Telefónica response to the consultation on the implementation of the Intellectual Property Rights Enforcement Directive

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1 ID REGISTER: Telef05162 Telefónica response to the consultation on the implementation of the Intellectual Property Rights Enforcement Directive Telefónica welcomes the opportunity to comment on the findings of the evaluation report on the implementation of the Intellectual Property Rights Enforcement Directive (IPRED), and the accompanying staff working document. The issue of intellectual property is an important element in the present and future European economy, and it is important for creators and consumers to get the balance between protection and access correct, particularly in the online environment. Telefónica is present in 6 EU Member States (Spain, Germany, Ireland, UK, Czech Republic and Slovakia) and is one of the world's largest integrated telecommunications companies, offering fixed, mobile, broadband and TV services across 25 key markets in 3 continents (Europe, Latin America and Asia). Depending on each country, Telefónica s operations offer a wide variety of digital multimedia content (audiovisual and musical) services across different platforms and/or distribution means, including mobile portals and applications, DSL connectivity, IP-TV, Internet Portals, and as such it is an important commercial user of intellectual property rights. Telefónica has grown in scale to become a global telecom company whilst remaining European based and committed to the ongoing success of the Information Society in Europe. General Points Telefónica supports the need for creativity to be fostered and for creators of content to be encouraged in a sustainable manner, in order to nurture European cultural diversity and access for consumers to attractive content wherever they desire. As a provider of content as well as connectivity, Telefónica is willing to play its proper part in the debate. This requires a holistic approach to the issue of content creation, consumption and protection. However, the focus in the evaluation report is on eradicating IPR infringement, particularly that caused by the Internet. The report examines the issue in too one- 1

2 dimensional a way, searching for a cure to the perceived effects of Internet piracy rather than finding a way to remove the incentives for illegal downloading in the first place. For Telefónica, finding new ways of offering content in an attractive way to European customers is the only sustainable long term solution. This requires a more global approach, working on fostering access to legal content and not just on limiting consumer action (and choice). Telefónica therefore welcomes the approach taken by the Commission in the Single Market Act 1, where an overall IPR strategy is planned. This should balance the several elements needed to create a sustainable market for creative content. One important element is reform of the licensing regime, in order to allow more competition among collective rights managers, easier licensing regimes and more flexibility for commercial users, and more possibilities for consumers to access content across the Single Market. Telefónica hopes that the forthcoming proposals on Collective Rights Management reflect these principles. Particularly, Telefónica would ask the European Commission to focus its efforts on improving the current reciprocal agreements to enable the collecting societies to grant multi-territory and multi-repertoire licenses as the best way to protect rightsholders whilst, at the same time, strengthening cultural diversity and fostering competition across Europe. It should also be emphasised that IPRED covers counterfeiting and piracy in the same way using the same tools, an approach which leads to confusion about the scope, methods and aims in this area. Counterfeiting of goods could be a criminal act, as serious implications for the health and safety of consumers could be involved, and is normally undertaken within an organised criminal context. Illicit sharing of content in breach of third parties IPR could be also a criminal act but is not usually considered as such but as a civil infringement, and so requires a different approach to that taken for counterfeiting. There is risk otherwise that neither activity is correctly addressed. Pursuing only a punitive approach for illicit filesharing will not solve the problem. The recent developments in France with the HADOPI law have shown that over 50% of users are not going to change their behaviour as a result of the law 2, knowing that technology 1 Proposal No 1: The European Parliament and the Council should take the necessary steps to adopt the proposals for the EU patent.. The aim is for the first EU patents to be issued in 2014 Proposal No 2: In 2011 the Commission will submit a proposal for a framework Directive on the management of copyrights, with the aim of opening up access to online content by improving the governance, transparency and electronic management of copyright. The Commission will also be proposing a Directive on orphan works. Proposal No 3: In 2010 the Commission will propose an action plan against counterfeiting and piracy, including both legislative and non-legislative measures. Furthermore, in 2011 it will make legislative proposals, in particular to adjust the legislative framework to meet the needs generated by the development of the Internet and to enhance customs work in this area, and it will re-examine its strategy on the implementation of intellectual property rights in third countries. 2 2

3 tends to outpace legislation in this field. Nearly 60% also found that this kind of regime carries a threat to personal freedoms. Furthermore, studies have also shown that often those engaged in filesharing also spend significantly more on legal content than others 3. This highlights the importance of incentivising new business models to attract such consumers away from illicit sources 4. Telefónica believes that the current legal framework around ISP s liability is sufficient to protect the different rights and interests of actors in the new digital ecosystem. The limits on liability as laid down in the ecommerce Directive have been fundamental to the growth of the Internet and its associated services, as it allowed users to communicate in confidence (see our response to the consultation on the ecommerce Directive: content/uploads/2011/01/telefónica-e-commerce-consultation-response pdf). Comments on the evaluation report COM (2010) 779 IPRED has taken a long time to implement at the national level, and as such Telefónica businesses have had little experience with the provisions therein. The report states itself that the Commission has not been able to conduct a critical economic analysis of the impact that the Directive has had on innovation and on development of the information society. The staff working paper elaborates: [I]t was not possible to make a clear assessment of the implications the Directive has had on innovation and the development of the information society. Cyprus, France, Luxembourg, Malta, the Slovak Republic and the UK have provided reports with particularly limited information. As a result, the Commission has not been able to engage in a critical economic analysis of the effects that this Directive may have had on innovation and the development of the information society. (p27-8, Annex 1) 3 4 The importance of incentivising new business models is emphasised in the UK s approach under the Digital Economy Act. 3

4 Given the important aims contained in IPRED, it is important that any revision of the Directive should be based on a solid evidence-based analysis of its impacts. The report carries no such quantitative analysis, which should be the first step in any revision of legislation if a proportionate solution is to be found. The evaluation concentrates overwhelmingly on the situation of rights holders and their difficulties in providing evidence which meets national legal standards, or the obstacles to their rights of information placed by European rules on data protection rather than suggesting ex ante measures such as new business models and educational programmes. This is not a balanced view of the situation, and should be corrected in follow up analysis and impact assessment. The Commission s lack of concrete evidence of the effects of IPRED could be addressed with more consultation and further observation of the national situations as they are allowed more time to develop. The role of the Observatory on Counterfeiting and Piracy may be helpful here, but only if it is composed in the correct fashion. The Observatory is mentioned as an important contributor to the analysis carried out on IPRED, particularly in the light of poor or non-existent information from Member States. However, the subgroups are currently open only to rightsholders organisations, with no representation from intermediaries such as ISPs or telecoms operators. If intermediaries are seen by the Commission and rightsholders as important in resolving the situation, then they should also be a part of the discussion of the problem. Telefónica also would like the focus of the revision to be widened, in line with the upcoming IPR strategy. Merely finding more effective ways to monitor and punish consumers for IPR infringements will not work, as there is a deeper underlying cause to this behaviour which needs to be more fully investigated. File-sharing of copyrightprotected content has become ubiquitous, partly because the development of legal offers of digital content has not been able to keep up with demand, especially on a cross-border basis, and has led many law-abiding citizens to commit massive infringements of copyright and related rights in the form of illegal up-loading and disseminating protected content. (p6) Telefónica would recommend that the Commission examine the root causes of this activity, which is hinted at here, rather than continuing to pursue the stick of enforcement of IPR infringement as the only tool. As the report itself mentions, currently available legislative and non-legislative instruments are not powerful enough to combat online infringements of intellectual property rights effectively, and while Telefónica is willing to play its proper part in reducing this phenomenon, we have seen that focusing solely on the enforcement of IPR leads to cumbersome solutions which eventually prove ineffective 5. Telefónica is convinced that it is more effective to 5 Worth mentioning is the example of the Czech Republic, where one of Telefónica s operative branches is situated. Telefónica O2 CZ s IPTV (TV broadcasting via IP protocol) business suffers from illicit downloading of movies. In the Czech Copyright Act, there have been introduced specific provisions on 4

5 anticipate consumer needs, offering them the maximum flexibility of choice. The changes in the digital environment create more of an opportunity for content owners than a threat, considering the new customers behaviour and expectations which need to be addressed by all stakeholders by developing new business models. Intermediaries (like ISPs) and rights holders need to work together to develop new services offering customers a wide range of legal offers with the content they want, how they want and for a fair price (growing consumption, new requirements and shift among platforms). Content owners should be more willing to enter in serious negotiations with the actors in the distribution chain (intermediaries) to allow online content distribution to adapt and respond to consumers needs. Content owners have the shared responsibility to conclude commercial agreements with intermediaries with the aim of putting legal offers in the market that suit end users demands. The report also mentions the possibility of re-balancing the right of information with the right to privacy. Intermediaries such as Telefónica are pulled in two different directions by the laws in place, confusing the situation and limiting the scope for voluntary action. Our role is currently defined clearly in the various relevant Directives (ecommerce, Data Protection, eprivacy, IPRED), and changing this via just one Directive risks toppling the balance reached in those other laws. In this respect, Telefónica supports the Commission`s proposal of developing a cooperational framework between the intermediaries and the judicial authorities within the European Union for the prevention and persecution of copyright infringements, provided that such collaboration does not undermine the liability protections for intermediaries established in the ecommerce Directive and of the legal restrictions established in the national legislations, including but not limited to privacy and data protection legislation. In this sense, the IPRED Directive provides for the right of information not only in the context of judicial proceedings;however, some Member States have gone beyond the Directive and provide for the right of information even before the formal judicial proceedings, as a provisional measure. In Telefónica s opinion we have to be very cautious when internet service providers are required, as a provisional measure, to provide some information on personal data (e.g. IP address). We believe that a prior judicial order is necessary when providing personal data. In this sense we give an example of how Spain and Germany are dealing with this issue. In Germany, the intervention of a Judge is always necessary in all cases. In Spain, the SINDE law (which came into force on 6 th Mach 2011) specifies that the responsible authorities rightholders protection (Section 40 of the Copyright Act) based on the IPRED. We have been requested by our partners (rightholders) for information, who might be the persons violating the law to the largest extent, and have provided this to our partners. So far, we have no evidence, that the rightholders would take any real steps in order to enforece their rights under these provisions of the Copyright Act. 5

6 may require providers of information society services to provide the necessary data to identify the infringers of IPR. However, the prior authorization of a judge is necessary to execute the measures adopted by the administration since these measures could violate fundamental rights and freedoms. Telefónica is in favour of the Commission`s proposal of establishing a neutral legal framework within the Member States legislations in which the right of information and the right to privacy are balanced but always provided that the achievement of these provisional measures do not introduce obligations for the intermediaries such as monitoring, detecting or preventing unlawful activities which conflict with the aim of the e-commerce Directive which states that the activity of the information society service provider is of a mere technical, automatic and passive nature which implies that the information society service provider has neither knowledge of nor control over the information which is transmitted or stored.. (Recital 42) Moreover, Telefónica also considers it necessary to recall that for achieving such a balance we have to take into consideration important fundamental rights involved, like the right of due process, freedom of expression and privacy and data protection, which could be at risk if measures are imposed without prior court orders. On the other hand, the accompanying working document to the Report makes reference to other tools as comprehensive notice and take down procedures that allow a timely elimination of illegal offers. Regarding the Private Notices, internet service providers may become liable for damages if they acquire actual knowledge or become aware of unlawful activities carried out by users of their servers. In principle, they could obtain such knowledge or awareness from private notices sent by interested third parties alerting them of the existence of the unlawful material. This kind of measure has created a liability regime which places upon on-line intermediaries the burden of deciding whether or not to remove suspicious material and thus the freedom of expression may be severely hindered. Telefónica believes that a legal system should neither permit nor encourage online intermediaries to indiscriminately eliminate any material from the Internet upon receipt of any notice from third parties, which often are not properly verified, and can be subjective or even opportunistic. This situation will unduly threaten freedom of expression and fair competition. Fundamental rights, like the right to due process, the protection of personal data and the freedom of expression, could be seriously threatened if the Directive is amended to introduce any obligation on intermediaries to act only on the request of private agents. In this regard, Telefónica believes that the revision of the Directive should be aimed to reconcile Intellectual Property Rights with Fundamental Rights, in a way than the 6

7 established legal instruments are able to offer the essential legal guaranties customaries in a rule of law. Injunctions Telefónica s experience with injunctions has been limited given the short time in which IPRED has been transposed in Member States, where Telefónica is active. We naturally comply with orders imposed from a court in line with national law, and see this step as crucial in the process, particularly when users personal data is concerned. We see that there is variation among Member States in their use of injunctions, and further harmonisation would clarify the situation for all concerned. However, this harmonisation should not change the current checks and balances in national laws. We would also be very concerned if the revision of IPRED led to a harmonisation of definitions that led to all infringements being seen as somehow commercial in scale, as this would be not proportionate to the problem being addressed. Conclusions In brief, regarding the issue of intellectual property rights, Telefónica is fully aware of how important the protection of copyright is to encourage the creativity and the development of powerful content for online use and trade. While Telefónica is fully engaged with achieving this goal, we firmly believe that punitive approaches will not provide any positive outcomes if they do not go hand in hand with other actions: to remove obstacles and competition problems in the current copyright management system, to allow new business models to develop and to promote information and educational campaigns to foster the cross-border trade of content in digital environments. To achieve that, rights holders should co-operate with other agents in the ecosystem in offering innovative and interesting legal ways to access their contents. Electronic communications operators, information services providers and rights holders are and should remain in a position to develop agreements on a bilateral basis as part of commercial negotiations. In the digital age, the development of new business models makes possible that customers can enjoy content in a way which ensures creators are rewarded. The market, more than ill-fitting enforcement, will meet consumers needs: the right to privacy, the right to choice and cultural diversity, demand for secure and user-friendly services and demand for high 7

8 quality content and a fair price. Content providers have a critical role in order to foster legal online content distribution responding to consumers demands. In addition and in Telefónica s opinion, voluntary cooperation between ISPs and rightsholders must by definition take place within the limits of the existing legal European framework, in particular, respecting Fundamental Rights to Privacy and also within the limits of national laws on civil and criminal proceedings. We believe that the current wording of the ecommerce Directive is and continues to be enough to deal with the question of liabilities, allowing national regulation to deal with the detail which best accommodates European law, fundamental rights and national legal structures. From the experience in the law and court practices in the countries in which Telefónica runs its operations, no serious problems have arisen in the interpretations of these concepts. March

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