SA COPYRIGHT LAW CAPTURED
How the copyright amendment bill, 2017, and the performers’ protection amendment bill, 2016, are likely to impact upon SA copyright industries, including the music industry.
A SHAMBOLIC DEBACLE
- A fundamentally flawed legislative process.
- Shockingly short consultation periods. No heed to warnings from industry (locally and internationally), from legal experts or even its own ‘Panel of Experts’.
- No meaningful economic impact assessment studies conducted.
- A skewed consultation process during drafting led to engagement with tech companies and advocates of the Copyleft movement.
- Hidden agendas (government’s ‘free education for all drive’ not to be funded by government, but by not paying license fees for use of copyright protected works for educational purposes – damaging authors’ ability to earn income for ‘the greater good’).
- Empty electoral promises to authors, composers, performers, artists and creatives. Promises of enhanced royalty streams and legal protections = hot air. In fact, those who are favoured the most are the users, especially the user-uploaded digital platforms that do not invest into the creation of original content or development of new local talent or markets.
What is required for thriving market conditions?
- Freedom to contract?
- Freedom to trade?
- Legal protections and enforcement remedies?
- Investor confidence and sustained and direct investment into the local market?
- Best practices aligning SA with leading foreign markets (especially global digital)?
- Avoidance of undue and over-regulation of industry by government?
- Avoidance of governmental interference in private contractual negotiations and agreements?
Risks posed by the present copyright reform process
- The stated goal of both Bills is to support and to ensure fair remuneration for SA’s creatives, authors, artists and performers.
- However, it would introduce vagueness into our law; undermine legal certainty of the business environment; restrict creators’ freedom to trade and contract, and risk significant disinvestment into our local creative sectors.
- The legislation allows more re-uses of copyright works without permission and without payment – leading to an unjustified expropriation of property.
- The plights of SA’s authors, composers, performers, producers and other rights holders are not being uplifted and the promises of increased legal protections and remunerations for our creatives would not be deliverable.
- The large beneficiaries would be the users of copyright protected works, including the digital companies whose business models are driven by the commercial exploitation of protected music (and other works) without investing in the local creative industries or paying license fees or market related royalties for commercial usages.
KEY ISSUE #1: Fair Use and other exceptions
- Fair use does not necessarily mean that the unauthorized use made of a copyright protected work was fair. It is a legal defence against copyright infringement.
- It is a US doctrine in terms of which the Court decides whether unauthorized use of a copyright protected work was fair in the circumstances.
- The manner in which fair use is introduced in SA is much broader than its application in the USA. In the US, their fair use system is built upon nearly two centuries worth of case law. Also, they have legal mechanisms such as punitive damages.
- In SA, damages for copyright infringement may only be claimed if it can be shown that the infringer had ‘guilty knowledge’ of the infringement. The risk posed to rights holders by the fair use system includes that infringers would have an additional ‘open-ended’ defence against infringement claims and they may only risk paying the legitimate licensing fee that was due in the first place.
- Industry concerns include that the effect of the enactment of the Bill will be to weaken copyright so that copyright would cease to be practically be enforceable in SA.
Government’s Hybrid model / monster
- Due to widespread criticism of incorporating foreign law into our law – from the US where we do not share Common Law and a system that has been rejected in countries with which, we do share common law (e.g. UK and EU), government introduced a so-called ‘hybrid system’.
- Users will be able to rely on the existing fair dealing provisions, as well as fair use (and the new general exceptions allowing reproduction of works in the educational field and by libraries).
- While the largest users of copyright protected materials, the online user-generated platforms of digital content promote the fair use system, copyright owners will now have even more instances where their works can be shared, used, adapted, etc. in the digital world without any stricter liability on digital platforms to manage how infringing content is to be dealt with and no obligation on them to pay market related royalties for usages (as is being pushed for presently in the EU).
KEY ISSUE #2: Retrospective Royalties
- The Bill introduces an unwaivable, perpetual and retrospective royalty right for authors of literary and musical works (unless specifically contracted out) – calculated from ‘gross profits’, and performers featured in audiovisual works (e.g. music videos, film and tv) – calculated from ‘profits’, to receive a reasonable royalty for any commercialization activities relating to the works.
- In the music and film industries the vast majority of projects do not turn a net profit and for many works, a return on investment is only secured over time.
- Profits from the small number of projects that are successful are used to invest, promote and market new talent.
- If all authors and performers all of a sudden have claims (retrospectively) for remuneration on past projects, investor confidence in SA will be destroyed. No investment would be forthcoming into a market where government disrespects the sanctity of contract in this manner.
- Smaller production companies may have to close their doors. Movies and music that have not turned a profit would be pulled from the SA market, no doubt.
Risk of Retrospective Royalties to Copyright owners
These provisions will also apply to a case where, despite the fact that full copyright was assigned and transferred in the past and:
- the author was overpaid for the assignment of copyright,
- the copyright owner suffered a loss in investing in the copyright work,
- the copyright owner has not yet recouped the investment made in the copyright work by reference to the amount of the advance paid to the author (a common practice in the literary and music industries).
The impact of these provisions is that authors of these works will gain rights in the copyright works that they have previously divested, at the expense of the current owner of the copyright, whose rights will first be impacted upon by an obligation to pay a royalty which did not exist before the amendment act comes into force, and then be deprived of the copyright in the work altogether when the 25-year limit expires.
The retrospective application of the provisions give rise to an arbitrary and substantial deprivation of property rights which are inconsistent with Section 25(1) of the Constitution.
Risk of Disinvestment due to retrospective royalties
- Expect Hollywood to consider alternative shooting locations or to only use foreign actors, musicians, scriptwriters, etc. and disinvestment into local content production.
- This does not only affect the film industry – many related economies would suffer harm (e.g. hotels, car rental, catering, local film crews, etc.)
- Expect music production, recording and publishing companies to look elsewhere as well and to invest in other African countries (e.g. Nigeria).
- Foreign performers may now have a claim for royalties against SA music and film production companies due to our obligations in terms of the Berne Convention.
- Who would suffer from all of this? The very creatives that the Bills purport to seek to protect and favour.
Risks for composers and performers (and actors)
- Performances from featured performers (FP) are remunerated differently in practice than performances from non-featured performers (NFP). FP typically receive substantial lump-sum advances + royalties; while NFP generally receive single lump-sum payments up front.
- NFP typically work on multiple different productions and depend on up front payments. The new royalty rates will mean that NFP will be paid in royalties and risk not receiving any money (if the project does not yield profits) or a long delay in receiving money from licensed (once the project turns a profit down the line).
- Result: Many NFP will receive less (even nothing) and take longer to receive it.
- Same goes for composers who writes for film and tv.
- The Minister’s determination of contractual terms and conditions and royalty rates to standardize contracts, does not recognize how different productions and different relationships (e.g. record company vis-à-vis featured performer or non-featured) require flexibility and different business and remuneration models.
- A 360-deal requires different terms than a limited recording deal , for instance.
Multi-authored works may become unusable
- The Copyright Bill proposes that all of the songwriters and composers whose works are featured on a sound recording (or in a music video) and all of the performers featured in a music video shall have a share of profits and, after 25 years (if any assignment of rights occurred) the rights will revert back to each separate party involved.
- All parties would share equally in revenues generated – regardless of the nature of the contribution. So, for the small number of works that succeed commercially, revenues will be shared with a much larger group (less money for everyone and possibly no advances). Featured artists and the recording companies that invest in them will receive less money – which means less revenues for investment into new acts. Worst case scenario – even the most successful productions become unprofitable, and the incentive to invest in such productions becomes reduced.
- Some works may partially become orphan works, that would harm publishing deals.
- Likely outcome – fewer SA performers, composers, songwriters would be engaged on new projects – especially in film and music videos where large numbers of people are often commissioned.
KEY ISSUE #3: Restrictions on Freedom to Trade/Contract
- The Copyright Amendment Bill includes a provision to the effect that no rights which are granted in terms of the Copyright Act may be renounced or waived.
- The Copyright Amendment Bill also contains a 25-year limitation on assignments of literary and musical works.
- Even if these terms does not suit the author – there is no choice – you have to contract as government decrees (and on the terms and royalty rates that the Minister might decree).
- This provision will be especially problematic for publishers who wish to leverage catalogues of work for the full duration of copyright – also for filmmakers or broadcasters who took assignment of rights in scripts, music for the life of the copyright.
- The Performers’ Bill contains a 25-year reversion of exclusive rights clause.
- Works may become commercially unusable after 25 years where one author or performer in a multi-authored work cannot be traced or does not wish to renegotiate terms.
- This restriction of the freedom to contract and trade as authors may wish might be unconstitutional.
KEY ISSUE #4: Government Overreach
- The Copyright Amendment Bill grants to the Minister of Trade & Industry the broad powers to prescribe compulsory and standard contractual terms to be included in agreements to be entered into in terms of the Act.
- This is applicable to all contracts relating to trade in copyright goods, not only contracts concluded by authors and copyright owners.
- This sends a dangerous message to investors in our copyright industries as government may, at any stage, intervene into private contractual relationships, as they are doing by enacting the provisions relating to ‘contract override’ and the perpetual, retrospective and unwaivable royalty rights for authors, performers and composers.
- Further, an amendment is included to the effect that copyright in works made under the direction or control of the State or local organizations prescribed by the Minister , will vest in the State or local organization as declared by the Minister and the copyright cannot be assigned. This automatic vesting of copyright in prescribed local organizations will apply in circumstances where there is no relationship of employment or commissioning of a work in return for payment which is a limitation to trade on authors, composers and artists.
Key Issue #5: Violation of International Treaties
- Government clearly did not consider the so-called 3-Step Test of the Berne Convention when developing the new set of copyright infringement exceptions.
- In terms of this test, any exceptions to copyright infringement should relate to specific cases.
- The fair use doctrine is an open-ended system which leaves it to the Courts to determine whether unauthorized use is permissible. This introduces vagueness into law and, instead of implementing increased legal protections for our already vulnerable creatives, government proceeded to blow open our closed set of ‘Fair Dealing’ provisions and to allow much more instances where our authors, composers, etc. would not receive any remuneration for their works.
- Government also recommended the ratification of the ‘Internet Treaties’ (WCT, WPPT, Beijing) but many of the proposals in the Copyright Amendment Bill and the Performers’ Protection Amendment Bill, fall foul of not only the obligations in these Treaties, but also in terms of existing obligations in terms of other Treaties (e.g. TRIPS).
- Principles of National Treatment and Minimum Rights could lead to situations where foreign authors have stronger legal protections in SA than locals.
KEY ISSUE #6: Lack of digital enforcement mechanisms
- While the criminalization of non-reporting or inaccurate reporting of the commercial usages of recorded music, has been heralded as long overdue by the music industry and Collecting Societies, the penalties for non-compliance are harsh and may be open to abuse.
- Companies can be fined up to 10% of their annual turn-over if found guilty (prison terms and fines are also possible).
- Selective prosecution is a danger.
- Acts of reporting for media companies that use audiovisual works and sound recordings may well prove too onerous to manage.
- Pirates would not be at risk.
- No civil remedies introduced to assist rights holders against non-reporting and piracy. No site blocking, for instance and no meaningful digital enforcement mechanisms to assist rights holders and broadcasters.
Where to from here?
- The National Assembly passed the Bills on 5 December.
- Presently, the Bills are considered by the National Council of Provinces.
- If approved, the Bill would be presented to the President, for signature.
- Industry has opportunities to intervene by presenting submissions to the NCOP and the President on how the enactment of the Bill (and its ‘sister legislation, the Performers’ Protection Bill) would likely cause damage to our copyright industries and lead to a disinvestment into local copyright markets.
- The Bills contain empty ‘electoral promises’ that might appeal to the general electoral base and even to performers, authors, composers, etc., but it would result in disinvestment and also in the changing of the landscape for SA creatives.
- As publishers, recording companies, film companies, etc. need to accept even more financial risk of recouping investments into developing local talent, expect that less monies would be made available to commercially unsuccessful artists.