The way forward to the Collective Rights Management Directive

Sebastian Felix Schwemer

As reported by the IPKat, a few days ago the Council formally adopted a new directive on “collective management of copyright related rights and multi-territorial licensing of rights in musical works for online uses in the internal market” [the 'CRM Directive'].

What is this new directive all about? Is there anything in it besides its never-ending title?

Yes, says 1709 Blog friend Sebastian Felix Schwemer (Centre for Information and Innovation Law, University of Copenhagen), who so writes:

"Last Thursday the Council adopted the CRM Directive. This followed a vote by the European Parliament (with a rather impressive majority of 640 of 680 votes) just two weeks prior to the Council’s adoption and an informal trialogue agreement in November 2013.

The Directive pursues two main objectives:

1) To increase transparency and efficiency in the functioning of collective management organisations (CMOs), and

2) To facilitate the granting of cross-border licensing of authors’ rights in the online music vertical.

As early as 1995 the Commission had collective management on their legislative agenda. The new Directive, however, represents the first EU intervention in the area of collective rights management, as well as the way the relevant organisations operate. 

Initially expected in 2010, the Commission proposed its draft directive in July 2012 [see here and here], as a key action of the Digital Agenda for Europe.

Will CMOs become so transparent ...

The first draft was significantly expanded and the CRM Directive is now composed of 58 recitals and 45 articles plus an annex covering reporting duties.

The main elements of the new rules have been summarised [and emphasised] by Commissioner Barnier as follows:

(1)  Clear description of rightholders’ rights; including their free choice of a collective management organisation and of the scope of authorisation (rights, categories of rights and types of works of their choice; territories of their choice);

(2)  Minimum requirements relating to a collective management organisation’s governance structure, eg the obligation on the collective management organisation to have a supervisory function to supervise management, provisions relating to voting rights of rightholders and their rights to give a proxy to a representative to exercise their right to vote at the general assembly;

(3)  Time limits regarding the payment made to rightholders by a collective management organisation [9 months], as well as rules regarding the use of the amounts which cannot be distributed;

(4)  Rules regarding the relation with users and criteria for setting up tariffs;

(5)  Transparency requirements towards rightholders, other collective management organisations, users and the public;

(6)  Establishment of criteria a collective management organisation has to fulfil to grant multi-territorial licenses for authors’ rights in musical works for online use;

(7)  Rules on representation agreements between collective management organisations for the purposes of multi-territorial licensing, in particular criteria for when a collective management organisation has an obligation to represent another organisation;

(8)   Provisions on dispute resolution, such as an alternative dispute resolution procedure for certain disputes relating to multi-territorial licensing.

The first objective, ie to increase transparency and efficiency in the functioning of CMOs, is addressed in the general provisions on collective rights management for all sectors and contains a governance and transparency framework. The Commission opted for the codification of the existing principles established in case law in conjunction with a “more elaborate framework on governance and transparency”, as pointed out in its explanatory memorandum.

One aspect discussed in the legislative process has been the scope of the Directive. While the initial draft referred to “collecting societies”, the Directive is now aimed at “collective management organisations”. The more general term was preferred to ensure the establishment of a level playing field.

A noteworthy provision that has been added during the legislative process is the possibility (Article 5(3)) for rightholders to grant licenses for non-commercial purposes (such as Creative Commons licenses).

The second objective of the CRM Directive, ie to facilitate the granting of cross-border licensing of authors’ rights in the online music vertical, is addressed through the establishment of a passport model, by which collective management organisations that satisfy certain minimum requirements are enabled to license authors’ online rights in musical works on a multi-territorial basis. This is not limited to downloading or streaming services only but also covers use of music in games or audio-visual content. This vertical approach has been criticised, amongst others, by the Max Planck Institute [here and here].

The new rules on multi-territorial licensing are not only expected to facilitate

... that it will be almost scary?

 new online services – and thereby enhance consumer choice – but also lead to a reduction in transaction costs, which should be passed on to consumers (or so recital 44 says).

Poland does not seem convinced that music service providers are “interested in acquiring licenses for multi-repertoire and multiterritorial coverage”. Pointing towards the potential detrimental effect on cultural diversity and the fact that service providers face a multitude of other challenges in offering pan-European services, this country abstained from voting in the Council.

It will be interesting to see to what extent the CRM Directive will achieve its goals. While this is a way forward for multi-territorial online music licensing, it is unlikely that this approach would be one-size-fits-all for other entertainment verticals. One might argue (indeed many have) that the earlier (and softer) measures such as the 2005 Recommendation and competition case law have increased fragmentation in the internal market (where we have not only mono-territorial licensing by collecting societies but also pan-European licensing of mono-repertoires).

During his speech in front of the Parliament on 4 February, Commissioner Barnier underlined that it is important that “CMOs, rightholders and users take ownership of the instrument”.

Member States will have to incorporate the provisions into domestic law no later than 24 months after its entry into force. When releasing its proposal, the Commission made it clear that the new rules would lead to “substantial changes” in most national laws. So: May the implementation games begin!”