Proposal for a European Parliament and Council Directive on the Legal Protection of Services based on, or consisting of, Conditional Access
Date: 1997-07-09
Institutions: European Commission
Subjects: approximation of laws, audiovisual piracy, broadcasting, pay television, right to justice

COMMISSION OF THE EUROPEAN COMMUNITIES 

t< rt ft 

•h  ">-( 

Brussels, 09.07.1997 
COM(97) 356  final 

97/0198 (COD) 

Proposal for a 
EUROPEAN PARLIAMENT AND COUNCIL DIRECTIVE 

on the Legal Protection of Sei'vices based on, or consisting of, Conditional Access 

(presented by the Commission) 

Table of Contents 

Introduction 

I. 

Conditional Access in the Internal Market 

From Encryption to Conditional Access 

A. 
B.  Broadcasting services 
C. 

Information  Society services 

II.  The need for Community legislation 

A.  A market exposed to piracy 
B.  A market threatened by regulatory fragmentation 
C.  Obstacles to the free movement of services and goods 

III.  Commentary  on individual Articles 

IV.  Proposal for a Directive 

Page 

3 

4 
5 
7 

9 
10 
11 

12 

17 

Introduction 

In  1994,  the  Communication  of  the  Commission  on  "Europe's  Way  to  the  Information 
Society"1  announced  the  preparation  of  a  Green  Paper  on  the  legal  protection  of 
encrypted  services.  The  need  for  a  Community  initiative  in  this  area  was  already  stressed 
in the "Strategic  Programme  for  the  Internal  Market"2  and  preliminary  studies  on  the  issue 
had  already  been  carried  out  for  the  Commission.  In  1995,  the  Commission  held  a 
consultation  of  the  interested  parties  by  way  of  a  questionnaire  that  was  circulated  and 
answered  by  a  number  of  economic  actors.  The  consultation  confirmed 
that  illicit 
reception  of  encrypted  services  and  fragmentation  of  the  legal  framework  pose  a  real 
problem for  the media  industry  in the  Internal  Market. 

The Green  Paper  on  the  "Legal  Protection  of  Encrypted  Services  in the  Internal  Market"^ 
was  the  subject  of  a  wide-ranging  process  of  consultation  in  1996.  The  reactions  to  the 
Green  Paper  confirmed  the  need  for  a  Community  legal  instrument  the  purpose  of  which 
should  be  to  harmonize  the  legal  protection  of  all  those  services  whose  remuneration 
depends  on  "conditional  access"  techniques  such  as  encryption  and  electronic  locks  Both 
the  European  Parliament4  and  a clear  majority  of  Member  States  share  this  view  and  have 
called  upon  the  Commission  to  present  a  proposal  for  a  Directive.  That  proposal  for  a 
Directive  was  announced  in  the  Commission  1997  Work  Programme  as  well  as  in  the 
Information  Society "Rolling  Action  Plan"5. 

On  16 April  1997,  the  Commission  adopted  a  Communication  on  "A  European  Initiative 
in  Electronic  Commerce"6.  The  aim  of  this  European  Initiative  is  "to  encourage  the 
vigorous  growth  of  electronic  commerce  in  Europe",  by  implementing  a  "coherent 
framework  of technological,  regulatory  and  support  actions,  as a matter  of urgency,  by  the 
year  2000"7.  With  a  view 
the 
to  creating  a  favourable 
Communication  states  that: 

framework, 

regulatory 

"A  secure  distribution  of  services  will  require  adequate  legal  protection  of  conditional 
access  services  across  the Single  Market.  Many  services  will  use  some  form  of  encryption 
or other  conditional  access  system  to ensure proper 

remuneration. 

Service  providers  will  need  to  be protected  against  (he piracy  of  their  services  by  illicit 
decoders,  smart  cards  or  other  piracy  devices,  lhe  Commission  will propose  a  directive 
to establish  an  equivalent  level  of protection  for  service  providers  across  Europe*. " 

COM(94) 347 final of  19 July  1994. 
COM(93) 632 final  of 22 December 1993. 
COM(96) 76 final of 6 March  1996. 
Resolution of  13 May  1997. 
COM(96) 607 final  of 27 November  1996. 
COM(97)  157 final  of  16 April  1997. 
Executive Summary, pp. 3 and 5, of the above Communication. 
Page 23, paragraph 55. 

6 
7 
8 

Explanatory  Memorandum 

I.  Conditional Access in the Internal Market 

I.A.  From Encryption to Conditional Access 

In  the  Green  Paper,  the  examples  provided  by  the  Commission  referred  mainly  to 
"encryption"  and "encrypted  services".  In fact,  the  protection  of broadcasting  signals  for 
remuneration purposes (pay-TV and pay-radio) is normally ensured by encryption. 

However,  encryption  is  a  tool  that  may  serve  different  purposes,  some  of  which  are 
outside the scope of this Community initiative9 

Moreover,  the  legitimate  interests  of  the  service  provider  may  also  be  safeguarded  by 
techniques other than encryption.  The Green  Paper deals with  services that  are  offered  to 
the  public  against  remuneration,  and  such  remuneration  may be  ensured  by a  number  of 
techniques that distinguish between "authorized" and "unauthorized" access10. 

The responses to the Green Paper  confirm  that  this model  (and the related  need  for  legal 
protection) is common to a wide range of broadcasting  and interactive services,  regardless 
of  the  means  of  transmission11.  The  common  feature  is that  access  to  the  service  at  a 
distance  is  made  conditional  upon  a  prior  authorization  that  aims  at  ensuring  the 
remuneration of the service. Accordingly, the scope of the proposed directive  covers all 
services that  are supplied  on a Conditional  Access  basis: this includes traditional  pay-TV 
(and  radio),  video-on-demand,  audio-on-demand,  electronic  publishing  and  a  wide  range 
of  on-line  services,  all  of  which  are  offered 
to  the  public  on  a  subscription  or 
usage-related basis12. 

Market  developments  suggest  that  the provision  of conditional  access  is, more  and  more 
frequently,  a service in its own right. 

At present,  numerous different  relationships among the  parties  are found  in practice  For 
example,  cable  operators  are  in  some  cases  involved  in  a  chain  of  services  that  may  be 
summarized as follows: 

9 

10 
1' 

12 

through the telephone network (to a special  radio set); 
"over the air" to a car-radio (narrowcasling); 
by a cable network to a TV-set  (as part of a package of digital services); 
on-line, via a multi-media computer. 

These  include  the  confidentiality  of  private  communications  and  the  security  of  financial 
transactions. 
Example: passwords and electronic locks. 
The  same  service  can  be  delivered  by  different  means  of  transmission  and  to  different  types  of 
terminal equipment. For example, pay-radio (or music-on-demand  services) can be transmitted: 
• 
• 
• 
• 
All these services arc "offered  to the public" in  the sense  that  a given content  is made available to 
any member of the public who is prepared to "pay the ticket" for  the service. Access to theatres and 
cinemas is based on the same principle (the difference  is that "access control" at a distance  is more 
difficult  and  requires different  techniques).  In both  cases,  the  service  may  be  restricted  to  ceilain 
categories of  the public  (example:  movies  that  are  not  appropriate  for  minors),  without  affecting 
the definition  of a service  "offered  to the public". 

(a) 

(b) 

(c) 

the provision of content (channels and/or interactive services) to be delivered  by the 
cable operator to the final consumer; 

the  provision  of  facilities  enabling  the  final  consumer  to  receive  the  contents  of 
those channels and services which he has been authorized to access; 

the  management  of  subscriptions  and/or  fees  paid  by  the  final  consumers 
(in principle, such  revenues  are shared  between  the channels,  after  deduction  of the 
remuneration due to the access provider)11 

To a certain extent, the access provider  (e.g. the cable operator  in this example)  plays the 
same role as a "tour operator" who sells package holidays (made of several  services, none 
of which he necessarily  provides). For  a package of channels, the reasoning is similar  the 
final  consumer  will sign  a single contract  (with the  access  provider,  possibly  acting  as an 
agent),  rather than  entering  into as many contracts  as  services  included  in the  package14 
This means that, in case of unauthorized  reception, a loss of revenues is (directly)  suffered 
by the access provider,  in addition to the financial  harm suffered  (indirectly) by the content 
providers  etc.  For  the  purposes  of  the  proposed  directive,  the  provision  of  conditional 
access is therefore  considered as a service in its own right. 

IB.  Broadcasting services: pay-TV, pay-per-view and pay-radio 

For  decades,  broadcasting  services  have  been  financed  by  advertising  revenues  and/or 
licence fees.  TV consumption  on a "direct  payment" basis was first developed  in the US: 
in  1995,  pay-TV  reached  54%  of  the  United  States  TV  market  (compared  to  39%  in 
Europe and 28% in Japan)15. However,  pay-TV grew the fastest  in Europe in  1996, with 
the number of subscribers rising from  13.2 to  16.1 million16. 

On  present  trends,  it  is  estimated  that  pay  TV  will  become  the  largest  medium  for 
consuming  movies world-wide  within  two  to  three  years17.  In  the  European  Union,  this 
has  already  been  achieved.  According  to  Screen  Digest,  the  EU  movie  spending 
breakdown in 1996 was the following  (the figures in brackets refer to  1988): 

cinema: 
31.3% 
video rental:  14.2% 
20.4% 
video sales: 
34.0% 
pay TV: 

(41.0%) 
(39.9%) 
(5.1%) 
(13.9%). 

13 

14 

15 

16 

17 

In  addition,  encryption  services  may  be  the  subject  of  a  separate  contract  between  a  "technolog\ 
provider" and the broadcaster. 
A similar  scenario is frequent  in the telecommunications  business, where  one operator  ma\  act  as 
the "gatekeeper" for a number of different  services. 
Source: 1DATE. According  to the same source,  the annual  growth  of pay-TV  in  Europe  was 23% 
(compared to  11% for "free TV"). 
The  highest  number  of  subscribers  was  reported  in  the  UK  (5.57  million),  followed  b\  France 
(4.913) Spain (1.465) and Germany (1.404). 
Screen Digest, January  1997. 

The competition  for broadcasting rights among pay-TV  channels has created  a substantial 
market for the audio-visual  industry:  according to studies carried  out for  the Commission, 
the  total  revenues  of  the  European  audio-visual  sector  increased  by  93%  in  real  terms 
between  1985  and  1994.  The  main  reason  was  the  creation  of  new  sources  of  revenues 
such  as pay-TV, whose total  subscription  revenue increased  by nearly 400% in real  terms 
over the same period18. 

Another  new  market  may  open  in  the  near  future,  when films and  sport  events  become 
available on a pay-per-view basis: in  1997, the England-Italy World Cup qualifying  match 
reached  3.8  million  UK  viewers;  in  Italy  (where  the  first  pay-per-view  soccer  service 
attracted 41  173 subscribers in 4 months) a new service is being tested  which would allow 
subscribers to buy matches individually, instead of buying a ''season ticket1'. 

The  recent  development  of  digital  audio  broadcasting,  meaning  that  a  number  of new 
"thematic" or specialised radio channels can be distributed to subscribers. This is expected 
to create further  opportunities for the media industry19. 

The  common  feature  of  pay-TV,  pay-radio  and  pay-per-view  is  that  the  broadcasting 
signal  needs  to  be  protected  against  unauthorized  reception,  because  the  service  is  run 
under  a subscription  arrangement  (or,  to  an increasing  extent,  according  to  usage-related 
tariffs).  For  all  of  these  services,  the  viability  of  the  business  relies  on  "Conditional 
Access" techniques (in particular,  scrambling and "encryption"20 technologies). 

Encryption technologies  are already  used  in a wide range of telecommunications  systems, 
both  to  protect  the  information  carried  by the  application  and  to  identify  the  sender  and 
the  authorized  receiver  of  this  information.  Once  associated  with  the  diplomatic  and 
military  communities,  encryption  now  plays an  increasingly  important  role  in  supporting 
several  applications  used  in  everyday  life.  For  instance,  the  introduction  of  mobile  radio 
networks  requires  the  identification  of  the  terminal  making  the  call  for  billing  purposes, 
whilst  the  call  requires  protection  against  eavesdropping.  For  these  reasons,  GSM21 
provides for both encryption of voice data (although this may not always be implemented) 
and  for  encryption  to  be  used  in the  authentication  of  the  user.  This  approach  has  also 
been used as the basis for the DVB specification  22. 

18 

19 

20 

21 
22 

KPMG, "Organisation and Performance  of Audio-visual  Services and  Production",  Final  Report to 
the  European  Commission,  December  19%  (Studies  on  the  Effectiveness  and  Impact  of  Internal 
Market  Integration).  Similar  conclusions  were  recently  published  as  regards  the  world-wide 
market: "over the past decade, the development  and emergence of new  forms of consuming movies 
has coincided with some dramatic increases in  total  spending on filmed  entertainment.  The advent 
of  pay-TV  and  video  has  stimulated  awareness  of  and  demand  for  good  product,  and  it  is  this 
development  that  has  in  part  driven  the  growth  of  the  theatrical  market"  (Screen  Digest 
January  1997). 
See the "Notification  of a partnership  agreement  to set up and  operate a digital  pay-radio  business 
for Europe (Music Choice Europe)" in OJ No C 70 of 6 March  1997, p. 7. 
In general,  "encryption"  is defined  as the process  of converting  input  data  (plain  text)  into  cipher 
text (output data). The opposite process is known as "decryption". 
European standard for digital public access mobile services. 
Common scrambling algorithm for Digital  Video Broadcasting. 

the 

legal  protection  of  encrypted 

In  September  1991 the  Council  of  Europe  adopted  and  addressed  to  its  Member  States 
television  services"2^ 
a "Recommendation  on 
(later updated,  in January  1995, by  a  "Recommendation  on  measures  against  sound  and 
audio-visual  piracy"24).  This text  highlights  the  adverse  consequences  of  piracy  and  sets 
out the range of activities that  should be the subject  of both civil remedies25 and "penal  or 
administrative  sanctions"26.  The  Recommendation  defines  "encrypted  service"  as  "any 
television  service, transmitted  or  retransmitted  by any technical  means, the  characteristics 
of  which  are  modified  or  altered  in  order  to  restrict  its  access  to  a  specific  audience" 
At the  Community  level,  the  corresponding  notion  is  that  of  "conditional  access" 
enshrined  in  Directive  95/47  on  the  use  of  standards  for  the  transmission  of  television 
signals  (Article 4)27.  However,  market  developments  suggest  that  conditional  access 
technology  is  likely  to  be  used  also  to  control  access  to  digital  services  other  than 
television  broadcasting.  "For  example,  non-television  services  transmitted  using 
broadcast  networks  (...)  or,  services  distributed  by  switched  networks"2*.  In  defining  the 
scope of the Community legal instrument, these services should not be ignored. 

I.C.  Information  Society services 

In  1996,  68.4  million  computers  were  sold  world-wide29.  At  the  end  of  January  1997, 
16.1  million  hosts30  were  connected  to  the  Internet;  while  America  still  dominates  "the 
Net"  (with just  under  60% of all hosts31) the  European  Union  represents  approximately 
20% of the global figure (the rest of the world remains at 20%32). 

In  the  proposal  for  a  Directive  on  Regulatory  Transparency33,  Information  Society 
services are defined  as "any service provided at a distance, by electronic means and on the 
individual  request  of a service  receiver".  This definition  covers  a wide range  of  services, 
examples  of which  can  be  found  in  the  Communication  that  accompanies  the  proposed 
directive.  In  their  early  stages,  these  services  were  available  "en  clair"  and  "free  of 
charge".  Nevertheless,  a  growing  number  of  new  services  are  being  established  on  (or 
evolving  towards)  a  "conditional  access"  model.  Current  examples  range  from  the 
electronic version of traditional  newspapers34 to the provision of financial information  and 

23 
24 
25 
26 
27 

28 

29 
30 

31 

32 
33 

Recommendation No R (91 )  14 of the Committee of Ministers. 
Recommendation  No R (95)  1  of the Committee of Ministers. 
Injunctions and damages (Principle II.2). 
Principle II. 1. 
Directive  95/47/EC  of  the  European  Parliament  and  of  the  Council  of  24  October  1995 
(OJ No L 281, 23.11.1995, p. 51). 
DTI, "The  Regulation  of  Conditional  Access  Services  for  Digital  Television"'  (Final  Consultation 
Paper),  27  November  1996.  According  to  this  Paper,  "the  (UK)  Government's  view  is  that 
conditional access to such services should be brought  within a single unified  framework". 
Source: International  Data Corp. 
Each host counts for between  one and  several  thousand  users (when  the connection  is provided bv 
local  communities,  universities,  companies  and  so on):  as  a  consequence,  the  number  or  Internet 
users is subject to divergent estimations, ranging between 48 and 60 million. 
N.B. It  should be  noted  that  the American  count  includes  all  hosts  ending  ".com"  and  this  factor 
may exaggerate their share (many "commercial"  hosts represent  in fact  European  businesses).  The 
same  reasoning  applies to the  hosts ending  ".net"  and  "org"  (included  in  the  American  count  of 
the market irrespective of the physical location of their owners). 
Source: Network Wizards. 
COM(96) 392 final of 30 August  1996. 

"package services"35.  Conditional  access to these services is currently based  on electronic 
locks, while other on-line services make use of encryption. 

According  to  Andersen  Consulting36,  the  electronic  share  of  the  publishing  market  by 
the  Year  2000  will  range  between  5  and  15%  and  be  worth  ECU  8.8  billion  to 
12.4 billion.  Electronic  publishing  allows  the  creation  of  new  low-cost  sources  of 
information  and  improve  access  to  the  existing  ones:  a  number  of  publications  (such  as 
encyclopaedias  and  specialized  magazines)  whose  "printed"  version  would  be  too 
expensive  for  the  average  consumer,  are becoming  accessible  at  a reasonable  fee  in  their 
electronic version. 

On-line applications could similarly improve access to a wide range of data,  provided  that 
the  viability  of  such  business  is  ensured  by  usage-related  tariffs  implemented  by 
conditional  access  (and  legal  protection  thereof):  unrestricted  access  is  simply  not 
compatible  with  the  investment  required  in  order  to  create  the  database.  Combined  with 
electronic  publishing37,  on-line  access  to  databases  is  one  of  the  most  promising 
applications  of  the  Information  Society  revolution:  in  the  words  of  a  recent  piece  of 
research38,  "many business  information  services,  available  for  many  years  to  professional 
customers  with  deep  pockets,  may  become  available  through  consumer  interactive 
services to wider distribution"39. 

Further  developments  in  the  short  term  include  the  on-line  provision  of  music  on 
demand: recently, the  International  Federation  of the  Phonographic  Industry40  estimated 
at "2 billion dollars the potential turnover of the electronic delivery of music recordings" 

At a later stage, access to video-on-demand  services is expected to be available from  both 
TV  sets  and  computer  screens.  As a consequence,  any  discrimination  between  means  of 
transmission  (or  reception  terminals)  would  be  contrary  to  the  equality-of-treatment 
principle, and may possibly distort  competition. 

34 

35 
36 

37 

38 

39 

40 

The number of on-line newspapers available on  the  World  Wide Web in February  1997 was  1  553 
(327 of which in Europe, compared to 880 in the United States). 
Example. America on Line (AOL) reached 8 million subscribers in February  1997. 
"Strategic  Developments  for  the European  Publishing  Industry  towards  the  Year  2000":  Studv  for 
the European Commission,  1996. 
The  electronic  version  of  a  newspaper  implies  a  number  of  links  (hypertext)  and  each  of  them 
leads the consumer to the archives of the publisher or to other related publications. 
Farncombe  Technology  "The  impact  of  new  signal  protection  methods  on  interactive  sen ices' 
business strategies": Study for  the European  Commission  1996. 
E.g.  some  financial  newspapers  offer  on-line  (on  a  subscription  basis)  a  "Personal  Journal 
that 
includes  a custom  news  page  and  portfolio  as  well  as  customized  access  to corporate  reports  and 
graphical presentation  of stock  performances. 
Quoted by Reuters, 2 December  1996. 

8 

11.  The need for Community  legislation 

II. A.  A market exposed to piracy 

The abovementioned  business opportunities (and the related  effects  on job  creation  in the 
media industry) will depend both on the availability  and the legal protection of conditional 
access techniques.  Since the  service is costly to  provide,  its viability  relies  on  conditional 
access  techniques,  but  in  the  absence  of  legal  protection  against  piracy,  the  potential 
publishers are unwilling to expose their products to "unprotected" access. 

In fact,  the market  for  services based  on conditional  access is rapidly  growing  as a result 
of  digital  technology,  but  this  growth  may  be  jeopardized  by  the  equally  rapid 
development of "piracy": a parallel and flourishing  industry that manufactures  and markets 
devices  giving  unauthorized  access  to  such  services.  Specialized  "publications",  and  a 
number  of  Internet  sites,  are  currently  being  used  to  market  such  devices  and  an 
"after-sales  services" market has also developed (providing maintenance of these devices) 

This kind of "piracy" has several adverse consequences: 

• 

loss  of  subscription  revenues  for  the  service  provider,  the  direct  cost  of  piracy  for 
pay-TV operators in  1996 has been estimated  to  reach ECU 240 million41 (the indirect 
costs  implied  by  the  need  for  replacing  the  pirated  system  are  not  included  in 
this  figure); 

•  financial  harm to  the conditional  access  provider,  who  may incur  additional  costs in 
having  to  replace  the  conditional  access  facilities,  and  whose  potential  revenues  are 
affected  if there is unauthorized access to protected  services; 

indirect financial harm  to  the  content  provider:  since  the  fees  paid  to  right-holders 
generally take into account the potential audience, illicit reception deprives them of the 
income they would have received from  subscription revenue; 

higher prices for the consumer: the service provider  will necessarily try to  recover  the 
losses  suffered  from  piracy  by  raising  the  price  of  (and/or  rental  charges  for)  its 
services and devices; 

less  consumer  choice:  the  use  of  illicit  devices  to  obtain  unauthorized  access  to 
protected  services  erodes  market  confidence  in  such  a  manner  that  content  providers 
are reluctant to make their works available for  distribution  in the form  of  broadcasting 
signals or of on-line services42; 

consumer  frauds:  many  consumers  are  misled  about  the  origin  of  the  pirated  device 
they  are  purchasing  and  thus  believe  they  are  buying  an  authorized  device,  if  the 
operator  modifies  the  conditional  access  system  (for  security  or  other  reasons),  the 
device purchased will be of no use for the consumer. 

41 
42 

Source: AEPOC (Association Européenne pour la Protection des Oeuvres et services Cryptes). 
See "Intellectual Property Protection in Cyberspace" (ITAA Discussion Paper)  1996. 

It  is for  these  reasons  that  the European  Parliament  and  the  Council  introduced  a recital 
on piracy in Directive 95/47 of 24 October  199543. The recital reads as follows:  "Whereas 
in the European audiovisual digital environment the scope for  piracy  will increase  (...) 
the  introduction and  enforcement of  efficient  anti-piracy  legislation at  European level 
will become increasingly necessary''. 

II B.  A market threatened by regulatory  fragmentation 

The  supply  of  services  on  a  Conditional  Access  basis  has  developed  to  satisfy  an 
increasingly  specialized  demand  (thereby justifying  their  remuneration  by  the final user) 
Their  development  as viable  services requires  a  market  of  a certain  size:  for  an  identical 
geographical  area  a niche-service  market  will  be  smaller  than  a  mass-service  market  and 
therefore  the  area  may  not  suffice  to  ensure  the  viability  of  the  "targeted"  service.  The 
services  examined  in  this  Communication  often  satisfy  the  demand  of  "transnational 
niches" (i.e. demand based on cultural factors  other than nationality). 

The  existing  disparities  in  the  level  of  legal  protection  against  piracy  have  an  adverse 
effect  on the development  of these services on a European  scale. In this respect,  it  should 
be noted that: 

1. 

2. 

3. 

4. 

5. 

6. 

in  a  majority  of  Member  States  the  existing  anti-piracy  regulations  cover  only 
broadcasting services44; 

the  legislation  of  one  Member  State  discriminates  between  cable  and  satellite 
broadcasting  so  as  to  deprive  the  latter  of  the  legal  protection  accorded  to 
the former; 

in another Member  State the legal  protection  is limited  to  those  services  which  are 
broadcast from  the national territory; 

in  several  Member  States  piracy  is only  sanctioned  under  the  "unfair  competition" 
general provisions, and these will apply only if and in so far  as the unlawful  practice 
affects  the  "national  market"  (which  may  not  be  the  case  if  the  pirated  decoders 
produced in those countries are marketed in another Member State); 

the  list  of  unlawful  activities  (where  it  exists)  differs  from  one  Member  State  to 
another (and so does the degree of protection); 

in  some  Member  States  there  is  no  regulation  to  sanction  the  illicit  reception  of 
services  supplied  on  a  Conditional  access  basis.  In  this  respect  it  should  be  noted 
that  the  "cable  and  satellite"  Directive45,  while  providing  rules  on  satellite 
broadcasting and cable retransmission  of protected  works, does not  assist  operators 
in their fight against  illicit reception. This is because reception does not constitute a 
relevant  "act"  for  the  purposes  of  copyright  law,  which  traditionally  covers 
communication as opposed to reception46. 

43 
44 
45 
46 

See above (footnote  No 22). 
Green Paper on the legal protection of encrypted services, p. 25. 
Directive 93/83/EEC. 
Green Paper on the legal protection of encrypted services, p. 23. 

10 

U.C.  Obstacles to the free  movement of services and goods 

Regulatory  fragmentation  can  create  obstacles  to  the  free  movement  of  goods  and 
services and compromise the proper functioning  of the Single Market.  For the purposes of 
legal  protection  against  illicit  reception,  regulations  that  make  a  distinction  based  on  the 
origin of the service47 are incompatible with the principles of the Treaty and will  therefore 
need  to  be  removed.  Other  regulations  discriminate  between  means  of  transmission, 
e.g. when terrestrial  and  cable broadcasting  services are  protected  against  illicit  reception 
whilst  satellite services (all of which are of foreign  origin) do not  enjoy  such  protectionts 
Such regulations do not  seem to be justified  in the  light  of the  European  Court  of Justice 
case-law.  Indeed  discriminatory  measures  affecting  the  freedom  to  provide  services  are 
compatible with Community law only if they can be brought  within an express  derogation, 
such  as  that  contained  in  Article  56  of  the  Treaty,  which  refers  to  grounds  of  public 
policy, public security or public health.  In these particular cases, it would appear  that  none 
of the grounds in question could justify  such discrimination49. 

Obstacles to the free movement of goods and services may also result from  the absence of 
legal  protection  in  certain  receiving  States.  Consultation  confirmed  that  operators 
consider legal protection against illicit reception  of the service to be an important  factor in 
their  market  strategy.  The  absence  of  such  legal  protection  in  some  Member  States 
(coupled  with  the  loopholes  of  legal  protection  as  regards  the  cross-border  provision  of 
services) currently makes the Internal Market much less attractive than it could be 

Negotiations  with  content  providers  are  more  difficult  in  the  absence  of  equivalent 
protection in every Member State where reception is possible; access providers thus find it 
more  difficult  to  secure  rights  at  a  reasonable  price,  and  this  affects  their  cross-border 
activities in particular. 

Disparities  between  national  regulations  can  cause  obstacles  to  the  free  movement  of 
goods. Some of these obstacles are incompatible with Community  law and need  therefore 
to  be removed;  others may be justified50  by general  interest  objectives  such  as  consumer 
protection (against fraud) and intellectual and industrial property rights (against  piracy). 

A  Community  legally  binding  instrument  to  establish  an  equivalent 
level  of 
protection is necessary to remove the obstacles identified  and to complete the regulatory 
framework  for  conditional  access  services  in  the  Internal  Market.  For  reasons  of 
proportionality,  the  Commission  considers  that  the  appropriate  form  for  this 
instrument  is a Directive:  a directive will  leave  Member  States free  as to  the  means  to 
achieve such objectives. 

The  proposed  Directive  does  not  cover  the  circumvention  of  rights  management 
information51  nor  of  technological  measures  used  by the  authors  in  connection  with  the 
exercise  of  their  rights52.  These  issues  were  addressed  by  the  Commission  in  the 
Green Paper  on  copyright  and  related  rights  in  the  Information  Society  and  will  be  the 

See Chapter Il.B point 3. 
See Chapter  Il.B point 2. 
Green Paper, page 32. 

47 
48 
49 
50  Where they respect the principle of proportionality. 
5 » 
52 

As defined  in Article  12 of the W1PO Copyright Treaty,  1996. 
Article  11 of the above Treaty. 

11 

subject  of  separate  measures,  as  announced  in  the  Commission  Communication  of 
20 November  199653.  Nor  does  the  proposed  Directive  deal  with  the  issue  of 
industrial property  rights  on  decoders,  as  these  rights  are  the  subject  of  specific 
Community legislation. 

The use of encryption for reasons other than remuneration of a service does not fall  within 
the  scope  of  the  proposed  Directive:  where  they  relate  to  the  integrity  and/or 
confidentiality  of  data  and  communications,  they  involve  different  general  interest 
considerations  (namely:  security  of  commercial  transactions54,  and  the  protection  of  the 
fundamental  right to privacy, including secrecy of communications). 

The proposed  Directive is intended to  apply without  prejudice  to the possible  restrictions 
on the use of encryption technology and products55. 

111.  Commentary on individual Articles 

Article I 

Paragraph (a) 

Paragraph  (a), in conjunction  with paragraph  (b), defines  the  scope  of the  proposal.  This 
covers broadcasting (television and radio) and Information  Society services, as well as the 
provision of access to the abovementioned  services, in so far  as they are provided  on the 
basis of a Conditional Access technique (as defined  in Paragraph (b)). 

The definition  of  television broadcasting" is the  same as  in  Directive  89/552/EEC That 
of "radio broadcasting", which  is based  on it,  should  be understood  to  include  not  only 
sound  signals but  possibly  also data  signals within  the same channel.  These  definitions  of 
broadcasting  do not  include the provision  of  services  on  individual  demand,  which  come 
within the scope of the third indent ("Information  society services"). 

The definition  of "Information Society services" is based  on the Commission  proposal  for 
a  Directive  amending  Directive  83/189/EEC  concerning  "regulatory  transparency  in  the 
Internal  Market  for  Information  Society  services".  According  to  Article  J  of  that 
proposal, the definition  applies to "any service provided at a distance, by electronic means 
and  on  the  individual  request  of  a  service  receiver".  Examples  of  these  services  include 
Video  on  demand  and  Audio  on  demand  (that  are  not  covered  by  the  definition  oi' 
"broadcasting"), irrespective of the terminal used by the receiver (television  set,  computer 
screen, or any other equipment). 

53 

54 

55 

COM(%)  568  final:  "Follow-up  to  the  Green  Paper  on  copyright  and  related  rights  in  the 
Information society". 
Example:  digital  signatures  will  fall  within  the  scope  of  the  directive  if  they  arc  used  as  a 
"password'1 to a conditional access service, but not when they serve other  objectives. 
On  27  March  1997,  The  OECD  Council  adopted  a  Recommendation  concerning  "Guidelines  for 
cryptography  policy"  While  "recognising  that  cryptography  has  a  variety  of  applications  (...) 
and that each  of  these uses  presents  different  issues",  the  Council  highlighted  that  "the  failure 
to utilise cryptographic methods can adversely affect  the protection of privacy, intellectual  propcrh 
(...)  and the operation of electronic commerce". 

12 

The  function  of  controlling  potential  end-users'  access  to  the  abovementioned  services 
is the  subject  of  a  distinct  operation  which  may  be  performed  by  the  service-provider 
(such  as  a  broadcasting  company)  itself,  but  which  in  an  increasing  number  of  cases  is 
being undertaken by a specializt company acting on its behalf. 

In this respect,  the functional  relationships (but  not  the conditional-access  techniques)  are 
similar to those in the case  of  a series of public  concerts  forming  a  'season',  where  each 
authorized  end-user  holds  a  season  ticket  representing  a  contract  with  the  concert 
management,  but  not  with  the  members  of  the  various  orchestras  who  perform  the 
concerts  under  contract.  Enforcement  of  the  conditions  for  access  to  the  concert-hall  is 
relatively  easy  (by  inspecting  each  concert-goers'  ticket  on  entry,  to  detect  any 
unauthorized  ones).  In  the  case  of  broadcasting,  the  only  effective  conditional  access 
technique  relies  on  the  end-users'  inability  to  obtain  intelligible  information  from  the 
distributed signal without using suitable equipment and software  to process it. 

Paragraph (b) 

The services listed in Paragraph  (a) will fall within  the scope of the proposed  Directive if, 
and  in  so  far  as,  they  are  provided  on  the  basis  of  a  "Conditional Access"  technique 
According  to  Paragraph  (b),  this  means  any  technical  measure  whereby  access  to  the 
service  is  made  conditional  upon  a  prior  individual  authorization,  in  so  far  as  such 
authorization aims at ensuring the remuneration of that service. This is because the  subject 
of legal protection  is not the technology  as such, but the legitimate  interest  served  by the 
technology  (remuneration  of  a  service):  similar  techniques  may  serve  different  interests 
(e.g. confidentiality  of private communications),  that  will remain  outside  the  scope  of the 
Directive. In fact, the services listed in Paragraph  (a) are made available to any member of 
the public who is prepared  to  "pay  the ticket",  and  the technical  measures  referred  to  in 
Paragraph (b) aim at ensuring the payment of such a "ticket". 

In this field, the available technologies  are evolving  quite  rapidly,  and  new  technologies 
may emerge.  This is one  of  the  reasons  why  the  proposed  definition  is not  expressed  in 
terms  of  a  specific  technology,  such  as  encryption,  although  this  is  widely  used  in 
digital systems. 

Some indicative,  and  not  exhaustive,  examples  of  Conditional  Access  techniques  are  the 
following: 

(digital) encryption and (analogue) scrambling of broadcasting signals, 

cryptographic  envelopes, holding an encrypted  version  of a document  (text,  image, 
video) as well as rules for determining access possibilities; 

electronic  locks,  that  allow  the  publisher  to  "lock"  a  given  content  in  such  a  way 
that  access to the  service is made conditional  upon  a prior  authorization  (e.g.  on a 
subscription basis). 

13 

Paragraph (c) 

The  definition  of  "Conditional Access  device"  includes  decoders,  set-top  boxes,  smart 
cards  and  any  other  equipment  or  software  which,  alone  or  in  conjunction  with  other 
devices,  is  necessary  to  receive  the  service  in  an  intelligible  form  (as  opposed  to  an 
encoded, unintelligible form). 

Paragraph (d) 

Even  though  not  eligible  for  legal  protection  under  Articles  3  and  4,  the  "associated 
services"  shall benefit  from  the provisions laid down in Article 2, paragraph 2. In fact,  the 
development of an Internal Market in this field requires the free movement of these related 
replacement  and  commercial  communication 
activities  (installation,  maintenance, 
services), that shall not be restricted,  for  reasons which fall  within the field coordinated by 
this Directive. 

"Commercial communication " is meant to cover,  in accordance with the Green  paper on 
Commercial Communications in the Internal Market  - COM(96)  192 of 8 May  1996 - "all 
forms  of  communication seeking to promote  either products,  services or the image of a 
company or organisation to the final  consumers and/or distributors ". 

Paragraph (e) 

The definition  of"illicit device" is linked to the list of prohibited  activities that  is provided 
in Article 3: all these activities relate to illicit devices, but the mere possession  (for  private 
purposes) of such devices is not sanctioned by the proposed Directive, as this aspect  is left 
to the discretion of Member States (15th recital). 

Paragraph  (f) 

The  notion  of  "unauthorized access  "  flows  from  the  definition  given  by  Paragraph  (b) 
and  must  be  read  in  accordance  with  the  latter:  the  refusal  of  authorization  for  reasons 
other than the remuneration of the service is thus not covered by the proposal. 

Unauthorized  access,  as  such,  is  not  sanctioned  by  the  proposed  Directive:  it  is  the 
commercial activities which make it possible (Article 3) that are sanctioned. 

Paragraph (g) 

The  definition  outlines  the  scope  of  the  approximation  of  laws,  regulations  and 
administrative  provisions  of  the  Member  States.  This  approximation  relates  to  the  legal 
protection  of  services  against  unauthorized  access,  which  is defined  by  paragraph  (f)  as 
"access  to  a  protected  service  without  the  authorization  of  the  service  provider"  As a 
result,  copyright  and  related  rights  do  not  fall  within  the  field  coordinated  by  the 
Directive: the interest  protected  by the proposed  measures  is the remuneration  of  service 
providers.  Even  though,  from  an  economic  point  of  view,  rightholders  will  certainly 
benefit  from  such  measures,  this  will  be  an  indirect  effect,  and  their  interests  remain 
distinct.  The  same  reasoning  applies  to  the  issue  of  industrial  property  rights  for 
Conditional Access devices. 

14 

Article 2 

This  Article  aims  at  ensuring  the  free  movement  of  protected  services,  of  associated 
services and  of Conditional  Access devices.  In order  to guarantee  the equivalent  level  of 
protection needed  to achieve these freedoms,  Paragraph  1 requires each Member  State to 
take  the  measures  whose  object  is defined  in  Articles  3  and  4.  To  fulfil  this  obligation, 
some Member States will have to adapt their legislation in accordance  with the  definitions 
given  in  Article  1.  For  example,  if  the  existing  regulation  covers  only  broadcasting 
services, it will have to be modified  so that it covers all the services defined  in Article  1(a); 
if legal protection  is limited to  services that  are broadcast  from  the national  territory,  this 
discrimination  will  have  to  be  removed,  and  the  same  applies  to  any  legislation  that 
discriminates between means of transmission (e.g. between cable and satellite) or between 
terminal equipment (e.g. between television sets and computers). In fact,  many services in 
Europe  are being  simulcast  via  satellite,  cable  and/or  terrestrial  transmitters,  and  digital 
services  in the  near  future  will  use  an  integrated  platform  of  cable  connections,  satellite 
receivers and decoders, telephone lines, etc. 

Paragraph  2 is the  plain  application  of  Internal  Market  principles:  once  a field has  been 
coordinated  by  an  harmonising  instrument,  there  is  no  longer  any  justification  for 
restricting the free movement  of goods and  services. With the  exception  of the  measures 
laid  down  in Paragraph  1, Member  States  shall  not  restrict  the  free  movement  of  those 
goods and services, which are covered by this Directive, for  reasons which  relate to their 
legal protection against the illicit activities contained in Article 3. 

Article 3 

The list of prohibited activities is mainly based on Principle I of Recommendation  R(91 )14 
of  the  Council  of  Europe.  This  Recommendation  makes  a  clear  distinction  between 
possession  for  commercial and  for  private  purposes:  the  former  is declared  as  unlawful, 
while  the  latter  is  not.  Moreover,  in  several  Member  States,  the  legal  protection  of 
encoded  services is ensured by general provisions relating to "unfair competition", which 
cover  only  commercial  activities:  unfair  competition  Law  applies  solely  to  activities 
carried out in the course of trade. Bearing in mind the need for  respecting the principle of 
proportionality  laid down in Article 3b of the EC Treaty, which limits Community  action 
to what  is necessary to achieve the pursued  objective,  the proposed  Directive  follows  the 
Council of Europe Recommendation on this point. 

As regards point (b), the Directive goes further  than the Recommendation,  but  is inspired 
by the same principle:  sanctioning the commercial activities that  favour  the  unauthorized 
reception, and not the unauthorized reception as such. 

Article  3(a)  envisages  the  restriction  of,  inter  alia,  the  importation  for  commercial 
purposes  of  illicit  devices.  Any  import  restriction  vis-à-vis  third  countries  has  to  be 
compatible  with  the  obligations  laid  down  under  the  relevant  provisions  of  the  WTO 
Given the fact  that this measure will be applied without  discrimination between  European 
and third country products, and considering that  it fulfils  the legitimate  aim of  controlling 
deceptive practices, the measure will be in compliance with the WTO. 

The  notion  of  "appropriate"  sanctions  and  remedies  is  clarified  by  the  conditions  laid 
down in Article 4. 

15 

Paragraph 1 

Article 4 

the  Role  of  Penalties 

To  be  effective,  any  legal  provision  should  be  assisted  by  the  appropriate  sanctions.  As 
regards  Community  Law,  this  principle  is  enshrined  in  the  Communication  of  the 
Commission  on 
in  implementing  Community  Legislation 
COM(95)  162.  However,  this  does  not  necessarily  mean  fixing  a  harmonized  level  of 
penalties:  Paragraph  1 of  Article  4  indicates  a  set  of  criteria  that  should  achieve  the 
objective,  while  leaving  enough  flexibility  to  the  Member  States.  In  addition,  useful 
elements  may  be  found  in  the  enforcement  section  of  the  TRIPS  Agreement,  which 
indicates a comprehensive set of measures against piracy. 

Paragraph 2 

This  Paragraph  indicates  the  usual  set  of  civil  remedies  that  applies  to  the  relevant 
activities in most Member  States; these remedies can be invoked by one or several  service 
providers.  Article 44  of the  TRIPS  Agreement  provides for  injunctions,  while  Article  45 
of the same Agreement contains rules about damages. In addition, the seizure of  infringing 
material  is  laid  down  in  Article  46  of  the  TRIPS  Agreement,  as  well  as  in  Article  7 of 
Directive  91/250/EEC,  that  allows  the  competent  authorities  to  seize  the  unauthorized 
copies of computer  software. 

These are standard provisions. 

Articles 5 to 8 

16 

Proposai for a 
EUROPEAN  PARLIAMENT AND COUNCIL  DIRECTIVE 

on the Legal Protection of Services based on, or consisting of,  Conditional  Access 

EUROPEAN 
THE 
EUROPEAN  UNION, 

PARLIAMENT  AND 

THE  COUNCIL  OF  HIE 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Articles 57(2), 66 and  100a thereof, 

Having regard to the proposal from the Commission56, 

Having regard to the opinion of the Economic and Social Committee57, 

Acting in accordance with the procedure laid down in Article  189b of the Treaty58, 

Whereas the  objectives  of the  European  Community  as  laid  down  in  the  Treaty  include 
establishing an ever closer union among the peoples of Europe and ensuring economic and 
social progress, by eliminating the barriers which divide them; 

Whereas the cross-border provision of broadcasting and Information  Society services may 
contribute significantly to the achievement of those objectives, 

Whereas  the  Treaty  provides  for  the  free  movement  of  all  services  provided  foi 
remuneration,  whereas  this  right,  as  applied  to  broadcasting  and  Information  Society 
services,  is also  a  specific  manifestation  in  Community  law  of  a more  general  principle, 
namely the freedom  of expression  as enshrined  in Article  10 of the European  Convention 
for the Protection of Human Rights and Fundamental Freedoms; 

the 
Whereas  the  Commission  undertook  a  wide-ranging  consultation  based  on 
Green paper "Legal  Protection  of Encrypted  Services  in the  Internal  Market"59,  whereas 
the  results  of  that  consultation  confirmed  the  need  for  a  Community  legal  instrument 
ensuring  the  legal  protection  of  all  those  services  whose  remuneration  relies  on 
Conditional Access, 

Whereas  the  European  Parliament, 
the 
Green Paper60, called on the Commission to present a proposal for a Directive covering all 
encoded  services  in  respect  of  which  encoding  is  used  to  ensure  payment  of  a  fee,  and 
agreed  that  this  should  include  Information  Society  services,  provided  at  a  distance  by 

in  its  Resolution  of  13  May  1997  on 

56 
57 
58 
59 
60 

OJ No 
OJ No 
Opinion of the European Parliament of 
COM(96) 76 final of 6 March  1996. 
OJ No C 

, Common Position of the Council of 

17 

electronic  means  and  at  the  individual  request  of  a  service  receiver,  as  well  as 
broadcasting services; 

Whereas  the  opportunities  offered  by  digital  technologies  provide  the  potential  for 
increasing  consumer  choice  and  contributing to  cultural  pluralism,  by developing  an even 
wider  range of services  within  the  meaning  of  Articles  59 and  60  of the  Treaty,  whereas 
the viability of those services will often  depend  on the use of Conditional  Access in order 
to obtain the remuneration  of the service provider; 

Whereas the importance of this issue was recognized  by the Commission  Communication 
on "A European  Initiative in Electronic  Commerce"61, which announced  a proposal  for  a 
Directive  in  order  to  establish  an  equivalent  level  of  protection  for  service  providers 
across Europe, 

Whereas, in accordance  with  Article  7a of the Treaty, the  Internal  Market  is to  comprise 
an  area  without  internal  frontiers  in  which  the  free  movement  of  sei'vices  and  goods  is 
ensured;  whereas  Article  128(4)  of  the  Treaty  requires  the  Community  to  take  cultural 
aspects into account  in its action under  other provisions of the Treaty; whereas by virtue 
of  Article  130(3),  the  Community  must,  through  the  policies  and  activities  it  pursues, 
contribute 
the  competitiveness  of  the 
Community's industry; 

to  creating  the  conditions  necessary  for 

Whereas  the  disparity  between  national  rules  concerning  the  legal  protection  of  services 
based  on,  or  consisting  of,  Conditional  Access  is  liable  to  create  obstacles  to  the  free 
movement of services and goods; 

Whereas  the  application  of  the  Treaty  is  not  sufficient  to  remove  these  Internal  Market 
obstacles;  whereas  those  obstacles  should  therefore  be  removed  by  providing  for  an 
equivalent 
level  of  protection  between  Member  States;  whereas  this  implies  an 
approximation  of  the  national  rules  relating  to  the  commercial  activities  which  concern 
illicit devices; 

Whereas  those  commercial  activities  are detrimental  to  consumers  who  are  misled  about 
the origin of illicit devices, whereas a high level of consumer protection is needed  in order 
to  fight  against  this  kind  of  consumer  fraud;  whereas  Article  129a(l)  of  the  Treaty 
provides  that  the  Community  should  contribute  to  the  achievement  of  a  high  level  of 
consumer protection by the measures it adopts pursuant to Article 100a, 

Whereas, therefore,  the legal framework  for  the creation  of a single  audiovisual  area  laid 
down in Council Directive  89/552/EEC  of 3 October  1989 on the coordination  of certain 
provisions  laid  down  by  law,  regulation  or  administrative  action  in  Member  States 
concerning  the  pursuit  of  television  broadcasting  activities62,  as  last  amended  by 
Directive 97/36/EC  of  the  European  Parliament  and  of  the  Council63,  should  be 
supplemented  with  reference  to  Conditional  Access  techniques  as  laid  down  in  this 
Directive,  in  order,  not  least,  to  ensure  equal  treatment  of  the  suppliers  of  cross-border 
broadcasts, regardless of their place of establishment, 

COM(97) 157 final of 16 April 1997. 

61 
62  OJ No L 298, 17.10.1989. p. 23. 
63  OJ No L 202, 30.7.1997, p. 60. 

18 

Whereas,  in  accordance  with  the  Council  Resolution  of  29  June  1995  on  the  effective 
uniform  application  of  Community  law  and  on  the  penalties  applicable  for  breaches 
of Community law in the internal  market64,  Member  States are required  to  take  action  to 
ensure that  Community  law is duly applied  with the  same effectiveness  and  thoroughness 
as national law; 

Whereas the  approximation  of the  laws,  regulations  and  administrative  provisions  of  the 
Member  States  should  be limited  to  what  is needed  in order  to  achieve  the  objectives  of 
the  internal  market,  in accordance  with  the  principle  of  proportionality  as  set  out  in  the 
third paragraph of Article 3b of the Treaty; 

Whereas  this  Directive  should  be  without  prejudice  to  the  application  of  national 
provisions  which  may  prohibit  the  private  possession  of  illicit  devices;  whereas  this 
Directive is without prejudice to the application of Community competition  rules, whereas 
this  Directive  is  without  prejudice  to  the  application  of  Community  rules  concerning 
intellectual property rights; 

Whereas this Directive  is without  prejudice  to  the application  of national  rules  which  do 
not  fall  within  the field herein  coordinated,  such  as those  adopted  for  the  protection  of 
minors in compliance with Directive 89/552/EEC, 

HAVE ADOPTED THIS DIRECTIVE: 

Artkie 1 
Definitions 

For the purposes of this Directive: 

(a) 

"Protected Service "  means  any  of  the  following  services,  where  provided  on  the 
basis of Conditional Access: 

Television  broadcasting,  as  defined 
Directive 89/552/EEC; 

in  point 

(a)  of  Article  1  of 

Radio  broadcasting,  meaning  any  transmission  by  wire  or  over  the  air, 
including  that  by  satellite,  of  radio  programmes  intended  for  reception  by 
the public; 

Information  Society  services  within  the  meaning  of  Article  1  point  2 
of Council Directive 83/189/EEC65, as amended by Directive ../..66, 

or the provision of Conditional access to the above services as a service in its own right. 

64 
65 
66 

OJN0CI88,  22.7.1995. p. 1. 
OJ No L  109, 26.4.1983, p. 8. 
OJ No L 

19 

(b) 

(c) 

(d) 

(e) 

(f) 

(g) 

"Conditional Access"  means  any technical  measure  and/or  arrangement  whereby 
access  to  the  service  in  an  intelligible  form  is  made  conditional  upon  a  prior 
individual authorization  aiming at ensuring the remuneration of that service, 

"Conditional  Access  device"  means  any  equipment  or  software  designed  or 
adapted to give access to a protected  service in an intelligible form, 

"Associated  service"  means  the  installation,  maintenance  or  replacement  of 
Conditional Access devices, as well as the provision of commercial  communication 
services in relation to protected  services or devices or other associated services; 

"Illicit  device"  means  any  equipment  or  software  designed  or  adapted  to  give 
unauthorized access to a protected service; 

"Unauthorizedaccess"  means access to a protected  service in an intelligible  form 
without the authorization of the service provider; 

"Field  coordinated  by 
unauthorized access to protected services. 

this  Directive"  means  any  provision 

relating 

to 

Article 2 
Internal market principles 

1. 

Each Member  State shall take the measures necessary to prohibit  on its territory  the 
activities listed in Article 3, and to provide the sanctions and remedies laid  down in 
Article 4. 

2.  Without  prejudice  to  paragraph  1, Member  States  may  not,  for  reasons  which  fall 

within the field coordinated by this Directive: 

(a) 

restrict  the  provision  of  protected  services,  or  associated  services,  that 
originate in another Member State, 

(b) 

restrict the free movement of Conditional Access devices. 

Article 3 
Infringing activities 

Member States shall prohibit on their territory  all of the following activities: 

(a) 

the  manufacture, 
illicit devices; 

import,  sale  or  possession  for  commercial  purposes  of 

(b) 

the  installation,  maintenance  or  replacement  for  commercial  purposes  of  an 
illicit device; 

(c) 

the use of commercial communications to promote illicit devices. 

20 

Article 4 
Sanctions and remedies 

1. 

2. 

The  sanctions  referred 
proportional to the potential impact of the infringing  activity. 

to  in  Article  2(1)  shall  be  effective,  deterrent  and 

Each  Member  State  shall  take  the  measures  necessary  to  ensure  that  service 
providers,  whose  interests  are  affected  by  an  infringing  activity  carried  out  on  its 
territory,  can  bring  an  action  for  damages  and  seek  for  an  injunction  and,  where 
appropriate, apply for the seizure of illicit devices. 

Article 5 
Implementation 

1.  Member  States  shall  bring  into  force  the  laws,  regulations  and  administrative 
provisions necessary  to  comply with this  Directive by 31 December  1999 and  shall 
communicate them to the Commission. 

When Member  States adopt  these provisions, these  shall contain  a reference  to this 
Directive  or  shall  be  accompanied  by  such  reference  at  the  time  of  their  official 
publication. The procedure for such reference  shall be adopted by Member States. 

2.  Member  States  shall  communicate  to  the Commission  the text  of the  provisions  of 

national law which they adopt in the field coordinated  by this Directive. 

Article 6 
Reports 

Not later than five years after  the entry  into force  of this Directive,  and every  three  years 
thereafter,  the Commission  shall present  a report  to the European  Parliament,  the Council 
and the Economic  and  Social  Committee concerning the implementation  of this Directive 
accompanied,  where  appropriate,  by  proposals  for  adapting  it  in  light  of  technical  and 
economic developments. 

Article 7 
Entry into force 

This Directive shall enter into force  on the twentieth  day following  that  of its publication 
in the OfficialJournal  of the European Communities. 

Article 8 
Addressees 

This Directive is addressed to the Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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ISSN 0254-1475 

COM(97) 356 final 

DOCUMENTS 

EN 

06  09 

Catalogue  number  :  CB-C0-97-359-EN-C 

ISBN  92-78-22697-1 

Office  for Official  Publications of the European  Communities 

L-2985  Luxembourg 

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