Clarifying proportionality of license fees to negotiated rights value and Collecting Society representativeness.
On December 31, 2023, Italy enacted its annual Market and Competition Act (the “Act”).[1] As usual, the Act contains general provisions designed to review the status of legislation and ascertain whether there are regulatory constraints that unjustifiably hinder competition and innovation in Italy. The Act has bearing on a number of sectors and, in this case, it also reviews some powers of the Italian Competition Authority.
The last section of the Act contains several different provisions, including a legislative amendment that has not gone unnoticed in the eyes of attentive copyright practitioners. Specifically, Article 20 of the Act amends the Article 180 of Law No. 633 of 1941 (“Copyright Law”) providing that the intermediation activity of collecting societies, especially when involved in licenses and authorizations for the use of protected works, shall be carried out under reasonable economic conditions proportionate to the economic value of the use of the negotiated rights and to the representativeness of the collecting organizations themselves.
The amendment further clarifies that the criteria for determining the representativeness of collecting societies for each category of rights will be identified by means of an ad hoc regulation to be issued by the Italian Communications Authority (“AGCOM”). This resort to AGCOM’s intervention is consistent with what has already been adopted by the Italian legislator during other recent copyright reforms.[2] However, the interplay between various acts at the regulatory level is not yet completely clear, given the significant overlap among the provisions at stake and the fact that many such regulations have not yet been adopted at this time. It is becoming clear that the notion of “representativeness” is going to be pivotal when it comes to the exploitation of protected works, due to the role played by collecting societies in a liberalized market. This notion is also key for the purposes of another newly implemented provision.[3]
It is against this backdrop that collecting societies shall manage their members’ rights for the purposes of negotiation, collection and distribution of revenues derived from the use of intellectual works and protected materials, consistently with the provisions contained in Legislative Decree No. 35/2017 (implementing the CRM Directive). While collecting societies were introduced to remedy the fact that individual rightsholders might have only weak bargaining power and could more effectively manage their rights through collecting societies, the recent amendment seems to take pains to stress that collecting societies must act in the interest of their members, but not without constraints. In this sense, the amended provision seems to be making explicit a general principle, namely that licensing fees cannot be determined arbitrarily, but must be (i) economically reasonable and (ii) proportionate to both the value of the rights that those fees remunerate and to the representativeness of the collecting society claiming them. Besides, clarifying that collective management activities must adhere to the criteria of reasonableness and proportionality that now inform the entire copyright sector regulation seems consistent with the overall architecture of the latest reforms of the Copyright Law.
Overall, changes under this amendment to Article 180 Copyright Law introduced by Article 20 of the Act will depend largely on the regulation to be issued by AGCOM in the coming months. That will detail the criteria for determining the representativeness of the collective management organizations for each category of collectively managed rights.
[1] The full text of Law No. 214/2023 is available in Italian here.
[2] For the most recent example, see the regulatory powers granted to AGCOM for identifying reference criteria to quantify fair remuneration due to publishers, as explained in our article here. For more on this topic, check out our articles on the Italian implementation of EU Directive 2019/790, especially those on Article 15 , on Article 17, on AGCOM’s guidelines for complaint and redress mechanism, and on Articles 18 to 23.
[3] Article 180-ter Copyright Law, transposing Article 12 of the DSM Copyright Directive.
