Tuesday, 18 February 2020

Regulatory divergence post Brexit: Copyright law as an indicator for what is to come




Martin Kretschmer, Professor of Intellectual Property Law (CREATe Centre, University of Glasgow)

Here we have it. The first instance of regulatory divergence. The UK is leaving the European Union, and already the rules of the single market are starting to break.

In response to a parliamentary question by Labour MP Jo Stevens, then-Intellectual Property Minister Chris Skidmore said on 21 January that the UK Government had no intention of implementing the most recent EU Copyright Directive, for which the UK Government had voted in the EU Council in spring 2019. There was significant dissent among EU Member States and the Directive would not have been adopted without the UK’s support.

Does this matter? Copyright law may not be what people expected to be the first post-Brexit regulatory fault line. The public debate has been dominated by standards for labour, the environment, public subsidies and taxation, where the EU’s concern is regulatory dumping. Yet Brexiteers have said many times that leaving the EU only makes sense if it leads to the UK becoming a more attractive destination for business. This means entering into a process of regulatory competition with its closest neighbouring market. So it is advisable to pay close attention to how this negotiation will play out. And copyright law is where the choices start.

Let’s consider the parliamentary exchange in the House of Commons in full:

On 16 January 2020, a written question was asked by Jo Stevens, Labour MP for Cardiff, headed “Copyright: EU Action” (4371):

“To ask the Secretary of State for Business, Energy and Industrial Strategy, what plans the Government has to bring forward legislative proposals to implement the EU Copyright Directive in UK law.”

Chris Skidmore, then Minister of State for Universities, Science, Research and Innovation (which includes responsibility for intellectual property) answered on 21 January 2020:

“The deadline for implementing the EU Copyright Directive is 7 June 2021. The United Kingdom will leave the European Union on 31 January 2020 and the Implementation Period will end on 31 December 2020. The Government has committed not to extend the Implementation Period. Therefore, the United Kingdom will not be required to implement the Directive, and the Government has no plans to do so. Any future changes to the UK copyright framework will be considered as part of the usual domestic policy process.”

Which future domestic policies may diverge from the aims of the Directive? The Directive on Copyright in the Digital Single Market contains three different groups of measures.

The first group harmonises a number of copyright exceptions affecting cross-border uses. New provisions also make it easier to use out-of-commerce works (Article 8) and ensure that works of visual art that have reached the end of their copyright term remain in the public domain (Article 14). This first group of provisions modestly benefits cultural heritage, educational and research institutions.

The second group of interventions seeks to improve the contractual position of authors and performers. A general fair remuneration principle is established, and greater transparency of royalty statements encouraged. Article 22 also gives authors and performers a new right to revoke a licence or transfer of rights where there is a lack of exploitation. These new contractual regulations could be considered a challenge to common law principles of freedom of contract, but they lack teeth. While they have been widely welcomed by creators, routes to enforcement remain unclear. Again, there is no obvious alternative policy path.  

The third group of measures is much more controversial. They are introduced in the Directive under the innocuous sounding label of “Measures to achieve a well-functioning marketplace for copyright”. The headline intervention is a change to the liability regime of platforms that host user-uploaded content. Article 17 (formerly 13) creates a new category of ‘online content sharing service provider’ that will no longer benefit from the ‘safe harbour’ of the e-Commerce Directive, a core piece of internet legislation adopted in the year 2000. The e-Commerce Directive exempts platforms from liability for unlawful content found on their services (if removed “expeditiously” following notice).

In the polarised debate of the Copyright Directive, Article 17 was pushed as a decisive industrial policy measure that would enable the music industry to improve licensing deals and revenue sharing offered by Google’s YouTube service. In an effective trope coined by the UK music industry, Article 17 was to close the “value gap” between European creators and US technology giants. Opponents characterised the measure as a “censorship law” that would lead to the default use of upload filters and the disappearance of “memes” (because they re-use identifiable copyrighted materials).

A typical exchange between the two sides of the debate can be found in these letters published by the Financial Times (paywalled) during the final stages of the legislative process: Julia Reda: State-of-the-art copyright filters threaten freedom of expression; Michael Grade: Copyright reform will put an end to this freeloading. Recent evaluations of the Copyright Directive can be found here and here.

Boris Johnson (then out of government) had tweeted near the end phase of the European legislative process on 27 March 2019: “The EU’s new copyright law is terrible for the internet. It’s a classic EU law to help the rich and powerful, and we should not apply it. It is a good example of how we can take back control”.

On the balance of evidence analysed by independent experts (to which I contributed), the Prime Minister seems to be correct. The industrial policy measures of the Copyright Directive will have numerous unintended consequences beyond the music sector, and will make market entry and user-led innovation harder.

So, has the UK suddenly seen the light? Does evidence matter? Are we observing the emergence of a coherent policy addressing the creative industries?

There is a possibility that the UK acted cynically, supporting the Directive in the European policy making process in the anticipation that it would damage the economy of the EU’s digital single market. This suspicion is implied by the outrage felt towards the UK’s policy U-turn last week. More likely, the UK civil service just kept their heads down during the copyright negotiations. They may not have wanted to draw attention at a moment of sensitivity over the Withdrawal Agreement. And perhaps the UK’s politicians were distracted. But this position will not do for much longer.

Post Brexit, regulatory divergence on copyright will not simply be a matter of domestic policy choice, as implied by the ministerial answer. Critically, it will depend on what new trade arrangements look like. Keeping a safe harbour for content sharing platforms in place may attract tech firms to set up in the UK. Yet there is also an agenda targeting the major digital platforms. The UK government is already committing to impose a “duty of care” liability (Queen’s Speech of 19 December: “My Ministers will develop legislation to improve internet safety for all [Online Harms Bill].” The government also says it will continue to pursue a Digital Services tax.

It is already clear that these platform measures cannot be insulated from wider Free Trade Agreements (FTAs) sought with both the EU and the US. In addition, looking at past FTAs negotiated by the US, there is a track record of taking aggressive intellectual property positions. For example, in 2004 Australia was unable to shelter its drug price control scheme (Pharmaceutical Benefits Scheme PBS) from significant change, and conceded increased intellectual property standards.

When studying the UK’s options as they affect culture and the creative industries, independent evidence on raising or decreasing obligations of platforms (with or without intellectual property dimensions) will be critical. There is an urgent need to develop a more coherent framework as trade negotiations begin in earnest. The AHRC funded Creative Industries Policy & Evidence Centre (PEC) is already studying the UK’s international competitive position. In this context, Prof. Philip Schlesinger and I are in the process of mapping the regulatory landscape for online platforms.

The legitimacy of governments is increasingly in doubt. The Brexit process itself is a challenge to established procedural principles that lend legitimacy to a ruling power. Legitimacy requires that a government can explain the reasons for its actions.

The UK Government needs to be held to this standard. We need to know on what basis, and for what aims and purposes, the UK intends to regulate contested norms, such as the liability of platforms under copyright law. Why does the UK wish to diverge? Just to signal that it is taking a different stance? Or is there actually a game-plan? Answers are needed before we enter into trade negotiations that will then fundamentally shape “domestic choices”.

Barnard & Peers: chapter 27
Photo credit: Gero Nagel, via Wikicommons

5 comments:

  1. ‘The legitimacy of governments is increasingly in doubt. The Brexit process itself is a challenge to established procedural principles that lend legitimacy to a ruling power.’

    That might carry more weight were it not the case that the EU has long-had a glaring constitutional deficit. Indeed it is that deficit that is at the heart of many of the problems the union now confronts. What this article seems to me to be doing is describing symptoms not cause. Is the EU reversible? I assume so given the existence of A50 – what other purpose is there to A50 if not to specifically see the EU as reversible? That fact that legal scholars by and large do not like that reversibility is neither here nor there! The fact that the implications of that reversibility are (for example) those set out in the article similarly does not matter to my mind.

    The symptom is, in this case, copyright law. The problem is that we’ve built this supranational entity and all its legal framework on a political and constitutional foundation of sand.

    None of the ‘centrifugal’ trends we see in the EU now should be a shock to anyone. None of this, or the things described in the article, were unforeseeable, just the EU institutions and national governments didn’t take the idea seriously. There are none so blind as those that will not see. As a European Studies student in the mid 1990s I sat in seminar rooms where several of us thought up dozens of scenarios, all far from theoretical, about how the EU supranational ‘norms’ were not at all settled and how there were gaping holes in the EU’s constitutional footing. Legal and political literature, then as now, was paper-thin on how such questions could be handled. The stark reality is that across Europe governments and EU institutions have not adequately confronted voters with the full implications of the integration we’ve seen and the de facto (if not de jure) irreversibility of it. The net effect has been a crass neofunctionalism where everyone can ‘spillback’ just as long as no one actually does it or thinks too hard about it. Voters have been left behind by the political and legal class and the result has been inevitable. To say as much is not to have a go at anyone, it is to state what’s been clear for decades.

    Indeed that idea of ‘wantonness’ set out in the link carries with it a rather unpleasant whiff of legalistic retrofitting. For that matter one wonders how the EU’s response to the crisis in the single currency would measure up to the idea of ‘wantonness’ set out in the link. If scholars wish to argue, as does the link, that, ‘adherence to procedure is not enough,’ that’s fine. But the people need to be confronted with that and confronted in the fullest sense. This is not a legal question, it is political. ‘Adherence to procedure is not enough’ in context is a world-view to be tested at a ballot box, not at law.

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    1. Of course countries can leave the EU via the means of Article 50. What I wonder is whether criticisms like yours grasp the fact that countries also choose to stay in the EU despite its flaws. Perhaps the missing gap in Eurosceptic literature is why they choose to do so?

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    2. For the record I think of myself as euro-critical, not eurosceptic. I voted REMAIN with a very, very heavy heart.

      You say that countries can leave the EU – well can they? I seriously struggle to see how a country in (say) the eurozone could ever realistically leave. Sure, the treaty right is there on paper, but I question how far that treaty right could be reified – particularly in a world of significant TARGET2 balances. And I think my point stands. Voters were never confronted with the (unspoken) expectation that this would never be reversed, that powers were gone forever, and voters have every right to feel left behind. What one does about that is another matter of course.

      Of course I grasp that countries choose to remain. Their reasons for doing so surely are clear-cut: power and interests, same as anything in international relations. It makes not one jot of difference to my mind why they want to remain or how they balance power and interests or how (more importantly) voters see power and interests. It could be because they love the mercantilist environment, it could be because they get a vast sum in agriculture subsidies, it could be because they like the tune to Ode to Joy. Similarly it makes not one jot of difference why states want to leave. A50 places no requirement on a leaving state to give a reason for leaving. Power and interests can, should, shift over time and that point just seems to have passed over the heads of generations of European politicians. Power and interests shifting is not an inherent problem. The lack of any mechanism to deal with that in a union that’s had an enormous legal framework built on top of it and with left behind voters very much is a problem. To retrospectively graft some idea of ‘wantonness’ onto the situation, as the link in the article does is just desperate lawfare.

      The missing gap in the eurosceptic literature... I’ve no idea. The whacking great gap in the European Studies literature is about the limits of neofunctionalism and the constitutional deficit in the EU. This was very much the point I made earlier. On my reading of the article Professor Kretschmer seems surprised that someone has activated A50 – if indeed he is surprised he really shouldn’t be. Nothing about the disintegrationist trends of the past few years was unforeseeable. Nothing about the possibility of a state activating an explicit treaty right should be surprising.

      Post Lisbon we’ve only ever been a 50%+1 vote away from a state(s) leaving. All the framework and agreements built up, such as copyrights, are on a foundation no more solid than that. Across 28 states. And it should never have been that way. The article may well be correct that a state leaving is, ‘a challenge to established procedural principles that lend legitimacy to a ruling power.’ However that’s not a good thing! Governments should be given legitimacy by the voter at large, not some supranational institution. If we want to turn the EU into some ‘USE’ then fine, but that’s not a debate anyone’s had.

      There is no mechanism to deal with naturally shifting power and interests and there is in effect no meaningful mechanism to deal with a situation where a country wants to enforce a treaty right. That is a glaring constitutional deficit and I don’t understand why legal scholars are so reluctant to engage on that point.

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    3. I don't see the vast crisis here. A country has left the EU; voters in the remaining Member States can make their view as to whether leaving is a good idea or not and vote accordingly. If another country leaves, the details can be worked out in another withdrawal agreement and future relationship talks. It's a lot to pin on a discussion of applying copyright law post-Brexit.

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  2. I think we all can agree on a fact that we need to start changing the legislative system. I wish we could create more such organisations as AAAPPP to provide citizen rights.

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