Territoriality and absolute territorial restrictions in licensing agreements
Under the “country of origin” principle, a service provider can use the licence in its country of origin (possibly obtained from a person holding the rights in that country only) in order to actively market content outside its country of origin as well. When rights are territorially fragmented, e.g. when different persons or entities hold the rights for different Member States, a service provider established in one Member States may therefore undermine the economic position of right holders in other Member States.
According to the “targeting” approach, this would only be the case with regard to passive sales (active sales into Member States for which no licence was obtained would still infringe copyright). As it would also be difficult to define reliable criteria for determining the place of establishment, the introduction of a “country of origin” principle would pose the risk that service providers may establish themselves in countries that have a weaker legal framework in terms of copyright protection. This could also prompt rights holders to withdraw their online rights from a large number of collecting societies, therefore creating a risk of repertoire disaggregation. This could affect cultural diversity. The “targeting” approach would not pose such risks.
Exceptions and other mechanisms to facilitate use
Option 3b proposes in some cases a scope for exceptions that could go beyond the minimum necessary to facilitate access and to reduce transaction costs, going in some cases as far as to enable non-commercial services to compete with licenced services on the basis of an exception (rather than on the basis of authorisations, as it the case with licenced, commercial services). For example, the expansion of the exception to enable libraries and archives to make available protected content that is otherwise distributed online by right holders would expand significantly the opportunities for cultural heritage institutions to make their collections available to the public.
However, the option risks undermining competition by enabling them to compete on an uneven footing with commercial services, undermining normal commercial channels, and therefore risking incentives to create and produce. Similarly, the introduction of a UGC-specific exception, without safeguards, would deprive rights holders of the possibilities to licence the use of their works or other subject-matter for the purpose of creation of derivative works. It risks the emergence of alternative, non-licenced business models, competing with licenced approaches, and thus risks long-term incentives to create and produce.
The entire phasing out of levy schemes as a result of the diminishing harm caused to right holders in the on-line environment would be harmful in the short- to medium-term for rights holders and on cultural diversity. At the same time, this may allow for the development of new business models, allowing right holders to identify new sources of revenues.