Bulgaria amends Copyright and Neighbouring Rights Act to implement DSM and CabSat directives - Part I

At the close of 2023, Bulgaria implemented the law amending and supplementing the Bulgarian Copyright and Neighbouring Rights Act (CNRA) after a long process of consultation and coordination with stakeholders, such as collective management organisations (CMOs), associations of copyright and neighbouring rights holders, audiovisual media services providers and electronic communication service providers. The amendments implement Directive (EU) 2019/789 of the European Parliament and of the Council of 17 April 2019 laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes, and amend Council Directive 93/83/EEC (Directive (EU) 2019/ 789 or the CabSat Directive) and  Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC (Directive (EU) 2019/ 790 or the DSM Directive). In the process of drafting and revision of the amendments, CMS Sofia represented the Association of Bulgarian Broadcasters (ABBRO), which unites media service providers with the largest audience share in the market. Media service providers are also among the largest online publishers and major investors in the production of TV series and TV shows.

New rules for fair remuneration to authors and performers

The transposition of the DSM Directive is a major step forward for the creative industries in Bulgaria. Following the amendments, Article 37, para. 2 of the CNRA is deleted and licence agreements may now be concluded for more than a ten-year licence term. The limitation of the licence period under the deleted provision of the Bulgarian law has created problems for producers and hindered the economic exploitation of Bulgarian audiovisual productions and phonograms. It was the right time to abandon this limitation since following the implementation of Chapter 3 Fair remuneration in exploitation contracts of authors and performers, Title IV of Directive (EU) 2019/ 790, authors and performers are entitled to the following:

• receive appropriate and proportionate remuneration;
• be informed about the exploitation of their works or performances and the revenues generated by their use; and
• claim additional, appropriate and fair remuneration when the remuneration initially agreed upon turns out to be disproportionately low compared to all the subsequent revenues generated.

Chapter 3 of the DSM Directive has been transposed to closely follow the wording of the Directive, with a few additional nuances reflecting a tailored approach to its application in the specific Bulgarian context.

Principle of appropriate and proportionate remuneration

Although Article 18 of the DSM Directive applies this requirement to the licensing of exclusive rights, the Bulgarian CNRA has implemented this principle for both exclusive and non-exclusive licensing agreements (see in Article 19 and 38, paragraph 1, 76, paragraph 2 CNRA). The appropriate remuneration is translated as “fair”. The requirement of fair and equitable remuneration will apply not only to authors and performers but also, by reference, to the other neighbouring right holders – phonogram producers, audiovisual producers and broadcasting organisations – when they license their protected subject matter. The licence fee may still be set as a lump sum, as proportion of the revenue derived from the use of the work or otherwise.

Transparency and reporting obligation

The transparency obligation (Article 19 of the Directive) is implemented by Article 39a CNRA (for authors) and Article 83a CNRA (for performing artists). The obligation applies to licence agreements with authors and performers. Licensors are obliged once a year within the licence period to provide to the respective author or performer with up-to-date, comprehensive, relevant and exhaustive  information on the exploitation of the work or performance, on the modes of exploitation, all revenues generated from the exploitation, including merchandising revenues and remuneration due. The information may be provided through electronic means unless otherwise agreed upon in the contract with the user.

Such information may also be obtained on request from sublicensees if the licensee does not have all the information. The request will be made through the licensee unless the licensee does not cooperate or circumstances make it impossible.

Where the administrative burden resulting from the transparency and reporting obligation is disproportionate in the light of the revenues generated by the exploitation of the work or performance, the obligation is limited to the types and level of information that can reasonably be expected in such cases.

An exception to this obligation is provided for where the contribution of the author or performer is insignificant in relation to the overall work or performance. However, if the author or performer claims that the information is necessary to adjust the remuneration to the subsequent revenues, the author or performer must be provided with the relevant information upon request.

The transparency and reporting obligation does not apply to agreements concluded with CMOs.

Authors and performers who receive data under the transparency and reporting obligations are responsible for its processing, use and protection in accordance with the obligations for the protection of personal data and trade secrets.

The transparency and reporting obligation raises practical issues, such as how the revenues generated from the exploitation of the respective work or performance will be determined and who will be the exact person to provide the annual reports. For example, a TV programme (i.e. TV channel) may consist of a number of original productions whereby the TV broadcaster may be the producer or co-producer. Revenue is generated from the media services and the channel distribution and cannot be directly linked or attributed to a particular work or performance.

The DSM Directive provides that when implementing the transparency obligation, member states should take into account the specificities of different content sectors, such as those of the music sector, the audiovisual sector and the publishing sector (see Recital 77). The Bulgarian CNRA has encouraged the self-regulation and the establishment of standards for effective enforcement of the transparency and reporting obligation in paragraph 5a of the Supplementary provision. The latter fosters the development of self-regulatory good practice instruments for the implementation of these new obligations in line with sector specifics.

Contract adjustment mechanism

In case the initially agreed upon licence fee of an author or performer turns out to be disproportionately low compared to all the subsequent relevant revenues derived from the exploitation of the work or performance, the author and performer may claim additional remuneration from the licensee or its successors in title. (Article 38, paragraphs 2-6 and Article 76, paragraphs 4-7 CNRA). The relevant revenues that are taken will include all the subsequent relevant revenues derived from the exploitation of the work, including merchandising revenues (i.e. sales of promotional goods), where applicable. For the purpose of the assessment, the contribution of the author or performer, the common market practices, the sector specifics and the actual use of the work will be taken into account.

The adjustment mechanism does not apply in cases where the licence agreement is concluded with a CMO.

If there is a collective bargaining agreement in force in the sector, which provides for a comparable mechanism for the author to claim an equitable, additional and fair remuneration in case of a disproportionately low initial remuneration, that agreement shall also be taken into account.

If the author and the licence holder do not reach an agreement, the author and the performer may resort to mediation or litigation. In a mediation procedure, authors or performers and users may be represented by their representative organisations.

Paragraph 5a of the Supplementary provisions of the CNRA encourages the self-regulation and the establishment of standards for effective enforcement of the contract adjustment mechanism.

 Right of revocation

The right of revocation provided for in Article 22 of the DSM Directive is implemented by an amendment to Article 39 of the CNRA. The right of revocation applies to exclusive licensing agreements where the licensee is not obliged to start exploiting the work within a certain period of time. If the licensee has not commenced exploitation of the work within two years from the conclusion of the agreement or from the date on which the work is made available, the author may terminate the licence agreement or revoke its exclusivity, in which case the agreement will be considered non-exclusive. The author must notify the person to whom the rights have been licensed and set an appropriate deadline by which the exploitation of the licensed rights is to take place. Where there is more than one author of the work, the right may be exercised jointly. In case of disagreement of the co-authors the matter shall be decided by the court. The right of revocation does not apply to employment contracts, contracts for the assignment of a work under Article 42 CNRA and contracts where the licensee is the end user of the work. An explicit exception is also provided where, due to the nature of the right, it cannot be separately licensed to a new licensee. The right of revocation is not entirely new since the previous version of Article 39 of the CNRA also provided for the right to terminate exclusive agreements in similar circumstances.

Although Bulgaria has implemented the wording of Directive (EU 2019/ 790), very closely, it should be noted that the transparency and reporting obligation and the contract adjustment mechanism are applicable to licence agreements but may not be applicable to assignment contracts under Article 42 CNRA that are common for the creative industries. Article 42 provides that the copyright in a work created on commission or assignment belongs to the author unless provided otherwise. Often the commissioner and author agree that the transferable economic and moral rights in a work vest in the commissioner as from the date of the creation of the work. We will see how these provisions will be interpreted and applied in practice.

It is likely that self-regulatory mechanisms and best practices will be introduced at the industry level to provide more practical and detailed rules for the application of these new principles.

For more information on the amendments of the Bulgarian Copyright and Neighbouring Rights Act, contact your regular CMS advisor or local CMS experts Anna Tanova, Counsel and Eva Petrova, Senior Associate.