The music market in the digital age: the legal environment Anne-Catherine Lorrain Legal adviser & Researcher at CERDI (University Paris Panthéon Sorbonne – Paris Sud) STAGE « CULTURAL INDUSTRIES IN EUROPE » Musical Industries facing technological evolutions Paris, 20 June 2006

Anne-Catherine Lorrain

Legal adviser & Researcher at CERDI

(University Paris Panthéon Sorbonne – Paris Sud)

STAGE « CULTURAL INDUSTRIES IN EUROPE »

Musical Industries facing technological evolutions

Paris, 20 June 2006

The music market in the digital age: the legal environment Rightholders Authors’ rights and neighbouring rights Technical protection measures Interoperability Good merchant policy Users Which uses are illegal on the Internet?

Rightholders

Authors’ rights and neighbouring rights

Technical protection measures

Interoperability

Good merchant policy

Users

The music market in the digital age: the legal environment The main legal objectives for the development of the European on-line music market: Adapting rights’ licensing to the Internet Clearing what acts are illegal when using music on the Internet

The main legal objectives for the development of the European on-line music market:

Adapting rights’ licensing to the Internet

Clearing what acts are illegal when using music on the Internet

Clearing the boundaries of rightholders’ authorisation of exploitation For which uses did rightholders give their authorisation? e.g. downloading and/or streaming and/or podcasting?… Clearing the modes of rights’ management Individual/collective rights’ management; compatibility of collective management with « alternative » rights’ licences ( e.g. Creative Commons) Towards an European « one-stop shopping » for on-line exploitation of music ? - Fading of territorial boundaries on the Internet  need of multi-territorial / multi-repertoires licences - The main issue at stake: competitivity of the European on-line music market Adapting rights’ licensing to the Internet

Clearing the boundaries of rightholders’ authorisation of exploitation

For which uses did rightholders give their authorisation? e.g. downloading and/or streaming and/or podcasting?…

Clearing the modes of rights’ management

Individual/collective rights’ management; compatibility of collective management with « alternative » rights’ licences ( e.g. Creative Commons)

Towards an European « one-stop shopping » for on-line exploitation of music ?

- Fading of territorial boundaries on the Internet  need of multi-territorial / multi-repertoires licences

- The main issue at stake: competitivity of the European on-line music market

Initiatives of rightholders: - Santiago Agreements (authors’ performance rights; model agreement expired; EC Commission issued Statement of Objections ) - Barcelona Agreements (authors’ mechanical rights) - IFPI simulcasting Agreement (recording producers’ right to make available) Other n ew initiatives: - MCPS-PRS/Gema-EMI Music Publishing deal - MCPS-SGAE eLOS joint venture - SABAM-BUMA alliance initiative - The French legislative episode of the « global licence » The issue of mandatory collective management; the WIPO/Hungary precedent Adapting rights’ licensing to the Internet

Initiatives of rightholders:

- Santiago Agreements (authors’ performance rights; model agreement expired; EC Commission issued Statement of Objections )

- Barcelona Agreements (authors’ mechanical rights)

- IFPI simulcasting Agreement (recording producers’ right to make available)

Other n ew initiatives:

- MCPS-PRS/Gema-EMI Music Publishing deal

- MCPS-SGAE eLOS joint venture

- SABAM-BUMA alliance initiative

- The French legislative episode of the « global licence »

The issue of mandatory collective management; the WIPO/Hungary precedent

Complaints of RTL (2000) and of Music Choice (2003) against CISAC to the competition authorities of the European Commission  Commission Recommandation on collective cross-border management of rights for on-line music services (adopted on 18 May, 2005, published in October 2005) Adapting rights’ licensing to the Internet

Complaints of RTL (2000) and of Music Choice (2003) against CISAC to the competition authorities of the European Commission

 Commission Recommandation on collective cross-border management of rights for on-line music services (adopted on 18 May, 2005, published in October 2005)

Adapting rights’ licensing to the Internet How to conciliate competition law and collective management? The Perspectives following the EC Recommandation: Transition between 3 models of multi-territorial / multi-repertoires licences

How to conciliate competition law and collective management?

The Perspectives following the EC Recommandation:

Transition between 3 models of multi-territorial / multi-repertoires licences

Adapting rights’ licensing to the Internet Model 1 Collecting society Country 1 X 24 societies = 24 reciprocal agreements 24 reciprocal agreements x 25 Member States’ societies = 300 reciprocal agreements minimum! Classical system of reciprocal agreements (territory by territory basis) « intra-European » but not « pan-European » system Users’ model

Model 1

Classical system of reciprocal agreements (territory by territory basis)

« intra-European » but not « pan-European » system

Users’ model

Adapting rights’ licensing to the Internet Model 2 - Classical system of reciprocal agreements (territory by territory basis) but limited to a reduced number of collecting societies e.g. IFPI Simulcasting Agreement (no more consumer allocation clause) - Users’ model

Model 2

- Classical system of reciprocal agreements (territory by territory basis)

but limited to a reduced number of collecting societies

e.g. IFPI Simulcasting Agreement (no more consumer allocation clause)

- Users’ model

Adapting rights’ licensing to the Internet Model 3 - Rightholders’ model Rightholders choose one collecting society or licensing platform responsible for the administration of their rights for the whole European territory ( e.g. MCPS-PRS/Gema-EMI Music Publishing deal) e.g. : creation of 3 licensing platforms  only 3 agreements between collecting societies

Model 3

- Rightholders’ model

Rightholders choose one collecting society or licensing platform responsible for the administration of their rights for the whole European territory

( e.g. MCPS-PRS/Gema-EMI Music Publishing deal)

e.g. : creation of 3 licensing platforms

 only 3 agreements between collecting societies

Adapting rights’ licensing to the Internet Competition among collective management societies: the pros and the cons The cons: - Risk of tariffs’ « dumping » - Risk of creation of different « classes » of music repertoires (incidence on cultural diversity) The pros: - In a short term: competitivity of European on-line music market - Inducing collecting societies to improve their management systems

Competition among collective management societies:

the pros and the cons

The cons:

- Risk of tariffs’ « dumping »

- Risk of creation of different « classes » of music repertoires (incidence on cultural diversity)

The pros:

- In a short term: competitivity of European on-line music market

- Inducing collecting societies to improve their management systems

What acts are illegal when using music on the Internet? Normative context: Towards a greater protection of rightholders? 2001 Information Society Copyright Directive 2004 Enforcement Directive (implementation deadline passed April 29, 2006) Criminal sanctions Directive Proposal (July 2005)

Normative context: Towards a greater protection of rightholders?

2001 Information Society Copyright Directive

2004 Enforcement Directive (implementation deadline passed April 29, 2006)

Criminal sanctions Directive Proposal (July 2005)

What acts are illegal when using music on the Internet? Protection of Technical protection measures (TPM) Legal basis: 1996 WIPO Treaties: WTC (Art. 11) and WPPT (Art. 18) 2001 Information Society Copyright Directive (Art. 6) Sanction of TPMs’ circumvention: - circumvention acts - manufacturing and offering to the public technical means allowing TPMs’ circumvention - Beyond the reproduction and performance rights? e.g. British Copyright Act limits MTPs’ protection only to the MTPs ensuring legal rights’ protection

Protection of Technical protection measures (TPM)

Legal basis:

1996 WIPO Treaties: WTC (Art. 11) and WPPT (Art. 18)

2001 Information Society Copyright Directive (Art. 6)

Sanction of TPMs’ circumvention:

- circumvention acts

- manufacturing and offering to the public technical means allowing TPMs’ circumvention

- Beyond the reproduction and performance rights?

e.g. British Copyright Act limits MTPs’ protection only to the MTPs ensuring legal rights’ protection

What acts are illegal when using music on the Internet? Technical protection measures v. private copying? The role of the « three-step-test » (Bern Convention, Art. 9; 2001 InfoSoc Directive, Art. 5.5): « The exceptions and limitations provided for (…) shall only be applied in: - certain special cases - which do not conflict with a normal exploitation of the work or other subject-matter and - do not unreasonably prejudice the legitimate interests of the rightholder. » Can the « three-step-test » be applied by the national judge? e.g. French case law: Cour de cassation , 28 February 2006 ( Mulholland Drive )

Technical protection measures v. private copying?

The role of the « three-step-test »

(Bern Convention, Art. 9; 2001 InfoSoc Directive, Art. 5.5):

« The exceptions and limitations provided for (…) shall only be applied in:

- certain special cases

- which do not conflict with a normal exploitation of the work or other subject-matter and

- do not unreasonably prejudice the legitimate interests of the rightholder. »

Can the « three-step-test » be applied by the national judge?

e.g. French case law: Cour de cassation , 28 February 2006 ( Mulholland Drive )

What acts are illegal when using music on the Internet? The P2P issue The inner paradox of P2P: Downloading Making available Coincidence of actions Reproduction right Making available right Fading of frontiers between rights Acts of P2P users Authors’ and neighbouring rights The P2P issue The legitimacy of the sources of downloaded files e.g. German Copyright ActÂ

The P2P issue

The inner paradox of P2P:

Downloading

Making available

Coincidence of actions

Reproduction right

Making available right

Fading of frontiers between rights

The P2P issue

The legitimacy of the sources of downloaded files

e.g. German Copyright ActÂ

What acts are illegal when using music on the Internet? The P2P issue The liability of P2P software manufacturers Case law condemning defendants of indirect (either vicarious or contributory) copyright infringement e.g. Australia, Sharman case (Federal Court of Australia, 5 Sept. 2005) US, Grokster case ( American Supreme Court, 27 June 2005 ) Netherlands, Kazaa case ( 19 December 2003 ) The legislator’s dilemma: how to conciliate legal sanction and technical innovation? e.g. French debate Rightholders initiatives e.g. EMI agreement for P2P distribution: « Qtrax » (US)

The P2P issue

The liability of P2P software manufacturers

Case law condemning defendants of indirect (either vicarious or contributory) copyright infringement

e.g. Australia, Sharman case (Federal Court of Australia, 5 Sept. 2005)

US, Grokster case ( American Supreme Court, 27 June 2005 )

Netherlands, Kazaa case ( 19 December 2003 )

The legislator’s dilemma: how to conciliate legal sanction and technical innovation?

e.g. French debate

Rightholders initiatives

e.g. EMI agreement for P2P distribution: « Qtrax » (US)

The on-line music market and its users The « interoperability » issue The importance of a good merchant policy for on-line music services

The « interoperability » issue

The importance of a good merchant policy for on-line music services

Interoperability The position of the French legislator Which regulation: law or competition?

The position of the French legislator

Which regulation: law or competition?

For a good merchant policy of on-line music services The price issue Choice of the law applicable to the contract On-line services’ liability vis-à -vis users e.g. Legal action brought by the Norwegian consumers’ association against iTunes

The price issue

Choice of the law applicable to the contract

On-line services’ liability vis-à -vis users

e.g. Legal action brought by the Norwegian consumers’ association against iTunes