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Changes to copyright licensing

Print publication

07/03/2014

The Enterprise and Regulatory Reform Act 2013 (ERRA) is set to bring big changes to copyright law, and will particularly impact upon the copyright licensing landscape.

At present, a copyright owner can choose to become a member of a particular collecting society. It gives express permission for its copyright works to be licensed, and the collecting society will then collect royalties on behalf of its members. This scheme, which operates on an ‘opt in’ basis, is all set to change.

Section 77 ERRA introduces a new section 116B into the Copyright, Design and Patents Act 1988 (CDPA) in relation to ‘extended collective licensing’. The new section provides for the Secretary of State to implement regulations to provide for a new licensing scheme. This scheme will enable collecting societies to grant licences in situations where it neither owns the copyright in the work, nor acts for the copyright owner.

How will it work?

In order to join the scheme, a collecting society (licensing body) will need to first make a voluntary application for authorisation to the Secretary of State. Part of the process will involve the collecting society having to show that it represents a significant number of rights owners in relation to a particular type of licensed work. The next stage will involve the current members of the collecting society deciding whether to approve its involvement. If the application is successful, the collecting society will be authorised to act for rights owners that it does not already act for in a particular sector, i.e. its non-members. A right holder can choose to ‘opt out’ by notifying the collecting society that it does not wish the society to act for it. This contrasts with the current ‘opt in’ procedure, mentioned above, whereby a rights owner becomes a member of a collecting society and grants the licensing of its works in exchange for the payment of royalties.

What will it achieve?

In line with recommendations in the Hargreaves Review, the new scheme aims to simplify the licensing process and increase efficiency. It is likely that it will become much quicker and easier for prospective licensees to access and search for copyright works and ultimately to get a licence in place, thus reducing a licensee’s search fees. It will facilitate the granting of licences in scenarios where there are clear difficulties in obtaining clearance from the copyright owner, and will offer more legal certainty for all parties involved – rights holders, licensees and collecting societies. It is also possible that such a system could lead to an increase in royalties for rights owners should there be an increase in its usage.

The regulations, which will implement the scheme, must include provision to prevent the grant of exclusive licences, and to enable copyright owners to limit or exclude the granting of licences. The regulations must also deal with royalty payments in terms of the deduction of administrative costs and the duration that such royalties must be held by the collecting society, and to provide for circumstances in which an authorisation can be withdrawn and deal with the rights and obligations of interested parties as a result. Section 116C CDPA further sets out that the regulations may include provision that a collecting society must continue to meet specific requirements in order to remain authorised to grant licences.

A draft set of regulations, entitled “The Copyright (Extended Collective Licensing) Regulations 2014” has been published for consultation and we currently await the Government’s response to the consultation. It will be interesting to see the finer detail of how the new scheme will operate once regulations are brought into force. In particular, what will constitute a “significant number” or “type” of work in order to enable a collecting society to qualify to join the scheme; how long will an authorisation be in place for; what will happen in a scenario whereby a rights owner fails to opt out and it is only on the subsequent granting by a collecting society of a licence to a third party that the rights owner changes its mind and opts out; who will absorb the greater administrative costs brought about when a non-member chooses to opt out; and will there be an increase in the costs for licensees to obtain a licence. It is also not yet clear how many collecting societies will apply for the extended licence, nor what the opt-out rate by rights owners will be.

When will the new provision come into force?

The ERRA received Royal Assent on 25 April 2013 and section 77 came into force on this day. It now remains for regulations to be passed and brought into force before the scheme can be implemented.

We await further developments with interest.

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