Creators' Rights Alliance - Between a rock and a hard place - E: The necessity of legislative action
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The European Community

The second forum where the CRA would like to see its proposals considered is the European Community/Union. The Community has been in the process of harmonizing copyright in Europe throughout the past decade. The Council and Parliament have adopted Directives concerning copyright protection of computer programmes, duration of copyright, cable and satellite broadcasting, rental and public lending, databases and most recently the “information society and artist’s resale royalty right”.[1] The most prominent reason for such intervention has been the desire to achieve a single market, and to remove distortions of competition within that market.[2]

More recently the aims of the Community (and Union) have broadened to include the promotion of research and technological development and the flowering of the cultures of the Member States.[3][4] Such a code must deal with the questions raised in this paper. Increasingly, the EU’s role in the copyright field appears to be responding less to particular problems with the Internal Market and more to the adoption of a copyright code.

In its work so far, the EU has largely been concerned with rights. This is especially so with the latest Directive on Copyright and the Information Society. The Commission has only once dealt with authors’ remuneration (in the Rental Rights Directive), and none of the Directives deal with the moral rights of creators. In April 2000, the Commission published a report on moral rights which had been prepared by Alain Strowel, Marjut Salokannel and Estelle Derclaye.

The report, entitled Moral rights in the context of the exploitation of works through digital technology, reveals substantial differences in the detail of the laws of Member States on moral rights, but little dissatisfaction with the lack of harmonization. In part, this reflects the consistently high levels of moral rights protection in most European countries (the exceptions being the UK and Ireland). The report also revealed that one of the reasons for the failure to press the Commission to undertake harmonization was fear that the effect of the legislative process would be to allow the influence of exploiters and the “copyright countries”, the UK and Ireland, to lower the level of protection.

The CRA believes that the European Commission should re-evaluate the conclusions of this study, and seriously consider the issue of harmonization of moral rights. In particular, we observe that the Commission’s inactivity on this issue in the past seems to have been based on claims that the UK Government has not received any complaints relating to moral rights. It may be the case that the government has not passed these on to the Commission, but there is proof that there have been such complaints by various member organizations of the CRA. In addition, there can be no doubt about the implications of moral rights for the Internal Market. For example, a colourized version of John Huston’s The Asphalt Jungle cannot be distributed in France without the consent of his heirs, but it could be distributed in the UK (since moral rights did not operate retrospectively in relation to films made before 1 August 1989) and Huston’s waiver under US law would be recognized).

However, one conclusion from the Strowel, Salokannel and Derclaye report with which the CRA would agree is the conclusion that “if there is to be harmonization, it must centre primarily on … questions of ownership and contract law.[5] As a consequence,[6]This study will be published in 2002.[7] This shift in focus from copyright rights to copyright contracts seems opportune, given the fact that the EU Commission has recently begun to focus on the question of harmonization of contract law generally in Europe. In July 2001, the EU Commission issued a Communication to the Council and the European Parliament on European Contract Law.[8] This document reports that the European Parliament had suggested that harmonization of contract law was essential for the completion of the internal market. So far, Community contract legislation has been on a sector-by-sector basis, as with the recent Directive 2000/31/EC of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market.[9] The Communication seeks to discover “if the co-existence of national contract laws in Member States directly or indirectly obstructs the functioning of the internal market and, if so, to what extent?” It suggests that if such obstacles are shown to exist, action at a European level may be necessary. the EU Commission has appointed Professor Bernt Hugenholtz to conduct a study of authors’ contracts, in order to decide whether harmonization is required.

As we have seen, and as Appendix 2 illustrates, national copyright contract rules vary dramatically throughout Europe. There is no question that these variations create what the Commission describes as “[p]roblems in relation to agreeing, interpreting and applying contracts in cross-border trade.[10] Rather than explain this complexity within the text, we have provided a standard example below.  What should be clear is that it can be very tricky indeed to decide the legal position of an author because of the variations in the law affecting authors’ contracts. In effect, these variations, coupled with problems in determining applicable law, increase transaction costs and inhibit the optimal functioning of the market. The only conclusion that one can draw from this example is that urgent harmonization of this area of law is essential, particularly as distribution of works becomes increasingly global.[11]

The Complexity of Copyright Contracts In Europe

Take, for example, a contract between a British author and a Dutch publisher, under which the author grants an exclusive licence to publish the work in any form throughout Europe. The contract grants the author a lump sum. The publisher places the work on the Internet, where it can be accessed from France on payment of a fee. Questions arise as to whether the author can claim more remuneration, object to Internet distribution etc.

Under UK copyright and contract law, the author can probably do nothing. Under Dutch law, however, because the right to Internet transmission was not specifically mentioned, the author is probably entitled to prevent such distribution. In French law, the contract would probably be void (because of its lack of specificity) and, if not, the author would be entitled to claim further remuneration. In Germany, the contract would be void in so far as it related to future technologies, but the remuneration provisions would only be challengeable if the profits to the publisher were grossly disproportionate to the contractual remuneration.[12] So, given these very different consequences, the question is which law would apply?

In deciding which is the applicable law, we would need to refer to the so-called “conflicts of law” rules contained in the national law of the relevant court where protection is sought. (Most countries have different sets of “conflicts of law” rules for copyright matters and contract matters). Imagine the author brought an action in the Netherlands (the place of domicile of the defendant, and therefore the most appropriate forum under Article 2 of the Brussels Convention) or France (on the ground that it was “the place of performance” of the obligation in accordance with Article 5 of Brussels). Either court, seized of jurisdiction, then needs to decide whether it is dealing with a “copyright” provision which would require the court to apply “copyright-conflicts” rules  (usually the law of the protecting state) or“contract” provision falling to be decided by reference to the “contract-conflicts” rules.[13] These distinctions, however, are by no means clearly drawn. Whether a rule against alienation of rights in relation to unknown media is a copyright rule or a contract rule is unclear. A German authority, Eugen Ulmer, has suggested it was a copyright rule, so that a foreign contract could not over-ride it.[14][15] In contrast, French case law has treated the rule on proportionate remuneration as a contract provision, and thus inapplicable to foreign contracts. However, French courts have treated rules on moral rights as a matter for French law.

Even where we know the provision is a “contracts provision”, and therefore to be governed by “contract-conflicts” rules, we then need to decide which law applies. Prima facie, if the contract specifies the “applicable law” (under the Rome Contracts Convention), that decision governs.

However, some exceptions apply under Articles 3(3), 5-6, 7 and 16.[16] If the contract does not specify the applicable law, the Rome Convention indicates that the country of the party who is to render “characteristic performance” under the contract is “most closely connected with the contract” (Art. 4). In the case of a publishing arrangement, this is likely to be where the publisher is located.[17]

The CRA calls upon the European Commission to consider the proposals we make below. In considering them, it is worth observing that, on occasion, the European legislation has already recognized the importance of granting creators appropriate remuneration. For example, in the Rental Rights Directive, there is recognition of an “unwaivable right to equitable remuneration” for the authors of works which are the subject of rental and lending, corresponding to similar (though more general) provisions in French law guaranteeing authors’ proportionate remuneration.[18] Recital 7 acknowledges that “the creative and artistic work of authors and performers necessitates an adequate income as a basis for further creative and artistic work”.[19] Moreover, the Explanatory Memorandum to that Directive refers to the need to protect creators as weaker parties, stating: 

“It would be misplaced to neglect, in contrast to producers, creators and performing artists and thereby those who hold the key to the cultural “production” in the Community because they “supply” the “contents” of the work support. Moreover, modern copyright always aims at a balance between the several groups of rights owners and this should not, as a matter of principle, be called into question to the detriment of creators of works and performing artists.”[20]

This recognition by the Commission of the need to protect creators from the untrammelled excesses of the free market in order to ensure creators obtain adequate remuneration is a useful precedent for some of the broader developments we suggest below.

In considering legislative proposals, we also draw the attention of the Commission to the European Parliament’s Resolution of 1 February 2001, on the new frontiers in book production: electronic publishing and printing on demand (2000/2037 (INI)), calling on the Commission to propose a legislative framework for e-publishing which “is sufficiently flexible with regard to permitted methods of remunerating authors, in order … to encourage and adequately finance, emerging authors.”[21]

[1] Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonization of certain aspects of copyright and related rights in the information society O L 167/10.

[2] Art. 2 EC (formerly Art. 2 of the Treaty) sets out the tasks of the Community as being to establish ‘a common market and economic and monetary union’ and ‘by implementing common policies and activities ... to promote throughout the Community a harmonious, balanced and sustainable development in economic activities.’ Subsequent provisions explain that the Community must prohibit restrictions on the import or export of goods, remove obstacles to the free movement of goods, persons, service and capital; introduce a system ensuring that competition in the internal market is not distorted. Art. 3 EC, (formerly Art. 3 of the Treaty).

[3] Note also Art. 5 EC (formerly Art. 3b of the Treaty) (subsidiarity). The flowering of cultures is elaborated in Art. 151 EC (formerly Article 128).

[4] H. Cohen Jehoram, ‘European Copyright Law – Ever More Horizontal’ (2001) 32(5) International Review of Industrial Property and Copyright Law 532.

[5] A. Strowel, Moral Rights in the Internal Market, address to Strasbourg Conference on Management and Legitimate Use of Copyright, (9-11 July 9 2000).

[6] The Commission indicated that it was prepared to foster an examination into the question of whether legislation in this field is necessary to achieve the smooth functioning of the internal market: Conclusions, EC Strasbourg conference on Management and Legitimate Use of Copyright, (9-11 July 9 2000), 92.

[7] A previous study by Adolf Dietz for the European Commission was published in German in 1984: Das primare Urhebervertragsrecht in der Bundesrepublik Deutschland and in den anderen Mitgliedstaaten der Europaischen Gemeinschaft. Legslatorischer Befund und Reformuberlegungen. (Vol 7 in the series Schriften zum gewerblichen Rechtsschutz, Urheberund Midienrecht. Munich: J. Schweitzer Verlag, 1984). His recommendations were in favour of treating freelance authors as employee-like persons, and regulating contracts through collective agreements.

[8] COM (2001) 398 final, 11 July 2001.

[9] OJ L 171/1 (17 July 2001).

[10] COM (2001) 398final, 11 July 2001, para 26.

[11] Discussed in B. Hugenholtz & A de Kroon, ‘The Electronic Rights War. Who Owns the Rights to New Digital Uses of Existing Works of Authorship?’ (2000) IRIS (Legal Observations of the European Audiovisual Observatory) 16, 19.

[12]  But note the German law has been altered, so that authors will be able to claim adequate remuneration: Article 32 of the German Copyright Act of 9 September 1965 (as amended). This however will only apply to contracts entered after 30 June 2001 as regards acts of exploitation that take place after 25 April 2002: Article 132.

[13] The terminology is borrowed from Paul Geller, International Copyright Law and Practice (New York: Bender, 2001) para 6[2], INT-223-INT-243.For a helpful discussion, see M.M. Walter, ‘Contactual Freedom in the Field of Copyright and Conflict of Laws’ in H. Cohen Jehoram (ed.), Copyright Contracts 219 (Sijthoff, Alphen aan den Rijn, 1977).

[14] E. Ulmer, Intellectual Property Rights and Conflicts of Laws 39 (Kluwer, 1978).

[15] Turner Entertainment v The estate of Huston, Cour d’appel de Paris 4e ch, 6  July 1989 (1990) 143 Revue Internationale De Droit D’auteur 329; Cass. civ. I, 28 May 1991 (1991) 149 Revue Internationale De Droit D’auteur 19, (1992) 23 International Review Of Industrial Property And Copyright Law 702; Versailles, chs. reunies, 19 December 1994 (1995) 164 Revue Internationale De Droit D’auteur 389. For commentary, see J.Ginsburg & P. Sirinelli, ‘Author, Creation and Adaptation in Private International Law and French Domestic Law. Reflections Based on the Huston Case.’ (1991) 150 Revue Internationale De Droit D’auteur 2.

[16] Jackson, Mandatory Rules and rules of ‘Ordre Public’ in PM North (ed), Contract Conflicts 59 (Amsterdam, 1982).

[17] Wegman v Ste Elsevier Science, 4e ch, Paris, 2 June 1999 (2000) 183 Revue Internationale De Droit D’auteur 302.

[18] Council Directive 92/100/EEC on rental right and lending right and of certain rights related to copyright in the field of intellectual property Art. 4. See G. Reinbothe and S. von Lewinski, The EC Directive on Rental and Lending Rights and  on Piracy (London: Sweet & Maxwell 1993) 65-7.

[19] British contracts have hitherto succeeded in neutering this recognition by specifying that the initial contractual sum includes an equitable pre-payment for rental and lending. Recital 7 of Council Directive 92/100/EEC had recognized that “equitable remuneration may be paid on the basis of one or several payments at any time on or after the conclusion of the contract”, a provision picked up on by the UK Government when implementing the Directive in section 93C(4) of the CDPA 1988.

[20] Com (90) 586 final, 24 January 1991 and Com (92) 159 final, 30 April 1992

[21] Official Journal of the European Communities, C Series, 21 September 2001 C 267/83.

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