Technology | CJEU decision on the validity of Article 17 of the Digital Single Market Directive

This week the CJEU handed down its decision in Case C-401/19 on the validity of Article 17 of the Digital Single Market Directive. Article 17 introduces a new specific liability regime for online content-sharing service providers, which provides access to copyright-protected works or other protected content uploaded by the users of the online content-sharing service. The CJEU found that Article 17 is valid.

Article 17 of the Digital Single Market Directive

Directive 2019/790 on copyright and related rights in the Digital Single Market (the Directive) aims to harmonise EU law applicable to copyright and related rights in the framework of the internal market, inter alia with respect to digital and cross-border uses of copyright-protected content.

Article 17 of the Directive introduces a new specific liability regime for online content-sharing service providers. Article 1 of the Directive defines online content-sharing service providers as a “a provider of an information society service of which the main or one of the main purposes is to store and give the public access to a large amount of copyright-protected works or other protected subject matter uploaded by its users, which it organises and promotes for profit-making purposes”. Certain services are explicitly exempted from the definition, including not-for-profit online encyclopedias, not-for-profit educational and scientific repositories and open source software-developing and -sharing platforms.

Article 17 firstly states that an online content-sharing service provider performs an act of communication to the public or an act of making available to the public, when the service provider gives the public access to copyright-protected works or other protected subject matter uploaded by the users of the online content-sharing service. Consequently, the online content-sharing service must obtain an authorisation from the relevant rightsholders, for instance by obtaining a license agreement.

Pursuant to Article 17(4), in the event such license or other authorisation has not been granted, the online content-sharing service provider shall be liable for unauthorised dissemination of copyright-protected works and other subject matter. The service providers may be exempted from this liability, if the service providers can demonstrate that they have:

made best efforts to obtain an authorisation, and
made, in accordance with high industry standards of professional diligence, best efforts to ensure the unavailability of specific works and other subject matter for which the rightholders have provided the service providers with the relevant and necessary information; and in any event
acted expeditiously, upon receiving a sufficiently substantiated notice from the rightholders, to disable access to, or to remove from their websites, the notified works or other subject matter, and made best efforts to prevent their future uploads in accordance with point (b).

As pointed out in the Opinion of the Advocate General, the provision should be viewed in light of the so-called value gap, namely the gap between the value obtained by the service providers by making the copyright-protected content available via its service, and the value of the revenue, or lack thereof, received by the relevant rightsholders.

The annulment case launched by the Republic of Poland

Poland launched an annulment case before the Court of Justice of the European Union (the Court) following the adoption of the Directive in May 2019. Poland claimed that the Court should annul Article 17(4), point (b) and Article 17(4) point (c) in fine (both cited above). However, as the Court found that such partial annulment could not be made without altering the substance of the entire Article, the Court had to consider Poland’s subsidiary claim, namely that Article 17 should be annulled in its entirety.

Poland argued that the provision constituted a limitation of the right to freedom of expression and information, guaranteed in Article 11 of the EU Charter of Fundamental Rights (the Charter), as providers of online content-sharing services, to be compliant and avoid liability, would have to implement automatic filtering tools to pre-approve all user uploaded content prior to making this available to the public, which would entail a limitation of an important means for sharing content online. Furthermore, Poland argued that this limitation did not meet the requirement of Article 52(1) of the Charter, namely that limitations on the exercise of the rights and freedoms recognised by the Charter may be made only if they are “necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others”.

The findings of the Court

The Court found that the specific liability regime, established in Article 17(4) of the Directive, entails a limitation on the exercise of the right to freedom of expression and information of users of content-sharing services, guaranteed in Article 11 of the Charter. However, the Court found that Article 17 does meet the requirement of Article 52(1) of the Charter, as the provision includes safeguards to ensure the respect for the right to freedom of expression and information of the users of those services, guaranteed in Article 11 of the Charter, and a fair balance between that right and the right to intellectual property protected by Article 17(2) of the Charter.

In its reasoning, the Court inter alia referred to Articles 17(7) and 17(9) of the Directive, which sets forth that the “cooperation between online content-sharing service providers and rightholders” shall not prevent user uploaded content, which do not infringe copyright and related rights, and that the Directive “shall in no way affect legitimate uses, such as uses under exceptions or limitations provided for in Union law”. In this regard, the Court held that automatic filtering tools to pre-approve all user uploaded content that do not “distinguish adequately between unlawful content and lawful content, with the result that its introduction could lead to the blocking of lawful communications, would be incompatible with the right to freedom of expression and information, guaranteed in Article 11 of the Charter”.

BAHR’s view

It will be interesting to follow the developments under the new regime introduced by Article 17 and whether the aim, as stated in recital 61 of the Directive, is achieved, namely to foster the development of the licensing market between rightsholders and online content-sharing service providers, in particular as contractual freedom is not affected by the Directive, meaning that rightsholders are not obligated to enter into licensing agreements with such service providers. In Norway, the Ministry of Culture and Equality is currently preparing a position paper with suggested amendments to the Norwegian Copyright Act, to incorporate the Directive in Norwegian law, which will then be sent on a consultation hearing, likely sometime during 2022.