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EU Copyright Changes Poised to Upset Critical Internet Policies

· October 18, 2018

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Controversial copyright legislation advancing through Brussels has received limited notice in Washington, despite its potential to significantly reshape copyright law on the Internet.  On September 12, the European Parliament voted to adopt a new Copyright Directive, which contains controversial provisions regulating news links and Internet filtering.  (DisCo has covered these provisions and this legislative process extensively. [1] [2] [3])

While the proposed Directive may not be law yet — final resolution of the proposal is estimated to occur early next year — these changes stand to affect how users outside of Europe experience the Internet.  The legislation is now in so-called “trilogue” discussions between the European Parliament, Council, and Commission.  Barring a significant course correction in Brussels, the Parliament’s proposed Directive is expected to become law in substantially its current form.  

This would not be the first time in 2018 that legal changes in the EU affected U.S. users.  The EU’s recent General Data Protection Regulation appears to have affected how U.S. companies are operating not only in the EU, but in the U.S. as well: to minimize compliance costs, some businesses simply elect to apply the most elaborate rules to all users worldwide, or exit the European market altogether.

EU regulators’ goal of reaching across the Atlantic has been fairly explicit.  The European Parliament’s press release after the vote specifically mentions several U.S. companies: “sharing platforms such as YouTube or Facebook, and news aggregators such as Google News.”  In defending the bill after a preliminary procedural defeat, one parliamentary backer of the bill removed any doubt about this focus, claiming “the ones [firms] that are reacting are mostly the ones we are targeting, which are the GAFA,” referring to prominent U.S. companies with a French acronym.

There are two major points of controversy over the Directive: (a) so-called “neighboring rights” for news that prohibit online services from linking or pointing to news articles online without paying for that privilege (Art. 11), and (b) language that functionally imposes a filtering obligation on online services (Art. 13).

(a) Ancillary copyright (Art. 11 and 13b)

Article 11 of the Directive imposes a neighboring right that governs use of press publications by online service providers.  The objective appears to be forcing U.S. online services to compensate news publishers, and the vehicle for achieving this is creating a new statutory right for uses of news content, including the act of pointing or linking to it.  For this reason, critics describe Article 11 as a link tax, and in March 2018 the U.S. Trade Representative characterized this type of measure as a “key barrier to digital trade.”  U.S. law, of course, has always permitted linking, given that it is a fundamental feature of the Internet.  In fact, the guaranteed right to quote freely from published works has been enshrined in international copyright treaties for over a century a commitment that the EU is poised to breach.  A similar provision in Article 13b of the Parliament’s proposal creates a parallel system over image indexing online.  This resembles a French regulation enacted in January 2017 targeting U.S. search providers by creating an obligation to license every Internet image indexed.   

These provisions may have particular implications on U.S. companies, which could be held liable for activity in the EU that is lawful in the United States, decreasing business certainty for companies operating and expanding internationally.  It may also threaten innovative new features in the online news space that would benefit journalists and the public — for example, Google News search shut down in Spain because of similar regulations several years ago.  On a broader level, these changes create uncertainty about hyperlinks and online services in general, which are fundamental tools of Internet functionality.

(b) Liability and Filtering obligations (Art. 13)

Article 13 of the Directive functionally requires the implementation of filtering mechanisms across online content sharing service providers.  Critics refer to Article 13 as the “upload filter” requirement.  While explicit references to “effective content recognition technologies” no longer appear in Article 13, it nevertheless presents online services with the choice of negotiating an indeterminate number of licenses, filtering user content, or facing direct liability.

As approved, the European Parliament’s version of the Directive now states, “Online content sharing service providers perform an act of communication to the public.”  It further states that online services “shall therefore conclude fair and appropriate licensing agreements with right holders.” Moreover, the proposed Directive makes clear in a recital that the regulated online services can no longer rely upon the intermediary protections that have existed in Europe’s e-Commerce Directive since 2001.  

In practice, therefore, online services will face direct liability arising for user content unless they license or filter.   Everything has to be licensed ahead of time, or must not appear online. If it does, the intermediary is instantaneously liable, potentially for millions of user postings.

This is a 180-degree turn from the shared responsibility model of “notice and takedown” that has prevailed on both sides of the Atlantic for nearly 20 years.  The U.S. implementation of “notice and takedown” appears in Section 512 of the Digital Millennium Copyright Act, and enables copyright owners whose works appear online without authorization can obtain quick extra-judicial relief by complaining directly to the intermediary.  The intermediary is required to remove content even without a court order, in order to maintain its legal protections. In addition to representing (for now) a point of U.S.-EU consensus, the DMCA has been a mainstay of U.S. international policy. It has been agreed to in over a dozen free trade agreements, including the recently renegotiated NAFTA.  

Faced with the prospect of requiring users to present proof of copyright ownership or a lawful license upon making every social media post, well-resourced online services may deploy automated content filtering solutions.  As Wired explains, “[a]lthough published versions of the proposal don’t explicitly require companies to adopt automatic filtering technology, critics argue that placing responsibility for policing content on platforms amounts to a de facto requirement for filters.”  Similar critiques were voiced by the Washington Post.  These filtering solutions are both expensive and imperfect, and tend to protect large industrial rightsholders at the expense of individual creators.  And due to the difficulties and costs of geographically restricting content, it is likely that firms without the resources to build Europe-only infrastructure may simply apply their filters worldwide.

In a press release, the European Parliament claims that “small and micro platforms” have been excluded from these regulations, “in an attempt to encourage start-ups and innovation.”  The release also refers repeatedly to “tech giants” — underscoring the goal of singling out successful U.S. tech firms.  In this sense, EU policymakers are in a bind.  On the one hand, they must explain that the Directive won’t burden new, small enterprises.  On the other hand, international trade commitments prevent the EU from targeting only U.S. tech firms with this Directive, even though EU parliamentarians have publicly conceded this intention.  

Requiring that online services implement filters also risks censoring freedom of speech and expression online.  This obligation particularly threatens smaller services, thus limiting competition and consumer choice.  While Brussels has a brief opportunity to change course before enacting its new Copyright Directive, it appears unlikely to do so unless trading partners and other affected stakeholders engage their EU counterparts and propose a better path forward.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.