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Introduction: The role of SIAE
Article 19 of Italian Law no. 148/2017 marks a turning point in the field of copyright management and collecting societies, as it provides for the ending of the legal monopoly of the encumbent Società Italiana Autori ed Editori (SIAE).
SIAE is a public law body, organized on a non-profit basis, engaged in the collective management of copyright. The 1941 copyright law (Law no. 633 /1941) granted SIAE the exclusive right to act on behalf of copyright holders in relation to the exploitation of protected works (including the rights of performance, recitation, broadcasting, and mechanical and cinematographic reproduction). Article 180 of the original 1941 law further provided that SIAE was the only entity entitled to provide authors and rightholders with collective services, including the licensing, collection and distribution of revenues from the economic use of their creative works.
The inefficiency of monopolies
Monopolies in the copyright protection market are present in several European countries[1]. However, this business model was characterised by particularly high fixed costs,since the monitoring and intermediation services on behalf of authors and rightholders required a physical network spread all over the whole territory.
In recent times the monopoly approach has been questioned more and more. First of all, legal monopolies do not necessarily provide a more efficient service for authors and users[2]; moreover, nowadays the quick development of information technology, digitalisation and network communication allows for the negotiation of licenses, the collection of royalties and even the possibility to monitor user activities even for limited repertoires. This is particularly relevant in the growing online market[3].
Consequently, an ever larger number of publishers, artists, users, operators and scholars have long advocated the liberalization of the copyright management market. They argue that only the promotion of fair competition could provide individual rightholders with the freedom to choose among different alternatives and that an open market for management would better fulfil rightholders’ interests (e.g. enabling them to set the tariffs applicable to licenses, the terms and conditions on the allocation of revenues).
Copyright management market under EU law
The legitimacy of national monopolies in the copyright collecting management field was first challenged on the basis of Article 56 TFEU (ex Article 49 TEC), which sets as a general principle the freedom to provide cross-border services without any restriction from the Member States[4]. Following a recommendation from the EU Commission (2005/737/EC) inviting the Member States to foster “effective structures for cross-border management of rights” (at least in the online services market), the EU Parliament and Council then adopted Directive 2014/26/EU of February 26th 2014 (known as “The Barnier” Directive). The Barnier Directive lays down a comprehensive framework for the copyright Intermediation Market. It was partially transposed into Italian law by Legislative Decree (D.lgs.) no. 35/2017.
The Barnier Directive sets out the overall requirements to ensure the proper functioning of collective copyright management organisations. It lays down strict rules concerning governance and accountability of the organisations, designed to enhance their transparency and efficiency. It also compels organisations to amend their statutes so as to ensure the involvement of all its member (i.e. the rightholders) in the decision-making process[5].
Boosting competition in cross-border copyright management services
While D.lgs. 35/2017 implemented the provisions of the Directive on governance, the issue of the right of collecting societies/parties, other than SIAE, to directly provide copyright management services in Italy was not addressed despite the fact that the Directive introduces, as a general principle, the right of rightholders to use either collective management organisations (Article 1) or independent management entities (Recital 15) of their choice for the management of their rights. Unlike collective organisations, independent management entities are not controlled - directly or indirectly - by rightholders and they are not organised on a non-profit basis, pursuant to Article 3 of the Directive.
The Directive sets out the right of (at least) collective management organisations (CMO) to provide cross-border copyright management services. This is abundantly clear from the combined reading of Article 5(2) and Recital 4. Article 5(2) recognizes of the right of rightholders to authorise any CMO to manage the rights of their choice for the territories of their choice, regardless of Member State of nationality, residence or establishment. Recital 4 is even more explicit, as it empowers any collective management organization established in the Union to “represent rightholders who are resident or established in other Member States” and to grant “licenses to users who are resident or established in other Member States”.
Ambiguities under the first Italian Implementation act/The D.lgs. no. 35/2017: still a legal monopoly for SIAE?
As strongly recommended by the Italian Antitrust Authority[6], a proper implementation of the Barnier Directive would have required abolishing the existing statutory monopoly. Nonetheless, Italy initially failed to comply with this provision. Indeed, Article 4(2) of the Legislative Decree no. 35/2017 formally acknowledged the right of authors and rightholders to revoke the mandate of SIAE and to entrust other organisations and independent entities, but without prejudice to the provisions of Article 180 of the 1941 copyright law. The effect of the maintenance of Article 180 was that no such organisation/entity was entitled to directly provide intermediation services in Italy, due to the statutory exclusivity of SIAE under the terms of Article 180(1).
This left the situation in Italy both ambiguous and inconsistent. On the one hand, it could be argued that any third collecting entity or organisation was forced to negotiate a representation agreement with SIAE for licensing, collecting and distributing services. However, this construction was clearly in contrast to the Barnier Directive, since it would have compelled rightholders, users and other collecting societies to unconditionally accept SIAE financial and organisational terms. This would have ultimately hindered the activity of foreign collecting societies in Italy.
On the other hand, it is noteworthy that, even pursuant the original provision of Article 180 of the 1941 copyright law, the exclusivity of SIAE was not absolute, but covered only collective copyright management services. In fact, Article 180(4) authorized “the author or his successors in title to exercise directly the rights afforded them”. In this way, rightholders could delegate to third parties the right to negotiate licences and collect royalties for any exploitation of music works.
In any event this confusion in the law was an important obstacle to competition in the EU ultimately limiting the freedom of choice of operators. Because of this, the Commission had decided to open an infringement proceeding against Italy.
The final adjustment to the Barnier Directive: Law Decree no. 148/2017
It is therefore good news that Law no. 148/2017 has finally abolished the statutory exclusivity of SIAE by amending Article 180 of the copyright law.
However, the Italian legislator adopted a middle ground between free market instances and the classic “solidaristic” view of copyright management service. While any form of intermediation (including licensing, collecting and allocating royalties) is now allowed for copyright management organisations, this does not apply to independent management entities. As a result, Italy requires the subjects engaged in collective copyright management to alternatively be organized on a non-profit basis or to be under the rightholders’ control, so as to safeguard the exclusive rights of the artists and rightholders.
How the new measures will impact the market is still uncertain: the provisions cannot guarantee the development of a fully competitive market just yet. But that beign said, this newest law does open a door for new actors: a newly founded CMO organised on a non-profit basis - Liberi Editori e Autori (LEA) - might pave the way for the forthcoming enlargement and increasing competition in the copyright management business in Italy.
This article is for information purposes only and is not intended as a professional opinion.
For further information, please contact Lorenzo Attolico.
[1] According to D. Menegon, “L’intermediazione dei diritti d’autore”, IBL Briefing papaers, 89, July 19th, 2010, a legal monopoly still existed in Denmark, Austria, Belgium, Czech Republic and Italy; besides, in Germany and Great Britain the leading copyright collecting societies enjoyed a monopoly position de facto.
[2] The same 2010 study by D. Menegon found that, compared to PRS, the organization that plays a dominant role but is not granted a legal exclusive in the british copyright collecting market, SIAE collecting management shows a way higher cost-income ratio. This results in lower earnings for artists and/or higher costs for users. D. Menegon, “L’intermediazione dei diritti d’autore” IBL Breafing Papers, 89, July 19th, 2010.
[3] See H.C. Jehoram, “the Future of Copyright Collecting Societies”, in EIPR 2001.
[4] Article 56, paragraph 1(ex Article 49 TEC) “Within the framework of the provisions set out below, restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended”. The European Court of Justice, Case 127/73 BRT v. SABBAM, [1974], ECR 313, first denied that Copyright Collecting Societies’ functions can be ascribed to the notion of “general economic interest’s service” and thus justify a monopoly. The EC Commission also issued two decisions against restrictions to cross border copyright management services in the Simulcast case (2003/300/CE, Simulcast) and especially in the CISAC case (EC Commission, July, 16th 2008, CISAC C2/38698). By contrast, in a recent decision (February 27th 2014, no. 351 Case C-351/12), the ECJ recognised Collecting Societies as entities that provide general interest’s services, and thus excluded that a legal monopoly might violate Article 56 TFEU.
[5] Article 8.5 of the Barnier Directive mandates that the general Assembly of Members decides on the most important issues, such as the general policy of distribution of incomes to rightholders.
[6] Autorità Garante della Concorrenza e del Mercato, recommendation to Prime Minister and Parliament, June, 1st 2016.
