Is the EU’s New Copyright Directive Too Complex to Work?

Penn's R. Polk Wagner and Steven Wilf of the University of Connecticut Law School discuss the implications of the new EU copyright directive.

After two years in the making, the European Parliament on March 26 passed a sweeping copyright directive that could have a major impact on big technology companies. Content platforms like Facebook, Google, YouTube and Twitter would be required to sign licensing agreements with musicians, authors and news publishers before posting their content. Failure to do so would make them legally responsible for copyright infringements by their users — something that they have fought hard against. The EU’s member states have two years to ratify the new directive to make it legally enforceable in their countries.

The European Parliament has justified the copyright directive on grounds that it would provide “fairer remuneration” to musicians, artists, news publishers and journalists. Critics have said that it would lead to censorship of content dissemination, and that it is an overreach that would in fact end up threatening the livelihoods of exactly the same people it seeks to protect.

YouTube has been among the most strident of protesters over the past two years. “[It] threatens to shut down the ability of millions of people to upload content to platforms like YouTube … and threatens hundreds of thousands of jobs, European creators, businesses, artists and everyone they employ,” YouTube CEO Susan Wojcicki wrote in a blog post last October. YouTube parent company Google, too, said “the directive would not help, but rather hold back, Europe’s creative and digital economy,” in a blog post in the days leading up to the adoption of the EU directive.

Gray Areas

“A lot of that concern and consternation surrounding these changes is uncertainty about exactly what content platform owners, content creators and users are going to have to do,” said R. Polk Wagner, law professor and deputy dean at the University of Pennsylvania Law School, whose specialties include intellectual property law and policy. “It could range from very little … to a much more extensive process of almost pre-screening any material you put online to make sure it doesn’t infringe anybody’s copyright.”

Wagner noted that in theory, the EU is attempting to require content providers to give more assurances to copyright owners that the material that’s being shared on their networks and on their platforms is compliant with copyright law. “The difficulty is how exactly do you do that without creating a lot of difficulty for either the content providers or the users of content altogether.”

“We don’t know how that liability will play itself out, how quickly that liability will be imposed or how massive that liability will be.”–Steven Wilf

A big gray area in the EU copyright law for large platforms like Facebook or YouTube is the liabilities they could face in the event of infringements, according to Steven Wilf, professor of global commerce at the University of Connecticut Law School, and also an expert in intellectual property law.

In the U.S., “safe harbors” such as the Digital Millennium Copyright Act (DMCA) have protected content providers from lawsuits over infringements if they take prompt action such as removing infringing material and adopting policies to prevent repeat offenses.

“[The content platforms] had to a large extent immunity from various safe harbors, and now suddenly there’s going to be liability,” said Wilf. “We don’t know how that liability will play itself out, how quickly that liability will be imposed or how massive that liability will be. Even from the very point of what they need to do in the beginning [to avoid] the legal liability — that’s completely unclear.”

Internet companies and news aggregation platforms have often in the past adjusted well to changing technologies, but the new directive is a different animal. “The internet is a very forgiving technology,” said Wilf. “It’s able to flexibly adapt one way or another. Legal liability is less of a flexible technology.”

Wagner and Wilf discussed the implications of the EU copyright law on the Knowledge@Wharton radio show on SiriusXM. (Listen to the podcast at the top of this page.)

Wagner said that even as there has been a fair amount of litigation in the U.S. over copyright violations, content platform providers like YouTube, Twitter, Facebook or even internet service providers like Comcast were “relatively safe” from being sued if they took prompt corrective action. They were not required to seek prior clearance for what they carried on their platforms, he added.

“American businesses are increasingly going to be thinking about regulatory regimes in terms of what the Europeans say as opposed to what the U.S. regulators say.”–R. Polk Wagner

All that could change now after the EU copyright law takes effect, Wagner warned. “There could be a pre-screening requirement every time you tried to post something to Twitter, Facebook or YouTube,” he said. “There would have to be an extensive process to determine whether whatever you were posting was infringing.”

Chief Sticking Points

Two features of the EU copyright directive have drawn the most criticism from content platforms — Articles 15 and 17. Under Article 15, news publishers get the right to secure licensing agreements with news aggregators like Google, which has been dubbed a “link tax.” That would give journalists and authors a share of the money their publications get from the likes of Google, a Business Insider report noted. The provision excludes hyperlinks and snippets.

According to Wilf, the directive is “confusing” in two aspects: “We don’t know how big of a snippet does it have to be or how much news can you take,” he said. The new directive allows hyperlinking by private individuals and educational institutions or for educational purposes, but that provision is not amply clear, he added. “What is allowed to private individuals in terms of hyperlinking? How do you distinguish between official news aggregators and private individuals?” Article 15 will not be too hard to implement, since it is directed toward large-scale aggregators, but it will be much more confusing around the edges, he noted.

Wagner pointed to one of the ambiguities in the provision covering links. “There is an exception for individuals, but at what point does an individual stop being an individual?” he asked. “If I have 50,000 followers on Instagram and I make money off of my Instagram account, am I a real individual actor or am I doing that as a business and should I pay the royalties that a business would have to?”

Under Article 17, content providers like YouTube are liable for infringing material put up on their sites. It will “enhance rightsholders’ chances (notably musicians, performers and script authors, as well as news publishers and journalists) to secure fair licensing agreements, thereby obtaining fairer remuneration for the use of their works exploited digitally,” according to a statement by the European Parliament.

“The way these European directives operate is they set forth a broad statement of expected policies and then individual member states are expected to follow these policies and implement their own systems,” Wagner said. “In many cases, these may end up be looking quite similar, but there’s going to be a lot of debate, processing and thinking through on what exactly to do.”

“It’s another layer of complexity regulation, uncertainty that anyone who wants to play in this space is going to have to figure out.”–R. Polk Wagner

U.S.-based content providers will not find it easy to follow two sets of rules — one in the U.S. and another in the EU. Wilf noted that at a time when there have been calls to have globally harmonized rules for protection of intellectual property rights, the EU sets “very different standards.”

One recent case is the EU’s General Data Protection Regulation (GDPR) that took effect in May 2018. “Companies had to scramble for that,” Wilf said. “It’s also true when we create more exceptions, limitations, privacy controls, whistleblower provisions and things of that nature like the new California privacy rules for Internet providers. It could be terribly hard for companies to know what to do. They’re going to have to establish best practices that are going to have to meet multiple legal requirements.”

Counterintuitive Outcomes?

Large companies like YouTube, Twitter or Facebook would be able to muster the legal and other resources to ensure compliance with the EU copyright law, Wagner noted. “They have a very large legal staff. They have the resources to go out and hire more lawyers — they can figure this out. They can branch their sites into different mechanisms depending on where users are coming from.”

However, relatively smaller organizations would find it more challenging to ensure compliance, Wagner said, and offered an example. “I often read a blog on University Michigan sports because I’m a Michigan sports fan. Is that small platform now going to be required to pre-screen all of the posts? Are they going to have to put in one of these very complicated and potentially expensive systems to enable them to be compliant under EU directives?”

Such a scenario is “counterintuitive,” Wagner noted. “Although a lot of the impetus from the regulator’s perspective is to try to force the YouTubes, Facebooks and Twitters of the world to pay more to content creators, the actual results of some of these changes is that it’s just going to entrench the large internet company platforms that we already know, make them more powerful. [At the same time, it would] make it much harder for upstarts and for new companies to break in because it’s another layer of complexity regulation, uncertainty that anyone who wants to play in this space is going to have to figure out.”

However, smaller platforms could have an advantage in one respect, according to Wilf. He pointed out that Article 17 takes into account three factors — the size of the provider, the amount of the content that is uploaded and the effectiveness of various technological measures. “What we might see is that the big platforms, like YouTube and Google, will be hamstrung in terms of having to have very significant filters, while smaller platforms could be more flexible and nimbler, because they won’t be bound in quite the same way.” He compared that to how tight regulation of banks allows more opportunities to “nimble and flexible actors” like hedge funds.

Wagner agreed that the new regulation could end up being “a much more fractured system with different rules for different size and scale organizations.” However, it would create “a far more regulatory complex world where you’re never sure exactly what rules may apply to you, and the rules that apply to you may change dramatically as aspects of your business change or as you change business models or get into new areas of content or whatnot.”

Implementation of the EU copyright directive may eventually turn out to be easy if the experience with GDPR is any indication. “A year after GDPR went into effect, for most users of the internet there has not been a great degree of change,” said Wagner. “Most platforms fairly seamlessly managed to integrate at least good enough compliance into their regular provisions. We haven’t seen some of the dire consequences and outcomes that that we were afraid of when GDPR was about to come into effect. In two years, we will come on your show again and say, ‘That was interesting, but maybe not that big a deal.’”

U.S.-based content providers will not find it easy to follow two sets of rules — one in the U.S. and another in the EU. Wilf noted that at a time when there have been calls to have globally harmonized rules for protection of intellectual property rights, the EU sets “very different standards.”

One recent case is the EU’s General Data Protection Regulation (GDPR) that took effect in May 2018. “Companies had to scramble for that,” Wilf said. “It’s also true when we create more exceptions, limitations, privacy controls, whistleblower provisions and things of that nature like the new California privacy rules for Internet providers. It could be terribly hard for companies to know what to do. They’re going to have to establish best practices that are going to have to meet multiple legal requirements.”

Counterintuitive Outcomes?

Large companies like YouTube, Twitter or Facebook would be able to muster the legal and other resources to ensure compliance with the EU copyright law, Wagner noted. “They have a very large legal staff. They have the resources to go out and hire more lawyers — they can figure this out. They can branch their sites into different mechanisms depending on where users are coming from.”

However, relatively smaller organizations would find it more challenging to ensure compliance, Wagner said, and offered an example. “I often read a blog on University Michigan sports because I’m a Michigan sports fan. Is that small platform now going to be required to pre-screen all of the posts? Are they going to have to put in one of these very complicated and potentially expensive systems to enable them to be compliant under EU directives?”

Such a scenario is “counterintuitive,” Wagner noted. “Although a lot of the impetus from the regulator’s perspective is to try to force the YouTubes, Facebooks and Twitters of the world to pay more to content creators, the actual results of some of these changes is that it’s just going to entrench the large internet company platforms that we already know, make them more powerful. [At the same time, it would] make it much harder for upstarts and for new companies to break in because it’s another layer of complexity regulation, uncertainty that anyone who wants to play in this space is going to have to figure out.”

However, smaller platforms could have an advantage in one respect, according to Wilf. He pointed out that Article 17 takes into account three factors — the size of the provider, the amount of the content that is uploaded and the effectiveness of various technological measures. “What we might see is that the big platforms, like YouTube and Google, will be hamstrung in terms of having to have very significant filters, while smaller platforms could be more flexible and nimbler, because they won’t be bound in quite the same way.” He compared that to how tight regulation of banks allows more opportunities to “nimble and flexible actors” like hedge funds.

Wagner agreed that the new regulation could end up being “a much more fractured system with different rules for different size and scale organizations.” However, it would create “a far more regulatory complex world where you’re never sure exactly what rules may apply to you, and the rules that apply to you may change dramatically as aspects of your business change or as you change business models or get into new areas of content or whatnot.”

Implementation of the EU copyright directive may eventually turn out to be easy if the experience with GDPR is any indication. “A year after GDPR went into effect, for most users of the internet there has not been a great degree of change,” said Wagner. “Most platforms fairly seamlessly managed to integrate at least good enough compliance into their regular provisions. We haven’t seen some of the dire consequences and outcomes that that we were afraid of when GDPR was about to come into effect. In two years, we will come on your show again and say, ‘That was interesting, but maybe not that big a deal.’”

Too Big to Fail?

Wilf also wondered if the too-big-to-fail phenomenon would play out with the copyright directive, as seen with big banks after the Great Recession of 2008. “Are we going to have companies that are too big to be liable?” he asked. “Are we going to have to back down from the kind of liability we might want to impose under certain circumstances because the ramifications would be too great? I’m not sure whether we are we are entering a period where nothing will happen or a period where too much will happen, and we’ll have to back away from that too much happening.”

Wagner noted that the Europeans are taking the lead in issues related to internet regulation and copyright protections. “American businesses are increasingly going to be thinking about regulatory regimes in terms of what the Europeans say as opposed to what the U.S. regulators say,” he said.

“We haven’t been stepping into the regulatory sphere in the way that we should,” Wilf added. “To the extent that we that we want to participate in the shaping of the global digital ecosystem, we have to somehow come up with our own regulatory apparatus.”

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