What does Article 13 mean for U.S. startups in Europe?
Disclaimer: This blog post does not provide legal advice and does not create an attorney-client relationship. Expansion Partner is a consulting firm, not a law firm. We are not attorneys nor are we affiliated or associated with an attorney. If you need legal advice, please contact an attorney directly.
Yesterday, March 26, the European parliament approved a copyright directive that will impact a number of tech companies doing business in Europe. The part of this directive that generated the most controversy is commonly known as “Article 13,” (though it was changed to Article 17 yesterday). It makes “online content sharing service providers” potentially liable for unlicensed copyrighted work uploaded by users on their service. Simply put, “online content sharing service providers” are platforms such as YouTube and Facebook that allow their users to upload and share content online.
Whilst there has been a lot of discussion on the impact of Article 13/17 on large platforms like Google and Facebook, there has been relatively little commentary on the impact on smaller startups. Here are some of our recommendations, as operators, rather than as lawyers, for what startups who think they might be affected should do next:
- Seek advice from your lawyers, even if you have no physical operations in Europe. This law might apply to any platform providing services affecting the EU (similar to GDPR).
- Know that as-of-today no changes are required following yesterday’s vote. The directive still needs approval by the EU member states. This will likely occur on April 9, as the member states have already indicated their intent to approve the law (though Germany is considering rescinding its support). And even once the directive is fully approved, member states have up to 2 years to implement it into national law. The exact impact will depend on its implementation in national law and court judgement.
- Discuss possible product and business model changes required with technical and legal teams, if impacted by the law. Companies have to demonstrate “best effort” to avoid the availability of unlicensed copyrighted work on their platform: this could mean preempting the upload of such work on their platform, e.g. via a technical filter mechanism (the “upload filter”). Currently, platform providers are often only required to remove specific copyrighted work if prompted by the rightholder to do so, similar to U.S. DMCA takedown notices.
- Explore the possibility your company falls under one of the many exceptions to the law. There are potential exceptions for “not-for-profit online encyclopedias, not-for-profit educational and scientific repositories, open source software-developing and sharing platforms, electronic communication service providers […], online marketplaces, business-to-business cloud services and cloud services that allow users to upload content for their own use.” There are also potential exceptions for businesses with less than EUR 10 million (~USD 13 million) revenue and that have been available to Europeans for less than 3 years and that have less than 5 million average monthly unique visitors in the EU.
- Consider the impact of Brexit. If the UK leaves the EU, it may be free to decide independently whether or not to implement EU laws, which may result in a different operating environment for content sharing providers there compared to the rest of Europe.
Given the widespread uncertainty surrounding this law, the changes this law will cause in the European and worldwide online landscape remain to be seen. Scenarios range from barely any impact to strengthening of incumbents to enabling startups to take on the incumbents. However, even significant compliance effort appears justified to keep access to the enormous potential of Europe, a single market with 513 million people (U.S.: 328 million) and a GDP of USD 17.3 trillion (U.S.: USD 19.4 trillion).
Disclaimer: This blog does not provide legal advice and does not create an attorney-client relationship. Expansion Partner is a consulting firm, not a law firm. We are not attorneys nor are we affiliated or associated with an attorney. If you need legal advice, please contact an attorney directly.
