Commentary on the amendment to the Copyright Act

24.10.2022 / Mgr. Jiří Kučera

On Friday 14 October 2022, a very important amendment to the Copyright Act was approved in its third reading, as amended by several amendments.

The amendment now heads to the Senate, where it can still be amended.

Let’s now take a look at the actual adopted text of the amendment.

1. Reason for the adoption of the amendment

The amendment is primarily aimed at implementing Article 15 of the Directive on Copyright in the Digital Single Market (EUCD) in relation to the publisher’s rights in its printed publications. Thus, publishers are to be granted the right to receive a reasonable remuneration for granting the right to exercise the right to use a press publication by platforms such as Google, Facebook, Twitter, Seznam, etc. (the legislative term for these is information society service provider).

In other words, internet search engines and social networks (but also other information society service providers) should pay the authors of articles that are published on their platform. This obligation has not yet been enshrined in legislation.

The main argument of the providers against this obligation is that publishers themselves benefit from publishing on search engines by increasing their ‚visibility‘ and ‚readership‘, which is an undeniable fact. However, according to the EUCD, this fact cannot deprive a publisher of the right to receive a reasonable remuneration for the publication of its work. The remuneration should therefore also take into account the above-mentioned fact and it is not excluded that the publisher and the provider may agree on a minimal or even zero remuneration.

However, the aim is to enshrine the obligation for providers to respect the right to reasonable remuneration and to negotiate in good faith with publishers whose content is presented on the platform in question.

2. Implementation problems in France

France has already implemented the EUCD in 2019, but this has led to a completely undesirable situation where the dominant information society service providers (internet search engines and social networks) have reduced the content displayed to links and „very short snippets“ which do not require a licence to use.

The French implementation of the Directive thus paradoxically produced the opposite effect to what was intended by the legislators when adopting the EUCD, as the publishers of print publications not only did not receive any remuneration, but also their „visibility“ in the online environment decreased.

This practice was subsequently halted by the Antimonopoly Authority (Autorité de la Concurrence), which, by way of a preliminary injunction, imposed a preliminary measure on the dominant information society service provider to display the content in its original scope and, at the same time, to negotiate in good faith with interested publishers for the grant of a licence.

Thus, in the context of the Czech implementation, there are concerns that the reaction of the dominant platforms may be ultimately counterproductive for all involved, similar to the situation in France.

3. Compulsory or voluntary collective management

The key issue here was also the management of publishers‘ rights, i.e. in particular whether there will be a single collective administrator by law to represent publishers in their dealings with platforms or whether there will be voluntary management.

As part of the adoption of the Directive, both models of mandatory collective management and voluntary administration were discussed, whereby the collective administrator does not represent all publishers of print publications, but only those who conclude a representation agreement with it (the so-called opt-in scheme).

A long-favored model has been the so-called extended collective management model, which is more akin to mandatory collective management with an opt-out option, i.e. a model where publishers of print publications who do not wish to be under collective management have the option to opt out.

As part of the discussion of the amendments in the 3rd reading, this model was finally abandoned and the model of voluntary management was preferred. Each publisher will therefore be able to decide for himself whether he wants to be represented by a collective administrator or not.

4. Obligation of platforms to negotiate with publishers

In order to avoid a „French scenario“, the amendment introduces a legal obligation for providers to negotiate in good faith for the granting of authorization to exercise the right to use a press publication, including the payment of a reasonable remuneration for such use, while not abusing their dominant position.

The amendment also contains criteria for determining the „fair amount“ of remuneration, such as the extent of the use of the print publication, the reach, the effort made by the publisher to acquire the content or the economic benefit to the provider.

Providers cannot therefore refuse to negotiate remuneration with publishers, nor can they circumvent the law by, for example, limiting the provision of the service to the minimum (as has happened in France).

It is this regulation that is a thorn in the side of big players such as Google, who fear that this regulation will be abused to their detriment, e.g. by forcing them to negotiate the granting of a license with e.g. disinformers, etc.

5. The Ministry as arbitrator

The amendment also provides for a situation where the provider and the publisher do not reach an agreement. In such a case, either party may turn to the Ministry of Culture, which will determine a fair remuneration, taking into account the legal limits.

The decision of the Ministry of Culture will also be reviewable by the court.

6. More tangible sanctions

As part of the amendments, the penalties for breaches of the law have also been significantly increased. The draft amendment originally envisaged a maximum penalty of CZK 500,000, which was considered by many to be disproportionately low given that the standard is intended to apply to large players such as Google, Facebook, Twitter, etc., who could realistically perceive even the maximum penalty as marginal.

The wording adopted by the Chamber of Deputies therefore provides for a penalty of up to 1% of the total annual turnover of the person who committed the offence.

The problem, however, is that this turnover is calculated on the worldwide turnover for the previous financial year, not only on the turnover in the Czech Republic.

Such a sanction, on the other hand, is perceived as disproportionately high and, as a result, could lead to the restriction or halt of the development of large players in the Czech Republic due to concerns about high sanctions for marginal or less frequent violations of the law (in units of cases).

7. Providers‘ concerns about the consequences of the amendment

The increase in penalties, combined with uncertainties about the interpretation of the newly imposed obligations, have raised concerns among major players, particularly Google.

In particular, the biggest concern is caused by the new provision in Section 14(b), which prohibits providers from arbitrarily restricting or modifying an information society service in a discriminatory manner by eliminating the need to obtain a right to use a print publication from a particular publisher without having a fair reason for the restriction or modification.

In particular, Google points out that it currently carries out approximately 1 000 updates per year, blocking, for example, content containing misinformation, i.e. blocking specific publishers, and it is concerned that disputes will arise as to whether or not there is a fair reason for specific publishers. There is therefore concern that providers will not block even potentially harmful content for reasons of legal certainty.

Providers also do not like the statutory obligation to provide the Ministry of Culture, free of charge, on request, with all data necessary to determine the amount of remuneration or how it is determined. According to them, a situation may arise in which the Ministry of Culture will request documents subject to the protection of commercial confidentiality, which the provider may not be willing to provide. However, the refusal to comply carries the risk of a substantial penalty of up to 1% of worldwide revenues.

Therefore, if operators compare the risks of sanctions (e.g. in cases where it is disputed what can be legitimately requested for release and what cannot) and the profits derived from operating on the Czech market, the new legislation may lead many to make a strategic decision not to further develop their services in the Czech Republic or, in the extreme case, to leave the market altogether.

This is certainly not the consequence that the legislator intended.

8. Conclusion

Overall, the amendment in its current form can be considered successful, however, the Senate’s deliberations do offer consideration of lowering the upper limit of the fine for violation of the law so that it does not act as a deterrent for large players.

Alternatively, consideration could be given to modifying the Ministry of Culture’s authority to request documents so that, for example, it is possible to refuse to provide documents containing trade secrets.

By: Mgr. Mgr. Jiří Kučera