That new Spanish law: a tale of fragments, aggregators -- and money

Last week the IPKat hosted this piece by Elena Molina and Sergio Miralles on the controversial new Spanish IP law.  Not to be outdone, the 1709 Blog has commissioned an analysis of its own. The author is our friend Valentina Torelli who, like Elena and Sergio, is currently practising in Spain. Here's Valentina's assessment:

As announced online last week, the Spanish Law no. 21/2014, the highly-publicised intellectual property law reform, was published on 5 November, provoking shock reactions within the world of ISPs. The law comes into force on 1 January 2015, except for some provisions which will be effective one year from publication. 

Among the changes to the previous intellectual property law, a green light has been given to the contested new Article 32(2), which makes the author’s right’s limitation for review subject to a compulsory economic compensation, when content aggregators communicate to the public literally “negligible fragments of contents”, taken from news publications or from latest news websites, which are directed at forming public opinion or have informational or entertainment purposes. 

The modification of Article 32(2) was intended to better comply with Article 5(3)(d) of Directive 2001/29 (the InfoSoc Directive):

“quotations for purposes such as criticism or review, provided that they relate to a work or other subject-matter which has already been lawfully made available to the public, that, unless this turns out to be impossible, the source, including the author's name, is indicated, and that their use is in accordance with fair practice, and to the extent required by the specific purpose.”

The most interesting part of the new Spanish provision is the inalienable nature of the economic compensation – which results to be compulsory collective management right for publishers and authors – in relation to making available negligible parts of publications. This compensation has been nicknamed the “AEDE tax” [tasa de la Asocición Espanola de Editores] as it will go to the benefit of publishers or other “right holders” and will be collected once a year by CEDRO, the Spanish collective society for authors and publishers, according to the Annual Budget Law. 

That said, although news-aggregators are exempted from asking for authorization to recompile periodicals’ and reviews’ irrelevant portions of contents, they will have to pay a predetermined amount of money to make them available to the public, irrespective of whether the legitimate right holder is a member of the Collective Society. This means that the collected compensation could be divided among the Collective Society’s members, without necessarily being paid to the legitimate right holder. Likewise, the publications released under Creative Commons will also be compensated by means of the new provision although their nature is quite the opposite to a ‘compulsory economic right’ philosophy. 

In any event, such limitation for review to author’s rights does not cover the communication to the public involving thumbnail images of images and photographs taken from the previously identified publications. 

From a legislative technique perspective, some perplexities may arise in regard to the criteria whereby the part of publications provided by content aggregators could be considered negligible (fragmentos no significativos) but protectable under copyright law and, therefore, exempted under condition of an economic compensation for the sake of the public interest in access to culture and information (Articles 44 and 20 Spanish Constitution). 

 It seems that the solution would be to carry out an assessment on a case by case basis, assuming that no authorization or compensation is due when the publications’ fragments are originally summarized by the aggregator and then communicated to the public together with the link to its original source. 

Another important point is the identification of the content aggregators, as there is always a tendency to take into consideration the big players in the market, disregarding other smaller operators, providing the same type of services addressed by these legislative measures. In this regard, sooner or later at international level the category of content aggregators should be regulated on its own for the purposes of copyright protection. 

Provided that social networks should not fall under the definition of content aggregators for the purposes of the reform, it would be interesting to analyse whether the limitation provided in Article 32(2) of the new Spanish Intellectual Property Law would apply to blogs, databases or applications, undertaking reviews of news publications. Indeed, Spanish law no. 34/2002 implementing Directive 2000/31 (the E-Commerce Directive) provides no definition of “service providers”, it being necessary to refer to the European legal framework and, in particular, to Article 1(2) of Directive 98/34 as amended by Directive 98/48, which provides the following definition:

“ ‘service’, any Information Society service, that is to say, any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services.”

Consequently, emphasis should be on services “normally provided for remuneration”, given that the provision of a service “at distance” “by electronic means” regards the inherent functioning of the Internet and that “at the individual request” involves the active participation of the users querying the internet itself. It follows that the category of providers engaged in content aggregation could be wider than is normally conceived when thinking of internet service providers, just because the concept of remuneration could be differently interpreted. 

In relation to the beneficiaries of the reform, again it is unclear whether the new provision encompasses only the traditional media of communication or also covers other players such as blogs and online reviews to the extent that they engage in news updates. Likewise, it seems that if the publication whose negligible fragments are aggregated was considered a collective work, the fragments’ authors would step back in respect to publishers’ right to the economic compensation. 

Moreover, according to the second part of Article 32(2), the new mandatory compensation may also entail browsing ISPs’ activities, when they offer users the search tools for spare words, included in the negligible portions of publications, and they do not comply with the three cumulative requirements provided by the law. Indeed, the review limitation to the author’s rights applies only if the availability of such search tools to the public (i) does not pursue the browsing ISP’s own commercial purpose, (ii) is strictly limited to the offer of search results in accordance to the users’ previous entries in the search engine and (iii) provides the link to the original webpages to which the protected contents belong. 

In this case, the provision has two main points.

·         the fact that the search tool regards spare words included in the publications, without specifying how many words or combination of them can be exempted.
·         such search services cannot be associated with the provider’s own commercial purposes, although it is not clear whether the provision is conceived only for pay-services or if it also embraces indirect revenue sources.

This being said, the reason underlying the introduction of the economic compensation concerns the publishers’ prerogatives to protect the undue exploitation of their intellectual property rights on the internet. In particular, it is aimed at contrasting the direct competition between them and content aggregator ISPs, in relation to access to information without the latter sharing the costs the publishers bear in producing their original content. 

Notwithstanding the argument relating to the anticompetitive effect of content aggregators’ services against both offline and online publishers, the Spanish National Commission for Markets and Competition (CNMC) in its report of 16 May this year took a totally different stand. In the light of the several versions of the Intellectual Property Law’s draft reform, the Commission proposed modification of Article 32(2), recommending that the limitation for review be reconsidered as regards the mandatory nature of the economic compensation and the exclusive assignment of its collection to collective societies. The main points of the report can be summarized as follows: 

1.       The content aggregator ISPs’ and press-clippers’ competitive role affecting publishers could not be confirmed. 

 The Commission observed that website holders could apply technological protection measures, such as the standard program robots.txt, to prohibit or to limit crawling and the aggregation of website content according a tailored degree of availability. However the snippets’ aggregation provides publishers with visits to their websites, as complete access to information is only possible on their pages. This takes into account the huge economic investments that many, if not all, publishers make in order to increase their indexing in search engines. Effectively, the Commission achieved a more favorable result in the contractual balance of interests between all the interested players as regulated by the market. In this regard, as content aggregators have raised concerns all over the European Union, it is worth mentioning that the German Federal intellectual property law had introduced an obligation for them to obtain publishers’ licences to communicate to the public full protected contents, with only the making available of snippets being exempted from such licensing. Moreover, the Commission emphasised that, while the predetermination of economic compensation would be ineffective, since it would not serve the publishers’ different and variable interests, the advertising revenues derived from the linking to their websites from those of content aggregators would be significant. 

 Indeed, that content aggregators could contribute economically to publishers’ adaptation to the online market is not a brand new idea: for instance, in 2013, Google signed an agreement with the French Press Association under the eye of the French Government, whereby a dedicated fund, amounting to 60 million euros, was established to facilitate the press’s transition to the online environment.  

2.       Horizontal competition among content aggregators ISPs would be undermined 

As regards the competition between content aggregators, the CNMC warned about the discriminatory character of the compulsory economic compensation, in that it would be a measure preventing the access to the content aggregators market, which the actual ISPs did not have to get over. 

While waiting for the entry into force of the new Article 32(2) next year, it will not be long before we see how affected content aggregators will deal with the new provision and adapt their business models to the rules of the Spanish web, and whether the Spanish internet will change its mode of operation.