Last Monday, February 15, the Brazilian Ministry of Culture launched a new public consultation (PT) about copyright. This time, the intention is to promote a discussion about the Regulatory Instruction (PT) that aims to regulate the collection and distribution of royalties for copyrighted works in the digital environment.

General context and background of the public consultation

It is important to make a distinction between this process of public consultation and the Copyright Reform that the Ministry of Culture promoted in 2010, after nearly three years of discussions in public forums. That reform proposal was shelved due to successive changes in the Ministry’s staff – an explanation of how this reform was stalled can be found here (EN). In 2013, part of the proposal was approved as a detached reform of the collective administration of copyrights system, by Statute n. 12.853 (PT). The collective administration reform reestablished the Ministry of Culture’s authority to supervise the associations that undertake that sort of activity.

The main consequence of this reform was the establishment of rules for the activity of ECAD, an organization that collects and distributes royalties for public performance rights, and that functions as an umbrella for bringing together 9 associations to which the copyright and neighboring rights holders associate. ECAD used to work under supervision during the period between its creation (the 1973 Copyright Act that established the creation of a centralized organ as the only entitled to collect public performance rights in the country) and the temporary extinction of the Ministry of Culture and its sector responsible for establishing rules and supervision of the collective administration (CNDA), in 1990. Even after the re-establishment of the Ministry of Culture, theCNDA was not reactivated. Thus, from 1990 until 2013, ECAD held its status of a legal monopoly, but without supervision.

The authors’ associations are challenging the constitutionality of the collective administration reform before the Brazilian Supreme Court, which, despite having held a public hearing on the subject in 2014 (PT), has not yet decided. Meanwhile, the Ministry of Culture issued norms regulating the act, detailing for example the conditions associations must comply with to be accepted as collective administration entities. The Regulatory Instruction now in consultation demonstrates the understanding of the Ministry of Culture of its newly established authorities.

It should be also noted that a Regulatory Instruction is an administrative act, complementary to statutes and decrees, and that cannot go beyond or modify the standards already established in the law. So we are not properly dealing with a legal reform.

The problem of copyright in the digital services in Brazil

If there is a certain instability regarding the status of the collective administration reform, the institutional field of copyright collection in the digital music services is currently even more unstable. It is worth clarifying that subscription-based music services like Spotify and Deezer, and “free” (ad-based) services like YouTube, are already paying royalties to authors, performers, phonogram producers and whoever represents them, i.e., publishers and labels, regarding their activities in Brazil. Since their arrival in the country, however, there have been conflicts over who is entitled to collect these royalties and distribute them to the rightful copyright owners. ECAD, representative of the collective administration system that has been in place in the country since the 1930s, tried to establish itself as legitimate, but was faced with opposition from the music services, the Judiciary, and now from new organizations that are gaining space with the development of the digital market in Brazil. Some state-level courts of appeals have been rejecting ECAD’s authority in some cases, but only last year a case reached a superior court – the Superior Tribunal de Justiça (STJ), that harmonizes federal law. Last December, the court held a public hearing (PT) to discuss the issue, but hasn’t come to a conclusion yet.

From a legal standpoint, the problem basically revolves around the concept of public performance. The legal monopoly ECAD holds relates only to this right, and not to others such as reproduction or distribution (bear in mind there is no such right as making available right, in Brazil). So the question is whether or not the use of music in a particular service falls within the concept of public performance of the 1998 Copyright Act (EN); it sounds simple, but it is not, as the text in this case is quite confusing and circular:

Art. 68 (…)

(2) “Public performance” means the use of musical or dramatico-musical compositions with the participation of paid or unpaid performers or the use of phonograms and audiovisual works in places frequented by the public, by means of any process including broadcasting or transmission of another kind, or cinematographic presentation.

(3) The expression “places frequented by the public” means theaters, cinemas, dance or concert halls, discotheques, bars, clubs or societies of any kind, stores, commercial and industrial establishments, sports grounds, circuses, fairs, restaurants, hotels, motels, nursinghomes, hospitals, public entities under direct or indirect management and foundation and State control, means of passenger-carrying land, sea, river or air transport, or any place in which literary, artistic or scientific works are presented, performed or transmitted.

What is the Regulatory Instruction trying to do?

The Regulatory Instruction under debate establishes a general system through which associations can become eligible for collecting and distributing royalties related to all sorts of works in the digital environment.

With respect to music, which will probably be the most controversial issue of the debates, the Instruction establishes that the public performance right shall apply “to services that allow the use of musical works, litero-musical works and phonograms by transmission with the purpose of enjoyment of the material by the consumer, without transfer of ownership or property” (art. 6, paragraph 1), and states ECAD’s authority to collect from these services (§ 1). In other words, streaming services, interactive (like Spotify and YouTube) or not (such as online radio), should pay royalties to ECAD, instead of paying to other actors, as has been the case.

When the Regulatory Instruction refers to users, it means “services and business operators in the digital environment using content protected by copyright and neighboring rights” (art. 1, § 2, II), i.e., YouTube, Spotify, and other portals containing music services; the Instruction does not directly regulate consumption of music by consumers. The fact that I listen to Spotify on my headset or use it for my DJ activities falls outside the limits of this public consultation, as ordinary rules on collective administration would apply.

Is the government trying to tax music services?

The public consultation has been received with some outrage, partly due to some uninformative pieces that have been published in some media outlets, as ECAD is being mistakenly understood as a government body that would now be trying to begin taxing Internet music services. Despite holding a legal monopoly, ECAD is a private association, which brings together the various private associations of copyright owners. ECAD does retain management fees, which should serve to maintain its activities; however, even after the state supervision established by Statute n. 12.853/13, the Brazilian state is never part of the money equation the system encompasses.

In other words, to establish who collects from Internet music services – whether ECAD or another association or even the labels – changes the rules of the game significantly, but in no way means creating a new tax. Also, the Regulatory Instruction is not aimed at regulating consumption, although one or the other model can have different impacts on the end user in terms of prices, what deserves a deeper analysis.

How to participate in the public consultation

To participate in the debate, you must register on the platform created by the Intellectual Rights Department of the Ministry of Culture.

After this registration, citizens, businesses and civil society organizations are invited to comment on each of the Instruction provisions. One can also suggest the inclusion of new provisions or make general comments. The public consultation runs until 30 March 2016 and the comments must be made in Portuguese.

InternetLab reports: our work in the coming weeks

In keeping with the model we have developed in 2015 during the public consultation on the regulation of “Marco Civil da Internet” and the Draft Bill for the Data Protection Act (EN), InternetLab will monitor the debates, and publish weekly bulletins both in Portuguese and English.

Considering that academia has a role to play in the discussion of public policies, our goal is to support and foster this participatory process by systematizing arguments, doing research and inviting other researchers and experts to give their perspectives on what is happening. These activities will be useful to clarify ambiguities and foster the inclusion of new stakeholders in the debate.

Note: The Ministry of Culture launched, at the same time, another public consultation on the obligations of users in relation to the public performance in audiovisual productions; this issue is also controversial and deserves attention, but we won’t address it specifically.

By Mariana Giorgetti Valente

Jonas Coelho Marchezan