In 2016 the European Council approved a new trade secrets directive, while the European Commission made a number of proposals to modernise copyright law, as WIPR reports.

Jean-Claude Juncker, president of the European Commission, has said he wants journalists, publishers and authors to be paid fairly for their work, with the help of proposals to modernise EU copyright law.

The proposals also include “better choice and access to content online and across borders”.

On September 14, 2016 the commission published its proposals for the modernisation of EU copyright rules as part of the ‘Digital Single Market’ strategy.

One of the proposals, the neighbouring right for news publishers, aims to create a “fairer and sustainable marketplace for creators and press”. Under the right, publishers could charge services such as Google for displaying parts of a work in search results.

Other changes include better choice and access to content online and across borders, allowing broadcasters to more easily obtain “the authorisations they need from right holders to transmit programmes online in other EU member states”.

The commission has also proposed a new exception “to allow educational establishments to use materials to illustrate teaching through digital tools and in online courses across borders”.

Competing interests

Jeremy Hertzog, partner at law firm Mishcon de Reya, says that as is usually the case with copyright policy, there are a number of competing interests at stake, and a number of technical problems with the drafting of the proposed neighbouring right.

“As would be expected, online service providers are strongly opposed to the proposal, arguing that there is no actual market need justifying the introduction of the ancillary right, and that it will impact detrimentally on the ‘win-win’ relationship they say currently exists between online services and press publishers.

“In particular, they argue it will lead to a decrease in traffic to publishers’ websites, and therefore to reductions in advertising revenue and will create barriers to entry,” he adds.

Discussing the potential impact of the related right on individual publishers, online services and ultimately users, he says it will depend on the outcome of negotiations between “market participants and their preferred business models”.

Neville Cordell, partner at Allen & Overy, adds that the “vast majority of press publisher respondents from a synopsis of a public consultation held by the commission indicated they are currently facing problems when licensing online uses of their press or other print content, or enforcing their rights due to the fact they are doing so on the basis of rights transferred or licensed to them by authors”.

He adds: “Apparently a majority of press publishers indicated that the new right would help them face these problems by ‘creating legal certainty, strengthening their bargaining power, fostering more licensing opportunities in the digital environment and empowering them to better fight against online piracy’.”

The proposals will now be considered by the European Parliament and Council.

Kostyantyn Lobov, associate at Harbottle & Lewis, says that copyright legislation “will never be truly modernised, in the sense that technology will always move at a faster pace than the law, and there will always be new challenges to overcome”.

“The job is tougher, and slower still, when attempting to harmonise laws across Europe. That said, the commission seems to be committed to its Digital Single Market strategy and has made some bold choices in these latest proposals,” he adds.

Hertzog agrees and says: “Given the significant objections of certain stakeholders to key aspects of the package, we can expect it to be subject to some quite intense examination and scrutiny.”

He adds that rights owners in the EU have “welcomed” the commission’s proposals to address the “value gap” between user-upload platforms and rights owners.

However, Hertzog continues, the proposals have also been criticised because “in addition to their potential impact in the market, there is a lack of clarity in the drafting and uncertainty as to how the proposals will interact with existing ‘safe harbour’ provisions for internet service providers in the e-commerce directive”.

The Brexit effect

Birgit Clark, professional support lawyer at Baker & McKenzie, adds: “Even though we now know more about the timing of Brexit, there is a realistic chance that the proposed EU legislation will be implemented before the UK exits the EU in early April 2019”.

The uncertainty of the future of the proposals is due in no small part to the Brexit vote, which has rocked the political climate in the EU and UK.

On June 23, the UK voted to leave the EU and the vote has since prompted IP and brand owners to reconsider their rights in the EU. The UK’s inclusion in the Unified Patent Court system has been seriously questioned.

"AS IS USUALLY THE CASE WITH COPYRIGHT POLICY, THERE ARE A NUMBER OF COMPETING INTERESTS AT STAKE, AND A NUMBER OF TECHNICAL PROBLEMS WITH THE DRAFTING OF THE PROPOSED RIGHT."

On October 2, UK Prime Minister Theresa May announced that article 50 of the Lisbon Treaty will be triggered by the end of March 2017, setting in motion the Brexit negotiation process.

Is Brexit going to affect the commission’s proposals?

Lobov says: “Brexit could play a role, but nobody knows how it will play out at this stage. In theory, if the UK leaves the EU before the end of the implementation period, it would not be obliged to implement the changes into national law.

“In that situation, the UK government could decide to enact new laws which give effect to the directive to keep our laws in line with those of the EU member states, or it could selectively pick the provisions which it wants to enact.”

Hertzog adds that the draft rules propose a 12-month implementation period for member states following their entry into force.

“Whether the UK will be required to ‘sign up’ to the directives and regulations making up the Digital Single Market copyright package will depend upon the timescales involved: both in finalising the legislation and it coming into force, and in the UK giving notice to leave the EU,” he says.

Cordell adds: “Ultimately it is a question for the UK parliament, which may see fit to ignore the deadline if they do not consider the measures in the directive to be in the UK’s interests."

“If the UK has left by then, parliament is of course free to pick and choose elements of the directive to implement—including all of it—if it considers they are beneficial.”

He adds: “We suspect that implementation will depend greatly on the views of our press. We pride ourselves on our world-leading free press, but many newspapers are really struggling for revenue. If our parliament were to agree that the end-game is something along the lines of the implementation and disapplication model mooted above, we could see the directive being implemented."

The copyright changes are in the early stages of development. “It is expected that these proposals will be fully adopted before the end of 2017. However, there can be no certainty in this regard since this will depend on the discussions taking place in the European Parliament and Council,” says Cordell.

“Once adopted, the regulations will come into force immediately in all EU member states, while directives will give member states a timetable for their implementation, generally two to three years.”

Guarding secrets

One directive has already been successfully adopted this year: the trade secrets directive (2016/943).

It aims to lay down common measures against the unlawful acquisition and use of trade secrets. It also aims to have a deterrent effect against the illegal disclosure of trade secrets, without undermining fundamental rights and freedoms of the public interest.

This public interest includes consumer protection, public health, environmental protection and mobility of workers.

EU member states are obliged under the directive to ensure that victims of trade secret misuse are able to defend their rights in court and seek compensation.

Under the directive, a trade secret is defined as providing commercial value to a company because it is secret.

The directive includes the protection of media investigations; this means that investigative journalism can be exercised without any new limitations.

Additionally, the directive does not impose any restrictions on employees, so they can use the skills and experience acquired without limitation in the course of their employment.

Whistleblowers will have adequate protection if acting in good faith and for the purpose of protecting the general public interest.

However, trade secrets protection does not apply when the person acts for the purpose of wrongdoing or illegal activity.

“There is a two-year implementation period, so member states aren’t obliged to comply with the directive until July 2018,” says Will Smith, associate at Bird & Bird.

From a UK perspective, Smith adds, “there’s no obligation to comply with it yet, and even if there were, UK law is already broadly compliant with the directive”.

However, he says, the trade secrets directive “will make a difference for businesses operating across the EU”.

Jonathan Exten-Wright, partner at DLA Piper, adds: “At this stage it is early days to try to predict how it will roll out, but I think it is worth picking up the idea that it reflects a general trend of people trying to encourage innovation".

“It’s interesting that there is a general trend—most people have thought of trade secrets as being quite narrow to the average person."

“This is a broader issue of commercially sensitive and valuable information, and that’s quite useful because it will protect legitimate interests which might not be pure copyright or might not be registered designs."

“In other words, ideas which might not be protected by IP rights could be protected under the trade secrets directive when it’s in force,” says Exten-Wright.

Article first published by World Intellectual Property Review (WIPR) on 22 November 2016.

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