Now more than ever, technology is influencing the way we do business, communicate, move through and around the world, access and manage our homes, receive and administer healthcare, make purchases, secure information, and protect our most valuable property. Morrison Foerster keeps pace with this rapidly evolving landscape across our internationally recognized corporate, finance, intellectual property, and litigation practices. MoFo Tech brings together our insights relating to fields such as blockchain and distributed ledger, cloud and as-a-service technologies, driverless cars, drones, fintech, computer hardware and software, the Internet of Things, semiconductors, and telecommunications. The MoFo Tech blog offers real-time, in-depth analyses of the trends and complex issues shaping the global technology industry.<h2>ABOUT MORRISON FOERSTER</h2>Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. Our clients include some of the largest financial institutions, banks, consulting and accounting firms, and Fortune 100, technology, and life sciences companies. Highlighting the firm’s commitment to client service, leadership in market-changing deals and impact litigation, and values-based culture, Morrison Foerster has been repeatedly recognized as one of the top 10 firms on The American Lawyer’s A-List. Year after year, the firm receives significant recognition from Chambers and The Legal 500 across their various guides, including Global, USA, Asia‑Pacific, Europe, UK, Latin America, and FinTech Legal. Our lawyers passionately care about delivering legal excellence while living our values. Morrison Foerster has a long-standing commitment to creating a culture that respects and celebrates differences, while providing an inclusive environment. The firm has achieved Mansfield Certification Plus since 2018 as a result of successfully reaching at least 30 percent women, communities of color, and LGBTQ+ lawyer representation in a notable number of current leadership roles and committees. The firm also has a long history of commitment to the community and society through providing pro bono legal services, including litigating for civil rights and civil liberties, improving public education and fostering the wellbeing of children, advocating for veterans, promoting international human rights, enforcing the right to asylum, and safeguarding the environment.

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Scott Llewellyn’s practice focuses on complex litigation in federal and state courts around the country, with an emphasis on patent and trade secret disputes. Over the past decade, he has worked on some of the most significant, high–profile IP cases involving technology for televisions, smartphones, and self–driving cars, relying on 40 years of experience with computer hardware and software. Scott also has significant experience with business divorce cases before courts and arbitrators, involving a mix of trade secret, patent, tort, and contract claims relating to technology development and implementation.Scott also has successfully tried general commercial arbitration and agency matters, briefed and argued various appeals in federal appellate court, and tried more than 20 cases for the Denver City Attorney’s office, most of them jury trials.Scott also has an active pro bono practice, having worked on a variety of criminal and immigration appeals, and having represented Colorado criminal defense and mental health organizations in high–profile suits against the state of Colorado for violations of the constitutional rights of defendants.At MoFo, Scott serves on the board of the Morrison & Foerster Foundation. In the broader legal community, he serves on the boards of the Colorado Lawyers Committee and Drop in the Bucket (a charity that builds wells and sanitation systems in sub–Saharan Africa).After law school, Scott clerked for the Honorable Clarence A. Brimmer, District of Wyoming, and the Honorable Diarmuid F. O’Scannlain, Ninth Circuit. He was also previously an adjunct professor at the Georgetown University Law Center.

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Scott Llewellyn’s practice involves complex litigation before state and federal courts around the country, with an emphasis on patent and trade secret disputes for high-tech companies, to which he brings more than 35 years of experience with computer hardware and software, in particular relating to the processing and transmission of audio, video, voice, and other types of data. Mr. Llewellyn has also tried commercial arbitration and agency matters; briefed and argued various appeals in federal appellate court; and tried more than 20 cases for the Denver city attorney’s office, most of them jury trials.

Scott F. Llewellyn

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Progress is being made regarding the protection of intellectual property (“IP”) rights in a post-BREXIT scenario on both sides of the English Channel. With BREXIT fast approaching, the European Union (“EU”) and the United Kingdom (“UK”) have been pushing things forward at the negotiators level, but also independently. The European Commission got the ball rolling by releasing the third version of the Draft Agreement on the withdrawal of the United Kingdom and Northern Ireland from the European Union and the European Atomic Energy Community (“Draft Agreement”) on March 19, 2018, which reflected the state of affairs with regard to post–BREXIT protection of pan-European IP rights. Shortly thereafter, on March 28, 2018, another statement was released pertaining to <a href="https://ec.europa.eu/info/publications/eu-domain-names_en">.eu country code Top Level Domains </a>(“ccTLD Statement”). The UK, on the other hand, ratified the<a href="https://www.gov.uk/government/news/uk-ratifies-the-unified-patent-court-agreement"> Unified Patent Court Agreement </a>(“UPCA”) on April 26, 2018, and, before that, the<a href="https://www.gov.uk/government/news/uk-ratifies-hague-agreement-for-industrial-designs"> Hague Agreement for industrial designs</a> that took effect on June 13, 2018. Additionally, the parties <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/717697/Joint_Statement_-_19_June_2018.pdf">jointly released a statement </a>on June 19, 2018 (“Joint Agreement”), stating that they had reached an agreement at the negotiators level with regard to the Draft Agreement relating, inter alia, to the protection of pending Supplementary Certificates (“SPC”).On July 12, 2018, the UK Government released a White Paper, a proposal for the future relationship between the UK and the EU (“White Paper”). On Thursday, July 19, 2018, the Parliamentary, Robin Walker MP, confirmed the UK Government’s intention to grant protection to IP rights holders following BREXIT equal to that under the current IP regime of the EU, which was then reaffirmed on July 23, 2018, by the post of a news story titled “IP and BREXIT: The facts” on www.gov.uk (“UKGov News”).This article is the first of two parts dedicated to providing a comprehensive overview of what IP right owners can expect when the UK leaves the EU on March 29, 2019 (“Exit Date”), by summarizing the state of affairs for each IP right category separately. Herein we will give you some background information and deal with post-BREXIT issues related to European Union trade mark Registrations (“EUTM”), Registered Community Designs (“RCDs”), Unregistered Community Design Rights (“UCDs”) and granted Community Plant Variety Rights (“CPVRs”) (together, “EU-IP”). The second part will be directed at issues relating to Geographical Indications (“GIs”), eu. country code TopLevel Domains (“ccTLD”), data base rights, European Patents (“EPs”) and Supplementary Certificates (“SPCs”). Both parts of the article will be supplemented by a set of actions that we suggest can be taken to address the risks indicated by the probable future IP right regimes that we are facing and the risks associated with the uncertainties of a “deal or no-deal” scenario.SOME BACKGROUNDWith the UK’s public vote to leave the EU on June 26, 2016, one of the countless topics to be addressed in the BREXIT negotiations is: “What will become of this EU-IP post BREXIT”? Without any form of agreement between the EU and the UK in place after the Exit Date, EU law will no longer apply to the UK, and the European Court of Justice (“ECJ”) will not have jurisdiction over the UK as of this date. In this worst case scenario, EU-IP will simply cease to extend to the UK from one day to the next. IP right holders that had mainly or exclusively relied upon such EU-IP and made significant investments in this regard could now end up without any form of protection in the UK. Given the thriving activities of UK businesses in filing, for example, EUTMs (being the second highest number of filings in the EU), this is not only a concern for EU-IP holders in the mainland Member States, but also of particular interest for EU-IP holders in the UK.Agreed and not agreed (until everything is agreed) – Part 11.      Transition Period and Certain Common PrinciplesThe Draft Agreement was the first sign of significant progress in the negotiations between the EU and the UK. Certain sections of it provide for certain common principles that apply to most EU-IP. Other arrangements only apply to certain types of IP rights.First and foremost, as stipulated in Article 121 of the Draft Agreement, the negotiators have preliminarily agreed on a transition and implementation period that runs from March 30, 2019, to December 31, 2020 (“Transition Period”). According to Article 122 of the Draft Agreement, EU rights – including EU-IP – will extend to the UK during the Transition Period and shall:<ul><li>produce in respect of and in the UK the same legal effects as those that it produces within the Union and its Member States;</li><li>be interpreted and applied in accordance with the same methods and general principles as those applicable within the Union; and</li><li>be deemed to include the UK when making any reference to Member States in EU.</li></ul>The Draft Agreement also states that EU-IP granted by December 31, 2020, will also automatically be registered as a separate right in the UK (“UK Equivalent”). This applies to all registered rights – i.e., EUTM, RCDs and CPVRs. The UK Equivalent will have the same filing, renewal and priority dates as the original EU-IP.If an EU-IP is subject to an invalidation/revocation or nullity or cancellation proceeding that has been ongoing prior to the end of the Transition Period and such EU-IP is declared invalid/revoked or cancelled in such a proceeding (even after the end of the Transition Period), the UK Equivalent too will be held invalid/revoked at the same date. However, in accordance with Article 50 Sec. 3 of the Draft Agreement, the UK will have no obligation to issue such declaration where the grounds for invalidity/revocation or nullity or cancellation of the EU-IP do not apply in the UK.Another agreement that could be reached pertains to the exhaustion of IP rights, which is a principle common to most IP rights, but has found its specific expression in the EU in what is called the “Fortress Europe.” In principle, exhaustion in the EU applies, and an IP right is not infringed by its use, if the IP right, or a product applying the IP right, was put on the market in the European Economic Area (“EEA”) by the proprietor or with his consent. The Draft Agreement contemplates that IP rights so exhausted within the EU (including the UK, for the term of the Transition Period) will remain exhausted in the UK and the EU thereafter. Naturally, the Draft Agreement does not address exhaustion after the Transition Period. It is yet to be discussed which approach on exhaustion the UK will take after the Transition Period. If the UK decides on using a national exhaustion regime, it may be possible for UK IP rights to be used to prevent parallel imports from the EU into the UK. This topic is further discussed <a href="https://www.citma.org.uk/membership/brexit/exhaustion_rights">here</a>. In the UKGov News, it has been suggested, however, that the UK looks forward to “exploring arrangements on IP cooperation that will provide mutual benefits to UK and EU rights holders”, and in this sense to discuss issues like exhaustion of IP rights. 2.     Trademark RightsIn addition to the above-stated principles that will apply to the registration of UK Equivalents, holders of EUTMs that are converted into UK Equivalent trademarks will further benefit, if applicable, from the seniority of a UK trademark that was claimed in the EUTM registration.A crucial point to highlight is that EUTM applications that were filed within the Transition Period and received a date of filing, but are still pending at its end, will not automatically be converted into UK Equivalents. Instead, the applicant will have a so-called “right of priority,” meaning the right to file for an identical copy of such EUTM application (i.e., identical mark and identical list of goods and services) in the UK within nine (9) months of the end of the Transition Period, and will then be granted the same filing date and priority as its corresponding EUTM application.Other issues to be aware of relate to: a.      genuine useUK Equivalent trademarks will not be liable to revocation on the ground that the corresponding EUTM was not used in the territory of the UK before expiry of the Transition Period. It remains unclear, however, when the non-use period will start to run after the end of the Transition Period. This effectively extends the so-called “grace period” of the UK Equivalent trademarks, meaning the period in which to commence use of the mark in the UK before the UK Equivalent trademark becomes vulnerable to cancellation for non-use. However, there is no such provision for the reciprocal grant of EUTMs used solely in the UK. Even though the EUIPO’s Q&A document published in January 2018 suggests that use of an EUTM in the UK qualifies as use in the EU at least as it relates to the period before the Exit Date, it has not found its way into the Draft Agreement. For businesses that have been operated in the UK exclusively before the Exit Date, there remains a risk that their EUTMs may be vulnerable to cancellation for non-use in the EU.  b.      reputationUntil expiry of the Transition Period, UK Equivalent trademarks will benefit from the reputation that the corresponding EUTM enjoys in the EU. Thereafter, reputation will be based on the use in the UK. c.       International Registrations with EU designationsThe UK also agreed to take measures to ensure that trademarks protected in the UK through an International Registration designating the EU via the Madrid System will continue to enjoy protection following the end of the Transition Period.  3.     Designs a.      Registered Community Designs (“RCDs”)The protection mechanisms provided under the Draft Agreement for RCDs are essentially the same as those for UK Equivalents in general (as described in Section 1) and UK Equivalent trademarks (as described in Section 2) above. Here, too, UK Equivalents will have the same filing and priority dates as their RCD counterparts, and RCD applications still pending at the end of the Transition Period must be filed again with the UK IPO within nine (9) months in order to enjoy such privilege.In addition, with its ratification of the Hague System on March 13, 2018, which took effect on June 13, 2018, the UK opened up another possibility for foreign companies and individuals to obtain design protection in the UK. Comparable to the Madrid System for international trademark registrations, the Hague Agreement allows applicants to register a design in any one of the 67 contracting countries through a single application via the World Intellectual Property Organization (“WIPO”). Previously, design protection in the UK via the Hague Agreement could be obtained by means of designating the EU only (which included the UK), but it will now be possible to designate the UK directly through the system. On the other hand, in the Draft Agreement, the UK agreed to take measures to ensure the protection of EU designations via the Hague System that were registered before the end of the Transition Period. b.     Unregistered Community Designs (“UCDs”)UCDs are designs that, from the date on which they were first made available to the public within the EU, are protected under the Council Regulation (EC) No. 6/2002. The UCD protection lasts for a period of three (3) years. The Draft Agreement provides that the holders of UCDs that were made available before the end of the Transition Period will benefit from a UK Equivalent for the remaining period of protection. However, the UK still has to provide for the respective mechanism, as the UK’s current unregistered design right legislation does not offer the same scope of protection as that provided under the EU regime. In the UKGov News the UK stated it will establish new schemes, which “will preserve the full scope of the UCDs in the UK”.4.      Community Plant Varity Rights (“CPVR”)UK Equivalents relating to CPVRs benefit from the same principals common to all registered EU-IP, as discussed in Section 1 above. Additionally, the term of the UK Equivalent shall be at least equal to the remaining period of protection under EU law. Comparable to the provisions on pending EUTM and RCD applications at the end of the Transition Period, CPVR applications will not automatically be converted into corresponding UK applications. The applicant will instead have an ad hoc right of priority, meaning the right to file an identical UK application that secures the priority of the CPVR application for the UK application for the purpose of determining distinctness, novelty and entitlement to the right of such a UK application. However, the period to file a priority saving application in the UK is reduced to six (6) months only.ACTIONS THAT CAN BE TAKEN NOWAlthough the UK’s Prime Minister, Theresa May, recently announced that the EU and the UK still want a deal in place by October 2018, the UK, at several points in negotiations, has threatened to leave the EU without a deal. And, indeed, the possibility remains that topics other than IP prevent the UK from signing the final draft of the Withdrawal Agreement. IP owners may seek comfort in the July 19, 2018, announcement of the Parliamentary Under-Secretary of State for Exiting the European Union, Robin Walker MP, that stated: “We have agreed to protect all existing EU trade marks, community registered designs and unregistered designs in the UK as we leave the EU. In place of those EU-level rights, 1.5 million new UK trade marks and registered designs will be granted automatically and for free.”However, IP owners are also advised to bear in mind when planning their future IP strategy that none of this is certain as of yet. Even though each portfolio provides for unique challenges and measures should be assessed on a case-by-case basis. There are a number of general actions that could be considered at this stage:   <ul><li>EUTM and RCD holders: </li><li>Review of Portfolio. Owners should review their portfolios for marks or designs that are protected solely by European or International Registrations with EU designation. With regard to important assets, thought could be given to filing a national UK application or an International Registration with UK designation for additional reassurance.</li><li>Dissimilar Protection. Likewise, if you hold protection under both the UK and the EU trademark regimes, you may want to make sure that the goods and services that your business offers, or will offer in the near future, are protected by both registrations equally – if this is not the case, you could consider filing a separate EUTM or UK trademark, as the case may be.</li><li>Existing UK trademarks. Owners of existing UK registrations are advised to consider a renewal of protection where necessary.  </li><li>New Filings. With regard to new filings for EUTMs or RCDs, important applications could be accompanied by a national UK application for additional reassurance.  </li><li>Pending EUTM Applications Subject to Oppositions. On the subject of pending EUTM applications that are subject to an opposition based on the earlier national right of countries remaining in the EU (i.e., trademark, company name, etc.), it may be advisable to push things forward, because, in order to profit from a UK Equivalent, the trademark must be registered at the end of the Transition Period. On the other hand, in relation to pending EUTM applications that are subject to an opposition based on an earlier UK right (e.g., by way of extending the cooling-off period), or pending UK trademark applications that are subject to an opposition based on an earlier EUTM, thought could be given to slowing down the opposition proceeding (e.g., by way of extending the cooling-off period). This is because, after the Exit Date or, respectively, the Transition Period at the latest, these earlier rights will likely not be a legal basis for an opposition against your application anymore.  </li><li>Sole Use of EUTMs in the UK. Owners of EUTMs that have been put to use exclusively, or almost exclusively, in the UK and are (or will soon be) subject to the use requirement may want to consider starting to use their rights more extensively in other EU countries or to register new national trademarks in important countries of the EU in order to benefit from a new grace period.</li></ul><ul><li>Breeders: With regard to applications not yet filed or likely not to be granted until December 31, 2020, breeders can expect to file applications in the EU and in the UK. Since the latter application will be required immediately following the Transition Period and will likely go hand in hand with double the paperwork and two lots of Distinctness, Uniformity, Stability (“DUS”) examinations, timely preparation will be an advantage.</li></ul>

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Wolfgang advises clients on contentious and non-contentious matters involving their most valuable intellectual property assets in the digital, high-tech, life sciences, and pharmaceutical industries.

Wolfgang Schönig

Wolfgang Schönig is a partner of Morrison Foerster (International) LLP based in our German office in Berlin. His practice specialty is advising on IP aspects relative to transactions in, among others, the life sciences, AgTech and pharmaceuticals industry, as well as legal representation in IP disputes. Wolfgang is specialized in research and development collaborations, complex licensing agreements, technology acquisitions, know-how protection strategies, and employee invention law.

NYSE-listed health tech company

One of UK’s largest public EV charging networks

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Associate

Sana Ashcroft is an associate based in the London office of Morrison & Foerster and is a member of the Technology Transactions Group.
Sana advises on a wide range of domestic and cross-border commerci

Sana Ashcroft

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Counsel

Robert advises companies from the technology and life sciences sectors on a wide range of commercial, intellectual property (IP) and regulatory matters. His clients range from multinational corporations to startups and scaleups.

Robert Grohmann

Robert Grohmann is counsel at Morrison Foerster’s German office in Berlin. As a member of the technology transactions group, he focuses on advising domestic and foreign companies and startups in all areas of technology and IP law, including patent and software licensing, employee inventions law, as well as know-how protection. Moreover, Mr. Grohmann’s expertise encompasses the judicial and extra-judicial representation in matters of trademark law, design law, and competition law.

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IP Protection Post BREXIT Part 1: A Right-by-Right Analysis

Supreme Court Restricts the Extraterritorial Reach of U.S. Patent Law for Exported Goods

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Progress is being made regarding the protection of intellectual property (“IP”) rights in a post-BREXIT scenario on both sides of the English Channel. With BREX

IP Protection Post BREXIT Part 1: A Right-by-Right Analysis

Originally, there were no foreign ownership limits for a non-bank company to act as an e-Wallet provider, e-Money issuer or fund transfer operator, leading to an influx in applications from foreign owned providers in Indonesia.On 7 May 2018, Bank Indonesia (“BI”) published a new Regulation on Electronic Money (Regulation No. 20/6/PBI/2018), limiting foreign investments in the payment sector to 49% direct or indirect ownership of the licensed entity.This client alert was first published in April and has been updated to reflect the impact of such new regulations on electronic money in Indonesia.Find out more in our <a href="https://protect-us.mimecast.com/s/XWiGCxk78yUzgLmnsYLO_t">client alert</a>.

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Payments and Lending: Trends to Convergence in the Indonesian FinTech Industry

Paying Employees in Cryptocurrency: Is That Lawful? 

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Originally, there were no foreign ownership limits for a non-bank company to act as an e-Wallet provider, e-Money issuer or fund transfer operator, leading to a

Payments and Lending: Trends to Convergence in the Indonesian FinTech Industry

When companies employ artificial intelligence technologies they have to be mindful of the legal and ethical problems those technologies might cause. While the scope of legal concerns surrounding AI technologies’ impact is broad, of particular concern are instances of unlawful bias and discrimination, privacy law violations, and legal liability resulting from harm caused by the AI technology.The good news is that corporate AI policies can help companies to encourage compliance and guide decisions about the acceptable use of AI technologies. This article describes the points that corporate AI policies should address.Read our piece in <a href="http://www.corporatecomplianceinsights.com/managing-corporate-ai/">Corporate Compliance Insights</a>.

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Stephanie assists companies with technology and life sciences transactions, representing both private and public companies, from emerging growth through the Fortune 50. In particular, Stephanie focuses on helping companies that leverage data through technology in structuring their business and commercial transactions.

Stephanie Sharron

Stephanie Sharron is partner in the Palo Alto office and a member of the firm’s Technology Transactions Group. Clients turn to Ms. Sharron for advice on how to leverage data through technology and the related issues that apply to their business models in light of the rapid changes in business, technology and law.

Stephanie Lynn Sharron

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Managing Corporate AI

USDOT Issues New Policy on Development and Deployment of Automated Vehicle Technologies

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When companies employ artificial intelligence technologies they have to be mindful of the legal and ethical problems those technologies might cause. While the s

Managing Corporate AI

As John Carlin notes in his op-ed for the New York Times, Russia has become “the world’s largest safe haven for cybercriminals.”  John, chair of Morrison & Foerster’s Global Risk + Crisis Management Group and former chief of staff to Robert Mueller, explains that while Mr. Mueller’s indictment of 12 Russian nationals accused of meddling in the 2016 U.S. presidential election may have dominated news headlines, Russian cybercrime — and the Russian government’s harboring of cybercriminals — is nothing new. In the piece, John outlines the magnitude of Russian cyber attacks, reasons why the Russian government continues to shield a “who’s who” of the world’s most wanted hackers, and steps the Trump administration can take to hold Russia accountable and protect American companies. Read John's <a href="https://protect-us.mimecast.com/s/29pSCmZM8ki94lxKcBP5_N">op-ed</a>.

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Putin is Running a Destructive Cybercrime Syndicate Out of Russia

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As John Carlin notes in his op-ed for the New York Times, Russia has become “the world’s largest safe haven for cybercriminals.”  John, chair of Morrison & Foer

Putin is Running a Destructive Cybercrime Syndicate Out of Russia

Companies acquiring or selling businesses that leverage data through technology face special challenges and risks. Focus and prioritization can assist both business principals and lawyers effectively manage these concerns.  This article offers answers to five key questions toward achieving that end.Read the full article in The M&A Journal <a href="https://media2.mofo.com/v3/assets/blt5775cc69c999c255/bltb2175331524d0a8c/627317c8a1a1dd2aa9f6ca66/180711-five-legal-risks-technology-ma.pdf">here</a>.

Fertility Center Litigation

Fitbit

MicroPort

Leading Healthcare, Pharmaceutical, and Medical Device Company

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Pain Pump Matters – Large Pharmaceutical Company

Major Technology Company

Leading Chemical Company

Security Device Company

In re Air Crash Near Peixoto de Azevedo, Brazil

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Co-Chair, Litigation Department

Erin Bosman is the global co-chair of Morrison Foerster’s litigation department. Erin is also the founder and co-head of the Artificial Intelligence group and former chair of the Complex Litigation + Advisement practice group. Clients value her business strategy, seeking her comprehensive counsel throughout the product life cycle, especially in high-stakes litigation and product recalls.

Erin M. Bosman

Erin Bosman is the Global Co-Chair of Morrison Foerster’s Litigation Department. Erin is also the founder and co-head of the Artificial Intelligence Group and former chair of the Complex Litigation + Advisement Practice Group. Clients value her business strategy, seeking her comprehensive counsel throughout the product life cycle, especially in high-stakes litigation and product recalls.

Erin Bosman

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Five Key Legal Risks for Data-Centric Technology M&A

Chinese Interest High Despite Uncertainty

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Companies acquiring or selling businesses that leverage data through technology face special challenges and risks. Focus and prioritization can assist both busi

Five Key Legal Risks for Data-Centric Technology M&A

On July 5, 2018, the European Parliament rejected the proposed amendments to the new Copyright Directive: Article 11, which attempts to protect press publications from impermissible digital use, and Article 13, which attempts to protect online content from impermissible use by online content-sharing service providers. While these proposals are mostly well intentioned to secure creators of content a fair remuneration for the content’s online use, they are less likely to incentivize Internet giants like Google to pay for content and more likely to put smaller Internet companies and startups out of business.Background – Modernizing Copyrights for the EU’s Digital Single MarketIn May 2015, the EU Commission (the “Commission”) launched a strategy for the creation of a Digital Single Market (DSM) in the EU. On September 14, 2016, as part of this strategy, the Commission published a proposal for a new Copyright Directive aimed at modernizing the existing copyright rules in the EU to meet the challenges of digitalization. On June 20, 2018, the Legal Affairs Committee of the European Parliament (EP) adopted a proposal introducing material amendments to the Commission’s proposed directive (<a href="http://www.europarl.europa.eu/meetdocs/2014_2019/plmrep/COMMITTEES/JURI/DV/2018/06-20/Compromiseamendments_CopyrightDirective_EN.pdf">the so called Axel Voss proposal</a>). Last week the EP rejected this amendment proposal and sent it back to the committee for re-discussion and revision (see <a href="https://twitter.com/Senficon/status/1014814460488413185">Julia Reda’s Tweet</a>) sharing the concerns expressed by many stakeholders with regard to the proposed Articles 11 and 13 in particular.The EP is expected to vote on a revised version of the amendment proposal in September 2018 at the earliest. If it approves the revised version, the policymakers – the EP, the Council of the European Union, and the Commission – will enter into inter-institutional negotiations to reach a compromise on their different positions. The adaptation of such a final compromise for a new Copyright Directive is expected at the end of 2018 or beginning of 2019 at the earliest. The EU Member States will then have a transposition period of at least 12 months (as proposed by the Commission) or 24 months (as proposed by the Council) to implement the new Copyright Directive into national law.Confronting the ControversiesThe most controversial provisions discussed among the three EU institutions and the different stakeholders in the industries are (i) the introduction of an exclusive neighboring right for e-publishers requiring online service providers (such as online news aggregators and search engines) to obtain (and pay for) the e-publisher consents to copy and display snippets or small extracts of their news content that may otherwise not be subject to copyright protection (Art. #11) and (ii) the introduction of obligations for online platform providers that host, optimize, and give access to the public to user-uploaded content, (called online content sharing service providers) to license, from the respective right owners, copyright-protected works contained in the user-uploaded content and to take measures preventing copyright-infringing content from being available on their platforms (Art. #13).Both Article 11 and Article 13, target prominent online service providers (such as Google News, Google Search, and YouTube) that (i) generate advertising revenues on their websites and apps by either displaying to their users snippets of news content linking to the respective e-publications or (ii) host and display to the public content uploaded by their users including music, films, and photos. The problem with such user-generated content is that some users upload copyright protected works without the owners’ consents and thereby infringe their copyrights. News publishers and entertainment companies (such as music labels, music publishers and film companies) have been arguing that these online service providers make profits by exploiting their content without their permission and without paying the creators of such content a fair remuneration. Both provisions aim to oblige these providers to obtain licenses from the copyright owners for these forms of use of their content and to pay them a fair and appropriate license fee.Article 11Germany and Spain introduced similar protection rights for press publishers some years ago without achieving the intended results. In Spain, Google ceased its Google News service altogether to avoid paying the compulsory license fee. In Germany, Google managed to cause all news publishers to grant Google News a zero price license while the responsible collecting society, VG Media, only collected EUR 715,000 from 2014 to 2017 from other online service providers for the more than 100 news publishers it represents while creating legal costs of EUR 7.6 million for litigation in this matter during the same time period. A <a href="https://www.asktheeu.org/en/request/4776/response/15356/attach/6/Doc1.pdf">study</a> ordered by the Commission but never published also indicates that the proposed neighbouring right is not an appropriate instrument to increase the revenues of the news publishers. This study also suggests that most European news publishers running on advertising revenue rather than as paid news services actually benefit from the user traffic they receive through online aggregator websites (which is the reason why most news publishers in Europe do not wall their news content against search engines and news aggregators though this is technically possible). Given this history, it seems very questionable that Article 11 will cause Internet giants such as Google to pay news publishers for news snippets. Instruments incentivising online service providers to collaborate with news publishers in marketing their news content may be more beneficial for them.Article 13According to the rejected proposal, online-content sharing service providers perform copyright-relevant acts of use of copyright-protected works contained in user-uploaded content (i.e., performs an act of communication to the public) requiring these providers to obtain the copyright owners’ authorization under EU copyright law (see Art. #3 of 2001/29/EC Copyright Directive). Therefore, these providers are obliged to “conclude fair and appropriate licensing agreements with the right holders” of the protected works. The rejected proposal takes the position that these online content-sharing platforms are not subject to the “safe harbor” otherwise applies to host provider platforms under Article 14 of the e-Commerce Directive as long as they are not aware of the infringing content. Providers that do not have a license agreement with the copyright owners would be obliged to prevent their users from uploading any content that contains unlicensed copyrighted third party works by taking “appropriate and proportionate measures.” Though this does not explicitly include an obligation to install and operate automated upload filters, employing such upload filters would be the only feasible solution to comply with this obligation given the vast number of content files uploaded on these platforms daily. Internet giants such as Google (the owner of YouTube) have already invested millions of Euros in deploying such filtering systems. For them it will be rather easy to optimize what they already have in place to fulfil such obligation. It is therefore very questionable whether Article 13 would urge these providers to enter into any license agreements with music and film companies for user uploaded content and to pay them a license fee going beyond the ad revenue share monetization model some of them currently offer the right owners for displayed user generated content that they claim is their property. But will the European online service providers hosting user-generated content be able to make such investments for upload filter systems? And what about start-ups with business models in this area? There may be many good intentions behind this proposal, but it may backfire to the European creative and technology sectors, weaken competitiveness, and leave artists and other creators of content as well as consumers in Europe with less choice and diversity.

DocuSign, Inc

enercity AG

SoftBank Vision Fund

TDK and its subsidiary EPCOS

Tele Columbus

United Internet/1&1

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Kristina has more than 20 years of experience advising clients across many industries, including the software, internet, mobility, media, and consumer electronics industries, with a particular focus o

Kristina Ehle

Kristina Ehle has more than 20 years of experience advising clients across many industries, including the software, internet, mobility, media, and consumer electronics industries, with a particular focus on technology-driven and IP-heavy transactions.

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European Parliament Voted 318 to 278 Against the Amendment Proposal for a Copyright Directive for the Digital Single Market

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On July 5, 2018, the European Parliament rejected the proposed amendments to the new Copyright Directive: Article 11, which attempts to protect press publicatio

European Parliament Voted 318 to 278 Against the Amendment Proposal for a Copyright Directive for the Digital Single Market

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The European Union’s legislators have reached an agreement on the revision of the EU’s Audiovisual Media Services Directive (AVMSD). The reform aims at providin

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