What does the transparency obligation mean for you as an exploiting party?

The transparency obligation under Dutch copyright contract law has applied since 7 June 2022. Merel Teunissen on what it asks of publishers, producers and broadcasters: which information you owe your authors, how sub-licensees fit in, and the two situations in which you may withhold it. Spoiler: your records will have to be in good order.

This article looks at what the transparency obligation under Dutch copyright contract law means for you as an exploiting party. That obligation has applied since 7 June 2022. Spoiler alert: as an exploiting party you will have to have your records in good order.

Who is an exploiting party?

An exploiting party is a party to whom an author assigns or licenses the rights in a copyright-protected work so that it can be exploited, in part for the author’s own benefit. Think of books, films, song lyrics, paintings, photographs and so on. Exploiting parties are, for example, book and music publishers, film producers and broadcasters.

In return for the right to exploit the work, the exploiting party owes the author an equitable remuneration (the Dutch Copyright Act uses the term billijke vergoeding). That remuneration can in principle be a one-off amount, a lump sum, but it is more common for a royalty to be paid: a percentage of the exploiting party’s profit or of turnover.

An exploiting party can, where that has been agreed, in turn grant a sub-licence or assign rights to a third party. That third party and the sub-licensee are then exploiting parties themselves.

What does the transparency obligation involve?

The transparency obligation means that the exploiting party has to account to the author annually for the exploitation of the work (how and what) and for what is being earned from that exploitation. That puts the author in a position to assess whether the remuneration due to them is fair. This article deals with the transparency obligation for the exploiting party in general terms. For a piece on what the transparency obligation means for authors, click here.

The Dutch Copyright Act prescribes that the exploiting party must provide the author with information about:

• the way in which the work is exploited. For the sale of a book, think of the number of printed copies sold in the calendar year concerned, the number of damaged copies and misprints, and the remaining stock of unsold printed copies (including copies received back);
• what the revenues of the exploitation are, which includes income from merchandising and income that (sub-)licensees earn with the work;
• the remuneration due.

Exactly how this obligation is to work in practice remains to be seen, and may well be settled by the courts.

The information must be up to date, relevant and complete. In other words, the author must be able to obtain access to recent data that is clear and material to them. Where the information provided does not meet those requirements, you as the exploiting party have not met the transparency obligation.

Transparency obligation for (sub-)licensees and third-party acquirers

As a (sub-)licensee or third-party acquirer you have to give the same information. Where you do not give that information to the “main exploiting party”, the author can also request it from you directly. That can cause problems where you conclude agreements with (sub-)licensees outside the EU. The transparency obligation does not apply to them, since this is European legislation. Note that the obligation does apply regardless of where in the world the exploitation takes place.

As an exploiting party it is therefore important to agree this transparency obligation with the (sub-)licensee or third-party acquirer.

To whom do I owe transparency?

Transparency has to be given to the author of a work: the writers of a song or a book, for instance. Alongside authors, performers can also require transparency about the income from exploitation. Performers do not create the work; they interpret it. Think of the singer and of the actor appearing in a film.

When is transparency not required?

There are two situations in which you as an exploiting party do not have to give transparency to the author. The first is where the author’s contribution to the work is so small that it counts as insignificant. Think of appearing as an extra in a film, or of freelancers working for a daily newspaper. Producing an information statement for individuals of that kind would involve too much administrative work. What counts as an insignificant contribution will have to emerge in practice or in the case law.

There is, in turn, an exception to that exception. Where an author who made an insignificant contribution wants to show that the remuneration they have received is out of proportion to the revenues of the exploitation, you can still be expected to provide that information to them.

An author may be entitled to additional remuneration where the remuneration received is disproportionate to the revenues of the work. That is known as the bestseller clause. Transparency about revenues certainly helps in assessing whether such a disproportion exists.

The second situation is where you can show that the revenues of the exploitation are so limited that they are out of proportion to the administrative burden the transparency obligation entails. In other words, where the work earns little and providing the information causes you disproportionate administrative trouble, the information obligation goes no further than what can reasonably be expected of the exploiting party. What does that mean? The legislature has used an open standard here. What can be expected of you as an exploiting party in a specific case will ultimately have to emerge in practice, or be determined by the courts.

The transparency obligation also does not apply to agreements between authors and end users. These are employers and clients (whether a business or a consumer) who do not exploit the work or the performance themselves. Think of logos, corporate identities or bespoke software.

What if I do not meet the transparency obligation?

Where you as an exploiting party do not meet the transparency obligation, the author or performer can lodge a complaint against you with the Stichting Geschillencommissies voor Beroep en Bedrijf (SGB), the Dutch disputes committee foundation for the professions and business. They could do so anonymously, although in that case the SGB cannot give a binding decision. An author who wants a decision from the SGB will have to identify themselves. The author can also go to court and claim access to the data. To avoid all kinds of legal trouble, it is important to make clear arrangements in the agreement with the author.

Conclusion

Authors are entitled to information about the way their work is exploited and about the income generated with it. That allows them to form a better view of the actual economic value of their work and to judge whether their income is still in proportion to what you as an exploiting party earn with it. The duty to provide that information rests on you as the exploiting party.

It is therefore important to take this transparency obligation into account when concluding your agreement or contract. Make concrete arrangements about, among other things, the date on which the information is provided and which specific information it has to cover.