7 October 2022

Copyright remuneration: are lump sums allowed?


The new rule Belgian copyright law now explicitly mentions the right to receive an appropriate and proportionate remuneration for an author who has assigned or transferred his exclusive rights to exploit his works under an exploitation agreement  (art XI.167/1 WER).

This is the implementation by the law of 19 June 2022 of the EU Directive 2019/790 on copyright and related rights in the Digital Single Market.  In exactly the same wordings Art. 18 of the DSM Directive stipulates: “Member States shall ensure that where authors and performers license or transfer their exclusive rights for the exploitation of their works or other subject matter, they are entitled to receive appropriate and proportionate remuneration”.

What is “proportionate” ?

The question arises what is meant by these terms, especially what is meant by the term ‘proportionate’. Does it mean that every remuneration must be proportionate to the income or the profit generated by the exploitation? The royalty of writers is often a percentage on the book sales and also in other industries the author sometimes receives a percentage on the gross profits or the net profits.  A proportionate percentage may not always be appropriate (ten percent of zero is zero).

The considerations of the DSM Directive (Consideration nr. 73) mention that the remuneration should de proportionate to the actual or potential economic value of the licensed or transferred rights, taking into account the author’s or performer’s contribution to the overall work and all other circumstances of the case, such as market practices. In that respect it is stated that a lump sum payment can also constitute proportionate remuneration but it should not be the rule. From these considerations follows that a lump sum can indeed be an appropriate and proportionate remuneration, to be evaluated in each case. Not every lump sum will be considered appropriate and proportionate.

What about other countries ?

In neighbouring countries such as Germany and The Netherlands, the provisions of the law were not changed in this respect following the DSM Directive. The Dutch copyright law stipulated and continues to stipulate that the author is entitled to a “fair remuneration” to be determined in the agreement for the grant of exploitation rights. In this case the standard of proportionality set by the DSM Directive will play a role in the interpretation of what is a fair remuneration.

In France on the other hand particular exceptions and situations were included in the law implementing the DSM Directive, stipulating when a lump sum payment is acceptable. Such exceptions include situations where the basis for calculating the proportional participation cannot be practically determined, the means of controlling the calculation of the participation are insufficient, or the costs of the calculation and control would be out of proportion to the results seen to be achieved. Also the nature or conditions of the exploitation could make it impossible to apply the rule of proportional renumeration (either because the author’s contribution does not constitute one of the essential elements of the intellectual creation of the work, or because the use of the work is only incidental to the object exploited).

Some other rules not to forget

The principle of appropriate and proportionate remuneration coexists with the contract adjustment mechanism for (unexpectedly) successful works (the so-called “success fee”): authors and performers (or their representatives) are entitled to claim additional, appropriate and fair remuneration from the party with whom they entered into a contract for the exploitation of their rights, (…), when the remuneration originally agreed turns out to be disproportionately low compared to all the subsequent relevant revenues derived from the exploitation of the works or performances (Art. 20 DSM-Directive; Art. XI.167/3 WER)

Belgian copyright law also still mentions the following as to remuneration: (…) “For each mode of exploitation, the author’s remuneration, scope and duration of the transfer or license must be explicitly defined (…)”. This has lead practitioners often scratching their ears and has led to contractual formula’s such as: “The remuneration of the author is a lump sum and is split in as many parts as there are modes of exploitation”. Even though this provision was part of Belgian copyright law since 1994 (almost 3 decades), it never gave rise to much case law.

Final comment

In the future is will also be up to the European Court of Justice to give guidance as to what constitutes appropriate and proportionate remuneration. It is clear that there is not a ‘one size fits all’ approach and that different situations need different solutions.

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