enjoyed free of charge, with or without the authorisation of relevant rightholders. 

Stichting Brein sued Wullems for copyright infringement before the District Court of Central Netherlands, claiming that through the sale of the Filmspeler player, Wullems was carrying out a ‘communication to the public’ contrary to Dutch copyright law.

The District Court held the view that the relevant Dutch provisions should be interpreted in light of Article 3 of the InfoSoc Directive but considered that: 

(1) CJEU case law existing at that time [notably Svensson and BestWaterwould not provide criteria sufficient for reaching a decision in this case; and 
(2) it was unclear whether the defence for temporary copies, pursuant to the Dutch transposition of Article 5(1) of the InfoSoc Directive, would be applicable to relevant streaming activities.

The District Court decided therefore to stay the proceedings and seek guidance from the CJEU as to the following:

‘1)      Must Article 3(1) of the [InfoSoc] Directive be interpreted as meaning that there is “a communication to the public” within the meaning of that provision, when someone sells a product (mediaplayer) in which he has installed add-ons containing hyperlinks to websites on which copyright-protected works, such as films, series and live broadcasts are made directly accessible, without the authorisation of the right holders?
2)      Does it make any difference:
-      whether the copyright-protected works as a whole have not previously been published on the internet or have been published only through subscriptions with the authorisation of the right holder?
-      whether the add-ons containing hyperlinks to websites on which copyright-protected works are made directly accessible without the authorisation of the right holders are freely available and can also be installed in the mediaplayer by the users themselves?
-      whether the websites and thus the copyright-protected works made accessible thereon — without the authorisation of the right holders — can also be accessed by the public without the mediaplayer?
3)      Should Article 5 of the [InfoSoc] Directive (Directive 2001/29/EC) be interpreted as meaning that there is no “lawful use” within the meaning of Article 5(1)(b) of that Directive if a temporary reproduction is made by an end user during the streaming of a copyright-protected work from a third-party website where that copyright-protected work is offered without the authorisation of the right holder(s)?
4)      If the answer to the third question is in the negative, is the making of a temporary reproduction by an end user during the streaming of a copyright-protected work from a website where that copyright-protected work is offered without the authorisation of the right holder(s) then contrary to the “three-step test” referred to in Article 5(5) of the [InfoSoc] Directive (Directive 2001/29/EC)?’

Today's AG Opinion

This morning Advocate General (AG) Manuel Campos Sánchez-Bordona delivered his Opinion, and held the view that:

(1) the sale of a multimedia player of the kind at issue in the main proceedings constitutes “communication to the public” within the meaning of Article 3(1) of the InfoSoc Directive [note (para 33) that the submission of the Commission is that in the case at hand Article 3(1) would not be triggered because what Wullems did was to provide a mere ‘physical facility’ that would enable, but would not in itself be, a communication], and 
(2) cannot be covered by the exception laid down in Article 5(1) therein, inasmuch as it does not fall within the definition of “lawful use” in subparagraph b) of that provision and, in any case, does not fulfil the conditions for application of the three-step test in Article 5(5).

Communication to the public

The AG noted at the outset [para 3] how the first and second questions referred by the Dutch court are, in some respects, the same as those which gave rise to the judgment in GS Media [Katposts here]. However, according to the referring court, in this case the factual difference is that - unlike the background proceedings in GS Media - no hyperlinks were posted on the defendant's own website, but rather add-ons with hyperlinks were installed in the mediaplayer offered by him. 

Despite this, according to the AG the CJEU judgment in GS Media is applicable to the case at hand [para 4]

Interestingly enough, at para 41 the AG also warned against the risks of departing from previous CJEU decisions [is this why not even AG Wathelet in his GS Media Opinion - here - dared to say that adopting his view would mean departing from the CJEU conclusions in Svensson?]:

"The requirement of certainty in the application of the law obliges the court, if not to apply the stare decisis in absolute terms [formally there is no system of binding precedent at the CJEU level], then to take care to follow the decisions it has itself, after mature reflection, previously adopted in relation to a given legal problem. To my mind, that is what must happen with regard to the case-law laid down (or confirmed) in the judgment in GS Media regarding the relationship between hyperlinks and communication to the public in the context of Directive 2001/29."

Having said so, the AG recalled the cornerstones of GS Media, ie that [paras 42-43]

"(a) the provision of clickable links to protected works must be considered to be ‘making available’ and, therefore, such conduct is an ‘act of communication’; (b) that concept refers to any transmission of the protected works, irrespective of the technical means or process used, and (c) there is a rebuttable presumption that the posting of a hyperlink to a work unlawfully published (without the authorisation of the right holders) on the internet amounts to a ‘communication to the public’ within the meaning of Article 3(1) of Directive 2001/79, if it is done in pursuit of profit.
In the same vein, the Court has held that the concept of communication to the public of a protected work requires either the communication to be made by a specific method different from those used before or, failing this, the work to be distributed to a ‘new public’, deemed to be a public which the right holders did not take into account when they authorised the original (limited) distribution of the work."

According to the AG [para 44] "it is not difficult to conclude that the case-law laid down in the judgment in GS Media, regarding the relationship between hyperlinks and the concept of communication to the public, is applicable" to the case at hand.

This said, he considered the material difference that, unlike in GS Media, Wullems did not directly provide any hyperlinks to protected works, but rather offered for sale a multimedia player with add-ons containing such hyperlinks.

Rejecting the Commission's "reductionist" [in the AG's view: see para 49] submission that Wullems’ intervention was ‘not crucial’ and that he merely ‘enabled’ the public to have access to content that can be downloaded from other websites, the AG held [paras 49-51] that:

"Marketing of the filmspeler goes beyond the mere sale of a technical accessory ... In that device, Mr Wullems provides, inseparably, the necessary hardware and software which are aimed directly at enabling purchasers to access copyright-protected works on the internet without the consent of right holders. Provision of that immediate access to an unspecified public is part of the added value of the service supplied by Mr Wullems, for which he receives the price paid — or at least a substantial part thereof — in return for the mediaplayer ... [T]here is no significant difference between posting hyperlinks to protected works on a website and, as in the present case, installing hyperlinks in a multimedia device designed specifically for use with the internet (in particular, so that, through it, users are able to access straightforwardly, directly and immediately, digital content made available without the consent of the authors). The provision of links to that protected content, the making available of that content to the public, is a feature common to both types of conduct, and its apparently incidental or ancillary nature cannot conceal the fact that the activities concerned are aimed at ensuring that anyone may, merely by clicking on the hyperlink, enjoy the protected works."

AG Campos Sánchez-Bordona
And here's the crucial bit [paras 53-54]

"It is therefore possible to refer to the indispensable role, within the meaning of the case-law, played by Mr Wullems in the communication to the public of protected works; his intervention is performed deliberately and with full knowledge of the consequences entailed. That is clear, in particular, from the examples of the advertising he uses to promote his device. 
In short, the filmspeler cannot be regarded as a mere ‘physical facility’ within the meaning of recital 27 in the preamble to Directive 2001/29, but rather as a type of communication to the public of copyright-protected works that have previously been unlawfully uploaded to the internet. Mr Wullems’ conduct involving the installation of hyperlinks to those works in his devices, which he clearly does in pursuit of a profit and in awareness of its unlawfulness, assists purchasers of the filmspeler to avoid the consideration payable for lawful access to those works, that is, payment of the remuneration due to the right holders which usually takes the form of a membership fee, subscription or another pay-per-view method."

Having said so, the AG turned to consideration of whether the public targeted by Wullems's act of communication would be also 'new'. The AG answered in the affirmative, also noting [para 58] that "the filmspeler entails an undeniable advantage for a significant portion of that public: persons not particularly skilled at using the internet to find illegal sites for watching films and televisions series, amongst other digital content. That portion of the public might prefer the user-friendly menu which the filmspeler displays on its screen to the sometimes laborious search for websites offering such content."

Temporary copies defence?

Turning to the third and fourth questions the AG considered that, in relation to Article 5(1) of the InfoSoc Directive, the condition that would not be satisfied is the one relating to the ‘lawful use’ of a protected work [para 65]. The AG added [para 71] that 

"lawfulness, in objective terms, depends rather on the authorisation of the right holder or his licensee. Excusable ignorance or reasonable lack of knowledge, on the part of the end user, of the fact that no such authorisation exists could, undoubtedly, exempt the user from liability, but it does not exclude — I repeat, in strictly objective terms — the unlawfulness of the ‘use’ referred to in Article 5(1) of Directive 2001/29."

indispensable intervention
It follows [para 72] that, since the protected works to which the hyperlinks installed on Mr Wullems’ filmspeler lead were not authorised by the copyright holders, streaming by an end user by means of that device would not be consistent with ‘lawful use’ for the purposes of Article 5(1)(b) of the InfoSoc Directive.

Three-step test

The AG also noted that, even admitting that use of Wullems's device was covered by Article 5(1), none of the conditions in the three-step test within Article 5(5) of the InfoSoc Directive would be satisfied. 

Also recalling the CJEU decision in ACI Adam [Katposts here], the AG noted how "it would run counter to Directive 2001/29 to allow indiscriminate or widespread reproductions from unlawful sources, or reproductions made by circumventing the access limits. Accepting the validity of such reproductions would be tantamount to promoting the circulation of pirated digital content and, to that extent, would seriously prejudice the protection of copyright and create favourable conditions for unlawful methods of distribution, to the detriment of the proper functioning of the internal market. [para 77]


Today's AG Opinion is good news for rightholders, especially because the AG appeared to construe the notion of 'indispensable intervention' fairly broadly and in a way that goes beyond a 'merely direct' indispensable intervention [as instead, in my view, the CJEU had done in Reha Training - here - and GS Media].

We shall see if the CJEU follows the AG Opinion: if this happens - and with the same nuances - then Filmspeler is going to be an additional step towards an even broader interpretation of what the elusive concept of 'communication to the public' entails.

[Originally published on The IPKat on 8 December 2016]

Friday, 2 December 2016

The proposed new VAT rules on e-publications: do they have any implications for copyright and digital exhaustion?

Trying to understand
newly proposed VAT rules
Can VAT rules have any implications for ... copyright?

Yesterday - as part of its Digital Single Market Strategy - the EU Commission unveiled proposals for new tax rules with the objective of supporting e-commerce and online businesses in the EU.

Among the measures proposed, there is one that may be of interest also from a copyright perspective. 

New VAT rules for e-publications

The Commission proposed in fact to apply the same VAT rate to e-publications, eg e-books and online newspapers, as for their printed equivalents, thus removing provisions that excluded e-publications from the favourable tax treatment allowed for traditional printed publications.

As explained in the relevant proposal, according to the VAT Directive electronically supplied services including electronically supplied publications have to be taxed at the standard VAT rate (minimum 15%). On the other hand, Member States have the option to tax publications on any means of physical support at a reduced VAT rate (minimum 5%) and some Member States were granted the possibility to continue to apply VAT rates lower than the current minimum of 5% (super-reduced rates) including exemptions with the deductibility of the VAT paid at the preceding stage (so called zero rates) to certain printed publications.

Readers may remember that, not long time ago, in the context of actions [European Commission v France, C-479/13, and European Commission v Luxembourg, C-502/13] that the EU Commission had brought against France and Luxembourg over their VAT regime, the Court of Justice of the Union (CJEU) ruled [here  and here] that, unlike analogue publications, Member States [like France and Luxembourg] cannot apply a reduced VAT rate to e-books. The court held in fact that, for the purpose of Article 98(2) of the VAT Directive, an e-book is not a good, but rather an "electronically supplied service" within the meaning of the second subparagraph of Article 98(2) of that directive.

The result [see p 2] of all this has been "a markedly less favourable VAT treatment of e-publications in most Member States": a situation that the new VAT regime is meant to remedy. 

The proposed amendment of Article 98 of the VAT Directive does in fact exclude e-publications from the treatment reserved to "electronically supplied services", although - it would seem - not from their general classification as "electronically supplied services".

What are the copyright implications of all this? Well, it would appear - potentially - that analogue and electronic copies of protected works should be subject - if not to the same classification - at least to the same treatment. 

But in what sense?

VAT-induced exhaustion
Digital exhaustion under the InfoSoc Directive

The scenario that immediately comes to mind - being also unsolved at the level of CJEU jurisprudence (at least for subject-matter other than computer programs) - is that of digital exhaustion.

Readers will promptly recall that in its shocking 2012 decision in UsedSoft, C-128/11 [Katposts herethe CJEU held that Article 4(2) of the Software Directive envisages digital exhaustion in relation to the first sale of digital copies of computer programs.

Following that decision, it has remained uncertain whether the same conclusions can be also extended to works falling under the InfoSoc Directive.

In its 2015 decision in Allposters, C-419/13 [Katposts here] the CJEU appeared to suggest that exhaustion under Article 4(2) of the InfoSoc Directive only applies to the tangible support (corpus mechanicum) of a work, and would not extend to the work incorporated therein (corpus mysticum). Being devoid of any tangible support, this might mean that the right of distribution in a digital copy would never be exhausted. At the time of the Allposters decision I wrote an article [here for a pre-edited version] in which I also referred to the CJEU decision in European Commission v France to come indeed to the conclusion that, albeit rooted within a very specific (analogue) background, in that judgment the CJEU appeared to rule out any possibility of having digital exhaustion under the InfoSoc Directive.

The AG Opinion in VOB

After all I might have been wrong, in the sense that this conclusion might have been premature. 

Although in the recent VOB case [C-174/15 - a reference for a preliminary ruling asking if EU law allows libraries to e-lend works in their collections] both Advocate General (AG) Szpunar in his Opinion [hereand the CJEU in its judgment [here] ruled out that addressing the issue of digital exhaustion under the InfoSoc Directive would be relevant to addressing the questions referred by the Dutch court, that case has something to tell about digital exhaustion under the InfoSoc Directive.

Of particular interest is the AG Opinion.

First, the AG dismissed the idea that Allposters could call "into question [or limit] in any way the conclusions which follow from the Usedsoft judgment." [para 54].

No differences in digital
and analogue publications either
Secondly, the AG rejected the relevance of argument advanced by the French Government [and, yes, also myself in the article mentioned above] that "the differential treatment, for value added tax purposes, of books in a physical medium and books distributed by electronic data transmission ... demonstrates that those two book formats are not equivalent." [para 59] 

The AG noted not only that such approach would be possibly against the principle of tax neutrality, but also recalled that "the Commission has recently published an action plan on VAT [of which yesterday's package is a follow-up] in which it specifically contemplates the alignment of the VAT rate applicable to digital books and newspapers with that applicable to printed books. That approach confirms the stance taken by the Commission, also in the present case, that electronic books and printed books are in substance equivalent." [para 62, emphasis added]


An initiative on VAT rules for e-publications does not, of course, have direct copyright relevance. Nonetheless, the package adopted yesterday is another step into the direction of suggesting the analogue and electronic copies of works could (or, rather, should?) be subject to the same treatment. Such principle of 'equal' treatment might not be limited to the field of VAT rules.

In any case and having said so, one should also recall that the package proposed by the Commission does not remove e-publications from their qualification as electronically supplied services, but rather sets an exception from their treatment as such.

In all this, the uncertainties surrounding digital exhaustion under the InfoSoc Directive remain, although it is not excluded that - when the opportunity arises - the new VAT rules might be invoked by those who advocate the existence of this principle beyond the realm of the Software Directive, ie in the InfoSoc Directive.

[Originally published on The IPKat on 2 December 2016]