In our blog series highlighting the DSM directive’s implementation, we have been each day putting a spotlight on the key changes in four areas brought by the Belgian implementation of the DSM directive.
In our first blog post, we discussed the DSM directive’s background and its Belgian implementation, as well as article 17, which is its most controversial provision.
Our second blog post focused on the new neighbouring right for press publishers and the four new mandatory copyright exceptions.
This third and final blog post will give an overview of the less talked about new rules governing copyright contracts.
New rules governing copyright contracts
The new rules governing copyright contracts have been receiving less attention. They arise from the DSM directive’s aim to provide fair remuneration to copyright and neighbouring rights holders, such as authors and performers, and to strengthen their position. Some of these rules already existed in Belgium for specific contracts, such as publishing and performance agreements; and now, with Belgium’s implementation of the DSM directive, they have been made generally applicable.
The following four measures apply to contracts licensing or assigning copyrights and performing rights and are mandatory law:
1) A general principle of appropriate and proportionate remuneration for authors and performers for all licenses granted or rights assigned (article 18 DSM directive, transposed into Belgian law in articles XI.167/1 and XI.205/1 of the Belgian Code of Economic Law (CEL)).
An appropriate and proportionate remuneration is “remuneration commensurate with the actual or potential economic value of the rights assigned or licensed, taking account of the contribution to the work as a whole”. The DSM directive only provides for minimum harmonisation. As such, Member States can exclude “lump sum payments” from being “appropriate and proportionate remuneration” in their national implementation. Belgium did not opt for such exclusion. However, for lump sum payments to qualify as being “appropriate and proportionate”, they will need to present a sufficient link with the actual or potential value of the work. Therefore consecutive (variable) lump sum payments instead of one-off lump sums are advisable.
2) A contract adjustment mechanism (article 20 DSM directive, transposed into Belgian law in articles167/3 and XI.205/3 CEL).
This ‘success clause’ or ‘best-seller right’ gives rights holders the right to review their remuneration to obtain a fair share when the remuneration originally agreed becomes disproportionately low compared to the success of their work.
3) A transparency obligation that aims to help rights holders have access to more information about the exploitation of their works (article 19 DSM directive, transposed into Belgian law in articles 167/2 and XI.205/2 CEL).
The implementing Belgian law will be applicable to works protected by copyright in Belgium as from 7 June 2021. The transparency obligation will however become effective in Belgium on 7 June 2022 (as a deviation to the law taking effect on the day of its implementation (1 August 2022)). The transparency obligation ensures that rights holders can effectively exercise the contract adjustment mechanism above.
The Belgian legislator has used the deviation right provided for in article 19 DSM directive to provide for two exceptions to the transparency obligation.
First, as the legislator was aware that such a transparency obligation could represent a heavy administrative burden in certain cases for the assignee or licensee of the rights, articles 167/2, §2 and XI.205/5, §2 CEL provide that in “duly justified cases, the transparency obligation may be limited to the type and level of information that can reasonably be expected in such cases”.
Second, the transparency obligation does not apply where the contribution of the author or performer is not significant in light of the overall work (articles XI.167/2, §3 and XI.205/5, §3 CEL). However, the author or performer can still request this information, if he or she can demonstrate that he or she needs it to exercise his or her best-seller right.
4) A mechanism for the revocation of rights (article 22 DSM directive, transposed into Belgian law in articles 167/4 and XI.205/4 CEL).
This revocation right allows rights holders to revoke their rights when their works or performances are not being exploited by the party with whom they have concluded an exclusive contract.
The DSM directive, as implemented into Belgian law, provides for an ambitious package of new rules, to which both rights holders and users will have to adapt.
It follows from established Belgian case law that legal provisions having a mandatory nature also apply to the future consequences of existing contracts. As such, it could be argued that the rules regarding copyright and performing rights contracts will apply to existing contracts as well, which means that it may be necessary to reassess such contracts.
The implications of these modifications to new and existing copyright and performing rights contracts will also be discussed in greater detail in the updated Practical Guide to Intellectual Property Contracts and Contractual clauses, which will be published soon on the Belgian Federal Public Service Economy’s dedicated webpage. In the meantime, do not hesitate to contact our IP team for further guidance.