EU copyright reform is coming. Is your startup ready?

Last Friday, members of Berlin’s startup community gathered at Silicon Allee for a copyright policy roundtable discussion hosted by Allied for Startups. The event sparked debate and elicited feedback surrounding the European Commission’s complex drafted legislation that would have significant impact on startups in the EU. Our Editor-in-Chief, Julia Neuman, gives you the rundown here — along with all the details you should know about the proposed reform.

‘Disruption’ in the startup world isn’t always a good thing — especially when it involves challenging legislation. Over the past five years, as big data and user-generated content began to play an increasing role in our society, startups have worked tirelessly to navigate laws regarding privacy and security in order to go about business as usual. Now, they may soon be adding copyright concerns to their list of potential roadblocks.

The forthcoming copyright reform proposed by the European Commission severely threatens the success and momentum that startups have gained in the EU, and it’s being introduced under the guise of “a more modern, more European copyright framework.”

On September 14, 2016, the European Commission tabled its Proposal for a Directive on Copyright in the Digital Single Market (commonly referred to as the “Copyright Directive”) — a piece of draft legislation that would have significant impact on a wide variety of modern copyrighted content. Consequently, it poses a direct threat to startups.

Members of the startup community are now coming together, unwilling to accept these measures without a fight. On Friday, members of Allied for Startups and Silicon Allee — alongside copyright experts and Berlin-based entrepreneurs and investors — met at Silicon Allee’s new campus in Mitte for a policy roundtable discussion. Additional workshop discussions are taking place this week in Warsaw, Madrid and Paris. The ultimate goal? To get startups’ voices heard in front of policymakers and counter this legislation.

Sparking conversation at Silicon Allee

Bird & Bird Copyright Lawyer and IP Professor Martin Senftleben led the roundtable discussions in Berlin, outlining key clauses and offering clarifying commentary. He then invited conversation from guests — which included representatives from content-rich startups such as Fanmiles, Videopath, and Ubermetrics. The result was a well-balanced input of perspectives and testimonials that sparked an increased desire to fight back. The roundtable covered the three main areas affected by the proposed reforms: user-generated content, text and data mining, and the neighboring right for press publishers.

User-generated content

The internet has allowed us all to become content creators with an equal opportunity to make our voices heard around the world. With this transition comes evolving personal responsibilities. Whereas in the past, copyright law only concerned a small percentage of society — today it concerns anyone posting to social media, uploading unique content, or founding a company that relies on user-generated content as part of its business model.

The proposed EU copyright reform shifts copyright burden to content providers, making them liable for user content and forcing them to apply content filtering technology to their platforms. As it stands now, management of copyright infringement is a passive process. Companies are not required to monitor or police user-generated content, instead waiting for infringement notices to initiate relevant takedowns.

New laws imply that companies would have to constantly police their platforms. As you can imagine, this would quickly rack up operating costs — not to mention deter investors from committing if there’s such a inherently persistent and high legal risk for copyright infringement. Furthermore, filtering technology would not exactly promote public interest or media plurality, as an efficiency-based filtering system would be more likely to result in overblocking and censoring (even if unintentional). This result is counter to the expressed aims of the reform.

“Having this necessity to add filtering technology from the start would kill any innovation for new startups, which is the reason why we’re all here and this economy is booming and creating jobs,” said Fabian Schmidt, Founder of Fanmiles. “The small companies suddenly cannot innovate and compete anymore.”

Text and data mining

The proposed reform also blocks startups from using text and data mining technology, consequently preventing the rich kind of data analysis that has added value and yielded deeper insights for growing startups. Copyright law today accounts for lawful access and consultation, however not for the automated process of reading and drawing conclusions. The scraping and mining of freely available texts could give rise to complex, costly legal problems from the get-go — problems that not even the most prudent founder teams could navigate (unless they work to the benefit of research institutions, which are exempt from the measure).

What kind of message does this send out to new startups? As with laws dealing with user-generated content, these measures don’t entice entrepreneurs to turn their seeds of ideas into profitable companies. Nor do they get VCs jumping to invest. Data input from mining and scraping suddenly gives rise to a huge legal issue that certainly does not benefit the public interest.

Senftleben reminded the group in Berlin that these types of legislation normally take several years to implement, and that the proposed policy could have amplified effects down the road as the role of data mining increases. “If this legislation is already limiting now, who knows what kind of text and data mining will be used in ten years and how it will play in,” he said.

Neighboring right for press publishers

The third and final point discussed at the roundtable has gathered the most media attention thus far. It’s the “elephant in the room,” unjustly pitting established publishers against startups. Proposed legislation creates an exclusive right for publishers that protects their content for digital use in order to “to ensure quality journalism and citizens’ access to information.”

Sure, this reasoning sounds like a positive contribution to a free and democratic society. But closer examination reveals that these publishers’ outdated and financially unviable business models are being grandfathered in for protection at the expense of more innovative content models.

It’s not hard to see why this is happening. Publishers have lobbying power, and they are bleeding money in today’s digital climate. “I work a lot with publishers. Their position here in Europe is a little more old school,” said one of the founders present at the discussion. “Their business model and revenues are going down, so they’re going to fight hard.”

Axel Springer, for example, is lobbying for greater protection; they want a piece of Google’s success. But the most interesting aspect of this measure is that it’s unclear how much value it would add for publishers, who already have rights to digital reproduction from the individual content creators employed under contract with their firms. A freelance journalist contributing to Die Zeit, for example, is already transferring digital reproduction rights to the newspaper just by agreeing to publish.

The drafted legislation makes it pretty clear that content aggregating search engines would take a big hit when they would inevitably have to pay content reproduction fees to publishers. But the interdependent relationship between publishers and online search aggregation services makes this legislation unlikely to generate a meaningful revenue stream for publishers anyway: Publishers want compensation for snippets of articles that show up on search engines, and search engines want compensation for bringing attention to them in the first place. In the end, content aggregators would likely just stop their use of content fragments instead of resorting to pay license fees to publishers.

It’s unclear how the proposed legislation could promote media plurality and freedom; instead, it seems to promote market concentration and monopolization of content publishing, potentially stifling free and open access to information.

“I know two small aggregators here in Germany that have given up because of this,” said Tobias Schwarz, Coworking Manager at Sankt Oberholz in Berlin.

What comes next? Turning discussion into action

What is clear now is that copyright law has potential to affect anyone. Startups in Europe, especially, are at risk with these new reforms. As players in the European economy, they have not been present in the policy debate so far. Allied for Startups and Silicon Allee are inviting founders, entrepreneurs, and interested members in the tech community to come forward and make their voices heard. They invite contributions to an open letter to the European Parliament which dives into this topic in more detail, explaining how toxic the Copyright Directive is for companies who are trying to stay alive without incurring €60 million in development costs.

“A lot of startup leaders have their heads down working on their next feature, without realizing policymakers are also creating something that can instantly kill it,” said Silicon Allee co-founder Travis Todd. “But if more startups come to the table and tell others what they learned, they will become more aware of these potential roadblocks and ultimately help change them.”

To find out more information, participate at the next discussion, or share your ideas and testimonials on this policy discussion, please get in touch! Drop a line to hello@alliedforstartups.org, tweet to @allied4startups, or join the online conversation using #copyright4startups.