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German Media Newsletter, November 2016

November 2016

YouTube and Collection Society GEMA Sign Agreement for Remuneration of Music Authors

On November 1, German Collection Society GEMA and online video platform YouTube signed a licensing agreement for the exploitation of copyright protected GEMA repertoire. The agreement came somewhat as a surprise after seven years of legal disputes and lengthy negotiations, and was called a "milestone" and "landmark" agreement by GEMA and YouTube, respectively. It provides for the remuneration of 70,000 music authors, lyricists and publishers represented by GEMA for the use of their works in online videos on YouTube, and will apply retroactively to cover the contractual gap existing since 2009 (when the previous 17-month agreement between the parties had ended). In addition to the traditional ad-based service, the agreement also covers a new subscription service YouTube is already offering in the U.S., and is planning to launch in Europe. Further details of the agreement remain undisclosed, specifically in regards to the model used for calculation and the amount of the payments YouTube will make to GEMA.

Following the agreement, viewers will no longer see the infamous blocking messages YouTube used for music videos containing GEMA repertoire.

New German Film Subsidy Act Passed 

After discussions by the Federal Council of German States (Bundesrat) and several rounds of hearing the German federal government's draft (see our April 2016 Newsletter for details) has now been finally discussed in parliament. On November 10, the German parliament (Bundestag) passed (in German only) the re-newed German Film Subsidy Act (Filmförderungsgesetz, FFG).
While there has not been any structural change in the funding models or mechanism, the new Act raises the minimum subsidy amount to EUR 200,000 per project, aiming to reduce the number of funded films and thereby increase individual subsidy amounts for high quality, more promising projects. Development funding will be increased overall. The provisions most heavily disputed during the legislative process, i.e. the holdback periods for different forms of exploitation, were maintained as in the current Act (six months after theatrical release of the funded film for DVD/BluRay and VoD exploitation, twelve months for Pay TV exploitation, and 18 months for Free TV exploitation). However, in addition to the existing possibility to shorten the periods upon application, the possibility of an extraordinary, further reduction or complete waiver of holdback periods was added.
Further, the new Act will restructure and diversify the decision-making bodies within the German Federal Film Fund (Filmförderungsanstalt, FFA).
The new Film Subsidy Act, when enacted and notified by the EU Commission, will be applicable from 2017 through 2021. 

Digital Single Market Update: Official Draft EU Copyright Directive and Regulation Published

On September 14, the EU Commission published its proposals for a new Copyright Regulation and Copyright Directive. The proposals are part of the Commission's strategy for a Digital Single Market, which was announced in May 2015 and first substantiated by an action plan for modernizing European copyright and a proposal for a regulation on cross-border portability of online content services in December 2015. In May 2016, the Commission proposed an update of the Audiovisual Media Services Directive (AVMS Directive) and released its proposal for a Geoblocking Regulation. Audiovisual content, however, is outside the scope of the proposed Geoblocking Regulation, and questions of licensing were reserved for the legislative package on copyright.
The latest draft "Regulation laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organizations and retransmissions of television and radio programs" and the draft "Directive on Copyright in the Digital Single Market" had been leaked to the public in early September (see our September 2016 Newsletter for details); the official texts now published have not been changed much in comparison.


The draft Copyright Regulation is a result of the Commission's review of the Satellite and Cable Directive (CabSat Directive), and is intended to complement the AVMS Directive and its proposed update. It aims:


to promote the cross-border provision of "online services ancillary to broadcasts", i.e., essentially, broadcasters' simulcasting and catch-up services, and


to facilitate digital retransmissions of TV and radio programs originating in other EU member states and provided by means of IPTV and other "closed" electronic communications networks.


To this end, the Regulation first provides for the application of the country of origin (COO) principle with regard to broadcasters' simultaneous streaming and catch-up services. VOD services not linked to a broadcast are expressly outside the scope of the draft Regulation,  and would not be governed by the COO principle. Secondly, the draft Regulation introduces rules on mandatory collective management to facilitate the clearance of rights for digital retransmission services provided over closed networks, similar to the provisions of the CabSat Directive concerning cable retransmissions.


The draft Copyright Directive also complements the current AVMS Directive and its proposed update.


The draft, inter alia, contains new and mandatory limitations to copyright (for text and data mining, cross-border teaching, and preservation of cultural heritage); a new neighboring right for press publishers for the digital use of their publications; provisions concerning the use of out-of-commerce works; and transparency and disclosure obligations for exploiters of protected works in order for authors and performers to claim adequate remuneration.


Regarding the regulation of audiovisual works and relevant licensing practices, the Commission acknowledges that existing models of financing, production and distribution of audiovisual content are based on minimum guarantees in exchange for exclusive territorial rights. While the development of alternative models "based notably on a greater collaboration along the value chain" will be encouraged, there is no mention of a ban on geoblocking or territorial licensing practices for any form of distribution of audiovisual content as was feared by many in the industry. The Commission’s draft Directive contains only a somewhat surprising provision in Article 10, which obliges Member States to implement a "negotiation mechanism" to provide "assistance of an impartial body with relevant experience" to parties wishing to conclude an agreement for the making available of content via VOD platforms, and facing difficulties relating to the licensing of rights.


Article 13 of the proposal also requires platforms making available "large amounts" of copyrighted material uploaded by users to enter into negotiations with rights holders to put in place "appropriate and proportionate" measures, such as content recognition technologies, to ensure the functioning of the agreements with rights holders for the use of their works. Some UGC platforms already have such processes in place, like YouTube's "ContentID", but most do not; and the Commission believes that the hosting defence (also called "provider privilege" in some jurisdictions) that many platforms benefit from leads to an uneven playing field concerning negotiations between platforms and rights-holder. The notice-and-take-down procedures laid down in the E-Commerce Directive would continue to apply if no agreement is in place, or if the content cannot be identified by the chosen measures.

Article 13 of the draft Directive, referred to by many as an upload filtering mandate, or "Robo Copyright", has caused major backlash. The Commission is accused of undermining principles of existing EU law such as Article 14 of the E-Commerce Directive, which provides conditional immunity to UGC platforms and rules out the imposition of a general obligation to monitor uploaded content, by requiring platforms to enter into so-called shadow regulations with rights holders. These would lead to error-prone automatic filtering of user-generated content, and effectively censor the internet.
As for the Regulation, the German umbrella organization of motion picture, video and television trade associations, SPIO, has heavily criticized its provisions as an unfair privilege for broadcasters, saying that the proposed extension of the COO endangers the principle of territoriality as the foundation of film financing and essentially leads to a "buy one, get 27 free" model for ancillary online services. VPRT, the association of German private TV broadcasters, shared this concern over the extended COO principle and its impact on the value chain, and ultimately the contractual freedom of broadcasters. Also, the transparency obligations would lead to new bureaucratic hurdles that take away money needed for production budgets. In contrast, Bitkom, Germany's association of companies in the digital economy, demanded that the simplified clearing of rights be extended further to all linear TV offerings, including those transmitted over open networks. Collection society GEMA welcomed the copyright package for its effort to ensure fair remuneration and to strengthen the role of collective rights management.
Now that the official drafts are published, heavy lobbying from all players is to be expected, and it remains to be seen in which forms the drafts will enter into EU law. While the Regulation, if passed, would be directly applicable without action by the Member States, the Directive would have to be implemented into the national laws of the Member States. Such national rules, however, may then not only apply to EU companies, but also to third country companies with websites tailored for, and addressed to, a European jurisdiction.     

ECJ Ruling on Liability of Providers of Open Wireless Networks for Copyright Infringements

On September 15, the European Court of Justice (ECJ) held that a business offering public access to a free Wi-Fi network is not liable for copyright infringement committed by a user of that network. However, the business may be required to password-protect its network in order to bring an end to, or prevent, infringements.

The underlying case was brought before the Regional Court Munich by Sony Music Entertainment Germany against a shop owner offering free Wi-Fi in order to bring in new customers. After a song file had been unlawfully offered for downloading via the network, the court found that the shop owner was not the party infringing the copyright, but that he was potentially indirectly liable since the network was not password-protected. The court asked the ECJ whether the E-Commerce Directive (2000/31/EC), which exempts intermediate providers from liability for unlawful acts committed by a third party with respect to the information transmitted, precluded such indirect liability. In its judgment, the ECJ confirms that the operator of a free Wi-Fi network provides access to a communication network in the sense of the Directive. Therefore, rights holders are not entitled to claim compensation or damages (including reimbursement of the costs of giving formal notice, or court or attorney costs) due to the network being used by third parties to infringe their rights. Unlike a website host, the provider of a Wi-Fi network cannot remove information or disable access to such information at a later time. However, the ECJ stressed that the directive does not preclude rights holders from requiring, e.g. by way of an injunction, that the provider secure the network to end, or prevent, any infringements committed by its users. Under this ruling, it is therefore recommendable for providers of free Wi-Fi networks within Europe to secure them either by password protection or user registration in order to avoid any cease-and-desist claims by rights holders.     

Berlin Appellate Court Rebukes GEMA Distribution Practice to Publishers

In its judgment of November 11, the Berlin Appellate Court (Kammergericht) held (press release, in German only) that collecting society GEMA, which exercises the rights of composers and lyricists for musical works, is not entitled to subtract and disburse a lump sum of collected royalties to publishers. The decision applies retroactively for royalties collected since January 2010.
The court, following an April ruling by the German Federal Supreme Court (Bundesgerichtshof – BGH ; see our June 2016 Newsletter for details) in a case against collecting society VG Wort, held that GEMA must disburse the royalties collected by exercising any rights transferred to it only to the owners of the exercised rights. Since publishers (except for magazine/newspaper publishers that were not involved in this case) are not granted any copyright or neighboring rights of their own under German copyright law, they cannot claim to participate in the collected royalties. This would be different only if a specific payment order was made in favor of the publisher, or if claims were (in part) assigned to the publisher (neither of which had happened in the present case).