What does the transparency obligation mean for you as an exploiter?

The transparency obligation under Dutch author's contract law has applied since 7 June 2022. Merel Teunissen on what it asks of publishers, producers and broadcasters: which information you owe your makers, 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 blog looks at what the transparency obligation under Dutch author’s contract law means for you as an exploiter. That obligation has applied since 7 June 2022. Spoiler alert: as an exploiter you will have to have your records in good order.

Who is an exploiter?

An exploiter is someone to whom the rights in a maker’s copyright-protected work are assigned or licensed in order to exploit them (partly for the benefit of that maker). Think of books, films, song lyrics, paintings, photographs and so on. Exploiters are, for example, book and music publishers, film producers and broadcasters.

In return for the right to exploit the work, the exploiter owes the maker a “fair” remuneration. That fair 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 exploiter’s profit or of turnover.

An exploiter 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 exploiters themselves.

What does the transparency obligation involve?

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

The Act prescribes that the exploiter must provide the maker 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 information obligation is to be given practical shape will have to emerge in practice, or be filled in by the courts.

The information must be up to date, relevant and complete. That is to say that the maker must be able to obtain access to recent data that is clear and important to them. Where the information provided does not meet those requirements, you as the exploiter 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 exploiter”, the maker 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 exploiter 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 maker of a work: the writers of a song or a book, for instance. Alongside makers, performers can also require transparency about the income from exploitation. Performers are not makers of works, but the interpreters of the work. 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 exploiter do not have to give transparency to the maker. The first is where the maker’s contribution to the work is so small that it is regarded as not significant. 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 “not significant” will have to emerge in practice or in the case law.

There is, in turn, an exception to that exception. Where the maker of a not significant part of a work 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.

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

Secondly, you may refuse to provide information 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 in that case goes no further than what can reasonably be expected of the exploiter. What does that mean? The legislator has worked with an open standard here. It will ultimately have to emerge in practice, or be filled in by the courts, what can be expected of you as an exploiter in that specific case.

Finally, the transparency obligation does not apply to agreements between makers 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 exploiter do not meet the transparency obligation, the maker 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. The maker could do so anonymously, although in that case the SGB cannot give a binding decision. If the maker wants a decision from the SGB, they will have to identify themselves. The maker 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 maker.

In closing

Makers 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 exploiter earn with it. The duty to provide that information rests on you as the exploiter.

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.