5 Jul 2017 | Copyright

Reform of copyright contract law enters into force

On 1 March 2017, the reform of German copyright contract law took effect. The reform brings along new challenges, in particular, new claims to information and accountability as well as new provisions regarding the granting of exclusive rights. Specific changes regarding the remake right are of particular interest for the film industry.

Why another reform?

The (previous) reform of copyright contract law in 2002 fundamentally revised German copyright law in the interests of strengthening the rights of authors. It introduced the claim for “reasonable remuneration” (§ 32 German Copyright Act, “GCA”) of authors and performing artists. In addition, the instrument of “common remuneration rules” (§ 36 GCA) was created. This has made it possible for associations representing authors and performing artists to establish agreements on appropriate branch specific adequate fees with user-associations.

From the legislature’s viewpoint, the 2002 reform failed to strengthen authors’ rights. In particular, the legislature identified a “disrupted contractual parity” as problematic. As a result, creatives were still required to partly enter into contract terms, wherein they transferred the exclusive rights to a work for an unreasonable one-time payment (“total buy-outs”). In particular, self-employed authors and performing artists lacked the necessary market and negotiating power to actually enforce their right to reasonable remuneration. Consequently, authors and performing artists were receiving unreasonably low remuneration. Against this background, the legislature sought to strengthen the protection of authors and performing artists with the current reform.

It goes without saying that the above mentioned assumptions were highly controversial during the legislative process. Publishers, producers, etc. have repeatedly pointed out that the principle of participation does not necessarily work in the creative’s favor. Authors and performing artists often prefer a (final) one-off payment immediately after they deliver their contribution rather than a participation solution in which they depend on the success or failure of production. It should, however, be noted that the copyright industries were not able to assert their objections in the legislative process.

An overview of the most important changes

The legislative reform entails an increase of legal provisions at the expense of copyright industries. To the extent that the amendments to the law were designed by the legislature as mandatory rules, they can only be waived or attenuated in favor of collective agreements within the meaning of Art. 36 GCA. This entails joint remuneration provisions between associations of creatives and users. Some industries do not have representative associations. The German Federal Court (BGH) recently decided that collective agreements with non-representative associations only have a limited scope (BGH GRUR 2016, 1296 – GVR Tageszeitung III). Thereby the tightened legal rules are not yet alterable by mutual consent in these industries. On the contrary, they are unremittingly obligatory.

New claims to information and accountability – Articles 32d, 32e of the new German Copyright Act (GCA new)

One of the main changes is the introduction of two new claims to information.

The new § 32d GCA new implements an author’s claim to information and accountability against his contractual partner. This extends to the scope of the use of the work and the income derived from it. Accordingly, an author who has licensed or assigned his right to another against payment of a fee can annually request information and accountability on the extent of the use of the work and the income and benefits derived from it.

This request for information applies to all cases of transfers and assignments of rights of use, even in the case of fixed fees. Previously, contractual partners were not required to provide information in case of a fixed remuneration, according to rulings of the German Federal Court.

Corresponding to the wording of the introduced claim, the duty to provide information and accountability refers to such information that is normally already available to the contractual partner “within the scope of the proper course of business”.

The statute provides some exceptions from the duty to provide information. For instance, authors or performing artists will not benefit from the new claim when their contribution to the respective work, production or service was minor (i.e. of “subordinate importance”). According to the statute, a contribution is “subordinate” especially “if it has little influence on the overall impression of a work”. For instance, it is not part of the representative content of a work. According to the grounds of the draft bill (decision of the 6th Committee on Legal Affairs and Consumer Protection), the concept of “subordinated contribution” does not entail a qualitative evaluation. As examples of “subordinate contributions”, the draft mentions a minor text contribution by a journalist or the appearance of extras in a film. The exact criteria of a “subordinate contribution” and when this is exceeded will have to be defined by case law. Another exemption to these claims is established for authors of computer programs (§ 69a (5) GCA new). Referring to the industry’s high demand for employees, the legislature is less worried about the contractual parity between creators and their contractual partners in the software industry than in other creative industries. Finally, the claim to information is precluded if its disclosure would be disproportionate for the contractual partner. This may be the case if the provision of the information appears unacceptable to the contracting party, if there is an opposing legal obligation, if the assertion of the claim is a misuse of rights, or if justified interests in the confidentiality are impaired.

The new claim to information in § 32d GCA new is compulsory in that deviating agreements detrimental to the interests of the author (or performing artist) can only be made within the framework of joint remuneration rules or collective agreements.

According to § 32e GCA new, third parties that substantially determine the exploitation in the licensing chain are also obliged to provide the respective information. An example of this would be broadcasting companies in the case of commissioned productions. The same applies to third parties who enter into the licensing chain in the “bestseller case” of § 32a GCA. Thus, § 32e GCA new widens the scope of those subject to these obligations to include businesses in the licensing chain that have no direct contractual relationship with the author.

Practical Note

Companies must be in a position to annually provide authors and performing artists with the relevant information and account for the extent of their use and their income. It is therefore advisable to review the internal processes for the provision of information (accounting, software, etc.) and, if necessary, to adjust these respectively.


Infringements of joint remuneration rules (§§ 36b, 36c GCA new)

Further amendments concern the instrument of common remuneration rules between associations of authors and associations of users.

Particular mention should be made of § 36b GCA new, which provides injunctive relief for violations of common remuneration rules. Accordingly, associations of authors or users can demand default against companies which do not comply with the applicable common remuneration rules. They start by filing a representative action. This action is not only open to authors’ associations which are parties to corresponding remuneration rules, but also to associations of users and individual users.

The newly created § 36c GCA new regulates the individual contractual penalties in case of an infringement of the common remuneration rules. Under this provision, the author may require his contractual partner to agree to an amendment of the contract by which the user deviates from a common remuneration rule to the detriment of the author. Thus, § 36c GCA new provides for a new claim to adjust a contract when companies deviate from the joint remuneration rules which apply to them.

The right to further exploitation after ten years (§ 40a GCA new)

The newly implemented § 40a GCA new provides the author with the possibility to exploit his work in further ways after the expiration of ten years. This rule applies to authors who have granted an exclusive right of use for a period of more than ten years against a lump sum payment. The right of the first entitled user continues for the remaining duration of use as a non-exclusive license. Therefore, he can continue with the current use but cannot continue such use on an exclusive basis. The original contractual partner must therefore accept and expect that the author can grant a third party a corresponding non-exclusive exploitation right. Thus, as of the 11th year, the exploitation of the work is no longer exclusive.

The new provision also allows contracting parties to agree to extend the exclusive rights to the entire duration of the contract at the earliest after five years. § 40a GCA new is also a compulsory provision. Differing agreements to the detriment of the copyright holder are only permissible in the form of collective remuneration rules or collective agreements.

Nevertheless, § 40a GCA new also contains some exceptions. The right to further use after ten years is not valid if the work in question is “only a subordinate contribution”, a computer program or a work of architecture. § 40a GCA new is also inapplicable to movie rights. Additionally, § 40a GCA new is also inapplicable when an artist gives consent granting rights concerning a work intended as a trademark (or other mark) or design.

Practical Note

A clause stipulating that the work created by the artist is intended to be a trademark (or other mark) or as a design must now be expressly included in contracts with brand designers, logo designers and product designers etc. Otherwise, the exclusivity ends after ten years and the author can otherwise exploit the work in question.


Changes to the remake right (§ 88 GCA new)

The reform also strengthens the position of authors in the area of film remakes. It grants the author the right to have his work re-filmed after ten years. This is a compulsory rule. Deviation is only possible in the form of an agreement based on a common remuneration rule. The new provision makes it impossible to grant unlimited rights to producers. However, it should be pointed out that the provision only refers to “real re-filming”, not to prequels or sequels. Producers can continue to enjoy exclusive rights of use for such subsequent films if the agreement is properly designed.

Remuneration of the performing artist for later known types of use (§ 79b GCA new)

§ 79b GCA new regulates the remuneration of (granted) rights of use for unknown ways of use. It complies with § 32c GCA, so that the performer is entitled to a separate reasonable remuneration if the contractual partner, who acquired the rights to unknown uses, takes up a new kind of use, if such use was unknown at the
time the contract was concluded. If the right of use is transferred to a third party,
the claim of the performing artist shall be subject to a separate reasonable remuneration against the third party as soon as the latter takes up the new type of use.

Entry into force on 1 March 2017

The new copyright contract law in principle only applies to contracts concluded after it went into force, (i.e. after 1 March 2017). Exceptions to this rule apply only for the right of recall due to non-exercise. In that case the new legal situation is applied to the old contracts, but only when circumstances arose one year after the entry into force.

Conclusion

Companies should examine their internal processes, and whether they are able to fulfill the annual claim to information now available to authors and performing artists. In addition, the new right to other exploitation after ten years (§ 40a GCA new) must be taken into account when drafting copyright licensing agreements. Where proper contractual arrangements have been reached, rights of use can be granted exclusively for more than ten years. In particular, an unlimited license, (i.e. unlimited in time), is still possible for works which are to be used as trademarks or for design when such purpose of the license is stated in the license agreement. In sum, the new copyright law brings along a number of challenges for companies using and exploiting copyrights and related rights. These challenges should be manageable by re-evaluating internal processes regarding information and accounting duties and diligently drafting new agreements.