New compensation rules in Copyright Law

To enable authors to exercise their new right to compensation, there are also provisions, which are mandatory, regarding their right to information (Sections 29a-c of the Swedish Copyright Act). The right to compensation also applies retroactively for 20 years, i.e., from 2003.

The background to the compensation provisions is the implementation of Directive (EU) 2019/790 on copyright and related rights in the digital single market and amending Directives 96/9/EC and 2001/29/EC. The so-called DSM Directive. The directive was adopted on April 17, 2019, but it was not until January 1, 2023, that the new provisions were incorporated into Swedish copyright law.

The compensation rules apply when the author himself transfers his copyright (original acquisition). The transfer can also be done through a company controlled by the author. To receive compensation, the copyright must be used in acquisition activities. An acquisition activity does not need to have a profit motive, but includes [acquisitions by] companies, authorities, and other organizations (cf. Section 2(4) of the Swedish Copyright Act). However, it does not include individuals or consumers.

Authors have a mandatory right to compensation regardless of the type of agreement, which can be commission agreements, employment agreements, etc. but authors do not have a right to compensation for gifts or collective management [arrangements].

To determine fair compensation, one starts with what can be considered reasonable at the time the agreement was made. A central factor in the assessment is the income potential associated with the work or related performance. Guidance can be sought, for example, from industry practices, expected use, and payment methods (one-time payments, royalties, salary). Another important factor in the assessment is the author's willingness and the parties' balance of power. In exceptional cases, it can also be determined as zero kronor, but the norm is that an amount should be paid.

If the original compensation is found to be disproportionately low after a certain period of time, authors have the right to additional compensation. There must be a clear imbalance (unequal distribution of revenue) and simply a misjudgement made at the time of the transfer [is not sufficient]. It should be noted that the threshold in the Copyright Act is lower than that in Section 36 of the Swedish Contract Act. To assess whether the original compensation has been disproportionately low, one should consider all of the acquirer's revenues, including the sale of related products.

For authors to determine if they have the right to additional compensation, they need information from the acquirer, and therefore, there are rules stating that the acquirer must report their revenues, uses, and the compensation the author is entitled to at least once a year (Sections 29a-29c of the Swedish Copyright Act). However, the acquirer has no obligation to provide information if the author's contribution is not significant or if it involves low revenues or minimal usage. Simply put, the administrative burden on the acquirer must not be too onerous - it should not be more costly to provide information than what is paid out. Since the acquirer's financial dealings often constitute trade secrets, there is a statutory duty of confidentiality imposed on authors.