SAA - Society of Audiovisual Authors

On 26 February, AG Maciej Szpunar delivered its opinion in the VG Wort case, following the request for a preliminary ruling by the German Federal Court of Justice in a lawsuit involving two authors and VG Wort, the German CMO. The case is about the interpretation of EU law regarding deductions for funding of culturally significant works and activities. The discussion around the interpretation of German law and its validity with EU law hides however a broader theme: the role of CMOs in advancing cultural diversity.

The origin of the case

The case was brought by an author of scientific works, pleading for himself and an assignor. The complaint concerns deductions made by VG Wort on the compensation for private copying and remuneration for public lending, and redirected to the ‘Science Promotion Fund’, owned by the CMO, established in 1978 and having the objective of supporting culturally important scientific works.

The beneficiaries of this fund are mainly rightsholders, but not only. The Science Promotion Fund included grants to support the production of doctoral theses on copyright. According to the plaintiff, the CMO did not have the right to make deductions for such purposes since the fund was not benefitting the rightsholders themselves.

This is where things get interesting. According to Section 32(1) of the German Act on the Administration of Copyrights and Related Rights by Collective Management Organisations (‘VGG’), CMOs are to promote culturally important works and contributions. But there is no specification on who can benefit from these activities. This lack of specification led in fact the lower courts in Germany to rule (in part) in favour of the plaintiff. The lower courts had taken stock of the Amazon/Austro Mechana CJEU ruling of 2013, which said that revenues from private copying and public lending could also come indirectly, such as via cultural activities benefiting the persons entitled to fair compensation.

The German Federal Court of Justice (higher court), however, noted that in the meantime Directive 2014/26 (CRM Directive) had joined the picture. The CRM Directive rules quite precisely on operating issues of CMOs, including on which governing body decides on the deductions from revenues and how these deductions are to be used.

To be more specific, recital 3 clearly states that CMOs ‘play, and should continue to play, an important role as promoters of the diversity of cultural expression, both by enabling the smallest and less popular repertoires to access the market and by providing social, cultural and educational services for the benefit of their rightsholders and the public’. According to the higher court, Articles 8(5), 11(4) and 12(4) together suggest that it is the general assembly of the CMO (made of the authors themselves!) which can decide whether these deductions can go to yet-to-be (or never-to-be) rightsholders. But due to a lack of CJEU jurisprudence on the matter, the case was referred to Luxembourg.

The opinion of AG Szpunar, or: on the importance of CMOs in advancing cultural diversity

To put it shortly, in his opinion, AG Szpunar is quite clear on the fact that CMOs’ general assemblies shall be allowed to redirect the deduction to a broader public beyond the rightsholders themselves. These deductions do not impact the right to remunerate authors, as this remuneration can come either directly or indirectly. In this case, a fund that benefits persons other than rightsholders responds to the broader aim of CMOs that is that of promoting cultural diversity, encouraging further creation.

The AG is honest in recognising a slight ambiguity of the provisions under scrutiny. While they do not mention explicitly the beneficiaries of the cultural and social fundings, the AG is able to annul this ambiguity by relying on recital 3, where the ‘public’ is mentioned together with the rightsholders. This is a crucial point that leads the interpretation to fall in favour of a fund that benefits more than rightsholders.

Following the view of the AG and by relying on the purposes of the CMOs as envisaged by the EU legislator, one can list at least three duties of CMOs. The first two, towards the authors, are represented by the distribution of revenues to the authors and cultural and societal spending via funds, which can cover for instance funding the works of little-known authors and pension schemes. The last one, towards the public, is about encouraging further creativity, sustaining national expression and respect for and knowledge of the copyright framework. Funding doctoral theses on copyright would be among these activities.

Allowing CMOs to redirect their funds to the public translates into contributing to a more creative society, while educating on the importance of remuneration for artistic work and on the functioning of the copyright framework. It is a well-known fact that creatives would create regardless of the income their art generates as they often do not have any return on investment in mind. But CMOs shall be allowed to continue being one of the entities that recognise the value of creative works and operate on the side of creatives – both present and future ones, these entities being especially valuable when it comes to maintaining the European cultural diversity made of national and regional traditions.

More remuneration rights managed by CMOs = more cultural diversity?

This leads us to reflect on the current state of the system surrounding CMOs. New uses and especially the switch to digital is source of concern among rightsholders and their CMOs, which are still trying to convince legislators that these market and technological changes require regulatory intervention: remuneration shall be recognised in these new uses, and this decision cannot be left to the market. Even when a legislator is successfully brought to its senses, powerful market operators start their battles and ask to take a step back. With no remuneration, CMOs cannot meaningfully sustain their main aim, i.e., revenue distribution, let alone funding for culturally significant activities!

There is a specific example that comes to mind when we mix the digital use of works and the remuneration deriving from it: the Streamz case, now at CJEU level but originating from Belgium. To be more specific, some platforms have initiated a lawsuit against part of the Belgian law implementing Directive 2019/790 (DSM Directive). The Belgian provision under attack mandates remuneration with collective management for the use of works by streaming and content-sharing platforms. Despite similar provisions in other EU countries, the Belgian Constitutional Court has decided to refer the case to the CJEU. If the platforms were to win, it could potentially lead countries other than Belgium to rethink their laws and remove the remuneration rights.

This would in turn lead CMOs to have less revenues to redirect not only to authors themselves but also to future authors and anyone who could benefit from the funds for culturally relevant activities. Indeed, while there are rightful limitations on how much deductions can be made from revenues, generally capped at 10%, it is quite elementary to denote that 10% of 200 is less than 10% of 2000.

A clash of values in disguise

As CMOs have such a central role in promoting culture, it is therefore important to reflect upon the impact decisions can have, especially if a decision is made according to European founding values. In the Streamz case, the attack on the mandatory collective management of remuneration rights for digital uses is advanced in the name of freedom of contract. While freedom of contract is a fundamental piece in a democratic society, one must wonder: how much freedom are we really ensuring when we deprive the author to obtain remuneration via a statutorily established mechanism and an entity created for the purpose of distributing revenues?

In the current system where the author is a lone entity, its bargaining power evaporates in front of producers and global platforms, which are assisted by teams of skilled, strategic and terrifically clever lawyers. When the author is given freedom to contract, what we are really doing is opening the gates for a sell out of rights and under-compensation. When we remove the CMO from the frame, we are eliminating an entity in the value chain created to strengthen the position of authors and a source of promotion of further cultural creation, doubling down on the damage.

The fight in the name of freedom of contract is a disguise for a clash of values. Europe values the protection of authorial works not only for monetary reasons, but also for cultural prosperity. The Old Continent is the home of authors’ rights, including moral rights. These values are endangered by non-EU companies, which instead see monetary benefit and market freedom as the main value and would rather see the creators deprived of any control over and fair remuneration for their creations.

CMOs help the EU achieve its cultural objectives

Given the state of the market, when the CMO is given the chance to operate by statutory backing, the income stability is transferred to the authors and more resources can be dedicated to funding future creation and copyright education, feeding the cultural dimension of each country, depending on the Member State where the CMO is operating. This is the most credible way of accomplishing the goals enumerated in recital 3 of the CRM Directive and, before that, the cultural objectives of Art 167 of the Treaty on the Functioning of the EU (TFEU) which, among other things, provides that the Union shall contribute to the ‘flowering of the cultures’ and shall encourage Member States by supporting their action in the areas of artistic creation - including in the audiovisual sector, of course!

The opinion of AG Szpunar in the VG Wort case has clearly brought to the attention some duties of CMOs that are often hidden in current discussions, blind to anything but pure monetary exchanges and economic power grabs. The AG reminds us that CMOs should promote cultural diversity, and this leads one to wonder about the consequences of choices made in the name of freedoms that, in practice, just relegate the author to continue being in a state of precarity while at the same time reducing the opportunities for future creations that nurture local and European expression.

We remain hopeful that the guidance of AG Szpunar will be followed in the verdict.  

Luisiana Schiera, Legal and Policy Officer