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Another development, also relating to collective management of copyright, is that the collective management organization Teosto's pricing of VOD services was considered as discriminatory and is still under the scrutiny of the Finnish competition authorities.
A third issue closely monitored by Finnish lawyers is the pending proceedings in the Court of Appeal as regards the nPVR service TVkaista. Below, we will shed some light on these three significant media law developments in Finland.
As the first two of the developments described herein concern collective licensing, we will begin by briefly describing the collective licensing system applicable in Finland. The Nordic countries, including Finland,have adopted a system of extended collective licensing, which allows copyright agreements made between a user and a representative collective management organisation to apply to all copyright holders in a specific field, regardless of whether they are members of the collective management organization or not.
The system of extended collective licensing was designed to streamline mass use of copyrighted works in cases where negotiating directly with individual copyright holders is not possible or would be too expensive. At the moment, there are seven collective management organizations operating in Finland. Teosto, i.e.the Finnish Composers' Copyright Society Teosto, is one of these.
New Act on Collective Management of Copyright
Until 1 January 2017, no specific legislation on collective management of copyright existed in Finland, and the rules and provisions relating to collective management organizations were scattered in different pieces of legislation. This changed trough the implementation of the Directive 2014/26/EU on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market, and on 1 January 2017, the Finnish Act on Collective Management of Copyright (1494/2016, as amended) entered into force.
The Act covers issues regarding collective management of copyright, such as the rights of right holders and members, their relations to the users, the monitoring of collective management organizations as well as multi-territorial licensing of rights in musical works.
Apart from the provisions regarding licensing terms, the Act does not, however, lay down any rules concerning the actual substance of the copyright. The purpose of the Act is, inter alia, to promote the functioning of the copyright market and ensure that the collective management of copyright is conducted in a responsible, efficient and transparent manner.
One major change introduced by the Act is that the monitoring of collective management organizations' compliance with the Act is assigned to the Finnish Patent and Registration Office (Fi. Patentti- jarekisterihallitus, "PRH").PRH will, when necessary, cooperate with the Finnish Competition and Consumer Authority ("FCCA") and the Ministry of Education and Culture. PRH may be requested to take action in alleged breaches of the Act, but it may also act on its own initiative.
The monitoring is mainly of ex-post nature and based on information that PRH has received. New copyright organizations have to file a notification to PRH before they start operating, while already active organisations had to file a notification within one month of the entry into force of the Act.
Although it is still too early to assess the actual effects of the Act, lawmakers expect the Act to have positive consequences for the economy as well as for right holders and users.
The Act and the underlying Directive harmonizing the operations of collective management organizations within the EU is expected to make the copyright market more efficient and increase competition on the market. This, of course, involves both opportunities and risks for the Finnish collective management organizations. The increased supervision and transparency of the collective management organizations' operations are further predicted to enhance the rights of the right holders and users.
Competition Authority Investigates Teosto's Pricing Practices
Since year 2015, FCC Ahas been examining the collective management organization Teosto's pricing practices. According to the initial assessment by the FCCA published in April 2016,the different prices for linear Pay TV and SVOD services applied by Teosto distorts competition between different distribution channels and impedes technological development on the market. At the moment (May 2017), the FCCA is still evaluating whether to continue the investigation or not.
The investigation was initiated by a complaint submitted by the Finnish TV company MTV SisällötOyon 3 July 2015.In its complaint, MTV SisällötOy argued that Teosto's pricing is non-transparent and that both the basis for the pricing as well as the pricing itself is discriminatory.
The complainant further argued that FTA TV, Pay TV as well as SVOD and TVOD services all compete on the same relevant market and that the pricing applied by Teostois not technology neutral. Based on the complaint, the FCCAstarted investigating Teosto's alleged abuse of its dominant market position.
Having heard different media companies on the field, FCCA presented its initial assessment of Teosto's pricing schemes in April 2016. First, FCCA pointed out that the applied royalties are lower for linear Pay TV than the corresponding royalties for SVOD services, which distorts competition and restricts technological development on the market. Secondly, FCCA held that the pricing applied by Teosto is not transparent, which enables discriminatory and unreasonable pricing.
In June 2016, Teosto presented to FCCA a draft version of its new comprehensive audio visual pricing model, in which Teosto had sought to resolve the competition issues addressed by FCCA. The new model attempted to enable a freer supply of content, make AV contents' linear and on-demand offerings commensurable, reduce the significance of minimum tariffs as well as facilitate small-scale business.
The pricing model contained two different price lists depending on whether the AV serviceis free to consumers or if the consumer is charged for the service. During fall 2016, most of the media companies on the field gave their view on Teosto's amended pricing model. Although the media companies were cautiously positive towards the amended pricing model, they generally held that it did not solve the competition issues pointed out by FCCA.
In late February 2017, FCCA requested Teosto to clarify why different price lists are used for FTA and Pay TV. In its response in late March 2017, Teosto submitted that the markets for FTA and Pay TV services
are to be considered as two different markets in Finland, and consequently, the applicable price lists
Teosto submitted that as the revenue per viewer is significantly lower for FTA TV than for Pay TV, it is justified that Teosto uses a higher royalty percentage for FTA TV services. It remains to be seen whether FCCA accepts this argumentation and considers that the amended pricing actually solves the competition issues addressed by it.
Tvkaista Proceedings Continue in the Court of Appeal
The last development that we would like to highlight is the TVkaista proceedings pending at the Court of Appeal of Helsinki. In September 2015,the District Court of Helsinki rendered a judgment in a criminal matter concerning the nPVR solution TVkaista.
The fundamental question in TVkaista was whether the technical implementation of the service was user-initiated, and hence constituted permitted private copying pursuant to the Finnish Copyright Act, or if the service was based on centralized capturing and on-demand streaming of broadcasts, which without the right holder's permission or appropriate license could amount to copyright infringement or a copyright offence.
In its judgment, the District Court concluded that the service Tvkaista did not fall under the exemption for private copying under the Copyright Act. According to the judgment, the defendants had made so called master copies of the broadcasts, and not individual user specific copies as they claimed.
The existence of a master copy was supported by evidence indicating that all recordings were named identically and that their content was completely identical. Based on the aforementioned and the fact that users were able to change the file format of their recordings without delay, the District Court concluded that the defendants had recorded all the broadcasts without any contribution from the subscribers and that, consequently,the service was not user-initiated. The District Court hence ruled that the TVkaista service amounted to copyright offence.
The decision was appealed to the Court of Appeal of Helsinki, where the final statements of the parties were given in mid-April 2017. The main issue at the Court of Appeal was, once again, the technical implementation of the TVkaistaservice and whether it could be considered private copying. To support their argument about private copying, the defendants claimed, inter alia,that the District Court had made an erroneous decision as it had not considered the actual technical implementation of the service.
The defendant's argued that their service was a so called "virtual digital recorder", which created one original record for each individual subscriber, and based on that record, three other copies were created. This technical implementation made it possible to identify and retrieve each individual user's recording, despite the fact that the users had no physical private recording devices. As each user had its own recording, the defendants argued that the private copying exemption applies. The Court of Appeal is expected to render its decision on this matter shortly.
From a media law perspective, interesting times are certainly ahead in Finland. New, digital services, such as the nPVR service TVkaista, continue to raise challenging legal questions,while the applicable legislation is insufficient to provide any clear answers to such questions. Clarifying case law from the Court of Appeal is, therefore, welcomed.
Moreover, it remains to be seen what the actual effects of the new Act on Collective Management of Copyright will be, and how the Finnish collective management organizations will be able to respond to the potentially increased competition on the copyright market.
Speaking of collective management, the outcome of FCCA's investigation of Teosto's amended pricing model will be especially thrilling to follow. The extended collective management system applicable in Finland, as described above,reduces the transactional costs related to the collective management of copyright, but is also quite problematic from a competition law perspective, as we have seen e.g. in relation to Teosto's discriminatory pricing.
With this in mind, it is possible that subsequent legal proceedings relating to FCCA's investigation of Teosto's alleged abuse of its market posion may be initiated.
The previous year has been very exciting for media lawyers in Finland, involving several interesting developments especially on the field of collective management of copyright and concerning VOD services. Firstly, a new Act on Collective Management of Copyright entered into force on 1 January 2017, introducing new rules and provisions for a legal field with no previous specific legislation.
Mikko Manner heads Roschier’s TMT and Outsourcing practices. He has extensive experience in both contentious and non-contentious IP and ICT work for clients representing a wide range of intellectual property-intensive industries. Mr Manner regularly advises on intellectual property and technology issues in transactional and strategic contexts. In addition, he has first and second chair trial experience of arbitration, mediation, and litigation before the Helsinki District Court and the Helsinki Court of Appeals. Mr Manner originally joined Roschier in 2001 and later spent over three years with Nokia Research Centre and Nokia Open Source Legal. He rejoined Roschier in 2006 and became a partner in 2010. He was a board member of the Finnish IT Law Association between 2006 and 2009 and an invited expert on the intellectual property advisory committee of Eclipse Foundation from 2005 to 2006. Mr Manner is recognised in international rankings as a leading expert in Finland for intellectual property, TMT and outsourcing.
Åsa Henriksson is an associate in Roschier's Intellectual Property practice. Since joining Roschier in 2014, she has been involved in various assignments relating to intellectual property rights as well as marketing and consumer law regulatory matters. In addition to her LL.M. degree from the University of Helsinki, Ms Henriksson studied law at the National University of Singapore.