One Little Word
By Luis C. Schmidt, Partner
Copyright World, February 2004
Luis Schmidt offers a thorough analysis of a new law which has simultaneously upset the status quo in Mexico, and moved the country away from the international community
* Mexico's 1996 Copyright Law, introduced to bring the nation in line with global obligations and modern practice, has recently been modified following pressure from the country's collecting societies.
*The legislature, by accepting the argument of the lobbyists and falling to exercise due care with its language has overturned the status quo previously enjoyed, and disrupted the necessary balance between the rights of authors and creators and commercial users
*In article 26 bis, for example, the use of "y" (and) instead of "o" (or) has resulted in ambuguity and illegality, with the legislature creating a situation where both an author and her or his assignee could benefit from the public performance of the work, notwithstanding that the author had previously transferred the corresponding rights to the assignee
*The author argues that Mexico's copyright las has fallen victim to the period of transition the country is undergoing following recent changes in government. Populism and influential interest groups have meant that an ill-conceived law has passes, even in the face of direct opposition by Mexico's president
2003 is a year that the intellectual property community of Mexico will long remember. The times that the country has been facing show a political environment, embraced by the winds of democracy, however struggling in a battle against the shadows of dictatorship that still contaminate society.
This analysis recognises that the battle has touched IP, hitting it hard and making it shake and tremble. Muddy environments do not provide a good basis for intellectual property rights to develop. The so-called transition period that Mexico confronts has triggered confusion among the IP community, and has put the system under threat. What has been achieved during recent years in terms of legislative improvement could easily disappear.
In Mexico, certain groups rely on the values of nationalism and protectionism to show that they are on the side of the people. However, this front hides the perversity of their individual political or economic interest. This article will explain how copyright law was recently used for these purposes, and how that has affected some sectors of industry as well as society at large.
Not long ago, collecting societies in Mexico collaborated to work towards a strategic common goal: seeking amendments to the Copyright Law of 1996, the statute currently in force that deals with the rights of authors and performing artists1.
This law imposed restrictions on the rights of authors and artists, prompting a number of collecting societies, led by SACM (Sociedad de Autores y Compositores de Música), to lobby before Congress in search of new sources of income from the use of authored works. However, achieving that objective would only be possible following a full reform of the Copyright Law.
Accordingly, collecting societies began the process of organising meetings and conferences, inviting representatives of government agencies and the legislature to speak or simply attend. The general purpose was conveying the message that the Copyright Law of 1996 did not fulfill the intention to protect authors from the evilness of cultural industries. That line of thought attracted the attention of a number of politicians that undertook to present a bill to the Congress.
Support came immediately from certain senators, mostly members of the political party which had ruled in Mexico for more than 70 years, and first lost power just three years ago. The societies' message won support from this quarter easily, because, firstly, the message raising voices in favour of the author as the weaker part of a relationship with the industry provided a convenient flagship for politicians who look for popularity. Secondly, collecting societies, but SACM in particular, have a strong political influence in their own right, and this was used negotiate directly with the government. In Mexico, collecting societies have clearly benefited from corporativism that has dominated the country for various decades.
It is true that the Copyright Law of 1996 was not at all popular with the collecting societies. In a number of its provisions, the determination of the legislature to obtain a balanced solution to the conflict of interests amongst authors and users of works is clearly visible. Accordingly, the law reflected the adoption of different formulas to prevent the rights of authors being employed to impair those of the users. Given that framework, rights were made subject to certain restrictions2 and concepts to redefinition3.
More comfortable with the primitive ways of former statutes, the collecting societies were totally opposed to the equations that the Congress implemented in 1996. While arguing that the law had left authors and artists unprotected, the collecting societies were in reality pushing for reform with the intention of returning Mexico's copyright industries to the past.
In a plenary session of November 8, 2001, a bill executed by various senators was put for analysis and discussion to the so-called "Commission of Education and Culture" of the Chamber of Senators4. The bill would propose amendments to articles of the Copyright Law, including provisions dealing with the communication rights of authors and performing artists. The idea behind it was not only to enhance the benefit authors and artists benefit could gain from the use and exploitation of works through the public performance thereof, but to introduce new or additional forms of income.
It took more than one year for the Commission to submit a response to the chamber for approval. The report on which the answer was presented, included suggestions to the Senate for approving additions to the law, was published at the Gazette of Congress, No 85 of December 12, 2002.
Concerning the right of public performance, the Commission considered the need for change:
"To guarantee that the rights of authors or of their assignees, would be recognized whenever any work of their creation has been communicated or transmitted by any means, contributing to give strength to the figure of collecting societies". 5
The Comission further considered that the original text of the law was unclear as to whether the author had a "right to obtain a royalty from the public communication of the works", as it was indeed the case of performing artists. It found it unfair that performing artists should enjoy more rights from the exploitation of works than the authors would.
In line with the above, the Commission proposed the following amendment:
'Article 26 bis. The author and his assignee shall enjoy the right to a royalty from the public communication or transmission of the work by any means. The right of the author cannot be renounced. The royalty shall be paid directly by whom the public communication or transmission of the works is made, directly to the author, or to the collecting society representing him, in accordance to what provided in articles 200 and 202, paragraphs V and VI of the Law " (emphasis added). 6
In a similar fashion, the Commission agreed to an amendment of the work-for-hire provision by adding a new article. However, apart from brief statements, the report did not offer technical reasons why modifications had to be made. The report stated:
"The reform as proposed does not make the work-for-hire provision disappear as it simply grants the author of musical works the legal certainty that the current text took away".7
The report also recognised that work-for-hire is a vehicle that producers of audiovisual works frequently employ to deprive authors of musical works of their patrimonial rights, and to circumvent the rules and restrictions relating to the assignment of rights. Because of this, the report said, work-for-hire provisions worked in opposition to the law on transmissions, designed to protect the authors of musical works. This required urgent amendment, according to the authors of the report, so the authors could benefit in the means and proportion that the work becomes successful in the market.
Accordingly, the provision as proposed would read as follows:
"Article 83 bis. In addition to what provided in the foregoing article, the person participating in the production of a musical work in virtue of a remuneration, shall have the right to pay any royalties that generate from the public communication or transmission of the work, in terms of articles 26 bis and 117 bis of the Law.
To consider that the work is made for hire, the terms of the contract shall have to be clear and precise, and in case of doubt, the interpretation favoring the author will be preserved. The author shall have also the right to draft his own agreement when a work is being requested to him".8
Finally, the Committee found that reform was required concerning the rights of public communication of performing artists. The intention was to make it clear that the rights of artists could be "assigned" (sic) in the terms that they were contracted. Another reason given to justify reform was that the artists had to "recover" their right of public performance, in a manner that it could not be renounced. In addition to that, article 118 would be modified, so that in consistency with the World Performers and Phonogram Treaty, it would state that said rights become exhausted "as long as the user that make use of the tangible objects for a purpose of gain and make the corresponding payment".9
In light of the above, the Commission would propose the following additions:
“Article 117 bis. Performing artists have a right that cannot be renounced to a royalty for the use and exploitation of their performances made with the purpose of direct or indirect gain, by any means, public performance or form of disposal."
“Article 118. Said rights shall be considered exhausted once the performer has authorized the incorporation of his performance onto a visual, sound, or audiovisual fixation, as long as whoever uses the tangible objects for a purpose of gain makes the corresponding payment".10
The report of the Commission was taken to plenary debate before the Chamber of Senators, and was approved on December 12, 2002. The bill was then sent to the Chamber of Deputies, where discussions were held from January until April 2003. The Chamber of Deputies passed the original draft with slight modifications — specifically to articles 117 bis11 11812 - and on April 29, 2003, returned it to the Senate for final approval.
The following day, the Senate delivered the bill to the President of the Republic for promulgation. The President objected vehemently, arguing that the promulgation and publication of the bill should not take place. He is reported to have considered exercising the power of veto, but this failed to eventuate, and the bill was signed into law and published on July 23, 2003, becoming effective one day after.13
As could have been expected, the ill-conceived amendments to the Copyright Law of 1996 will now have significant negative impacts. Whether Congress acted in good faith is something that should perhaps not be doubted. However, suspicion naturally arises from the fact that the legislature ignored the position of the users of the works, and were careless about the interest of society. Congress should have borne in mind that copyrights are very complex subjects that can easily confuse anyone that is alien to the practice of that field of the law. Under that premise, the legislative process should have been more indepth and exhaustive, and discussion should have considered all possible intervening factors. Otherwise, the resulting product would reflect just a partial and one-sided view of the picture, as it evidently was the case.
The law as it was
The Copyright Law of Mexico has been framed around a notion of fairness, where the rights of authors are subject to restrictions to protect the interests of the users of works, but principally, those of the society at large. Rights and obligations are thus required to meet a balance, and the duty of Congress, as well as of the Courts, is to procure that this is achieved.
Consistent with that goal, the 1996 Congress established a system to protect the rights of authors from a patrimonial and personal angle.14 Moral rights were asserted to protect the author as the intellectual creator of the work. They cannot be transferred, sold or assigned, because they are inherent and integral to the individual who has created the work — the author — who holds them permanently and perpetually, during and after his or her life. It is not possible for the author to renounce his or her moral rights; they cannot be pledged, and they never prescribe.15
On the other hand, patrimonial rights vest originally on the author — subject to the exceptions recognized in the law — and can be transferred, licensed, or in other way disposed of, and its duration is temporary.16 The Copyright Law has divided patrimonial rights into different categories, including reproduction17, distribution18, public performance19 and display20 and the making of derivative works.21
In regard to the transfer of patrimonial rights, the Copyright Law recognises both assignments and licenses as the fundamental forms by which rights can be disposed of.22 Accordingly, authors are legally entitled to make transfer of patrimonial rights to third parties, who will then become the owners of said rights. These latter are considered to be "secondary" or "derivative" owners of rights:"causahabientes" as they are known in Spanish.
The difference between "original" and "secondary" or "derivative" makes clear that there can be owners that acquire the title by having created the work, and others by virtue of a transfer of rights. As mentioned previously, transfers can be made through either assignments — which implies a full transfer of title and licenses responding to a partial or limited transmission of rights, where the author would keep control over the use or exploitation of the work made by the licensee.
The Copyright Law considers as an exception to the general rule that the author is the "original" owner of patrimonial rights, and that applies when the work was made for hire.
Under that rule, whoever commissions the creation of a work or a part thereof to someone, under employment23 or as a freelance24, and makes retribution to that person for the contribution, can be regarded as the "original" owner of the patrimonial rights. The meaning of this is that the commissioner or employer becomes the owner ab initio and without the need of a transfer. On the other hand, the author or "intellectual creator" (in Spanish "creador intelectual" or "colaborador remunerado"), as the law and doctrine refer to the individual contributing to the creation of the work, is not entitled to any patrimonial rights, and shall keep the right of paternity.
All the above is in conformance with the framework created by international treaties. For example, article 6 bis of the Berne Convention for the Protection of Literary and Artistic Works (Paris Act)25, as well as article XI of the Interamerican Convention of Washington26, recognise the distinction between moral and patrimonial rights, and the possibility that these latter be transferred through assignments or otherwise. However, the North American Free Trade Agreement in article 1705(3)27, sets out something of particular relevance:
"3. Each Party shall provide that for copyright and related rights:
(a) Any person acquiring or holding economic rights may freely and separately transfer such rights by contract for purposes of their exploitation and enjoyment by the transferee; and
(b) Any person acquiring or holding such economic rights by virtue of a contract, including contracts of employment underlying the creation of works and sound recordings, shall be able to exercise those rights in its own name and enjoy fully the benefits derived from those rights".
The Copyright Law of 1996 refers to the audiovisual work — which includes the cinematographic work - as a complex production resulting from the integration of different works made by a number of contributors, under the "initiative", "coordination" and "responsibility" of a producer.28 The Law regards audiovisual works as independent from all the particular contributions supporting it, and confers upon the producers the patrimonial rights thereof29.
Likewise, the Law regards the director, the writers, composers, photographers and cartoonists, as the authors of the audiovisual works.30 The authors are the subjects to patrimonial rights on their contributions to the audiovisual production. However, the rights are subject to restrictions.31 For example, the law refers to the "contract for audiovisual production" as that by which:
"The authors assign to the producer with exclusivity unless otherwise agreed, the property rights of reproduction, distribution, public communication and subtitling of the audiovisual work. The authors of musical works are exempt from the above".32
From the above it can be obtained that, under a "contract for audiovisual production" the authors or holders of rights shall "assign with exclusivity" four different patrimonial rights, including public performance. As a result, the producer will acquire said rights in connection with the audiovisual production, which means that it will only have the right to use the contribution when incorporated as part of the audiovisual production.
Likewise, once the authors or their assignees (causahabientes) have consented to contribute to the production of the audiovisual work, it will no longer be possible for them to reproduce, distribute or perform their contributions to the public.33 This means that the author or titleholder of the right shall have the option to assign the patrimonial rights over the contribution — excepting a musical work — to the producer in virtue of a "production agreement", assign it to a third party or hold the rights.
In the first case, if the author has entered into an "audiovisual production agreement", the right of public performance on the contribution as incorporated to the audiovisual production will be transferred automatically to the producer, as are the rights of reproduction, distribution and subtitling. In the second case, any right subject to an assignment would have to be specified in an agreement. And in the third case, the rights would vest with the author who would be entitled to exercise them at her or his own will.
The practice in the cinematographic industry of Mexico, as it is the case of other countries, dictates that the producer will grant a license to a third party for the distribution of the film. The distributor will then authorise its exhibition in movie theaters for a royalty or fee. On the other hand, an exhibitor shall be bound to pay royalties to the producer for the rights that it holds on the cinematographic production, and the particular contributions owned in virtue of "audiovisual production contracts" or work-for-hire agreements.
The author will have the right to collect for the contribution to the extent that she has not transferred them to the producer or a third party, and the transferee will have rights on the contribution provided that it obtained them from the author. In order to collect, the authors or titleholders will have the right to be represented by a collecting society or other representative.34 In those cases, the collecting society was required to show to the exhibitor, as the user of the work, that the authors that it represents actually hold the rights.35
The case of performing artists is slightly different. Under the Copyright Law they hold a right to "oppose" that cannot be disposed of, in contrast to the rights of authors. A performing artist shall be entitled to essentially impede third parties from making unauthorized fixations —audiovisual for example — of their performances onto an objective medium or make a reproduction or public performance of said unauthorised fixation. However, the Copyright Law states that the right to oppose to a reproduction or public performance shall become exhausted, once the artist has consented to the fixation of the performance.36
The reforms and their impact
As has been explained, the amendments that Congress passed and approved will certainly transform the modus operandi in the cinematographic industry, as well as any other industry dealing with the public performance of audiovisual or musical productions.
Unfortunately it cannot be expected that the impact will be in the positive. As will be addressed below, articles 26 bis, 83 bis, 117 bis and 118, all provide that authors and artists will increase the chance to obtain an income for the public communication of their works or performances. However, that noble purpose has been obscured by different factors of a technical and substantive nature.
Article 26 bis. This article could produce an unpredictable yet devastating effect. The use of a conjunction "y" (and) instead of a disjunctive "o" (or) cannot be regarded as a minor or innocuous drive or twist. The problem is meaningful.
If the legislators had chosen to use an "o", article 26 bis would have been redundant and repetitive, considering that the Copyright Law already confers a right of public performance upon the author or assignee.37
However, the fact that article 26 bis used an "y" has triggered ambiguity and illegality. It will allow both an author and her or his assignee, to benefit from the public performance of the work, notwithstanding that the author had previously transferred the corresponding rights to the assignee. However, the consequences could go further. In case of cinematographic or audiovisual works, authors would be entitled to a patrimonial right of public performance, regardless as to whether they assigned the rights on their contributions to the producer — by virtue of a production agreement — or to someone else. In this latter event, the assignee would have the right to seek royalties from the public communication of the work in parallel to the author.
To make things worse, the law did not impose any limitation as to who the assignee could be. That would necessarily give the chance that the author assigns the rights to any third party, including a friend or a relative, who would then be entitled to receive a royalty in the same terms and conditions as the author would have. This would, of course, be possible in addition to the rights that the producer has over the audiovisual work per se.
And if it is considered that every single author whose work is included in the production could make his or her own assignments, the problem could become exponential. Users of works, such as film exhibitors, will be the resulting targets of that game.
The question arises, why did Congress employed the conjunction "y" instead of the disjunctive "o", if, from legislative history it can clearly be drawn that the legislature of 2003 wanted to give the provision an exclusive rather an inclusive approach? The records available simply do not answer this question. However, it is a given that Congress made a change as a response to the lobbying of collecting societies. Whatever the reason was, as it was mentioned above, Congress did just ignore what other groups of interest had to say.
Article 83 bis. This provision shall produce nearly the same results as those of article 26 bis. Congress introduced article 83 bis as a complement to article 83 of the Copyright Law. Article 83 refers to the figure of work-for-hire by stating:
"Unless otherwise agreed, the natural or legal person who commissions the production of a work, or produces it with the remunerated collaboration of others, shall enjoy title to the property rights in such work, and shall have the corresponding powers concerning the disclosure, integrity of the work and collection on these type of creations".
In Congress' report, it was stated that the individual contributing to the work under commission should be entitled to seek royalties in parallel to the holder of the rights, and that that should not distort the figure of work-for-hire."38 However, that assumption is incorrect. As mentioned previously, under work-for-hire, the party commissioning the intellectual creation becomes the original owner of the patrimonial rights. That can be interpreted in the sense that contributor has no one single right over the work and its exploitation that can be disposed of. It is hard to see how, under the copyright law, the contributor could claim rights over the public performance of the work, in parallel to the owner of the rights. From the users perspective, this situation would not have been fair, as it would bear obligations in front of two entities having exactly the same right for the same cause or reason.
Articles 117 bis and 118. The changes made to article 118 are so vague that have made it hard to understand. Article 118 states the neighboring rights of performer artists as follows:
“Artist interpreters or performers have the right to oppose:
I Public communication of their interpretations or performances;
II Fixation of their interpretations or performances on a material medium, and
III Reproduction of the fixation of their interpretations or performances.
The foregoing rights shall be considered to have exhausted once the artist interpreter or performer has authorized the incorporation of her performance or interpretation on a visual, sound or audiovisual fixation".
The last paragraph of article 118, in general terms would state that the right to oppose to the exploitation of the interpretation or performance of a public performance — in a public communication, for example, shall become exhausted when the author has consented to the fixation of the performance on audiovisual or other media. It is understood that the legislature used the expression "consent to fixation" as a criterion to distinguish when the communication right can get exhausted from when it cannot. Accordingly, performers would have a right to oppose to the public communication of their performances if they did not authorise the fixation of the performances. However, said right would be exhausted if the artist granted consent to the fixation.
The reform introduced a new factor to the rule stated above, with the intention to liberalise the exhaustion restriction, to the benefit of the performers. In keeping with this, Congress added that exhaustion of "said rights" (it must refer to those in article 118), shall be produced "as long as whoever uses the tangible objects for a purpose of gain makes the corresponding payment".
The addition cannot be regarded anything else but absurd or a nonsense. In the first place, the use of a performance — for example, in virtue of a public performance — can occur after an authorised fixation has been made. However, the paragraph that Congress added suggests to the contrary.
It is absurd to suggest that the right will become exhausted at the time that fixation has been authorised and made, but subject to a later payment, when the public communication occurs. Another interpretation is that the user shall have to pay to get the right of public performance after a payment has been made. However, why then consider a right that becomes exhausted (by a fixation) requires of a further act (a payment), so that the user can exploit the performance? What really determines exhaustion, fixation or payment? Congress appeared to be in favor of a double exhaustion theory. A further technical flaw would arise from the fact that Congress established that the subject of the use is a "material object”.
The fact that Congress imposed an obligation to pay when a right got exhausted is against logic and the law. If exhausted a right, the user should be free to exploit that subject matter without having to pay. The question arises why the law was modified to create contradictions if it had remained clear since article 118 was adopted in 1996? Article 117 bis appears to reiterate what article 118 states, by just adding that the right to remuneration cannot be renounced. However, it is questionable under Mexican Law whether a patrimonial right cannot be renounced.
From the arguments presented herein, it can be understood that the amendments that Congress made were not thoroughly meditated upon as to the impact that they could produce. They seem to have been thrown without any thought as to whether they would be compatible with the copyright law and system, from the technical and substantive points of view.
As has been mentioned throughout this article, it is expected that said practices will inflict harm not only on the exhibitors of films and other corporations devoted to the public communication of works, but also to the public in general. By imposing the measure to broaden the options of authors and artists to receive more money for the use of their works, Congress not only altered the good practices of an industry, but it attempted to move against a system of law. The dividing line between the rights of authors and users was heavily shifted to the side of the former, to the detriment of society.
It cannot be doubted that Mexico has taken a backward step by changing the law to upgrade rights in sacrifice to the principle of legal certainty. Congress has innocently played the tune dictated by a specific interest group, with the achievement of an obvious outcome. The transition period, and the duality in which theis country has been immersed, have thus captured copyright law as its first victim. What will be next?
1 Published at the Federal Government Gazette of December 24, 1996, entering into force on March 25, 1997.
2 Among the restrictions the Copyright Law imposed more and clearer limitations on copyright ability (articles I I and subsequent), transfer and ownership of patrimonial rights (articles 24 and subsequent, 30 and subsequent, and 83 and 84); termination (article 29); contracting (articles 42 and subsequent); and fair use (articles 148, 149 and 150).
3 Fundamental concepts, such as authorship, originality, fixation, work-of-authorship and exploitation were defined in a more clear fashion.
4 Gazette of Congress (Senate), No. 85, December 12, 2002, P.I.
5 Gazette of Congress, No. 85, p. 6.
6 Gazette of Congress, No. 85, p. I I.
7 Gazette of Congress, No. 85, p. 9.
8 Gazette of Congress, No. 85, p. 13.
9 Gazette of Congress, No. 85, p. 10.
10 Gazette of Congress, No. 85, p. 14.
11 The Chamber of Deputies deleted a portion of this article, as it was contrary to the provisions of the law relating to representation of artists and collection of royalties.
12 The original version of the bill contemplated the total deletion of the last paragraph of article 118 and the adding of an article 118 bis, which was even less structured and technical than article 118 as finally reformed. Article 118 bis was disapproved at the Chamber of Senators itself and rather substituted by article 118. It is very curious to see that article 118 bis did not only referred to a right of public communication restricted to direct performances or broadcasting transmissions, but to on-line or internet transmissions as well. However, as article 118 bis was disregarded, the Senate stopped further discussing rights for performers on a digital environment.
13 Published at the Official Government Gazette by Decree on July 23, 2003.
14 Copyright Law of 1996, article II.
15 Copyright Law of 1996, articles 18 and subsequent.
16 Copyright Law of 1996, articles 24 and subsequent.
17 Copyright Law of 1996, article 27(I).
18 Copyright Law of 1996, article 27 (IV).
19 Copyright Law of 1996, article 27 (II) — public communication — and (III) — public transmission-.
20 Copyright Law of 1996, article 27 (II)(b).
21 Copyright Law of 1996, article 27 (VI).
22 Copyright Law of 1996, article 30.
23 Copyright Law of 1996, article 84.
24 Copyright Law of 1996, article 83.
25 Paris Act of July 24, 1971 and published at the Official Gazette of the Federal Government on January 24, 1975.
26 Inter American Convention on Literary, Scientific and Artistic Works, signed in Washington D.C. on June 22, 1946, and published at the Official Gazette of the Federal Government of Mexico on October 24, 1947.
27 North American Free Trade Agreement (NAFTA), signed on December 17, 1992, approved and ratified by the Senate of Mexico on November 22, 1993 and published in the Official Gazette of December 20, 1993.
28 Copyright Law of 1996, articles 94 and 98.
29 Copyright Law of 1996, articles 95 and 97.
30 Copyright Law of 1996, article 97.
31 Copyright Law of 1996, article 99.
32 Copyright Law of 1996, article 68.
33 Copyright Law of 1996, article 99.
34 Copyright Law of 1996, articles 192, 195, 196 and 197.
35 As implied from articles 195 through 201 and those relative to ownership of rights of the Copyright Law of 1996.
36 Copyright Law of 1996, article 118.
37 Copyright Law of 1996, article 27(11) and (III).
38 Gazette of Congress, No. 85, p.p. 9 and 10.