Will a Munich Legal Decision Give UMG Leverage Against TikTok?

At the end of February, TikTok took down every song in which Universal Music Publishing Group owns a share, a complicated step in the escalating showdown between the two companies that started a month earlier during the week before the Grammy Awards. 

We are now in uncharted territory: Never before has a major label used the “nuclear option” to withdraw both recorded music and publishing rights from a platform — an especially dramatic step because it includes any song in which UMG owns even a small share. (By Billboard‘s estimates, it affects over 60% of the most popular TikTok songs in the U.S.) What most people don’t know is that these negotiations might perhaps also be affected by a Feb. 9 decision from the Munich Regional Court about the German implementation of the 2019 European Union Directive on Copyright in the Digital Single Market — the Urheberrechts-Diensteanbieter-Gesetz (UrhDaG). It will certainly shape future negotiations like this.  

The case involved the Berlin-based film distributor Nikita Ventures, which operates YouTube channels and, coincidentally, TikTok. And although it wasn’t covered much by English-language press, it shows that negotiating leverage is gradually shifting from platforms to rights holders. “This verdict,” Matthias Lausen, a founding partner of the Lausen law firm, who represented Nikita told me, “shows that there is no safe harbor in Europe anymore for platforms.”

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In the case, Nikita said that it offered to license its content to TikTok in early 2022, at a cost of three euros per thousand views, an amount based on a published rate from GEMA, the German collecting society. (Licensees often seem to pay less than this.) By summer, TikTok had not responded with a counteroffer, and Nikita said that the content it had asked TikTok to block was available until August. TikTok said in court that it was still negotiating, that its filtering system is compliant with the law and that it responded to takedown notices. The court essentially ruled that TikTok didn’t make a best effort to negotiate, though, and held the company liable for infringement, with damages to be determined, plus required it to provide information about how many times the content in question was accessed, as well as its resulting revenue and profit. 

Why does this matter? Until now, the U.S. Digital Millennium Copyright Act and laws like it have limited the leverage of rights holders in negotiations. Platforms that make available content uploaded by users have been free to build audiences, and businesses, as long as they have no direct knowledge of infringement and respond promptly to takedown notices filed by copyright holders. This has given platforms what some might call a “Free Ride,” and on a Feb. 28 UMG earnings call chairman and CEO Lucian Grainge said “there must not be free rides for massive global platforms such as TikTok.”  

The 2019 European Copyright Directive was intended to address this, and it requires online platforms to make their “best efforts” to license content, as well as block content they haven’t licensed once rights holders have given them the necessary information. But this is the first court decision based on it.  

Nothing will change overnight. The scope of this decision is limited, platforms could potentially get around it by better documenting their negotiations with rights holders, and it’s hard to imagine it will have a substantial effect on UMG’s negotiations with TikTok. But it shows that Europe is serious about forcing online platforms to negotiate on an even playing field, which should result in more favorable deals. (Since European countries do not have class-action lawsuits or high statutory damages for copyright infringement, though, this will not lead to a gold rush of litigation.) 

Much of that is in the future, and some of these deals will involve platforms that don’t even exist yet. To get a sense of how this might play out, though, imagine a video-based nano-blogging platform that allows schoolchildren to record minute-long covers of pop songs. (I’m making this up, of course, but it’s not the dumbest idea I’ve heard this year.) That platform would have to approach rightsholders about deals early and often, then take serious steps to block the content they ask it to. That means it would have to license content before it got big — not once it’s already too big to fail. 

Even now, TikTok needs to make a “best effort” to take down UMG’s publishing catalog. The company took prompt action, so it’s likely to be in the clear there, although it will be interesting to see what happens with recordings that are sped up and slowed down. At a time when songs are sliced and diced by influencers, how elaborate does a best effort have to be? Could we find out in a case that involves this dispute? The odds are against it, but stranger things have happened.  

For the past quarter century, rights holders have had a hard time negotiating on an even playing field, which has arguably pushed down the price of content for both online businesses and, through them, for users. That dynamic is changing — slower than rights holders want and faster than platforms prefer — but steadily all the same. It will be hard to measure this, because these big licensing deals by their nature are complicated and intransparent. Finally, though – for good or ill depending on what side you’re