Countdown to Implementation of The Collective Rights Management Directive – What does the future hold for Collecting Societies?

Countdown to Implementation of The Collective Rights Management Directive – What does the future hold for Collecting Societies?

Suzanne Rab*

The UK Intellectual Property Office (IPO) has issued Guidance on how to comply with new EU legislation on the regulation of collecting societies and other rights management organisations (CMOs).  The reforms are contained in the (long titled) Directive on Collective Rights Management of Copyright and Related Rights in Musical Works for Online Use in the Internal Market (Directive).  The aim behind the Directive is to ensure that CMOs act in the best interest of rights holders by establishing minimum governance and reporting standards.

Copyright licensing in the EU has traditionally been organised along national lines.  It is not hard to see how this compartmentalisation has come under pressure against EU internal market goals.  Online distribution of content and the demands of service providers for multi-territorial licensing arrangements have further exposed the weaknesses of CMO organisational structures.  For over a decade the European Commission (Commission) has pushed for greater accessibility.  Yet reconciling the tensions between and interests of artists, publishers and consumers has been no easy task. 

Expectations that the Directive would force a seismic shift in the collective management of copyright are probably unlikely to be realised in practice, given the compromise position adopted in its final text.  There are nevertheless important changes about to take effect which will have potentially far-reaching commercial consequences for collecting societies, authors, distributors and music users.

The UK has implemented the Directive through the Collective Management of Copyright (EU Directive) 2016 (2016 Regulations).  Those who have been following the Directive’s legislative journey may have noticed that regulations were issued in the UK in 2014 in the form of the Copyright (Regulation of Relevant Licensing Bodies) Regulations 2014 (2014 Regulations).  However, the 2014 Regulations do not cover all the issues contained in the Directive and will be replaced by the 2016 Regulations when they come into force on 10 April 2016.

The 2016 Regulations contain a number of innovations that are likely to present challenges for CMOs in ensuring that their administration, data management and record keeping are robust.  CMOs that grant multi-territorial licences will be required to have “sufficient capacity” to process efficiently and in a transparent manner the data needed to administer multi-territorial licences. CMOs must, in response to a “duly justified” request from rights holders, service providers or other CMOs, provide current information on their online repertoires.

The 2016 Regulations also preserve many of the provisions in the 2014 Regulations to require appropriate training for CMO staff, independent dispute resolution, and effective and timely complaints procedures for licensees and members.  Licensees must be dealt with in good faith and not only once their licence has been concluded.

The interplay between the Directive and wider EU competition and regulatory policy remains in a state of flux.  It is not long since the EU General Court gave its judgments in proceedings brought by the International Confederation of Societies of Authors and Composers (CISAC) and 21 of its collecting society members.   The Court upheld the Commission’s 2008 decision finding that the collecting societies had violated the EU competition law prohibition on restrictive agreements contained in Article 101(1) of the Treaty on the Functioning of the EU through the provisions in their reciprocal representation agreements. 

Reflecting a similar impetus to break down barriers to online trade and geographic market divisions, only last week the Commission published its interim report in its e-commerce sector inquiry.  The Commission emphasised that one of its priorities is to tackle “unjustified barriers” to cross-border e-commerce.  It has commented that geographical sales restrictions are common on both the online and bricks and mortar world.  The Commission has criticised such practices as geo-blocking which occur when retailers block online purchasers based on their location.  The Commission has also hinted that draft legislation to address geo-blocking competition concerns is in the pipeline and that this may be published as early as May. 

The 2016 Regulations will partly address some of the challenges in dealing with what can be a labyrinth of multi-layered procedures and regulations for EU copyright licensing.  Reform is well overdue.  Whether the Directive does effect meaningful change so as to make the online music market more accessible will depend on how CMOs respond in practice.  Some may choose to race to the bottom by applying the minimum standards and no more.  Given already voiced concerns that those standards do not go far enough, pressure in licensing negotiations for greater transparency and accountability might operate as a tactical lever to push for higher standards than required.  

Suzanne Rab is a barrister at Serle Court Chambers in London.  Suzanne has wide experience of EU law, regulation and competition law matters combining cartel regulation, commercial practices, IP exploitation, merger control, public procurement and State aid.