The 1709's
knowledgeable readership will be well aware that royalties are the
lifeblood of the copyright 'promise'. In exchange for cultural
enrichment, society grants authors, artists and musicians a legally
enforceable set of rights which constrain how the works they create
may be exploited. Very few of these creators receive just a single
lump sum in exchange for releasing these rights, and indeed the whole
idea of the lifetime plus 70 years duration of these rights in
predicated upon a steady stream of royalties making up the lion's
share of a successful author or artist's income. Behind this
relatively simple concept lies a truly labyrinthine web of
organisations which are responsible for assessing, collecting,
apportioning and generally administering these various fees,
royalties and other disbursements. Of course many copyright holders
are large or SME companies, who generally have gained their rights
through section 11(2) CDPA which covers works made by individuals in
the course of their employment. For various reasons, including the
fact that these companies are, or should be, resourced to administer
their rights in a businesslike manner, this article does not consider
this group of rightholders further.
Be it tiny fractions of
a penny for each Spotify download, or seemingly generous advance fees
running to many thousands of pounds paid to best-selling authors, the
money comes almost by magic, from a veritable alphabet soup of
abbreviations, acronyms and occasionally organisations with real
names. Among these are the CMOs or Collective Management
Organisations, often referred to as Copyright Collecting Societies.
Each creative discipline has its own CMO, or for instance like the
music industry, several. These are generally not-for-profit limited
companies. Added to these are many other intermediary bodies, such as
publishers (literary and music), agents, management, record
companies, and even government sponsored bodies such as the Public Lending Right Office (PLR is not technically a copyright issue, but
it works in a very similar manner to a CMO) and of course the IPO
itself falls under this heading because it collects fees in respect
of orphan works. And if the UK ever embraces a private copying levy,
that strand will also need to be added to the existing skein -
although skein perhaps implies an order which is wholly absent from
the vast range of intermediaries who service the copyright
'industry'. Organisations and companies in this second, non-CMO,
group which are manifestly run for profit are termed independent
management entities (IMEs) in the jargon, and this distinction
becomes significant when we look later at some of the legislative
initiatives in this area.
The whole system runs
on trust. There are few true audits, and most importantly, the author
or artist who lies at the far end of this chain of beneficence has
virtually no means of verifying that the amounts he or she receives
are the correct ones. Even in the world of highly detailed contracts
such as in the music business, what the artist receives in royalties
is virtually impossible to confirm independently, given the
complexity of the supply chains, including the reciprocal links
between various CMOs worldwide. This is one of the reasons for bodies
which represent the interests of their particular creative groupings,
such the Musicians Union, the Society of Authors, the Featured
Artists Coalition, the Association of Photographers and many others.
Like the more traditional labour unions, these bodies advocate on
behalf of their members and attempt to get improvements in their
income. But even they have to assume a certain amount of trust that
the system is working both efficiently and honestly. And at a time
when so many other institutions have proved unworthy of the trust
placed in them, be it banks or sport governing bodies,
pharmaceutical giants, motor manufacturers or high street
supermarkets, it would be wise to be a little sceptical about all
this when it comes to copyright revenues. Whether it's cockup or
conspiracy, the opportunities for the money which rightly belongs to
the creators to go astray are enormous. As are the sums involved. The
International Confederation of Societies of Authors and Composers
(CISAC) reported that for 2014, the total revenue collected by its
members worldwide was €7.9 billion (£5.8 Billion), while the
figure for the UK alone was €635M (£470M).
These figures underline
the need for financial probity, especially where the recipients of
these sums (after administrative expenses have been deducted) are by
definition self-employed individuals (albeit possibly registered
companies for tax efficiency purposes) who have neither the time nor
the expertise to hold their paymasters to account. This is the
fundamental reason for the EU Directive 2014/26 EU on collective
rights management, which required member states, inter alia, to
supervise the running of CMOs and introduce a code of practice to
apply best practice and provide greater transparency for
rightholders. The UK Statutory Instrument (SI 2014/898) which
transposes the Directive into UK law is not yet fully in force.
However the SI lays out the criteria for the CMOs to incorporate into
their codes of practice, which if they are judged to be inadequate,
can result in a more suitable code being imposed on the society
concerned. And there are financial penalties for CMOs which fail to
abide by their own or an imposed code.
So with all that in
mind, what are we to make of a serious breakdown in the system which
goes to the very heart of the trust which it relies on? This autumn a
body which represents some photographers, EPUK, discovered that someone at the previously
well-respected picture agency, Rex Features, had been forging the
signatures of photographers on mandate forms in order to claim a
share in the payouts from the Payback scheme run by the CMO Design
and Artists Copyright Society (DACS). EPUK estimate that the Payback
scheme would have paid around £400,000 to Rex during 2014, although
how much of this was based on the fraudulent mandates is not known at
this stage. Readers are invited to read both the EPUK press release,
and the DACS release, in order to get more details on the matter.
What is clear is that if the system can break down in this way once,
what are the chances that something similar is going on elsewhere, as
yet undetected? As far as is known, the fake mandates related to real
people, who in fact got payments they weren't expecting (albeit after
Rex appears to have taken out an unjustified administration fee),
however exactly the same process could have been used to divert funds
to bogus individuals. So how will the EU Directive and the UK
implementation of it, prevent this kind of behaviour in the future?
It remains to be seen, but what is significant about this allegation
is that Rex is not a CMO, but an IME as explained in paragraph 2
above. Thus vast chunks of the EU Directive do not apply to them as
an IME and under the SI as it stands, while IMEs appear to be
included under the heading of 'relevant licensing body', the criteria
for the codes of practice fail to include anything on the integrity
of the staff, or on safeguards against outright fraud (I don't think
"act in the best interests of its members" really covers it
with sufficient vigour). This incident therefore should act as a
wake up call that more is still required to bolster trust.
The good intentions of
the EU Directive and the IPO's secondary legislation are laudable but
until we can have genuine trust in the vast machinery which monetises
copyright, all talk about reforming other parts of copyright is
rather like building a house on sand.
