Attenzione! …. for those who perform acts of piracy from the Internet connection at home. The fact of residing in a home with other roommates, all potentially capable of using the Internet, will not be enough to exempt themselves from liability by claiming, as a defense, that offender could be someone else. The Court of Justice of the European Union has ruled that there must be a way to allow the a copyright holder to defend his interests in case of violation perpetrated through shared Internet connections.
It may seem like a common sense solution but, in the case originated from Bavaria, the German rules on the protection of family life did not allow further investigations within the family unit that used the offending Internet connection. In fact, a German publisher, Bastei Lübbe AG, had sued a Bavarian citizen, Mr. Strotzer, because through the latter’s Internet connection had been downloaded, and subsequently shared on a peer-to-peer platform, a file containing an audiobook of the publisher. Mr. Strotzer defended himself by denying having infringed the copyright of the publisher and stating, moreover, that his parents, with him cohabiting, had equal access to the connection, without however providing further clarification on the possible use that the parents themselves would have made of the Internet connection. The Bavarian court of first instance rejected the application of Bastei Lübbe, considering that the fundamental right for the protection of family life prevailed in this case. However, the appeal judge felt differently and asked the European court whether such a defense may be sufficient to exclude the responsibility of the holder of the Internet connection.
The European court simply stated that right holders must have an effective form of redress or tools to enable the competent courts to order the disclosure of the necessary information. It is therefore not a question of weakening the fundamental right to privacy, but rather a signal sent to the German authorities to provide all the necessary instruments to ensure that there is a balance between the various interests at stake, including protection of intellectual freedom. In the present case, Mr Strotzer will therefore have to argue better about the use of his Internet connection by third parties, including mother and father.
The case of shared Internet connections can go beyond home and involve broader situations, such as the communities of students, workers, friends, as well as public WiFi connections. The European ruling does not oblige the holder of the Internet connection to ensure the identification of each user, rather to make themselves more cooperative with the courts in the search for offenders. The European court evokes a possible remedy, namely an objective liability of the Internet subscriber (as it happens with cars), but this seems to be an extreme solution, to be used only when the national legislator does not allow operations to identify the offenders among those who have access to a shared Internet connection.
The present case may seem a little excessive given the family context from which it originates, but it must be borne in mind that the objective of the judicial action was not the illicit use of a protected content (a condemnable action but with a modest impact on the publisher), rather the uploading of a file on a peer-to-peer platform accessible to anyone.
NB: on September 12 the copyright provisions regarding publishers have been approved, and the content of the post is more valid than ever!
Is the current European copyright reform something really good for press and journalists? While mainstream newspapers publish appeals in support of the reform, the reality seems to be more complex and fragmented. Beside traditional publishers vehemently pushing for the approval of the new rules, innovative and online press are against. An important group of journalists sent a letter to the Parliament supporting the new bill, while others have started to publish opposite positions (see for instance Luca Sofri and Federico Ferrazza of WiredItalia. I have personally talked with various journalists and some of them do not understand or support the reform, while remaining silent (maybe to avoid potential retaliations by their publishers). Such discrepancies within the press sector is an evident signal that this reform is problematic and it may not be as good as it was conceived at be beginning.
It is all about Art. 11 of the Copyright Reform proposal providing for a remuneration (technically: an ancillary copyright) that online platforms (mainly news aggregators) should pay to the publishers for their news reported by them, entirely or via excerpts (the so-called snippets). No one has figured out how this payment should be collected and how much could amount at the end. However, it is unlikely that the most important target of publishers, such as Google, will pay a single penny to publishers. By contrast, Google may adopt different way to avoid such payment:
1. it will stop its aggregation service (Google News) in case of approval of the new rules, as it already happened in Spain, thus causing substantial damage to publishers which were profiting of his traffic;
2. it could limit the aggregation of news to the mere title of the article with the hyperlink, as it already happened in Germany;
3. it could negotiate the ancillary copyright to an amount equal to zero, by bargaining its indexation and traffic service (which until now was for free). These conditions may be acceptable for some publishers but not to others. However, the latter will end up being excluded from the aggregation services and may suffer a competitive disadvantage against the publishers who have accepted it. Probably, at the end, everyone will have to accept the conditions offered by Google, because being the sole publisher excluded by Google News will be detrimental.
Without Google to pay, it is doubtful whether the reform will provide any penny to the publishers, since the other news aggregators left, small guys or start-ups, would probably close down that business or would be unable, in any case, to provide the cash flow expected from Google.
It has doubtful whether the reform could be applied to Google as such, that is to say to the search engine. In such a case Google could simply de-index the European press with an enormous damage for the publishers.
It has been argued that Facebook could be an alternative target for the publishers, but the current reform will not help on that. News on Facebook are uploaded by publishers themselves (which may also have agreements with Zuckerberg’s company) or shared by users. Thus, the ancillary copyright could not apply, although there might be some uncertainty with regard to the previews of articles (are such previews part of the hyperlinks or do they constitute a distinct act of communication to the public?).
To sum up, whatever will happen in the Parliament (on September 12, when the plenary session will have to vote) or later (in the Trilogue procedure) publishers are running the risk to remain with nothing, even if the reform will be approved in the best ideal form. So much ado about nothing.
How could we end up with this paradoxical situation? Everybody agree that press and journalists should be able to be remunerated adequately and that a solution should be found for the impact suffered because of the digital transition, which has drastically affected the traditional press business. However, the European copyright reform started in the wrong way, pushed by German publishers convinced that the solution simply consisted in a mechanism to force Google to share some of its profits. The German commissioner Oettinger endorsed the proposal.
However, this initiative has not worked out, firstly because the Google News business have been overestimated. Users have access to news mainly via Google search engine and Flipboard, and then via e-mail, apps and Facebook. Google News is well below in this rank and in fact Google would prefer to close it, instead of paying publishers. The rest of the news aggregation market is highly fragmented and poorly financed, therefore there is nobody else who could provide publishers with a substantial financial stream based on the news aggregation business.
But, more importantly, the press market is changing. The high-quality publishing industry is progressively migrating toward paying models, while free-to-view press, still remunerated with advertising, is left for generic or less qualified news services. This means that the current copyright reform is based on a model – Internet traffic and advertising – which is disappearing, at least in economic terms. In other words, this copyright reform is old-fashioned even before to exist in legal terms.
The new copyright rules would however be in force to operate some negative effects: the news aggregation business model would risk to be killed since, at the end, only Google was able to extract some money from that because of profiling activity of users. Such source of revenue would be excluded for other operators and start-up which do not own the same critical mass of data of Google. Therefore, they will close or will never start.
The good news is that other negative effects should be avoided (at least we hope): the latest legislative drafts seem to exclude the application of the ancillary right upon hyperlinks and upon users and individuals (other than digital companies). The bad news is the small and SME companies are in the scope of the linktax (while an exemption is foreseen for videosharing and filtrers under art. 13).
At the very end, the most dramatic consequence of this copyright reform is that politics and media believe that the legislative initiative will solve the economic problems of the press sector, while it will not. Unfortunately, it will take some years to understand the mistake, because of the time of the legislative process, the implementation period and the time for the assessment of the effects. Something between 5 and 6 years will be lost, while they could have been devoted, instead, to more effective and reasoned interventions.
Today’s decision of the European Commission strikes at the heart of the dominance of Google, namely its dominance in the Internet search, but not its business model and its ability to provide popular and innovative services. The Commission has in fact sanctioned the (alledged) behaviors through which Google – starting from the free installation of Android – has consolidated its dominant position as a general Internet search engine over the years. From this dominant position (90% in most European markets) derives wealth and power of Google: thanks to the ability to analyze the traffic of (almost) all users who do searches on the Internet, Google has accumulated over the years a huge quantity of information. These big data can then be monetized elsewhere, particularly in online advertising. A per-se lecit activity, without doubts: but the problem, according to Commissioner Vestager, lies with the conduits through which Google is suspected to have eliminated potential competition from other search engines, imposing in various ways to the manufacturers of Android smartphones the pre -installation of Google Search.
The case in question is therefore crucial for Google’s global commercial strategy, much more than the Google Shopping case, which now appears of secondary importance, because – unlike Google Search – the online comparison market is ancillary and not central to the Californian search engine. Because of that, what really matters in the decision of Brussels is not the fine of € 4.3 billion, a sum-monstre that could however be placed one off on the budget without too much pain on the part of a company of this size (31 billion turnover in the first quarter of 2018). What instead worries Google is the order of the Vestager to end, within 90 days, the alleged abusive behaviors: in other words, the producers of Android smartphones should be entitled to pre-install any app, including search engines other than Google Search. The impact of these new rules on the business of Google is substantial but will materialize only in the long run, since it will take some time for competitors to (re)emerge. The European Commission will also monitor on this phase: it is probable that, unlike in the past, Google (as well as other dominant OTTs) will not be allowed to buy and incorporate potential competitors.
If the European Commission’s analysis is correct – but we will only know it at the end of the inevitable Google’s appeal – users will only have to be happy: not only will Google continue to continue its business, but there will be room for potential competitors, a novelty for many Internet users, many of whom – for age reasons – have never imagined the possibility of a search engine other than Google.
Some final considerations: someone will say that the sanction to Google is an act of war of Europe against US, and now Trump will well impose duties on German and French cars, and maybe even on Ferrari and Parmesan. In truth, the biggest Google complainants are US companies, which today have succeeded in obtaining in Brussels what Washington never delivered until now. The same happened in 2004 to Microsoft, which had been attacked by Sun Microsystem in front of the Commission. In other words, the great US antitrust battles are now being played in Europe, not in the United States.
From this it derives another consequence: if there were no European Union with supranational institutions with binding powers, such as the European Commission with its antitrust sanctioning powers, the European states would be defenseless in the face of global multinationals, should they be US, European or Chinese. Those who think they can govern the great global issues from an exclusively regional perspective should be aware of it.
(NB: the original version of this article was published in Italian on La Stampa)
European Union and Japan agreed to create the world’s largest area of safe data flows, allowing their companies to securely process personal data of both European and Japanese citizens anywhere within this vast territory. This creates the digital market among the largest but above all the most important in the world, made up of almost 640 million consumers with an average spending capacity higher than the world population.
For European and Japanese companies it is a breath of fresh air in times of commercial wars. Thanks to the agreement, exchanges will be facilitated, especially in services and sophisticated and high-tech goods, which are mainly based on the processing of personal data of users: ranging from services via the Internet, from the most common (e-commerce and billing) to more sophisticated ones (e.g. cloud), but also to many innovative assets like connected-TV, consoles for electronic games, all kinds of IT assets. Even seemingly less sophisticated but valuable assets, such as luxury or gastronomy, will benefit the data agreement, to the extent that the sellers need marketing policies focused on certain customer segments.
European Union and Japan have agreed that the respective data protection systems (in Europe the famous “GDPR” entered into force on 25 May 2018) are equivalent and therefore the respective companies will be able to process and transfer consumer data anywhere from Lisbon to Tokyo in an homogeneous framework, without having to question whether something is allowed or not from a coast to another of this huge market. Conversely, in the absence of such an agreement a European or Japanese company should instead make an ad hoc analysis whenever its business involves the processing of data of the other party’s citizens, and whether is is lawful under the other country’s legislation.
It is interesting to note that the agreement between the European Union and Japan does not constitute a compromise between the two parties: on the contrary, it is basically Japan that has agreed to adjust its data protection legislation to the European GDPR, which sets more rigorous levels of protection.
From a geo-economic point of view, the agreement is extremely significant, because it happens during the explosion of research on the Internet of things, connected cars, robotics and artificial intelligence, extremely sophisticated sectors which need access to a large amount of user data. The creation of this unique big data market helps European and Japanese industry that normally suffer the competition of US and Chinese, which usually enjoy greater economies of scale as well as an accumulation of data (also of European citizens). This is an advantage, however, that will tend to decrease, at least as regards the processing of data of European and Japanese citizens, since US and Chinese can no longer freely process such information after May 25, 2018 (date of entry into force of the GDPR).
In fact, although US and Chinese may be able to do at home what they want (in compliance with the respective local legislation), it is not the same for their global businesses, which will have to comply with the GDPR. This is a problem that Google, Facebook and other non-European OTTs are considering seriously: in other words, even if a company is quartered in California, it is unthinkable to divide its global data business depending on whether data of European citizens are involved or not. From a technological point of view such a separation would be complicated and expensive, and there would still be the risk of European fines for every mistake. Therefore, it may be better, at the end, to adapt the whole business to the European GDPR, even if US legislation is less stringent. At this point, however, it would be even better for US OTTs to adapt US legislation to European legislation, that is, to the GDPR, in order to close the circle.
It is precisely what Japan has done, anticipating and resolving the problem of its multinationals, whereas Trump’s administration, committed to the contrary in worsening international trade, is not catching this opportunity in time. But they will have too, sooner or later.
There is much debate about the Copyright reform and I see the need to make some clarification based on the actual draft of the legal provision to be voted by the European Parliament next week (July 5th), and not on chats and tweets.
Is art. 13 of the new Copyright directive imposing filters?
Yes, but without using the word “filters” and instead calling them “appropriate and proportionate measures leading to the non-availability on those services of works or other subject matter infringing copyright or related-rights”. In technical terms, this can only consists in a software detecting and blocking content. It cannot be done manually (otherwise it would take one week to upload content) and it does not work ex post (otherwise the current notice & take down system would be sufficient). Thus, we are talking about automatically preventive/preliminary filters. Even MEP Cavada, one of the rapporteurs, admitted it enthusiatically in one of his outstanding tweets.
Well, filters are forbidden by the EU jurisprudence (cases Sabam and Netlog), aren’t they?
Yes, and this is the reason why the European Parliament plays with words and avoids to call them “filters”. In addition, art. 13 tries to make such filters to appear the result of a private negotiation, nota an imposition by law. Fact is, according to the provision drafted by the European Parliament, the “appropriate measures” (aka filters) should be “taken” by the video sharing platforms “in cooperation with stakeholders” in case they do not agree on a licensing agreement (aka: paying money) with regard to content uploaded by end users
Why it is so important to make such filters to appear to be a private matter, rather than an imposition by law?
Because when a filter is voluntarily applied by a platform, then it is not prohibited by the jurisprudence of the European court, which instead concerns filters imposed by the law. Youtube has developed a kind of voluntary filters mechanism called Content ID.
Ok, but at the end, art. 13 concerns mandatory or privately negotiated filters?
It is about mandatory filters imposed by the law, because video-sharing platform are obliged to adopt then to avoid liability for the uploaded content in the absence of a license agreement with rights-holders. However, the tortuous and byzantine wording used by the European Parliament create intentional confusion and misunderstanding, so as someone may believe that such filters are a private decision.
Well, could video-sharing platform simply agree on licensing agreement to avoid the obligation to adopt filters?
Yes, they could. However, it would be an unbalanced negotiation, because when just one party (i.e. the platform) risks legal consequences (i.e. the obligation to adopt appropriate measures, aka filters) in case of failure of reach an agreement, the negotiation cannot be balanced. The other party (the rights-holders) will be in the position to charge more than a fair price.
Ok, then the choice for sharing platforms would be between unfair prices, on one side, and adopting filters, on the other. What will happen, at the end?
With the exception of Google/Youtube (which can resist any legal dispute and has already developed a legal filtering technology, namely Content ID) the other (small) players will probably find more convenient to adopt a simple filter technology provided by the rights-holders themselves, blocking everything the latter wish. Small platforms do not have money to develop a proprietary filters technology like Youtube Content ID or to resist in legal disputes against stakeholders.
Ok, this is how the censorship machine work. But I have read that the new Copyright directive provides for an exception for freedom of speech, parodies, memes ecc ….
Yes, but it will not work, because it is mentioned, in a restrictive way, only in a recital (n. 21a) of the Directive, not in an article, and it is envisaged only in favor of users, not platforms (so reads recital 21d). This means that platforms’ filters will still have the obligation to block and remove, in automatic way, everything that rights-holders consider their property, even if it is just an extract, fragment, elaboration, memes of a proprietary works. Then it will be up eventually to the user to make a claim, then there will be a kind of proceeding for the redress. But is is unlikely that a normal individual will start this procedure against the rights-holder, while the platform will be simply pissed-off, because it is not their job manage judicial proceedings and are not equipped for that.
Ok, lets’ sum up: the first step is that everything is blocked automatically. Then, the user can appeal, wait for justification from the right-holder and then somebody decides to reinstate or not reinstate the content. If it is still not reinstated, the user can further appeal.
Yes, and this is the reason why so many Internet father, scientists, the Italian data protection supervisor Antonello Soro are against. The UN special rapporteur reads it: “I am concerned that the restriction of user-generated content before its publication subjects users to restrictions on freedom of expression without prior judicial review of the legality, necessity and proportionality of such restrictions. Exacerbating these concerns is the reality that content filtering technologies are not equipped to perform context-sensitive interpretations of the valid scope of limitations and exceptions to copyright, such as fair comment or reporting, teaching, criticism, satire and parody”.
One last question: do you work for Google?
No, I never got a penny from them.
Who benefits, in the end, this European copyright reform?
There are two rules on which everyone’s attention is polarized: art. 11 on ancillary rights, which would enable publishers to demand payment whenever an article, or even a short excerpt of it (the so-called “snippet”) is published on the web, irrespective when this is done simply to quote the article or to make it more accessible from the Internet chaos through a search engine; and then art. 13, which aims to facilitate licensing agreements between sharing platforms and content owners, in relation to content shared by users. In the absence of such licensing agreements, there would be an obligation to adopt “appropriate measures” to ensure the “non-availability” of such non-licensed content on the platform, even if they are posted by third parties, and not by the platform. The rule, with a tortuous and Byzantine text, avoids talking about preventive filters, since these technological tools would risk, in principle, to be illicit according to European jurisprudence (Sabam and Netlog cases). The European Parliament thus develop a kind of new-language, trying to name with different words what cannot be said. But there is no doubt that preventive filters are involved by this article, since the mechanisms of ex-post removal already exist under European legislation, while the compelling demands of the content industry have always been directed to ask for an active and preventive involvement by of online platforms. If the law passed, therefore, legal battles would start to make preventive filtering mechanisms possible, while not being named in this way to avoid to contrast with the European court. So, we are in full new-language.
From the above rules we extract two very important common elements: first, that the main target of the new legislation is Google (more than the American platforms in general,) that operates as Google News in the case of art. 11 and as Youtube in the case of art. 13; second, the proponents firstly claim from Google (and then from others, if there will be) a sort of economic compensation for the c.d. “Value gap” that would be, according to some of them, the gap between what is generated by creative content on the web and how much is returned to those who hold rights.
The first subject, that of Google as a target, reflects an understandable battle which is however conducted with wrong weapons and, in addition, with the risk of creating collateral damages far worse than the potential benefits. Where some national states (Germany and Spain) have anticipated the measure of art. 11, Google responded with de-indexing news in concerned countries, in order not to pay the unexpected tax. As a result, publishers have asked to give up the tax but in general the impact on online operators has been heavy, because not everyone can afford to do what Google does, that is to close a business. And here the real problem emerges, namely the dominant position of Google, whose services are essential to the Internet ecosystem, including newcomers such as publishers who moved from traditional press to the online dimension.
Google appears dominant even when it operators like Youtube and, should the provision on filters and licenses under Article 13 be approved, it should not do much: Gioogle has already developed an ad hoc technology, the c.d. Content ID costing millions of bucks, and is therefore well equipped to resist the worst scenario. But could all the others do the same? Google already has few competitors but with the new legislation it will not have any more, because nobody could afford to develop a technology like that of Content ID on infinitely lower scales. For the few of them it would only remain to pay content providers, but in the end the tax would apply to the ones with poor wallets, not Google certainly.
Then there is the argument of the value-gap. Here too the battle is understandable, but still one should consider whether the problem is approached in the right way. The digital revolution had an overwhelming effect on consolidated business models: a clear example is the music market, which came out completely transformed by the Internet devolution, from the small shops selling CDs for 30 euros to online music stores offering everything in streaming at flat rates. In telecommunications there was a similar process: from phone calls and SMS at a high price we moved to Skype, WhatsApp and flat rates. In both cases, the traditional owners (i.e. recording companies and large telcos) did not like the change, but they know that back to the past is now unthinkable: technology does not allow it and consumers do not want it.
For publishers and content providers, a similar dilemma arose: resisting the digital devolution or embracing? At the end, they have opted for a conservative and anti-historical position, thanks above all to the help offered by the European Commission lead in last years by the German Oettinger (a commissioner who appeared sympathetic to the problems of the great German publishers ): so, despite the disruptive power of technology, publishers have invented a sort of reimbursement ex-lege that, moreover, creates more damage to the online industry in general (especially the European one, made up of dwarfs and start-ups ) rather than large American platforms.
In truth, the change created by the digital revolution should be controlled and exploited, rather than suffered passively, even when submission may seem less bitter because legislation grant some small amounts of repayment. This is a solution that could benefit some quarterly profit & loss statements, but only for a short time, since it could not be a structural solution.
The real problem of the value gap is why the wealth created by digital revolution remains in the hands of a few operators, as in the case of the accumulation of capital in 1800 AD. The problem is not the value gap itself, but its concentration. On this theme, the European copyright reform completely misses the target but, on the contrary, lays the foundations for a consolidation of online monopolies giving them, paradoxically, also a sort of mediation power on the circulation of information (as warned by the Italian Data protection chair, Antonello Soro).
So, who benefits from this copyright reform?