Category: Austria

The Digital Services Act (“DSA”) was published in the Official Journal of the European Union on 27 October 2022. This means that the Act, targeting numerous online services, will enter into force only 20 days later, on 16 November 2022.

As part of the European Commissions’ digital strategy for the EU, the DSA aims to transform the internet into a safer space for users in Europe. Its focus is on protecting the fundamental rights of users and tackling illegal content and misinformation in the context of digital services. By creating extensive obligations for providers of digital services regarding, e.g. targeted advertisements, content moderation, transparency for terms and conditions, internal “complaint-handling systems” and the like, websites and online platforms are to become more transparent.

Who is affected?

The DSA targets many online services, ranging from websites to online/internet infrastructure services and online platforms.

Pursuant to Art 2, the DSA applies to all information society services (or “intermediary services”) offered to recipients that are established or located in the EU, irrespective of where the service provider is established. Intermediary service means (i) a mere conduit service, providing access to or transmitting information in a communication network, (ii) a caching service, transmitting information in a communication network also involving the temporary storage of that information, and (iii) a hosting service, consisting of the storage of information provided by a user (or “recipient”) of the service.

This means that the DSA applies not only to internet access providers, but also to cloud and webhosting services, search engines, online platforms such as social media platforms, online marketplaces, app stores and collaborative economy platforms, among others. All those services, whether established in the EU or not, will have to comply with the DSAs’ regulations.

SMEs will benefit from numerous provisions adapted to their respective size and capabilities, without reducing their accountability under the DSA. Likewise, there will be specific provisions which provide for additional obligations for very large online platforms (“VLOP”) or online search engines (“VLOSE”) (i.e. platforms or search engines with an average of at least 45 million active users per month).

What are the key points?

The DSA explicitly states that intermediary services have no obligation to monitor all the information they transmit or store “to seek facts or circumstances indicating illegal activity”. This means that the widely discussed obligation to implement upload filters did not make it into the final text of the DSA.

Other things that affect all intermediaries include:

• Intermediaries must follow standardised rules upon the receipt of an order from the relevant national court or authority to act against illegal content and inform the court/authority without undue delay about its fulfilment.
• Intermediaries must designate a single contact point to enable direct communication with authorities, the Commission and other relevant bodies. Also, a single point of contact for users of the service to communicate with the intermediary must be designated.
• Transparency:
  • Terms and conditions: Information must be provided in the terms and conditions about internal policies, procedures, measures and tools used for content moderation, including algorithmic decision-making and human review, as well as the rules of procedure of the internal complaint handling system. This information must be in clear, plain, intelligible, user-friendly and unambiguous language, and must be publicly available in an easily accessible and machine-readable format.
  • Reporting obligation: Intermediaries must publish reports on content moderation at least once a year containing information on the type of illegal content, the time needed to delete the content, the content moderation engaged at own initiative, training and assistance measures to persons in charge of content moderation, measures that affect the availability of information provided by users, the number of complaints received through the internal complaint-handling systems, any automated means used for content moderation, etc. Additional semi-annual reporting obligations for providers of online platforms apply.

Additional obligations for online platforms

• Action mechanisms must be in place to allow users to notify intermediaries about illegal content. The obligation to implement an internal complaint-handling system that enables users who have submitted a notification or are concerned by an intermediary’s decision (e.g. to remove content, to suspend or terminate the users account, etc.) to electronically lodge complaints against the decision taken free of charge. The obligation to suspend users if they frequently provide illegal content. Users must also have the option to select a certified out-of-court dispute settlement body.
• Notices of trusted flaggers (who must be competent for identifying illegal content, independent and objective) must be prioritised and processed without undue delay.
• Prohibition to use “dark patterns”: The interface of an online platform must not be designed, operated or organised in a way that deceives or manipulates the users of the service or impairs their ability to make a free and informed choice.
• Information on advertisements: Users must be able to clearly, concisely and in real time identify that the information at hand is an advertisement, and establish the identity of the advertiser who paid for the advertisement and the parameters used to determine the recipient of the advertisements and how to change them. Also, a prohibition to present advertisements based on profiling using special categories of personal data.
• Obligation to set out in plain and intelligible language in the terms and conditions the main parameters used to determine the order of information presented to the user. The user must be provided with a function to modify the parameters.

For online platforms allowing consumers to conclude distance contracts with traders, the following additional obligations apply:

• The trader must be identified by the intermediary through the means of an identification document or other electronic identification.

Additional obligations for VLOPs and VLOSEs

• Reporting obligations on the number of monthly active users (starting from 17 February 2023 and at least semi-annual thereafter).

• Risk assessment for risks stemming from the design or functioning of the service and its related (algorithmic) systems and, based on its outcome, the implementation of reasonable, proportionate and effective mitigation measures.

• The obligation to assess compliance with the DSA at least once a year through an independent audit at its own expense.

• Additional advertising transparency obligations.

• Access to data necessary to monitor and assess compliance with the DSA for the Digital Services Coordinator and the Commission and the obligation to explain the design, logic, functioning and testing of the algorithmic systems.

• The obligation to implement an independent compliance function with sufficient authority and resources to ensure compliance with the DSA.

• Additional reporting obligations.

Pursuant to Art 49 DSA, Member States must designate the authorities responsible for supervising the intermediaries and enforcing the DSA, as well as a Digital Services Coordinator responsible for coordination at a national level. Notably, the Commission itself will be the administrative body responsible for supervising and enforcing the DSA vis-à-vis VLOPs and VLOSEs to prevent a “bottleneck” effect in DSA enforcement due to inadequately staffed or funded national authorities.

The penalties following an infringement of the DSA are quite harsh and can amount to up to 6 % of the annual worldwide turnover achieved by the intermediary in the preceding financial year. This means that fines are even higher than under the GDPR (4 % of worldwide turnover).

Timeline and to-dos

After being published in the Official Journal of the European Union, the DSA will enter into force by 16 November 2022 and will be effective only 15 months later by 17 February 2024.

However, certain obligations for VLOPs and VLOSEs will apply as early as 16 November 2022. These are, among others, the reporting obligation on the number of monthly users, the Commission’s competence to adopt delegated acts to designate online platforms or search engines as VLOPs or VLOSEs, to lay down rules for the performance of audits and to establish the technical conditions for data access.

Considering the extensive internal changes (organisational, technical and procedural) required for intermediaries to comply with the DSA’s regulations and the severe fines, intermediaries should waste no time in setting the necessary requirements for DSA compliance.

Steps to follow

1. Analyse and classify: What type of intermediary is my organisation/company? Which provisions are applicable?

2. Determine the status quo: Where is the organisation/company already compliant with the DSA and where is it not? Identify deviations from the DSA’s requirements.

3. Lay the foundations: Start implementing the DSA by creating appropriate technical, personnel, structural and organisational measures.

4. Monitor: The DSA provides for various possibilities for the Member States and the Commission to adopt (delegated) national acts. Monitoring the legislation of the EU and the relevant Member States will therefore be mandatory.

5. Check: Conduct an internal or external audit for compliance before the applicable cut-off date.

By Florian Terharen, Associate, Schoenherr

Cerha Hempel has advised NC Management and the NC Growth Fund I on a EUR 12 million series B financing for Pimcore. 42law advised Pimcore and its shareholders and founders.

According to Cerha Hempel, “the investment will support the Austrian tech company’s global expansion, the commercialization of the open-source platform, and continued development of disruptive data and experience management capabilities for enterprises.”

Nordwind Growth is a German-based growth fund.

Pimcore is an Austrian enterprise open-source software platform for customer experience management, digital asset management, product information management, multi-channel publishing, and e-commerce software.

“We are delighted to fuel the growth of Pimcore,” Nordwind Growth Managing Partner Christian Plangger commented. “It’s an outstanding product with an exceptional global vision. It’s simply a 100% fit within our investment strategy.”

The Cerha Hempel team included Partners Albert Birkner, Nadine Leitner, Peter Knobl, and Armin Schwabl, Senior Counsel Wolfgang Sindelar, Senior Associates Martin Eichinger, Alistair Gillespie, Christopher Peitsch, and Alina Alavi Kia, and Associates Jakob Weber, Liliana Niederhauser, and Boris Treml.

The 42law team included Principal Christof Strasser, Attorney-at-Law Tobias Tangl, and Associate Barbara Neuwirth.

The Nordwind Growth in-house team included General Counsel Johannes Wittmann.

Schoenherr has advised the shareholders of Vienna-headquartered biotech company Eucodis Bioscience on the sale of the company to the Biosynth Group. Reportedly, Gibson Dunn & Crutcher and E+H advised the Biosynth Group.

Biosynth is a Swiss life sciences reagents, custom synthesis, and manufacturing services company specializing in complex chemistry, peptides, and key biological raw materials.

According to Schoenherr, “Eucodis is an expert in engineering and developing enzymes for pharma, biotech, and applied markets. The transaction involved the coordination of a total of 19 sellers and structuring and implementing the concurrent termination and payoff of equity participation instruments. It closed on October 17, 2022, after the transaction received the required FDI clearance.”

Schoenherr’s team included Partners Robert Bachner and Dominik Hofmarcher, Counsel Marco Thorbauer, Attorney at Law Daniel Wadl, and Associate Leonhard Telsnig.

Herbst Kinsky, working with Norton Rose Fulbright, has advised Treis on the sale of Cycleenergy Holding to an Austrian investor group consisting of Invest AG, Industrieliegenschaftenverwaltung, and the company’s management team.

The transaction remains contingent on regulatory approval.

Cycleenergy specializes in decentralized energy solutions and produces energy from biomass in Austria and Germany. The company operates four biomass cogeneration plants and three pellet plants with a production of around 90,000 megawatt-hours of base-load capable electricity.

Treis is a family-owned investment group, that had been Cycleenergy’s majority shareholder since 2011.

The Herbst Kinsky team was led by Attorney-at-Law Christoph Wildmoser and Associate Alexander Lotz and included Attorney-at-Law Valerie Mayer and Associates Elisabeth Fitzek and Danielle Noe.

Norton Rose Fulbright’s team was led by Munich-based Partner Klaus Bader and Counsel Wenzel Richter.

Herbst Kinsky did not respond to our inquiry on the matter.

Approximately two and a half years ago, online gambling providers started being sued by their customers, in various courts in Austria and Germany, demanding reimbursement for their losses by arguing that these services are offered illegally. This article will highlight some of the main issues surrounding these claims.

The Austrian Gambling Act holds that only licensed companies are allowed to offer gambling. Accordingly, the offering of these services by foreign companies in Austria under a foreign license is considered illegal, entitling the foreign company’s customers to reclaim their gambling losses (apart from sports betting, which is subject to provincial law and therefore cannot be reclaimed).

In terms of liberalization, the European gambling market has changed a lot over the past twenty years. While most EU member states either had no dedicated regulations for online gambling or only state-owned online gambling monopolies, nowadays the multi-licensing system has been adopted by nearly all EU member states.

Austria, however, still holds on to a strict licensing system, whereas Germany is currently liberalizing the gambling market. In mid-2021, a new edition of the Interstate Treaty came into force, which regulates four categories of betting products: online casino table games, virtual (online) slots, online poker, and sports betting. The new law has a series of player safety measures in place, with the aim of protecting vulnerable players, preventing underage gambling, and combating problem gambling behavior.

Hungary abolished its monopoly recently. In the process of liberalizing the Hungarian online gambling market, the system was gradually changed from a monopoly to a licensing system. Austria, on the contrary, assigned the only available license to the partly state-owned operator win2day, leading to a de-facto-monopoly in Austria.

Foreign operators holding a license from another EU member state, such as Malta, offer their services in Austria based on the freedom of services the EU provides. As Austria is a member state, the applicability and supremacy of EU law are a given. The main issue here is that the de-facto-monopoly in Austria violates the freedom to provide services, and restrictions on fundamental freedoms are only possible under special circumstances.

The tension was reviewed by the Austrian Constitutional Court, which ruled in 2016 that the restrictions of the Austrian law are justified and adequate to reach their intended objectives, such as preventing excessive incentives to attract more players. Limited licensees can be monitored more effectively and therefore serve the aim of player protection. Therefore, Austrian civil courts currently base their judgments solely on the aforementioned Constitutional Court judgment, without assessing whether the situation has changed since then.

The main aspect that is being disregarded by the courts is that the shareholder structure of the Austrian lotteries has changed significantly over the past years. It is majority-owned by CASAG, which in turn is majority-owned by a Czech company through complex structures. The monopolist has been pursuing aggressive advertising practices to increase its large profits in recent years. These practices are not in line with advertising practices in the member states, with a licensing system and strict sector-specific rules. Accordingly, the protective purpose with which the licensing system was justified is thus thwarted, and new target groups are lured into gambling. Nevertheless, Austrian courts continue to adhere to the outdated line of jurisprudence. Neither do they review whether there is a comparable situation to 2016, nor do they examine the monopolist’s advertising behavior.

Further issues that arise in these claims which are based on unjust enrichment are that the statute of limitation amounts to 30 years and even the claimant’s knowledge of the alleged “illegality” of the offering does not impair the claim. Moreover, poker game losses in a multiplayer modus are to be reimbursed by the online gaming provider, even though the provider has never been enriched in the amount of the total loss, but only in the amount of a so-called table fee. In addition, the Austrian state profits from the court costs in these proceedings, and where these costs are supposed to be partially refunded, this currently takes up to several months.

It remains to be seen whether both the flawed case law as well as the problematic license system in this particular form can be maintained in Austria.

By Claudine Vartian, Country Managing Partner, and Nicole Daniel, Counsel, DLA Piper

This Article was originally published in Issue 9.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

CMS has advised Swedish-Swiss technology group ABB on its acquisition of Austrian energy optimization company ASKI Energy.

Financial details were not disclosed.

ABB is a Swedish-Swiss multinational corporation focusing on electrical equipment, robotics, and automation technology.

According to CMS, ASKI Industrie Elektronik produces automated systems for energy optimization and control that help its customers reduce their energy costs. “The acquisition of ASKI Energy expands ABB’s digital energy management portfolio and accelerates the development of the digital energy services ecosystem. In addition, the acquisition enables ABB to offer new features and technologies on the market in the areas of energy optimization and control.”

CMS’ team included Partners Alexander Rakosi and Andrea Potz, Lawyers Florian Mayer, Mariella Kapoun, and Dieter Zandler, and Associates Thomas Liegl, Maximilian Uidl, and Ramona Mujanovic.

CMS did not respond to our inquiry on the matter.

Schoenherr has advised the shareholders of Vienna-headquartered biotech company Eucodis Bioscience on the sale of the company to the Biosynth Group.

Biosynth is a Swiss life sciences reagents, custom synthesis, and manufacturing services company specializing in complex chemistry, peptides, and key biological raw materials.

According to Schoenherr, “Eucodis is an expert in engineering and developing enzymes for pharma, biotech, and applied markets. The transaction involved the coordination of a total of 19 sellers and structuring and implementing the concurrent termination and payoff of equity participation instruments. It closed on October 17, 2022, after the transaction received the required FDI clearance.”

Schoenherr’s team included Partners Robert Bachner and Dominik Hofmarcher, Counsel Marco Thorbauer, Attorney at Law Daniel Wadl, and Associate Leonhard Telsnig. 

Schoenherr did not respond to our inquiry on the matter.

Herbst Kinsky has advised the Uniqa Insurance Group on a syndicate agreement with Raiffeisen Holding Lower Austria-Vienna, Haselsteiner Privatstiftung, and Hans-Peter and Klemens Haselsteiner for maintaining the existing controlling interest in Strabag.

“The syndicate partner Uniqa, together with the other syndicate partners as bidders, has made a public mandatory tender offer to acquire outstanding no-par value shares in Strabag at an offer price of EUR 38.94 per Strabag share,” Herbst Kinsky informed. “The offer price corresponds to the minimum price pursuant to the Takeover Act, whereby Strabag will acquire up to 10% as treasury shares. The bidders will acquire these shares in the course of the offer in trust for Strabag.”

Strabag is an Austrian construction company. 

“Due to the sanctions regime under European law, the offer will not be addressed to the 28,500,001 Strabag shares held by Rasperia Trading Limited, indirectly controlled by Oleg Deripaska,” the firm added. “As a result of the EU sanctions, which also affect Oleg Deripaska, complex legal questions arose in the areas of the takeover, share, stock exchange, banking, insurance supervision, merger, and sanctions law.”

The Herbst Kinsky team was led by Partners Philipp Kinsky and Wolfgang Schwackhoefer and included Associates Carmen Walser, Angelika Kurz, and Leopold Gottsauner-Wolf.

Herbst Kinsky did not respond to our inquiry on the matter.

Karasek Wietrzyk Rechtsanwaelte has advised the Myneva Group on the acquisition of Mocca Software. Act Legal WMWP advised the sellers on the deal.

The Myneva Group provides software solutions for elderly care, child and youth welfare, healthcare, and social assistance.

According to KWR, Mocca Software “emerged from Ilogs, based in Klagenfurt, and is the market leader in the field of care software for mobile care with the product Mocca One. It offers a holistic software solution for the social and health sector, especially in mobile/outpatient home nursing and 24-​hour care.”

KWR’s team included Partners Thomas Haberer, Gerold Wietrzyk, and Anna Mertinz, Attorney at Law Alexander Hoeller, and Trainees Elisabeth Plese and Stefanie Praeuer.

WMWP’s team included Partners Martin Mutz and Paul Koppenwallner and Senior Associate Philipp Stephan.

The Amendment of the Austrian Copyright Act fundamentally revised the Copyright contract law. An entire series of new provisions for the protection of authors was implemented. But what does this mean for (future) license holders? Let us take a look!

With the Amendment of the Austrian Copyright Act, which came into force on 31 December 2021, the Austrian Copyright contract law was overhauled. Besides the implementation of the provisions of the Digital Single Market Directive (“DSM Directive”), the amendment provides the adoptions of individual provisions from the German Copyright Act. This insight series shall provide an overview of the most important changes and further explore their consequences.

First of all, what is Copyright contract law? Copyright contract law concerns all contractual relationships involving the granting of rights of use to works protected by copyright law (like texts, drawings, photos, graphics, music, films, etc.). Since we are constantly creating copyrighted works and using others’ works this also affects our daily lives. The legal provisions in the field of copyright contract law restrict the private autonomy of the contracting parties in favour of the author. The justification in terms of legal policy lies in a (presumed) unequal balance of power. Furthermore, the DSM Directive assumes that authors, as natural persons, usually have the weaker negotiating position when it comes to granting licenses or assigning their rights for exploitation. It should be noted, however, that the need for protection generally only exists for authors as natural persons and only if the contract partner of the author is not acting as an “end user”. Thus, conceptually, these new provisions are aimed at constellations in which authors are dependent on the help of intermediaries who act as a link between the creative author and the end user of the work.

Consequently, the amendment – with a few exceptions – exclusively concerns the legal relationship of the author (even if they act through their own company) to a first licensee, and not the relation between licensees.

Here is a first overview of the new provisions:

Based on the DSM Directive, the following provisions have been implemented:

• Principle of appropriate and proportionate remuneration (transposition of Art 18 DSM Directive): This principle exists both in the case of transfer/granting of exclusive as well as (beyond the requirement of the DSM Directive) non-exclusive rights of use, without, however, formulating a claim. The provision further specifies the adequacy of collective bargaining agreements and remuneration rules.
• Contract adjustment mechanism (transposition of Art 20 DSM Directive): This provision provides that the author is entitled to an additional appropriate remuneration if the originally agreed remuneration proves to be clearly disproportionately low.
• Transparency obligation (transposition of Art 19 DSM Directive): To check whether the remuneration is still appropriate with regard to the revenue of the licensee, authors shall receive information from their contractual partners at least once a year about the exploitation of the work (in particular about the income generated). In Austria, the provision is designed as an active duty of the exploiter to provide information.
• Alternative dispute resolution (“ADR”) procedure (transposition of Art 21 DSM Directive): Disputes relating to the transparency obligation and the contract adjustment mechanism can be brought before a specially established ADR committee.

Notably, these provisions are not applicable to computer programmes. Furthermore, the contract adjustment mechanism, transparency obligation as well as the ADR procedure cannot be waived in advance. They are mandatory rights of the author.

Following the German Copyright Act, the following provisions were additionally implemented:

• Transfer of rights by purpose
  If the forms of exploitation are not specifically stated in the license agreement, the purpose of the agreement shall determine the actual forms of exploitation granted (thus broad grant of rights clauses are restricted if the forms of exploitation are not specifically stated). Similarly, but only in case of doubt, the purpose of the contract shall determine whether a license to use the work has been granted (non) exclusively, how far the permission and the right granted extend and the restrictions to which they are subject.

• Unknown exploitation forms
  The provision contains protective measures in favour of the authors (written form and right of revocation) when they grant rights in respect of as yet unknown forms of exploitation. Exceptions for the right of revocation exist for cinematographic works, subordinate contributions, employee works or when additional appropriate remuneration is provided for.

• Right of second exploitation
  The provision essentially says that an exclusive license granted by the author and remunerated at a flat rate shall automatically be converted into a non-exclusive license after 15 years. The parties may extend the exclusivity to the entire duration of the contract term after 5 years at the earliest. Exceptions exist for specific types of works, works created by employees or commercially produced cinematographic works.

Applicability

The provisions on the contract adjustment mechanism, transparency obligation and the alternative dispute resolution procedure even apply to contracts concluded before the entry into force of the new Copyright Act (i.e. 31 December 2021) – but only with regard to acts of exploitation based thereon The other new provisions only apply to contracts concluded after 31 December 2021.

Conclusion

The Amendment offers an entire range of new rights to protect authors. There is no question that fair remuneration of authors is important. However, what does remain undecided is not only what is “fair” in a specific individual case, but also to what extent the new provisions of copyright contract law can contribute to this. They are well-intentioned, but only fit certain constellations. Legal uncertainties therefore remain in many areas. It will be up to the courts to offer some certainty for rights-holders as well as authors through case law.

To give a better insight into what to expect in the meantime, we will take you on a deeper dive into these provisions in the coming weeks, including some practical advice on what to consider when drafting copyright license agreements. 

By Dominik Hofmarcher, Partner, and Roland Vesenmayer, Associate, Schoenherr