Germany finally tightens copyright contract law

After two years of debate, the German federal parliament (Bundestag) finally tightened the legislation on copyright contract law. A new “Act for improved enforcement of claims of authors for reasonable compensation” will come into force on 1 March 2017.

Why is this needed?

German copyright law already provides authors with a right to “fair and equitable” compensation. The pre-existing law also allows associations of authors to set up “collective remuneration rules” (“Gemeinsame Vergütungsregeln”, GVRs) with single users or associations of these. These GVRs give guidance as to what is “reasonable”.

But despite these existing rights, the inequality of commercial bargaining power means that authors are still being forced to accept total buy-outs in return for unfairly low remunerations – at least according to the German Federal Ministry of Justice.  Further, the Ministry fears that if authors fight back, they will not receive any follow-up commission and might risk being blacklisted. This leads the Ministry to conclude that there is a “structural imbalance of power” at the expense of creative individuals when it comes to negotiating compensation for their works.

What is the effect of the new legislation?

The new legislation on copyright contract law gives authors – and authors’ associations – several additional powerful rights against the users of the works. Not only publishing houses, software companies, advertising agencies or other media companies need to be alert, but also all other companies that use copyright-protected services.

On an individual level, the new Act gives authors the right to oblige users to render an account once per year of the extent of use of their works and the benefits derived from it, in order to enable authors to verify the “reasonableness” of the compensation. There are a few exceptions to this statutory rule: where the contribution of the author to the work is of subordinate importance; if the claim is disproportionate; or if the exclusion has been agreed collectively in GVRs.

Following strong opposition from users across a variety of sectors, the German parliament refrained from its initial plan to oblige users to pay separate compensation to authors for separate usages and to entitle authors to call back their licences after five years of use.

Instead, the new Act gives authors a new right to recall exclusively granted licences and to license them elsewhere after a period of ten years. In this case, the user who initially owned an exclusive licence would retain a non-exclusive licence. Again, this right can only be excercised if the exclusion is agreed collectively in GVRs and the respective GVR is fully applied between author and user.

On a collective level, the legislator introduced a right to bring collective actions against the users of works. Authors’ and users’ associations will be entitled to seek injunctions against copyright users in cases where existing GVRs are not applied properly. Prerequisite for such a claim is that the user must be a member of an association which established GVRs.

As a consequence, copyright users will need to assess carefully the advantages and disadvantages of being a member of a users’ association. Non-members do not have to fear collective actions if they do not apply GVRs. However, the advantage of applying GVRs lies in the fact that they entitle users to exclude the authors’ rights to make annual claims to render an account and to recall exclusive licences.

What will this mean for rights holders and users?

The new Act has been discussed and lobbied intensely for the last two years throughout the media sector,  but it will also affect many other sectors, wherever creative works are being generated.

Fundamentally, the new copyright Act will give authors and authors’ associations a stronger position in relation to the users of their works, who should therefore prepare for tougher licence negotiations in future and consider how to avoid costly court proceedings.