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Germany Looks to Prop Up News Publishers With Snippet Subsidy, But Is a Quotation Tax Legal?

As the 21st century has not been too kind to news publishers, German legislators have proposed a subsidy in the form of a so-called “neighboring right” – related to copyright – that may be invoked against news search sites, principally, Google.  First announced in March, the proposal operates under the premise that the American search provider and others would willingly pay for the “privilege” of quoting from German news publishers.  This post explores the legal implications of a quotation tax, and concludes it would likely violate international obligations.

Others have already pointed out that the German proposal is a terrible business idea.  If compelled to pay to link to a site, most news aggregators simply won’t.  Attaching a cost to pointing to traditional news publishers will only accelerate newspapers’ march toward obscurity by driving users toward savvier online news sources, blogs, and social media.  One reason traditional news publishers are suffering is because these online competitors have lower cost structures, and many are generated without expectation of remuneration.  When new sources abound, expensive sources will suffer.

Unfortunately, the prospect of being paid every time one’s works are quoted holds such great appeal that it overwhelms common sense.  Rightsholders thus rationalize owning quotes by substituting ideologically-driven constructions of ‘ownership’ for any economic justification.  Germany is not alone here; the notion of a quotation tax has gained currency elsewhere in Europe, and as I recently noted, the estate of William Faulkner has also contracted quotation mania, having leveled lawsuits at a movie and advertisement that had the audacity to quote the author.

The proposal’s faith-based approach to handing out IP rights is also a terrible policy idea.  European law has already had experience with this sort of self-defeating exercise: in the previous decade, the European Union created a neighboring right in databases, on the entirely unfounded expectation that the European database industry would outcompete its American counterpart.  It didn’t.  The European database industry experienced a brief spike and then promptly tanked, such that the Commission’s own review of the directive even offered up repealing it as an option.

Legality of a Quotation Tax

While the quotation tax may be bad business and bad policy, the question remains: how does it fare legally?  A careful review indicates the proposal would likely violate Germany’s international treaty commitments, which limit nations from granting rights over ideas and facts, including news items.

That a quotation tax, or any form of neighboring right for news, could violate international commitments should not come as a surprise.  Historically, IP protection for news has had a very weak pedigree.  Until 1967, international copyright law allowed newspapers to reproduce in their entirety “[a]rticles on current economic, political or religious topics”.  This rule was embodied in the then-current version of the reigning copyright treaty, the Berne Convention, and it was decidedly hostile to IP rights in news.  At the instigation of journalistic organizations, however, this language was removed, in favor of some partial protection for news.

Historical Hostility to Ownership of News

Since the 1967 revision conference in Stockholm, the Berne Convention has continued to limit rights in news coverage in favor of the free flow of information in two ways.  First, article 2(8) states that its protection “does not apply” to “news of the day” or “miscellaneous facts having the character of mere items of information.”  The records of the 1967 revision conference report that a committee of international copyright experts construed this article thus:

“the correct meaning of this provision is to exclude from protection articles containing news of the day or miscellaneous information, provided such articles have the character of simple press information, since news of this kind does not fulfil [sic] the conditions essential for admission to the category of literary or artistic works.”

The 1967 revision reaffirmed the experts’ assessment.  Proponents of a snippet subsidy might argue, however, that merely because Berne “doesn’t apply”, Germany is not prohibited from granting protection above and beyond it.  The argument is, in essence, that Berne is a ‘floor,’ not a ‘ceiling.’

Yet this interpretation conflicts with both the quotation right, discussed below, and the consensus from the preparatory documents from Stockholm.  In fact, scholars Ginsburg and Ricketson contend that the exclusion of (a) “news of the day” and “mere items of press information” and (b) the quotation right are the “only two clear imperative restrictions of significance under the present text.”

The Rise of the Quotation Right

The Berne Convention circumscribed copyright protection for news in a second way: it reaffirmed and expanded the pre-existing quotation right.  Before 1967, the Berne Convention contained a right to quote from “newspaper articles and periodicals.”  Article 10 of the 1967 revision expanded this right to state that

“It shall be permissible to make quotations from a work which has already been lawfully made available to the public, provided that their making is compatible with fair practice, and their extent does not exceed that justified by the purpose, including quotations from newspaper articles and periodicals in the form of press summaries.”

Notably, the placement of quotations and press summaries after the provisos serves to illustrate that they are inherently included in what is provided.  They are thus not limited by the fair practice or ‘exceeding the purpose’ requirement.  Rather, they are exemplary of what inherently satisfies these requirements  This interpretation is reaffirmed in the preparatory documents to the Stockholm conference, which reflects that it was the opinion of experts after “exhaustive discussion” that these uses be included “by way of an example” of what was permitted.

The revision expanded the quotation right in another way as well.  Whereas previously, the right existed only to make “short quotations”, the 1967 revision consciously deleted the word “short.”

This was not accidental; abolishing the ‘short’ requirement was specifically recommended by the copyright experts.  They reported:

“Sufficient direction in these various fields [referring to ‘politics, economics, religion, and cultural life’] cannot be achieved unless it is possible to reproduce, in certain cases, fairly considerable portions of articles which constitute the contributions of other newspapers to public discussion.”

In fact, a reader in the habit of casually perusing diplomatic conference minutes from 1967 (and who isn’t?) might note that a French-Swiss proposal was advanced to re-insert the word “short” before “quotation.”  Diplomats considered and then overwhelmingly rejected the proposal, reaffirming the experts’ recommendation that the quotation right should not be limited to “short” quotes.  The quotation right, incidentally, is now widely embraced [PDF] throughout the world [PDF].

Insofar as Germany is foremost among European states contemplating restrictions on the quotation right, it is interesting to recall the views that the delegate from the Federal Republic of Germany voiced on this item.  The West German diplomat, one Mr. Reimer, said that his

“country could not support the proposal to inert the adjective “short” before the word quotations, because cases occurred in which quotations were permissible when when they were not short; Article 51 of the Law which was in force in Germany was drafted on those lines and it placed no restriction on quotations in scientific or literary works, for instance, or on quotations from musical works.  The Delegation of the Federal Republic of Germany thought it should be possible to delete the phrase “compatible with fair practice” or to replace it by some other phrase corresponding to the English term “fair use” or “fair dealing.”

In short, the views of West Germany in 1967 were that quotations should not be restricted, and that international law should more closely resemble the Anglo-American tradition of fair dealing and fair use.

None of this is to say that all news articles lack literary originality, or that no headline will ever be of sufficient length and creativity that it could qualify for copyright protection.  This latter possibility, however theoretical, need not be categorically ruled out.  To assign a neighboring right to quotations and thereby headlines, however, is to embrace the position that all headlines are original, and none are mere items of press information.  In the face of clear international obligations, this position seems untenable.

The Trade Consequences of Violating the Berne Convention

The consequences here are not merely theoretical.  Because the Berne Convention is incorporated by the TRIPS Agreement – a trade instrument with the power to force dispute resolution – violating Berne can lead to international litigation and penalties.  European authorities should know this particularly well, as European initiated a successful action against the United States before the World Trade Organization in 1999 for violating the Berne Convention.

The EU complaint arose from Section 110(5) of the U.S. Copyright Act, which permits the public performance of music and television in certain public places (chiefly, small businesses, bars, and restaurants), without any royalty being paid.  This, European trade authorities alleged, was a violation of Berne, and thus TRIPS.  The U.S. claimed Section 110(5) was consistent with Berne, but a dispute resolution panel disagreed, and assessed millions of dollars in fines against the U.S. Government.

Finally, this proposal is a bad idea from a political perspective as well – specifically, trade politics. The United States and the European Union are presently exploring a possible Free Trade Agreement, an agreement which, if achieved, would constitute one of the largest trade pacts ever.  Legislation in Europe’s largest economy that obviously targets a major U.S. economic interest — particularly at a time when the Internet economy represents an increasingly large percentage of GDP — is remarkably poor preparation for a successful FTA.  Harming the chance of a comprehensive FTA would be a high price to pay for this gift to German publishers.

Intellectual Property

The Internet enables the free exchange of ideas and content that, in turn, promote creativity, commerce, and innovation. However, a balanced approach to copyright, trademarks, and patents is critical to this creative and entrepreneurial spirit the Internet has fostered. Consequently, it is our belief that the intellectual property system should encourage innovation, while not impeding new business models and open-source developments.