Author: Breffni Banks

Although this was an own-initiative report from the Parliament and therefore without any legislative impact, it has a particular political importance, since the European Commission is due to prepare its review on the Geo-blocking Regulation in 2025, and it has been asking the AV sector to bring new solutions, projects or ideas that would lead to, (where possible), less or no geo-blocking of  AV content, and indicating that in absence of such measures the Commission would need to take legislative action in the review process.   The report adopted by the leading IMCO Committee asked for the prohibition of geo-blocking in the field of the AV sector and the inclusion of AV services into the scope of the regulation at the forthcoming review.  However, following an extensive campaign organised by the AV sector this provision was reversed at the Plenary vote, and the final text no longer asks for such an inclusion, even noting that geo-blocking is needed to ensure cultural diversity and the business model in the AV sector.

Note that the various committees already had an understanding not to extend the scope to the music sector since all music content is already available across the EU without any issues, and any remaining geo-blocking practices, where they exist, serve to consumers’ advantage. This was also the finding of the dedicated expert study commissioned by the Commission several years ago, to which GESAC contributed.  GESAC also worked extensively at the committee level to keep music out of the scope of other music rightsholders and to support the efforts of the AV sector.

The provisional agreement reached in the “trialogue” at the end of last year needs to be endorsed by the Council and the Parliament once the text has been finalised at a technical level.  It will then be formally adopted by both institutions hopefully in spring of this year. It will bring a legal framework for all types of AV or print media companies – a first in EU legislation. While aiming to ensure media freedom and pluralism, it also raises some questions regarding intervention in journalistic and editorial decisions of media companies at the EU level. While the political agreement is achieved, several issues are still to be finalised at a technical level, and stakeholders in the field have mixed views on the outcome.

On February 2nd, 2024 the Committee of Permanent Representatives in the European Union formed by the Ambassadors from the 27 EU Member States, adopted the definitive proposal for the AI Act.

Background

A compromise position was reached in December between the European Parliament, the Commission and the Council, (trilogue) but negotiations for a definitive text were still ongoing up to last week as some of the leading countries in the EU, notably, France (though also Germany and Italy also weighed in at one point), considered the political agreement reached in December to be too restrictive and expressed support for lower transparency requirements (e.g. non-binding codes of conduct) in the AI Act to make training AI models easier for European AI companies.  This position raised serious concerns amongst rightsholders, including GESAC, which advocated for the inclusion of transparency obligations for providers of general-purpose AI models. France dropped its reservations just before the COREPER meeting while issuing some conditions, including that the regulation balances transparency and protection of trade secrets and doesn’t make obligations overburdening for companies.  Germany also said that it would be scrutinising implementation to ensure that it met their requirements.

What it entails

One of the benchmarks of the AI Act is that AI systems must comply with EU copyright laws, with the final agreement stating that providers of general purpose AI models will need “to put in place a policy to respect Union copyright law, as well as make publicly available a sufficiently detailed summary about the content used for training of the general purpose AI model, based on a template provided by the AI Office” without prejudice of trade secrets. The text also foresees a disclosure requirement on providers to “embed technical solutions that enable marking in a machine-readable format and detection that the output has been generated or manipulated by an AI system and not a human” (Recital 70 a).

The rules for general-purpose AI models (GPAI), were introduced into the text last year in response to the rise of foundation models, such as large language models (“LLMs”). The specific obligations for these models can be grouped into the following four categories – with additional obligations for such general-purpose AI models that entail systemic risks:

• drawing up and keeping up-to-date technical documentation of the model, including training and testing process and evaluation results.
• Provide transparency to downstream system providers looking to integrate the model into their own AI system.
• putting in place a policy for compliance with copyright law.
• publishing a detailed summary of the training data used in the model’s development.

GPAI providers with systemic risk must also perform model evaluations, implement risk assessment and mitigation measures, maintain incident response and reporting procedures, and ensure an adequate level of cybersecurity protection. The Commission may adopt delegated acts to amend the thresholds.   The AI Act’s rules target general-purpose “models” that underpin AI tools — not the customer-facing apps, but the software architecture integrated into different providers’ products.  Developers of these models — such as those powering ChatGPT or Google’s Bard — will have to keep detailed technical documentation, help the companies or people deploying their models understand the tools’ functionality and limits, provide a summary of the copyrighted material (such as texts or images) used to train the models; and cooperate with the European Commission and the national enforcing authorities when it comes to compliance with the rulebook.

Some general-purpose models are labelled a “systemic risk” thanks to their power and reach – e.g., an ability to precipitate catastrophic events. Developers of these systems will also have to put mitigation strategies in place and pass on details of any incident to the Commission’s new “AI Office”, lined up to police the rules.

Role of Members States and the Commission

Member States hold a key role in applying and enforcing the AI Act. Each Member State must designate one or more national competent authorities to supervise the application and implementation of the AI Act, as well as carry out market surveillance activities.  Each Member State is expected to designate one national representative to represent the country in the soon-to-be-established European Artificial Intelligence Board.

In addition, the Commission will establish a new European AI Office within the Commission, which will supervise general-purpose AI models, cooperate with the European Artificial Intelligence Board, and be supported by a scientific panel of independent experts.

The new entity will be primarily responsible for supervising compliance by providers of GPAI systems while also playing a supporting role in other aspects, such as the enforcement of the rules on AI systems by national authorities.

Rightsholders organisations in Brussels (including GESAC) expect to have a role to play in inputting to the European AI Office.

Penalties and enforcement

The AI Act comes along with strong enforcement powers and potentially high penalties. Penalties must be effective, proportionate, and dissuasive and can significantly impact businesses. They range from €7.5 to €35m or 1.5 % to 7% of the global annual turnover (whichever is higher), depending on the severity of the infringement.

Next steps in adoption and timeline

Following the endorsement of Feb 2nd, the European Parliament has scheduled meetings of the Committees on Civil Liberties, Justice and Home Affairs and Internal Market on 14 and 15 February 2024 in preparation for the plenary vote of the full Parliament. This will be followed by a final legal-linguistic revision by both co-legislators, with lawyers and linguists cleaning up the text. The formal adoption by Council and Parliament is expected at the end of February or the beginning of March. Once approved, the EU’s AI Act will become the world’s first treaty on AI, setting the standard for AI regulatory frameworks globally.

Following its publication, it can be expected that the AI Act (as now drafted) will enter into force before the summer break. Some provisions of the AI Act (for certain high-risk systems) will become mandatory six months later, i.e. well before the end of the year. Most other provisions will then gradually be applied in the course of 2025 and 2026.

On January 17th, 2024 the European Parliament adopted a resolution on the “Policy implications of the development of virtual worlds” which aims to set a framework for the rapid evolution of virtual worlds and calls on the Commission to propose guidelines and good practices clarifying the legal obligations and responsibilities of the different stakeholders involved.

Co-rapporteurs Iban Garcia del Blanco and Axel Voss text asserts that the EU’s legal framework for the protection of intellectual and industrial property rights, including copyrights, trademarks, patents, designs, and trade secrets fully applies to virtual worlds, while noting that the development of virtual worlds poses new challenges when it comes to IP enforcement and identification of infringers, and to the issues concerning the conflict-of-law rules on applicable law and jurisdiction.

The JURI committee’s intention is not to address all the points but to highlight certain principles to protect the rights (IP, patents, copyright) and see how to use them in the metaverse.

The Co-rapporteurs based their work on what was already done at EU level, such as the recent European Commission’s Call for Evidence on “An EU initiative on virtual worlds” (May 2023) to which GESAC answered. The secretariat has been in close contact with the rapporteurs and political advisors to ensure that its main priorities were included. The report underlines the applicability of liability rules to cover the uploading of user-generated content but asserts the need for further clarification on how existing rules asserted in the DSA and Copyright Directive should apply and be enforced to online content-sharing services that make content available in virtual worlds.