OUTLINE: 1. Introduction. 2. The rationale for collective licensing. 3. Types of collective licenses. 4. European Court of Justice case law on collective licensing. 5. Multi–territorial licensing in the EU. 6. Towards EU–wide licensing schemes in the on–line music field. 6.1 The European Commission Recommendation on collective cross–border management of copyright for legitimate online music services. The right of copyright owners to choose the collecting society of their choice. 6.2 Critical considerations on the “third option system”. 6.3 The aftermath of the Recommendation: the rise of EU licensing “platforms”. 7. Conclusions.
This contribution aims at highlighting the most important issues related to collective copyright licensing. After looking at the rationale and different types of collective licences, I will examine, inter alia, both the European Court of Justice case law on this matter and the EU initiatives aimed at promoting Community–wide licensing schemes in the on–line music field.
2. The rationale for collective licensing
Collective licensing is the system under which right holders (e.g. artists or record producers) authorise collecting societies to license their copyright to users (1).
The rationale for that system is that right holders cannot individually monitor and license all the different and countless uses of their works, so that they need to entrust this task to better–equipped collecting societies. For example, it would be impossible for a singer to monitor all the possible uses of his song, such as uses in discothèques or in TV programs; consequently, it would be impractical for that singer to find all the persons or companies that want to exploit his song and propose each of them to enter into a license agreement. Likewise, it would be unrealistic for users to search for each right holder and ask him to enter into an individual license agreement. In other terms, where individual rights licensing is neither practicable nor economically viable, collective administration is the most efficient method for licensing copyright, since it enormously facilitates transactions for both right holders and users.
Collecting societies are therefore at the very heart of copyright management: they grant licenses, provide the auditing and monitoring of rights by ensuring payment and terms of licenses, collect fees for the use of the copyrighted material and distribute the same to right holders. Of course, such services are not for free and collecting societies are entitled to deduct from the fees they collect (to be distributed to right holders) an amount necessary to cover their administration expenses (“deductions”). Moreover, it happens frequently that said societies – on behalf of right owners – grant licences to commercial users, which thus are entitled to sell the copyrighted material to final consumers (2).
So collective licensing is important because it can secure relevant economic gains for both right holders and commercial users, as well as guarantee the distribution of copyrighted works to final consumers.
In particular, on the supply side, economies of scale are guaranteed, since societies undertake licensing negotiations on behalf of many right holders collectively: this lessens the marginal cost of the licensing activity to the benefit of right holders.
On the demand side too, collective licensing produces economies of scale (3). Indeed, such a system offers a cost–efficient and effective market structure by (i) providing users willing to get licenses with a single point of reference and (ii) guaranteeing them access to the whole society’s repertoire (4).
3.Types of collective licenses
There are different types of licenses.
Transactional licenses, for example, allow particular uses of a specific work, in a particular context and for a specific time. Said licences are for one–time or infrequent uses of copyright protected works and are often used, for instance, in licensing course–packs (collections of photocopied material for students): educational institutions that produce course–packs must obtain prior authorization for each piece of content used, and said authorization covers only that course–pack. Likewise, the use of music in advertising or to make a commercial recording is often licensed on a transactional basis, covering only that specific use.
On the contrary, blanket licenses allow users to copy or reproduce any work included in a society’s repertoire. Said licenses, for example, enable users (such as companies or public institutions) to make an unlimited number of photocopies of material included in the society’s repertoire. Likewise, they allow music users to perform any or all of the million musical works included in a repertoire as much or as little as they like; the licenses at issue, moreover, can provide broadcasters with single annual authorization encompassing many thousands of songs owned by thousands of composers and lyricists.
Blanket licenses, therefore, reduce the cost to users: in fact, users pay just a single fee for accessing the whole of a society’s repertoire, thus avoiding the higher transaction costs that would be incurred through clearing rights in respect of each specific work. In such a manner economies of scale are maximised (5).
Usually, the effects of a license agreement concluded between a collecting society and a user cover only said contracting parties: such an agreement is not binding on third parties and therefore does not extend to non–represented right owners, i.e. to right owners who have not given any mandate to said society.
However, some European States – i.e. the Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) (6) – have put in place a system of extended collective licensing, which extends the effect of existing license agreements also to non–represented right owners. In the extended license system a collective agreement obtains, directly on the basis of the law, a binding effect on non–represented right owners: it is the law, therefore, which extends the effect to non–represented right owners. The overall purpose of such a system is to create favourable conditions for the use of protected materials to the benefit of all right owners (both represented and not) and users (7).
Of course, neither kind of collective license – whether transactional, blanket or extended – is for free and the user must pay the collecting society a royalty, which will then be distributed by the society to right holders.
Having said that, can collecting societies grant users licenses which cover foreign repertoires, i.e. copyrighted material which is administered by foreign societies?
Yes, they can: thanks to the reciprocal representation agreements which have been signed between many national collecting societies. Indeed, national collecting societies have build up a network of reciprocal agreements providing each collecting society (“management society”) the right to license, in its own territory, the right to use copyright protected works which belong to the repertoire of other collecting societies (“affiliate societies”): such agreements allow users to obtain the so–called multi–repertoire licenses, i.e. licenses which cover the repertoires of both the management society and the affiliate societies. In such a manner, collecting societies are all participants of a supranational network of reciprocal representations agreements and are able to offer a more extended repertoire to their licensees.
However, pursuant to most of traditional reciprocal agreements, collecting societies can only license the exploitation of works for their own territory. Accordingly, a commercial user willing to sell copyrighted material in several countries should approach each national society and obtain in each State a license (this is the so–called “territorial restriction clause”). In other terms, such agreements permit users to obtain “multi–repertoire”, but not “multi–territorial”, licenses. Furthermore, right holders which get said multi–repertoire licenses are usually obliged to bear as many deductions as the number of societies involved, the “management” and the “affiliate” ones.
4. European Court of Justice case law on collective licensing
Let us now draw our attention to some relevant European Court of Justice (ECJ) rulings regarding collective licensing (8).
In the following cases the ECJ considered whether the charging by certain national societies of additional or high royalties were compatible with EU principles.
(i) Gema cases (1981) (9)
These cases regard two disputes between Gema, the German collecting society, and two companies which imported sound recordings of protected musical works to Germany. At that time, under German law whoever imported sound recordings manufactured in other Member States to Germany should have paid Gema the higher level of royalties requested in this State, regardless of the fact that a license had already been granted in the country of manufacture and a lower fee had already been paid in said country. Accordingly, in the cases at issue Gema requested the above importers to pay the difference between the higher rate of royalty payable in Germany and the lower fee paid in the country of manufacture (10).
The ECJ was asked whether such an exercise of copyright was compatible with the provisions of the EC Treaty regarding the free movement of goods.
The ECJ held that no provision of national legislation may permit a collecting society to charge a fee on products imported from another Member State where such goods were put into circulation with the consent of the copyright owner and a royalty had already been paid: indeed, such a provision would cause the common market to be partitioned. In particular, such practice would amount to allowing a collecting society to impose a charge on the importation of sound recordings which are already in free circulation in the common market as a consequence of their crossing a frontier: it would have, therefore, the effect of legitimising the isolation of national markets, which the EC Treaty seeks to abolish.
(ii) Basset v. Sacem case (1987) (11)
The ECJ was asked to decide whether the charging by the French society (Sacem) of an additional royalty – which was not asked in other Member States – violates EU provisions on free movement of goods. Such royalty – which is requested only in France and justified under French law – is imposed on whatever subjects that – having acquired sound recordings (such as CDs) – make public use of them (so–called “supplementary reproduction fee”). In particular, such an additional royalty was imposed on French discotheques, which use copyrighted material massively(12).
The ECJ was asked the above question because there was uncertainty about whether the charging of a supplementary fee on sound recordings was compatible with EU law, in particular where such goods have been imported from another member state where they were lawfully marketed and no supplementary royalty was requested. As in the above Gema case, the fear was that the charging of an additional royalty that was not envisaged by other Member States might have had the effect of interfering with the free movement of goods across EU (in this case sound recordings, such as CDs).
This case is similar to the above examined Gema ones, but here the ECJ took a different view.
The ECJ ruled that – even if the charging of the additional royalty could have a restrictive effects on imports from other Member States – it did not constitute a disguised restriction on trade, nor a means of arbitrary discrimination between Member States. On the contrary, the charging of the supplementary royalty had to be considered as a normal and lawful exploitation of copyright (see ex Art. 30 and 36, now 28 and 30, of the EC Treaty).
In particular, the ECJ argued that – although it is true that other Member States do not impose such an additional royalty – nevertheless that circumstance per se does not imply that the total amount of the charged royalties or their function are different compared to the French ones.
Moreover, this measure was deemed as not discriminatory because, inter alia, the contested fees were applied to whichever sound recordings, whether such records were of French origin or were manufactured or marketed in another Member State. Therefore, there was no discrimination vis–à–vis foreign sound recordings.
(iii) Tournier and Lucazeau cases (1989)
In these cases the ECJ held that the charging of certain high royalties by a collecting society constitutes an abuse of dominant position and thus violates EU antitrust provisions (i.e.: ex Art. 86, now 82, of the EC Treaty).
As a general remark, it should be borne in mind that collective licensing per se tends to lead to monopoly situations, since the presence of few entities (i.e. collecting societies) carrying out licensing activities inevitably narrows the possibilities for potential users to choose their licensors: collective licensing is therefore antitrust–sensitive (13). Indeed, the ECJ had recognized the dominant position of collecting societies arising from their de facto monopolies in national territories (14) in the cases BRT v. Sabam (15) and GVL v. Commission (16).
Having said that, in the Tournier (17) and Lucazeau (18) cases it was argued that the royalties imposed by the French society Sacem to discothèques were higher than those requested in other Member States. In particular, French discothèque owners had complained that the fees were excessive because they only used a part of Sacem’s repertoire (mainly popular dance music of Anglo–American origin) whereas Sacem’s royalties were calculated for the use of the worldwide repertoire.
Well, the ECJ held that – when a collecting society holding a dominant position imposes scales of fees which are appreciably higher than those charged in other Member States and where a comparison has been made on a consistent basis – that difference must then be regarded as indicative of an abuse of dominant position. Indeed, in the cases at issue, the royalty imposed by Sacem to French discotheques was very high, i.e. 8,25% of their gross turnover, whereas in other countries the royalty was much lower.
The ECJ added that the burden of the proof is placed on collecting societies: in order to avoid a condemnation for abuse of dominant position, it is for them to justify the difference amongst royalties by reference to objective dissimilarities between the situation in the Member State concerned and the situation prevailing in all the other Member States.
5. Multi–territorial Licensing in the EU
We saw earlier that collecting societies can represent foreign repertoires in their own jurisdictions by virtue of reciprocal representation agreements: such agreements allow users to obtain the so–called “multi–repertoire” licenses.
In recent years collecting societies have entered into different types of reciprocal representation agreements, which permit users to obtain, not just “multi–repertoire”, but also “multi–territorial” licenses. Under said system a user can obtain a license which is valid in any country party to the agreement. In other terms, such new accords do not provide any “territorial restriction clause” and permit to overcome the main shortcoming of traditional reciprocal agreements, according to which collecting societies could only license the exploitation of works for their own territory (as it has been said, such traditional agreements oblige commercial users wishing to distribute copyrighted material to approach each national society and obtain in each State a license).
Indeed, multi–territorial licenses are very useful, especially from a commercial user’s perspective, since they exempt the latter from having to obtain a license from as many collecting societies as the countries where he wishes to sell copyrighted material. Such a system seems to be more suitable to the development of the Internet, which entails a massive use of protected works beyond territorial boundaries. It appears, moreover, to be more suitable to the broadcasting industry, considering that satellite TV broadcast often originates from a Member State other than the one in which viewers are resident.
We have seen, therefore, that these new reciprocal representation agreements can be very useful.
However, said agreements – depending on how they are devised – are not free from antitrust concerns and, accordingly, some of them have been severely scrutinized by the European Commission. Let us see a few examples of such new reciprocal agreements.
(i) The Simulcasting Agreement
The Simulcasting Agreement was signed on November 16, 2000 by collecting societies of 31 countries (19). Simulcasting means “simultaneous broadcasting” and takes place when broadcasters simultaneously transmit radio or TV programmes over the Internet.
Before this agreement, broadcasters originating from the EU were obliged to ask for a license in each territory where their signal was accessed and the copyright–protected material was channelled, which turned out to be very difficult, cumbersome and costly. That, however, was in line with the old model of the above mentioned reciprocal agreements, which allowed collecting societies to grant licenses only for their own national territory.
The Simulcasting Agreement was then proposed with a view to finding a solution to such difficulties. In particular, the system allow broadcasters to obtain from just one collecting society a single license, which is not only multi–repertoire, but also multi–territorial: broadcasters are therefore allowed to transmit terrestrial programmes simultaneously over the Internet into numerous countries by virtue of a single license.
Since the Simulcasting Agreement also included the whole European Economic Area (20) (except for Spain and France), the same was notified to the European Commission, which was requested to approve and exempt the accord at issue in conformity with the EU competition rules.
The original version of the notified agreement provided that a collecting society had the power to issue a multi–territorial license only to broadcasting stations, whose signals originated in its territory. That meant that broadcasters in the EEA could not obtain such a license from a society of their choice and that accordingly they were obliged to approach the collecting society in their own country of origin in order to acquire said license (that is the so–called “customer allocation clause”, also known as the “economic residence clause”).
The European Commission praised the multi–territorial approach of said licenses, but could not accept the “customer allocation clause” in view of its anti–competitive effects and imposed the removal of such clause.
Indeed, according to the Commission, what should be avoided is that collecting societies are given monopolistic rights for their territories with regard to the granting of multi–territorial licenses. Broadcasters, on the contrary, should be allowed to request any collecting society – also outside their own country of origin – to obtain such licenses: commercial users should therefore be free to choose the most efficient society in Europe for the delivery of the license. The removal of the above clause was clearly imposed with a view to promoting and spreading competition amongst societies with reference to the cost and quality of collective licensing.
As requested by the Commission, the “customer allocation clause” was removed and the Simulcasting Agreement was finally accepted (21).
(ii) The Santiago Agreement
The European Commission tried to apply the same condition to another multi–territorial licensing system, the so–called “Santiago Agreement”.
This agreement was signed in October 2000 by five collecting societies and subsequently joined by all societies in the EEA (except for the Portuguese and the Swiss society). As the Simulcasting Agreement, also the Santiago Agreement tried to adapt the traditional licensing framework to the on–line world by allowing each of the participating societies to grant multi–repertoire and multi–territorial licences: such licenses covered webcasting, streaming, online music on demand, as well as music videos transmitted online.
On April 2001 the Santiago Agreement was notified to the European Commission (22).
As the first version of the Simulcasting Agreement, this accord provided that users wishing to obtain licenses should do so from a collecting society in their own country; consequently, said users were forbidden to approach the society of another State (that is again the “customer allocation clause”).
Accordingly, the European Commission held that said system might have been in breach of competition rules. Indeed, this provision entailed that each national collecting society was given absolute exclusivity rights for its territory with regard to the possibility to grant multi–territorial licenses, putting in place a system which limited commercial users in their choice to the monopolistic collecting society established in their member States. Thus, although the Santiago Agreement aimed at promoting the use of multi–territorial copyright licenses (which the Commission anyway praises), the practical result would have been a lock up of national territories transposing into the Internet the national monopolies the societies have traditionally held in the off–line world (23): such result might have constituted a breach of Art. 81 of the EC Treaty (24).
For example, according to the Commission, an Italian company that wishes to offer music on the Internet should be permitted to acquire rights from any collecting societies in the EU rather than from only the Italian society. Indeed, the lack of competition between national societies in Europe hampers the achievement of a genuine single market in the field of copyright licensing to the detriment of commercial users and final consumers. Collecting societies – the Commission said – should be obliged to compete for the benefit of companies which offer on–line music and to final consumers which listen to it.
The Commission went on to argue that the territorial exclusivity afforded by the Santiago Agreement to each of the participating societies was not justified by technical reasons and was irreconcilable with the world–wide reach of the Internet.
Accordingly, the Commission recommended applying the same condition as in the Simulcasting case, i.e. the removal of the costumer allocation clause. However, the parties to the Santiago Agreement did not want to accept said condition and the agreement expired at the end of 2004 (25).
6.Towards a EU–wide licensing in the on–line music field
From the above we can deduce the following.
(i) There are new ways copyrighted works are distributed, such as through Internet, mobile telephones, digital terrestrial, etc., which permit the dissemination of copyrighted material across national borders.
(ii) In light of the above, the traditional licensing system that requires authorizations for each country where products are exploited is anachronistic (26).
(iii) There have been attempts to adapt the traditional societies’ representation agreements to the new forms of distribution, with a view to providing users with multi–territorial copyright licenses (e.g. the Simulcasting and Webcasting Agreements).
(iv) It is indisputable that the new ways copyrighted material (especially music works) is now distributed in the EU require a new licensing policy at Community level. This is particularly true if we take into consideration the deep gap between EU and US copyright industries (27).
The European Commission has recently addressed the above issues, with particular reference to the licensing of on–line music (28).
In particular, in April 2004 the Commission released a Communication to the Council and European Parliament, recognizing that many media operators were generally calling “for more Community–wide licensing” (29). Such expression may be used as “an umbrella term to describe the grant of a license by a single collecting society in a single transaction for exploitation through the Community” (30). Hence, the Commission recognized that – in order to safeguard the functioning of collective management and licensing throughout the internal market – a legislative approach at Community level was required.
Later, in July 2005 the Commission released a working document entitled “Study on a Community Initiative on the Cross Border Collective Management of Copyright” (the “Study”) (31), which highlighted the main problems affecting collective licensing of on–line music in the EU. In this document, the Commission confirmed that the main target should be to make a move towards pan–European licenses (32). To this end, the Commission substantially took into consideration three main policy options.
(a) The first option is to do nothing. This option was immediately ruled out by the Commission.
(b) The second option would entail eliminating territorial restrictions and customer allocation provisions in the traditional reciprocal agreements concluded by collecting societies. This choice is basically founded on the system of multi–repertoire and multi–territorial licenses envisaged by the above Simulcasting and Webcasting Agreements.
(c) The third option is to give right holders the choice to authorise a collecting society of their choice to license their works across the entire EU (hereinafter also “the third option system”).
The Study concluded that the most suitable solution for achieving new structures for cross–border licensing in the on–line field is the third option.
6.1 The European Commission Recommendation on collective cross–border management of copyright for legitimate online music services. The right of copyright owners to choose the collecting society of their choice
Following the Study, in October 2005 the Commission adopted a Recommendation on the licensing of on–line rights in musical works. In so doing, the Commission clearly changed its mind, preferring a “soft law” instrument instead of a legislative approach (33).
The Commission recommended that right holders and commercial users of copyright–protected material should be given a choice as to their preferred model of licensing. The recommendation, therefore, does not choose between the above second and third options, but considers both valid. On the one hand, it proposes the elimination of territorial restrictions and customer allocation provisions in existing reciprocal representation agreements (as in the Simulcasting and Webcasting cases) (34); on the other hand, it leaves right holders who do not wish to make use of those agreement the possibility of choosing a collecting society of their choice for EU–wide direct licensing. Most provisions of the Recommendation, however, are devoted to the latter option (which earlier I have called the “third option system”): I shall now to analyse this system.
Firstly, let us look at what the Recommendation provides with reference to this option. It provides that right holders should have the choice to (i) authorize any existing collecting society to license their works across the entire EU and (ii) determine the territorial scope of the relevant license activity, irrespective of the Member State of residence or the nationality of either the collecting society or the right holder; (iii) it further states that right holders should also have the right to withdraw any of the on–line rights and transfer the multi–territorial management of those rights to another collecting society (35).
In particular, what would happen if right holders were given the right to approach a collecting society of their choice? Here follows the possible scenario which is envisaged by the Study.
By giving right holders such freedom of choice, the third option system would (a) marginalize the role of reciprocal representation agreements and (b) introduce choice and competition at the “up–stream” level (i.e. at the level between right holders and collecting societies) (36).
(a) The main principle which lies behind such a system is that a collecting society’s on–line repertoire and territorial licensing power should not derive from the reciprocal representation agreements between collecting societies, but from right holders concluding contracts directly with a society of their choice. By cutting out such intermediaries in favour of direct membership in a single collecting society, this system would not expose right owners to pay as many deduction fees as the affiliate societies involved and accordingly allow the above right holders to receive an higher amount of revenue (37).
(b) Furthermore, it is believed that such a system could create a more competitive environment for cross–border licensing of copyright, an environment in which collecting societies would have to compete to attract right holders and consequently would be encouraged to provide better and diversified services. As the above Study pointed out, the system at issue should be more “competitive–oriented” than the one envisaged by the Simulcasting and Webcasting Agreements. Indeed, according to the Study, agreements such as the Simulcasting and Webcasting accords introduce just a “static” service, which is capable of freezing, and not promoting, competition amongst collecting societies (38).
Why do accords such as the Simulcasting and Webcasting agreements introduce just a “static” service?
Let us examine the following simple example (which is also brought by the Study) (39).
Let us assume that the 25 national societies of the EU countries enter into reciprocal representation agreements, which do not provide any “territorial restriction” or “economic residence” clauses (as in the Simulcasting and Webcasting cases). Such accords would certainly give all 25 societies the unlimited ability to grant multi–repertoire and multi–territorial licenses, which cover all 25 EU countries. However, there would be no variation as to the multi–repertoire and multi–territory services offered by the 25 societies, with no society having an attractive and specific repertoire of its own: indeed, all these collecting societies – by virtue of a network of “symmetrical” reciprocity – would offer an identical repertoire to commercial users. Such users, therefore, will have no incentive to switch from one society to another, because the service rendered by all the 25 societies would remain for ever identical. That is why competition among collecting societies would be merely “static”.
On the contrary – as pointed out by the above Study – giving right holders the possibility to freely choose and move amongst societies could create a competitive environment, that obliges societies to effectively compete among themselves and in particular offer better and diversified services to right holders.
Firstly, it is held that a truly competitive environment could be created, an environment in which – if a society offers inefficient or too expensive services – right holders could move to another society which renders better services more in line with their individual needs.
The third option system could also allow societies to build up genre–specific repertoires, by specializing in certain fields. It might happen, for example, that a right holder entrusts the society “A” to licence Latin–American music to be distributed via webcasting, the society “B” to license pop music channelled through mobile phones and the society “C” to license Anglo–American music works distributed via streaming, etc. Such a system, therefore, would provide right holders with the opportunity to develop niche markets by virtue of the specific nature of both their repertoire and the forms of music distribution and exploitation.
6.2 Critical considerations on the “third option system”
The above analyzed “third option system” is hailed by many operators and commentators as the most appropriate one.
Other commentators, however, have criticized this system, considering it not to be so favourable to commercial users.
(i) First of all, the benefits to right holders would be counterbalanced by the costs certain commercial users would incur. In fact, we must take into consideration that there are still users that require an extended repertoire and would like to obtain a multi–repertoire blanket license from a single collecting society: such users, therefore, are not attracted by specialized repertoires, but would prefer to obtain a EU–wide license covering an aggregate and all–inclusive repertoire. On the contrary, by adopting the third option system, said users would incur high transaction costs, because – in order to obtain an enlarged repertoire – they would have to approach more than one collecting society: in other terms, these commercial users would lose their usual single point of reference (40).
(ii) Secondly, as a consequence of fierce competition, collecting societies might tend to charge the lowest possible price at the most favourable conditions for their users (so–called “race to the bottom”). This might be to the detriment of right holders and the creativity industry, with possible negative effects on the incentives to create new musical works (41).
(iii) It has also been questioned whether the “third option system” duly takes into consideration the interest of lesser artists, e.g. those known only nationally. In fact, such artists might not be able to afford to license their rights to collecting societies in other Member States: in this regard, language barriers and organizational difficulties could represent insuperable obstacles (42). Some believe, therefore, that the proposed system might carry the risk of small national right holders being discriminated (43).
(iv) Moreover, some have pointed out that the system at issue might jeopardize cultural diversity(44). Some collecting societies are concerned that marginalizing the role of national bodies would actually impoverish music production and variety: in fact, we have to consider that one of the purpose of collecting societies is the promotion of social and cultural activities.
6.3 The aftermath of the Recommendation: the rise of EU licensing “platforms”
What happened after the Recommendation?
Of course, there has been a move towards EU–licensing schemes, as suggested by the Recommendation.
Some expected that such a move would have been prompted by a competitive process being triggered by the possibility of right holders to freely approach the collecting society of their choice.
It appears, however, that EU–licensing schemes are now being offered in another way, i.e. by creating new platforms that pool several repertoires. There are recent indications that these new platforms are conceived as “open platforms” ready to attract more and more right holders; even collecting societies might have an incentive to pool their repertoire into such new platforms (45).
This trend appears to be confirmed by some recent EU–wide licensing schemes that were announced in 2006.
For example, on January 2006 the UK and Spanish collecting societies have formed a joint venture, which creates a unique platform for future joint EU–wide licensing of the Anglo–Hispanic repertoire (which includes all the Latin America repertoire held by the Spanish society).
Likewise, in January 2006 the publishing company EMI announced its entry into an Heads of Agreement with the UK and German societies, with the aim of offering EMI’s Anglo–American repertoire under a single license across the EU for mobile and on–line digital uses.
The above agreements confirm that a new trend is emerging, i.e. the trend to grant music licenses, not via any of the existing collecting societies, but via new growing platforms in which, not only right holders, but also existing societies, pool their repertoire just for the purpose of licensing: in this latter case, while distribution and membership would remain local (i.e. at the level of national society), only the licensing function would be centralised. It has been said that – within a short period of time – there might be 3/4 on–line licensing platforms, all of them operating on an EU–wide basis (46).
Collecting licensing is very important nowadays. Indeed, the role of collecting societies in copyright licensing is essential, as they help to reach economies of scale at both the supply and the demand level.
However, collective licensing is antitrust–sensitive and might violate important EU provisions. Accordingly societies should carry out said activity in a proper and fair manner and avoid requesting undue royalties or abusing their dominant position, as the ECJ pointed out in the cases examined.
We have seen, moreover, that the debate on EU–wide licensing – and in particular on which is the best way to move towards pan–European licenses – is still open.
It is not easy to decide on the best solution. Choosing an option might benefit some stakeholders, while at the same time jeopardizing the interest of others. What should be clear is that – whatever system is adopted or prevails in the end – copyrighted works should be affordable and easy to obtain for new markets entrants and innovative service providers, while at the same time giving creators an economic incentive to make their work available, especially on the Internet: in such a way, collecting licensing would be more in tune with the new forms of distribution of copyrighted material, as well as benefiting the interests of final consumers.
1 Bibliography on collective licensing and management is broad. See, inter alia, D. Gervais (edited by), Collective Management of Copyright and Related Rights, Kluwer Law International, 2006; M. M. Frabboni, A Difficult Future for Reform on Collective Management of Rights, Entertainment Law Review, 2005, 144-148; M. Kretschmer, The Failure of Property Rules in Collective Administration: Rethinking Copyright Societies as Regulatory Instruments, in European Intellectual Property Review, Issue 3, 2002, 126-137.
2 Let us think, for example, about the several on-line music providers (such as i-Tune), which acquire music licences from collecting societies and sell the relevant content to final consumers.
3 See the 2005 European Commission Staff Working Document “Study on a community initiative on the cross-border collective management of copyright” (available at http://ec.europa.eu/internal_market/copyright/docs/management/study-collectivemgmt_en.pdf).
4 “Repertoire” means the catalogue of copyrighted works, which is administered by a collective society.
5 See M. M. Frabboni, The current discussion on collective management of rights in the EU. Economic Concerns, paper presented at the Workshop on the Law and Economics of Intellectual Property and Information Technology, July 22-23 2005, Università Carlo Cattaneo Castellanza LIUC, 7 (available at http://www.liuc.it/ricerca/istitutoeconomia/-laweconomicsjuly2005/papers/frabboni_LIUCpaper.pdf).
6 As it is known, Denmark, Finland and Sweden are EU Member States, whereas Iceland and Norway form part of the European Economic Area (see note 12 above).
7 See J. Liedes – H. Wager – T. Koskien – S. Lahtinen, Extended Collective License, 1991, leaflet of the Ministry of Education, Finland, as well as the IFRRO/WIPO publication Collective Management in Reprography, Geneva, 2005, 18-19 (available at http://www.wipo.int/freepublications/en/copyright/924/wipo_pub_924.pdf). See also T. Koskinen – Olsson, Collective Management in the Nordic Countries, in D. Gervais (edited by), Collective Management of Copyright and Related Rights, cited above, 257-282.
8 In particular, I will make reference to cases regarding the relationship between collecting societies and users. I will not take into consideration ECJ rulings regarding the relationship between collecting societies and right holders and among societies themselves.
9 Joined cases 55/80 and 57/80, Musik-Vertrieb membran GmbH et K-tel International v GEMA – Gesellschaft für musikalische Auffuhrungs – und mechanische Vervielfältigungsrechte.
10 For an overview of the German system of copyright collective management see J. Reinbothe, Collective Rights Management in Germany, in D. Gervais (edited by), Collective Management of Copyright and Related Rights, cited above, 193-226.
11 Case 402/85, G. Basset v Société des auteurs, compositeurs et éditeurs de musique (SACEM).
12 For an overview of the French system of copyright collective management see N. Piaskowski, Collective Management in France, in D. Gervais (edited by), Collective Management of Copyright and Related Rights, cited above, 153-192.
13 On this issue see D. Wood, Collective Management and EU Competition Law, V SGAE Conference on Intellectual Property and Collective Management – Madrid 12th, 13th and 14th November 2001 (available at http://ec.europa.eu/comm/competition/speeches/text/-sp2001_025_en.pdf). In general, on the relationship between copyright and antitrust provisions see M. Ricolfi, Diritto d’autore ed abuso di posizione dominante, in Rivista di Diritto Industriale, 2001, I, 149-193.
14 This is not the case for the Italian collecting society, SIAE, which operates under a legal monopoly (see Art. 180 Italian copyright law N° 633 of 22 April 1914, as amended). Also the Dutch and Spanish societies operate under a legal monopoly.
15 Case 127/73, BRT v. SABAM et NV Fonoir.
16 Case 7/82, GVL v. Commission.
17 Case 395/87, Ministère public v. Jean-Louis Tournier.
18 Joined cases 110/88, 241/88, 242/88, François Lucazeau and others v. Société des Auteurs, Compositeurs et Editeurs de Musique (SACEM) and others.
19 Argentina, Austria, Belgium, Bulgaria, Canada, Czech Republic, Denmark, Estonia, Finland, Germany, Greece, Honk Kong, Hungary, Iceland, India, Ireland, Italy, Malasya, Mexico, Netherlands, New Zealand, Norway, Peru, Poland, Portugal, Singapore, Sweden, Taiwan, Thailand, United Kingdom and Switzerland.
20 The European Economic Area (EEA) groups all the EU countries plus Norway, Iceland and Liechtenstein.
21 This is the first decision by the European Commission concerning collective licensing for the purposes of commercial exploitation of on-line musical works (decision of June 8, 2002, OJ L 107/58).
The Simulcasting Agreement was followed by another similar accord, the “Webcasting Agreement”, which was signed in November 2003 by several national collecting societies. Said agreement allows webcasters to clear record producers’ rights in a multitude of States by entering into a single license in one participating country. “Webcasting” is the streaming of music programmes on the Internet and is just one of the new forms of on-line music distribution that the music industry is now promoting.
22 “Santiago Agreement”, notification of May 17, 2001, OJ C 145/2.
23 See the Press Release of the European Commission of May 3, 2004.
24 As it is known, article 81 of the EC Treaty prohibits agreements between undertakings which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, in particular, agreements which limit or control markets.
25 On both the Simulcasting and Webcasting Agreements see D. Wood, Regulation and competition in the media sector, Competition Law Insight, 15 November 2005 (available at http://media.gibsondunn.com/fstore/documents/pubs/CLImedia-111505-DWood.pdf ).
In 2001 an accord very similar to the Santiago Agreement was signed between BIEM, the international organisation representing mechanical rights societies, and several national collecting societies: it is the so called “Barcelona Agreement”, which covered webcasting, on-demand transmission by acts of streaming and downloading (also this agreement expired at the end of 2004).
26 See M. M. Frabboni, Cross-Border Licensing and Collective Management: A Proposal for the On-Line Context, in Entertainment Law Review, 2005, 16 (8), 204. For an historical evolution of copyright collective licensing see D. Gervais, The Changing Role of Copyright Collectives, in D. Gervais (edited by), Collective Management of Copyright and Related Rights, cited above, 15 ff.
27 For example, in 2004 on-line music revenue in Western Europe amounted to € 27,2 million, whereas in the USA such figure reached € 207 million, making US on-line revenues almost eight times higher than those achieved in Western Europe.
28 On such issues see M. M. Frabboni, The current discussion on collective management of rights in the EU, cited above; T. Toft, Collective rights management in the on-line world – A review of recent Commission initiatives, 2006 (available at http://ec.europa.eu/comm/competition/speeches/text/sp2006_008_en.pdf); P. Tuma, Pitfalls and Challenges of the EC Directive on the Collective Management of Copyright and Related Rights, European Intellectual Property Review, Vol. 28, Issue 4, 2006, 220-229; L. Gibault – S. Van Gompel, Collective Management in the European Union, in D. Gervais (edited by), Collective Management of Copyright and Related Rights, cited above, 117-152.
29 For a first comment on the Communication see M. M. Frabboni, A Difficult Future for Reform, cited above, 144.
30 See point 1.2.4 of the Communication.
31 See note 3 above.
32 For a first comment on this document see M. M. Frabboni, Cross-Border Licensing and Collective Management, cited above.
33 For a first comment on the Recommendation see M. M. Frabboni, Online Music Licensing: the Calm after the Storm, Entertainment Law Review, 2006, 17 (2), 65-69.
34 See Recitals 7 and 8, as well as Article 9.
35 See Recital 9 and Art. 5-c.
36 On the contrary, we have seen that the second option system (i.e. the one upon which the Simulcasting and Webcasting Agreements are based) would introduce choice and competition at the “down-stream” level (i.e. at the level between users and collecting societies)
37 See Study, 40.
38 Ibidem, 40-41.
40 See the Response to the Study by the European Consumers’ Organization BEUC, 2005, 3 (available at http://www.consumersdigitalrights.org/mdoc/collectivemanagementofcopyrightsBEUCX0292005_35834.pdf).
41 See M. M. Frabboni, The current discussion on collective management of rights in the EU, cited above, 12.
42 See the Response to the Study, cited above, 4.
43 See M. M. Frabboni, Online Music Licensing, cited above, 66.
44 Ibidem, 67.
45 See T. Lueder, Working toward the next generation of copyright licences, paper presented at the 14th Fordham Conference on International Intellectual Property Law & Policy, April 20-21, 2006, 20 (available at http://ec.europa.eu/internal_market/copyright/docs/docs/lueder_fordham_2006.pdf).