MEMO/05/241

Brussels, 7 July 2005

Frequently Asked Questions (FAQs) on central copyright clearance for online use across the EU

What is copyright?

Copyright and related rights are rights which ensure that right-holders (e.g., writers, composers, lyricists, performers or record producers) get a share of the money earned from the commercial use of their creations.

Why is copyright exploited collectively?

Collective management of copyright is the system under which a right-holder authorises a body to commercially exploit his rights. As right-holders cannot individually monitor all the different uses made of their works, they entrust this task to collecting societies.

What do collecting societies do?

Collecting societies provide the following services for right-holders: (1) the grant of licences^[1] to commercial users; (2) the auditing and monitoring of rights by ensuring payment and terms of licensing (enforcement); (3) collection of royalties; (4) distribution of royalties to rights-holders. Some collecting societies also provide social and cultural funding.

Why have we looked at the services provided by collecting societies?

We have looked at collecting societies services’ because the licensing of copyright content across EU borders should be improved. Improvements are necessary because new Internet-based services such as webcasting or on on-demand downloads^[2] are not as widespread in the EU as they are in the US. The absence of pan-European copyright licenses makes it difficult for the new Internet-based services to take off.

We have also looked at collecting societies because it appears that royalties are not always distributed to right-holders across national borders and distribution does not always reflect actual use made of their work in other territories.

What needs to be done?

The main obstacles to the growth and availability of Internet-based services in the EU have to be removed by: (1) Introducing effective models for cross-border licensing of copyright-protected content in the on-line environment; and (2) Introducing effective models for cross-border distribution of royalties in both the online and the off-line environments.

What options did we consider to remove these obstacles?

We have considered three options: (1) Do nothing (Option 1); (2) Suggest ways in which cross-border cooperation between national collecting societies in the 25 Member States can be improved (Option 2); or (3) Give right-holders the choice to authorise one single collecting society to license and monitor all the different uses made of their works across the entire EU (Option 3).

What are we proposing?

The paper comes to the provisional conclusion that Option 3 offers the most effective long-term model for cross-border licensing of copyright-protected content in the online environment and cross-border distribution of online royalties. With respect to cross-border licensing, the right-holders’ ability to choose one single collecting society to license the different uses made of his works across the EU, creates an EU-wide license for his works. With respect to cross-border distribution of online royalties, the right-holders freedom to choose any collecting society in the EU, will be a powerful incentive for collecting societies to provide optimal services to all its right-holders, irrespective of their location – thereby enhancing cross-border royalty payments.

How will this proposal be implemented?

In line with Better Regulation principles, the form and intensity of our policy intervention needs to be tailored to the severity and urgency of the problems to be addressed. In addition, all policy initiatives should ensure that the cost of compliance does not exceed the expected economic benefits.

In pursuing Option 3 as the long-term rights management model for cross-border copyright exploitation, EU action would not be based on detailed micro-regulation but would set forth a series of core principles:

• The right-holder’s choice as to the online management society is based on the freedom to provide rights management services directly across borders. The freedom to provide cross-border management services by means of direct membership contracts will eliminate administrative costs inherent in channelling non-domestic right-holders’ royalties through reciprocal agreements between different societies.
• The principle that a right-holders’ choice of a single EU rights manager should be exercised irrespective of residence or nationality of either the rights-manager or the right-holder.
• The principle that a collecting society’s online repertoire and territorial licensing power would not derive from reciprocal agreements but from right-holders concluding contractual agreements directly with a society of their choice. Right-holders should be able to withdraw online rights from their national CRMs and transfer their administration to a single rights manager of their choice. For that to work, these online rights must be withdrawn from the scope of reciprocal agreements as well.
• The principle that the individual membership contract will allow the right-holder to define precisely the categories of rights administered and the territorial scope of the society’s authority. As the licensing authority would derive from the individual membership contract, the collective rights manager of choice would not be limited to managing these rights in his home territory only, but rather could manage them throughout the EU.
• Individual membership contracts create a fiduciary duty between the collecting society and its members, obliging the former to distribute royalties in an equitable manner. The principle of equitable distribution obliges CRMs to treat domestic and non-domestic members alike with respect to all elements of the management service provided. The fiduciary duty enshrined in membership contracts is thus is a tool to maximise the royalties that accrue to right-holders.
• Membership cannot be refused to individual categories of right-holders who represent mainly non-domestic interests (e.g., music publishers). In addition, these right-holders should have a voice in how royalties are distributed that is commensurate with the economic value of the rights they contribute to the CRMs repertoire.
• Non-discrimination as to the service provided and the fiduciary duty of the collective rights manager vis-à-vis its members introduces a culture of transparency and good governance as to how rights are collectively managed across EU borders.

^[1] Permission given by the owner of copyright to another person to use a copyright-protected work.

^[2] The terms upload and download often create confusion, as their definitions depend on the exact context. Download and upload refer to the transfer of information between computers. The person/computer sending the information refers to the transfer as an upload, while the person/computer receiving the information refers to it as a download.