Abstract

This article analyses the value gap argument and the legislative outcome of Art. 17 of the Directive on copyright in the Digital Single Market (CDSM). The analysis is based on a qualitative content analysis of key documents related to the value gap problem and entitlement analysis of the property and liability rules character of Art. 17.

The central theme of this article is the conflict between control and compensation. This ties into Peukert’s communication culture concept, which emphasizes exclusivity or access. Control and compensation are vital elements in the property and liability rules framework.

The first part explores the roots of the value gap argument and its connection to the proprietary paradigm of copyright. The content analysis of the value gap argument shows that it is built upon the property narrative of copyright.

The second part examines Art. 17 through the lens of property and liability rules, drawing on the framework developed by Calabresi and Melamed. The results show that Art. 17 has a mixed character, with a dominant property rule. However, when the real market dynamics are considered, the analysis reveals different results in different creative industries. Industries with strong collective management presence operate under liability rule schemes. As a result, authors in these industries benefit from ‘compensation without control’.

The article concludes that integrating liability rule mechanisms is crucial for promoting access and fair compensation. This is exemplified by Art. 17 and markets that function under liability rule organizations, where minor authors particularly stand to benefit.

I. Introduction

Adopting the Directive on copyright and related rights in the Digital Single Market (‘CDSM’) marked a significant crossroads of copyright law in the European Union.1 The highly controversial Art. 17 CDSM (‘Art. 17’) revolutionized dynamics between online platforms, their users, and copyright rightsholders.2 It sought to support the licensing market and allow rightsholders to hold platforms directly liable for copyright infringement.3 Article 17 oscillates between licensing and enforcement measures.4 Put more broadly, it offers control and a way to obtain compensation.

This article contributes to the ongoing discussion around the CDSM by analyzing Art. 17 from the perspective of control and compensation and the corresponding law and economics framework of property and liability rules.5 Like Calabresi and Melamed, this article provides one perspective of the emerging legal framework and aims to enrich the academic discussion. Limits of this article follow, i.e., full legal analysis of presented issues and national implementations – including the respective legislative processes – of Art. 17 fall outside its scope.6 It is important to clarify that while this article primarily explores the theoretical dimensions of Art. 17, it does not extensively address national implementations. This article is thus a conceptual exploration, predominantly grounded in the principles and literature of law and economics.

The article echoes previous arguments advocating for a universal right to remuneration and fostering a culture of access.7 A fresh aspect of this article is its integration with concepts from law and economics. This involves examining how legal rules are laid down based on whether rights can be transferred without consent and how their value is decided.8

The research question analyzed is whether Art. 17 and its policy reasoning promote control or compensation as the primary mechanism. Moreover, analysis of such questions through Calabresi’s and Melamed’s framework is appropriate as it was previously applied to online copyright issues9 and the question of regulation of online platforms.10

This article admittedly provides a historical review of how Art. 17 was shaped. Understanding developments surrounding it are crucial as Art. 17 will serve as the online legal framework for the following decade(s).11 Therefore, the significance of this historical context should not be overlooked.

The article shows that Art. 17 primarily offers control mechanisms while compensation remains only a supportive mechanism.12 In other words, Art. 17 offers easy access to control and enforcement, while compensation mechanisms rely on court remedies. As such, law primarily struggles to strengthen control in the digital environment, and only afterwards seeks to compensate for uncontrolled uses. The suggestion proposed by this article is that it might be better to design regulation – including regulation by market, technology, and social norms –13in a way that provides easy access and compensation.

At this point, one must recognize that property and liability rules14 are not legal concepts. They are concepts from law and economics, and their understanding and meaning differ from standard notions of, e.g., liability in the legal framework. One should avoid confusing these terms with their legal counterparts. For this reason, part 2 provides a common frame of reference for legal scholars to make the conclusion presented in this article more accessible.

Regarding scope, this article focuses on the issue of a subset of online platforms known as Online Content Sharing Service Providers (‘OCSSP’) within the context of the CDSM.15 This term is a subgroup of hosting ISPs and overlaps with very large online platforms under the Digital Services Act.16 It is essential to differentiate these terms and recognize that throughout the article the term online platforms will be used as an umbrella term encompassing OCSSPs, such as YouTube, Twitch, or Facebook.17

This article proceeds as follows: part 2 establishes the fundamental distinction between control and compensation and its connection to property and liability rules that tie together the entire article. Part 3 discusses two economic theories of intellectual property, namely proprietary and incentive theory, and goes through content analysis of the value gap problem – a key policy driver for Art. 17 – to determine if stakeholders advocated for control or compensation policies. Finally, part 4 applies the property and liability rule framework to Art. 17 to understand whether the outcome represents a control or compensation mechanism and provides a perspective on the benefits of liability rule schemes.

The article ultimately showcases the benefits of a liability rule framework that enables authors to extract value from Art. 17 due to having compensation as the primary mechanism. In its absence, however, the culture of exclusivity and control threatens the copyright balance.18

II. Control, compensation, and copyright

This article’s starting point is identifying two regulatory and academic paradigms in digital copyright. These paradigms expand on Peukert’s communication cultures.19 Admittedly, these represent a simplification of regulatory and academic models that, however, reflect some of the priorities pursued by regulators and promoted by academics.

The first paradigm emphasizes control and builds upon the culture of exclusivity.20 The second focuses on obtaining compensation and is based on the culture of access.21 Control and compensation are simultaneously central to the law and economics concepts of property and liability rules, where the degree of control and compensation are distinctive features.22

The following section serves as a critical link throughout the article, elaborating on how the discussed ideas connect with broader concepts in law and economics, as well as copyright. It will detail the underlying thread that ties together various parts of the article, providing a deeper understanding of its relevance to legal and economic theory fields.

1. Control, exclusivity, compensation, and access

The first regulatory and academic paradigm is that of control. It follows the idea of ‘if value, then right’23and promotes the culture of exclusivity. This means if digital content has value, there should be a right to control it. It is about strong ownership rights over digital content.24 This paradigm aligns with the traditional understanding of copyright.25 Its goal is to grant rightsholders robust control over the use of their works.

The second paradigm highlights compensation and promotes the culture of access. It differs from the first and focuses on easy access to digital content. Lessig calls this approach ‘compensation without control,’ and it promotes a free culture.26 It must be highlighted that this approach doesn’t eliminate property rights but reduces the control of rightsholders.27 It aims to offer broad access to cultural works while compensating rightsholders for this access.

In the corner of compensation, one can refer to the writings of Lessig, Hugenholtz,28 or Quintais.29 Gervais suggested copyright reform promoting control and access based on the needs of specific author groups.30 Similarly, the bipolar copyright system presented by Peukert represents a compromise between control and compensation.31 On the other hand, the control is often proposed by creative industries. It is, however, supported, e.g., by the later work of Landes and Posner.32 By endorsing the proprietary paradigm of copyright, they generally view greater control as a favorable outcome in regulation.

Emphasis on compensation can benefit a democratic society by increasing social dialogue and personal autonomy.33 It has the potential to improve the overall welfare effects of copyright.34 It helps support creators and innovators whose rights can get hijacked by markets.35 Ultimately, prioritizing compensation over control contributes to systems that fairly compensate authors.36

However, there are constraints on compensation systems. Peukert notes that compensation as the main rule, along with optional exclusivity, is restricted by international treaties.37 Still, the current system enables enough flexibility, as Peukert and other authors have explored.38 Moreover, market, technology, and social norms as modes of regulation present additional opportunities for implementing compensation as the primary rule.

2. Framework of property and liability rules

The following part provides an overview of the property and liability rules framework developed by Calabresi and Melamed.39 The rules are introduced as a unique insight into how legal norms are structured. As previously, one must recognize that the following concepts originate from law and economics and should not be confused with their legal counterparts.

Foremost, the property and liability rules framework considers the assignment of entitlements that could be commonly understood as legal rights.40 In modern states such legal entitlements are protected by legal rules that Calabresi and Melamed distinguish into three categories. The points of distinction are whether there are rights and obligations to transfer the entitlement and how one assigns the value of such transfer of entitlement.41

The first category of rules is the property rules characterized by their large degree of control. Property rules assign holders the exclusive right to transfer the entitlement.42 The value of such transfer is subject exclusively to the individual’s choice. Consequently, the transfer value is determined based on subjective criteria such as personal preference, emotional value, or opportunity cost.43 Property rules are commonly legal claims of an injunction.44

The second category is liability rules for which compensation is characteristic. Contrary to property rules, liability rules assign holders exclusive rights of transfer that can, however, be overridden. While the entitlement holder can attempt to negotiate for value based on subjective criteria, the overridability allows third parties to infringe on the holder’s right. The value of the transfer is based on objective criteria. Liability rules are commonly legal claims of torts or contractual rights.45

In other words, property rules grant holders complete control, whereas liability rules provide limited control accompanied by a right to compensation. The concept of liability rules aligns closely with ‘compensation without control’.46 Lemley and Weiser summarize the point:

‘a property rule provides for an injunction and a liability rule provides for nonconsensual access in return for a payment of money damages.’47

Subsequently, the most substantial differences between each set of rules, i.e., property and liability rules, are the (in)voluntary transferability of the goods and the criteria to determine the transfer value.48 Naturally, the objective and subjective values might align. More often, however, one would find a misalignment between the subjective individual expectations and the objective value of a good.

One could consider a hypothetical scenario where an individual decides to sell their grandmother’s wedding ring. Under the property rules framework, the owner has the right to transfer ownership of the ring voluntarily and can determine the value of the transfer based on what they believe the ring is worth. This can include sentimental value and the value of the materials and craftsmanship. If the ring is stolen, the property rule prevails, and the owner seeks complete property restoration, i.e., the ring’s return.

Alternatively, under the liability rules framework, market negotiations may take place, potentially leading to a transfer of ownership. However, if negotiations fail to lead to a market transaction, an involuntary transaction – such as unauthorized possession – becomes an alternative. In such a scenario, the original owner can seek a court remedy, but this would be limited to compensation based on objective criteria such as material or market price.

Finally, one must recognize the alignment of property rules to the exclusivity culture and control mechanism and, on the contrary, the alignment of liability rules to the access culture and compensation mechanism. Essentially, the framework of property and liability rules delineates the characteristics of legal rules that favor either control or compensation. Therefore, by categorizing Art. 17 as either a property or a liability rule, one can discern whether its primary mechanism is focused on control or compensation.

III. Property narrative and the problem of value gap

The following part explores the character of the European legislative process surrounding Art. 17.49 It explores two fundamental theories of copyright in law and economics literature, before looking at Art. 17’s central issue of value gap and how it promotes control and compensation.

From the start, it is essential to recognize that the theories discussed here are selective representations of intellectual property theories. Specifically, this article focuses on the law and economics justification for copyright, how these justifications interlink with broader law and economic theories, and the overarching themes of control and compensation. This article therefore provides an exploration within the larger context of the ongoing discourse.

Different legal systems often favor different foundations for copyright. For example, in the US, the utilitarian approach can be seen in the Constitution.50 In contrast, the European Union emphasizes protection based on moral and economic rights and sees intellectual property as a way to foster creativity and innovation.51 However, as Fisher notes, theories and perspectives usually swirl together.52

This blend of different approaches is further emphasized in the global market, where businesses and authors operate internationally. This environment enables the assimilation of foreign values and perspectives. Economic theories formulated outside Europe also play a role in the European environment. Elkin-Koren and Salzberger note that theoretical rationales in Europe and the US merge and that the European Commission employs economic reasoning to advance the existing regime.53

First, the following part considers the conversion towards a proprietary paradigm in law and economics theory and the increased emphasis on control.54 Second, this part considers the property metaphors underlying numerous arguments in copyright discussions over the past decades.55 Finally, the following part explores the roots of the value gap argument to understand how it relates to control and compensation.

1. Proprietary and incentive paradigm in copyright

Elkin-Koren and Salzberger provide an overview of two leading intellectual property models in law and economics analysis.56 First, the incentive paradigm observes intellectual property as an incentive system. Copyright law mainly provides incentives to create and disseminate cultural goods. The incentive paradigm highlights the public good nature of intellectual property and reasons that public interference in the form of intellectual property is necessary to ensure the creation and maintenance of this public good.57

The incentive paradigm is not anti-copyright. It does not seek to abolish copyright protection, and it does not oppose the author’s right. However, it asks what benefit the copyright regime creates and how it helps authors and the public. Thus, the incentive paradigm does not consider intellectual property an end in itself and instead requires a frequent readjustment of established systems and rules to seek efficient creation and maintenance of information goods.58 It builds upon authors like early Landes and Posner,59 Mennel,60 and, more recently, Lemley.61

Second, the proprietary paradigm revolves around property rights in intellectual assets. It argues that property rights are necessary for creators to protect and exploit their creations, often resorting to the tragedy of commons or tragedy of anti-commons as underlying ideas.62 The proprietary nature of intellectual property is an end in and of itself that does not lend itself to frequent reevaluation of copyright framework.63

Regarding control and compensation, it’s clear that each paradigm emphasizes these aspects to varying extents. The incentive paradigm, in particular, can support both control and compensation as objectives, provided they contribute to enhancing positive incentives. Conversely, the proprietary paradigm views the existence of intellectual property as the ultimate goal, with stronger rights also boosting the public good. From this viewpoint, the incentive paradigm is more adaptable to the conflicting aspects of exclusive and access cultures. In contrast, the proprietary paradigm finds it challenging to incorporate access, as it conflicts with its aim of maintaining exclusivity.

Litman summarizes the issue as follows:

‘One element of legal property rights is control, and most debates over treating copyright as a form of property have focused on the control that a property owner is able or should be able to exercise.’64

According to Lemley, intellectual property increasingly faces paradigm shifts stemming from the language of property.65 It seeks to erode the fundamental incentive principles of copyright.66 As such, it is an attempt to capture the full social value created by intellectual property, which is unprecedented in any other segment of the market economy.67 This attempt, however, is misguided as there is no need to fully internalize the benefits of intellectual property since the attempts to capture the positive externalities may reduce the system’s benefits and the effort invites rent-seeking.68

Patry also observes what has been termed the propertization movement in copyright, similarly arguing that the notion of property obscures the true nature of copyright as an incentive system of temporary legal monopoly.69 Patry attributes propertization of copyright with a misguided emphasis on control and ownership rather than promoting creative expression and innovation.70 Patry notes that framing something as property puts it outside the need for an evidence-based policy as its existence as property and need of its protection is justification enough.71

According to Patry, the difference between proprietary and incentive paradigms lies in the type of legal inquiry.72 Under the proprietary paradigm, the emphasis is placed on how best to protect and enforce existing rights.73 On the other hand, the incentive paradigm approaches the issue from a different perspective by asking what kind of relationships copyright law should promote and how best to achieve them.74

2. Property metaphors

The article next examines the language of copyright, exploring how it reflects specific economic theories of copyright, particularly emphasizing control or compensation. It is essential to recognize that the categories discussed originate from American scholarship, notably from Lemley and Patry.75 However, there is no global agreement on these categories.

Despite this, these academic categories are still pertinent in Europe, where the same global dynamics influence businesses as in the United States. One example can be IFPI’s argument of the value gap that addresses European and American law simultaneously.76 Therefore, even if European scholars do not fully embrace the same categories as their American counterparts, the underlying arguments and biases might still play a role in European regulatory processes where the very same industry players attempt to capture them.77 The purpose of the following part is thus to identify such categories based on existing scholarship.

Patry recognizes three popular property metaphors used in copyright, i.e., three arguments based on copyright as property. These are the parent-child relationship, the agrarian aspect of copyright, and the bad actor’s concept of pirates, thieves, and parasites.78 Lemley distinguishes the property metaphor of free riding.79 These specific property metaphors are further considered below.

The power of these property metaphors lies in their capacity as framing devices that enable the communication of simplified ideas and notions by approximation and association with shared beliefs and fears.80 In other words, these copyright metaphors can distort understanding and contribute to cognitive bias.81 Subsequently, such metaphors can distort legislative processes by emphasizing a greater scope of control and protection. Their usage is not a result of having property rights but a metaphoric step in gaining them.82

a) Free riding metaphor

Lemley explicitly points out the rhetoric of free riders based on fundamental property ideas.83 Free riding labels those who benefit from third party’s investment as free riders.84 By its very nature, the copyright system is full of these free-riding opportunities, e.g., exceptions and limitations, limited terms of protection, or leaving specific uses in the public domain.85 Property narrative of copyright, however, seeks to uproot these loopholes and excise them from the law whenever possible.86

The property metaphor of free riding consists of two elements. Firstly, it seeks a party that benefits from another’s investment and can be observed as a free rider. Secondly, it claims that the derived benefits are unjust.87 The nature of this metaphor is the property, as it claims unfair benefits from another’s property. This would not be a justified conclusion under the incentive paradigm, which would additionally consider whether such free riding creates a justified effect, e.g., enabling the operation of online platforms that could not otherwise bear the liability.88

b) Parent-child metaphor

The first property metaphor recognized by Patry relates to the extraordinary personal and moral relationship between the author and their work.89 This metaphor argues for extensive control over one’s works and calls upon copyright to protect this special relationship.90 The nature of such a relationship is approximated to one’s children and emphasizes one’s right to raise and protect them.91

The parent-child metaphor appeals to the moral value of the relationship between parent and child that it approximates to the author-work relationship. The existence of orphan works can demonstrate its linguistic strength.92

c) Agrarian metaphor

The agrarian metaphor is the second property metaphor observed by Patry. It can be found in two modalities, namely the rights to one’s fruits of labor as a positive form and reaping what you have not sown as a negative form.93 The roots can be attributed to the Lockean justification of copyright that also considers the fruits of one’s labor.94

It urges copyright to protect the author’s labor and effort by enabling only authors to benefit from their creation.95 It fundamentally frames authors as unselfishly devoted to creating works through hard labor and genius compared to other, lazy and immoral figures, who steal it.96

The agrarian metaphor pleads again the special relationship between the author and the work. However, in this instance, it derives its justification from the author’s personality. The metaphor calls upon copyright to protect the personal investment of the author. The appeal calls upon the fairness principle.97

d) Bad actors metaphor

As a third metaphor, Patry identified what could be labeled as a ‘bad actors’ metaphor. Online copyright frequently witnesses this property metaphor of thieves, trespassers, pirates, or parasites who presumably commit criminal acts to trespass upon another’s property.98 The expressive framing language naturally evokes negative connotations that one exploits another’s property without justification.99 However, the metaphor remains potent without graphic language devices, as its core maintains the idea of using another’s property without justification. These negative notions frame the policy debate as a battle between good and evil.100

The fundamental element of the bad actor’s metaphor is seeking the party who commits the offending activity while simultaneously casting its activity in a negative light. The framing of the online copyright debate showcases the power of this metaphor as the issue of online piracy is repeatedly raised.101 However, the bad actor’s metaphor is not limited to the label of pirates. For example, one could consider Telec, who attempted to frame those who promote a less legal monopoly over information goods as e-communists, with all its negative connotations embedded in the society of a post-communist country.102

3. Value gap and property metaphors

The following part considers the application of four property metaphors – parent-child, agrarian, bad actors, and free riders – to the context of the Art. 17 legislative process. The content analysis findings reveal that the value gap argument is rooted in the proprietary copyright paradigm. To paint the complete picture, the following part also considers the incentive level of the value gap argument that it does not find particularly strong and persuasive.

The content analysis method is employed to analyze the surfacing of property narrative in the value gap argument and surrounding policy debates. The empirical study reveals resurfacing motives of bad actors and free riding targeted on platforms that cast them in a negative light in combination with the agrarian metaphor that appeals to the moral entitlements of authors. Use of metaphors and policy reasoning varies in industry reports such as IFPI annual reports,103 and EU policy documents such as the CDSM impact assessment.104

The goal of the following part is to paint the picture of Art. 17 origins and to understand whether Art. 17 initially aligned with control or compensation. However, a complete examination of the legislative process is out of the scope of this article due to its breadth,105 and the content analysis at this point prioritizes the depth of the issue.

Moreover, one must understand that the following parts do not seek to diminish policy arguments. Instead, the goal is to clarify sources and underlying policy argument themes and how they relate to the issue of control and compensation. Only through this approach can academia gain a deeper understanding of the broader context surrounding the creation of Art. 17. In other words, the goal is not to argue if the value gap is real or if copyright reform is necessary. Instead, the article looks at the language of the value gap.

a) Value gap problem

Article 17 adoption was engulfed in heated debates from the onset.106 Legal academia107 and mainstream media108 repeatedly contributed to the discussions. Online platforms sought to leverage their user base in policy debates.109 Users became hysterical about the ‘meme ban’ that CDSM would prohibit sharing memes.110 The following part, however, inspects how the stage of CDSM was set in the first place, focusing on the omnipresent argument of the value gap.

Value gap can be defined as the mismatch between the economic value generated by copyrighted and user-generated content and the remuneration authors receive.111 At its core, the idea compares two alternatives of online dissemination of copyright-protected works and the remuneration received.112 Its origins can be traced to the music industry.113

Before discussing other aspects, delineating and defining the value gap is in order. This part provides definitions and arguments formulated by the music industry as the most vocal pre-CDSM.114 It offers insight into how the European Commission adopted these ideas throughout the legislative process.

Music Managers Forum first formulated the value gap in 2015 in the following way:

‘The argument goes that the safe harbours give YouTube an unfair advantage in licensing negotiations, because it can basically say “we have your content already, either license us on our terms, or you’ll be left with the cost of monitoring our networks on a daily basis”. User-upload services might counter that rights owners always have to dedicate some resource to monitoring unlicensed use of their content, while YouTube could argue that Content ID removes many of the costs anyway (…)

This, some labels and publishers argue, results in licensed user upload services getting preferential rates creating a “value gap” in the music rights sector.’115

IFPI argued similarly in 2017:

‘WHAT IS THE VALUE GAP?

The value gap describes the growing mismatch between the value that user upload services, such as YouTube, extract from music and the revenue returned to the music community – those who are creating and investing in music. The value gap is the biggest threat to the future sustainability of the music industry.

(…)

WHY IS IT A PROBLEM?

The music ecosystem is dependent on record companies investing in music and in artists. Music must be valued fairly and those that invest in it and create it must be properly remunerated. If services that are not recognising the true value of music are allowed to attract users from other, fairly licensed, services and therefore drain revenues from the system, then it becomes unsustainable.’116

The creative industry’s arguments resonated with the European Commission and found fertile ground within the framework of CDSM.117 In its Impact Assessment, the European Commission argued:

‘(…) rightholders face difficulties when seeking to monetise and control the distribution of their content online. There is a growing concern about the sharing of the value generated by some of the new forms of online content distribution (…)

The functioning of the online content market place is complex. There has been a progressive shift from ownership to access-based models. (…) As a result, rightholders do not always have control over the way their content is distributed online. (…)’118

The value gap problem also took shape in the CDSM itself as part of the Recital 61:

‘Online services are a means of providing wider access to cultural and creative works and offer great opportunities for cultural and creative industries to develop new business models. However, although they enable diversity and ease of access to content, they also generate challenges when copyright-protected content is uploaded without prior authorisation from rightholders (…).’119

The subsequent parts now inspect the above definitions and arguments and identify the underlying themes.

b) Methodology

Methodologically, the following part utilizes content analysis to understand the property narrative and the control emphasis. Content analysis entails using analytical methods on a limited number of policy documents and industry reports that outline the value gap argument. It consists of three steps: data collection, inferring, and narrating.120 In the data collection stage, specific documents and their parts are chosen. In the inferring stage, the analytical method helps identify, categorize, and establish connections between specific phenomena in the text. In the narrating phase, answers and explanations are offered. In this study, a smaller sample of documents is subjected to content analysis to facilitate qualitative analysis and generate conclusions reflecting the issue’s depth.121 However, it is important to encourage further research that explores the breadth of the problem as well.

The following part considers seven documents where value gap legal reasoning was developed for data collection, and their specific sections dealing with the value gap and intermediary liability. These documents are the Music Managers Forum122 and IFPI 2016123 and 2017124 reports; the digital single market strategy for Europe;125 Communication from the European Commission towards a modern, more European copyright framework;126 the European Commission impact assessment that formed part of the CDSM legislative process; and finally, the CDSM itself.

The Music Managers Forum report and IFPI 2016 report were used in the impact assessment carried out by the European Commission, making them appropriate documents for this study, as they were employed directly by the Commission.127 The IFPI 2017 report, on the other hand, was produced at a later stage and served as support for arguing that Art. 17 was a viable policy. Given the influential impact of the previous IFPI report, including it in this study is also appropriate.128 The legislative documents are necessary for analysis as they reflect the Commission’s thoughts and processes. Specifically, the strategy outlined the policy goal of reforming rules of intermediary liability129 that were further detailed in the communication.130 Impact assessment captures the legislative processes and CDSM’s final results. Selected documents provide a sufficiently representative sample for the qualitative study.

The following study identifies property metaphors in the relevant parts of the outlined documents. The analysis identifies which parts of documents deal with the value gap problem and online intermediary liability.131 Subsequently, the coding entailed the identification of relevant parts of documents that either explicitly or implicitly rely on outlined metaphors. Each identified instance is classified based on the specific metaphor used and the focus of the argument.

As to the coding of metaphors, the study observes four metaphors as categorized by Lemley and Patry.132 Coding of property metaphors inspects whether a specific instance falls under the categories previously outlined. However, one must note that the study does not analyze passages highlighting some aspect of copyright attributable to property and incentive paradigm, such as stating that rightsholders should receive remuneration. Each identified instance must contain an additional element appealing to the proprietary paradigm, such as arguing for fair compensation.133

In addition to analyzing the types of arguments, examining the focus of observed instances is crucial. By assessing whether the debates focus on authors, rightsholders, or platforms, one can better understand the property narrative employed and which metaphors are commonly associated with a specific focus. Arguments focus on whether it puts authors, rightsholders, or platforms in the spotlight.

c) Findings

The study into property metaphors in the value gap argument reveals a clear relation of focus and property metaphor where free riding and bad actors metaphors are exclusively tied to platforms. In contrast, the agrarian metaphor connects to the role of authors and rightsholders. Moreover, the study recognizes that industry reports focus predominantly on the free riding and bad actors metaphors while EU policy documents focus on agrarian metaphor. One might inspect the results in more detail below (Table 1).

Table 1:

Overall results

MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered130012
Author-centered0040
Rightsholders-centered00100
Author/Rightsholders-centered0070
Number of instances1302112
MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered130012
Author-centered0040
Rightsholders-centered00100
Author/Rightsholders-centered0070
Number of instances1302112
Table 1:

Overall results

MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered130012
Author-centered0040
Rightsholders-centered00100
Author/Rightsholders-centered0070
Number of instances1302112
MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered130012
Author-centered0040
Rightsholders-centered00100
Author/Rightsholders-centered0070
Number of instances1302112

The findings associate the value gap argument with free riding, bad actors, and agrarian metaphors. However, the parent-child metaphor commonly found in copyright discussions was not identified. Moreover, it reveals that free riding and bad actors metaphors are exclusively associated with platforms. To illustrate this focus, one could consider the excerpt below:

‘At the heart of the value gap is the misapplication of legislative “safe harbor” rules that allow some services, including user upload services such as YouTube, effectively to circumvent the normal rules of music licensing and use copyrighted music content to build their busines without fairly remunerating rights holders.’134

The argument focuses on the role of platforms and how they circumvent the established rules. This motive was identified repeatedly.

The agrarian metaphor, on the other hand, focuses variously on authors, rightsholders, or both. While this focus could be grouped, it is helpful to differentiate between authors and other creative market intermediaries. This distinction reveals that other interests are frequently grouped with authors and, in their fashion, free ride on the morality of the author’s sentiment to reap the rewards. One such illustration can be observed below:

‘However, as a result of a critical distortion in the market, a large share of music consumption on digital platforms today is not fairly remunerating artists and investors in music.’135

The focus of the argument is not only on artists but also the investors in music. Nonetheless, one should note that this tendency surfaced more in the industry reports as, e.g., the impact assessment uses only the umbrella term of rightsholders.

To provide even more detail, the distinction can be made between industry and EU documents (Table 2):

Table 2:

Industry documents

MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered100011
Author-centered0000
Rightsholders-centered0040
Author/Rightsholders-centered0050
Number of instances100911
MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered100011
Author-centered0000
Rightsholders-centered0040
Author/Rightsholders-centered0050
Number of instances100911
Table 2:

Industry documents

MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered100011
Author-centered0000
Rightsholders-centered0040
Author/Rightsholders-centered0050
Number of instances100911
MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered100011
Author-centered0000
Rightsholders-centered0040
Author/Rightsholders-centered0050
Number of instances100911

One should note that industry more frequently appeals to the free riding and bad actors metaphors. Thus, the industry focuses predominantly on platforms’ role in online copyright.136 Where the agrarian metaphor is employed it never focuses only on authors, but instead either groups the interest of other intermediaries with it, or highlights rightsholders as a bundle (Table 3 further below).

Table 3:

EU documents

MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered3001
Author-centered0030
Rightsholders-centered0060
Author/Rightsholders-centered0020
Number of instances30111
MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered3001
Author-centered0030
Rightsholders-centered0060
Author/Rightsholders-centered0020
Number of instances30111
Table 3:

EU documents

MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered3001
Author-centered0030
Rightsholders-centered0060
Author/Rightsholders-centered0020
Number of instances30111
MetaphorFree ridingParent-childAgrarianBad actors
Platform-centered3001
Author-centered0030
Rightsholders-centered0060
Author/Rightsholders-centered0020
Number of instances30111

The EU document, in comparison, shows a predominant appeal to the agrarian metaphor with minimal use of free riding or the bad actors metaphor. The documents are diplomatic, as the European Commission does not seek to cast platforms in a negative light. The agrarian metaphor focuses more on rightsholders while occasionally differentiating authors and rightsholders.

The findings above serve as the basis to argue that the value gap argument is based on the property narrative of copyright that emphasizes copyright control.

d) Incentive level of value gap

Here, one must also acknowledge that the value gap does reflect the incentive paradigm to a limited degree.137 In several instances, the incentive function of copyright is highlighted. For example, IFPI argues:

‘WHY IS IT A PROBLEM?

The music ecosystem is dependent on record companies investing in music and in artists. Music must be valued fairly and those that invest in it and create it must be properly remunerated. If services that are not recognising the true value of music are allowed to attract users from other, fairly licensed, services and therefore drain revenues from the system, then it becomes unsustainable.’138

This argument revolves around the return of investments. Nonetheless, the argument does not focus on the authors but seeks returns for artists and those investing in music, i.e., music industry intermediaries.

Despite this, a certain level of the incentive paradigm is relevant here, considering the sustainability of future creative work. However, even within the incentive paradigm, the focus is on reinforcing control of compensation. The fundamental argument persists that rightsholders require control to prevent unauthorized usage.

However, one might not find these notions of incentive systems put forward by the industry particularly persuasive as they do not promote a sustainable market and the creation of works of copyright but sustainable business models for creative market intermediaries. This observation aligns with Elkin-Koren’s and Salzberger’s observation that the creative industry hides its motives behind the authors.139

The European Commission puts forward the incentive arguments more frequently, e.g.:

‘This in turn risks constraining the sustainable growth of digital content markets and future investment in content creation and production.’140

or

‘SOCIAL IMPACTS

There could be an indirect negative impact on cultural diversity in the long term if the revenues generated for the commercial use of copyright protected content cannot sustain the production of new (and diverse) content.’141

Incentive considerations put forward by the European Commission are more elaborated and considerate of the balance of the copyright system. However, incentive considerations surface less frequently and supplementary compared to the proprietary paradigm.

IV. Rules in the online copyright arena

This part analyses the framework of property and liability rules in the context of online copyright. The connecting thread is again the aspect of control and compensation represented by property and liability rules, respectively.

This part examines how property and liability rules were reflected in online copyright, focusing on online platforms and the new framework of Art. 17 is considered. The section begins with assessing factors influencing the decision to adopt property or liability rules, specifically regarding safe harbor regulations. Additionally, it briefly introduces the legal framework of Art. 17 before delving into the characterization of Art. 17 regarding property and liability rules.

1. Choice of rules and online copyright

The choice between property and liability rules is of specific interest. Both property and liability rules can efficiently protect rights. However, some forms of protection are more fitting depending on the context.

Calabresi and Melamed preferred liability rules specifically where considerable transaction costs142 are present.143 The argument relates to Coasean economics as transaction costs obstruct efficient market bargaining and transacting.144 In such a situation, a liability rule that enables bypassing market transacting by objectively determined compensation offers an efficient solution.145 Property rules usually relate to real property and ownership, while liability rules are associated with contractual rights.146

As for the online environment, Lemley and Weiser highlight the following:

‘Property rules designed with land in mind often do not translate well to the more fluid environment of the Internet, where they have the potential to impose significant transaction costs and prevent the efficient functioning of the Internet.’147

Lemley and Weiser recognize the problem that intellectual property rights are vaguely defined when compared to, e.g., real property, where physical boundaries are much clearer.148 The online environment produces additional considerations. Respectively, applying property rules to intellectual property may result in significant error costs, i.e., where enforcement of property rules extends to lawful use and the targeted infringement.149 A practical example is frequently noted on online platforms where take-down requests target legal content.150

Additionally, the internet constitutes an aggregated network and produces an additional risk of hold-out behavior, i.e., the party strategically restricts market transactions to raise its value.151 Where buyers must aggregate from a number of different rightsholders to produce reasonable results, there is a risk that some rightsholders will engage in a hold-out.152 In simpler terms, rightsholders may refuse to sell in order to demand a disproportionate share of the revenue. The aggregating project will be impossible if many rightsholders engage in such behavior.153

To illustrate the previous point, online platforms aggregate access to many copyright-protected works. Subject to specific legislation such as CDSM, there is an obligation to seek licenses from rightsholders. This aggregation could be impossible should a significantly large market share of rightsholders engage in hold-out behavior.

Lemley and Weiser claim that delineating the scope of property rules in online copyright is challenging.154 The first problem is the internet’s vast and dispersed nature, which makes automated copying and searching regular.155 Automation can potentially cause an infringement without the intermediary’s voluntary decision.156 Property rule has the negative potential of restricting a substantial part of non-infringing use and the infringement itself.157

The second issue is the nature of defendants, where copyright is most commonly invoked against parties who do not directly infringe but only facilitate an infringement.158 In these instances, it proves challenging to tailor appropriate injunctions targeting only the infringing uses but leaving the non-infringing unaffected.159 Where enforcement of property rules leads to shutdown of non-infringing use, the property rule proves inappropriate.160

For stated reasons, Lemley and Weiser argue that liability rules should play a role in copyright online in cases where property rules have detrimental consequences.161 The liability rule limits the negative impacts of the property rule and enables non-infringing uses.

Liability rules, however, should not be perceived as a one-size-fits-all solution. Their efficiency depends on their complexity as they must be managed by authorities such as courts or collective management organizations (‘CMOs’). The complexity of liability rules’ access regime hinders multiple parties having simultaneous access, whether information to tailor its scope is readily available and apparent, and how dynamic the set of relationships and technology is addressed.162 However, the efficiency of liability rules is not the focus of this article.163

2. Property rules and liability rules applied to safe harbors

In the following section, the focus shifts towards regulating safe harbors in online copyright and using the property and liability rules framework in their analysis. It explores the notions of property and liability rules when applied to safe harbor regulation, and its insight is applied in the following parts.

As highlighted before, one of the core elements of property and liability rules is whether transactions can be done voluntarily and what remedies are available against infringers. Injunctive relief is associated with property rules, while compensation relief is characteristic of liability rules.

Husovec also highlighted this element:

‘An infringement of an intellectual property right is an attempt to bypass the market. If it can be followed by an injunction prohibiting such future acts, the right is subject to a property rule.’164

When considering the safe harbor regulation, it is crucial to analyze what remedies it offers rightsholders in order to establish which category of rules apply. In other words, if the safe harbor regime enables control over work and its use, it would be deemed a property rule. If, on the other hand, the rightsholder loses the ability to control work and its uses and can apply only for compensation, the regime would be deemed a liability rule.

Online copyright, however, is still more complicated as infringement enables different claims simultaneously. Husovec notes that a situation where the ‘holder of an entitlement can collect compensation for past infringement together with an injunction for the future’ is a framework of mixed rule with dominant property rule.165

Husovec considers the cooperation claims and whether they belong under property or liability rules.166 These cooperation claims can be illustrated by the intermediary’s obligations under Art. 14 of the eCommerce Directive that prescribe, e.g., the removal obligation. Husovec concludes that cooperation claims can fall under both categories depending on their consequences.167 If compliance is a precondition to operating in the first place, such a claim behaves as a property rule.168 Should non-compliance only trigger compensation proceedings, it acts as a liability rule.169 Husovec concludes that whether the cooperation claim is a property, or a liability rule depends on how countries construe such claims.170

3. Article 17 in focus

The following part seeks to answer whether Art. 17 is an example of a property or liability rule. It briefly introduces Art. 17 and the elements one must understand for the following analysis. Then, the article considers various aspects of Art. 17 to determine the overall applicability of the property or liability rules framework.

The following part also fits well within Lessig’s modalities of regulation.171 It explores the legal framework of Art. 17 as part of the legal regulatory framework. However, it goes beyond this, and additionally explores the market ordering as another equally significant source of regulation. The complete picture of Art. 17 can be captured only by analysis of all four sources of regulation: the law, markets, technology, and social norms. The following part combines the study of law and markets to understand better how Art. 17 operates.

a) Briefly on Art. 17

Article 17 applies to a specific type of online service provider known as OCSSP, which are platforms that store and provide public access to large amounts of copyrighted works or other protected content uploaded by their users.

The core elements of the definition are (i) ‘provider of an information society service’; (ii) ‘of which the main or one of the main purposes is to store and give the public access to a large amount of copyright-protected works or other subject-matter uploaded by its users’; and (iii) ‘which it organizes and promotes for profit-making purposes.’ While Art. 2(6) excludes various information society services, it includes, as a general rule, popular platforms such as YouTube, Facebook, Instagram, TikTok and Twitch.172

The critical principle of Art. 17 is the concept of communication to the public, which refers to using copyrighted content in a public way via digital technology. OCSSPs are considered to engage in this act of communication to the public when they make copyrighted works available to their users.173

Article 17 requires OCSSPs to obtain legal authorization or license to use copyrighted works,174 which means they must obtain permission to communicate works to the public. This is a significant change from the previous eCommerce Directive framework, where platforms were not directly involved in the use of copyrighted works.175

Rightsholders can still refuse authorization to OCSSPs. Article 17 introduces a new ‘safe harbor’ provision to address the resulting liability for copyright infringement.176 To benefit from this safe harbor and avoid liability, OCSSPs must fulfill certain obligations.177 These include using best efforts to obtain authorization from rightsholders, the take-down obligation of removing infringing content when notified, and the stay-down obligation of preventing the future upload of reported content.178 These obligations are central to further analysis as they provide injunctive claims over the use of information goods. They essentially enable rightsholders to exert control over the uses of works of copyright, including imposing filtering obligations upon OCSSP to prevent uploads in the future.

Finally, Art. 17 provides several balancing elements, such as a more attainable safe harbor regime for startups and several forms of user protection. Most importantly, one must note Art. 17(7), which seeks to reduce overblocking, and Art. 17(9), which prescribes a complaint and redress mechanism in the event of take-downs.

DSA is another source of balancing measures that could significantly impact Art. 17 application. While DSA is out of the scope of this article, DSA measures can be applied even within CDSM, as elaborated by Quintais and Schwemer.179

Unfortunately, the ongoing research so far showcases that compliance with balancing measures is low. Specifically, Mezei and Harkai’s findings suggest that platforms failed to adapt their policies and accommodate Art. 17(4), (7) and (9).180 Policies analyzed showcased that OCSSPs employ misleading terminology, asymmetric terms and conditions and diverge from CDSM

‘in multiple ways, especially regarding the contractual bypassing of liability under Article 17(4) CDSM Directive and the lack of introduction of end-user safeguards in line with Article 17(7) and (9) CDSM Directive’181

b) CJEU on Art. 17

Take-down and stay-down systems are limited by Art. 17(7), which prescribes that safe harbor compliance cannot lead to the unavailability of non-infringing works. Article 17(7) restricts take-down and stay-down systems when exceptions and limitations are assessed.182 Quotation, criticism, review, caricature, parody and pastiche are prescribed as specific mandatory exceptions and limitations.183

ACR technology was the center of Poland’s dispute over Art. 17, where it claimed an infringement of the right to freedom of expression and information under Art. 11 of the Charter.184 The CJEU admitted that Art. 17 might restrict rights guaranteed by the Charter.185 However, the Court ruled that Art. 17 provides appropriate safeguards to ensure a fair balance between the right to expression of information and the right to intellectual property.186

The CJEU, most importantly, limited the use of ACR systems just to situations where it can distinguish adequately lawful and unlawful content:

‘[a] filtering system which might not distinguish adequately between unlawful content and lawful content, with the result that its introduction could lead to the blocking of lawful communications, would be incompatible with the right to freedom of expression and information, guaranteed in Article 11 of the Charter, and would not respect the fair balance between that right and the right to intellectual property.’187

The level of adequacy was not sufficiently specified. OCSSPs, moreover, have limited stay-down preventive obligations:

‘providers of those services cannot be required to prevent the uploading and making available to the public of content which, in order to be found unlawful, would require an independent assessment of the content by them in the light of the information provided by the rightholders and of any exceptions and limitations to copyright.’188

CJEU, consequently, attempted to limit the negative impacts of ACR technology, but only further practice can reveal the actual negative impact.189 Considering the existing data the risk of overblocking and associated extensive control would still seem potent.190

c) Article 17 as property rule

First, it must be noted that Art. 17 prescribes an authorization obligation to the OCSSPs. The entitlement is allocated to the rightsholders who exercise control. If standard licensing occurs, the price is determined based on the subjective evaluation of the rightsholder who sets the price. This signals the property rule nature of Art. 17.

To consider the property and liability rule, however, one must also explore the legal consequences of bypassing the entitlement provided under Art. 17(1). Should an infringement occur, the OCSSP is held liable for breach of copyright, subject to national rules. However, Art. 17(4) provides for a safe harbor that prescribes additional compliance requirements. The focus below is specifically on the take-down and stay-down obligations.

The first degree of control is the take-down system that enables rightsholders to request the removal of infringing content. The second is the stay-down obligation that allows preventive control over future infringing uploads.

As Husovec argues, the preventive obligation and compensation signify a dominant property rule nature.191 Similarly, if compliance is necessary, nature tends towards property rule.192 The ease of obtaining these remedies represents the property rule nature. The preventive obligation is an element of Art. 17(4) safe harbor and should be performed automatically without any interference by courts as a matter of compliance if OCSSPs wish to benefit from the safe harbor.

If safe harbor is breached, rightsholders are entitled to a compensation claim. Nothing restricts negotiations between rightsholders and OCSSPs on its value. However, lengthy court proceedings are necessary if they fail to find an agreement or possible settlement. In these proceedings, value is determined on objective criteria set in the Directive on the enforcement of intellectual property rights, such as the amount of royalties or fees that would have been due, negative economic consequences, or lost profits.193 Only a limited number of subjective considerations are enabled under the Directive, such as the considerations of the moral prejudice caused.194 The compensation claim is thus of a mixed nature, with the dominant liability rule compensating objective value.

Subsequently, Art. 17 grants rightsholders a mixed entitlement protected by property and liability rule where the property rule is dominant. Foremost, the licensing obligation signals property rule character. In the case of an involuntary transfer, obtaining the injunction is a matter of compliance, while the compensation claim is not. While the compensation is predominantly a liability rule, the injunctive character of take-down and stay-down obligations signals a property rule nature. Moreover, in practice, the property rule injunction is readily accessible, while the liability rule compensation is a matter of lawsuit.

d) Private ordering and liability rules

The previous part considered the nature of legal rule in isolation. The following part, however, introduces additional considerations of market context. In other words, the next part considers Art. 17 as a property or liability rule in the real market. The point of focus is private ordering mechanisms employed in the markets.

Here, it is essential to acknowledge that the copyright market consists of various submarkets that employ vastly different organizing mechanisms. For the following part, this article differentiates between collectively organized markets, such as the music industry, and individually organized markets, such as the movie195 or video game196 industries.197 The point of difference is the organizational aspect within the creative industries themselves.

In collectively organized markets, vast numbers of individual artists can create with minimal investments, and their interests are aggregated via a small number of third-party proxies known as CMOs. Individually organized markets, on the other hand, consist of a small number of large rightsholders who enable the creation of high-investment works and aggregate rights to individual works, making up the larger work of copyright. These large rightsholders can operate the market without additional external intermediaries aggregating high volumes of rights.198

Focusing first on the individual organized markets, private ordering enables these rightsholders to control the uses of their works effectively. In combination with appropriate technology, individually organized markets can effectively exercise a high degree of control as those setting the terms of private ordering wield significant market power.199 These strong private ordering measures, combined with Art. 17, signify a strong property rule basis where workings of the market further strengthen the property rule nature of Art. 17.

However, collectively organized markets present a unique set of challenges that require different modes of organization, namely CMOs, which can aggregate large numbers of rights and lower transaction costs of obtaining a license or stemming from hold-out behavior.200 The degree of control remains strong, though the party in control differs. While in individually organized markets, the large rightsholders are in charge, in collectively organized markets they depend on CMOs. However, one should acknowledge that even collectively organized markets may differ, and different modes of organization exist. Artists may exercise their rights individually and opt out of CMOs.201

One must also comprehend the CMO’s inner workings, specifically the price-setting and revenue distribution mechanisms, to understand the issue. The nature of the property rule dictates that individual holders can determine subjectively the value of their property, and no party can bypass their valuation.202 CMOs, however, pool holders’ rights and value them differently. The price-setting mechanism can be described as a collectively determined price where members agree and continue to readjust the price for licensees.203 Moreover, the revenue distribution depends on internally agreed rules on how to split the gross revenue.204 CMOs produce an internal distribution key that enables revenue distribution based on objective criteria such as the total number of uses of specific work, time of day, or user impact.205

The CMOs’ workings indicate a liability rule character based on these observations. According to Merges, a liability rule best accommodates the needs of industries with a high volume of transactions.206 The CMOs differ from traditional examples of liability rules, such as compulsory licensing schemes, because they are contracted. In other words, these organizations are private liability rule organizations where property rule holders contract into a liability rule scheme.207

Consequently, CMOs present a case of liability rule. While rightsholders are allocated property rule entitlement in copyright, they opt to establish a liability rules scheme.208 Members of CMOs effectively lose control over specific uses of their work. Their compensation is determined based on objective criteria. These facts imply a strong liability rule character of collectively organized markets. The resulting state tends towards a liability rule, even when built around Art. 17 as a dominant property rule.

In conclusion, private ordering mechanisms lead to two different outcomes. Individually organized markets leverage Art. 17 character of property rule and exhibit property rule nature. Collectively organized markets, however, build upon a contracted liability rule to leverage the property rule nature of Art. 17. As such, markets shift the character of legal rule towards the dominant liability rule as the complex picture must also weigh the distribution of rights and compensation mechanisms between rightsholders and authors.

e) Control, compensation, and inconsistencies

The previous analysis concludes that the property narrative was firmly embedded in the value gap argument. Specifically, it showcased the use of property metaphors based on the property perspective of copyright. Subject to previous analysis, Art. 17 shows the dominant property rule character of Art. 17. When the doctrinal analysis is supplemented by economic analysis that accounts for the market’s organization, the conclusion shifts towards liability rule organized markets, layered over a property rule-based legal framework.

This leads to a notable inconsistency. The central assumption here is that framing the value gap issue within a property narrative highlighting the control aspect should logically lead to establishing property rules that provide robust protection. In other words, emphasizing the importance of control and enforcement should lead to a framework accommodating absolute control of authors over the uses of their works.

The inconsistency arises from the observation that despite being a vocal proponent of control-based arguments, the music industry operates on a liability rule model that offers authors ‘compensation without control’.209 In other words, the industry’s argument for strong control does not align with the actual outcome of compensation.

This doesn’t imply that the outcome is undesirable. On the contrary, Art. 17 may result in fair compensation. Most importantly, it enables small authors to benefit from Art. 17’s legal design. As discussed by Husovec and Quintais, big rightsholders are the ones largely benefiting from Art. 17, while it simultaneously harms smaller ones.210 Liability rule-based collective management organizations become crucial in promoting compensation and access.

Adopting liability rule mechanisms is a large benefit that enables fairness in compensation and encourages access. They have the potential to level the playing field, especially for those minor authors who can gather remuneration.211 Furthermore, by aligning with free culture principles, these rules can foster a more open and accessible creative environment, benefiting the wider public.

At the same time, current research suggest that the property rule character of Art. 17 is not sufficiently balanced by a protection of users that would promote access. It follows that liability rule mechanisms might also promote user welfare. While a significant portion of Art. 17 regulates protection of users, the empirical studies currently largely suggest ignorance and inaction of rightsholders and platforms alike.212 This may however change with time and with implementation of DSA in their businesses.

While the detailed design of these liability rules is beyond the scope of this article, references to the work of scholars like Peukert, Litman, Hugenholtz, and Quintais can provide valuable insights.213 However, it is crucial to consider the legal constraints imposed by international treaties as some compensation mechanisms would also require their amendments.214 That does not preclude solutions by other regulatory means such as technology, market, or social norms.

Finally, the inconsistency within the music industry arguments is somewhat unnecessary. The industry hides behind authors, advocating for greater control in their name. In reality, authors often lack such control and merely benefit from compensation. However, applying liability rules emerges as a positive outcome, fostering access and compensation. Discussing issues from the angle of prioritizing compensation and access over control and exclusivity may lead to innovative legislative solutions that diverge from the conventional property toolbox.215

V. Concluding remarks

Coming back to the issue of control and compensation, the article tells the story of how Art. 17 came to emphasize control as a primary mechanism. The argument, however, remains that the compensation aspect was neglected. As such, the article argues that designing a regulatory framework that leverages the strengths of liability rules can be beneficial. Evidence of such an outcome can be found in the music industry, where small authors would be neglected without the support of the liability rule organization of CMOs.

This article consists of two elements. First, it analyzed the value gap argument and its roots in the proprietary copyright paradigm, a conclusion supported by qualitative content analysis of prominent Art. 17 legislative process documents. The content analysis revealed an emphasis on control through property metaphors.

The second element is the analysis of Art. 17. The framework used is property and liability rules developed by Calabresi and Melamed.216 Property rules can be characterized as ‘absolute permission rules’217 where holders are given absolute control over the use and value of their works. Property rules emphasize the aspect of control and the culture of exclusivity. On the other hand, liability rules offer only a limited degree of control and allow third parties to bypass the holders for compensation based on objective criteria.218 Liability rules emphasize compensation and the access culture.

From a purely normative perspective, Art. 17 has a mixed character with a dominant property rule. In other words, it grants rightsholders greater control. Nonetheless, the legal framework is operated in a real market that should also be considered. Here, the analysis branches into two conclusions. In the movie or video game industries – considered individually organized – the private ordering schemes tend towards property rule character.

However, in the music industry – which can be observed as collectively organized – the character of the outcome drastically changes. Authors enter contracted liability rule schemes known as collective management organizations. Such liability rules lead to the situation of ‘compensation without control’.219

This outcome of the liability rule embraces the compensation and access culture. Moreover, it improves the position of small authors. At the same time, it also reveals the inconsistency of the value gap argument. While the music industry argued for more control, authors effectively lost control. The beneficiaries of Art. 17 are the creative market intermediaries instead of the authors. That confirms that copyright caters to the interests of the creative industry and establishes mechanisms to protect their investments.

Funding and acknowledgment

This article was written at Masaryk University as part of the project n. MUNI/A/1172/2022 ‘Fostering Internationally Oriented Scientific Results of PhD Students in Intellectual Property Law’.

Footnotes

1

Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC (hereinafter: Directive (EU) 2019/790).

2

For the scale of the discussion, see, eg, Sophie Stalla-Bourdillon and others, ‘An Academic Perspective on the Copyright Reform’ (2017) 33 Computer Law & Security Review 3; Jan Bernd Nordemann, ‘Art. 17 DSMCD a Class of Its Own? How to Implement Art. 17 Into the Existing National Copyright Acts – Also a Comment on the Recent German Discussion Draft’ (Social Science Research Network 2020) SSRN Scholarly Paper ID 3649626 <https://papers.ssrn.com/abstract=3649626> accessed 18 August 2022; Christina Angelopoulos and João Pedro Quintais, ‘Fixing Copyright Reform: A Better Solution to Online Infringement’ (2019) 10 JIPITEC 147-72.

3

Rec 61 Directive (EU) 2019/790 (n 1).

4

Martin Husovec and João Pedro Quintais, ‘Too Small to Matter? On the Copyright Directive’s Bias in Favour of Big Right-Holders’ in Jonathan Griffiths and Tuomas Mylly (eds), Global Intellectual Property Protection and New Constitutionalism: Hedging Exclusive Rights (OUP 2021) 220.

5

In simple terms, property rules give exclusive control over rights and deal with unwanted transfers through enforcement. Liability rules, on the other hand, provide weaker control and offer compensation for such transfers. See Guido Calabresi and A Douglas Melamed, ‘Property Rules, Liability Rules, and Inalienability: One View of the Cathedral’ (1972) 85 Harvard Law Review 1092.

6

For full-scale account see Christina Angelopoulos, ‘Comparative National Implementation Report: Articles 15 & 17 of the Directive on Copyright in the Digital Single Market’ <https://informationlabs.org/wp-content/uploads/2023/12/Full-DCDSM-Report-Dr-Angelopoulos.pdf> accessed 21 April 2024.

7

See, eg, Bernt Hugenholtz and João Pedro Quintais, ‘Towards a Universal Right of Remuneration: Legalizing the Non-Commercial Online Use of Works’ in Bernt Hugenholtz (ed), Copyright reconstructed: rethinking copyright’s economic rights in a time of highly dynamic technological and economic change (Wolters Kluwer 2018); or Alexander Peukert, ‘A Bipolar Copyright System for the Digital Network Environment’ in Alain Strowel (ed), Peer-to-Peer File Sharing and Secondary Liability in Copyright Law (Edward Elgar Publishing 2009).

8

Calabresi and Melamed (n 5).

9

Mark Lemley and Phil Weiser, ‘Should Property or Liability Rules Govern Information?’ <https://osf.io/vgf7p> accessed 23 January 2023.

10

Martin Husovec, ‘Accountable, Not Liable: Injunctions Against Intermediaries’ 40-43 (2 May 2016) <https://papers.ssrn.com/abstract=2773768> accessed 7 February 2023.

11

For similar development pre-CDSM see P Bernt Hugenholtz, ‘Copyright in Europe: Twenty Years Ago, Today and What the Future Holds’ (2013) 23 Fordham Intellectual Property, Media and Entertainment Law Journal 503.

12

Such a tendency was extensively observed by Patry. See William Patry, Moral Panics and the Copyright Wars (1st edn, OUP, USA 2009) 26 ff.

13

ie, all four regulatory modalities. See Lawrence Lessig, Code 2.0 (Version 2.0, Basic Books 2006).

14

Calabresi and Melamed (n 5).

15

Generally, platforms that allow users to upload and share content online, such as social media platforms or video-sharing websites. See art 2(6) CDSM.

16

art 33 ff Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a Single Market For Digital Services and amending Directive 2000/31/EC (Digital Services Act) [2022] OJ L277/1.

17

For more details on various terminology, see João Pedro Quintais and others, ‘Copyright Content Moderation in the EU: An Interdisciplinary Mapping Analysis’ 44 ff (1 August 2022) <https://papers.ssrn.com/abstract=4210278> accessed 10 July 2023.

18

Lessig (n 13) 185.

19

Alexander Peukert, ‘Copyright and the Two Cultures of Online Communication’ (9 July 2015) <https://papers.ssrn.com/abstract=2628565> accessed 6 January 2024.

20

ibid 2.

21

ibid 3.

22

Calabresi and Melamed (n 5).

23

Rochelle Dreyfuss, ‘Expressive Genericity: Trademarks as Language in the Pepsi Generation’ (2014) 65 Notre Dame Law Review 405.

24

Peukert (n 19) 2.

25

ibid 8.

26

Lawrence Lessig, The Future of Ideas: The Fate of the Commons in a Connected World (1st edn, Random House 2001) 201.

27

Lawrence Lessig, Free Culture: The Nature and Future of Creativity (Reprint, Penguin Books 2005) xiv.

28

Hugenholtz and Quintais in Hugenholtz (n 7).

29

João Pedro Quintais, Copyright in the Age of Online Access: Alternative Compensation Systems in EU Law (Wolters Kluwer 2017).

30

Daniel J Gervais, (Re)Structuring Copyright: A Comprehensive Path to International Copyright Reform (Edward Elgar Publishing 2017) 191 ff.

31

Peukert in Strowel (n 7).

32

Landes and Posner, in their later writings, shifted towards the proprietary intellectual property paradigm. See Richard A Posner and William M Landes, ‘Indefinitely Renewable Copyright’ (2003) 70 The University of Chicago Law Review 471.

33

Niva Elkin-Koren, ‘It’s All About Control: Rethinking Copyright in the New Information Landscape’ in Niva Elkin-Koren, Neil Netanel and C Edwin Baker (eds), The commodification of information (Kluwer Law International 2002) 80.

34

Hugenholtz and Quintais in Hugenholtz (n 7) 1.

35

Lessig, Free Culture: The Nature and Future of Creativity (n 27) xiv.

36

Quintais (n 29) 3.

37

Peukert in Strowel (n 7) 189.

38

ibid, Hugenholtz and Quintais in Hugenholtz (n 7); or Quintais (n 29).

39

Calabresi and Melamed (n 5).

40

ibid 1092.

41

Louis Kaplow and Steven Shavell, ‘Property Rules versus Liability Rules: An Economic Analysis’ (1996) 109 Harvard Law Review 713, 715.

42

Calabresi and Melamed (n 5) 1092.

43

James E Krier and Stewart J Schwab, ‘Property Rules and Liability Rules: The Cathedral in Another Light’ (1995) 70 New York University Law Review 440, 443 ff.

44

Lemley and Weiser (n 9) 786.

45

ibid.

46

Lessig, The Future of Ideas: The Fate of the Commons in a Connected World (n 26) 201.

47

Lemley and Weiser (n 9) 786.

48

Krier and Schwab (n 43) 443 ff.

49

For national study, see eg, Ondřej Woznica, ‘Legislative pitfalls: Case study of article 17 DSM Directive RIA in the Czech Republic’ (Jusletter IT, 27 April 2023) <https://jusletter-it.weblaw.ch/issues/2023/27-April-2023/legislative-pitfalls_2df5c8275f.html__ONCE&login=false> accessed 24 July 2023.

50

William Fisher, ‘Theories Of Intellectual Property’ in Stephen Munzer (ed), New Essays in the Legal and Political Theory of Property (CUP 2001) 174.

51

Annette Kur, Thomas Dreier and Stefan Luginbühl, European Intellectual Property Law: Text, Cases and Materials (2nd edn, Edward Elgar Publishing 2019) 5 ff.

52

Fisher in Munzer (n 50) 176.

53

Niva Elkin-Koren and Eli Salzberger, The Law and Economics of Intellectual Property in the Digital Age: The Limits of Analysis (Routledge, Taylor & Francis Group 2013) 53.

54

ibid 69.

55

eg, the Napster case and surrounding controversies. Patry (n 12) 8 ff.

56

Elkin-Koren and Salzberger (n 53) 57 ff and 115 ff.

57

William M Landes and Richard A Posner, ‘An Economic Analysis of Copyright Law’ (1989) 18 The Journal of Legal Studies 326.

58

For criticism of such an approach, see Alexander Peukert, ‘Intellectual Property as an End in Itself?’ (9 February 2010) <https://papers.ssrn.com/abstract=1550001> accessed 6 January 2024.

59

Landes and Posner, ‘An Economic Analysis of Copyright Law’ (n 57) 325.

60

Peter S Menell, ‘Tailoring Legal Protection for Computer Software’ (1987) 39 Stanford Law Review 1329.

61

Mark A Lemley, ‘Property, Intellectual Property, and Free Riding’ (1 May 2007) <https://papers.ssrn.com/abstract=982977> accessed 8 May 2023.

62

For overview, see Elkin-Koren and Salzberger (n 53) 118 ff, 134 ff.

63

Lemley (n 61) 1031.

64

Jessica Litman, ‘What We Don’t See When We See Copyright As Property’ (2018) 77 The Cambridge Law Journal 550.

65

Lemley (n 61) 1033.

66

ibid 1031-032.

67

ibid 1046 ff.

68

ibid 1032.

69

Patry (n 12) xvii-xviii.

70

ibid 26 ff.

71

ibid 103.

72

ibid 124.

73

ibid 124 ff.

74

ibid 124.

75

Lemley (n 61); Patry (n 12).

76

IFPI presents the value gap as a global problem and introduces the European solution later in the text. IFPI, ‘Global Music Report 2017: Annual State of the Industry’ 24 ff <https://www.musikindustrie.de/fileadmin/bvmi/upload/06_Publikationen/GMR/GMR2017_press.pdf> accessed 30 April 2023.

77

William F Shughart and Diana W Thomas, ‘Interest Groups and Regulatory Capture’ in Roger D Congleton, Bernard Grofman and Stefan Voigt (eds), The Oxford Handbook of Public Choice, Vol 1 (OUP 2019) <https://doi-org.libproxy.ucl.ac.uk/10.1093/oxfordhb/9780190469733.013.29> accessed 25 July 2023; or Glyn Moody, Walled Culture: How Big Content Uses Technology and the Law to Lock down Culture and Keep Creators Poor (BTF Press 2022) 165.

78

Patry (n 12) 69 ff.

79

Lemley (n 61).

80

Patry (n 12) 69.

81

Richard H Thaler and Cass R Sunstein, Nudge: Improving Decisions About Health, Wealth, and Happiness (Penguin Books 2009) 32 ff.

83

Lemley (n 61) 1032.

84

ibid 1040.

85

ibid 1041.

86

ibid 1042.

87

ibid 1044.

88

Mark A Lemley, ‘Rationalizing Internet Safe Harbors’ (2007) 6 Journal on Telecommunications and High Technology Law 101-02 <http://www.jthtl.org/articles.php?volume=6> accessed 27 July 2023.

89

Patry (n 12) 69.

90

ibid 70.

91

ibid.

92

ibid 77.

93

ibid 84.

94

John Locke, Two Treatises of Government (Reprint, Student edn, CUP 2012) Second Treatise, s 27; or Robert Nozick, Anarchy, State, and Utopia (Reprint, Blackwell 2012) 187-82; or for an overview Fisher (n 50) 171.

95

Patry (n 12) 78.

96

ibid.

97

ibid 84.

98

ibid 86.

99

ibid 87.

100

ibid 91.

101

For an analysis of the economics of online piracy, see, eg, João Pedro Quintais and Joost Poort, ‘The Decline of Online Piracy: How Markets – Not Enforcement – Drive Down Copyright Infringement’ (14 August 2019) <https://papers.ssrn.com/abstract=3437239> accessed 2 June 2023.

102

Specifically in the Czech Republic. Ivo Telec, ‘Není Informace Jako Informace’ [2014] Právní rozhledy 15.

103

IFPI, ‘Global Music Report 2016: Annual State of the Industry’ <https://www.musikindustrie.de/fileadmin/bvmi/upload/06_Publikationen/GMR/Global-Music-Report-2016.pdf> accessed 30 May 2023; IFPI (n 76).

104

Commission staff working document impact assessment on the modernisation of EU copyright rules Accompanying the document Proposal for a Directive of the European Parliament and of the Council on copyright in the Digital Single Market and Proposal for a Regulation of the European Parliament and of the Council laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes 2016.

105

According to Corporate Europe Observatory, 765 declared lobbying meetings occurred since November 2014 with a focus on copyright and where main actors came from across copyright industries. See Moody (n77) 129.

106

Matt Reynolds, ‘What Is Article 13? The EU’s Divisive New Copyright Plan Explained’ [2019] Wired 13 <https://www.wired.co.uk/article/what-is-article-13-article-11-european-directive-on-copyright-explained-meme-ban> accessed 27 August 2020.

107

eg, Stalla-Bourdillon and others (n 2); Nordemann (n 2); Angelopoulos and Quintais (n 2).

108

eg, Emma Woollacott, ‘EU Copyright Directive Passed - Upload Filters And All’ (Forbes, 2019) <https://www.forbes.com/sites/emmawoollacott/2019/03/26/eu-copyright-directive-passed-upload-filters-and-all/> accessed 26 August 2022; Reynolds (n 106) 13; Bruce Sterling, ‘Backstage at the European Copyright Wars’ (Wired, 2019) <https://www.wired.com/beyond-the-beyond/2019/03/backstage-european-copyright-wars/> accessed 27 May 2020; BBC Newsround, ‘EU Copyright Law: Your Memes and GIFs Are Safe’ <https://www.bbc.co.uk/newsround/47721090> accessed 26 August 2022.

109

See Twitch and YouTube’s call for action for users to contact their representatives and fight the CDSM. Shear Emmett, ‘From Our CEO: A Letter to Twitch Creators about Article 13’ <https://blog.twitch.tv/en/2018/12/05/from-our-ceo-a-letter-to-twitch-creators-about-article-13-16ae8ec41c70/> accessed 30 April 2023; ‘Article 13 - Burning Questions’ at 2:50 (Directed by YouTube Creators, 2019) <https://www.youtube.com/watch?v=TRYSxIYHS0w&t=0s> accessed 30 April 2023.

110

European Commission, ‘No, No, No, We Are Not Banning Memes!’ (Medium, 18 January 2019) <https://europeancommission.medium.com/https-medium-com-europeancommission-no-no-no-we-are-not-banning-memes-copyright-proposal-abf4d21f65d2> accessed 30 April 2023.

111

Annemarie Bridy, ‘The Price of Closing the “Value Gap”: How the Music Industry Hacked EU Copyright Reform’ (2020) 22 Vanderbilt Journal of Entertainment & Technology Law 326 ff; Michael Stedman, ‘Mind the Value Gap: Article 17 of the Directive on Copyright in the Digital Single Market’ 7 ff (1 September 2019) <https://papers.ssrn.com/abstract=3810144> accessed 14 February 2023.

112

IFPI (n 76) 25.

113

See MMF (Music Managers Forum), ‘Dissecting The Digital Dollar’ 65 <https://themmf.net/digitaldollar/> accessed 30 April 2023.

114

See footnotes 413 and 414 in Commission staff working document impact assessment on the modernisation of EU copyright rules (n 104).

115

MMF (Music Managers Forum) (n 113) 67.

116

IFPI (n 76) 25.

117

Notably, the actual text of the impact assessment does not use the term ‘value gap.’ It refers to the value gap only in footnotes. Commission staff working document impact assessment on the modernisation of EU copyright rules (n 104).

118

ibid ch 5.2.

119

Rec 61 CDSM.

120

Sharon Bar-Ziv, ‘A Content Analysis Approach to Intellectual Property Research’ in Irene Calboli and Maria Lillà Montagnani (eds), Handbook of Intellectual Property Research: Lenses, Methods, and Perspectives (OUP 2021) 475 <https://doi-org.libproxy.ucl.ac.uk/10.1093/oso/9780198826743.003.0031> accessed 19 March 2023.

121

Rubén Moreno-Bote and others, ‘Heuristics and Optimal Solutions to the Breadth–Depth Dilemma’ (2020) 117 Proceedings of the National Academy of Sciences 19799, 19799-19800.

122

MMF (Music Managers Forum) (n 113).

123

IFPI (n 76).

124

ibid.

125

Communication from the Commission to the European parliament, the Council, the European economic and social committee and the Committee of the regions a digital single market strategy for Europe 2015 (Digital single market strategy for Europe).

126

Communication from the Commission to the European parliament, the Council, the European economic and social committee and the Committee of the regions towards a modern, more European copyright framework 2015 (Towards a modern, more European copyright framework).

127

See footnotes 413 and 414 Commission staff working document impact assessment on the modernisation of EU copyright rules (n 104).

128

See the Commission’s considerations of IFPI in ibid footnotes 414 and 415.

129

Digital single market strategy for Europe (n 125).

130

Towards a modern, more European copyright framework (n 126).

131

Bar-Ziv (n 120) 479.

132

Patry (n 12) 69 ff; Lemley, ‘Property, Intellectual Property, and Free Riding’ (n 61).

133

As fairness can be associated with the agrarian metaphor. Patry (n 12) 84.

134

IFPI (n 76) 8.

135

ibid 22.

136

In an interview with Walled Culture, Trendacosta mentioned that the creative industry has even turned the negative sentiment towards large online companies into a weapon. See Moody (77) 120.

137

Elkin-Koren and Salzberger (n 53) 57 ff.

138

IFPI (n 76) 25.

139

Elkin-Koren and Salzberger (n 53) 69.

140

Commission staff working document impact assessment on the modernisation of EU copyright rules (n 104) c 5.2.1.

141

ibid 149.

142

ie, any costs incurred to carry out the transaction, including ex-ante and ex-post costs. Francesco Parisi, The Language of Law and Economics: A Dictionary (CUP 2013) 297.

143

Lemley and Weiser (n 9) 793.

144

The Coase theorem highlights two key points: firstly, in an ideal market without transaction costs, the market naturally finds the optimal distribution of goods and rights, regardless of initial legal entitlements. Secondly, in reality, markets are constrained by transaction costs, meaning outcomes are optimal only within specific initial conditions, like legal rights distribution, rather than universally. Hence, the legal framework sets the boundaries for market operations. See Ronald Coase, ‘The Problem of Social Cost’ (1960) 3 The Journal of Law & Economics 1-44.

145

Lemley and Weiser (n 9) 786.

146

ibid.

147

ibid 790.

148

ibid 793.

149

ibid 794.

150

For empirical analysis, see Daniel Kiat Boon Seng, ‘Copyrighting Copywrongs: An Empirical Analysis of Errors with Automated DMCA Takedown Notices’ (23 January 2015) 40 ff <https://papers.ssrn.com/abstract=2563202> accessed 2 June 2023.

151

Lemley and Weiser (n 9) 793.

152

ibid.

153

ibid.

154

ibid 800.

155

ibid.

156

ibid 801.

157

ibid 801.

158

ibid 802.

159

ibid.

160

ibid 803.

161

ibid 785.

162

ibid 809.

163

For more details, see ibid 813 ff.

164

Husovec (n 10) 41.

165

ibid.

166

ibid 42.

167

ibid.

168

ibid.

169

ibid.

170

ibid.

171

Lessig, Code 2.0 (n 13) 122.

172

Ondřej Woznica, ‘Video Game Streaming: How Poor Licensing Undermines Creators’ (2022) 5 Interactive Entertainment Law Review 35 <https://www-elgaronline-com.libproxy.ucl.ac.uk/view/journals/ielr/5/1/article-p32.xml> accessed 27 August 2022.

173

For further discussion on the nature of communication to the public, see Eleonora Rosati, Copyright in the Digital Single Market: Article-by-Article Commentary to the Provisions of Directive 2019/790 (OUP 2021) 324-327; Husovec and Quintais (n 4).

174

Rosati (n 173) 334.

175

Compare with The Pirate Bay CJEU ruling. Eleonora Rosati, ‘The CJEU Pirate Bay Judgment and Its Impact on the Liability of Online Platforms’ 2017 (39) EIPR 737-48 <https://papers.ssrn.com/abstract=3006591> accessed 30 January 2021.

176

art 17 (4) CDSM.

177

Rosati, Copyright in the Digital Single Market: Article-by-Article Commentary to the Provisions of Directive 2019/790 (n 173) 330-33.

178

Woznica, ‘Video Game Streaming: How Poor Licensing Undermines Creators’ (n 172) 37.

179

João Pedro Quintais and Sebastian Felix Schwemer, ‘The Interplay between the Digital Services Act and Sector Regulation: How Special Is Copyright?’ (2022) 13 European Journal of Risk Regulation 191.

180

Péter Mezei and István Harkai, ‘End-User Flexibilities in Digital Copyright Law – an Empirical Analysis of End-User License Agreements’ (2022) 5 Interactive Entertainment Law Review 2.

181

Péter Mezei and István Harkai, ‘Private Ordering Mechanisms of Platform Providers Prior to and After the Implementation of Art. 17 CDSM Directive’ (Kluwer Copyright Blog, 26 September 2022) <http://copyrightblog.kluweriplaw.com/2022/09/26/private-ordering-mechanisms-of-platform-providers-prior-to-and-after-the-implementation-of-art-17-cdsm-directive/> accessed 13 March 2024.

182

Quintais and others (n 17).

183

ibid 105.

184

Case C-401/19 Republic of Poland v European Parliament and Council of the European Union ECLI:EU:C:2022:297, paras 23-24.

185

ibid paras 54-55.

186

ibid para 98.

187

ibid para 86.

188

ibid para 90.

189

ibid paras 86, 90.

190

Paul Keller, ‘YouTube Copyright Transparency Report: Overblocking Is Real’ (Kluwer Copyright Blog, 9 December 2021) <http://copyrightblog.kluweriplaw.com/2021/12/09/youtube-copyright-transparency-report-overblocking-is-real/> accessed 15 March 2024; YouTube, ‘Copyright Transparency Report’ (blog.youtube, 2021) <https://blog.youtube/news-and-events/access-all-balanced-ecosystem-and-powerful-tools/> accessed 10 January 2024.

191

Husovec (n 10) 41.

192

ibid 42.

193

art 13(1) Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights 2004.

194

ibid art 13(1)(a).

195

For an argument why the movie industry should not be subjected to compulsory licensing as a form of liability rule, see Scott Martin, ‘Alternative to Collective Management: DRMs and Other Business/Technology Options Symposium: Collective Management of Copyright: Solution or Sacrifice’ (2010) 34 Columbia Journal of Law & the Arts 843.

196

For an analysis of video game market ordering mechanisms, see Woznica, ‘Video Game Streaming: How Poor Licensing Undermines Creators’ (n 172).

197

For an analysis of individual or collective exercise of rights, see Daniel Gervais, ‘Keynote: The Landscape of Collective Management Schemes Symposium: Collective Management of Copyright: Solution or Sacrifice’ (2010) 34 Columbia Journal of Law & the Arts 591, 592 ff.

198

In this sense they operate in the more traditional firm setting. Ronald Coase, ‘The Nature of the Firm’ (1937) 4 Economica 386.

199

Elkin-Koren and Salzberger (n 53) 163.

200

For a general overview, see, eg, Rudolf Leška, ‘Sync That Tune! The Role of Collective Management of Rights in Film Production and Distribution’ in Petr Szczepanik and others (eds), Digital Peripheries: The Online Circulation of Audiovisual Content from the Small Market Perspective (Springer International Publishing 2020).

201

In some cases, the collective management with the extended effect would even require an explicit opt-out from artists to exercise rights individually. See art 12 CDSM.

202

Robert P Merges, ‘Contracting into Liability Rules: Intellectual Property Rights and Collective Rights Organizations’ (1996) 84 California Law Review 1302.

203

ibid 1328.

204

ibid 1303.

205

See, eg, ASCAP formula in ibid 1336.

206

ibid 1296.

207

ibid 1303.

208

ibid 1296, 1303.

209

Lessig, The Future of Ideas: The Fate of the Commons in a Connected World (n 26) 201.

210

Husovec and Quintais (n 4) 219-220.

211

ibid.

212

Mezei and Harkai, ‘End-User Flexibilities in Digital Copyright Law – an Empirical Analysis of End-User License Agreements’ (n 180); similarly on inaction in videogame market licensing see Woznica, ‘Video Game Streaming: How Poor Licensing Undermines Creators’ (n 172).

213

Peukert in Strowel (n 7); Jessica Litman, ‘Sharing and Stealing’ (2004) 27 UC Law SF Communications and Entertainment Journal 1; Hugenholtz and Quintais in Hugenholtz (n 7); or Quintais (n 29).

214

Peukert in Strowel (n 7) 189.

215

Litman (n 64) 556-58.

216

Calabresi and Melamed (n 5).

217

Merges (n 202) 1302.

218

ibid.

219

Lessig, The Future of Ideas: The Fate of the Commons in a Connected World (n 26) 201.

Author notes

Ph.D. candidate at the Institute of Law and Technology, Faculty of Law, Masaryk University, Brno, Czech Republic. E-mail: Ondrej.Woznica@law.muni.cz.

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