Innovation Policy Post

Shortly before the next elections in Germany which will take place exactly a year from now, the German government set into motion the adoption of a new copyright law that, if it passed parliament, would be unique in the world. Unique, however, in every negative sense of the word.

In essence, the German government would like to introduce a so-called Leistungsschutzrecht for press publishers. The Leistungsschutzrecht would be a new neighboring right that has the aim of increasing the protection of press publications online. It is a new, unprecedented IP right targeting snippets in online search engines’ and other news aggregation sites’ indexes. Accordingly, these snippets, i.e. short parts of press articles like headlines or single sentences displayed to the search engine’s user, would be protected under the new copyright law and, hence, not be allowed to be used by various online news aggregation services without a license.

Before turning to the vast negative consequences of such a law, it is worthwhile to explain why anybody would ever come up with something of this magnitude. Press publishers have for years been struggling to come up with new and viable business models in the Internet age. The traditional model of income generation through selling content in hard copies, often via subscriptions, plus advertisement revenue proved difficult in the online world where income is far more dependent on advertising. In the publishers’ view search engines free ride on their online content by indexing it in search results through short extracts, i.e. snippets. Thus, they demand a ‘fair share’ of the income generated by successful online search services without, however, specifying what ‘fair share’ is supposed to mean.

The envisaged German law aims to change that. Since snippets would be protected by copyright, every online search provider would have to negotiate a license with every publisher to be able to display a short extract like e.g. a headline. Apart from the practical difficulties, if not to say impossibility, of such negotiations there are considerable concerns relating to inter alia press diversity, innovation in the digital economy and legal uncertainty. Will everyone who posts or blogs online be considered a publisher with whom online service providers will have to negotiate a license to be able to display a snippet from his or her content?

There is a danger that only the biggest news publishers will have the capability to deal with the huge administrative burden of licensing. Smaller publishers and bloggers would never be able to deal with this scale of rights clearance requirements. The result could be less press diversity with all associated problems for a democratic society. This argument is also valid the other way around. Hence, it could only be the biggest players in online search who are able to afford the negotiation as well as the payment of licensing fees to publishers. This clearly raises the barrier to market entry for start-ups and SMEs and, thus, acts as a severe break on innovation in the digital environment.

Furthermore, questions remain of whether such a system will actually be commercially beneficial to publishers. As the Copiepresse case in Belgium showed, there is a symbiotic relationship between content providers and search engines in the sense that the later actually drives online traffic to publishers’ websites. In Copiepresse Belgian publishers have successfully sued Google for copyright infringement as regards its news aggregation service. As a result, these publishers’ content was removed from Google’s search results. This, however, has lead to a considerable drop in traffic to their sites which in the end has prompted them to agree with Google to put their content back up in the search engine’s index. As regards smaller publishers in particular, it is worthwhile to ask whether they really want to support such an incredibly intrusive legislative proposal. Given their lower marketing resources they are the first to benefit from search engines redirecting traffic to their websites. This has a clear pro-competitive effect in the marketplace for press products.

Another problem is the increased legal uncertainty such a law would bring. Thus, what would the relationship be between the proposed law and German law implementing the E-Commerce Directive? The answer to this question is of particular importance to social networks and user-generated content sites. Would Facebook have to negotiate a license for every link to a press article one of its users posts on the social network? The overall idea behind the intermediary liability limitation provisions of the E-Commerce Directive is to protect online intermediaries from the unlawful conduct of their users. Accordingly, would users’ themselves have to negotiate a license with publishers before posting anything to Facebook, Twitter, etc.? Presupposing they would not do so, would these services be obliged to remove content (or face liability charges) or maybe even assist law enforcement authorities in finding users that break the new IP right?

As a last point it is worthwhile to highlight the broader ramifications of such a law in the European context. Thus, whereas European institutions continue to find ways of making the digital single market a reality, a law like this will surely not make things easier. It further fragments Europe’s single market and leads to legal uncertainty for online operators. What is a non-German news aggregation service, established outside of Germany and serving users outside of Germany supposed to do? What if other countries in the EU introduced similar laws? Will new entrants be tempted to set up services that permit the sharing of news stories if there are different laws of this nature, or different levels of compensation, in each country? Clearly this will prevent small European companies expanding across frontiers, at least legally, thus leaving the market to the well established who may find a way to cope. In times where EU countries like the Netherlands, Poland or the UK have engaged on a path to make IP laws more flexible realizing that this is inevitable to meet the demands and realities of a digital economy, the German proposal is far more than just an anachronism. Crucially, the time to act and voice opposition to this law is now! The proposal has entered the consultative stage in the German legislature and the government hopes to vote on it by February next year.

For more information and the possibility to voice opposition see the IGEL (Initiative gegen ein Leistungsschutzrecht) initiative online at:

http://leistungsschutzrecht.info/

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