value gap

The European Union is nearing finalization of significant changes to the copyright law, which will increase the legal obligations of websites and apps that allow sharing of user-uploaded content, often referred to as UGC or user-generated content. While it is still progressing through the legislative process, it seems likely some form of this legislation will become law. The three current versions approved by separate arms of the EU government share a few common provisions.

If it becomes law, it will likely apply to websites and app platforms that meet four basic conditions:

First, the platform allows the storing and distribution of UGC that may include copyright content, even if use is just incidental.  If users can upload content with embedded clips of music or video as part of their content, this provision applies.

Second, the platform promotes or optimizes content for commercial purposes. Commercial purposes would include the generation of income through advertising, subscriptions, app and in-app purchases, and other creative income producing schemes, or attracting users to the service to increase the capital value of the platform.

Third, the platform is located in the EU or if it is located outside of the EU, is it accessible by users from any of the 28 countries currently in the EU. That means if the platform is based in the US but allows users in the EU to access it, this law applies.

Fourth, the platform is above a certain size, currently proposed to be more than 50 employees or annual revenues in excess of €10 million.

Some exceptions to the type of platforms covered are expected.  For example, cloud storage services that are for individual use.  Other examples include not-for-profit encyclopedia services (such as Wikipedia), open source software platforms (such as GitHub) and online markets whose main activity is selling of physical goods (such as eBay).

If a platform falls under these qualifying conditions of the directive, then what?  The company will be required to obtain licenses from copyright owners or must take preventive measures to ensure that copyright works are not available through their service. Since there are inconsistencies between the three versions, it’s not yet clear what will qualify as a preventive requirement.  However, it is expected that copyright owners will be obligated to specify what content they want protected.

So where do things go from here?

A trilogue process is currently underway by the EU to reconcile the three different approved versions. A compromise version is expected to be finalized before the end of 2018 and approved in the first quarter of 2019.  Once approved, there is a two-year period before it becomes law in every EU member state.