Collective Rights Management

Whenever a song, film or book is purchased online, the artist should be correctly rewarded. The European Commission believes that for this to happen, the rules governing the collection of royalties needs to be overhauled, in order to take account of the new digital reality, and has proposed legislation to that end.

Online music, film and book markets enable artists to reach a wider audience than ever before and give consumers much more flexibility and choice. This borderless market however means that ensuring artists are paid correctly has become a far more complex task.

Collecting societies manage the licensing of copyright-protected music tracks for online use and collect and redistribute royalties, and many of these have struggled to adapt to cross-border trade. As a result, cases of long-delayed payments of royalties to rights holders have been reported. The Commission believes that current rules prevent the efficient and transparent management of rights.

The proposal

The Commission proposal therefore sets out to modernise rules on copyright collecting societies. It also aims to improve the governance and transparency of collective societies and give authors more freedom to choose which collective society manages their rights.

The proposed Directive would apply to: 
• The management of copyright and related rights by all sectorial collecting societies 
• The multi-territorial licensing of online rights in musical works by authors

Collecting Societies

Membership

Right-holders would be free to choose the collecting society that will manage their rights. They would also have the right to terminate the authorisation to manage rights or to withdraw any of the rights or types works entrusted to a collective society.

Collective societies can only refuse a request for membership on the basis of objective criteria previously set out in its statute. A right-holder becomes a member after giving consent to a collective society for managing its copyrights.

Under the proposed rules, collective societies would be required to ensure certain rights to its members and provide for an appropriate and effective mechanism of participation in the decision-making process. Regardless the different categories of members, the decision-making process must be fair and balanced. Differences in voting rights between members can only be based on duration of membership and amounts received.

Organisation: General Meeting

The General Meeting of the members would have the power to approve amendments to the statute and the membership terms, decide on the appointment or dismissal of the directors and approve their remuneration. It would, at least, take decisions on the following issues:
a) Policy on the distribution of the amounts due to right-holders
b) Use of the amounts due to right-holders which cannot be identified
c) General investment policy
d) Rules on deductions from rights revenue

Supervisory Internal Body

All collecting societies would be required to create an internal-body provided with supervisory powers to monitor and exercise control over the management of the society. Such body would have, at least, powers to approve any acquisition of immovable property, shares or rights in other entities; approve the setting-up of subsidiaries, mergers and alliances; and approve the taking-out and granting of loans or guarantees.

Managing Principles

The management of the collecting society would be required to exercise its functions in a sound and prudent manner. The society would be required to have procedures to avoid conflicts of interest including an annual individual statement by each person in the management.

Management of rights revenue

Collecting societies would have to keep a separated the income collected as a result of the exploitation of rights and the society’s own assets.  All deductions applied to the rights revenue must be clearly specified.  Members would be entitled to access the social, cultural or educational services funded through deductions from rights revenue.

The payment of the correspondent amounts to right-holders must be done without undue delay no later than 12 months from the end of the financial year in which the rights revenue was collected.

Management of rights on behalf of other collecting societies

The proposal would set out a principle of non-discrimination between the members of a collective society and any right-holder whose rights are managed under a representation agreement. The principle must be observed in particular with the managing of tariffs, management fees, conditions for collection of rights revenue and distribution of the amount to right-holders under a representation agreement.

As regards deductions, the managing society would not be able to apply deductions, other than management fees, to the rights revenue collected under a representation agreement.

Fair play with users

Licensing terms would have to be based on objective criteria. In absence of any national law fixing the prices of licenses, the collecting society would have to base its own prices on the basis of the economic value of the rights.

Transparency and reporting

The proposal would set out information and reporting obligations for collective societies as regards:
a) Information provided to right-holders: at least once a year, collecting societies would have to make available, by electronic means, certain information to each represented right-holder such as its right revenue and deductions
b) Information provided to other collecting societies under representation agreements
c) Information to provide on the request of members, other collecting societies and users: (i) standard licensing contracts and applicable tariffs, (ii) repertoire and rights managed, and (iii) a list of representation agreements
d) Disclosure of information to the public: among others, (i) the statute, (ii) membership terms, and (iii) list of managing personnel
e) Annual transparency report

Online licensing of musical works

Multi-territorial licensing

The second section of the proposal focuses on creating a framework to govern the conditions under which collecting societies could provide multi-territorial licensing for online exploitation of musical works.

Collecting societies are free to choose whether to provide multi-territorial licences. However, in case they decide to provide they would have to comply with some obligations and conditions:
a) Have sufficient capacity to process efficiently and transparently the data needed for the exploitation licences (e.g. identifying of its music repertoire, monitoring of its usage)
b) Provide updated information allowing the identification of the online music repertoire it represents
A collecting society which does not offer to grant multi-territorial licenses of musical works can request another collecting society to enter into a representation agreement. Any representation agreement would be of a non-exclusive nature and the online rights entrusted would have to be managed on non-discriminatory terms.

In order to ensure that the repertoire of all societies has access to multi-territorial licensing, the Commission proposes a safeguard provision: 
a) If a collecting society is requested to enter into a representation agreement, it would be obliged to accept such request if the collective society is already granting licenses on behalf of one or more other collecting societies
b) If one year after the date for transposition of the proposed Directive a collecting society does not grant multi-territorial online licences and did not enter into an representative agreement with another society right-holders of such collecting society would be able to grant multi-territorial online licences by themselves or through any other collecting society.

The proposal would also include a provision aimed at providing flexibility to licensing schemes. The Commission considers there to be huge innovation in the online services. Collecting societies granting online licenses would therefore not be required to apply the same terms agreed with music online providers in the past, if the interested online music service provider is carrying out a new type of service which has been available in the market for less than 3 years.

These rules would not apply to collecting societies granting multi-territorial licences to broadcasters for the online use of their radio or television programmes containing musical works.

Enforcement measures

The proposal would require collecting societies to create an effective mechanism for dealing with complaints and for resolving disputes. Also, under the proposed Directive, Member States would ensure that:
a) The competent authorities monitor the compliance of the proposed Directive
b) Disputes between collective societies and users could be submitted to a court or to an independent and impartial dispute resolution body
c) Disputes regarding multi-territorial licensing for the online exploitation of musical works can be submitted to an independent and impartial alternative dispute resolution body
d) All interested parties can submit complaints to the competent authority
e) Competent authorities take appropriate administrative sanctions and measures as regards the implementation of the proposed Directive

Next steps and entry into force

The proposal will now be sent to the European Parliament and the Council for examination following the ordinary legislative procedure. It would enter into force 20 days after its publication in the Official Journal.

Member States would be required to transpose the proposed Directive into national legislation one year after its entry into force.

Five years after the end of the transposition period, the Commission would present a report assessing the application of the proposed Directive.