A brief storm over the right to "revoke" a licence or transfer of rights

Bumpy road to implementation of the DSM Directive

The controversy surrounding the implementation of Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the digital single market and amending Directives 96/9/EC and 2001/29/EC (the so-called 'Digital Single Market' Directive, hereinafter the “DSM Directive”) has been ongoing in Poland for several years.

In 2019, Poland filed a complaint with the CJEU regarding Article 17 of the DSM Directive. This provision, according to the Polish government, threatened freedom of expression online. In April 2022, the CJEU dismissed the complaint, and less than two months later, the European Commission published guidelines on the correct implementation of Article 17 of the DSM Directive.

Accordingly, in June 2022, i.e., more than a year after the original deadline for implementation, a draft Act amending the Act on Copyright and Related Rights and certain other Acts, prepared by the Minister of Culture and National Heritage (hereinafter the “MoC”), was published on the website of the Government Legislation Centre. It contained, inter alia, provisions implementing the DSM Directive into the Polish legal order.

The project was met with a negative reception. During the public consultations, several dozen entities expressed criticism of the adopted solutions. The MoC took some of the comments into account and in the second half of November presented a revised draft Act.

The planned amendment provides for numerous changes to the Act on Copyright and Related Rights (hereinafter the "Copyright Law"), including imposing new obligations on Internet content providers, introducing new forms of fair use and collective licences with extended effect, and modifying the scope of an author's right to “revoke” a licence or transfer of rights. It is the latter change and the controversy surrounding it that we wish to devote more attention to. 

June proposal

In the explanatory memorandum to the project of 6 June 2022 the MoC pointed out that Article 22 of the DSM Directive requires Member States to put in place an institution that allows authors who have granted an exclusive licence or transferred their rights to revoke all or part of the licence or transfer of rights if the work is “not exploited”.

In order to implement the aforementioned provision of the DSM Directive, the MoC has proposed a number of amendments to the content of Article 57 of Copyright Law, which grants rights to authors in the event that the acquirer of rights or the licensee fails to distribute the work or to make it available to the public.

Firstly, the MoC limited the scope of application of the provision to agreements on transfer of author's economic rights and exclusive licence agreements. This means that an author who has concluded a non-exclusive licence agreement will no longer be able to exercise the right under Article 57 of Copyright Law. Such modification results directly from the DSM Directive. Secondly, the MoC made use of the right provided for in Article 22 of the DSM Directive and made it possible for an author who had granted an exclusive licence to decide whether, if the prerequisites provided for in the provision are fulfilled, she wants to revoke the licence or terminate the exclusivity of the agreement by granting the licence to other persons. Additionally, the MoC resigned from the exclusion of the application of Article 57 of Copyright Law to agreements concerning architectural, architectural-urban and urban planning works and allowed the authors of such works to exercise their right after 20 years from the date of conclusion of the agreement. The above modifications faithfully correspond to the wording of the implemented DSM Directive and therefore have not been the subject of controversy.

On the other hand, the changes included in the June proposal concerning the scope of activities to be undertaken by the rights acquirer or licensee and the compensation for the author who exercises the right under Article 57 of Copyright Law met with a completely different reception. Doubts were also raised in relation to the establishment of a uniform time limit of 2 years for the commencement of use of a work. Each of these issues is discussed below.

Problematic “exploitation”

As regards the scope of activities undertaken by the rights acquirer or licensee, in the justification of the project of 6 June 2022, the MoC explained that in order to fully implement the DSM Directive, it was necessary to extend the scope of the entitlement under Article 57 of Copyright Law not only to cases where the work has not been distributed, but also to situations where the acquirer or licensee does not otherwise exploit the work. Such an objective was to be achieved by replacing the phrase “distribution” with the term “exploitation”. In effect, paragraph 1 of the provision under review was to provide that “if the acquirer of the author's economic rights or the licensee to whom an exclusive licence has been granted does not commence exploitation of the work within 2 years of the transfer of the author's economic rights or the granting of the licence, the author may withdraw from or terminate the agreement”.

The proposed amendment was widely criticised by the doctrine, as well as during the public consultation. It was pointed out, inter alia, that the term “exploitation” is not a well-established concept in Polish copyright law and may give rise to many interpretative doubts. In the opinion of ZAiKS (Polish Society of Authors and Composers) the proposed amendment may also lead to a situation in which the acquirer of rights or the licensee may claim that any use of the work (e.g. printing one copy of a verbal work) fulfils the obligation of exploitation. Such a limitation of the author's right of withdrawal would be incompatible with the idea of the DSM Directive.

No compensation for the author

The second problematic change concerned settlements between the author and the rights acquirer or exclusive licensee upon termination of the agreement under Article 57 of Copyright Law. As drafted on 6 June 2022, Article 57 would allow the author to retain the remuneration in the event of withdrawal from or termination of the agreement. This entitlement would replace the current regulation, according to which the author has the right to claim double remuneration specified in the agreement in the case where the lack of distribution of the work is due to circumstances for which the acquirer of the author's economic rights or the licensee is responsible. Alternatively, she may also claim damages under the general rules.

Entities participating in the public consultations criticised the above amendment as lowering the level of protection of the interests of authors, who are often the weaker party to the agreement. Among others, the Polish Chamber of Patent Attorneys argued in favour of leaving in place the existing provisions protecting the property interests of authors.

Rigid deadline of 2 years

According to the draft of 6 June 2022, the entitlement under Article 57 of Copyright Law was to be vested in the author after the lapse of 2 years from the date of conclusion of the agreement on the transfer of copyright or granting a licence (except for agreements concerning architectural, architectural-urban and urban planning works, for which the deadline was 20 years). The uniform deadline was to replace the previous rule, according to which the rights acquirer or licensee was obliged to start distributing the work “within the agreed period, or failing that, within two years from the acceptance of the work”. This means that the MoC wanted to take away the freedom of the parties to agree on the date when the work which is the subject of the agreement should be put in use.

This change also received criticism. CD Projekt raised objections to the proposed deadline, explaining that the production cycle of video games usually lasts more than two years. The company argued for allowing the parties to contractually shape the period within which the use of the work should commence or extending the statutory deadline to 10 years for complex works. Similarly, Netflix expressed a view that “the introduction of a two-year grace period is completely unrealistic in light of the realities of the audiovisual sector”.

November proposal

The MoC considered the above comments as justified and withdrew some of the controversial proposals for amendments to Article 57 of Copyright Law. The new proposal was published on 7 November 2022.

According to the new project the possibility to exercise the right of withdrawal or termination would be made conditional on the absence of “distribution” of the work by the rights acquirer or licensee. The vague term “exploitation” is no longer included in the provision.

Secondly, the MoC left in place the current regulations allowing the author to claim double remuneration specified in the contract, in the case where the lack of distribution of the work results from circumstances for which the acquirer of the author's economic rights or the licensee is responsible. As before, the author can choose to claim damages under the general rules instead.

Thirdly, the MoC has abandoned the indication of a uniform deadline after which the author will be able to withdraw from or terminate the agreement. According to the latest project, this deadline is to be determined by the parties on a case-by-case basis. The justification for the project reads that such a solution is to allow the deadline for exercising the statutory right to withdraw from or terminate an agreement to be adjusted to the practices existing in particular industries. However, to ensure an appropriate level of protection of the interests of authors, the MoC also provided for an absolute right to withdraw from or terminate an agreement if the work has not been distributed within 10 years (and 20 years in the case of architectural, architectural-urban and urban planning works) of the date of conclusion of the agreement.

Additionally, the MoC excluded the application of the analysed provision to co-authors whose creative contributions are not of independent significance. Such a solution is to ensure the possibility of using a co-authored work as a whole and meets the needs reported by entities operating in the audiovisual sector.

What’s next?

According to the original plans, the draft amendment to the Copyright Law was to be adopted by the Council of Ministers in the last quarter of 2022. However, given the need to take into account the comments made during the public consultation, we can expect the process of implementation of the DSM Directive to be prolonged. The draft amendment is yet to be reviewed by the Committees of the Council of Ministers and the Law Commission, which means that it will reach the Parliament in a few months at the earliest.

In the meantime, the content of Article 57 of Contract Law may still undergo minor changes. Regardless of what its final wording will be, it is worth noting the regulations determining the scope of application of the provision under analysis. Pursuant to Article 26 of the DSM Directive, the provisions implementing that Directive shall apply to agreements concluded after 7 June 2021. Additionally, it should be borne in mind that the entitlement under Article 57 of Contract Law does not apply to creators of computer programmes (Article 23 of the DSM Directive).

Author: Zuzanna Kietlińska