UPDATE 5 February 2019: Germans and French delegations found a kind of agreement reported in a new compromises proposal by the Romanian presidency, whereby the exemption in favor of SMEs is eliminated while a soft-regime is granted to micro-entreprises (with a turnover less of 10 million Euro).  The latest draft of art. 13 is quite messy and will make very difficult life for videosharing platforms, unless they install overblocking filters. Censorship seems to be the most convenient and practical solution for operators wishing to avoid legal issues with rightsholders.

The European copyright reform is currently delayed because of disagreements amongst Member States about some crucial aspects of the new legislative text. The Rumanian presidency failed in proposing an acceptable compromise and its mandate request, which would have permitted to the Council to rapidly close the negotiations with Parliament and Commission, was rejected on January 18, 2019.

The apparent stallo between France and Germany

Apparently, the main stallo situation is about a potential exemption clause in art. 13 (the upload filters provision) for small enterprises: Germany defends the exemption, while France opposes. This is why Germany and France are reported to talk together and bilaterally, in order to find an agreement and speed up the end of the legislative process. The timing is crucial: the stakeholders supporting the reform (commercial broadcasters as well as traditional media and publishers) fear that the new European Parliament (to be elected in May 2019) may be less favourable to their interests, therefore they hope that everything should be finalised within the current legislature. To be fully sure to complete the legislative process without interferences, the plenary session of the European Parliament should approve the copyright reform by March 14, 2019.

The disagreement about the “small enterprise exemption for upload filters” seems to be a minimal question with respect to the ambit of application of the entire copyright reform. Therefore, it is more reasonable to believe that France and Germany are negotiating, with the support of the Commission, in order to define all pending details and getting a final agreement. The rumours about the matter to be escalating to Macron and Merkel are likely instrumental to this effect: to submit to the others a plan which is final and  not negotiable any longer. This byzanthine behaviour may be disliked by other Member States, however this is the way things often happen in Brussels. The weight of a joint French-German position may be so relevant to overcome whatever blocking minority in the Council.

What the impact for publishers?

If the above is true, and provided that legislators act rapidly, the copyright reforms may be approved before the “Copyright Barbarians” will conquest the next parliament. What could be the possible impact for the publishing industry?

Despite official declarations, most stakeholders (including publishers) are skeptical about the concrete outcome of this reform, whether or not it could provide a (at least monetary) solution for the crises of traditional media. At the current situation, it seems more a matter of principle and a “contentino”, namely a cake for a kind.

In this respect, on should consider whether the ancillary right provided by art. 11 of the new Directive could be waived by publishers (as it happened in Germany with the 2013 local legislation) or not (as it happened, instead, in 2014 in Spain). The European proposal has been always ambiguous to this point, although the current Council’s text seems to favour the German solution: “Nothing in this Directive should be interpreted as preventing holders of exclusive rights under Union copyright law from authorising the use of their works or other subject-matter for free, including through free licences, when they consider it appropriate” (recital 43b). To undermine this result, the Parliament proposed a different wording: “the listing in a search engine should not be considered as fair and proportionate remuneration”.

The German scenario (i.e.: publishers may waive the ancillary copyright)

In case of a “German scenario” publishers may waive the compensation from Google as well as other news aggregators (and, in general, from whoever should pay the fee because displaying an article or a simple snippet, entirely or via a hyperlink). It is well-known that small and innovative online publishers are against this reform and therefore will be more than happy to make the waive. But what would happen with the big publishers which have been supporting this reform? When the German copyright law was enacted, most publishers accepted the waive with Google but then some big of them filed a recourse with the antitrust authority for abuse of dominant position. Would this happen also with the European legislation and with which chances? Google is super-dominant in many markets, but not as Google News in the market of news aggregations, since this market is evolving and other platforms and communicating tools, including Facebook and Whatsapp, play an important role. To better attack Google and find it dominant (and potentially abusive), one should address the entire online advertising market (where also Facebook operates, however). This move, however, would weaken the competition case for the ancillary copyright, which is much more specific than online advertising. A competition assessments is always based on valid economics, not on lobbying declarations, and therefore there might be the risk that a competition authority states that a non-dominant Google News has a legitimate interests in offering the news aggregation service for free because it gains from it much less than what the publishers do. This is confirmed by a consistent perception that publishers need news aggregation and digital sharing irrespective from a potential remuneration via an ancillary copyright.

The Spanish scenario (i.e.: publishers cannot waive)

In case of Spanish scenario, publishers would not be entitled to waive their rights vis-à-vis Google and whoever. This is a complex scenario because a mandatory licensing system would be complicated to set-up and, in any case, the big fishes, Google in primis, still would have the choice between the nuclear option (closing the business limited to news aggregation) or grant the minimum. Fact is, it is doubtful whether the economics of the online news market may compensate publishers for what they have lost during the years. As mentioned by Quintarelli, the margin of Facebook in Europe per user is 1,3 Euro/month (with ARPU at 2,4 Euro), while for Twitter is only 10 Eurocent/month/. Margins may be higher for Google but, as mentioned above, the case is about Google News, not the entire’s Google business. In other words, there is no decent pie to share amongst the hundreds European traditional publishers.

The Spanish scenario may be further complicated by third parties setting the fee on the basis of various criteria, with subsequent appeals by opposing operators. The practical enforcement of the compensation will be delegated to the national authorities and the directive does not say very much about. The legal uncertainty resulting from that may likely undermine any potential gains.

The impact for small publishers and users

The above uncertain scenarios will be mostly problematic for small and innovative online publishers providing quality and local content. For them the Spanish scenario would be chaotic since they would not be able to set up decent licensing system with the entire market because they do not have sufficient resources to do it. Such operators will certainly be in favour of the German scenario (i.e.: the ancillary copyright may be waived). By contrast, poor informative or low-quality publishers may be interested with the Spanish system because their business is based on sharing whatever content and rapidly, from fake news to kittens.

The uncertainty will be detrimental for the Internet in general, in particular because the foreseen complex regulation of hyperlinks and snippets, with various conditions, carve-out and exemptions attached. To make an example, the text agreed sofar by the Council (recital 34) states that: “The rights granted to the publishers of press publications should not ….. extend to the mere facts reported in the press publications”. The need to rule this clear, self-evident principle, which is fundamental for the freedom of speech, is an explanatory evidence of potential disturbing consequences deriving from the regulation of hyperlinks and attached statements (the so-called snippets).

The hyperlinks 

The current drafts of  art. 11 (the so-called link-tax) keep uncertain the status for the hyperlinks. Article 11 (press publishers’ rights). The text of the Romanian Presidency insists with the quantitative criterion to exclude snippets, while other delegation would prefer a qualitative criterion. The application of a quantitative criterio may look like simpler in theory, however it will end up with arbitrary results: an hyperlink will be subject to a fee depending of the number of words attached to it. In addition, there is no clear carve-out for individual users (bloggers and so on) and micro-enterprises. An appropriate exemption is foreseen by the Parliament:

“the rights ……. shall not prevent legitimate private and non-commercial use of press publications by individual users”

however its practical implementation is doubtful due to uncertain border between personal commercial use in the Internet, because of adverttising, terms and conditions of blog services as well as professional interests mixed with private uses.

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What next? Germans and French should soon let us know what they have decided under the support of the Commission. We understand that next COREPER I meeting is scheduled on February 8, while the Trilogue could take place on February 11. The last plenary session of the Parliament is scheduled in April 2019 but, for technical reasons, it would be advisable for the copyright legislator to close the file in March 2019.