In its quest for a true “Digital Single Market“, with better online access for consumers and businesses across borders between Member States, the European Commission is using many of its legislative tools to tackle the barriers in its way. Last week, it announced proposed changes to copyright law, to achieve ‘portability’ of digital content. Will the Commission ultimately prohibit territorial licensing in favour of EU competition law?
The Commission has now published its plans for a new regulation on the cross-border portability of online content (read our update here). The Commission suggests that copyright-protected online content that customers have subscribed to or acquired at home should be available when they travel to another Member State. To this end, the Commission proposes to adapt copyright rules by addressing aspects related to the territoriality of copyright.
The overall goal of the Commission is to create a true EU-wide digital single market. Whereas EU competition law is fully in line with this goal, copyright law allows the owner to geographically restrict a license. Copyright owners such as film studios are therefore entitled to grant national licenses to platforms in each EU Member State. This prevents subscribers of such platforms being able to access their content when they travel to other Member States. The proposed copyright reform tackles this situation and was drafted to ensure cross-border portability, thereby reconciling EU competition law and copyright law.
Impact on geo-blocking?
Where content has been licensed on a territory-by-territory basis, it is generally protected by geo-blocking. Geo-blocking is applied at the stage of purchasing content (or physical products) online. The customer is denied access to the website of an online service provider in another country, or re-routed to a local website of the same company with different prices or a different product or service.
The key way that the Commission has addressed geo-blocking to date is through the competition law investigation into Pay TV (read more here). In the press release to its Statement of Objections, the Commission indicated that it was the agreement to geo-block that was anti-competitive. Since the Statement of Objections, the Commission has allowed some groups to join the investigation as ‘interested parties’, because of the potential impact of the case on their businesses or industries. Interested parties are understood to include England’s Premier League, ProSiebenSat.1, BT Group and lobby groups representing consumers, producers and independent filmmakers. These parties will no doubt be lobbying hard to protect territorial licensing, as it is fundamental to the way in which rights are currently exploited.
However, even if the agreement to geo-block is prohibited under EU competition law, unilateral decisions to geo-block will not be (unless the company is dominant). Platforms will therefore have to take their own decision on whether geo-blocking is desirable in order to comply with legal or contractual requirements, including territorial licensing. If the Commission’s portability proposals proceed, platforms will also have to take into account that geo-blocking will not be permissible where it blocks content that a consumer can lawfully access in their home territory. In such a case, the new rules on portability would override the agreement to geo-block.
What now for territorial licensing?
We await the outcome of Pay TV and the portability proposals with interest. In the meantime, both rights holders and platforms need to assess the potential impact on their businesses and how to address these developments. Many license agreements will need renegotiation in the coming months.
However, the Commission has reiterated that it is not seeking to prohibit territorial licensing. Indeed, although the Commission stated originally that it wanted to fight all “unjustified” geo-blocking, it seems that politicians are now considering more carefully which steps to take.
In its plans for the reform of copyright, the Commission also mentions additional legislative proposals for adoption in spring 2016. With the exception of television and radio programs, the Commission does not indicate that it will further restrict the right to geographically limit copyright licenses. It follows that other industries such as gaming might escape a legislative reform related to the territoriality of copyright. Once the legislative proposals are on the table, we will know whether these vague announcements have come to fruition.