The EU Copyright Directive Is Likely To Stifle Competition And innovation


 Sunday, March 31, 2019  /  17.25PM / By Institute of Economic Affairs


Yesterday, the European Parliament voted in favour of the Directive on Copyright in the Digital Single Market, in one of the final stages before it becomes law. There were protests against the Directive across Europe over the weekend, and campaigners were optimistic that these could be effective in view of upcoming European Parliament elections – but to no avail.


The Directive purports to update and harmonise aspects of copyright law in order to build the digital single market. In reality, its two key provisions, Articles 11 and 13, seem likely to stifle innovation, embed incumbency and fragment the availability of content on the Internet. I described the problems with these Articles in two Epicenter Briefings: The EU Battles the Internet and Battle Resumes – the Copyright Directive is Back.


Article 11 introduces a new category of rights holder – the “press publication”, which is, broadly, mainstream journalistic content published under the editorial control of a service provider. Press publishers will have the right to be compensated by websites that link to their content. This provision has been dubbed the “link tax”. It has been widely criticised as a distortive measure that seeks to prop up a declining industry. While it seems unlikely that it will arrest the decline of the traditional press, it seems certain to reduce the news content in circulation, as platforms may simply stop making news links available, as happened in jurisdictions where a link tax has been tried. Acknowledging and adapting to the new reality of how news is consumed would surely have led to better outcomes for publishers and consumers.


Article 13 requires platforms that make material uploaded by users available to the public to enter into licensing arrangements with rights holders in any material that may ever be uploaded their sites, and to use technology to pre-filter user content that violates copyright. Failure actively to do both will lead to platforms being liable for copyright infringement. Legal experts have expressed serious criticisms of this approach, as it removes the protection for platforms previously available if they removed violating content promptly on receiving notice of it, and contravenes fundamental rights such as free expression and freedom from monitoring. It also effectively rewrites existing EU copyright law. As the Directive progressed on its legislative journey safeguards were added, such as a requirement on member states to ensure that users are able to rely on the exceptions for quotation, criticism, review, caricature, parody and pastiche. It also states that that it will not to lead to any general monitoring obligation. Such safeguards will be difficult to achieve in practice.


Platforms such as YouTube routinely screen content for copyright and other violations, but being mandated by law to do so, with serious financial implications of being found not to meet the new legal requirements, will lead to more content being screened out across all platforms. This will inevitably include false positives, as automated means will not be able to determine accurately whether an item falls under a permitted exception. This will dissuade users from uploading content that quotes, parodies or pastiches copyright material. Even straightforward user-owned content could be at risk. As noted by MEP Julia Reda, who has campaigned against the Directive, platform users could be confronted with the message “Please wait while we compare your holiday snapshots with all stock photos ever made”. Complaint and redress mechanisms cannot effectively safeguard against this. The vast volume and short shelf life of uploaded content make human review a fruitless task. The mechanisms are rarely taken up by users, and are not a realistic way of safeguarding fundamental rights or the dynamism of platforms.


Non-EU platform operators will probably take action to avoid coming within the sphere of onerous EU regulation by blocking their content to users in the EU. While the biggest platforms such as Facebook and YouTube may be able to invest in the content filtering technology and legal requirements, smaller operators may simply avoid the EU market, disincentivising innovation and competition amongst platforms in the EU.


The Directive now passes to final approval by the Council, by qualified majority voting. While the Council agreed the text in “trialogue” negotiations with the Parliament and Commission representatives, it is thought to be possible that Germany may not now support the Directive, as senior ministers in the German government are known to oppose it. This would make a majority in the Council unlikely, but seems a faint hope at this stage. If agreed by Council, member states would have two years from the date of publication of the final text to implement the Directive in their domestic law. It includes a lot of broad, ambiguous concepts that represent significant departures from existing copyright law, which will have to be determined on a case by case basis, so the risk of legal uncertainty and variable implementation and enforcement across member states is high.


It seems likely (though far from certain) that the UK will no longer be an EU member or otherwise obliged to implement the Directive under transitional arrangements when it is required to come into force. Whether the government still elects to implement it will be a test of whether the UK is serious about pursuing regulatory independence and policies that support innovation and competition in the digital economy. Unfortunately, the UK government is thought to have supported the controversial provisions in the Council, and current policies from a digital tax to a new regulator of the Internet suggest that the government as presently constituted would enthusiastically adopt the Directive.



About The Author

Victoria Hewson, Senior Counsel; joined the IEA’s International Trade and Competition Unit in Spring 2018. She is a lawyer and practiced for 12 years in the fields of technology and financial services, before joining the Legatum Institute Special Trade Commission to focus on trade and regulatory policy. She has published work on the implications and opportunities of Brexit in financial services and movement of goods and the issues in connection with the Irish border. Before entering the legal profession Victoria worked for Procter & Gamble in the UK and Germany.



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