Collecting societies gain rights to collect royalties by default under Government plans

Out-Law News | 03 Jul 2012 | 5:00 pm | 2 min. read

Collecting societies will be able to collect royalties on behalf of all rights holders and not just members under a Government plan that would require individual content creators to opt out of their systems.

The Intellectual Property Office (IPO) has published a policy statement (20-page / 416KB PDF) outlining changes that will be made to the existing extended collective licensing (ECL) regime in the UK. The statement declares the Government's intention to draft new laws which would allow new voluntary ECL schemes across the creative sectors to be established.

Under the new regime collecting societies will be able to collect royalties on behalf of rights holders that were not its members, although rights holders would have the right to opt out of such a system.

The IPO said that it does not believe the new system would affect rights holders' existing royalties arrangements through "direct licensing models".

"In practice, we expect that ECL will be a more attractive option in areas where licensing is characterised by high-volume, low-value transactions with high administrative costs for individual clearance – such as those areas where collective licensing already plays a big role," the IPO said. "Some sectors have developed other solutions, and the Government does not intend to disrupt that."

"ECL is an additional tool being made available for use where it makes sense for a sector to do so; it is not intended to supplant existing alternative models where these work well," it added.

Under the new laws collecting societies that can show they are "significantly representative of rights holders" in a certain creative sector will be able to run voluntary ECL schemes on behalf of those rights holders. The collecting societies' application to operate such schemes would have to be supported by its members. Rights holders who are not members would have the right to opt out of the scheme if they did not want the collecting society to collect royalties on their behalf.

The collecting societies would operate in accordance with self-regulatory codes of conduct which would "ensure minimum standards of governance, transparency and protection for non-member rights holders," the IPO said. Those codes would be developed and agreed upon by collecting societies and rights holders who between them would "decide on the scale/scope of any application against the context of the safeguards."

The IPO said that, in its consultation on modernising the UK's copyright framework, licensees had "overwhelmingly" sought statutory codes of conduct for governing how collecting societies operate ECL schemes. They had claimed that statutory codes, together with penalties for non-compliance, would "counteract the monopoly position of collecting societies".

However, the IPO said that it would press ahead with drawing up a law that facilitates voluntary codes to be created and would only resort to use "backstop" powers to establish statutory codes if the voluntary rules do not solve existing concerns. It said that licensees and some rights holders to its consultation had "described problems with the current system – particularly in relation to lack of transparency, administrative costs, and negotiation practices around licences and tariffs – that codes of conduct could address."

"The Government values the benefits of collective licensing, and the work that collecting societies continue to undertake to improve their practices," the IPO policy statement said. "However, evidence from the consultation demonstrates a lack of confidence in elements of the current system which reflect the monopoly status of collecting societies."

"Government will therefore legislate to allow the introduction, through Regulations, of a backstop power to enable the application of a statutory code of conduct. This power would be used in the event of failure by a collecting society to implement or adhere to a voluntary code which encompasses the minimum standards," it said.

The IPO said that the Government would draw up new draft regulations setting out base criteria for new voluntary codes of conduct for ECL. These will be developed through working with users, collecting societies and "through wider consultation." "This consultation will seek to ensure that the minimum standards are fit for purpose and reflect existing good practice, and that an effective enforcement mechanism can be constructed," it said.

"Extending licensing arrangements for collective societies, whilst ensuring rights holders are protected, will ... help maximise the benefit for the UK's world-class creative industries," Business Minister Norman Lamb said in a statement.