Table of Contents
A. Introduction 410
B. Remuneration Rights Per Se 416
I. Remuneration Rights Created outside the Scope of Exclusive Rights Provided by the International Treaties 417
II. Remuneration Rights Coexisting and Overlapping with Exclusive Rights Provided by the International Treaties 430
C. Limitation-Based Remuneration Rights 439
D. Conclusions 459
A. Introduction
International treaty norms shape essential elements of national and regional copyright systems around the world. Modern policymakers interested in developing new legal tools for the benefit of creators while at the same time pursuing important public interest goals are thus confronted with copyright treaty norms that frame their action, without always knowing their room to manoeuvre. Indeed, international copyright norms often reflect difficult political compromises and therefore inevitably tend to use vague language and open concepts. Also, in contrast to national or regional norms, they often are less scrutinised by scholars and benefit from less exposure to judicial applications, as they are mainly addressed at legislators. Therefore, it is essential to determine with more precision the policy space available for the legislator in particular when it comes to imagining new or better copyright norms. As an illustration, this chapter looks at the international copyright framework for the creation of statutory remuneration as a tool for achieving a balance between the different interests involved in copyright law. It also proposes a taxonomy for remuneration rights and advocates using this legal construction more frequently in the future.
In recent times, legislators have shown an increasing interest in statutory remuneration rights as a policy solution to safeguard access to copyrighted works and secure fair remuneration for creators. Scholars have underlined the advantages of this legal construction to fulfil the rationales of copyright, thus helping to bridge the continental ‘author’s right’ with the Anglo-Saxon ‘copyright’ tradition and create a framework of universal acceptance to reach balanced solutions respectful of the many interests involved in copyright law.Footnote 1 To advance this option for legislators, several arguments are put forward, mainly based on the fact that the existing copyright system based on exclusive rights has not ‘done the job’ it has been assigned, namely securing protection over and access to copyrighted works, while at the same time remunerating creators in a satisfying manner.Footnote 2 In fact, the current legislative framework seems particularly creator-unfriendly: creators can even be considered the losers of the copyright system, as they are (most of the time) not remunerated well for their creations and often face hurdles in their creative process, in particular when they want to reuse creatively existing copyrighted material.Footnote 3 In short, this is a ‘lose-lose situation’ for creators, as the copyright system does not reward them appropriately for what they have done, and at the same time does not create the right framework for them to be creative and to enrich society through their cultural production.
On the remuneration side, several empirical studies have underlined that the current system of exclusive rights only rewards top-selling authors; other remuneration avenues have to be found for the rest of them. As demonstrated in a recent study about the earnings of writers, all surveys consistently revealed the presence of ‘winner takes all’ markets: ‘There is a large gap between the earnings of successful writers and the rest. … The top 10% of writers still earn about 70% of total earnings in the profession’.Footnote 4 Similar results have been found for music creators:
Composers and musicians in the top income brackets depend heavily on revenue that is directly related to copyright protection. But the vast majority of other musicians do not … . For most musicians, copyright does not provide much of a direct financial reward for what they are producing currently. The survey findings are instead consistent with a winner-takes-all or superstar model in which copyright motivates musicians through the promise of large rewards in the future in the rare event of wide popularity.Footnote 5
Based on these findings, several authors have emphasised the interesting potential for creators in terms of statutory remuneration rights vis-à-vis exclusive rights.Footnote 6 It was in particular underlined that the earnings resulting from these rights can in many cases be much more interesting for authors than the royalty payments they receive from contracting parties resulting from their exclusive entitlements.Footnote 7 This reasoning was explicitly endorsed by some courts in Europe in order to justify the extensions of certain statutory remunerations from the analogue to the digital world through an extensive reading of certain copyright limitations.Footnote 8 Furthermore, these remuneration rights are sometimes considered inalienable for creators,Footnote 9 in contrast to the exclusive right which is most of the time systematically transferred to exploiters. Finally, scholars have highlighted the interest for creators to set up statutory remuneration rights when the enforcement of exclusive rights is hardly achievable, in particular with regard to infringing mass uses in the digital environment, such as streaming or peer-to-peer file sharing. In these cases, the statutory model could mirror the model of the private copy exception in the analogue world, which secures considerable earnings for creators when their works are copied.Footnote 10
On the creativity side, it has further been underlined that the exclusive right is hardly compatible with the fact that copyright law was originally meant to be ‘the engine of free expression’,Footnote 11 aimed at protecting creators from the interference of others and from all risk of censorship.Footnote 12 In effect, the need to ask for a licence might not be compatible with freedom of expression and freedom of artistic creativity for a creator of derivative works, as asking for authorisation introduces the possibility to say ‘no’ and thus of private censorship; this option leaves private entities deciding on what can (or cannot) be created. In addition to this uncertain compatibility with fundamental rights,Footnote 13 submitting derivative creations to the exclusive right is also problematic for a number of practical and economic reasons (high transaction costs to get a licence and uncertainty with regard to who owns the right, etc.). Therefore, it is not surprising that derivative works have always been the subject of a lot of litigation on both sides of the Atlantic. To address this issue, proposals have increasingly been advanced to submit creative uses to a statutory remuneration right,Footnote 14 in particular in the context of user-generated content (UGC) online.Footnote 15 Furthermore, the potential of carving out certain uses from the veto power of rightholders has been analysed with regard to the incentive function of the copyright system, with interesting results. Recent empirical studies have established that these limitations to the exclusive right are incentivising follow-up creativity and that many very innovative industries are based on the free spaces left by copyright law.Footnote 16
For all these reasons, statutory remunerations can have beneficial consequences for innovation and creativity, while also readjusting the copyright balance in favour of creators. Thus, they constitute precious tools in the hands of policymakers to design effective and balanced copyright legislation. However, national and regional legislators are not entirely free to design their copyright system according to their wishes and needs, as their laws have to comply with the international treaties they have ratified. For this reason, this chapter aims to analyse possible ways of creating remuneration rights in the light of international treaty obligations and to map all options.Footnote 17 In order to do so, the relationship between ‘remuneration rights’ and ‘exclusive rights’ was chosen as the decisive criterion of classification because of the way in which the copyright system is conventionally understood.Footnote 18 It needs however to be stressed from the outset that different theoretical and legislative approaches can be taken to conceptualise the role of ‘remuneration rights’ and their place in the copyright system. There is, for example, no universally agreed upon legal definition of ‘remuneration rights’. Various other terms are used in scholarship to refer to mechanisms providing for remuneration to rightholders other than through ‘exclusive rights’, including terms such as ‘legal licence’, ‘compulsory licence’, ‘obligatory licence’, ‘non-voluntary licence’, ‘statutory licence’, ‘right for compensation of remuneration’, ‘liability rule’, and ‘limitation-based remuneration rights’.Footnote 19
Conceptually, as discussed elsewhere,Footnote 20 the terminology used of course matters and can potentially carry important nuances in the understanding of this legal technique to design non-exclusive uses. For the purpose of inclusiveness, this chapter employs the term ‘remuneration rights’ to refer to statutory entitlements providing holders of copyright or related rights with a claim of remuneration without the ability to authorise or prohibit the use of copyrighted works or subject-matter covered by related rights.Footnote 21 In short, the use is ‘permitted-but-paid’, as Jane Ginsburg has put it in a foundational article on the matter.Footnote 22 This definition covers two broad categories of rights: remuneration rights created as such (‘remuneration rights per se’), created either outside the scope of exclusive rights or coexisting and overlapping with them (section B); and remuneration rights created through exceptions and limitations to exclusive rights (‘limitation-based remuneration rights’, section C).Footnote 23
B. Remuneration Rights Per Se
For the purpose of this article, ‘remuneration rights per se’ are rights to remuneration provided as such by international treaties, regional norm or national legislation adopted outside the scope of those treaties. Enactment of such rights does not result in the creation of exceptions or limitations to exclusive rights provided by the international treaties, since the international copyright framework does not provide for an obligation to create corresponding exclusive rights, or, when it does, the exclusive rights coexist and overlap with the remuneration rights granted on the top of them.
I. Remuneration Rights Created outside the Scope of Exclusive Rights Provided by the International Treaties
1. Remuneration Rights Provided by the International Treaties outside the Scope of Exclusive Rights
This category of remuneration rights refers to the rights provided by the international treaties either without corresponding exclusive rights (the right to an equitable remuneration for broadcasting and communication to the public of commercial phonograms, and the resale right) or as an alternative to the provision of an exclusive right (the right to equitable remuneration for broadcasting and communication to the public of fixations of audio visual performances, and the right to an equitable remuneration for rental).
a. Rights to an Equitable Remuneration for Broadcasting and Communication to the Public
A right to a single equitable remuneration for the use of commercial phonograms for broadcasting or for any communication to the public is provided by Article 12 of the Rome ConventionFootnote 24 and Article 15(1) of the WIPO Performances and Phonograms Treaty (WPPT).Footnote 25 While this provision is often referred to as a ‘non-voluntary licence’Footnote 26 or ‘compulsory licence’Footnote 27 (connoting a limitation of an exclusive right), it is important to clarify that this right to remuneration is provided as such for the sake of balancing the interests of rightholders and users, and is not an exception or limitation to the corresponding exclusive right of communication to the public.Footnote 28 This remuneration right is generally considered to be one of the central norms of these treaties, although contracting parties may decide to limit their application.Footnote 29 Payment of remuneration by users is paramount in case of remuneration rights, and it is the main condition for respect of these rights,Footnote 30 which cannot be exercised before a commercial phonogram is used for broadcasting or communication to the public. According to the Rome Convention, contracting parties have a choice of whether to provide remuneration to performers, producers of phonograms or both,Footnote 31 while under the WPPT parties retain only the possibility to determine the share of remuneration between the performers and producers if they do not reach an agreement.Footnote 32 Another important difference between the two treaties is that the Rome Convention requires the use to be ‘direct’ in order to trigger the application of the provision, whereas the conditions of the WPPT are satisfied when the use is ‘direct or indirect’. The WPPT also defines and extends the notion of ‘phonograms published for commercial purposes’,Footnote 33 further encompassing phonograms made available to the public without production of copies.Footnote 34
Regional copyright norms provide for some statutory remuneration rights in addition to the international treaties. Contracting parties to the Rome Convention and the WPPT may not adopt the right of performers and phonogram producers to a single equitable remuneration for broadcasting or for any communication to the public of commercial phonograms if they wish so.Footnote 35 Nevertheless, the twenty-eight member states of the European Union (EU)Footnote 36 and seventeen member states of the African Intellectual Property Organisation (OAPI) have to provide for this remuneration right by virtue of Article 8(2) of the EU Rental and Lending DirectiveFootnote 37 and Article 51 of Annex VII to the Bangui Agreement,Footnote 38 respectively.
Provisions of regional EU instruments on remuneration rights were developed over time by the case-law of the Court of Justice of the European Union (CJEU), giving some ‘flesh’ to the at times generally worded legal texts that twenty-seven countries agreed to abide by.Footnote 39 The CJEU drew several critical distinctions between the nature of the authors’ exclusive right of communication to the public (provided by Article 3(1) of the Information Society DirectiveFootnote 40) and the right of performers and phonogram producers to a single equitable remuneration for communication to the public of commercial phonograms (provided by Article 8(2) of the Rental and Lending Directive). When comparing the exclusive right of authors and the remuneration right of performers and phonogram producers in the context of communication to the public, the CJEU concluded that the exclusive right is ‘preventive’, whereas the latter is ‘compensatory’Footnote 41 and ‘financial’Footnote 42 in nature. The finding is, consequentially, relevant in differentiating the scope of the two rights covering ‘communication to the public’. According to the established case-law of the EU, the notions of the act of ‘communication’ and the ‘public’ are constituent parts of the ‘communication to the public’. While the CJEU applied the same case-law for defining the notion of ‘public’ with regard to both of the rights above, it developed a slightly different approach for qualifying an act as a ‘communication’, relying on the different nature of the rights. The CJEU ruled that ‘if it is relevant that a “communication” within the meaning of Article 3(1) of [the Information Society Directive] is of profit-making nature, this must be all the more true in the case of the essentially economic right to equitable remuneration of the performers and phonogram producers under Article 8(2) of [the Rental and Lending Directive]’.Footnote 43 Hence, the CJEU considered the profit-making nature of communicating to the public to be of higher relevance in case of the right to remuneration than for exclusive right of authors.Footnote 44
The CJEU also defined the significance of the word ‘single’ in the phrase ‘a single equitable remuneration’. The Court interpreted it as meaning that, regardless of types and the numbers of rightholders, users are not obliged ‘to pay separate remuneration several times for the same act of communication to the public, as that single remuneration will … be shared amongst the different beneficiaries of the equitable remuneration’.Footnote 45 Hence, the users need to pay only once.Footnote 46 This feature greatly simplifies compliance with the conditions for respective uses of commercial phonograms.
The established case-law of the CJEU also offers EU member states some guidelines on the concept of ‘equitable remuneration’. National laws should ‘enable a proper balance to be achieved between the interests of performing artists and producers in obtaining remuneration for the broadcast of a particular phonogram, and the interests of third parties in being able to broadcast the phonogram on terms that are reasonable, and that it does not contravene any principle of [EU] law’.Footnote 47 Whether the payment is ‘equitable’ should be assessed, in particular, in light of the value of the use concerned in trade.Footnote 48 The Court provided for the following factors that could be taken into account for determining the equitable remuneration: ‘the actual audience, the potential audience [and] the language version of the broadcast’Footnote 49 as well as the
number of hours of phonograms broadcast, the viewing and listening densities achieved by the radio and television broadcasters represented by the broadcast organisation, the tariffs fixed by agreement in the field of performance rights and broadcast rights in respect of musical works protected by copyright, the tariffs set by the public broadcast organisations in the Member States bordering on the Member State concerned, and the amounts paid by commercial stations.Footnote 50
Furthermore, the CJEU, when dealing with the comparison between requirements of ‘remuneration’ and of ‘equitable remuneration’, concluded that ‘the amount of the remuneration will necessarily be less than that which corresponds to equitable remuneration or may even be fixed on a flat-rate basis’.Footnote 51
In adition, ‘[p]referential trade agreements [PTAs] have become a major source of international intellectual property regulation’,Footnote 52 and rights to remuneration did not escape from this trend. The right of performers and phonogram producers to a single equitable remuneration for broadcasting or for any communication to the public of commercial phonograms is provided by, for example, Article 237(3) of the EU – Central America PTA (2012);Footnote 53 Article 10.9(3) and (4) of the EU – Korea PTA (2010); Article 220(3), (5) and (6) of the EU – Andean Countries PTA (2012);Footnote 54 Article 285 of the EU – Moldova PTA (2014); Article 158 of the EU – Georgia PTA (2014); Article 20.8(2) of the EU – Canada (CETA) (2016); Article 170(3) of the EU – Ukraine PTA (2014); and Article 70 of the EU – Kazakhstan PTA (2015). Overall, this right to remuneration, formulated in terms similar to Article 15(1) of the WPPT, is the most frequently referred right to remuneration in the PTAs concluded between the EU and its member states with third countries.
The international treaties, regional instruments and PTAs do not specify whether this remuneration right could be waived or transferred, and countries are free to clarify this in their national legislation.Footnote 55 For example, the laws of France,Footnote 56 Germany,Footnote 57 and the UKFootnote 58 limit the transfer of this right from performers to producers.
Countries around the world provide for this right to remuneration.Footnote 59 However, the scope of this right can differ to a large extent from country to country, as the Rome Convention and the WPPT make it possible for contracting parties not to apply this right to remuneration or to apply it only partially by making a formal notification to this end.Footnote 60 For example, the USA, non-party to the Rome Convention but a party to the WPPT,Footnote 61 provides for this right only in respect of communication to the public by means of a digital audio transmission. In the majority of European countries, this right to remuneration is interpreted in such a way as to cover not only traditional analogue ‘broadcasting’ but also ‘simulcasting’ (i.e., non-interactive linear transmission of broadcast programming via the Internet simultaneously to the original broadcast) and ‘webcasting’ (i.e., non-interactive linear transmission of broadcast programming via the Internet only).Footnote 62 Some countries do not limit this right to the phonograms published for commercial purposes and extend it to any phonograms.Footnote 63 Overall, of all the remuneration rights, the right to an equitable remuneration for broadcasting and communication to the public of phonograms constitutes the most significant source of revenue for European performers.Footnote 64
The Rome Convention and the WPPT focused on the protection of audio performances. After many years of negotiations and a failed diplomatic conference,Footnote 65 24 June 2012 marked the conclusion of the Beijing Treaty on audiovisual performances.Footnote 66 Article 11(2) of the Beijing Treaty provides that ‘[c]ontracting Parties may … declare that, instead of the right of authorizationFootnote 67 … , they will establish a right to equitable remuneration for the direct or indirect use of performances fixed in audiovisual fixations for broadcasting or for communication to the public.’Footnote 68
In the case of Colombia, Ecuador, Peru, and the EU and its member states, Article 220(6) of the EU – Andean Countries PTA (2012) is also of relevance: ‘The Parties may recognise to performers of audiovisual works an unwaivable right to obtain an equitable remuneration for broadcasting or for any communication to the public of their performances fixed’. This agreement was signed on 26 June 2016, just two days after the signing of the Beijing Treaty reconfirmed the policy space enjoyed by the parties. Under the national legislation of a number of European countries, the right to an equitable remuneration for broadcasting and communication to the public also covers fixations of audiovisual performances.Footnote 69
b. Resale Right (Droit De Suite)
Article 14ter of the Berne ConventionFootnote 70 indicates a possibility to introduce, for the benefit of authors, an inalienable right to an interest in any sale subsequent to the first transfer by the authors of original works of art and writers and composers of original manuscripts.Footnote 71 The resale right is also widely known by the terms ‘droit de suite’’and ‘resale royalty right’.Footnote 72 Although the resale right is not mandatory for parties of the Berne Convention, the EU and OAPI member states have to grant this right by virtue of Article 1 of the EU Resale Right DirectiveFootnote 73 and Article 10 of Annex VII to the Bangui Agreement, respectively.
In the EU, the scope of the resale right encompasses, in addition to the original works of art,Footnote 74 original copies.Footnote 75 At the same time, EU legislation excludes the original manuscripts of writers and composers from the scope of the resale rightFootnote 76 and, uniquely, limits the maximum amount of royalty to be paid.Footnote 77 The EU law makes clear that it is for sellers to pay the remuneration.Footnote 78 Even if sellers or dealers in works of art responsible for payment of the resale royalty agree with ‘any other person, including the buyer, that that other person will definitely bear, in whole or in part, the cost of the royalty’, such a contractual arrangement does not affect their obligations towards the authors to pay the royalty.Footnote 79 The CJEU clarified the obligation of the member states to make this remuneration right ‘inalienable’.Footnote 80 This feature of the right does not prevent member states from making ‘their own legislative choice in determining the categories of persons capable of benefiting from the resale right after the death of the author of a work of art’ for the remaining term of protection.Footnote 81 Thanks to the common normative framework, a rather high level of harmonisation was achieved among the member states of the EU by virtue of the Resale Right Directive.Footnote 82
Some countries undertook the obligation to provide for the resale right under the terms of trade agreements. For example, Colombia, Ecuador, Georgia, Kazakhstan, Moldova, Peru, Ukraine, and the EU and its member states each have to provide for the resale right as a part of the implementation of the PTAs they concluded.Footnote 83 The inalienable and unwaivable character of the resale right is cemented in the international order by these PTAs referring to the right either as ‘an inalienable and unwaivable right’Footnote 84 or as ‘an inalienable right, which cannot be waived, even in advance’.Footnote 85 The position of the EU in the international trade negotiations involving copyright is informed by Recital 7 of the Resale Right Directive stating:
The process of internationalisation of the [EU] market in modern and contemporary art, which is now being speeded up by the effects of the new economy, in a regulatory context in which few States outside the EU recognise the resale right, makes it essential for the European [Union], in the external sphere, to open negotiations with a view to making Article 14b [14ter] of the Berne Convention compulsory.Footnote 86
The resale right was first introduced in the legislation of France (in 1920), Belgium (in 1921), Czechoslovakia (in 1926), Poland (in 1935), Uruguay (in 1937) and Italy (in 1941).Footnote 87 As of January 1986, national legislation of twenty-eight countries granted resale rights.Footnote 88 Although the resale right is not mandatory under the international treaties, multiple countries not bound by the EU, OAPI and PTAs norms introduced the resale right in their legislation. More than eighty countries around the world have introduced resale right.Footnote 89 The Tunis Model Law on Copyright for developing countries (Tunis Model Law) contains this remuneration right in its Article 4bis.Footnote 90 Currently, there are discussions about the development of an international treaty on the resale right.Footnote 91
c. Rights to an Equitable Remuneration for Rental
The TRIPS Agreement,Footnote 92 the WCTFootnote 93 and the WPPT, while conferring rightholders with the exclusive rental right,Footnote 94 enable contracting parties to continue providing for the right to an equitable remuneration for rental of phonograms instead.Footnote 95 Contracting parties that had and continue to have in place ‘a system of equitable remuneration’ to rightholders for the rental right on 15 April 1994 may maintain such a system provided that it does not lead to the material impairment of the exclusive right of reproduction.Footnote 96 Thus, once contracting parties bound by these provisions abandon the system of equitable remuneration for rental, they are not able to restore it in its former shape.Footnote 97
The Agreed Statements concerning Articles 6 and 7 of the WCT and concerning Articles 2(e), 8, 9, 12 and 13 of the WPPT clarify that the scope of the rental right under the treaties is limited ‘exclusively to fixed copies that can be put into circulation as tangible objects’. Due to this limitation of the medium, the remuneration right excluding digital uses, like other rights tied to a particular technology, might lose its economic significance for rightholders as a consequence of technological and consumption changes.Footnote 98
2. Remuneration Rights Created outside the Scope of the International Treaties
Other than creating remuneration rights under respective provisions of international treaties, countries may introduce in their national copyright legislation statutory remuneration rights outside the scope of the minimum exclusive and remuneration rights provided by these treaties.Footnote 99 Notable examples of such remuneration entitlements adopted in a number of countries are the paid public domain (‘domaine public payant’Footnote 100) and the remuneration for use of works of expressions of folklore.Footnote 101
a. Remuneration for Use of Works of Expressions of Folklore
The first provisions regulating use of folklore through copyright law were established in Tunisia (1967), Bolivia (1968, for musical folklore only), Chile (1970), Morocco (1970), Algeria (1973), Senegal (1973), Kenya (1975), Mali (1977), Burundi (1978), Côte d’Ivoire (1978) and Guinea (1980).Footnote 102 The most significant binding regional legal authority is Annex VII to the Bangui Agreement, relevant for seventeen OAPI member states. Article 59 of Annex VII makes use of works of expressions of folklore subject to an appropriate payment (‘une redevance y afférente’) and requires a part of the sums collected to be spent for social and cultural purposes.Footnote 103 Copyright-based protection of folklore is also provided by Articles 1(3) and (5bis), 2(1)(iii), 6, 16(2) and 17 of the Tunis Model Law. Some African countries outside the OAPI grant copyright-related protection to folklore.Footnote 104
b. Remuneration for Use of Public Domain Works (Domaine Public Payant)
Like in the case of folklore, the international treaties do not provide for remuneration for use of works where the term of protection has expired, as they only refer to the minimum term of protection. In the first half of the 20th century, only a few countries had in place legislation providing for the domaine public payant (Uruguay, Bulgaria, Italy, Romania and Yugoslavia).Footnote 105 By the second half of the 1980s, domaine public payant systems were already in place in Algeria, Argentina, Brazil, Bulgaria, Chile, Côte d’Ivoire, Cuba, Czechoslovakia, Guinea, Hungary, Italy, Mali, Mexico, Portugal, Senegal, Portugal, Tunisia, Uruguay, USSR and Zaire.Footnote 106 However, an international study on the subject concluded in 2010 for WIPO demonstrated the existence of domaine public payant systems in fewer countries than was previously the case, namely, Algeria, Republic of the Congo, Côte d’Ivoire, Kenya, Paraguay, Ruanda and Senegal.Footnote 107 Remuneration for use of works in the public domain remains a recurring idea in national policy debates.Footnote 108 Article 59(1) of Annex VII to the Bangui Agreement provides for the domaine public payant. The amount of payment for the use of public domain works should be determined as half of the usual amounts, according to contracts and practices, for the use of protected works (Article 59(2) of Annex VII). Creation of the domaine public payant is also referred to in Article 17 of the Tunis Model Law. Some European countries provide for some forms of the domaine public payant – such as Croatia (communication to the public of folk literary and artistic creations),Footnote 109 Hungary (for the resale of original works of art), Norway (for the broadcasting of phonograms)Footnote 110 and Slovakia.Footnote 111
II. Remuneration Rights Coexisting and Overlapping with Exclusive Rights Provided by the International Treaties
In addition to the possibility to grant remuneration rights provided by international treaties and remuneration rights outside the scope of exclusive rights, states may grant remuneration rights coexisting and overlapping with the scope of the exclusive rights provided by the international treaties or by national legislation. Such remuneration rights, granted in addition to the corresponding exclusive rights, cover the same types of usesFootnote 112 and can be exercised only once economic operators (e.g., audio and audiovisual producers), to whom the exclusive rights had been transferred, have authorised use of the respective works and/or protected subject-matter.Footnote 113
The main reason for granting such rights is the alteration of the distributive justice achieved by the copyright system with regard to creators (i.e., authors and performers).Footnote 114 Holders of exclusive rights (e.g., audio and audiovisual producers-owners or transferees by virtue of legal presumptions or contracts) in their negotiations with users always aim at charging profit-maximising fees for the use of protected works and subject-matter (i.e., the maximum fee that users are willing to pay). It is likely that the grant of remuneration rights to authors and performers covering the same uses does not lead to an increase of users’ willingness or resources available for payment. The probable consequence is the redistribution of revenues generated by pre-existing fees in favour of holders of the remuneration rights (in accordance with the so-called ‘pie theory’Footnote 115). The consequential factual decrease in revenues for the transferees of exclusive rights is overcome by reliance on a legal fiction commonly used when creating new copyright entitlements: additional rights do not prejudice pre-existing rights.Footnote 116 Granting coexisting remuneration rights cannot alter all the consequences of granting exclusive rights, but this mechanism could contribute to the increase of real income for creators.Footnote 117
Granting coexisting remuneration rights could be a useful policy option for countries that either replaced remuneration rights by exclusive rights (e.g., due to international commitmentsFootnote 118) or introduced into their national legislation exclusive rights beyond the requirements of international treaties (e.g., in order to favour some industry groupsFootnote 119 or due to foreign pressure) and would still like to have some of the benefits of non-exclusive remuneration entitlements. Even if new evidence favours a return to the pre-existing situation, it is usually a challenging task; for policy makers, it is easier to grant rights than to take them away.Footnote 120
Remuneration rights coexisting and overlapping with exclusive rights and dependent on their transfer are often described in legal scholarship as ‘residual’ rights to remuneration. They are called ‘residual’ because authors and performers enjoy the unwaivable right to remuneration only upon the transfer of exclusive rights to audio and/or audiovisual producers.Footnote 121
The Beijing Treaty is the only international multilateral treaty that explicitly mentions this option. Its Article 12(3) provides that ‘[i]ndependent of the transfer of exclusive rights … , national laws … may provide the performer with the right to receive royalties or equitable remuneration for any use of the performance, as provided for under this Treaty including as regards Articles 10 [right of making available] and 11 [right of broadcasting and communication to the public]’ (emphasis added). This article of the Beijing Treaty explicitly provides for the possibility of persistence of the rights to remuneration after the transfer of exclusive rights.Footnote 122
The provision of Article 12(3) of the Beijing Treaty was inspired by Article 5(1) of the EU Rental and Lending Directive,Footnote 123 which obliges member statesFootnote 124 to provide authors and performers with a ‘residual’ remuneration right for rental of phonograms and films:Footnote 125 ‘Where an author or performer has transferred or assigned his rental right concerning a phonogram or an original or copy of a film to a phonogram or film producer, that author or performer shall retain the right to obtain an equitable remuneration for the rental’.’Footnote 126 The notions of ‘rental’ and ‘copies’ in the Rental and Lending Directive refer only to physical objects.Footnote 127 The title of Article 5 of the Rental and Lending Directive refers to the right to an equitable remuneration as ‘unwaivable’, and Article 5(2) states that ‘[t]he right to obtain an equitable remuneration for rental cannot be waived by authors or performers.’ The provision does not say anything on whether the right is ‘inalienable’,Footnote 128 but the CJEU interpreted the ‘unwaivable’ character of the right to equitable remuneration for rental in a broad way, concluding that the right is not only ‘unwaivable’ but also ‘inalienable’. The remuneration right cannot be transferred by contracts between private parties as well as by a national legislative presumption of transfer of rightsFootnote 129 from performers and authors to film producers.Footnote 130
Since its integration in the EU acquis, the above-described formula of ‘residual’ remuneration rights was used in trade agreements. For instance, the text of Article 179, titled ‘Unwaivable right to equitable remuneration’, of the EU – Ukraine PTA (2014) is identical, mutatis mutandis, to the text of Article 5 (with the same title) of the EU Rental and Lending Directive. Article 220(5) of the EU – Andean Countries PTA (2012), although formulated as a ‘may’ provision and referring only to performers, refers to the act of making available in addition to the unwaivable remuneration for rental: ‘Where performers have transferred the right of making available or the right of rental, a Party may provide that performers retain the unwaivable right to obtain an equitable remuneration, which may be collected by a collecting society duly authorised by law, in accordance with its domestic law.’Footnote 131
Another example of the remuneration right coexisting and overlapping with the scope of exclusive rights could be found in the EU Term Directive,Footnote 132 which extended the term of protection of phonograms beyond fifty years after publication, or communication, whichever is earlier. This legislative instrument provides performers, whose contract with phonogram producers on transfer or assignment of their rights gives a right to claim a non-recurring remuneration (typically, session musicians), with the unwaivable right to an annual supplementary remuneration from phonogram producers.Footnote 133 The remuneration right is supplementary to the exclusive right and has no legal impact on the existenceFootnote 134 or exercise of the exclusive right; that is, recording companies to whom the rights were transferred continue to exercise them as they deem fit. This remuneration ‘shall correspond to 20% of the revenue which the phonogram producer has derived, during the year preceding that for which the said remuneration is paid, from the reproduction, distribution and making available of the phonogram in question’.Footnote 135
With regard to the definition of the ‘revenue’ from which the aforementioned percentage should be calculated, Recital 13 of the Term Directive clarifies that ‘no account should be taken of the revenue which the phonogram producer has derived from the rental of phonograms, of the single equitable remuneration received for broadcasting and communication to the public or of the fair compensation received for private copying’. The purpose of this statement is to ensure that the remuneration right is supplementary to and independent from other remuneration rights.Footnote 136 This distinction is essential because the term extension remuneration right could be presented as an entitlement to an annual lump sum payment covering all types of uses controlled by the publisher holding exclusive rights. Unlike the duration of other remuneration rights (closely tied to the usual terms of protection of respective exclusive rights of authors, performers and phonogram producers), the right of performers to annual supplementary remuneration limited by the term extension starts immediately following the fiftieth year after publication of the phonogram (or, failing that, lawful communication).
In a number of EU member states, ‘residual’ remuneration rights (i.e., coexisting with the corresponding exclusive rights and dependent on their transfer) were introduced beyond the obligations under the Rental and Lending Directive and the Term Extension Directive.Footnote 137 Some stakeholders and scholars proposed unwaivable (‘residual’) remuneration rights for making available of audiovisual authors,Footnote 138 and of audio and audiovisual performersFootnote 139 and of authors and performers.Footnote 140
Discussions on the creation of new remuneration rights coexisting with exclusive rights were entertained by EU policymakers. In its Green Paper of 2011, the European Commission considered as a policy option the introduction of unwaivable remuneration rights for authors and performers for making audiovisual works available and subject to mandatory collective management:
It could be argued that authors have no economic benefit from the online exploitation of their works if no proportional remuneration is being passed on a per use basis. To remedy this, one option would be the introduction of an unwaivable right to remuneration for their ‘making available’ right managed, compulsorily, on a collective basis.
…
It could be argued that performers should equally be entitled, on a harmonised basis, to an unwaivable right to remuneration from which they would benefit even after they have transferred their exclusive right of making available. This right could also be compulsorily collected by collective management societies.Footnote 141
In 2012, the European Parliament called ‘for the bargaining position of [audiovisual] authors and performers vis-à-vis producers to be rebalanced by providing authors and performers with an unwaivable right to remuneration for all forms of exploitation of their works, including ongoing remuneration where they have transferred their exclusive “making available” right to a producer’.Footnote 142 In September 2017, the Committee on Culture and Education (CULT) of the European Parliament proposed the Committee on Legal Affairs (JURI) to include the following Article 14a(1), ‘Unwaivable right to fair remuneration for authors and performers’, in the Draft Directive on copyright in the Digital Single Market (DSM) Directive: ‘Member States shall ensure that where authors and performers transfer or assign the right of making available to the public their works or other subject-matter for their use on information society services that make available works or other subject-matter through a licensed catalogue, those authors and performers retain the right to obtain fair remuneration from such use.’Footnote 143
The adopted text of the DSM Directive, however, deviated from the approach promoting the grant of substantive statutory rights to remuneration. DSM Directive’s Article 18(1), titled ‘Principle of appropriate and proportionate remuneration’, reads as follows: ‘Member States shall ensure that where authors and performers license or transfer their exclusive rights for the exploitation of their works or other subject-matter, they are entitled to receive appropriate and proportionate remuneration.’ (emphasis added). This provision does not require member states to establish a substantive statutory right to remuneration, as it aims primarily at regulating the conditions of exploitation contracts. Still, according to the European Copyright Society (ECS), ‘Member States are also free to use non-contractual mechanisms to implement the principle of a fair remuneration. One such mechanism that Member States are free to maintain or introduce in their law code consists of an unwaivable right to remuneration that authors or performers cannot transfer’.Footnote 144
Another relevant provision of the DSM Directive is Article 15(5), stating that ‘Member States shall provide that author of works incorporated in a press publication receive an appropriate share of the revenues that press publishers receive for the use of their press publications by information society service providers.’Footnote 145 Similarly to the cited Article 18(1), it also does not require member states to implement it by granting authors a right to remuneration. Yet, it is one of the ways in which this provision of the DSM Directive could be transposed into the national laws of member states.
As is demonstrated by the preceding paragraphs, the grant of remuneration rights coexisting with exclusive rights covering the same uses is a legislative tool of distributive justice, provided by a few international and regional instruments as well as by the national law of some countries. Those instruments are usually interpreted as permitting or requiring the provision of remuneration rights entering into play only upon the transfer of the exclusive rights to economic operators (e.g., producers). Those instruments, nevertheless, do not prohibit the introduction of unwaivable remuneration rights coexisting with corresponding exclusive rights, without requiring the transfer of exclusive rights.
Nowadays, thanks to technological and business developments, notably in the accessibility of recording technologies and online platforms enabling an easy reach to the public, many creators participate in the copyright-based economy without passing through traditional economic actors playing the role of intermediaries, publishers and producers. Granting of a right to an equitable remuneration only to creators who transferred their exclusive rights, but not to those who preferred to keep them (e.g., self-publishing and self-recordingFootnote 146), does not seem to have a solid legal or economic public policy rationale. In the case of remuneration rights existing independently from the transfer of exclusive rights, an equitable remuneration requirement could also be applicable to the transfer of exclusive rights. Further empirical and interdisciplinary research on the impact of the grant of remuneration rights coexisting with exclusive rights is necessary (e.g., on the welfare of creators, on the cost of production of investment-intensive works, and on the prices for consumers). It seems that, given the ultimate purpose of the mechanism is to ensure some minimum standard of revenue-sharing from the results of creators’ artistic input, some outcomes of policy discussions and their conclusion in the domain of minimum wage could be of high relevance. The link between the conclusions of the discussion on minimum wage and the proposals for the grant of coexisting remuneration rights is strong where the creative input of authors and performers is the primary outcome of their labour.
With regard to the situations of coexistence and overlapping of exclusive and remuneration rights independent from the transfer of the exclusive rights, it could be observed that they could occur not only when entitlements to remuneration are granted to creators in addition to the pre-existing exclusive rights. The same situations should, in principle, occur when countries required by the international treaties to provide for a remuneration right decide to grant an exclusive right in addition to the corresponding remuneration right.Footnote 147
The unwaivable nature of some remuneration rights permits ensuring a connection between the commercial success of the creations and their creators, unlike the one-time payments of the commonly practiced ‘buy-outs’ (i.e., ‘all-rights included’ contracts by which authors and performers transfer all their rights to publishers, phonogram and audiovisual publishers, and other economic operators for the full term of copyright and for all the territories).Footnote 148
If the natural-person creators are the intended beneficiaries of the grant of remuneration rights, in addition to merely declaring such rights ‘unwaivable’ (and non-transferable), it is important to consider situations where, by virtue of statutory provisions, original creators (often employee creators and contributors to collective works) are not considered to be ‘authors’ or ‘owners’, for the purpose of initial allocation of rights. This runs contrary to the ‘creator doctrine’Footnote 149 of copyright law but is in line with the labour law.Footnote 150
Of course, not all creators always create with commercial motives in mind, and some creators sometimes do not want to put a price tag on the use of their works. Today, many creators legally express their wish for free non-commercial uses through free public non-exclusive copyright licences, such as the popular Creative Commons non-commercial licences.Footnote 151 In this regard, it is important to provide for an exception to the unwaivable character of rights where creators grant such licences.Footnote 152
C. Limitation-Based Remuneration Rights
States not bound by international treaties establishing minimum obligations with regard to exclusive rights are free to introduce and design statutory remuneration rights instead of exclusive rights, as they see fit, in their national policies.Footnote 153 The vast majority of the international community signatory of the international conventions however can transform the exclusive rights provided by international norms into remuneration rights only under certain conditions and to the extent permitted by the treaties. Limitation-based remuneration rights, unlike remuneration rights per se,Footnote 154 are generally also called ‘non-voluntary licences’, ‘compulsory licences’ or ‘statutory licences’. As explained above, we prefer the use of a unified terminology referring to remuneration rights, be it per se or based on limitations, since the remuneration entitlement is in both cases not technically based on a ‘licence’ but on a right given to rightholders, by law, to be remunerated for a particular use.
Many exceptions and limitations are explicitly mentioned in the international treaties. Some provisions require payment of remuneration to rightholders, and others do not. Regardless of the requirement of payment, such provisions can be implemented in national or regional law as remunerated exceptions and limitations to exclusive rights (referred as ‘limitation-based remuneration rights’ in this chapter).Footnote 155 Many other exceptions and limitations to exclusive rights, not mentioned by the international treaties, were created through the legislative flexibility available under the three-step test.Footnote 156 This section analyses the categories of entitlement, in the presented order.Footnote 157 As was stressed at the beginning of this chapter, the lines between the different categories of remuneration rights are sometimes difficult to draw precisely in practice. Nevertheless, the proposed classification could still be helpful for understanding different ways and grounds for creating limitation-based remuneration rights.
I. Limitation-Based Remuneration Rights Created within the Scope of Exceptions and Limitations Provided by the International Treaties
All the exceptions and limitations to exclusive rights provided by the international treaties have to comply with certain conditions, incorporated from what is generally referred to as the ‘three-step test’.Footnote 158 However, as there are different views on the interpretation of the test, and as the test is inherently an imprecise tool, it could be challenging to define with precision the contours of each and every limitation-based right that could be created under this flexibility mechanism.
Some international norms which explicitly mention possible exceptions and limitations provide some level of confidence with regard to the permitted legislative action at the national or regional level. This part provides an overview of limitation-based remuneration rights created within the scope of such exceptions and limitations mentioned by the international treaties.
1. Limitation-Based Remuneration Rights Provided by the International Treaties
Some of the international treaties explicitly foresee a possibility of making exceptions and limitations to exclusive rights subject to remuneration (‘limitation-based remuneration rights’).
Article 11bis(2) of the Berne Convention provides contracting parties with the competency to determine the conditions under which authors may exercise their right prescribed by this article,Footnote 159 provided that it is not prejudicial to authors’ right to obtain ‘equitable remuneration’.Footnote 160 Similarly, Article 13(1) of the Berne Convention allows state parties to impose reservations and conditions, subject to ‘equitable remuneration’, on the exclusive right granted to the author of a musical work, the recording of which has already been authorised.Footnote 161 The Phonograms Convention foresees that if contracting states permit the duplication of phonograms for the purpose of teaching or scientific research, they ought to subject it to the payment of ‘an equitable remuneration’ to the producers of phonograms.Footnote 162 The Marrakesh Treaty provides that parties to the treaty may subject to remuneration certain exceptions and limitations regarding the making of accessible format copies that give persons with visual impairments or other print disabilities access to copyrighted works.Footnote 163 Contracting parties may also subject to remuneration the importation of accessible format copies.Footnote 164 Article 3(6) of the EU Directive implementing the Marrakesh TreatyFootnote 165 reconfirms the liberty of EU member states to provide that specified uses undertaken by authorised entities for the benefit of visually impaired persons could be subject to ‘compensation schemes’, but imposes some limitations on such schemes.Footnote 166
The Appendix to the Berne ConventionFootnote 167 and Articles Vter and Vquater of the Universal Copyright ConventionFootnote 168 accord developing countries a possibility to introduce remunerated exceptions and limitations to the rights to translation and reproduction of copyrighted works for the purposes of education and research, subject to a ‘just compensation’ (Article IV(6) of the Appendix). A number of developing countries availed themselves of the faculties provided by Articles II (right of translation), III (right of reproduction) or V (right of translation) of the Appendix.Footnote 169 It is important to note that countries that opted for a regime for translation under Article V cannot reverse to the regime of compulsory licences for translations under Article II of the Appendix, and vice versa.Footnote 170 As the overview of the Berne Notifications demonstrates, while many of the ‘developing countries’ made respective declarations to avail themselves of the faculties provided for in Articles II and III of the Appendix, they did not renew their declarations upon the expiration of the ten-year period (according to Article I(2) of the Appendix). Hence, their national legislation cannot provide for respective remuneration rights outside the prescribed renewable ten-year period for which declarations are made under the Appendix.
The lending right is not dealt with by the major international treaties.Footnote 171 However, in 2014, Ukraine and the EU and its member states bound themselves by an Association Agreement, Article 178(1) of the intellectual property chapter of which obliges the parties to provide for an exclusive right of lending.Footnote 172 At the same time, Article 178(3), (4) and (5) of the EU – Ukraine PTA (2014), reproducing mutatis mutandis Article 6 of the EU Rental and Lending Directive, makes it possible for the contracting parties’ legislators to replace the exclusive right by ‘a remuneration’ to ‘at least authors’.Footnote 173 Prior to the adoption of the original Rental and Lending Directive in 1992,Footnote 174 out of all the EU member statesFootnote 175 only Germany provided for a copyright-based system, while other members provided for remuneration for lending and based their systems outside the copyright framework.Footnote 176 By 2014, the following EU member states provided for the right to remuneration for public lending: Austria, Belgium, Czech Republic, Estonia, France, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands and Spain.Footnote 177
The CJEU interpreted the provision of Article 6 ‘Derogation from the exclusive public lending right’ of the Rental and Lending Directive requiring ‘remuneration’ (rather than ‘compensation’) for lending as providing for the ‘public lending exception’.Footnote 178 It further stated that the ‘concept of “remuneration” [in case of public lending] is also designed to establish recompense for authors, since it arises in order to compensate for harm to the latter’.Footnote 179 In the EU, the remuneration for public lending should be determined taking into account the number of works lent and the number of persons borrowing from lending establishments.Footnote 180 For example, a flat-rate remuneration mechanism taking into account only the number of borrowers registered with public lending establishments is not compatible with the EU law.Footnote 181
Although the notion of ‘remuneration’ for lending was interpreted narrowly, the judges reached the conclusion that the notion of ‘lending’ in Articles 1(1), 2(1)(b) and 6(1) of the Rental and Lending Directive encompasses so-called ‘e-lending.’Footnote 182 Member states of the EU may decide to make the public lending of digital copies of works available for lending conditional to a prior ‘first sale or other transfer of ownership of that copy’ in the EU by the holder of the right of distribution, or otherwise with his consent.Footnote 183
Article 178(5) of the EU – Ukraine PTA (2014) and Article 6(3) of the Rental and Lending Directive permit member states to ‘exempt certain categories of establishments from the payment of the remuneration’ for public lending. The CJEU established that since this derogation is quantitative in nature and must be strictly interpreted, exemption of almost all categories of establishments undertaking the public lending of works from the obligation to pay remuneration for the lending carried out is prohibited by the Rental and Lending Directive.Footnote 184 However, it seems that some qualitative restrictions to this limitation-based remuneration right are tolerated. Denmark, Norway and Sweden, historically the world’s first countries to have introduced public lending systems in 1946, 1947 and 1954 respectively, remunerate only authors of works written in their national languages.Footnote 185 In Lithuania and the UK, the remuneration is due only for the public lending of books and similar publications.Footnote 186
International instruments do not explicitly deal with the question of whether the right to remuneration for lending could be waived, and different approaches were taken in different states. For example, while the right to remuneration for lending could be waived in the Netherlands, it is unwaivable in Austria and Italy.Footnote 187
2. Limitation-Based Remuneration Rights Created within the Scope of Unremunerated Exceptions and Limitations Provided by the International Treaties
Provisions of the international treaties foreseeing the possibility of introducing unremunerated exceptions and limitations can also serve as a basis for the introduction of remunerated exceptions and limitations (‘limitation-based remuneration rights’).Footnote 188 If a treaty explicitly allows contracting parties to establish an exception or limitation for certain uses without any payment to rightholders, this does not necessarily preclude making the same use conditional to payment, provided of course that it is compliant with international copyright normsFootnote 189 – but also with human rights obligations at the international and national levels.Footnote 190
The Berne Convention refers to some specifically permitted exceptions and limitations to the exclusive authors’ rights. Examples are Article 2(4) (regarding official texts of legal nature and their official translations), Article 2bis (regarding political speeches and speeches delivered in the course of legal proceedings, as well as certain uses of lectures and addresses), Article 10 (use of works for teaching) and Article 10bis (certain uses of works related to reporting current events).Footnote 191 Article 11bis(3) also leaves it to the contracting parties to ‘determine the regulations for ephemeral recordings made by a broadcasting organisation by means of its own facilities and used for its own broadcast’. Under the ‘minor exceptions’ doctrine (also referred to as ‘implied exceptions’ or ‘minor reservations’Footnote 192), contracting parties to the Berne Convention and the TRIPS Agreement may provide minor exceptions to the rights provided, notably, by Articles 11 and 11bis of the Berne Convention.Footnote 193 In the EU, Article 5 of the Information Society DirectiveFootnote 194 and Article 6 of the Databases DirectiveFootnote 195 reproduce some of those unremunerated exceptions.
For example, instead of providing for an unremunerated exception or limitation for teaching purposes, as permitted by the international treaties, some countries provide for a limitation-based remuneration right for reproduction for the purpose of education (e.g., Croatia, France, Germany and the Netherlands).Footnote 196 Article 5(4) of the recently adopted DSM Directive, which is still being transposed into member states’ national laws, unambiguously states that ‘Member States may provide for fair compensation for rightholders for the use of their works or other subject matter [in digital and cross-border teaching activities]’.Footnote 197 This clearly indicates that unremunerated exceptions or limitations under international treaties may nevertheless be turned into a limitation-based right to remuneration and remain compliant with international treaty norms.
With regard to the related rights, Article 15(2) of the Rome Convention, Article 6 of the Phonograms Convention, Article 16(1) of the WPPTFootnote 198 and Article 13(1) of the Beijing Treaty contain general clauses declaring that the contracting parties may provide for the same type of exceptions or limitations with regard to the rights of performers, audio and audiovisual producers, and broadcasters as they provide for copyright. In the EU, Article 10(2) of the Rental and Lending Directive establishes the same general rule.
Article 15(1) of the Rome Convention specifically refers to the possibility to introduce limitations for the following uses: private useFootnote 199; use of short excerpts in connection with the reporting of current events; ephemeral fixation by broadcasters by means of their own facilities and for their own broadcasts; and use solely for the purposes of teaching or scientific research. This list is reproduced verbatim by Article 10(1) of the EU Rental and Lending Directive, leaving EU member states free to pick and choose from the list. A different approach was taken in the OAPI, where Article 58 ‘Remuneration for private copying’ (‘Rémunération pour copie privée’) of Annex VII to the Bangui Agreement prescribes the grant of a right to remuneration for private copying to performers and phonogram producers. Still, the limitation-based right of performers and producer to remuneration for private copying is provided by the majority of European countries. The remuneration for private copying provides European performers with the second most significant source of revenue among all the remuneration rights.Footnote 200
II. Limitation-Based Remuneration Rights Created Only under the Flexibility of the Three-Step Test
The creation of remuneration rights on the basis of exceptions and limitations has some consequences. Even if public policies, new technologies and business practices may seem to favour the transformation of some exclusive rights (or their parts) into limitation-based remuneration rights, the international legal framework imposes constraints on how governments can create exceptions or limitations to the rights. Countries acting within the limits imposed by the international legal framework may introduce remuneration rights not explicitly mentioned by copyright treaties through the margin of flexibility provided by the three-step test of Article 13 of the TRIPS Agreement,Footnote 201 Article 9(2) of the Berne Convention, Article 10(1) of the WCT, Article 16(2) of the WPPT and Article 13(2) of the Beijing Treaty.Footnote 202 The three-step test also constitutes an integral part of the EU copyright lawFootnote 203 and applies to exceptions and limitations to exclusive rights provided by the EU law.Footnote 204 Understanding the utility of the three-step test in the formation of limitation-based remuneration rights may shed some light on the ability of member states to adapt their domestic laws to accommodate new norms.
1. The Three-Step Test and Its Room to Manoeuvre to Create Remuneration Rights
Much has been written about understanding the exact scope of the so-called ‘three-step test’. The criteria enumerated for the test are rather vague, and no particularly clear guidelines for their application emerge from the legislative history of their adoption and their diverse applications over time by courts at the international, European and domestic levels.Footnote 205 In fact, it seems that it is generally their vagueness and their imprecise contours that guaranteed their successful subsequent introduction in copyright legislation. As has been underlined, the wording of the criteria – even if similar at first glance – diverges slightly from one instrument to another, and the context of the adoption of the particular treaties that codified the criteria are also diverse,Footnote 206 so that a unified reading is not possible.Footnote 207
The question of the scope of the three-step test is of course crucial to determine how much policy space is available to legislators for the implementation of limitation-based remuneration rights, and the stricter the interpretation, the fewer are the possibilities for other approaches than ‘exclusivity’. However, the interpretation of the test is controversially discussed among scholars: to simplify, the flexibility to introduce limitation-based remuneration rights will depend whether a sequential (‘step by step’) approach is followed, stopping the assessment of the legality of the use if one step is not fulfilled, or a holistic approach to the test is followed. It is not possible to discuss here the arguments advanced in this debate. As demonstrated elsewhereFootnote 208 and supported by a large group of academics,Footnote 209 there are strong reasons to consider the three-step test rather as a flexibility tool, allowing to adapt the copyright system to new circumstances, rather than as a mere restriction mechanism for legislators.Footnote 210 In any case, as convincingly shown by Geiger, Gervais and Senftleben, even if the steps are considered sequentially, there is hardly any doubt that the test in any case constitutes a single analytical whole and should serve the ultimate goal of striking an appropriate balance of the different interests involved.Footnote 211 Also, the provision of a remuneration to the benefit of creators or rightholders under exceptions and limitations makes it easier to comply with the third step of the test (precluding ‘unreasonable prejudice’ to rightholders or authors) than in case of unremunerated exceptions or limitations.Footnote 212 In short, limitation-based remunerations are likely to pass the test if the use is justified by important competing interests, as the remuneration aspect for the use is safeguarded,Footnote 213 which is one core mission of the copyright system – provided, however, that the exclusive right is not entirely replaced by a remuneration right, as this would contravene the provisions on exclusive rights established by the treaties.Footnote 214
In the EU, some of the exceptions and limitations provided by Article 5 of the Information Society Directive, Article 10 of the Rental and Lending Directive, Article 6 of the Databases Directive,Footnote 215 Articles 5 and 6 of the Computer Programs DirectiveFootnote 216 and Article 6 of the Orphan Works DirectiveFootnote 217 are not explicitly mentioned by the international treaties and were created under the flexibility of the three-step test of the international treaties. The same is true with regard to the exceptions and limitations newly introduced by the DSM Directive for text and data mining (Articles 3 and 4),Footnote 218 digital cross-border teaching activities (Article 5), preservation of cultural heritage (Article 6) and use of out-of-commerce works (Article 8(2)).Footnote 219
Introduction of three of those EU exceptions and limitations into national law is subject to the requirement of ‘fair compensation’ to authors in respect to the following: reprography (‘reproductions on paper or any similar medium, effected by the use of any kind of photographic technique’), private copying (‘reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial’), and reproductions of broadcasts made by social institutions pursuing non-commercial purposes (e.g., hospitals and prisons).Footnote 220 Recital 17 of the DSM Directive, to the contrary, explicitly prohibits making the text and data mining exception introduced by Article 3 subject to compensation.Footnote 221
2. Two Examples of Limitation-Based Remuneration Rights Created under the Flexibility of the Test: Private Copying and Reprography
a. Private Copying
While international treaties do not explicitly provide for the possibility to make copies of works for private use, the right to remuneration for private copying, replacing the respective exclusive right, is one of the most prominent examples of limitation-based remuneration rights created under the flexibility of the three-step test.Footnote 222 This statutory mechanism creates a revenue stream for rightholders (who would not otherwise receive remuneration for private copying of their works) by imposing the obligation to pay on manufacturers, importers and/or retailers of devices used for private copying as well as on economic operators who make devices available for private copying by individuals. Rightholders cannot control the marketing of devices capable of copying and are merely entitled to remuneration. Natural persons are free to either purchase copying devices or use services provided by third parties.Footnote 223
Article 58 ‘Remuneration for private copying’ (‘Rémunération pour copie privée’) of Annex VII to the Bangui Agreement provides authors with a right to remuneration for private copying,Footnote 224 and twenty-three African countries (Algeria, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Chad, Côte d’Ivoire, Democratic Republic of Congo, Djibouti, Gabon, Ghana, Kenya, Madagascar, Mali, Mauritius, Morocco, Mozambique, Niger, Nigeria, Senegal and Tunisia) provide for remuneration for private copying exception.Footnote 225 Six countries in North and South America (Canada, Dominican Republic, Ecuador, Paraguay, Peru and USA)Footnote 226 and nine countries in Asia (Azerbaijan, Georgia, Israel, Japan, Kazakhstan, Kyrgyz Republic, Turkey, Turkmenistan and Uzbekistan)Footnote 227 introduced remuneration for private copying into their national legislation. In Europe, thirty-seven countries created a remunerated limitation for private copying.Footnote 228 In 2015, global collections of levies for private copying of copyrighted works represented almost €310 million.Footnote 229
The contours of the private copying systems are similar in different countries. Uses need, in general, to be undertaken by a natural personFootnote 230 in a manner that is considered private and for a non-commercial purpose.Footnote 231 The main aspects differentiating the scope of the right in different countries are the type of products on which the private copying levies are imposed and the setting of tariffs. For example, in France, Germany, Italy and the Netherlands, levies cover a wide range of devices, including set-top boxes, smartphones and tablets,Footnote 232 whereas only blank compact discs are levied in CanadaFootnote 233 and blank cassettes in Israel,Footnote 234 thus excluding devices corresponding to modern consumption habits.Footnote 235 In the EU, the CJEU interpreted the Information Society Directive (Article 5(2)(b) on private copying) as not covering provision by commercial undertakings of ‘a cloud service for the remote recording of private copies of works protected by copyright, by means of a computer system, by actively involving itself in the recording, without the rightholder’s consent’.Footnote 236 It is likely that similar cases will appear in the future, testing the compliance of different technologies and business models (e.g., provision to customers of Network Personal Video Recorders, NPVRs) with the condition of ‘active involvement’.
b. Reprography
Reprographic reproduction is another example of a limitation-based remuneration right created under the flexibility of the three-step test.Footnote 237 The remunerated reprography limitation is not tied to any particular users (e.g., natural persons) nor purposes (e.g., private use), but is restricted to ‘reproductions on paper or any similar medium, effected by the use of any kind of photographic technique or by some other process having similar effects’.Footnote 238 So the remuneration for reprography is required from various organisations in different spheres of activities, such as schools – in Austria, Belgium, Czech Republic, Germany, Hungary, Lithuania, Portugal (sold copies) and Slovakia; higher education institutions – in Austria, Belgium, Czech Republic, Germany, Hungary, Lithuania, Portugal (sold copies) and Slovakia; public administration – in Belgium and Czech Republic; and businesses – in Belgium, Czech Republic and Lithuania.Footnote 239 There could be some overlap between private copying and reprography exceptions. In the EU, however, the CJEU came to the conclusion that, with regard to the relationship between reprography and private copying,
it is necessary to draw a distinction according to whether the reproduction on paper or a similar medium effected by the use of any kind of photographic technique or by some other process having similar effects is carried out by any user or by a natural person for private use and for ends that are neither directly nor indirectly commercial.Footnote 240
Furthermore, the scope of both exceptions cannot cover uses undertaken from unlawful sources in the EU.Footnote 241
The notion of ‘fair compensation’, required for exceptions and limitations permitting reprography, private copying and reproductions of broadcasts made by social institutions pursuing non-commercial purposes, is an autonomous concept of EU law, and it must be interpreted uniformly in all the member states that have introduced those exceptions.Footnote 242 According to the CJEU, ‘fair compensation’ must be regarded as ‘recompense for the harm’ suffered by authors as a consequence of introduction of the exception(s),Footnote 243 and it must be calculated on the basis of the ‘criterion of the harm’ in order for a ‘fair balance’ between the persons concerned to be achieved.Footnote 244 Definition of the ‘harm’ as the core criterion for determining what amount is ‘fair’ is not without consequences. The fair compensation required by the Information Society Directive should not exceed the ‘actual harm suffered’,Footnote 245 and hence ‘“overcompensation” would not be compatible with the requirement, set out in recital 31 in the preamble to Directive 2001/29, that a fair balance be safeguarded between the rightholders and the users of protected subject-matter’.Footnote 246 A lump sum compensation system that does not provide for a reimbursementFootnote 247 mechanism limiting the amounts paid by users to the amount defined by the ‘criterion of the actual harm suffered’ is prohibited by the EU law.Footnote 248 It seems, however, that ‘overcompensation’ is practically inevitable, given the factual impossibility for distributors of devices to know in advance the purchasers and the subsequent indiscriminate application of the compensation. The integration of a remuneration rationale in the structure of limitation-based remuneration rights could enable remuneration to rightholders beyond the mere ‘harm’ suffered.
In a few countries, remuneration for private copying is paid to rightholders from the state budget. Under such systems, not only the consumers of copying devices but all taxpayers effectively contribute to private copying levies. Such remuneration schemes are in place in Finland,Footnote 249 IsraelFootnote 250 and Norway.Footnote 251 The CJEU interpreted Article 5(2)(b) of the Information Society Directive as precluding the establishment of a scheme where fair compensation would be paid from the general state budget and where it would be impossible to ensure that the cost of the compensation is borne by the natural persons benefitting from the exception.Footnote 252 For this reason, Spain, which had had a state budget-funded system in place, had to revert back to the levy-funded model.Footnote 253
The international treaties do not explicitly deal with the issue of whether remuneration due under exceptions and limitations can be waived or transferred. In the EU, prior to the adoption of the DSM Directive, the CJEU interpreted the fair compensation for private copying and reprography under the Information Society Directive as unwaivable entitlements of authors.Footnote 254 Yet, the adoption of Article 16Footnote 255 and Recital 60Footnote 256 of the DSM Directive has changed this presumption, leaving the question of publishers’ entitlement to a share of a fair compensation under exceptions and limitations to member states. National legislation of some member states stipulates that the remuneration for private copying is unwaivable (and non-transferable).Footnote 257 Such a national approach is preferred if the remuneration of creators is the core objective of the copyright system.
D. Conclusions
As this chapter has tried to demonstrate, international copyright law provides far more policy space than often assumed to create statutory remuneration rights. It offers a classification of remuneration rights based on their relationship with the exclusive rights provided by international treaties. The three broad categories encompass remuneration rights defined as such by international or national norms and usually created outside the scope of exclusive rights (‘remuneration rights per se’); remuneration rights coexisting and overlapping with exclusive rights (including the so-called ‘residual remuneration rights’); and remuneration rights created through exceptions and limitations to exclusive rights (‘limitation-based remuneration rights’). The proposed classification demonstrates the policy options available for opting for the ‘middle way’ in copyright – between exclusive rights and unremunerated free uses, where appropriate.
Review of the international normative framework confirms that there is a variety of options for remunerating creators, other than through the grant of exclusive rights. Statutory remuneration rights are one of such instruments suitable to achieve a reasonable balance of interests between authors and exploiters. They also secure broad access to copyrighted works as they remove the blocking effects of exclusivity: they guarantee access and thus enhance the acceptance of copyright norms amongst the general public. Although there is relatively limited mention of statutory remuneration rights in the international treaties (in comparison with exclusive rights), such rights could also be introduced either as remunerated exceptions or limitations under the flexibility provided by the three-step test or in addition to exclusive rights. However, this is where grey areas remain due to the unclear interpretation of this crucial hurdle for legislators, as all limitations and exceptions to exclusive rights have to comply with the three-step test.
Therefore, in order to fully profit from the potential of introducing remuneration rights as sound balancing mechanisms in copyright law, legislators at the international level need to clarify the scope of the test in the future. This can be done via the implementation of hard law (such as agreed statements or an appendix) or soft law (declarations, guidelines or codes of conduct), thus securing the needed room to manoeuvre for legislators.Footnote 258
As we have seen, in the cases when the international treaties explicitly permit the creation of unremunerated exceptions and limitations, there seems to be increased acceptance that limitation-based remuneration rights comply with the test. Another possibility, consisting of creating remuneration rights coexisting and overlapping with the scope of exclusive rights (i.e., granted in addition to the exclusive rights), could be of use in situations where – for example – the leeway or political opportunities for the creation of limitation-based remuneration rights are few and where it is desired to alter the distributive justice achieved through a system of exclusive rights.Footnote 259 As mentioned earlier, politically it is easier to grant rights than to take them away.
Provisions on remuneration rights in international treaties are so far less frequent than on exclusive rights. Those provisions are either formulated as ‘may’ norms, or it is possible to avoid their application by maintaining some reservations to international treaties. However, multiple preferential trade agreements concluded with the EU, and regional copyright rules in the EU and OAPI, make the grant of some remuneration rights mandatory. Furthermore, national legislation of many countries provides for remuneration rights beyond the minimum rights referred by the international treaties.
The language used to formulate legal provisions on remuneration rights is not without consequences for defining the extent of the remuneration. As demonstrated by the example of the case-law of the CJEU, there are real consequences on the calculations of the amounts to be paid resulting from the precise interpretation of the terms used for describing rightholders’ entitlements to payment: ‘equitable remuneration’, ‘remuneration’ and ‘fair compensation’. On a teleological level, if one of the purposes of a remuneration right – including a limitation-based remuneration right – is to remunerate creators, the determination of its amount does not have to be limited to the ‘harm’ or ‘market value’ dilemmaFootnote 260 but should further take into account the remuneration objective.
Within the copyright system, some remuneration rights are the only economic entitlements with regard to which the international, regional and national norms specify that they cannot be waived and/or transferred. This feature of the remuneration rights, differentiating them from the tradable exclusive rights, is often seen as one of their key elements ensuring a direct connection between generated revenues and remuneration to creators. To put it simply, the impossibility to waive and/or transfer remuneration rights ensures a revenue stream to authors and performers in spite of the common industry practice of buy-out contracts. EU copyright law seems to be developing in the direction of rendering the remuneration rights per se unwaivable and non-transferable. For remuneration rights to serve their purpose, it seems that the unwaivable and inalienable character should be their necessary characteristic.Footnote 261 Yet, the adoption of the DSM Directive reversed past decisions of the CJEU and again left the question of sharing of compensation under exceptions and limitations between authors and publishers to the discretion of member states.
In many instances, if properly implemented, remuneration rights provide a very interesting option. They secure ‘a middle way’ in copyright law (a way between exclusivity and free use),Footnote 262 making sure cultural goods are accessible while at the same time helping to reduce the difference between revenues of creators (i.e., authors and performers) on the one side, and of economic operators (e.g., publishers, audio and audiovisual producers), on the other side.Footnote 263 Without any doubt, the creation of remuneration rights is a feasible option under the existing international treaty framework, and it deserves more research and policy attention as one of the components of the up-to-date and balanced copyright system.
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