Germany: Implementation of the DSM Copyright Directive

The EU’s initiative to create a Digital Single Market requires a number of major changes to Member States‘ copyright laws. Part of this project is reflected in the DSM Copyright Directive. On 24 June 2020, the BMJV presented the discussion draft for a Second Act on the adaptation of copyright law to the requirements of the digital internal market for the implementation of the DSM Copyright Directive, and on 2 September 2020 a rapporteur’s draft (not yet published). The draft provides for important new provisions in German copyright law. Central are provisions on the implementation of Art. 17 of the DSM Directive in a separate ‘Copyright Service Provider Act’, regulations on collective licences with extended effect, on copyright limitations and changes with regard to the remuneration of authors. Furthermore, in implementation of the Online SatCab Directive, regulations on mainly internet-based retransmission will be introduced.

The modernisation and further harmonisation of copyright law is one of the key elements of the EU’s Digital Single Market Strategy. A series of new rules have been adopted on this basis: The Portability Regulation (Regulation 2017/1128 on cross-border portability of online content services in the internal market), Directive 2019/789 of 17 April 2019 on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes („Online SatCab Directive„), but above all Directive 2019/790 of 17 April 2019 on copyright and related rights in the digital internal market („DSM Directive„).

On 24 June 2020, the Federal Ministry of Justice and Consumer Protection (BMJV) presented the eagerly awaited discussion draft for a Second Act on the Adaptation of Copyright Law to the Requirements of the Digital Singe Market („discussion draft„) for the implementation of the DSM Directive. At the same time, the provisions of the Online SatCab Directive are to be implemented. Both Directives have a deadline for transposition into national law of 7 June 2021 at the latest. Furthermore, German copyright law is to be adapted to the requirements of the „Metall auf Metall“ decision of the European Court of Justice of 29 July 2019 (Ref. C-476/17). In the meantime, a large number of comments on the draft have been submitted, which can be downloaded from the BMJV’s website.

The provisions of the DSM Directice on the ancillary copyright of press publishers, publisher participation and the limitation of text and data mining (Art. 3, 4, 15 and 16 DSM Directive), were already the subject of an earlier discussion draft of the BMJV of 15 January 2020 (Draft First Act on the Adaptation of Copyright Law to the Requirements of the Digital Single Market).

These plans have now been summarised in a recently published rapporteur’s draft (Draft Act on the Adaptation of Copyright Law to the Requirements of the Digital Single Market, status 2 September 2020, not yet published) („rappporteur’s draft„), which, however, largely corresponds to the previous discussion drafts.

The legislative process raises a number of controversial issues. A selection of the planned regulations is presented below.

1. Overview

In particular, the discussion draft provides for the following innovations:

• A new Copyright Service Provider Act (UrhDaG-E) to implement the regulations on the responsibility of online content sharing service providers from Art. 17 DSM-RL
• The introduction of a copyright limitation for caricature, parody and pastiche
• The introduction of collective “ licences with extended effect“, and the collective licensing of unavailable works by cultural heritage institutions
• The repeal of the provision on „free use“ (Section 24 UrhG)
• adjustments to copyright contract law, in particular an obligation to provide regular annual information on the exploitation of protected works
• Facilitating the acquisition of rights for certain EU-wide internet services offered by broadcasters.

2. Implementation of Art. 17 of the DSM-RL – the draft for a Copyright Service Provider Act (Urheberrechts-Diensteanbieter-Gesetz) – “UrhDaG-E”)

Due to the wealth of new regulations in the UrhDaG-E, only a few selected aspects of the UrhDaG-E will be dealt with in the following.

2.1 Scope of application

According to its meaning and purpose, the draft discussion paper restricts the scope of application of the planned law to those service providers for online content sharing (online content-sharing service providers; hereinafter: OCSSPs) which are in competition with „online content services“ (Sec. 2 para. 1 no. 4).

2.2 Liability concept and obligations of the OCSSP

The discussion draft implements in Sec. 1 (1) the fiction of an act of use by the OCSSP as defined by the DSM-RL. This provision initially only refers to works, but Sec. 22 clarifies that the draft should also apply to related rights.

Section 1 (2) introduces the possibility of exemption for OCSSPs. If the OCSSP fulfils the requirements which the new graded liability concept places on him, he is not liable for copyright infringing content on the platform. Since the OCSSP now carries out a (fictitious) act of use himself, he must first try to conclude agreements on rights of use. In the explanatory memorandum, the draft explicitly refers to a unilateral obligation to contract. It should be emphasised that the OCSSP does not have to make offers to everyone. Rather, it must contact the collecting societies established in Germany and acquire rights of use from them, where available. The OCSSP does not have to proactively contact other right holders not organised in collecting societies. In this respect, it is incumbent on the rights holder to offer corresponding rights of use (Sec. 4 (1)).

If the OCSSP concludes a rights of use agreement, this should also apply in favour of its users, provided they are not acting commercially or are not generating substantial revenues (Sec. 9).

If the OCSSP does not acquire rights of use, for example because the rights holder does not want to conclude an agreement or the offer made is not appropriate, the OCSSP is obliged to ensure that under the conditions set out in more detail the availability of copyright infringing content on the platform is prevented. In this respect, the use of filter technologies – in contrast to what the Federal Government still intended in its protocol declaration on the adoption of the DSM Directive – cannot be completely ruled out.

These regulations on blocking and removal of content (keywords: „stay-down obligations“; „upload filter“), which were particularly controversial in the legislative procedure at EU level, form part three of the discussion draft and contain an obligation for the rights holders to cooperate. The legal text does not specify the necessary information to be provided, but the explanatory memorandum explains that the type of information required depends on the technologies used in the OCSSP. In this respect, in the field of audio-visual content, reference files may be required for the already known procedures such as fingerprinting or watermarking.

For OCSSPs with a start-up character (i.e. companies whose services are less than three years old and which have an annual turnover of no more than 10 million euros), there are less stringent obligations (Secs. 2 para. 2, 10 para. 2). It is worth noting the rebuttable presumption in favour of small OCSSPs (annual turnover of no more than 1 million euros), which should not be obliged to block because of the principle of proportionality and the considerable costs associated with such obligations (Secs. 2 para. 3, 10 para. 3). For these OCSSPs, the notification and takedown procedure should remain in place.

Blocking and removal of content are also subject to the principle of proportionality (Sec. 1 para. 2), so that a measure is only indicated if the OCSSP has suitable and effective means at its disposal, the use of which is also reasonable from a cost perspective.

2.3 Limitations

The draft implements the limitations to quotations, criticism and reviews as well as to caricatures, parodies or pastiches, which have become mandatory under the DSM Directive (see also below). The limitations themselves are to be incorporated into the Copyright Act; the UrhDaG-E refers to the corresponding regulations.

Of note is a new fee-based de minimis limitation, which makes the use of excerpts of films or sound tracks or text snippets of up to 1000 characters and photographs or graphics with a data volume of up to 250 KByte free of charge (Sec. 6 (1)). There is no such limitation in EU law. The discussion draft deals with arguments of a possible illegality of this limitation in EU law and considers it nevertheless admissible, since Art. 17 of the DSM Directive represents a new legal regime that does not fall under the Copyright Directive 2001/29/EC („InfoSoc Directive„) and its exhaustive catalogue of limitations.

2.4 (Pre-)Flagging

If a blocking request from a rights holder is filed with the OCSSP with regard to a specific content – according to the rapporteur’s draft – users should be given the opportunity to mark the content as legitimate when uploading it (so-called „(pre-)flagging“). Such (pre-)flagging would have the consequence that a content would not be blocked despite a request for blocking by a rights holder, unless the respective marking of the content as permitted use is obviously incorrect (Sec. 12). Right holders would have the possibility to file a complaint against the failure to block the content. The service provider would not be responsible for the content marked in advance until the complaint procedure was concluded (Sec. 16).

The proposed mechanism is likely to impose an additional technical, administrative and, not least, financial burden on OCSSPs. It is also questionable whether rightholders would welcome this provision.

2.5 Further aspects of the UrhDaG-E

In addition to the aspects presented, the draft for discussion contains a number of other points, such as on complaint mechanisms, measures against abuse and out-of-court settlement of disputes.

3. Further provisions in the discussion draft

3.1 Copyright limitations for caricature, parody and pastiche

Section 51a UrhG-E introduces a new limitation for caricature, parody and pastiche and thus at the same time implements Art. 17 (7) (b) of the DSM-RL, which – within the framework of Art. 17 DSM-RL – provides for this as a mandatory limitation. The parody limitation was already provided for in Art 5 (3) (k) of the InfoSoc Directive as an (optional) general copyright limitation.

The limitation for caricature, parody and pastiche has no direct model in German law. It is to be expected – also as shown in the explanatory statement to the discussion draft – that uses previously covered by Section 24 UrhG will in future at least partly be covered by Section 51a UrhG-E. Section 24 UrhG is to be deleted.

The pastiche is also not defined in more detail in the EU Copyright Directives. In art literature, this is understood to be a „stylistic“ imitation, and within the framework of Section 51a UrhG-E, the restriction is also to permit copies of the original work which are still parody or quotation in addition to the caricature. The discussion draft sees particular relevance in the digital environment, in user-generated content and in the Social Web such as remix, memes, GIFs, mashups and fan fiction.

3.2 Changes to the editing right and the abolition of „free use”

Sec. 23 UrhG-E provides for a new version of the right to edit. In some cases, the well-known distinctions between adaptation (Sec. 23 UrhG) and free use (Sec. 24 UrhG) appear in it, in that a „sufficient distance“ to the work used must be maintained, otherwise the consent of the author is required. Thus, if parts of a work that are not protected in themselves are removed or used, or if these parts „fade“ completely behind the original work, the consent of the author or rights holder should not be required in future either. This function, which concerns the scope of protection of copyright, shall therefore be maintained within the framework of Sec. 23 UrhG. Restrictions of the editing right, e.g. for filming, execution of a construction plan and the transformation of a database work, are also unchanged. The so-called rigid protection of melodies, which was previously contained in Section 24 (2) UrhG, is also maintained (Sec. 23 (1) sentence 2 UrhG-E).

The „free use“ (Sec. 24 UrhG), however, is deleted. The legislator thus intends to comply with the judgment of the European Court of Justice of 29 July 2019 (C-476/17 – Pelham GmbH et al/Ralf Hütter et al – „Metal auf Metall“).

3.3 „Collective licences with extended effect

One of the declared aims of the draft discussion paper is to facilitate the licensing of uses of protected works. To this end, a number of new rules on „collective licences with extended effect“ are proposed as a new licensing instrument. In German law these are so far unknown, models of extended collective licensing (ECL) exist especially in Scandinavian countries.

3.4 Adjustments in copyright contract law

The provisions of the DSM-RL concerning the „fair remuneration“ of authors and performers (Art. 18 ff. DSM-RL) are already remarkably close to the already existing provisions of German law (Secs. 32 et seq. UrhG). The discussion draft provides for a number of selective and editorial adjustments to the DSM Directive, but also contains important innovations. Insofar as the existing provisions offer a higher standard of protection to the benefit of authors than the DSM Directive, the draft discussion paper sees no need for amendment, as the Directive only aims at a minimum level of minimum harmonisation.

In Sec. 32 (2) sentence 3 of the UrhG-E concerning „fair remuneration“, each possibility of use by the contractual partner should in principle be taken into account separately, unless a lump-sum remuneration is justified by special features of the industry. For example, the principle of proportionate participation of the creator in the exploitation revenues should be emphasised.

The claim for subsequent remuneration under Sec. 32a UrhG (so-called bestseller paragraph) currently still presupposes a „conspicuous imbalance“. Sec. 32a UrhG-E lowers the threshold for subsequent remuneration of the author and is intended to entitle the creative to subsequent remuneration in future already then if the originally agreed remuneration proves to be „disproportionately low“ in relation to the exploitation success of the contractual partner (or third parties in the further licensing chain). The possible liability of further exploiters in the licensing chain remains in place. The deletion of Sec. 32 (2) sentence 2 UrhG, which was still provided for in the discussion draft, is no longer included in the rapporteur’s draft. It therefore remains the case that the direct contractual partner is only liable for subsequent remuneration to the extent that the disproportion to the remuneration of the creative results from his own earnings and advantages. In the case of a disproportion which only arises in the further licensing chain, the sublicensees continue to be directly liable to the author or performing artist.

The information and accountability obligations of the applicable Secs. 32d, 32e UrhG are revised in Secs. 32d, 32e UrhG-E and adapted to the transparency provisions of the DSM-RL (Art. 19 DSM-RL). According to these provisions, the contractual partner must now provide the author with information on the scope, revenues and benefits from the use of the work in the case of licensing against payment „at least once a year“ without being requested to do so. As before, this is to be done on the basis of the information that is „normally available in the ordinary course of business“. The obligation to provide information is limited in time to the period of essential use of the work. Accountability is only to be rendered upon request of the author. The obligation to provide information and accountability shall not apply if the author has only made a subordinate contribution (unless the information is required for an adjustment of the contract), or the provision of the information would otherwise be disproportionate. In the case of films, for example, no separate information on the exploitation of clips, trailers and stills should be required.

According to §32e UrhG-E, the author may also demand information and accountability from further (sub-)licensees in the licensing chain. However, according to the discussion draft, this claim exists – according to the discussion draft – only subsidiarily if the direct contractual partner does not have this information at his disposal; according to the rapporteur’s draft, the sublicensee should already be obliged to provide information if the author’s direct contractual partner does not provide the information within three months.

The said provisions are mandatory. According to the rapporteur’s draft, deviations from them can only be made by collective agreement (collective bargaining agreement or common remuneration rules), but a degree of transparency comparable to that required by law must be ensured for authors.

3.5 Implementation of the Online Sat-Cab Directive: Easier acquisition of rights for certain retransmission services and adaptation of the country of origin principle

Without a direct relation to the provisions of the DSM Directive, the discussion draft also provides for the implementation of the Online Sat-Cab Directive. This will be achieved in particular by adapting Secs. 20b and 87 UrhG and introducing a new Sec. 20c UrhG-E and Sec. 20d UrhG-E. This also takes account of the technical development that radio and TV programmes are often broadcast via the Internet.

3.6 Other provisions

In future, reproductions of visual works which are in the public domain will no longer be protected (Sec. 68 UrhG-E). This applies, for example, to mere photographs of works of visual art in the public domain and leads to a partial revocation of the current case law of the Federal Court of Justice (I ZR 104/17 – Museumsfotos). However, protection of the photograph as a protected work within the meaning of Sec. 2 UrhG can still arise if it itself exceeds the threshold for copyright protection.

The already existing right of revocation due to non-exercise (Sec. 41 UrhG) is adapted to Art. 20 DSM Directive, which also allows for a partial recall. Accordingly, the author may recall either only the exclusivity or the right of use as a whole (Sec. 41 (1) sentence 1 UrhG-E). Upon revocation, the licensee’s right of use changes accordingly into a non-exclusive right of use, or it expires altogether.

4. Outlook

With the discussion (and rapporteur’s) draft, the BMJV has submitted a proposal for the implementation of the DSM Directive which is surprising and courageous in some areas. In view of the short time until implementation in June 2021, the present draft is already of considerable importance. It is to be expected that the many quite surprising proposals will cause controversial discussions and lead to a lively debate in the further legislative procedure.

Zum ProfilDr. Gregor Schmid, LL.M. (Cambridge)
Partner, Berlin
Zum ProfilDr. Malek Barudi, M.Jur. (Oxford)
Salary Partner, Hamburg