What might a Digital Single Market for content look like?

The Commission's recently published DSM strategy is, on the face of it, deceptively simple, but once you consider how it might work in practice and the legal reforms needed to bring it about, it begins to sound too good to be true.

Cross border access to content

One idea behind the DSM is that businesses should be able to sell their products and content online from wherever to wherever in the EU without differences in national law getting in the way.  This would give businesses the opportunity to 'scale up', building services which have access to a sizeable, pan-EU marketplace, much as new services in the US have a huge marketplace on their doorsteps in which to launch their services.

On the consumer side, in a DSM, consumers should be able to purchase products and content online from anywhere in the EU without their location making a difference to what they can purchase, when and for how much.  In the Commission's ideal DSM, a consumer in Germany would be able to watch the same TV programmes online, on the same terms and at the same time as a consumer in the UK.  Notices saying "This video is not available in your country" would become a thing of the past.

Looking at two of the UK's biggest cultural exports, Premier League football and the BBC, gives some insight into the possible consequences of the EU's reform agenda.

The FAPL's broadcasting rights distribution model has been the subject of much speculation since the seminal Karen Murphy CJEU decision in 2011; there was much discussion then about whether that would bring about the end of its territorial distribution and what impact on pricing, revenues and access the decision might have. Those discussions would be intensified should reforms bring about a truly single digital market. If, for example, Sky's Now TV service in the UK (which provides online access to FAPL matches) became available without restriction across the EU, this could have substantial effects on how the entire distribution model operates.

The BBC's iPlayer is not available outside the UK but, following the Commission's logic, it should be available across the EU in the same way as it is available in the UK.  But would this mean that UK licence fee payers would be subsidising access to BBC content for residents in the other 27 Member States who do not pay the licence fee? If that subsidy is to be avoided (and non-licence payers required to pay for access), would some form of geo-blocking be permissible?  And should the BBC be required to acquire pan-EU licences to enable pan-EU access when it may not be financially justifiable or feasible to do so?

Mandating pan-EU access would interfere with the business interests that have led to territorial licensing and geo-blocking, so the impact such a reform would have should be properly considered; it would be counter-productive to introduce a reform which would make it more difficult to finance creativity in future.

Rights acquisition for distributors may become materially more expensive if every piece of content they acquire is to be accessible by the entire population of the EU rather than just the population of one or a small number of Member States.  This may lead to a reduction of choice of service provider for EU consumers, with only the biggest players able to afford the licence fees, and prices for consumers may have to rise to fund the increased acquisition costs.

Running through the Commission's agenda (and its proposed competition law investigations) is distaste for the market strength and practices of certain big US tech companies.  It is ironic, then, that the big US tech companies are in a strong position at present to benefit from the DSM given they have the scale, resources and market penetration to provide the pan-EU offerings that the DSM allows.  Of course, what the Commission hopes is that the DSM will create the conditions for EU versions of the big US tech companies to develop because they would suddenly have a huge, pan-EU potential market for their services, which they don't easily have at the moment.

Portability of legally acquired content

Portability of content is mentioned by the Commission alongside cross-border access.  Portability of legally acquired content would allow, for example, a UK Now TV subscriber to access his or her UK service when travelling in other Member States, which is currently not possible.  It would not allow, of itself, someone in Germany to become a subscriber to the UK service.  This may represent a more proportionate and achievable policy objective, even if it would not deliver the level of cross-border access which the Commission wants to see.

Using the word "acquired" suggests portability would apply only to a certain type of digital access (i.e. permanent or temporary download) but it surely must mean lawful acquisition of access to any service.  Even this may be too narrow a definition: what about services that require no "acquisition" other than pressing 'play', should they also be subject to portability?  If so, the boundaries between portability and full cross-border access may be more porous than the Commission appears to suggest.  The Commission would have to establish which "legal acquisitions" counted to qualify for portability and give guidance to service providers on how they can work out who is making a legal acquisition in their 'home' Member State.

For a streaming service, portability would arguably not need a change in copyright law (because this sort of passive, cross-border provision of a service arguably does not engage the making available right in the country of receipt).  Rather, it would require "just" intervention in the terms of access and prohibition of geo-blocking of existing customers when overseas.  It would also not spell the end for exclusive territorial distribution.  However, for a service which involved making reproductions, where those reproductions took place in a country other than the 'home' country, it would be more complicated and could need reform of the underlying copyright law we go on to discuss.

The substance of digital copyright

To mandate content being available in every country would require substantial reform to the nature and licensing of copyright rights in the EU.  At the moment, 28 bundles of copyrights would have to be cleared to operate a truly pan-EU service.  The Commission appears to want to reform the nature and substance of digital copyright to make that process much simpler.  Thinking through the ways that copyright could be reformed to bring this about demonstrates the fundamental nature of the reforms it may have in mind.

In future, would clearance of one Member State's copyright be sufficient to clear them all, introducing a form of digital exhaustion of rights in which content available online in one Member State was automatically accessible from any other (i.e. as is technically possible in the physical world)?  Or would the rights be reformed so that clearance would only be needed in one country?  Conceptually it may be possible to do this with the making available right (see further below) but it is, at the very least, conceptually awkward to apply this thinking to the reproduction right.  What would happen if the rights in different countries were owned by different entities?  Would, for example, content made available by the rights holder in Member State A be required to be accessible in Member State B, without the approval of the rights holder in that Member State?

If a one-size fits all rights approach is not possible, might just the making available / communication to the public right be reformed to require only licensing at source?  The Commission will review the SatCab Directive to "assess the need to enlarge its scope to broadcasters' online transmissions". This, however, suggests a narrow focus to their reform of the making available right, potentially capturing only online simulcasting and/or webcasting, which does not match the scale of ambition set out elsewhere in its strategy.

When the making available right was introduced in 2001, no decision was made as to where that act took place (unlike the decision that had been made for satellite broadcasting in 1993).  One way to "ensure enhanced cross-border access to broadcasters' services" would be to stipulate that it only takes place at source, provided that source is in the EU.  The effect of this would be that streaming services would need licences from only one EU country (assuming that any reproductions at destination fell within the temporary copies defence).  But it does not appear that that option is presently under consideration by the Commission.

The Commission could, at least, usefully give some consideration to clarifying where the act takes place.  There has not yet been a CJEU decision directly on this point and, although the English courts takes the view that the act takes place only at source and where "targeted", it would help smooth the single market if this could be clarified, together with some indication of what it means to "target".

Licensing of rights and geo-blocking

Even if copyright were reformed to facilitate cross-border access, it could still be open to rights holders and distributors to put national barriers back up when they come to license their rights.

According to the Commission, two things standing in the way of achieving a DSM for content are territorial licensing and unjustified geo-blocking.  Territorial licensing is the practice of rights owners selling rights to their content on a country-by-country basis and preventing leakage across borders, which means that the same content could be available at different times, in different ways and at different prices in different countries.  To support that territorial licensing, online content is often "geo-blocked", which means that cross-border access to it is prohibited by technical measures.  The Commission wants to clamp down on use of such technology and contract terms.

Article 20(2) of the Services Directive may provide a blueprint for how unjustified geo-blocking and territorial licensing could be outlawed. It provides:

Member States shall ensure that the general conditions of access to a service, which are made available to the public at large by the provider, do not contain discriminatory provisions relating to the nationality or place of residence of the recipient, but without precluding the possibility of providing for differences in the conditions of access where those differences are directly justified by objective criteria.

This language could be adapted and expanded to apply to the supply of digital content but would have to operate alongside the changes to the definition of the exclusive rights in copyright which we discuss above.  The "justified by objective criteria" wording is, however, likely to be narrower when it comes to geo-blocking, because the only justification for geo-blocking currently envisaged by the Commission is when a service is lawful in one Member State but unlawful in another. However, Commissioner Oettinger told an audience at the Cannes Film Festival, following publication of the strategy, that some territorial licensing and geo-blocking may be allowed in the audiovisual industry, to protect its funding model, and that he did not want to impose pan-European licences.

Article 20(2) leaves it to Member State law to prohibit discriminatory provisions and a similar framework would have to apply in the DSM context, because the contracts to which the provision would apply would not be governed by harmonised EU law.  For the Directive and implementing laws to be fully effective, they would have to apply to contracts for exploitation of content in the EU regardless of the applicable law.

The Directive will have to establish the consequences of breaching the prohibition: would it result in fines (like breaches of competition law can) or just unenforceability of the relevant contractual term?  Further, if a service is subject to unlawful geo-blocking techniques would consumers be given a right to complain, perhaps akin to that envisaged by Article 6(4) of the Copyright Directive?

Exceptions

Further harmonisation of exceptions could be equally as important for the DSM as reform of the nature and licensing of rights.  The DSM cannot function satisfactorily if an exception applies in one Member State but not in another, as that would mean content could not be lawfully distributed across borders without a licence in the Member State in which the exception does not apply.

The present state of harmonisation is probably the most unsatisfactory across the whole of EU copyright: a non-mandatory, vaguely worded collection of a wide assortment of exceptions ruled on by a court without jurisdiction to apply its rulings to the facts, is hardly a sound basis for meaningful cross-border exchange of copyright.  The Commission is likely to focus on further harmonisation of the exceptions that have an impact on the DSM.  It has mentioned exceptions for research, education and text and data mining, which are likely to be of relatively niche application, but this seems to downplay the scale of the lack of harmonisation relevant to cross-border access to content.  The exceptions for quotation, news reporting and parody, among others, seem to be just as, if not more, important to the functioning of the single market.  Further harmonisation of these exceptions will, therefore, be important.

From such an unpromising starting point, the Commission has got a lot to consider: (i) which exceptions should be mandatory across the EU; (ii) how they should be drafted; (iii) whether new ones should be introduced and, if so, which ones; (iv) whether contract override should be prohibited; and (v) whether Member States should have any flexibility in their implementation of the exceptions.  At least one question, that of how far towards a general transformative use/open norm exception the EU should go, has already been answered: there is no mention in the strategy of any sort of open approach to exceptions.  However, there is certainly appetite at the Commission for trying to make the exceptions regime more future proof and flexible than it currently is.

Enforcement

The desire to bring about a DSM has been expressed ever since the Juncker Commission took office in November 2014.  What has made a more recent appearance is the Commission's interest in assisting rights holders to enforce their rights and reconsidering the balance struck by the hosting exception in the E-commerce Directive.

To many stakeholders, improved enforcement would be considered the quid pro quo to a DSM: if legislation mandates pan-EU access then pan-EU remedies against infringing content should also be available.  If content available in one Member State is to be available everywhere in the EU, so an injunction obtained in respect of one Member State's copyright should, on this view, be applicable and enforceable everywhere.

The Commission wants to "modernise" enforcement of intellectual property rights, in particular against commercial scale infringements and focussing on cross-border applicability.

It is currently cumbersome, difficult and expensive to obtain and enforce a copyright remedy which would apply in every Member State and take into account harm caused in each Member State (assuming the infringement takes place across the EU which online infringements typically would).  Cross-border applicability would likely need reform of at least the Brussels Regulation regime, which has only recently been recast.

The Commission mentions the "follow the money" approach.  In the UK that typically means taking enforcement action not against the direct perpetrators of infringements but against those whose services are used by the perpetrators to carry out and fund their infringements.  These include services like advertisers, digital advertising platforms, payment providers, search engines, domain name registrars etc.  The Commission has given no suggestion of what measures it may adopt: might it, for example, seek to impose liability on the "money" if they do not take adequate measures to withdraw their services from infringers when on notice?

The hosting exception

Reform of the hosting exception could have material implications for how most internet companies operate their services.  The exception was introduced at a very different stage in the development of online services and has undoubtedly allowed the services we know and use today to develop and flourish.  The Commission is of the view that now is the time to look again at how such services can continue to benefit from the defence.

The Commission talks about "clarification" of the defence, the apparent need for which probably comes from a lack of consistency across Member States about when and to whom the defence applies and what steps an intermediary needs to take to benefit from it.  Lack of consistency is not helped by a lack of judgments from the CJEU on this important issue.

Areas to clarify should include what level of knowledge means the defence does not apply, how quickly and effectively take down procedures have to be implemented, the relevance of how much control there is over the content on the service and how the design of the service influences whether the defence applies.

The Commission wants to go further than just clarifying the rules applying to intermediaries: it wants to explore "rigorous procedures" for removing illegal content and whether to impose a duty of care on intermediaries.  The underlying message seems to be that intermediaries should have to do more to 'earn' their hosting immunity.  This may mean, for example, being required to take a more proactive role prior to and following upload and to take further steps to ensure content stays down.  The current hosting regime, perhaps counterintuitively, disincentives intermediaries from actively monitoring their services because to do so could put them on notice, thus losing the benefit of the defence.  Perhaps the Commission would introduce some encouragement to monitor actively (and take down), for example, by ensuring the defence remains available (or even enhancing the defence) when effective monitoring is carried out.

Of course, this discussion reveals the potential impact this reform could have on the E-commerce Directive intermediary liability regime and what the Commission needs to consider.  This reflects a general theme of the Commission's DSM reform agenda: its aims may be relatively straightforward to set out and may have instinctive, common-sense appeal but, as soon as one scratches the surface, the level of complexity and the layers of stakeholder interests involved become quickly apparent.  In this light, it would be a significant achievement if the necessary reforms to, among others, the SatCab, E-commerce, Copyright and Services Directives and the Brussels Regulation, could be introduced during this Commission's term of office, not to mention the other areas in which reform is proposed.

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