The Digital Content Directive (the Directive) being pushed through by the Dutch EU presidency could have a significant impact on UK businesses supplying digital content. The Directive is part of the Digital Single Market Initiative. There are also draft directives on copyright law, geo-blocking and the online sale of goods. But the Digital Content Directive is likely to be the first adopted and is the one to watch.
The Directive will not only apply to ‘traditional’ suppliers of digital content, such as pay TV providers or online games companies, it will also apply to all suppliers of digital content, by any business, that fall within its scope. It will be another consumer protection Directive that businesses in all sectors of the economy must comply with when supplying digital content to their customers in exchange for money, personal data or, rather perplexingly, ‘any other data’. This is unless businesses can show that they need the personal data supplied by the consumer for the ‘performance of the contract’ or to meet ‘legal requirements’. But there is no guidance on what this might mean in practice.The European Commission is promoting it as necessary to increase cross-border trade. They hope it will create greater certainty for businesses and consumers alike, by creating one set of rules for the sale of digital content online within the single market.
In theory, these new rules will remove barriers to cross-border trade and encourage consumers to feel more confident in buying digital content online from suppliers in other member states. The EU commission is concerned that only 12% of EU retailers sell online to consumers in other EU countries while 37% do so within their own country. Similarly, only 15% of consumers purchase digital content online from another EU country, while 44% do so from their own country.
The Directive is inspired in part by the digital content chapter in the Consumer Rights Act but, with significant differences. It introduces rules similar to those in the Act. These include the requirement of digital content to conform to the contract similar to the Quality Rights set out in the Act. Similarly on remedies, the Directive places an obligation on suppliers to bring digital content into conformity with the contract, but if that is not possible then to offer consumers a price reduction and/or full refund.
But, unlike the Consumer Rights Act, the Directive will: apply to all supplies of digital content for consideration, personal data or any other data; require suppliers to return to consumers user-generated digital content on termination of the contract; introduce a permanent reversal of the burden of proof for digital content supplied; and, most controversially for the UK market – prevent suppliers from imposing contracts longer than 12 months for digital content.
There are many other proposals within the Directive that also represent a departure from the current provisions on digital content set out in the Consumer Rights Act. These proposals are, however, subject to ongoing discussion.
But the scope of the Directive, the definition of digital content and the obligation to return user-generated digital content are all likely to make it into the final draft, as the majority of member states appear to support their inclusion at this stage.
The Directive will apply to any digital content supplied for consideration, personal data, or ‘any other data’. But, there is no suggestion of proportionality here. There are many situations where consumers provide data that is not personal data, in exchange for free digital content. The Directive fails to acknowledge that consumers would have a much lower set of expectations in relation to such digital content, than they would for digital content that costs considerable sums of money.
However, the previous debates about personal data having a monetary value now appear to be over. All members states seem to agree that the Directive will apply to contracts for digital content where the content is supplied in exchange for personal data provided, for example an e-mail address. It should be noted that where digital content is supplied as part of a wider service to the consumer, this Directive will only apply to the digital content element of that contract.
Article 2 of the Directive contains a very wide definition of digital content that includes services allowing for the creation, storage and distribution of digital content. These are for the reasons set out in recital 11, including the need to future proof the law on digital content against technological change, which in turn requires a wider definition than that originally provided in the Consumer Rights Directive [2011/83/EU] (CRD).
Recital 11 also says that the law requires there to be no differentiation between different categories of digital content in order to avoid the law favouring one type of digital content over another.
But recital 11 and Article 2 go too far. The definition of digital content in the Consumer Rights Directive actually achieves the objectives set out in recital 11 of the draft Digital Content Directive. It isn’t possible to have a definition wider than that contained in Article 3 (11) of the CRD: digital content means ‘data which are produced and supplied in digital form’.
By including within the definition of digital content ‘services’ allowing for the storage, processing, creation and sharing of digital content, Article 2 of the Directive only succeeds in conflating activities that are traditionally considered to be services with digital content.
This conflation of ‘digital content’ and ‘services’, within the definition of digital content, leads to the creation of certain rights that in reality the market cannot support for a variety of technical, legal and commercial reasons.
Many of the difficulties that flow from that conflation of content and services could be avoided if the definition of digital content was broken apart. Instead of conflating digital content with digital services, the categories could be defined separately.
It would make more sense to retain the definition of digital content set out in the CRD and then have a new definition for ‘digital services’, which would cover any service allowing for the creation, processing, storage, or sharing of digital content provided by other users of that service.
Defining ‘digital services’ in this way, separate from digital content, would allow the Directive to recognise that it is not always possible to return to a consumer their user-generated digital content, when that content could only exist in the context of the ‘digital service’ to which the consumer subscribed.
Ceasing that ‘digital service’ often means that the user-generated digital content cannot be available outside of the functionality offered by the platform supported by that ‘digital service’.
It does not make sense to a consumer or a business to make available to a consumer the benefits of an in-app purchase after they have deleted the app in question. For example, people often buy a hammer in Candy Crush Saga for the sole purpose of enjoying the use of the game-specific ‘booster’ within that game. If they delete the Candy Crush Saga app they would have no use for the hammer they bought within that app.
Alternatively, what could a consumer meaningfully do with a user-generated avatar in an online computer game, after they have ceased subscribing to the game in question? For example, a user of the popular online game Minecraft has built a full-scale replica of Star Trek’s USS Enterprise. This player even claims ‘It has a full interior’ but that the accuracy cannot be guaranteed as no ‘blue prints of this ship currently exist’ (unsurprisingly). If this player leaves Minecraft, it would be impossible for him to have this user-generated digital content, ‘the USS Enterprise’, returned to him in a meaningful format. It can only exist in the context of the digital service to which he subscribed. If he chose to end that service, he would not be able to enjoy his creation as it cannot exist independently of Minecraft, which in itself would also benefit from protection under the Copyright Act.
Conversely if a customer subscribes to a credit reference agency for a year to access their credit report, and in the process they update their details to make them more accurate, it should be possible on termination of that ‘digital service’ contract to receive an up-to-date report, comprised of ‘digital content’ in a portable document format, that sets out their user-generated digital content.
The Directive should therefore distinguish between user-generated digital content that is specific to a digital service and associated platform, to which the consumer may have subscribed, as opposed to data that can be stored in a portable document format independently of that platform.
The Dutch EU presidency is prioritising the Directive. But, it took the UK government six years to legislate on digital content. The European Commission is attempting the same process across the single market within an 18-month time frame. So although the debate continues, time is running short. There is a danger of the old adage being observed again: draft in haste and repent at leisure.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.