The Companies Act – Guarantee Companies
3 SEPTEMBER 2015 BY LINDA SCALES
The Companies Act came into force on 1st June 2015, making a wide range of changes to Company law. Guarantee companies retained their basic structure, with their governing documents consisting, as before, of memorandum and articles. The language has however changed a little, with the memorandum and articles being collectively called “the constitution” and the articles becoming “regulations”. The company names also changed to end in a new suffix: in place of “Limited” or “LTD” companies will use “Company Limited by Guarantee “or “CLG”, or their Irish equivalents.
One of the more fundamental changes is that the old Tables in the 1963 Act, on which most company memorandum and articles were based, were replaced by new template constitutions. Most of the contents of the former Tables are now to be found in the body of the Act, the new template constitutions containing little more than a bare framework. Under the new regime, the memorandum need only state [insert]. As to the articles, the company can adopt detailed “regulations” drawn from the governance provisions of the Act, or can simply say that it adopts the provisions of the Act, without specifying what they are.
The Act provided that the memorandum and articles of guarantee companies registered before 1st June 2015 would continue in force. However this is only to the extent that they are not inconsistent with a “mandatory provision” of the Act. Without reviewing those mandatory provisions, a company does not know the extent to which its existing memorandum and articles continue to apply. This is the principal reason a company will want to review its memorandum and articles. Another reason is that the existing documents contain references to what are now redundant provisions of the old legislation, now repealed. Most companies will take the opportunity to make their constitutions conformable with the new regime.
In revising the constitution, the company needs to take into account that the governance provisions of the Act are of two types:
Provisions which apply whether or not they are stated in the constitution. These are the mandatory provisions. For example: “No business shall be transacted at a general meeting of a company unless a quorum of members is present at the time when the meeting proceeds to business”. Some of these contain an internal “option” of sorts by using the word “may”. For example: “At a meeting a poll may be demanded” or “A company may by ordinary resolution remove a director before the expiration of his or her term of office”. These mandatory provisions cannot be “switched-off”. Although they are based on the old Tables of the 1963 Act and are therefore quite familiar, there are some which are new and some to which small changes have been made.
Provisions that are stated in the Act to be “optional”. These provisions may be excluded or modified. Unless excluded or modified on the making of alterations to the articles after the commencement of the Act, they will apply. The following is an example of an optional provision, permitting the appointment of alternate directors: “Any director…may from time to time appoint any other director…or with the approval of a majority of its directors, any other person to be an alternate director”.
Where the optional provisions are concerned, the company should make a conscious decision as to those it wants to exclude or modify. It should then decide the extent to which it wants to reflect the provisions of the Act in its new constitution. It can adopt a minimal approach and largely allow the provisions of the Act to govern the situation. This has the disadvantage that the governance regulations are not completely stated in the constitution and reliance has to be placed on knowledge of the Act. Taking the opposite approach and aiming to replicate all of the governance provisions is also problematic, in that the articles will be very long and stated in fairly dense language.
A middle course seems to be the best option, with the thrust of the provisions represented in the constitution and section numbers of the Act referred to where appropriate for further consultation. An element of judgment will be called-for.
The company may also want to retain as much as possible of the existing memorandum and articles for reasons of familiarity. Where the articles are concerned, this can be done by:
reviewing the optional provisions, retaining those already reflected in the existing articles, and adopting, excluding or modifying others;
inserting any key mandatory provisions not already in the articles, and amending the existing clauses where necessary to align them with the mandatory provisions.
As mentioned above, the memorandum will need little tailoring, although some companies may decide to take the opportunity to review their objects.
If a company does not adopt a new constitution, the position is that the existing memorandum and articles will continue to apply, but, as mentioned above, the mandatory provisions of the Act will over-rule those, where there is a conflict. If the company does not change its name, on the expiry of a “transitional period” of 18 months from the commencement of the Act (i.e. before 1st December 2016), the name will be deemed to be altered to incorporate the new suffix, and the Registrar of Companies will issue the company with a new certificate of incorporation.
Ireland implements the Orphan Works Directive
9 NOVEMBER 2014 BY LINDA SCALES
On 29th October, the Minister for Jobs Innovation and Enterprise signed the EU (Certain Permitted Uses of Orphan Works) Regulations 2014. These regulations implement the EU Orphan Works Directive of 2012. They create a new copyright exception for the use of “orphan works” by a range of establishments, such as public libraries, museums and archives which operate with a “public interest” remit. For the first time, these establishments will be able to digitise orphan material in their collections and to put the material online for viewing by members of the public, without the need to obtain the permission of the copyright owner.
Once a work has been determined to be “orphan” in one EU country, it will have the same status throughout the EU. A searchable European database has been created at OHIM (the Office for Harmonization in the Internal Market) for the registration of orphan works. The Irish regulations oblige beneficiary institutions to provide information regarding the identification and use of orphan material to the Office of the Controller of Patents Designs and Trade Marks. The Controller’s Office in turn will forward the information to the OHIM registry.
The following is an outline of the scheme in FAQ form:
What is an orphan work? This is a work for which a copyright owner is either unknown, or cannot be found.
What institutions will benefit? The beneficiary establishments are publicly accessible libraries, educational establishments and museums, as well as archives, film or audio heritage institutions and public-service broadcasting organisations, but only when acting in pursuit of their “public interest” remit.
What works can be used? The works which may be used are literary works, film and sound recordings which were first published in a Member State of the EU, and which are held in the permanent collection of the beneficiary organisation. Disappointingly the Directive excluded visual works, except when the work (such as a photograph or illustration) is “embedded or incorporated in, or constitutes an integral part of” a work included in the scheme.
What are the pre-conditions to use? Before the beneficiary institution can use a work, it must be established that the work is a genuine orphan. This is done by carrying out a “diligent search” for the copyright owner. The parameters of the search are set out in a schedule to the regulations. For a book, for example, the search should be made first of all in the European Registry of Orphan Works to see if it is already listed there. Then, in legal deposit library records; ISBN records and other databases listing books in print; publishers and authors associations; online databases such as the WATCH file, VIAF and the ARROW registry, and databases of collecting societies (the relevant Irish society for literary works being the Irish Copyright Licensing Agency).
When a work is established as orphan, the beneficiary institution must keep a record of the searches carried out, must furnish the search results to the Controller and must inform the Controller of the use to be made of the work.
What uses can be made of the works? While in general the regulations reiterate and elaborate where necessary the provisions of the Directive so as to make a readable stand-alone text, when it comes to stating the permitted uses of orphan works, it is done (as in the Directive) by referring toanother Directive – the Information Society (or Copyright) Directive, forcing the reader to consultthat Directive to try to understand the position. The permitted uses in the regulations are:
1. a) making the work available to the public, within the meaning of Article 3 of the Information Society Directive, and
2. b) reproducing the work within the meaning of Article 2 of the Information Society Directive, for the purpose of digitisation, making available, indexing, cataloguing, preservation or restoration.
There is a genuine pitfall for the institutions in the first of these. The institutions may, not unreasonably, assume that “making the work available to the public” means all forms of publication or communication to the public. This is not the case. Although “making available” under Irish law does imply almost all forms of communication, the term as used in the Information Society Directive has a much narrower meaning. The meaning is confined to a communication with the characteristic that “members of the public may access [the work] from a place and at a time individually chosen by them”. This is the “on-demand” right, regarded as confined to internet communications. So the permitted uses will not, for example, include traditional publishing, but would include e-publishing, when a text can be read online via on-demand internet delivery, provided of course the other conditions of use are met.
What is the “public interest” mission? As mentioned above, the uses are only sanctioned when the institution is acting in pursuit of its “public interest mission”. The limits of this phrase are unclear. It is simply stated (as in the Directive) that it means “in particular …the preservation of, the restoration of and the provision of cultural and educational access to relevant works”.Can the institutions charge for providing access to the works? The regulations provide that an institution may “generate revenues …. for the sole purpose of covering the costs incurred by it in digitising the relevant work concerned and making it available to the public”.
Can the institutions grant licences to third parties for commercial use of the works? It is clear that the scheme is designed to exclude commercial licensing of orphan material by the beneficiary institutions. They may only act in pursuit of their public interest remit and may only cover their costs in making the material available. Moreover, the exception only permits them to put the material online and not to make or authorise further uses. Of course it is possible that a person who accesses the material online may be able to use the work (if it is provided in a re-usable format) on foot of a different copyright exception (such as fair dealing for research, for criticism or review, or for quotation), but that is another matter.
It is interesting to note that the UK has taken a much broader stance on the orphan works problem. In addition to implementing the Directive, a licensing scheme has been introduced whichdoes permit the commercial re-use of orphan material. This scheme is, of necessity, confined to uses within the UK.
What happens if the copyright owner is identified after the work has been used? A copyright owner may appear at any point and put an end to the orphan status of the work. If that happens, the right holder is entitled to receive “fair compensation” from the institution which used the work. The amount of compensation can be settled by agreement, but in default of agreement can be fixed by the Controller. The Controller, in conducting this exercise, is given some pointed indications that the level of compensation need not equate to commercial value.
While he must take into account the possible harm to the right holder, he must also have regard to the “cultural promotion objectives of the State” as well as the non-commercial nature of the use by the institution in seeking to realise its public interest mission.
Spike and Suzy go to Court
9 OCTOBER 2014 BY LINDA SCALES
The EU Copyright Directive permits Member States a neatly-worded copyright exception for “parody caricature and pastiche”. Ireland has not as yet embraced this opportunity, but as the Report of the Irish Copyright Review Committee has recommended that we do, and as the exception has recently been adopted in the UK, it can be expected to arrive on our shores soon . Over and above the fact that is an interesting question, this gives some relevance to the question “what is a parody?”
The CJEU addressed the question in a judgment (Case C-2013/13, Deckmyn) handed down on 3rd September. The case involved the use of a cartoon on the cover of a publication, Suske en Wiske (in English, Spike and Suzy) titled The Compulsive Benefactor. It is shown on the left below. The copy is shown on the right. It is a piece of political commentary on the activities of the Mayor of Ghent. In both images the events are being observed with some dismay by Spike & Suzy.
Belgian law has the parody exception, but when the case came before the hof van beroep de Brussel, that court found itself exercised about whether or not a parody needs to be funny or to mock, and whether other conditions have to be satisfied. So it sent a note up to the CJEU. Spike & Suzy went along to hear what the judges had to say.
The CJEU cleared its throat: “It is clear … that the concept of ‘parody’, which appears in a directive that does not contain any reference to national laws, must be regarded as an autonomous concept of EU law and interpreted uniformly throughout the European Union”.
Mmmmm. Spike wondered if this meant that – if it has to be funny – it has to be funny not just in Brussels, but in Barcelona and Bratislava too?
Warming a little to the task, the Court addressed the questions of the Belgian court. It said the essential characteristics of parody are the following:
- it evokes an existing work, while being noticeably different from it
• it constitutes an expression of humour or mockery
It need not, the Court said, do any of the following:
- display an original character of its own
• relate to the original work itself
• be obviously by a different author to that of the source work
• mention the source work
Suzy was wondering how many other things she and Spike could be used to parody and would it not be better if a parody had to have some relationship to the original. She began to redden with anger at the idea that she and Spike might be used for, well, almost anything.
The Court moved on briskly however, adding that “the interpretation of parody must, in any event enable the effectiveness of the exception …to be safeguarded and its purpose to be observed…..The objectives of the directive …include…a harmonisation which will help to implement the four freedoms of the internal market and which relates to observance of the fundamental principles of law and especially of property, including intellectual property, and freedom of expression and the public interest”
At this point Spike & Suzi felt a bit overwhelmed. …the four freedoms of the internal market…the fundamental principles of law….they wondered if they needed to stay until the end. However the Court was nearly finished. “In addition… the application, in a particular case of the exception for parody …must strike a “fair balance” between the rights and interest of authors on the one hand and the rights of users of protected subject-matter on the other”. For that, all of the circumstances of the case must be taken into account. And that is a matter for the national court.
And the judges gathered up their papers and went home.
On the way back on the train, Spike and Suzy agreed that they might have preferred a bit more. Or even a bit less. Maybe something like the decision of the American judge in the case of Nike Inc. v. “Just Did It” Enterprises, who said a parody is “a take-off, not a rip-off.”
The Irish reform agenda – a clue or two?
14 MAY 2014 BY LINDA SCALES
The EU Copyright Directive permits Member States a neatly-worded copyright exception for “parody caricature and pastiche”. Ireland has not as yet embraced this opportunity, but as the Report of the Irish Copyright Review Committee has recommended that we do, and as the exception has recently been adopted in the UK, it can be expected to arrive on our shores soon . Over and above the fact that is an interesting question, this gives some relevance to the question “what is a parody?”
The Department of Jobs, Enterprise and Innovation has put on its website the Irish submission to the European Commission consultation on the review of copyright rules. For those keen to know where the Irish reform agenda is heading, it is interesting to look for clues in this document.
Of course this is a response to a series of questions, rather than an open opportunity to theorise about the future of EU copyright, but the Commission consultation document pays close attention to the exceptions to copyright, as does the Irish Report of the Irish Copyright Review Committee, Modernising Copyright, and it is in the exceptions that the most interest – and controversy – lie.
So what, if anything, can we learn from the document, in particular in relation to the position of the Department on the subject of copyright exceptions?
Non-commercial uses
The submission argues the need for greater harmonization for “exceptions that would be beneficial in key strategic policy areas and facilitate societal goals”. Non-commercial uses for research, teaching, reproduction by cultural institutions and uses by persons with a disability are all referred to in this context. A new research exception for data and text mining is singled out for specific mention.
Private copying
The submission advocates examination of the existing exceptions for private copying. In particular, a specific provision to permit format-shifting between devices would provide a legal basis for what has now become common practice. It is notable that cloud storage, potentially a problem for music right holders, is not mentioned.
Of course in most mainland European countries private copying is remunerated largely by levies on blank media and copying equipment. This meets the need for “fair compensation” which is a requirement of the Copyright Directive for private copying exceptions. Levies are not collected in Ireland or the UK, both countries arguing (as does the submission) that we “do not have exceptions which require the payment of fair compensation”. Notwithstanding the distance thus declared, the submission engages with the issue, emphasising the need to simplify levies to reflect recent findings of the CJEU and to take into account the Vittorino Report commissioned by the European Commission.
User generated content
User generated content is often a mix of protected content and original material created by internet users and published on sites such as YouTube. The use of the protected content is frequently unauthorised. The submission makes the case that an exception for UGC might be permitted by the Copyright Directive. This is hard to see (although some UGC might well fall within one of our existing exceptions – such as fair dealing for the purposes of criticism or review, or the permitted European exception for parody, caricature or pastiche.) In any event, the submission recommends exploration of a new exception for UGC created for non-commercial purposes, provided the new work does not have a “substantial adverse effect” on the original work and the authorship of the original is acknowledged.
Linking and browsing
Many have been surprised that these activities, fundamental to the operation of the internet, have been opened up for examination by the CJEU. The decision in the case of Svensson – that linking to “freely available material” on the internet does not infringe copyright – has been helpful and further cases are in the offing. The submission points to the need for legal clarity.
Modernising Copyright
The Report of the Review Committee is described in the submission, reference being made to its recommendations being “in excess of sixty”. Of those sixty, it would not have been appropriate to mention a large number of them in the submission – either because they are not relevant to the consultation and are matters of national competence, or because it is self-evident that they are already provided for in the Copyright Directive.
Of those that are mentioned in the submission, the approach is cautiously worded. In most instances the Department is suggesting the need for greater harmonization, or more clarity, or is pointing to possibilities rather than committing itself to a position. This is presumably, as explained in the submission, because “the Government is currently examining the recommendations in the Report against the broader policy context and the legal scope affecting each of the recommendations”. No firm policy decisions have yet been made. However, it is hard to conclude other than that the Department is in favour of the possibilities identified.
Modernising Copyright – the Irish Review Report
14 MAY 2014 BY LINDA SCALES
On 29th October, the Minister for Jobs Innovation and Enterprise signed the EU (Certain Permitted Uses of Orphan Works) Regulations 2014. These regulations implement the EU Orphan Works Directive of 2012. They create a new copyright exception for the use of “orphan works” by a range of establishments, such as public libraries, museums and archives which operate with a “public interest” remit. For the first time, these establishments will be able to digitise orphan material in their collections and to put the material online for viewing by members of the public, without the need to obtain the permission of the copyright owner.
Once a work has been determined to be “orphan” in one EU country, it will have the same status throughout the EU. A searchable European database has been created at OHIM (the Office for Harmonization in the Internal Market) for the registration of orphan works. The Irish regulations oblige beneficiary institutions to provide information regarding the identification and use of orphan material to the Office of the Controller of Patents Designs and Trade Marks. The Controller’s Office in turn will forward the information to the OHIM registry.
The following is an outline of the scheme in FAQ form:
What is an orphan work? This is a work for which a copyright owner is either unknown, or cannot be found.
What institutions will benefit? The beneficiary establishments are publicly accessible libraries, educational establishments and museums, as well as archives, film or audio heritage institutions and public-service broadcasting organisations, but only when acting in pursuit of their “public interest” remit.
What works can be used? The works which may be used are literary works, film and sound recordings which were first published in a Member State of the EU, and which are held in the permanent collection of the beneficiary organisation. Disappointingly the Directive excluded visual works, except when the work (such as a photograph or illustration) is “embedded or incorporated in, or constitutes an integral part of” a work included in the scheme.
What are the pre-conditions to use? Before the beneficiary institution can use a work, it must be established that the work is a genuine orphan. This is done by carrying out a “diligent search” for the copyright owner. The parameters of the search are set out in a schedule to the regulations. For a book, for example, the search should be made first of all in the European Registry of Orphan Works to see if it is already listed there. Then, in legal deposit library records; ISBN records and other databases listing books in print; publishers and authors associations; online databases such as the WATCH file, VIAF and the ARROW registry, and databases of collecting societies (the relevant Irish society for literary works being the Irish Copyright Licensing Agency).
When a work is established as orphan, the beneficiary institution must keep a record of the searches carried out, must furnish the search results to the Controller and must inform the Controller of the use to be made of the work.
What uses can be made of the works? While in general the regulations reiterate and elaborate where necessary the provisions of the Directive so as to make a readable stand-alone text, when it comes to stating the permitted uses of orphan works, it is done (as in the Directive) by referring toanother Directive – the Information Society (or Copyright) Directive, forcing the reader to consultthat Directive to try to understand the position. The permitted uses in the regulations are:
1. a) making the work available to the public, within the meaning of Article 3 of the Information Society Directive, and
2. b) reproducing the work within the meaning of Article 2 of the Information Society Directive, for the purpose of digitisation, making available, indexing, cataloguing, preservation or restoration.
There is a genuine pitfall for the institutions in the first of these. The institutions may, not unreasonably, assume that “making the work available to the public” means all forms of publication or communication to the public. This is not the case. Although “making available” under Irish law does imply almost all forms of communication, the term as used in the Information Society Directive has a much narrower meaning. The meaning is confined to a communication with the characteristic that “members of the public may access [the work] from a place and at a time individually chosen by them”. This is the “on-demand” right, regarded as confined to internet communications. So the permitted uses will not, for example, include traditional publishing, but would include e-publishing, when a text can be read online via on-demand internet delivery, provided of course the other conditions of use are met.
What is the “public interest” mission? As mentioned above, the uses are only sanctioned when the institution is acting in pursuit of its “public interest mission”. The limits of this phrase are unclear. It is simply stated (as in the Directive) that it means “in particular …the preservation of, the restoration of and the provision of cultural and educational access to relevant works”.Can the institutions charge for providing access to the works? The regulations provide that an institution may “generate revenues …. for the sole purpose of covering the costs incurred by it in digitising the relevant work concerned and making it available to the public”.
Can the institutions grant licences to third parties for commercial use of the works? It is clear that the scheme is designed to exclude commercial licensing of orphan material by the beneficiary institutions. They may only act in pursuit of their public interest remit and may only cover their costs in making the material available. Moreover, the exception only permits them to put the material online and not to make or authorise further uses. Of course it is possible that a person who accesses the material online may be able to use the work (if it is provided in a re-usable format) on foot of a different copyright exception (such as fair dealing for research, for criticism or review, or for quotation), but that is another matter.
It is interesting to note that the UK has taken a much broader stance on the orphan works problem. In addition to implementing the Directive, a licensing scheme has been introduced whichdoes permit the commercial re-use of orphan material. This scheme is, of necessity, confined to uses within the UK.
What happens if the copyright owner is identified after the work has been used? A copyright owner may appear at any point and put an end to the orphan status of the work. If that happens, the right holder is entitled to receive “fair compensation” from the institution which used the work. The amount of compensation can be settled by agreement, but in default of agreement can be fixed by the Controller. The Controller, in conducting this exercise, is given some pointed indications that the level of compensation need not equate to commercial value. While he must take into account the possible harm to the right holder, he must also have regard to the “cultural promotion objectives of the State” as well as the non-commercial nature of the use by the institution in seeking to realise its public interest mission.
The Svensson decision is published!
13 FEBRUARY 2014 BY LINDA SCALES
The Court of Justice of the EU gave its judgment in the case of Svensson this morning. It has been keenly awaited because it addresses the question fundamental to all internet activity: whether linking infringes copyright. The main question posed to the Court was whether linking is an “act of communication to the public”, and therefore a publication of the work (to which the link is provided) which would require the permission of the copyright holder.
The Court has decided:
The provision of a clickable link to works freely available on another website does not constitute an “act of communication to the public”, within the meaning of the term in the Copyright Directive .(emphasis added)
Does this liberate all links from the shackles of copyright? Are those vindicated who say that linking is simply pointing to the availability of something, and not engaging in a use that can infringe copyright?
Not entirely. Note the words “freely available”. The basis for the decision is that linking is an “act of communication” but to be an “act of communication to the public” it must be addressed at a “new public”, and not a public already taken into consideration in the initial communication. So, if the linking simply involves enabling people to access a work that they could in any event access freely by consulting the original site where the work is published, there is no new public, no act of communication to the public and therefore no need for the permission of the copyright holder.
On the other hand, the Court says, where a clickable link enables a user to circumvent restrictions put in place to limit public access to “subscribers only”, users who access via a link which circumvents the restrictions do constitute a new public not taken into account by the right holder, and authorisation is needed.
The decision is very clear, as far as it goes, but questions spring to mind. What kind of “restrictions” must apply? What does the Court mean by “subscribers”? What is the situation, for example, when the right holder makes works available without a technological access control, but subject nevertheless to terms of use of the website which prohibit linking, or permits access to “subscribers” without payment of a fee? The Court refers to “an intervention” (by the entity providing the link) “without which those users” (those who access via the link) “would not be able to access the works transmitted”. This seems to be the key sentence, which we will have to spend (many enjoyable hours) haggling over.
Government Report issues
4 NOVEMBER 2013 BY LINDA SCALES
Modernising Copyright, the Report of the Copyright Review Committee appointed by Government to examine possible reforms to copyright law, was published on October 29th. A number of its recommendations are unique provisions by European standards and are likely to generate a good deal of heat in what the Report calls “the copyright community”. This post is a neutral summary of the main recommendations.
The brief of the Committee centred on two questions: whether copyright law needs specific reforms in order to remove barriers to innovation; and whether as US-style “fair use” exemption to copyright might be appropriate in an Irish context. These are contentious questions. Copyright is frequently combative, but never more so than in current conditions, with, on the one hand, right holders losing heavily from online piracy and on the other, internet and digital enterprises lobbying hard for a shake-up of the copyright framework to permit more generous legitimate access to protected material.
The main thrust of the recommendations centre on improvements to the copyright infrastructure, coupled with a range of new exceptions to copyright designed to facilitate greater access to protected works. These include a unique version of “fair use”.
THE COPYRIGHT INFRASTRUCTURE
• The Report proposes the establishment of a Copyright Council. This will be independent of Government, operated and funded by the “copyright community”. It will be a standard type of non-profit company, with a broadly-based subscribing membership and a board of 13 directors intended to represent the broad sweep of copyright interests. Its objectives will include leading the debate on copyright; making proposals to Government; developing codes of best practice for the sector; undertaking research projects on the social and economic impact of copyright; promoting creativity, sharing, open access and innovation.
• The Copyright Council is to be given the task of exploring the feasibility of a Digital Copyright Exchange. This would be a type of online licensing platform, facilitating easier access to legal licences for the use copyright works. This echoes a development in the UK, where the Copyright Hub has recently been established for the same purpose.( http://www.copyrighthub.co.uk)
• A mediation service for copyright disputes should be offered by the Copyright Council. In addition, the existing Small Claims Procedure in the District Court should be made available for all intellectual property disputes valued at up to €15,000. A specialist Intellectual Property Court should also be established at Circuit Court level, to take claims valued at up to €75,000. If adopted, these changes would make a very significant difference to the copyright system, offering new forms of dispute resolution, especially for claims of low value.
COPYRIGHT EXCEPTIONS
General expansion of existing exceptions:
• It is recommended that the existing exceptions to copyright should be expanded to take advantage of all exceptions permitted under EU law. This is an approach currently being pursued in the UK. It will means new or expanded exceptions within certain limits for:
• private copying, including format-shifting for private use, to enable use of legitimate copies on different devices;
• caricature, parody, pastiche or satire;
• educational purposes;
• uses by persons with a disability;
• copying by heritage institutions for preservation and archiving of protected material, for publications in catalogues and certain other minor uses.
• The existing “fair dealing” exception (non-prejudicial use for research and private study, reporting current events and criticism or review) are to be no longer definitive of the exemption but as examples of fair dealing, with the court having the discretion to elaborate new uses falling within the concept.
New exceptions
Entirely new exceptions, novel by European standards, include the following:
• Linking is declared to be a non-infringing act, except where the provider of the link ought to have been aware that the link is provides access to infringing material;
• In ease of news and other aggregators, a “very small snippet” of a protected work may be reproduced alongside a link, subject to a limit of 40 words;
• “User-generated content” is legitimised in a non-commercial context, provided it does not have an adverse effect on the exploitation of the original work;
• Educational establishments may reproduce or publish for their educational purposes any work found on the internet, unless the work is protected by a technological protection measure (such as encryption), or there is a clear prohibition of use posted on the internet site, or the institution should otherwise have known that the work was available on the internet without the consent of the copyright owner;
• Content-mining is to be permitted, in the context of education, research and private study.
New exception for “Innovation”
• Perhaps the most interesting of the new exceptions in one for “innovation”. It will be permissible for “an owner or lawful user” of a work to derive from it an “innovative work”. This is one which is substantially different from, or transformative of the initial work. It must not conflict with the normal exploitation of the original work and must not prejudice the legitimate interests of the original right holder. The creator of the innovative work must notify it to the original right holder within a “reasonable time” of making it available, and if the original right holder can demonstrate that that s/he had already embarked on a similar process of exploitation, the exception will not apply.
Fair Use
In what will be seen as a radical proposal:
• “Fair use” is given an overarching role governing all of the exceptions, with all permitted uses to be regarded in future as examples of fair use.
• There is no definition of “fair use”, but it is clear that a court will be able to construe new exceptions to copyright, having first examined whether one of the existing exemplars applies.
• In conducting this exercise, the court must take into account such matters “as it considers relevant”, including factors such as the purpose of the use, the amount of the work used and the impact on the normal exploitation of the work.
• This new exception, coupled with the proposed alteration to the “fair dealing” exception, would give the court a broad discretion to formulate new exceptions to copyright, unique in Europe and very similar to that which pertains in the US.
A formal launch of the Report will take place in early December, when it may be made clear whether Minister Bruton proposes to adopt the recommendations in their entirety, or whether there will be a further process of review by Government before the amending legislation (appended to the Report) is commenced.
Note: This document is a brief overview of the contents of the Report. It should not be relied upon as a substitute for legal advice.
Watch this space!
2 NOVEMBER 2013 BY LINDA SCALES
The long-awaited Report of the Copyright Review Committee on copyright reform issued on Tuesday of this week. Titled Modernising Copyright, it contains many brave recommendations for the reform of copyright law, including some intriguing new exceptions to protection. These include an exception for “innovation” and another for user-generated content. A blog post follows soon….
Meltwater goes to Europe
28 APRIL 2013 BY LINDA SCALES
The Supreme Court in the UK gave its decision in the latest round of the links-and-snippets news cases on April 17th. The case is about the Meltwater news service. Meltwater trawls the internet for articles containing search words its end-user clients have given it. The end-users receive results by email or by viewing them on Meltwater’s website. The results include links to articles cited in the results and a 256 character extract from each article.
Meltwater has a licence and pays for its activities. The question in the appeal was whether or not the end-user also needs a licence when he or she uses the service simply by viewing the material on Meltwater’s website.
The law frequently appears an ass and this may be another example. Browsing and caching may cause your computer to make and temporarily retain copies of material, but you simply cannot use the internet without looking at webpages and creating the cached copies that support browsing. In fact the law does allow for this, in an exception for temporary copies designed specifically to facilitate internet use which is mandatory for all EU Member States. The question in this case is whether that exception applies to the activities of the Meltwater users.
There are no fewer than five conditions to the temporary copy exception, and here perhaps the law begins to grow donkey’s ears again, especially when it is exposed to the argument that a copy is not temporary if the user turns off his or her computer for the evening and goes home, leaving the temporary copy to reside on the computer overnight before being overlaid by new material the following morning. Or when a screen copy is left open for a protracted period.
The decision is happily notable for a succinct and clear summary of the case law of the CJEU on the five conditions of the temporary copy exception, developed -since Meltwater commenced- in Premier League and Infopaq II. Lord Sumpton said:
The purpose of these formulations is plain. It is to distinguish between the use of a computer or other equipment simply to view the relevant material, and its use to record it. The object ….is to ensure that the exception does not apply to protect downloading or other forms of digital or physical copying which will remain in existence until the user chooses to delete or destroy them and are therefore as permanent as he chooses to make them.
So, in the absence of some other intervening act of reproduction by the end user, it is clear that the viewing of protected material on screen and the making of the inevitable cached copy in the computer to facilitate browsing are exempt. If however the user downloads or makes physical copies, the temporary copy exception is exceeded.
While not in any doubt about its decision, the Court decided to make a reference to the CJEU before making an Order, for the reason that the case has a transnational dimension and important implications for many millions of users across the EU, and so that “the critical point may be resolved in a manner which will apply uniformly across the European Union”.
This case is now a companion-piece to the Swedish reference in the Svensson case, already awaiting hearing by the CJEU. Both cases involve news and media monitoring services. In Svenssen the issue is the act of providing a hyperlink. In this case it is browsing and caching. It may seem strange that these, the most fundamental tools on which internet use depends are still being litigated. There’s that donkey again….
Public Relations Consultants Association Limited (Appellent) v The Newspaper Licensing Agency Limited and Others (Respondents),[2013] UKSC 18.
Live streaming – a line of longitude?
12 APRIL 2013 BY LINDA SCALES
A number of years ago my husband and I were walking on a beach somewhere in South East Asia. High up in the air I saw what looked like a long cord stretching from somewhere inland right out into the ocean. I couldn’t see where it began or ended. “What on earth….? ” I said. My husband replied patronisingly “It’s just a line of longitude”.
The UK case of ITV Broadcasting & Others v TV Catchup in which the CJUE gave a decision on March 7th involves an issue which reminds me of this. The question is how, for copyright purposes, to categorise live streaming of a broadcast signal. Is it re-broadcasting? Is it cable retransmission? Or is it something else entirely? And if the latter, by what rules is it governed? The CJEU decision brings some clarity to the issue in confirming that, irrespective of whether live streaming of a broadcast can be shoe-horned into a definition of either re-broadcasting or cable retransmission, it is unequivocally a “communication to the public” for which authorisation is needed from the right holders of works included in the live stream.
The facts were that TVC captures normal terrestrial and satellite digital broadcast signals of UK free-to-air programme material via a domestic TV aerial and a single satellite dish. It passes the signals along a chain of servers which prepare streams of video for sending over the internet. The servers can connect to a user’s computer via the internet. They can also connect to mobile devices. There is a mixture of wired and wireless activity involved. Software creates a separate stream for each user who requests a channel, and sends an individual packet on the occasion of each request.
TVC does not store copies of the broadcasts, although for technical reasons it holds a very small amount of data in the memory of the servers. It previously, but no longer, provides catchup television, being now exclusively a live streaming service.
When sued by ITV and other public broadcasters, TVC claimed that it was not reproducing protected material, nor was its activity a communication to the public for copyright purposes. It was merely providing the technical means to assist people to receive what they could already receive on their television sets, and for which they paid a television licence fee. It also claimed the benefit of a “reception area” defence. This is a copyright exemption for cable retransmission of the “must carry” channels in the region intended to be reached by the broadcast transmission. It is contained in S 73 of the UK Copyright Designs and Patents Act. There is a similar exemption in the Irish Copyright and Related Rights Act.
The UK court felt comfortable about dealing with the “reception area” defence. Floyd, J said “I see no reason why the cabling system in the internet should not be regarded as “cable” for the purposes of the Section 73 defence. So I reject the bald “internet is not cable” argument. However to take advantage of the section it seems to me that the whole of the transmission must be by cable….it is clear to me that the signal must reach its destination by cable for the defence to bite. Accordingly I would hold that TVC cannot take advantage of the defence where their retransmissions are for reception by mobile phone.” In addition, to the extent that TVC retransmitted services “out of area”, the defence would not apply.
The UK court was uncertain about whether the live stream constituted copyright infringement by being a “communication to the public”. It referred the question to the CJEU. The European Court has now held that where a retransmission by means of an internet stream is made by an organisation other than the original broadcaster, even to recipients within the area of reception of the broadcast who may receive the broadcast on a television receiver, there is a communication to the public involved.
The decision is very welcome, but the case certainly raises a question concerning the validity of the “reception area” defence in UK and Irish law. Originally intended to permit cable operators to retransmit in shadow areas of the national broadcasters’ transmission, it was not drafted with the internet in mind. It is clear from the decision of the UK court that the exception does not extend to streaming to mobile or “out of region” of the broadcast. However, even within region of the free-to-air- broadcast, in the light of the CJEU decision it is questionable whether it provides too much latitude….
ITV Broadcasting Ltd, ITV2 Ltd., ITV Digital Channels, Channel 4 Television Corporation, 4Ventures Ltd, Channel 5 Broadcasting Ltd and ITV Studios Ltd v TVCatchup Ltd. Case C-607/11
Links and snippets – it’s news again!
10 MARCH 2013 BY LINDA SCALES
In my last post, I referred to the questions posed to the CJEU in the Swedish Svensson case. They directly address the key question whether the provision of a clickable link on a website is an act which falls within the meaning of “communication to the public” for copyright purposes, and therefore requires the permission of the right holder in the work accessed by the link. The case is another of those involving news aggregation (as to which more below).
On February 15, a group of European academics published a paper relating to the case. The paper is unusual, to the extent that it is not presented as an opinion on the issues, but specifically on the reference to the Court. The group is the European Copyright Society, which describes its nineteen members as “renowned scholars and academics from various countries of Europe, seeking to promote their views of the overall public interest”. The ECS “wishes to take the opportunity to put on record its views of the issues before the Court in Case C-446/12 Svenssen.” The group does indeed constitute an impressive roll-call of many of the most prominent academic commentators on copyright and information law. It is presumably the intention of the group to offer assistance to the Court.
In its conclusion, the ECS paper says this:
“In this case, the Court needs …. to consider the effect of its ruling. If hyperlinking as regarded as communication to the public, all hyperlinks would need to be expressly licensed. In our view, that proposition is absurd”.
However it also points out that, while “hyperlinking in general should be regarded as an activity that is not covered by the right to communication to the public…..this does not mean that creating hyperlinks in no circumstances involves liability. In fact, as is clear from national case law, different forms of hyperlinking may indeed give rise to the following forms of liability:
(a) Accessory liability (particularly in respect of knowingly facilitating the making of illegal copies);
(b) Unfair competition;
(c) Infringement of moral rights;
(d) Circumvention of technological measures.”
In relation to these possibilities, the interesting comment is added: “Only the last of these has been the subject of harmonisation at European level and thus falls within the competence of the Court of Justice”. In other words, while national legislation may have provisions which can be used to render linking an infringing activity (such as the prohibition in Irish law on authorising infringement), it is only in relation to those of the possibilities that have been harmonised in EU law (the single one being where there is circumvention of a technological measure such as a pay-wall) that the ECJ has competence.
It may be a year before the Svensson case comes before the Court.
Meanwhile, at national level, different compromises are emerging to the question whether links to and publication of snippets from newspaper sites ought to command a licence fee.
In France, publishing associations have been pushing the issue for some time. Against the background of a proposal by the Government to legislate for a “snippeting right”, Google countered with a threat to stop indexing French news sites. In early February, with the aid of a Government-appointed mediator, a settlement was reached in which Google will create a €60 million Digital Publishing Innovation Fund designed to help French publishers to increase their online revenues. This is not the first such settlement. A similar, but smaller arrangement was made a number of months ago with Belgian newspapers.
Opinion seems to be divided on whether the newspaper industry or Google was the victor in the latest engagement in Germany. Not a settlement in this case, but a piece of legislation passed by the Bundestag in the teeth of some pretty heavy lobbying. On March 1, the Financial Times reported: Google wins German copyright battle, while the New York Times went for German Copyright Law Targets Google Links.The law in question grants publishers the right to charge fees to search engines and other online aggregators for reproducing their content, but, in a last-minute change to the text, the Parliament wobbled and added an exclusion for “single words or very small text excerpts”. What is a “very small excerpt”? Well, who knows? A bonus for lawyers perhaps.
The German legislation has yet to pass the upper house of Parliament and there is no guarantee that this will occur. Google has said that the law “was not necessary because publishers and Internet companies can innovate together, just as Google has done in many other countries”.
Does linking infringe copyright?
13 JANUARY 2013 BY LINDA SCALES
A lot of heat has been generated by this issue in the last couple of weeks, arising from a demand by Newspaper Licensing Ireland (NLI) that the charity Womens’ Aid pay for links to newspaper content displayed on its website, and the outrage of their solicitor Simon McGarr who blogged about it on December 30th under the headline “2012: the year Irish newspapers tried to destroy the web”.
The NLI published a clarification of their position on January 4th. They say first of all that they only seek licences on behalf of their members (Irish national newspapers) for links provided in a commercial context. They do however maintain that linking does infringe, a position they argued in their submission to the Copyright Review Committee (due to report sometime soon, hopefully).
Are they right? Well, yes and no. There is a whole panoply of case law in a variety of different jurisdictions going in both directions. It is clear that linking can infringe, but that it does not by definition infringe. As linking is integral to the working of the internet, clearly it’s a major question. The case law proves that it does not have a single, or a simple answer.
My point here is simply to say that we should not get too exercised about it right now. There are higher authorities at work, namely:
The UK Supreme Court:
In the background to the NLI statement will be the UK Meltwater case, in which both the High Court and the Court of Appeal decided that links to newspaper content both by Meltwater (a commercial newspaper snippet service) and its end-users do require licences by the NLI’s sister society in the UK, the NLA. The Copyright Tribunal fixed the tariffs for these licences last February. Presumably the NLI tariffs bear some relationship to these. However the question is under further appeal to the UK Supreme Court. The hearing is imminent, scheduled for February 11th. Here’s the case summary from the Supreme Court website:
Issue
Are the copies created when accessing a web page exempt from copyright protection by reason of the temporary copies exception provided by s.28A of the CDPA?
Facts
The First Respondent is a company that manages the intellectual property rights of its newspaper publisher members. It creates schemes authorising the use of its members’ online publications. The Appellant is a professional association which represents the interests of its members who are UK public relations providers using the Meltwater News service.
The Meltwater service is akin to Google News. It trawls newspaper websites for articles containing search words which its end-users have given it. The end-users then receive search results, via email or by viewing them on the Meltwater website. These results include an electronic link to the article at the publisher’s website and a 256 character extract from the article.
The First Respondent sought a declaration that the members of the Appellant body (end-users) require a licence or consent in order lawfully to receive and/or use Meltwater News.
The Court of Justice of the EU (ECJ)
An even higher authority, obviously.
In a Swedish reference to the ECJ made in November (Case 466/12), the following questions have been addressed to the Court:
1.If anyone other than the holder of copyright in a certain work supplies a clickable link to the work on his website, does that constitute communication to the public within the meaning of Article 3(1) of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society?
2. Is the assessment under question 1 affected if the work to which the link refers is on a website on the Internet which can be accessed by anyone without restrictions or if access is restricted in some way?
3. When making the assessment under question 1, should any distinction be drawn between a case where the work, after the user has clicked on the link, is shown on another website and one where the work, after the user has clicked on the link, is shown in such a way as to give the impression that it is appearing on the same website?
4. Is it possible for a Member State to give wider protection to authors’ exclusive right by enabling ‘communication to the public’ to cover a greater range of acts than provided for in Article 3(1) of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society?
This hearing is further out. The deadline for observations is January 31.
Both cases will address the underlying legal questions.
So, let’s wait and see, huh?
Copyright – blowing in the wind?
12 JANUARY 2014 BY LINDA SCALES
Copyright stakeholders will be waking up in January to some developments in late December that may appear to mark the beginning of a new phase in copyright.
In the last year or so there has been a real heightening of tension in the battle over copyright, with right holders seeking stronger enforcement measures to protect their revenues from leaking away over the internet, and users of protected material lobbying extensively for broader exceptions to copyright to fuel the growth of digital and internet business models. There have been heated exchanges in the US about SOPA, in the European Parliament about ACTA, and in Ireland about the enforcement S.I. (dubbed “Ireland’s SOPA”). There has also been an intense process of Government consultation in the UK and on a more modest scale in Ireland about whether copyright reform is needed in order to boost innovation, “reform” in this context largely focusing on the expansion of exceptions to copyright.
On the enforcement side of the equation, it appears that the European Commission has given up on its quest to have ACTA ratified in Europe. The multi-national Anti-Counterfeiting Trade Agreement – which contains enhanced IP enforcement measures – was overwhelmingly voted down by the European Parliament on July 4. The Parliament refused to ratify it on the grounds that it could potentially diminish online privacy rights and freedom of expression of European citizens. The European Commission had been one of the main players in negotiating the Agreement. Recognising the level of disquiet, in May the Commission had made a formal request to the Court of Justice for a ruling on whether the Agreement was compatible with the EU Treaties. After the vote in the Parliament, Trade Commissioner de Gucht confirmed that “The European Commission will continue to seek the legal opinion of the European Court of Justice…”. It was expected that – depending on the outcome – the matter might be put before the Parliament a second time. However on December 19, the Commission withdrew its request for a ruling. The Commission website dealing with ACTA – under the auspices of DG Trade – has not yet reported this, but the speculation is that the Commission feared a negative assessment by the Court. Whatever the reason, ACTA now seems to be dead in the water, at least in Europe.
On the other side of the equation – the question of copyright exceptions – the latest development in the UK copyright reform process was announced on December 20. New exceptions were certainly on the cards. The surprise is that the proposed changes look more modest than many expected. They are as follows:
Private copying: there will be a limited private copying exception which will allow consumers who have bought or own a copy of a work to copy it for personal use. This is intended to facilitate format shifting between devices and cloud storage. The exception will not apply to rented borrowed or streamed content.
Quotations: there will be an expanded exception for the fair use of quotations when accompanied by an acknowledgement. This exception already exists in Irish law.
Parody caricature and pastiche: there will be a new “fair dealing” exception for these acts of exploitation.
Research and private study: the existing “fair dealing” exception for non-commercial research and private study will be extended to all types of work. This is already the case in Ireland but with the important distinction that the Irish exception is broader in another respect too, in that it is not confined to non-commercial research.
Data and text mining: there will be a new, carefully drawn exception to permit these aids to research in a non-commercial context. It will allow a person who already has the right to access a work – whether under licence or otherwise – to copy it as part of a technological process of analysis and synthesis of the content.
Education: the educational exceptions will be extended. There will be a new non-commercial “fair dealing” exception for “teaching” which will permit the use of works by way of illustration to the extent necessary in order to teach about a subject. This will not permit general classroom copying, for which a licence will still be required. It will be made clear that the educational exceptions will apply to facilities for distance learning.
Disability: the Government will develop existing proposals to broaden and simplify disability exceptions, to apply to all disabilities and all types of copyright work.
Archiving and preservation: it will be made clear that cultural institutions may copy all types of work in their collections for archiving and preservation purposes.
Public administration: existing exceptions for use of works for public administration will be broadened to include making available on the internet.
The proposals are clearly crafted to stay within the limits prescribed by the Copyright Directive. There is nothing ground-breaking in them, although it is probably true to say that just a year ago the idea of moving the exceptions at all might have appeared radical. Against the background of more sweeping developments in Canada last summer, the changes seem conservative. Right holders will probably feel they have lost less than expected, and users that they have not gained as much as they would have liked.
The proposals will represent an interesting reference point for the Irish Copyright Review Committee. With the Canadian legislation leading a charge and the UK review process open, anything has looked possible over the last year. However the UK is now committed to a position that does not appear to stretch the boundaries of its European commitments. This may constrain the imagination of the Irish Review Committee!
Blowing in the wind? Well there was certainly a sense in 2012 that no one was steering the ship and that it might easily end up on the rocks in the virtual world. In bringing wide-ranging consultations to a swift and decisive conclusion, the UK is contributing to the idea that a stable outcome is possible. In Europe, the Digital Agenda is driving progress. The Orphan Works Directive has been adopted. The Proposal for a Directive on collecting societies is on the table during the Irish Presidency. Also on the Commission agenda are a review of the enforcement directive and examination of “notice and action procedures” for ISPs. Position papers have been pouring out of the Commission in the last two years. But real progress is very slow, with deadlines for action routinely missed, and the whole process weighed-down by intense lobbying. Witness the ACTA debacle.
4 NOVEMBER 2012 BY LINDA SCALES
ORPHAN WORKS – Europe legislates while the US litigates.
In an interesting counterpoint, the last month has seen the Orphan Works Directive reach the European statute book, while, in the US, the publishers jumped ship on the marathon Google books lawsuit. As the Directive was originally conceived as a response to the Google book threat, the timing was apt. The European solution is however a conservative one, narrowly focused on the use of orphan material by cultural archives. In the US, a broader outcome is possible via the courts. The Google books litigation was effectively acting as a legal bulwark against free use of orphan works by Google. The litigation is not at an end but the author co-plaintiffs, who appear to have been taken by surprise by the settlement, will have to reassess their position.
If this were not news enough, the decision by US District Court Judge Harold Baer in the Hathi Trust case came on October 12th. This was an infringement action by the Authors Guild and other author groups arising out of a mass book digitsation project conducted by five major universities in conjunction with Google. The court found that the activities of the Trust in collaborating with Google to produce digital copies of books and to make them available for full text searching, for preservation and for access by print-disabled persons fell within the contours of the fair use defence. While the uses in this instance are limited and carried out by a by a non-profit entity, it will provide yet more traction for the Google book project. There was an orphan works dimension which added impetus to the litigation. Part of the Hathi project was an orphan works database. Within two days of the release of the database in 2011, the Authors Guild had found that a substantial number of the works classified as “orphan” were no such thing, but books whose right holders could easily be located. The Trust was forced to suspend access to the database. To the dissatisfaction of the Authors Guild, Judge Baer declined to address claims relating to the database, in view of the suspension of access.
So, while the contrast between the US and European systems is again evident, with the US courts having the capacity to shape the contours of copyright law by interpreting the fair use defence, there may be a legislative solution to the orphan works dilemma in that jurisdiction too. Judge Chin, in rejecting the earlier Google book settlement in 2011, had certainly made it clear that, in his view, the orphan works question was a matter for the legislature. The US Copyright Office (whose role includes advising Congress on legislative measures) is currently conducting a consultation on what legislative, regulatory or voluntary solutions to the orphan works problem deserve deliberation at this time.
Here in Ireland we will now have two years to implement the Directive. In outline:
• The Directive affects orphan literary material, film and phonograms in the collections of a range of publicly-accessible cultural institutions, film and audio heritage institutions and public service broadcasting organisations. It also apples to works (such as visual works) embedded in these works.
• A work will be regarded as orphan if the right holder(s) cannot be identified or located.
• Subject to the conduct of a diligent search in specified sources to establish that a work is truly orphan, the beneficiary institutions may digitise for curatorial purposes and to make works available online, provided they do so to achieve aims related to their public interest mission (in particular preservation, restoration and the provision of cultural and educational access to their collections). The institutions may generate revenue from such uses but only to cover the costs of digitisation and making available online.
• Once a work is determined to be orphan in one Member State, it may be treated as orphan throughout the EU.
• Records must be kept of the searches conducted and the uses made of the works. Member States must ensure that this information is made available to the “competent national authority” and logged in a new database of orphan works to be established at the EU Office for Harmonisation of the Internal Market (OHIM).
• An author may come forward at any stage and put an end to the orphan status of the work. In that event “fair compensation” must be paid for uses made of the work.
The Directive explicitly creates a new exception to copyright, adding to existing exceptions in the Information Society (or “Copyright”) Directive. It leaves a number of issues to be fleshed-out in national legislation, and decisions to be made (such as the identity of the “competent national authority”).
While the solution is a narrow one, in that it does not address commercial uses of orphan material and it applies to a limited range of institutions, it has to be seen alongside a couple of other developments designed to improve access to otherwise unusable works. The ARROW project, an EU-funded consortium of stakeholders, is a vast database project designed to facilitate identification of literary right holders. In addition, a Memorandum of Understanding concluded in September 2011 between representatives of libraries, authors, publishers and collecting societies, witnessed by the European Commission, is designed to promote voluntary agreements enabling the use of “out of commerce” literary works.
The UK has been conducting its own examination of solutions to the orphan works problem, in pursuit of aims identified in the 2011 Hargreaves Report. A much broader solution is under consideration there, involving licensing of orphan material through the proposed Copyright Hub – the controversial Digital Copyright Exchange. Would Ireland follow suit? The Consultation Paper issued by the Copyright Review Committee earlier this year proposes an Irish Digital Copyright Exchange, to be established by a cross-stakeholder Copyright Council. That particular proposal seems unrealistic, but it would certainly not be impossible to devise a system of licensing of orphan material that might work in an Irish context.
Football Fixtures Given the Boot in Europe?
5 MARCH 2012 BY LINDA SCALES
“I must also observe that, in the present case, the very idea of using copyright to protect football fixture lists seems peculiar, to say the least” -Advocate General Mengozzi
On March 1st, the Court of Justice gave judgment in the case of Football Dataco v Yahoo. This was a reference from the UK Court of Appeal. It concerned the question whether English and Scottish football league fixtures lists are databases protected by copyright. For some of us, the precise method by which football fixtures are compiled represents too much information, and the amount of litigation spawned by them suggests a strangely English obsession. But they have done European copyright law a favour, in time and time again coming back for a kicking in the courts. Without them, the Database Directive would be near impossible to interpret.
This time however, for UK and Irish law, the implications extend beyond protection of the database. The European Court was asked to comment on the common law test for originality – whether “labour and skill or judgment” in creating a work is enough to justify copyright protection, or whether the European standard of “the author’s own intellectual creation” requires something more, and if so, what. Because the European Court has, in a flurry of recent cases, determined that the latter standard applies to all copyright works, the need to rewrite a lot of textbooks has been hanging in the balance.
Back in 2004 the European Court had decided that footfall fixtures lists failed to qualify for the “database right” – a form of protection with no originality requirement. But, in evaluating the method by which the lists are complied, the UK High Court decided on this occasion that while they did not enjoy the “database right”, they enjoyed the alternative form of protection for databases, as original copyright works. The reason lay in the fact that the process leading to the creation of the fixtures lists involves considerable labour and judgment in satisfying a number of competing imperatives. The process is not one in which everyone would come up with the same solution. There are several phases to the settling of the lists, the last of which involves the exercise of a number of choices made personally by a Mr Thompson.
The Court of Appeal was not so sure, and referred the matter to Europe.
The European Court has emphasised that copyright protection for the database concerns the structure of the database and not its contents. The selection or arrangement of the contents must amount to an original expression of creative or formative freedom on the part of the author. Intellectual skill and effort in creating the data is irrelevant for this purpose. It is for the national court to assess whether the football lists in question are databases which satisfy the conditions for eligibility. In conducting this assessment the court will need to be satisfied that the procedures for creating the lists is supplemented by elements reflecting originality in the selection or arrangement of the data contained in the lists.
It does indeed look as though the football fixtures have been given the boot again. And further, that the “labour skill and judgment” test is toast. The phrase will have to be banished from the copyright lexicon in this part of the world and replaced by “the author’s own intellectual creation”, and yes, it seems that editing the textbooks will be necessary.
But I’d wait a little longer if I were a publisher. We have yet to see what the UK court makes of the judgment. A small window of opportunity remains open. It is not entirely impossible that the court will construe Mr Thompson’s contribution as one which does demonstrate the required level of expression of creative or formative freedom in selecting the data for the final lists from the available range of options and that, in consequence, the “author’s own intellectual creation”, when it crosses the Channel, may look not at all unlike “labour and skill or judgment” !
Good Tidings!
14 MAY 2014 BY LINDA SCALES
Midnight on December 31st will bring two reasons for some to raise a glass to copyright.
In the first place copyright expires in Ireland in James Joyce’s published works, freeing them of the shackles of Stephen Joyce’s oppressive literary stewardship. There are lots of Stephen Joyce stories, but a good example is the case he took against Cork University Press in 2000. CUP had sought Joyce’s permission to publish extracts from Ulysses in an important anthology of the works of more than 300 Irish authors – Irish Writing in the Twentieth Century, A Reader. Joyce wanted a licence fee of €7000. This amounted to half the budget for licence fees for the entire publication. So CUP sought out instead an extract from Joycean scholar Danis Rose’s unauthorised version of Ulysses, believing that it benefitted from a window of opportunity for works created before the term of copyright was extended by EU Directive. Joyce sought and obtained a High Court injunction against CUP, restraining publication of the anthology. The book was already printed and in the warehouse. CUP had to take a blade and cut out the extracts from Ulysses before sending it out for distribution. Yeats and Beckett, Heaney and Kavanagh were there but Joyce appeared only in the index of this important reference work.
However, the coast is not entirely clear. While Joyce’s published works go out of copyright, it appears that works unpublished at his death do not. This is because a section of the Copyright and Related Rights Act 2001 seems to preserve the effect of a provision in the Copyright Act of 1963 which stated that the copyright term for literary works unpublished at the authors death was 50 years from the date of publication. So, for as long as the work remained unpublished, the copyright term was potentially perpetual. The 1963 Act was modelled on the UK Copyright Act of 1956, which had a similar provision. The problem was addressed in the UK in 1988, by giving affected works a finite term of protection, expiring in 2039. It is accepted in the UK that Joyce’s unpublished works fall into this category. In Ireland there is still something of a struggle in relation to the issue but a growing recognition that the problem is a real one. In a piece in the Irish Times earlier this year, the problem was acknowledged by US academic and board member of the National Library of Ireland, Robert Spoo. So, for those who have enjoyed Sephen Joyce’s antics, the fun and games may not be over.
Visual artists and their families will also have reason to celebrate. From January 1st the Irish Government is obliged by EU Directive to extend the artists resale right to their heirs. The right is already enjoyed by living artists. It entitles visual artists to a proportion of the sale price of their works, subsequent to the first sale. It is regarded as putting artists on a similar footing to other creators, all of whom enjoy royalties during their lives and for 70 years after death. It is also seen as compensating to some degree for the fact that artists earn so little in the early part of their careers. The addition of heirs will add considerable value to the right. The highest prices by far for works of Irish art are achieved for the likes of Paul Henry, Jack Yeats and some others still in copyright, and whose values are holding up surprisingly well in the current recession.
INNOVATION, INFORMATION AND THE INTERNET
22 OCTOBER 2011 BY LINDA SCALES
Below is the text of a paper I gave at an event held in the Law Society yesterday, October 21st, designed to facilitate the work of the Copyright Review Committee. It was a lively event – hats off to TJ McIntyre for pulling together such an excellent line-up. Amsterdam academic Martin Senftleben showed how new space could be created for more flexible national laws, both inside and outside the Information Society Directive. He pointed to some nooks and crannies of the Directive I had never spotted, such as a “such as” or two that could make all the difference… Peter Jaszi of the American University of Washington talked about fair use. He believes that the addition of the transformative use filter, in diluting the importance of the “fourth factor” in fair use (economic harm to the right holder) has enabled the cultural to trump the economic in fair use decisions…. Cambridge Professor Lionel Bentley and Stephen Rowan of the UK Intellectual Property Office charted the crowded path of policy development in the UK. The messages included “Way too much talk and not enough action” and “I wouldn’t start from here”. I think we’d be delighted to have all that talk and not unhappy to be starting from there. But given that Lionel Bentley expressed some admiration for the Irish Act, there seemed to be a touch of faraway hills being greener on both sides…… Irish Solicitor for the music majors Helen Sheehy gave a passionate anti- piracy presentation….. and my brief was to give a practical practitioner perspective on working with the current legislation. Eoin O’Dell seemed to be listening closely to everything and giving nothing away. The Consultation Paper will probably not be available for several weeks yet.
INNOVATION, INFORMATION AND THE INTERNET: Modernising Copyright Law
A Practitioner Perspective
21st October 2011
Introduction
Innovation is a broad term. Certainly enterprises using digital technology to produce new products and services are seen as innovators. Many of these use the internet to disseminate those products and services. For many the internet is their business. And a number are making an important contribution to the Irish economy. They need fertile legal ground to develop their enterprises.
The need for a piece of primary legislation
The first point to be made is that Ireland needs a new piece of primary or substantive copyright legislation. The Copyright and Related Rights Act was a decade old on 1st January this year. Producing it was quite a challenge as it had to reflect 38 years of technological change as well as accommodating a number of international treaties and European Directives. It also, importantly, was finalised about a year before the finalisation of the EU Information Society Directive and had to try to anticipate the final version of that Directive.
Since the Act there have been two pieces of primary legislation amending it – in 2004 and 2007, to correct errors in the Act. There have also been at least 15 pieces of secondary legislation, by which I mean Orders or Regulations or Statutory Instruments made by the responsible Minister. Many of these relate to procedural or technical matters but a number relate to substantive matters, including for example Regulations made to implement parts of the Enforcement Directive and the Artist Resale Right Directive.
It is worth noting the tendency that developed in recent years to rely on secondary legislation to implement European Directives. This practice by-passes the primary legislative process. I believe it is a reason why the copyright constituency has felt increasingly side-lined by the absence of the kind of public debate that accompanies the legislative process. Another point about this practice is that there are rules about what you can and cannot do by secondary legislation. The Supreme Court has laid down guidelines in relation to what can be done when implementing European Directives.If the Minister in question wants to avoid primary legislation to implement a Directive, he or she must ensure that the secondary instrument is an exercise in minimal transposition of the Directive. If any discretion is exercised by the Minister, then it is a matter for the legislature. If you try to squeeze the feet of a Directive into this tight shoe, the result can be uncomfortable. For example, the Artist’s Resale Right was implemented in a form which was strongly influenced by the need to avoid exercising any discretion, including as to the threshold above which the royalty is payable. Artists have felt very short-changed by these Regulations.
However the principal reason for a primary piece of legislation is that it has been demonstrated that there are problems with the Act. And the number and nature of them make it impossible to cure these problems without primary legislation.
As mentioned, the Amendment Acts of 2004 and 2007 were needed to correct errors identified in the Act. A further error was exposed last year by litigation instigated by the music industry against the internet intermediary UPC, in which the court found that we fhad ailed to adequately provide for injunctions against intermediaries whose services are used to infringe copyright, as required by Article 8(3) of the Information Society Directive. And yet a further problem with transposition of the Information Society Directive has been exposed by a case taken by Phonographic Performance Ireland, which is the subject of a reference to the Court of Justice of the EU. The Opinion of the Advocate General given in June is that an exemption in the Act for the playing of music and broadcasts in hotels and certain other establishments over-reaches what is permitted by the Directive.
These problems have come to the surface in a public way. But beneath the surface practitioners are grappling with a wide range of interpretative challenges, possible errors and inconsistencies relating to issues that have not been litigated. I’ll give you a couple ofexamples:
Unpublished material
Prior to the introduction of the Act, copyright protection in material which was unpublished at the author’s death was potentially perpetual. This arose because the term of protection was calculated from the date of publication. If publication never took place, the copyright would not expire. The Act appeared clearly to abolish this problematic possibility.
What was not at all obvious was that buried in the transitional provisions was a section saying that the duration of copyright in works existing at the commencement of the Act continues to be determined in accordance with a set of Regulations implementing the EU Term Directive, even though those regulations were revoked. When you follow the trail into those Regulations you find you have go deeper into the Duration Directive and back further still to the 1963 Act, and when you have completed the exercise it seems impossible to avoid the conclusion that the status quo was unchanged, and that copyright in works unpublished at the authors death is still potentially perpetual. This is not a purely academic point. It concerns the ability to make new uses of unseen material in some cases by well-known authors and artists. In an article in the Irish Times earlier in the summer, a US copyright lawyer, who is also an expert on Joyce and a member of the board of the National Library of Ireland referred to the fact that this problem affects valuable unpublished Joycean material held by the National Library. Joyce’s published works go out of copyright on 1st January next and will be free for all to use. His unpublished works, in many ways all the more valuable because they are unpublished, probably do not.
If this interpretation is correct, then there is a substantial body of unpublished material which may never see the light of day. Was this the intended purpose of the legislature? I think not.
Fair dealing
A second example touches closely on the current debate. Before the CRRA we knew (or thought we knew) the meaning of “fair dealing”. It meant use for one of the three purposes: research & private study, reporting current events or criticism or review, and which was also “fair”. The legislative provisions in Ireland were identical to those in the UK, the Irish Act of 1963 having been based on the UK Act of 1956. The meaning of “fair” had historically been left to the courts to develop, indeed the legislative provisions had grown out of court decisions. Over time, case law elaborated this“fairness” aspect of the defence. As the provisions were the same, we relied heavily on UK decisions. In a well known case of 1972, Lord Denning explained the relevant considerations in deciding on the element of fairness. He said they included: the amount and proportion of the work that had been used; the purpose of the use and whether it competed with the original work; but importantly he did not seek to tie down the defence. He said that “other considerations may come to mind also” and that “after all is said and done, it must be a matter of impression”.
Since 1972, many other cases have developed the defence. As Lionel Bentley points out in his book Intellectual Property Law, the courts have construed the specified purposes liberally, so that the first hurdle is relatively easy to overcome. In relation to the second, the requirement of fairness, the UK courts have continued to develop the concept, being influenced in some cases by new factors, to take one example, the motive of the infringing party, a factor which is also considered relevant in the US for the purposes of fair use.
This was the framework around fair dealing that practitioners were familiar with. The element of flexibility around the meaning of “fairness” was not problematic as long as its meaning was well signalled by case law.
In drafting the CRRA, a decision was made to depart from the UK framework. Instead of continuing to rely on the development of fair dealing by the courts, the Act set out to define “fair dealing”, in this way:
“fair dealing” means the making use of a [published] [work] … for a purpose and to an extent which will not unreasonably prejudice the interests of the owner of the copyright”
This made an important change. It removed the connection with prior law and the case law developed in the UK. Our law now diverges from that in the UK. Our courts do not have the flexibility enjoyed in the UK to decide the factors relevant to the consideration of what is or is not fair. They are tied to the specific consideration of whether or not the use is for a purpose and to an extent that will not prejudice the interests of the copyright owner. While it looks as though it favours the right owner, this is not necessarily the case. The court would not appear to be free, for example, to be influenced by the motive of the user, something which is relevant under both UK and US law.
The biggest difficulty in this for a practitioner is what to make of the new provision. The words “for a purpose and to an extent that will not prejudice the interests of the copyright owner” have not been interpreted by an Irish court. The phrase calls to mind part of the international three step test, and to that extent it may be possible to look to interpretations of the test in other jurisdictions. We have seen however in case law in other European countries that the three step test is capable of being interpreted both very widely and very narrowly, and to that extent appears to be an unpredictable post to which to tether the fairly dealing exemption.
These are just two examples of difficulties with the CRRA. There are many others.
I have made the point about the need for primary legislation because a sense has pervaded the establishment of the Copyright Review Committee and the publication of its terms of reference that a broad review of the legislation should be avoided. In order to the cure the deficit exposed in the UPC case, the Department proposes a statutory instrument. It is emphasised in the consultation terms of reference that it is not intended to consider a broad piece of legislation similar to either the UK Digital Economy Act or the French HADOPI system.
Of course the Department of Jobs Enterprise and Innovation, as with all Government Departments, is suffering from a reduction in resources and may not relish the task of re-writing parts of the Act. In fact they may not be alone in this. Many right holders, embattled by the internet war, believe that they can only lose by a broad review of the legislation. And even users may believe that they benefit more from the present legal lacuna regarding enforcement in the online environment than they would under a new piece of legislation. So you could conjecture that there is a considerable number of stakeholders sitting tight together on top of what they perceive to be a Pandora’s box.
What kind of legislation?
But assuming that it is necessary to open the box, it is appropriate to ask what kind of legislation is appropriate.
The debate (in so far as there has been any real debate between stakeholders) has so far been characterised by a polarisation of right holder and user, with right holders pushing for better enforcement in the online environment and users seeking liberalisation of exemptions.
I’d like to make a couple of points about each.
Enforcement
The first thing is that in many respects the Irish legislation on enforcement is very favourable to right holders. While doubts hang over compliance with the Information Society Directive, we certainly have the full range of sanctions and remedies specified by Berne, the TRIPs agreement, the Enforcement Directive, and more.
Examples of what I mean by “more” are that in court proceedings, both civil and criminal there are presumptions in favour of the right holder including that copyright subsists in a work and that the Plaintiff is the copyright owner. Hearsay evidence is permitted in an infringement action and evidence may be given on affidavit. These things are by no means standard in copyright law and were controversial in 2000 in the extent to which they favoured the right holder.
However, there are problems:
The most immediate and obvious problem concerns enforcement in the online environment. It is a very difficult time to be trying to frame legislation to deal with this problem. Across Europe various attempts to force ISPs to block access to infringing services, to filter traffic for infringements, to participate in a “three strikes” or “graduated response” procedure have met with varying degrees of success or failure. The same can be said of actions against right holders. It is a war of attrition for right holders. Various European legislatures have grasped the nettle, most prominently in the UK with the DEA and in France with its HADOPI legislation. The approaches are quite different. So it is not clear what approach is the best or is most likely to succeed.
In Ireland however it is not possible to do nothing at this juncture.
The gap in relation to Article 8(3), having exposed by the UPC case, has to be closed. There is no option in this regard. It leaves the State potentially exposed to right holders for failure to adequately transpose the Directive. The Department has proposed a Statutory Instrument to barely implement Article 8(3) by reiterating its wording. I don’t disagree that this should be done because it can be done within the Supreme Court guidelines for secondary legislation and it can be done quickly. There is no merit in leaving our law obviously out of kilter with the Information Society Directive for any longer than is absolutely necessary.
The question does arise however whether this will be enough.
I say this because I believe that the Information Society Directive, in saying in Recital 59 that the “conditions and modalities” relating to the injunctions envisaged by Article 8(3) “should be left to national law” can be interpreted as meaning that conditions and modalities ought to be articulated in national legislation.
I also believe that it may be beyond the scope of an injunction to devise the sort of complex procedures that are necessary to compel an ISP to cooperate with right holders to implement solutions which, in the words of the Framework Directive, must “respect fundamental rights and freedoms…. which are appropriate proportionate and necessary and subject to adequate procedural safeguards .. including effective judicial protection and due process”.
And finally, reading Charleton’s judgment in the UPC case it is hard to conclude other than that he was calling for detailed legislation to provide the court with the capacity grant injunctions against internet intermediaries, and that he did not have in mind a simple re-iteration of Article 8(3) and a Statutory Instrument.
I note that in the most recent Newzbin decision in the UK, S 97A of the Copyright Designs and Patents Act was used as the legal basis for the decision to grant a blocking injunctionto oblige BT Telecom to block access to the Newsbin site. That section provides the court with the power to grant an injunction against a service provider, where that service provider has actual knowledge of another person using their service to infringe copyright. It is quite bare. Apart from the enabling statement, there is some elaboration of what is meant by actual knowledge, but no more. Although there is therefore some reference to conditions and modalities, it is minimal. This decision could be regarded as a positive reference point for right owners who want to believe that the proposed Statutory Instrument will be enough. However while it might, on this basis of this precedent be enough to ground an injunction to block access to a stubbornly infringing site such as Pirate Bay, I find it hard to believe that it could take right owners any further than that.
It is also the case that Article 8(3) deals only with remedies against the ISP. We should not overlook the fact that we also need a remedy by the right holder against the online infringer and the question arises as to whether the CRRA provides that. I believe that in bringing a case for online infringement there must at very least be the potential for evidentiary problems, relating for example to proof of the infringement, where a computer may be used by many different people living or working in the same premises. In France this has been dealt with by placing certain positive duties on the subscriber to an internet service. We need to examine the CRRA to establish the extent to which it needs to be supplemented, and how this might be done. Again it seems to be impossible to avoid a piece of legislation that is bound to be controversial.
There is another problem relating to enforcement which concerns not so much the legislation as the wider enforcement framework. Owing to the very high cost of litigating in the Irish courts very few right owners or users can afford to litigate. The Commercial Court provides speedy resolution of IP disputes, but litigating in the Commercial Court is extremely expensive. Many copyright disputes are of low monetary value and the appropriate court will be one of the lower courts. But even in the lower courts litigation is too expensive for many copyright litigants and disproportionate to the value of the claim. Moreover, litigating IP before the lower courts is problematic because there is a marked shortage of judicial expertise in IP matters.
In consequence enforcement is marked by its absence at a practical level. Many infringements are not pursued. The expenses associated with the risk of losing deter many potential litigants, even those with what appear to be strong cases. This situation gives unfair advantage to the litigant with the deepest pockets. It also means that the practitioner has a very impoverished precedent bank to call on for interpretation of the CRRA.
These things are needed:
• Specialised expertise in the court system for the hearing of IP claims.
• A small claims track for claims of low monetary value.
• A framework for alternative dispute resolution. A structure such as that provided by the IPO in the UK, would encourage alternative dispute resolution.
• Liberalisation of exceptions
The Hargreaves Review in the UK concluded that in some respects IP law is obstructing economic growth. It has fallen behind and needs to adapt to new forms of innovation, creativity and technology. The need is particularly marked in relation to copyright.
The UK Government has accepted the following recommendations of Hargreaves in relation to exemptions:
• A limited private copying exception
• Widen the exception for non-commercial research, including text and data mining
• Widen exception for library archiving
• An exception for parody
• All of these things can be done within the framework of existing EU law.
The Hargreaves document helps to shape the debate here on exceptions and I have no doubt will be reflected in the submissions to the Review. As to how his recommendations might be received in Ireland:
1. Limited private copying exemption
In most European countries private copying is permitted, and remunerated by way of levies on the equipment used to generate or carry the copies. Hargeaves is not advocating the introduction of a levy, but a type of format shifting exemption to allow individuals to make copies for their own and immediate family’s use on different media. Depending on how it was framed, this type of exemption might not be controversial in Ireland, legitimising a situation that right holders already accept. They may have concerns such as the possibility that material moved to a cyberlocker might then be too easily be exchanged with other users, and such concerns would need to be addressed.
2. Widen exception for commercial research, including by data and text mining.
We already have a fair dealing exemption that does not preclude commercial use. Our exemption permits fair dealing for “research and private study”. This is not the case in the UK, where the fair dealing exemption was amended to confine the exemption to commercial research, as appears to be required by the Information Society Directive. This is another respect in which the Irish Act is out of kilter with the Directive. It will be interesting to see how this proposal develops in the UK and the extent to which it is possible to draft proposals which do not over reach the Information Society Directive. As to data and text mining, this looks like the sort of new technology-enabled use that might fit well into fair dealing, but while I understand how, as explained by Hargreaves, it can facilitate valuable medical and other research, its other potential uses – and possible abuses – would need to be understood.
3. Widen exception for library archiving.
Currently the CRRA provides a set of exemptions for libraries and archives. They are closely based on the exceptions in the UK Act of 1988 and are impossible to interpret confidently except in the context of analogue uses. It is clear that mass digitization of library holdings for purposes such as preservation and archiving are not exempt, something which is specifically authorised by the Information Society Directive. I very much doubt that any right holder would object to the use of modern technology to support the internal curatorial activities of cultural institutions and that such an exemption would be uncontroversial.
A related exemption permissible under the Information Society Directive is the display of works on a closed intranet on the premises of a library archive or museum. This would enhance the access to material in cultural institutions, especially as many of them are unable to show more than a portion of their holdings due to space restrictions. Again cannot imagine that right holders would object.
4. Exception for parody
The Information Society Directive permits exemptions for “caricature, parody or pastiche”. It has always been possible to use the fair dealing exemption for criticism or review to construct a defence akin to parody and in many ways it is surprising that such a defence has not been established within the fair dealing exception before now. It is something that I know a number of right holders who are also users actively support, but provided it occurs within the framework of fair dealing.
Fair use
This is mentioned specifically in the terms of reference of the Copyright Review. In the UK, the adoption of a US style fair use exemption has been discounted by Hargreaves. He points out that the UK cannot introduce such an exemption within the framework of EU law.
A couple of things puzzle me about the proposition that European countries should adopt a US style fair use defence.
The first is to understand exactly what it is that is sought. My understanding is that the main attraction of US fair use lies in the fact that US law is perceived to be more flexible than laws in Europe. This flexibility arises because the court is capable of finding fair use for purposes other than those enumerated in the Copyright Act 1976. Section 107 says
The fair use of a copyright work… for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use) scholarship or research is not an infringement of copyright”
It is the use of “such as” that gives the court its flexibility. Fair use is not tethered, as is fair dealing to a specific set of defined uses.
And the second attraction is that court has used the flexibility in the US legislation to exempt in particular uses that are transformative. This includes, for example, the use by a search engine of thumbnail size copies of protected images.
The belief appears to be that fair use enables the US court to examine new types of technology-enabled uses and find them exempt under the fair use provisions.
And if you look at it from a different angle and say that those who want fair use want the right to use protected material online in a different context to the original use, then you see the connection with “user generated content.”
But what is sought is not clear and it is not helpful to simply propose adoption of a fair use exemption. Fair use originated in the common law fair dealing exemption and migrated to the US. But it has developed in the US within the immediate legal framework of the US Copyright Act aand the wider framework of Article 1 of the US Constitution, which specifically refers to the balance beterrn the rights of authors and the public interest.
I think a framework is needed for this discussion and it seems to me that simply pointing to fair use as being desirable is not a sufficient or appropriate framework for that discussion. Specific proposals need to be put on the table.
But this debate will have to play out in Europe. And of course we should, as the UK Government has undertaken to do, play a proactive role in the debate.
At home we need to work on the legislation; we need to improve the infrastructure, we need to devote enhanced resources at Department level and at the Patent Office to offer improved services. There are studies to be done and reports to be produced. The question of resources is an important one. If the Government is serious about providing real support for innovative enterprises, then it will have to prioritise the resources needed. The job ahead cannot be done on the basis of stakeholder consultation alone, welcome though that is.
And finally, I was amused at former Appeals Court Judge Sir Robin Jacob’s reported response to the Hargreaves Report “It is not possible” he said “to do the whole of IP in six months”. This may be so but certainly let’s hope the Copyright Review will help us to make a decent start on it.
Proposal on orphan works published today
24 MAY 2011 BY LINDA SCALES
The European Commission has published its promised Proposal for a Directive on certain permitted uses of orphan works. I’m not sure that it was generally anticipated that it would create a new copyright exception, but it does. It proposes to permit digitisation and online dissemination of orphan material, after a diligent search, by publicly accessible libraries, educational establishments or museums, as well as archives, film heritage institutions and public service broadcasters, when fulfilling their public interest missions of preservation, restoration and provision of cultural and educational access to the works contained in their collections.
Member States may also permit the institutions to make uses of the material which go beyond the public interest mission, but if so, remuneration will be payable to the right holder if he or she comes forward to claim ownership at a later stage. Monies earned from “non-public interest mission” uses must be retained by the institutions, and if unclaimed after a certain period, should be used to enhance the development of rights management information sources.
The works to which the proposal applies are literary, cinematographic, and audiovisual works in the collections of the relevant institutions, when the author of the the work is unknown or cannot be located. In the case of broadcasting organisations the works must have been produced prior to 31st December 2002, and audio works are included. Visual works are omitted from the proposal, except to the extent that they are incorporated in an affected work.
The “diligent search” is to involve consulting identified sources of information, to be determined by each Member State. The search need only be conducted in the Member State of first publication or broadcast, and the work may then be regarded as orphan in all Member States. The institutions will be required to keep records of searches and to make the results publicly accessible.
The proposal addresses only part of the orphan works dilemma. It aims to release cultural material that the European Commission is so anxious to see made available, in particular through its flagship portal EUROPEANNA. However, it does not enable the use of orphan material by parties other than the designated institutions, and no plan for licensing (such as the Hargreaves proposal to use extended collective licensing for the purpose) is proposed. While projects such as ARROW, for which Digital Agenda Commissioner Neelie Kroes sees an ambitious future, will help to identify ownership of rights, there is still a legal gap to be bridged to provide a licensing system for orphan works.
The proposal is however just one part of a two-pronged approach on the part of the Commission to unlock access to unavailable material. The second part, as described in the EU IP Strategy, also published today, is the promotion of collective licensing schemes for works that are still in copyright, but “out of commerce”, i.e. not commercially available. It remains to be seen what further solutions will emerge via that route.
The cultural institutions who will benefit from this will be delighted, because it will solve an intractable problem for them. There is bound to be some concern however, including on the part of the institutions, that the solution proposed means that works which are without parent will have no one to look out for them once they are posted on the internet.
Hargreaves’ Top Ten
22 MAY 2011 BY LINDA SCALES
The Hargreaves Report, Digital Opportunity, was published last Tuesday. Ian Hargreaves, Professor of Digital Economy at Cardiff University, was asked by David Cameron to examine whether the current IP framework is adequate to support innovation and growth in the UK economy. He concludes that it is not, that it is in fact today an obstruction to growth. He makes 10 proposals to address the deficits and to open up a more facilitating space for IP-related enterprise.
It is a happy coincidence that this report arrives so soon after the appointment of the Irish Copyright Review Group. A great deal of work has gone into the Hargreaves process. The available material will be of immense benefit in helping to inform the Irish review, especially as the time limited for submissions is so short. However the report does not provide a set of ready-made solutions to the Irish questions. The Irish regime has diverged quite a bit from that of the UK in the last two decades. So although many of the issues are the same, our starting point is different. We will need to accurately identify the shortcomings in the Irish regime and arrive at solutions that will work in an Irish context.
Hargreaves’ 10 recommendations are summarised below. The most striking are the proposals to establish a Digital Copyright Exchange as an online licensing platform and to introduce extended collective licensing for orphan works. Some changes to exceptions are proposed, including the introduction of new exceptions for format-shifting, parody and library archiving. These were proposed by the Gowers Review in 2006, but not implemented. What is new however is the proposal to promote at EU level an exception to support text and data analytics, and to provide a mechanism to allow uses enabled by technology in ways that do not directly trade on the underlying purpose of the work. This addresses the concerns of the “fair use” advocates.
It is remarkable that although Hargreaves was asked to review the whole IP structure, it is copyright that is the major preoccupation of the report. It is also remarkable that he focuses on design law as having been overlooked in the contribution it can make as a support to innovation. There are lessons for us in both of these aspects of the report.
There is just one problem with Hargreaves from an Irish perspective, and that is that the UK Government may act upon it. For some years now the UK has been seeking to establish a reputation as the best place in Europe to locate digital business. Hargreaves’ Digital Copyright Exchange proposal will certainly make a splash in Europe, where the EU Commission is still grappling with how to frame a Proposal for a Directive on Collecting Societies so as to open a path for pan-European licensing. So, while Hargreaves is of considerable reference value to us in terms of our review, it does add to the pressure to appropriately upgrade the Irish regime, to demonstrate a similar commitment to provide a facilitating base here for digital enterprise.
The 10 Recommendations
1. Government should ensure that IP policy is evidence-based.
2. It should attach a high priority to promoting a unified EU patent system.
3. The UK should establish a cross-sectoral Digital Copyright Exchange and support the European Commission in establishing a framework for cross-border licensing.
4. Legislation should provide a system of extended collective licensing for orphan works.
5. New copyright exceptions should be created for format-shifting, parody, non-commercial research and library archiving. The Government should support new exceptions to permit text and data analytics, and to allow technology-enabled uses that do not trade on the underlying purpose of the work.
6. Government should investigate how “patent thickets” can be eased and work to ensure that patents are not extended into sectors such as non-technical computer programmes and business methods, without clear evidence of the benefits.
7. The Intellectual Property Office should conduct an evidence-based assessment of the relationship between design rights and innovation.
8. An integrated approach to enforcement of rights should be adopted, incorporating education and support for the growth of legitimate markets as well as implementation and monitoring of the effect of the Digital Economy Act. A small claims track should be introduced for claims of low monetary value.
9. The Intellectual Property Office should provide enhanced IP legal and commercial advice to small business.
10. The Intellectual Property Office should be mandated by law to focus on the central task of ensuring that the UK IP system promotes innovation and growth through efficient contestable markets.
Copyright Review – Hargreaves Lite?
15 MAY 2011 BY LINDA SCALES
The anticipated copyright review is now underway, a Review Committee having been established by Minister Richard Bruton.
The review process involves a short window of opportunity for the making of submissions by interested parties – expiring on June 30th. The Committee will examine the submissions and produce a Consultation Paper on which further submissions will be invited, to be received by 22nd September. The Committee will then, before end 2011, present a Report to Government with a set of recommendations for legislative change.
The review is very welcome. It has been apparent for some time that the 2000 Act is in need of reform. The decision late last year in the UPC case highlighted a particular set of problems, but there are others.
The terms of reference for the review centre on these two objectives:
“..to identify any areas of the legislation that might be deemed to create barriers to innovation and to make recommendations to resolve any problems identified”, and
“..to examine the US style ‘fair use’ doctrine to see if it would be appropriate in an Irish/EU context.
The wording here points to a balancing act. Leaving aside the issue of “fair use” for a moment, the focus of the review is the identification of areas of the existing legislation that pose a barrier to innovation. This suggests a concern to contain the scope of the exercise. If you compare the wording with the terms for the Hargreaves Review, you can see that Hargreaves is also focused on innovation, but extends way beyond the removal of barriers in existing legislation, to an examination of how the framework can be improved in order to promote entrepreneurialism and growth and give the UK a competitive advantage. Of course Hargreaves covers the whole IP spectrum and not just copyright, but the same delineation of scope applies.
However what constitues a “barrier to innovation” almost defies containment, and allows the Review Committee plenty of scope. All interested parties will have the considerable advantage of having the Hargreaves Report as a reference point. The European Commission will also have published its new IP strategy, currently scheduled for May 24th. This should provide some clear signals on the direction of EU copyright policy, and the limits that are implied for national legislation. So the timing of the review could really not have been more fortuitous.
On the “fair use” issue, the Government is delivering on a commitment given in its programme for government. Hargreaves is expected to reach some conclusions on whether such an exemption ought to be adopted in the UK. A number of copyright academics in both the UK and in Europe think that copyright exemptions are looking increasingly inflexible and ill-adapted to a fast-changing environment, and that while a US-style fair use doctrine might not exactly fit the bill, it is worth exploring whether any aspect of it might be advantageous from a European perspective. Thus far, the European Commission has not shown any liking for the proposition. The principal difficulty is of course that anything that proposes to shift the balance between right holder and user will be enormously contentious and not undertaken lightly. The Review Committee will presumably present the arguments in order to inform the policy position that the Government will adopt.
Copyright heavyweights to come to Dublin
12 MAY 2011 BY LINDA SCALES
ALAI (Association Litteraire et Artistique Internationale, founded by Victor Hugo in 1878) will hold its bi-annual Study Days in Dublin on June 30 and July 1, hosted locally by the Copyright Association of Ireland.
This event will bring world copyright academics and industry representatives to Dublin to debate cutting edge issues with each other. The President of French enforcement agency HADOPI will be there, as will industry representatives from corporations such as Google and Walt Disney. Irish speakers will include Judge Peter Charleton, Professor Robert Clark and Solicitor Helen Sheehy, who represented the music industry Plaintiffs in the Eircon/UPC file-sharing litigation.
The programme and application form can be accessed at www.alaidublin2011.
Google Book Settlement fails
6 APRIL 2011 BY LINDA SCALES
“Not by the hair of my chinny chin chin!”
On March 22, Judge Denny Chin rejected the Google Book Settlement, finding that it was not “fair, adequate and reasonable”, thereby failing one of the tests of settlement of a class action in the US. Central to his decision was the fact that the settlement proposed a remuneration scheme that would require right holders to opt-out, or be included.
The decision is an important one in European terms. Google’s unauthorised digitisation of many millions of books that are still in copyright, if it could be legitimised, would give Google an overwhelming advantage in the online market for the material. It would disadvantage European competition seeking to operate within the confines of copyright law, expending time and resources to clear the rights to use the material. This is particularly relevant to the substantial reserve of “orphan” or “unclaimed” works – where the author is either unknown or cannot be located. The Google solution encompassed this material, bypassing the US legislature, which has been unable thus far to find a satisfactory solution to the problem. In Europe, partly because of the heat that Google has injected into the drive for access to this material, the race has been on to find an appropriate solution, with a Proposal for a Directive expected imminently. The rejection of the settlement validates this approach, at the same time delivering a healthy message about enforcement.
Here are the facts:
The proposed settlement
Under the proposed settlement, authors’ and publishers’ representatives agreed to release claims arising from the mass digitisation and publication of extracts from many millions of books by Google, without the permission of the right holders. Google could continue to digitise; could sell subscriptions to an electronic books database; could sell online access to individual books; sell advertising on pages from books, and make certain other uses of the books. Google would pay a flat fee to authors to remunerate the act of digitisation. It would fund the establishment of a Books Registry, overseen by authors and publishers, which would receive and distribute to right holders 70% of the net revenues from sales. It would also create an independent Unclaimed Works Fiduciary to assume responsibility for decisions relating to “unclaimed works”.
Right holders could opt out of the scheme, but would otherwise be included. The Books Registry would be obliged to make “commercially realistic” efforts to find right holders who did not voluntarily register with it. Funds unclaimed after five years could be used in part to cover the expense of locating owners of unclaimed works. After ten years, these funds could be distributed to literary-based charities.
The decision
Judge Chin visited a number of traditional legal cornerstones in explaining how he arrived at his decision. His arguments included these:
A matter for the legislature
The question of who should be entrusted with guardianship over orphan books, under what terms, and with what safeguards, are matters more appropriately decided by Congress then through an agreement among private self-interested parties.
The copyright owner’s exclusive right
As the settlement involved an “opt-out” system, in which authors’ works would be included unless they opted out, it would have given Google the effective right to expropriate the rights of copyright owners who had not agreed to transfer those rights. Copyright is a property right, and compulsory licensing is, of necessity, undertaken sparingly. Judge Chin said “[T]he notion that a court-approved settlement agreement can release the copyright interests of individual owners who have not voluntarily consented to transfer is a troubling one”
Competition concerns
Only Google has engaged in the copying of books en masse without copyright permission. At least as to orphan works, this gives Google a de facto monopoly, and creates the possibility that only Google would be able to market a comprehensive digital-book subscription. The seller of an incomplete database – which did not include the millions of orphan works – would be unable to compete. This would further entrench Google’s market power in the online search market.
International law
While the availability of the books included in the settlement scheme was to be confined to US users, the settlement would have covered foreign books registered with the US Copyright Office. Books published in Canada, the UK or Australia before January 5, 2009 were also included (the date limitation being a way of excluding works “commercially available”). Judge Chin did not attempt to decide whether the settlement would infringe relevant international agreements including the Berne Convention and TRIPs, but was satisfied that the fact there was a strong international representation to this effect was “another reason why the matter is best left to Congress”.
What next?
Judge Chin encouraged the parties to seek a revised agreement based on opt-in, rather than opt-out by right holders. This of course would be something completely different, with huge logistical challenges. The matter is back in court for a status conference on April 25th.
It looks as though Judge Chin’s house is made of bricks, but we’ll see…………
Note – the Status Conference has been postponed to 1st June.
Note – the Status Conference has been postponed again, to July 19th.
The Programme for Government
11 MAY 2011 BY LINDA SCALES
Intellectual Property in the new Programme for Government.
The new government is in place and the Taoiseach has promised to “hit the ground running” with the programme, Government for National Recovery 2011-2016.
What will the programme deliver for the IP-sensitive sectors?
A good deal of the respective election manifestos of Fine Gael and Labour is preserved in the programme (see blog February 27).
The programme adopts the recommendations of the most recent report of the last government, Trading and Investing in a Smart Economy. This document identified opportunities in ten economic sectors, including software, the creative industries, life sciences, clean technology, and “silver” technologies – all of which are highly IP-sensitive. As technology progressively drives development in every sector however, IP grows in importance right across the economy. With each successive policy document, this fact can be seen more clearly, even when it is not explicitly acknowledged.
The digital economy
The digital games industry is again singled out for support, as is the development of Ireland as a “digital island” and first-mover in the development of information technology. Key technology areas where innovation can be applied are to be targeted. Ireland is to be a leader in the emerging market of cloud computing.
The ICSC
The development of the International Content Services Centre is retained – “to make Ireland a world leader in managing intellectual property”
Bringing innovation to market
The National IP Protocol, proposed by the Innovation Taskforce last year, is to give predictability to the terms on which IP created in universities can be accessed by enterprise. The Labour proposal for a network of Technology Research Centres has also been adopted, to help bridge the gap between research and commercialisation.
Copyright reform
The US-style “fair use” defence to copyright infringement, proposed in the Fine Gael manifesto, surfaces again, with a promise to “pioneer” such a model within the EU. In fact Ireland will not be the first in Europe to propose this. It has been mooted in the UK and forms part of the current Hargreaves review of IP law. The Dutch Government too has been interested in it for a number of years, and has recently been called upon by the Dutch Labour Party to deliver on its promise to initiate discussions at European level about a fair use defence for user created content.
Hidden away in a section of the document entitled “Communications” is the undertaking to:
“review and update Intellectual Property legislation currently in place to benefit innovation, develop a National Intellectual Property protocol [already mentioned in the document] to give clarity about terms on which business can access IP created in Higher Education Institutions, and clarify legislation relating to online copyright infringement and enforcement of rights relating to digital communications”.
It is difficult to read this as a broad promise to review the IP regime. However, combined with clear statements made in the Fine Gael manifesto, it does appear to signal at least an attempt to address the file sharing problem, if not a wider piece of legislation along the lines of the UK Digital Economy Act. The fact that it is classified under the heading of Communications may indicate that Pat Rabbitte’s Department will take the lead.
Implementing EU Directives
It is particularly interesting to find this: “The situation can no longer be tolerated where Irish Ministers enact EU legislation by statutory instrument”. It is undoubtedly the case that a wide view has been taken in recent years of the extent to which EU directives can be transposed by way of secondary legislation. The guidelines were laid down by the Supreme Court in Meagher v Minister for Agriculture [1993 1IESC2] and Maher v Minister for Agriculture & Ors [2001 IESC32], but the boundaries have been stretched at times. The Artists Resale Right is an example of a measure which ought to have had the benefit of primary legislation, and which has proved problematic because of the minimalist approach dictated by the need to rush it through by Ministerial regulation.
ACTA: European Parliament Gives Qualified Approval
1 FEBRUARY 2011 BY LINDA SCALES
The final text of the international Anti-Counterfeiting Trade Agreement – described by the participants as a “plurilateral treaty” – was published in early December. Its development provided sparks in the European Parliament. It was originally conceived by a small group of developed nations and negotiated in secret outside the normal channels of WIPO and the WTO. The aim was to establish agreement on a higher international standard for IPR enforcement than exists under TRIPS, particularly for the online environment. The European Commission joined the discussions early in the process. Leaks from the talks indicated that the group was considering proposals for enforcement in the online environment which included the controversial “three-strikes” solution, and which appeared likely to over-reach existing EU laws in a number of respects. The lack of transparency infuriated the Parliament, which eventually went so far as to threaten proceedings in the Court of Justice unless the text was made public. In consequence, the text under discussion was finally published last March.
Apart from the European Union and its Member States (represented by the Commission and the Belgian Presidency) participants included the U.S., Australia, Canada, Japan, Korea, Mexico, Morocco, New Zealand, Singapore and Switzerland.
DG Trade describes the agreement as including “state-of-the-art provisions on the enforcement of intellectual property rights, including provisions on civil, criminal, border and digital environment enforcement measures, robust cooperation mechanisms among ACTA Parties to assist in their enforcement efforts, and establishment of best practices for effective IPR enforcement.”
Two respects in which the text represents an enhancement of existing EU norms concern criminal enforcement of IPR and enforcement in the digital environment. Perhaps however the most interesting provision from an Irish perspective is the article concerning the obligations of the ISP in relation to online copyright infringement. Here it is:
“A Party may provide, in accordance with its laws and regulations, its competent authorities with the authority to order an online service provider to disclose expeditiously to a right holder information sufficient to identify a subscriber whose account was allegedly used for infringement, where that right holder has filed a legally sufficient claim of trademark or copyright or related rights infringement, and where such information is being sought for the purpose of protecting or enforcing those rights. These procedures shall be implemented in a manner that avoids the creation of barriers to legitimate activity, including electronic commerce, and, consistent with that Party’s law, preserves fundamental principles such as freedom of expression, fair process, and privacy.”
The ultimate provision is tame by comparison with the texts which were explored in the negtiations. The article is not mandatory and is confined to the possibility of disclosure of the identity of the ISP subscriber in circumstances where the right holder has filed a “legally sufficient claim” for infringement. Implementation must also be consistent with the State’s other laws and fundamental principles, including privacy.
The Parliament stayed in close contact with developments leading to the publication of the final text. Its approval was bounded by a serious list of qualifications, for example:
“Whereas, as the Commission has repeatedly stated, ACTA is concerned solely with enforcement measures and does not include provisions modifying the substantive intellectual property rights (IPR) law of the EU or the other ACTA parties, but rather establishes, for the first time, a comprehensive international framework to assist the parties in their efforts to combat IPR infringements effectively, and it does not therefore imply any change to the acquis communautaire.”
Charities Act 2009 – Implications for Non-profits
4 DECEMBER 2010 BY LINDA SCALES
The Charities Act 2009 is now law. Its provisions will be implemented on a phased basis. The legislation is designed to regulate charitable organisations, making them more publicly accountable and transparent. A new regulatory authority will be established, to be called the Charities Regulatory Authority (CRA). All organisations whose activities fall within a definition of “charitable purpose” will be obliged to register with this authority.
A new Appeals Tribunal will hear appeals from certain of the decisions of the CRA, and, in turn, the High Court may hear certain appeals from decisions of the Tribunal. The Commissioners for Charitable Donations and Bequests will be dissolved and their functions (and staff) transferred to the CRA.
A number of duties, including new levels of disclosure, will be imposed on charitable organisations and on the members of their boards, committees or trustees (all to be called “charity trustees”). Sanctions are provided for failure to comply with the provisions of the legislation, including fines of up to €30,000 and terms of imprisonment of up to 10 years.
The Act will bring all charitable organisations within a new, common regulatory framework. The framework is well described in the Bill, but more detail will be contained in Ministerial regulations to be published after the Bill is enacted.
The principal implications of the legislation for nonprofit organisations are the following:
New definition of “charitable organisation”
The legislation will apply to all organisations falling within a new legal definition of “charitable organisation”. There are three parts to the definition of “charitable organisation”.
Firsly, the organisation must promote a “charitable purpose”. This is defined to mean one of the following:
• the prevention or relief of poverty or economic hardship;
• the advancement of education;
• the advancement of religion;
• any other purpose that is of benefit to the community.
The phrase “of benefit to the community” is defined by reference to a wide range of purposes, including the advancement of community welfare; community development (including rural or urban regeneration); civic responsibility or voluntary work; health; the advancement of conflict resolution; religious and racial harmony; protection of the natural environment and advancement of environmental sustainability; the advancement of efficient use of the property of a charitable organisation; animal welfare; the advancement of arts, culture, heritage or sciences, and the integration of disadvantaged persons into society.
In addition to having a “charitable purpose”, the organisation must be “of public benefit”. It must be intended to benefit the public or a section of the public, and, where it benefits someone in some other capacity, the benefit must be reasonable in all the circumstances and pertinent to the public benefit.
And finally, the organisation must either be a charitable trust, or one which devotes its property and income to the advancement of its charitable purpose, and is precluded from distributing profit to its members.
The definition of “charitable organisation” will bring into the regulatory regime a number of organisations which, although they may have obtained charitable status for tax purposes, do not currently think of themselves as charities – arts organisations, for example. Some voluntary organisation are specifically excluded. These include human rights organisations, political parties, sports bodies, trades unions, employers’ organisations and chambers of commerce. Organisations promoting unlawful or terrorist purposes, or a purpose contrary to public policy or morality are also excluded.
The Register of Charitable Organisations
The Charities Regulatory Authority will maintain a public register of all charities. In the first instance, organisations already in possession of a CHY number from Revenue will be deemed to be registered. All other qualifying organisations must register – in the case of a new organisation, before it commences operating; in the case of an existing organisation within 6 months of the commencement of the Act. An application fee will be payable. Organisations registering as charities will be obliged to provide information about their trustees, the activities of the organisation and its financial affairs in the preceding 12 months.
Responsibilities of “charity trustees”
Anybody who serves on the board or as an officer on the management committee of a charitable organisation will in future be described as a charity trustee. The responsibilities of trustees include the obligations to ensure that the charity meets all of the reporting and other compliance requirements specified in the legislation, and to report any suspicion of the commission of an offence under the Criminal Justice (Theft and Fraud Offences) Act 2001, with “whistleblowing” protection for those who provide such information.
Annual reports and accounts
Guarantee companies are already obliged under company law to file audited financial statements with the Companies Registration Office, annexed to their Annual Return. The Charities Act will oblige the Registrar of Companies to supply the CRA with a copy of the Annual Return, and – as the CRA will receive the accounts in this way – the guarantee company will not be required to file accounts with the CRA. For other types of organisation, the CRA will have the power to set a precise standard for the keeping of financial records and the preparation of annual financial statements to be furnished annually to the CRA.
Every charitable organisation, irrespective of its legal nature, will be obliged to furnish annually to the CRA an “Annual Report”. This will contain details of its activities in the previous year, and such other information as the Minister may prescribe by regulation.
All of this information relating to charitable organisations will be available for public inspection.
Powers of investigation
Amongst the powers granted to the CRA is a power of investigation of the affairs of charitable organisations. The CRA may appoint an inspector, with whom charity trustees and their agents (including bankers, solicitors and former trustees) must cooperate, furnishing books records and other information requested. In addition, upon application by the CRA, the District Court may order that the premises of a charitable organisation be searched, and books and records seized.
Offences, penalties and sanctions
A impressive number and range of offences is created for failure to comply with the legislation. The organisation will be liable for non-compliance, as will the charity trustees personally. Penalties include fines and terms of imprisonment. Charity trustees may also be disqualified from acting in that capacity in the future.
Charity trustees may be paid for services to the organisation
The legislation clarifies that trustees may be paid for professional or other services rendered to the organisation, so long as this is not precluded by the constitution of the organisation, and the arrangement is both documented and considered to be reasonable and proportionate by the other trustees.
Indemnity Insurance
Company law reform – no new structure for non-profits
3 DECEMBER 2010 BY LINDA SCALES
Company law has become highly complex and increasingly inaccessible. There are 13 pieces of primary legislation and more than 20 pieces of secondary legislation. Apart from the sheer volume of legislation, the law has become extremely technical. This situation does not serve the simultaneous drive for better standards of compliance. It is moreover a positive deterrent to the recruitment of company directors to voluntary boards.
The twofold purpose of the Companies Consolidation and Reform Bill is to codify the law and to modernise it. The General Scheme for the Bill was published in May 2007. It is planned to publish the Bill itself in 2009 and to enact it in 2010. Of course there may be slippage in these dates. It is an ambitious undertaking and it seems almost inevitable that there will be delays.
What are the implications for the nonprofit organisation that is already a company or one which intends to incorporate?
A new structural model?
Nonprofit organisations almost always incorporate as companies limited by guarantee without a share capital. Of the available options, this is the most suitable, although it is generally accepted that it is not ideal. The provision of a new structural model has been strongly advocated by the Law Reform Commission and others. The UK has already taken this step in introducing the CIO (Charitable Incorporated Organisation). The Irish Government has however decided to shelve the question and to watch developments in the UK before considering it further. Accordingly, the guarantee company remains the standard for the nonprofit sector.
Fundamentals
The classification of companies by type is a strong feature of the Scheme. The guarantee company will be one of just two types of company to retain its two-document constitution, and the objects clauses contained in the Memorandum of Association. Many of the standard “default” provisions to be found in the Articles of Association of most organisations (relating to matters such as the convening of meetings, voting, proxies, and so forth) will be set out in the Bill, and it will be clear which of these are obligatory, and which are discretionary.
The guarantee company will be required to use the letters “CLG” (Company Limited by Guarantee) after its name, but may be relieved of this obligation in the same way as companies may currently be permitted to dispense with the use of the word “limited”.
Only two members will be required for a guarantee company. This is a significant change which should benefit nonprofits. The existing requirement of seven members is often a problem, especially for start-up organisations.
The existing rules relating to the keeping and auditing of accounts, the management of records and filing of returns in the CRO are all carried over. Similarly, although other types of company will no longer be obliged to hold an AGM, the rules regarding the calling and conduct of members meetings remain essentially the same for the guarantee company.
Directors’ Duties
Directors’ duties currently comprise their statutory duties (set out in various places in the Companies Acts), and their common law or fiduciary duties, which are to be found in case law and are not easily ascertained.
The Bill will give the fiduciary duties a statutory description for the first time. As stated in the Scheme, they are:
• To act in good faith and in the best interests of the company;
• To act honestly and responsibly in relation to the conduct of the affairs of the company;
• To act in accordance with the company constitution;
• To exercise the powers of the company for lawful purposes;
• To refrain from using company property for his or her own use, unless authorised;
• To refrain from agreeing to restrict the director’s independent judgment, except in limited situations;
• To avoid conflicts of interest;
• To exercise the duty of care, skill and diligence which would be expected of a director by a reasonable person with the knowledge and experience which the director has, and that which would be expected of a person in the same position as the director.
• To have regard to employees’ and members’ interests.
Concerning the statutory duties (the usual governance obligations to keep accounts, registers, minutes, make returns and so forth), they are set forth in detail the Scheme for the Bill and are largely unaltered. There is one interesting change. While every director has a duty to ensure that the company is compliant, this general obligation is no longer placed on the company secretary. This does not relieve the secretary of all obligations, but it is an appropriate move, and will be of comfort to the many CEOs who act as company secretary. There is obligation placed on the directors to ensure, when appointing a company secretary, that the person selected has “suitable skills”.
Other Governance Matters
As is the case under the existing Companies Acts, wide powers of management are given to the directors, although these can be altered by the members in general meeting. It is clarified that the members may only control the directors through amending the articles by special resolution, and not by a more informal “direction” given in general meeting, as is occasionally thought to be the case.
The meaning and liability of de facto and shadow directors are clarified. The former is defined as “a person who occupies the position of director but who has not been formally appointed a director”, and the latter as “a person in accordance with whose directions or instructions the directors of a company are accustomed to act” (excluding a professional advisor). Both shall be treated as directors for all purposes.
When a director acts in breach of his duties, he will be liable to account to the company for any gain made, and to indemnify the company against any loss arising. This was the position under common law, although never stated in the Companies Acts. However, it is re-stated that in any proceedings against the director for negligence, default, breach of duty or trust, the court may relieve the director from liability if he or she has acted honestly and reasonably and in the circumstances he or she should fairly be excused.
Some minor additional alterations include the following:
• A person may be disqualified from acting as a director if he or she is absent from board meetings for more than 6 months.
• No one under the age of 18 may act as a director.
• It is clarified that a company may not act as a director.
Offences
Offences consisting of failure to observe the provisions of the legislation will be classified for the first time, into four categories, with a sliding scale of penalties.
Conclusion
The Constitution of the Organisation – Keeping it in Tune
1 DECEMBER 2010 BY LINDA SCALES
The constitution of an organisation serves two main functions:
(i) To define the aims of the organisation;
(ii) To describe how decisions are made in the organisation.
In the guarantee company (the most common legal form of the non-profit organisation), the constitution consists of the Memorandum & Articles of Association of the company. The former states the nature of the company and its aims. The latter acts as the internal “rule-book” governing decision-making, and dealing with matters including:
• Membership of the company
• The appointment and retirement of directors
• The role of the directors
• The convening of meetings, and voting rights
• The audit and the keeping of accounts
Whatever the legal nature of the organisation, it is imperative that board members of the organisation are not merely acquainted with the constitution, but on intimate terms with it. The constitution should be up-dated, refreshed, re-modeled, and adapted as often as necessary to keep it in tune with the activities and aspirations of the organisation. It should govern freely and easily, giving plenty of room for the organisation to grow and develop, at the same time providing a sensible sub-structure of rules and boundaries to guide the activities of the board and executive.
Sometimes voluntary organisations are established on the basis of a “shelf company”, with a standard form constitution which has never been properly tailored to the particular requirements of the organisation. Often such constitutions are left, literally, on a shelf to gather dust, while the organisation proceeds to operate in a fashion which does not take account of its legal status and framework. This can have expensive consequences in the event of a dispute.
Whenever it is appropriate to do so, the board should initiate review of the constitutional documents of the organisation, to ensure that the legal status of the organisation is appropriate, and that the constitution is up to date and properly adapted to the needs of the organisation