UK: Management of online rights in musical works

File sharing has been a very hot topic recently. There has been mounting pressure on the Government to implement legislation to make file sharing illegal. Alternatively there have been concerns that legislation would be too restrictive a method of controlling new technology which has been increasingly popular. The result has been a Commission recommendation, so-called "soft law", which is not legally binding. The aim is that if it proves workable, it may be adopted as binding legislation. The recommendation sets out measures for updating the management of online rights in musical works and recommends that an EU-wide copyright licensing system be established.

In a related development the Australian Kazaa case sheds light on how any similar file-sharing case may be dealt with in the UK.

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File sharing has been a very hot topic recently. There has been mounting pressure on the Government to implement legislation to make file sharing illegal. Alternatively there have been concerns that legislation would be too restrictive a method of controlling new technology which has been increasingly popular. The result has been a Commission recommendation, so-called "soft law", which is not legally binding. The aim is that if it proves workable, it may be adopted as binding legislation. The recommendation sets out measures for updating the management of online rights in musical works and recommends that an EU-wide copyright licensing system be established.

In a related development the Australian Kazaa case sheds light on how any similar file-sharing case may be dealt with in the UK.

In October 2005 the European Commission adopted a recommendation on the management of online rights in musical works. The changes that are included are necessary as new internet-based services such as webcasting or on-demand music downloads would benefit from pan-European licence rights that cover their activities throughout the EU.

The aim is to get all EU member states onto a more level playing field but also to become more competitive, in order to make Europe the leading knowledge based economy to be able to compete with the US. It is also hoped this will maintain the value of intellectual property rights generally. The absence of EU-wide copyright licences has been one factor that has made it difficult for new Internet based music services to develop their full potential. One of the main ideas is to allow rights-holders one manager and one licence to cover the whole of Europe. To help achieve this the recommendation has removed territorial restrictions.

The Commissioner stated that he believed that the "recommendation strikes the right balance between ease of licensing and maintaining the value of copyright protected works so that content is not available on the cheap". The Commissioner wants to use the recommendation as an opportunity to monitor how the market is developing, and if the recommendation is not providing sufficient progress the Commission will consider implementing "tougher action", which could mean legislation.

Consultation was held prior to the recommendation and it showed that the majority of collective rights managers favoured the option of allowing each society in the EU to grant EU-wide licences covering other societies’ repertoires; whereas the music publishers/independent record labels favoured giving rights-holders the choice to appoint a collective rights manager for the online use of their musical works across the entire EU. The Commission decided that rights-holders and commercial users of copyright protected material should be given a choice as to their preferred model of licensing as different online services may require different licensing policies.

The recommendation aims to eliminate the traditional territorial restrictions and customer allocation provisions in existing licensing contracts, while leaving rights-holders who do not wish to make use of those contracts the possibility to tender their repertoire for EU-wide direct licensing. Rights-holders should have the right to withdraw from existing agreements with collective rights managers and transfer their management, on a territorial scope of their choice, to a collective rights manager of their choice, irrespective of the Member State of residence of the collective rights manager or the rights-holder. In addition, included are provisions regarding governance, transparency, dispute settlement and accountability of collective rights managers in order to enable the relevant stakeholders to decide which licensing model is best suited to them.

The relationship between rights-holders, collective rights agencies/managers and commercial users, and the relationship between managers and rights-holders are both covered in the recommendation’s working document. It states that there should be no discrimination as to treatment of rights-holders and as to how royalties and deductions should be managed.

It is made clear in the recommendations that the Commission expects annual reports on progress from Member States and collective rights managers so that the Commission can continually assess the development of the online music sector in view of its recommendations and it will consider the need for additional Commission involvement in this area. Clear indicators are set out in the working document that will be used to measure how much improvement has been achieved.

In connection with this issue, it is interesting to note that in a landmark decision, the Federal Court of Australia, in September this year, ruled that operators of the Kazaa peer-to-peer network (a method used for file-sharing) infringed the copyright of 30 music companies. This case is of particular relevance to the UK, given the similarities between the Australian Copyright Act and the UK Copyrights Designs and Patents Act. This case focused on issues of control authorisation and preventative methods when determining liability, which are issues that a UK case on this issue is also likely to focus upon. This therefore shows how case law can find ways to restrict copying music in this way.

It is hoped that the introduction of a multi-territorial system of collective copyright licensing for online music services will provide commercial users with greater certainty when accessing music online, encourage the development of legitimate online services and increase the revenue stream for rights-holders. It is questionable whether this "soft law" is going to be forceful enough to achieve all that is envisaged by the Commission, but given the Kazaa case other legitimate file-sharing methods must be encouraged.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 29/11/2005.