The transparency obligation: what information must an exploiting party give me as an author or performer?

Since 7 June 2022, anyone who has entrusted the exploitation of their work to another has had the right to be informed annually about that exploitation and about what it earns. Merel Teunissen on what the exploiting party has to disclose, how sub-licensees fit in, when the obligation does not apply and what you can do when it is not met.

This article is about the transparency obligation that has applied since 7 June 2022. If you, as an author, have entrusted the exploitation of your work to someone else, or have otherwise enabled another party to exploit your work, you have the right to be informed about that exploitation and about the income the exploiting party earns from it. Exactly what information has to be provided, how do (sub-)licensees fit in, are there situations in which the transparency obligation does not have to be met, and what can you do when it is not met?

What is an exploitation agreement?

As the writer of a book or the creator of a film, you want your book to be published or your film to be shown in cinemas. In that case you are the author of a copyright-protected work. The party that publishes your book, or that gets your film made and into cinemas, is an exploiting party.

As the author you hold the copyright in a work. That means that, in principle, you are the only one entitled to communicate the work to the public and to reproduce it (to make identical copies of a work). Depending on what you agree, you can assign that right in whole or in part, or license it, to the exploiting party. The agreement concluded between the author and the exploiting party is the exploitation agreement. In that agreement, author and exploiting party make arrangements about the exploitation of the work: think of printing a book, producing an eBook or recording an audiobook.

Assigning your copyright in whole or in part means that, as an author, you are no longer the copyright holder for the part you have assigned. You may not want to assign the full exploitation right in a work. You then give the exploiting party the right to use the work in a particular way for the duration of the agreement. You can agree, for instance, that the exploiting party may only print books and may only sell them in the Netherlands, for a limited period. That way you do not lose your copyright.

The 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.

Where the exploiting party has the right to exploit your work, they are obliged in return to pay you as 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.

What does the transparency obligation involve?

The transparency obligation means that exploiting parties have 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 you as an author in a position to assess whether the remuneration due to you is equitable. This article deals with the transparency obligation in general terms.

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;
• 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, you as an author must be able to obtain access to recent data that is clear and material to you.

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

The exploiting party also has to provide information about any (sub-)licensees and any other third parties, and about what they have earned. Where the exploiting party, (sub-)licensee or third-party acquirer does not give that information to the “main exploiting party”, you can also request it from them directly. That applies even where you as an author have not concluded a contract with the (sub-)licensee yourself.

In the music sector, for example, a great deal is done with (sub-)licences, even (sub-sub-)licences. Composers and artists often have very little idea what is being earned, and the transparency obligation should bring more clarity.

Exploiting party outside the EU

Problems can arise where the exploiting party or sub-licensee is not established in the EU. The transparency obligation came about on the basis of European legislation. It does not apply to exploiting parties and sub-licensees outside the EU. Where the contract was not concluded under European law, obtaining access to the data may prove difficult. Note that the obligation does apply regardless of where in the world the exploitation takes place. Another article goes further into what the transparency obligation means for you as an exploiting party.

Who can require exploiting parties to be transparent?

The author of a work is entitled to transparency from their exploiting party. Alongside authors, performers can also claim this information: singers on a track, dancers and actors. They too can require the record label, the producer and/or the broadcaster to be transparent.

The transparency obligation applies not only to new agreements, but also to agreements already concluded at the moment the Act entered into force (7 June 2022).

When does the transparency obligation not apply?

In two exceptional situations you cannot, as an author or performer, require the exploiting party to be transparent. The first is where your 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 you have made an insignificant contribution but want to show that the remuneration you have received is out of proportion to the revenues of the exploitation, the exploiting party can still be expected to provide that information to you. As an author you 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 the exploiting party 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 your work earns little and providing the information causes 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 steps can you take as an author or performer where the transparency obligation is not met?

Where the exploiting party or (sub-)licensee does not meet their annual transparency obligation, you can as an author or performer request them to do so. Such a request can be made by letter or email. Should the exploiting party or (sub-)licensee still not come forward with the exploitation data, you can lodge a complaint with the Stichting Geschillencommissies voor Beroep en Bedrijf (SGB), the Dutch disputes committee foundation for the professions and business. That can be done anonymously, but if you want the SGB to give a decision in your case you will have to identify yourself. The point of the disputes committee is that it is a more accessible route than litigation. You can also go to court to claim access to the information. Liaise can help you with that.

Conclusion

As an author you are entitled, at least once a year, to information about the way your work is exploited and about what it earns, so that you can judge whether the money you receive for it is still in proportion to the exploitation revenues. 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.