Aniko GYENGE: The Hungarian model of licensing orphan works

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1 Aniko GYENGE: The Hungarian model of licensing orphan works (Presentation at the ES Presidency conference on Digitisation of cultural material. Digital libraries and copyright 14 March 2010, Madrid) We were asked to speak about the new Hungarian rules on orphan works, especially about the policy questions, such as the considerations of choosing the model of special licensing. In the second part I will introduce you to the elements of the existing rules, and as a final step I will mention some directions in which the actual Hungarian law could be developed on the basis of a future EU law. First of all I have to emphasize that the new legislation about which I will speak a bit later is only one tool of a more complex system of opportunities to legally use works which are protected but we do not know their rightholder or we are not able to find them. These opportunities are the following: 1.The extended collective licensing system. According to the Copyright Act the collecting societies registered at the Ministry of Culture and Education authorize the use for the users and on the basis of this licence the user shall be entitled to the same use of all the works of the same type. But I have to emphasize that in the Hungarian system of collective management the CMO is registered for concrete rights of concrete groups of rightholders. The power of the CMO covers exclusively the group of the rightholders and the type of their rights in regard of which and whom it is registered. 2.The exceptions and limitations. According to the Copyright Act uses falling within the scope of the free use shall not be subject to the payment of any consideration and to any authorization of the author. We have a very long list of exceptions and limitations for private uses, education, archiving, scientific

2 research and so on. They cover practically all types of rights but they are strictly bound to the specialised and reasoned aim of the use. 3.We have special regulations on anonymous and pseudonymous works. These state that if a work was published anonymously or under a pseudonym, the author's rights shall be exercised, until the author becomes known, by the person who first published the work. As a consequence of this system there are many rights (covered by collective management) which cannot be orphan, there are many types of uses (covered by exceptions and limitations) which do not require a licence and there are a third group of works of which author is not identifiable for everybody but can be licensed by the publisher. Keeping this in our mind when we prepared the special legislative solution for the problem of orphan works, practically we had only to complete the system in regard of the uses which do not fall within collective management, exceptions or under the rule of anonymous and pseudonymous works. So that was the legislative situation in Hungary before The new Hungarian legislation followed the call of the European Commission i2010 initiative which proposed that the Member States take concrete steps to solve the problem of licensing such rights which cannot be licensed in other traditional ways. The Hungarian law refers directly to the Commission Recommendation 2006%585/EC on the digitisation and online accessibility of cultural material and digital preservation. Of course I know that this is not a binding law but in Hungary there was another and perhaps more important argument supporting the introduction of a solution because it was already an acute practical problem which needed a prompt response. And that was the legal situation of our national film heritage. Most of the rights of the older Hungarian films are owned by the state, thanks to a nationalization during the communist area. The nationalization covered all the rights which

3 were guaranteed by the 1969 copyright act. Nevertheless the digital rights (and especially the right to make the work available to the public online) remained behind with the original right holders who are mostly unknown or we do not know where they can be found. This was due to a very old principle of Hungarian law, namely that no licence can be validly granted for a means of use that is unknown at the time a contract is concluded. This principle was acknowledged by the court as regarding the nationalization also. On this legal basis the older Hungarian films could not be made available to the public online and they were dying in the archives. The problem could not be solved by collective management because the rightholders of the films who are known would like to licence the making of their films available to the public online individually. We could not create an exception because it would have been an obvious infringement of the EU law. And of course most of them could not be qualified as an anonymous or pseudonymous work. Of course we had also got some information from our libraries that they couldn t digitize their collections, but we didn t get any exact data about how many items of the collections can be qualified as orphan. Nevertheless it was an indication that we have to find a more general solution and we have to take into consideration all of the similar problems. Of course before amending the Copyright Act the Ministry of Justice analysed the possible regulatory models which seemed to be applicable for solving the situation. For example the Nordic Member States of the EU use the blanket license system for licensing orphan rights. But in the frame of the Hungarian copyright law only the collecting societies can use blanket licenses and even then exclusively in relation to the rights which are managed by them on the basis of their

4 registration at the Ministry of Culture. So, their competence is not a general one and it does not apply to all orphan rights. From this point of view the Hungarian law on collective rights management is a dual system: there are rights which belong to mandatory collective management and others that belong to voluntary collective management. It is strictly regulated in the international and EU copyright law where a Member State can introduce mandatory collective management of the rights but neither law mentions the orphan rights as such. Voluntary collective management of the rights is possible if a number of the relevant rightholders would like to establish a collecting society for collective management of a right. But as the possible orphan rights are so diverse and the identifiable rightholders are not interested in collective management, this legal tool did not seem to be the appropriate one to solve the problem, although there was a collecting society which was open to managing the orphan rights. But as I mentioned the Hungarian system of collective management does not make it possible for a CMO to manage every right but the rights of right holders only in relation to which and to whom they are registered at the Ministry of Culture. That is why the new provisions on authorising the use of orphan works cannot be applied to those types of uses in respect of which rights clearance takes place through collective management. The government examined the US bill on orphan rights too. According to the US model the remedies for infringement shall be limited if the infringer proves by a preponderance of the evidence that before the infringement began, the infringer or a person acting on behalf of the infringer (I) performed and documented a qualifying search, in good faith, for the owner of the infringed copyright and was unable to locate the owner of the infringed copyright. I think it is a remarkable solution, and the cheapest one, but the cultural institutions indicated during the consultations that they can not support the introduction of such a regime because the costs of it are not predictable and that is why they can hardly

5 build the risk of infringement into their budget. Nevertheless one element of the US proposals should be adopted: this is the principle of diligent research which was also emphasised by the Commission and which can be found in the Canadian orphan works legislation too, which, as we will see, became our primary model. After taking into consideration these models and the practical arguments, the Government decided against them and chose the third, practically the Canadian model: the introduction of a special licensing scheme. The Amending Act of the Copyright Act was adopted in December 2008 and entered into force on 1 February The system for licensing orphan rights has been completed by the adoption of Government Decree 100/2009. (V. 8.). It entered into force on 16 May According to the new 57/A. of the CA the Hungarian Patent Office grants a license for a proportionate royalty for the applicant, who carried out a due diligence search depending on the type of the work and the use applied - but did not succeed to find the right holder. A diligent search for the rightholder is required as a precondition for lawfully using an orphan work. Sector-specific criteria are to be applied when examining whether a diligent search has been performed. The fact that a diligent search has been performed needs to be documented. Article 3(1) of the Government Decree establishes a non-exhaustive list of measures that may be taken to perform a diligent search. The examples given in this Article do not constitute a minimum number of search steps, either. A prospective user can perform a diligent search without taking all the measures listed, but, on the other hand, even taking all the measures on the list may not amount to a truly diligent search. This has to be determined with due regard to the individual circumstances of each case.

6 The following measures are mentioned in Article 3(1) of the Government Decree: - searching the database set up by the HPO on the basis of its voluntary register of works, - searching the databases of CMOs, - searching databases available on the Internet, - searching databases suitable for finding the residence of the rightholder, - searching the databases of publicly accessible collections of works, - requesting information from organisations engaged in publishing works on a regular basis, from persons carrying out some other use of the work, from other authors of the work if they are known and can be found, as well as from public authorities performing official functions in relation to the work, - advertising in national daily newspapers. Article 1(2) of the Government Decree makes it clear that its provisions are to be applied mutatis mutandis to licensing the use of artists performances. Therefore, other related rights (such as the rights of phonogram producers, film producers and broadcasting organizations) are not covered. Significantly these rights are owned by legal entities, and it might perhaps be said that the successor of a legal entity is easier to identify. The license is valid for a maximum of 5 years, solely within the territory of the Hungarian Republic, is not exclusive, can not be transmitted, does not cover the right to give further licenses, and does not allow the adaptation of the work.

7 If the use is not designed to earn or increase income, the compensation shall be paid after the author or his place of residence becomes known. If the use is designed to earn or increase income even in an indirect manner, the compensation shall be deposited in advance with the Hungarian Patent Office. The new Hungarian legislation offers a preferential treatment for not-for-profit uses: the amount of remuneration does not have to be deposited and a preferential rate of the administrative fees applies. If the right holder re-appears when the licence is still in force, the HPO revokes the license without retroactive force, but leaving the possibility for the licensee to continue the use for the time remaining from the licence for a maximum of one more year - without extending the volume of the use. The right owner can demand the royalty a maximum of 5 years after the revocation of the licence, or the expiration thereof. After this period of time the HPO transfers the deposit to the collective right management society which grants licenses for the other works of the right owner or, in the lack of such a society, to the National Cultural Fund. The National Cultural Fund shall use the compensation transferred for making cultural goods accessible. If the sum of the royalty is contested by the right-owner, the rules of the copyright tribunal proceedings are to be applied. The rules detailed above cannot be applied in cases where the right to grant the licence belongs to a collective rights management society. Hungarian legislation (namely, Article 8 of the Government Decree) also provides for a register of orphan works. It is to be kept by the HPO, but only in respect of those orphan works for the use of which it has granted a licence. It is a

8 publicly available administrative register that can be consulted and inspected by anyone. It has to be made accessible electronically (online). As a final remark I have to emphasize that a new legal regime in its first working year should not be adjudicated upon. We cannot yet judge its effectiveness. Theoretically speaking it guarantees respect for copyright and can help the legal certainty of the uses, but of course it has only an indirect effect on piracy. I have to admit that although under certain circumstances a single licence can be requested for multiple orphan works, the scheme is not fully suited to deal with mass-scale digitisation projects involving a large number of works. Nevertheless as far as I know the HPO has received a serious request from the National Audiovisual Archive to license 370 works and one other from the Library of the Hungarian Parliament for about 1000 works. The register of orphan works kept by the HPO will necessarily remain incomplete, although a publicly available online register can be developed on the basis of applications relating to orphan works or another register for the purposes of looking for rightholders. Of course we don t know to what extent the Hungarian scheme would fit in with a Europe-wide solution to the issue of orphan works, and, in particular, whether, and under what conditions, it would ensure mutual recognition of different arrangements (in particular, different criteria for diligent searches) in various EU Member States. We are open to methods of improving our system and it is our secret intent to export the positive elements of the system to the European level. I hope that we

9 will have the possibility to do this during the Hungarian Presidency, where a major copyright priority is the promotion of the EU-wide solution to the problem of orphan works. I don t think that we could describe ourselves as having finished our work at the end of the day, but I am sure that we have taken the most important step and I think the Hungarian Government is committed to going forward on this path. Aniko GYENGE Head of unit Ministry of Justice and Law Enforcement European Law Department Consumer Protection, Copyright and Industrial Property Unit Tel.: Fax: Mail:

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