Draft statute published for implementation of the Digital Content Directive

Philipp Reusch

EU Directive 2019/770 on "certain aspects concerning contracts for the supply of digital content and digital services" (the Digital Services Directive for short) was enacted on 20 May 2019. The main goal of the Directive is to improve consumer access to digital content and services and make access consistent Europe-wide. In this way, it will be possible to achieve a "genuine digital single market," as described in Recital No. 3 of the Digital Services Directive, while at the same time ensuring a high level of consumer protection. However, EU Directives do not take effect directly, but must instead be implemented into national law by the individual member states through an implementing statute. The responsible German agency, the Federal Ministry of Justice and Consumer Protection, published the first draft of such an implementing statute on 3 November 2020, which calls for implementing the Digital Services Directive by adding new provisions to the German Civil Code.

Broad scope

In accordance with the new § 327(1) of the Civil Code provided for in the draft, the new provisions would only apply for consumer contracts relating to the supply of digital content or services ("digital products"). In accordance with § 327(2) Sentence 1 of the Civil Code, as provided for in the draft, "digital content" is defined as data which are produced and supplied in digital form. "Digital services," in accordance with § 327(2) Sentence 2 of the Civil Code, are initially defined as services which allow the consumer "to create, process, store or access data in digital form" or "the sharing of any other interaction with data in digital form uploaded or created by the consumer or other users of that service." This relatively broad scope is limited by § 327(6) of the Civil Code, which clarifies e.g. that the new provisions do not apply to other service agreements, even if those services are provided using digital forms or means. Also excluded from the scope of the law are contracts for electronic communications services, health care services, gambling services, financial services and certain contracts for the supply of software, digital content or information, provided certain conditions are met. In accordance with § 327a(1) Sentence 1 of the Civil Code, the new provisions also apply for "bundle contracts" which, in addition to the supply of digital products, also including other content, such as the provision of non-digital services. In this case, however, the new provisions typically apply only to the digital portion of the contract.

Supply typically without undue delay

In accordance with § 327b(2) of the Civil Code, as provided in the draft, the consumer would be able to request supply of the digital product without undue delay after conclusion of the contract, unless otherwise provided in the contract or the circumstances dictate otherwise. In such a case, the product must be supplied immediately. In accordance with § 327b(3) of the Civil Code, digital content would be considered to be supplied when "it is made available or accessible to the consumer, either directly or through a facility chosen by the consumer for this purpose." For this purpose, it is sufficient for the consumer to receive "suitable means of access or download." Accordingly, the consumer does not need to actually download the digital content for the content to be successfully supplied. The same is true for digital services, in accordance with § 327b(4) of the Civil Code: in this case as well, the product is considered to be supplied once the consumer receives access to the service. If the contract provides for the supply of multiple individual digital products, these provisions apply for the supply of each individual product, in accordance with § 327b(5) Sentence 1 of the Civil Code. If the contract calls for a product to be supplied on an ongoing basis, it must be made available throughout the entire supply period (§ 327b(5) Sentence 2 of the Civil Code). If the company fails to supply a product as required even after it was called upon to do so by the consumer, although such a call can be dispensed with, the consumer can terminate the contract in accordance with § 327c(1) of the Civil Code. Accordingly, companies would be well-advised to adjust their technical capacity so as to ensure that digital products can be supplied at any time without limitation. In particular, consideration should be given in this context to measures capable of absorbing peak loads or cyberattacks on availability, such as distributed denial of service (DDoS) attacks.

Defects in digital content and mandatory updates

Under § 327d of the Civil Code, digital products would have to be provided to the consumer free of product defects and defects in title in terms of §§ 327e through 327g of the Civil Code. Digital products would be subject to different rules for defects than conventional products, for which the definition of defect can be found in §§ 434 of the Civil Code and subsequent sections. Pursuant to § 327e(1) of the Civil Code, a digital product would have a product defect if, "at the relevant time, it meets [sic!] the subjective and objective requirements and the requirements for integration." When this is the case specifically is defined in § 327e(2) of the Civil Code and the subsequent section. Accordingly, companies must be prepared for an entirely new definition of defect, and will have to satisfy considerably more requirements than was previously the case. Another new element is that, in accordance with § 327f (1) of the Civil Code, digital products need to be supplied with updates for a certain period of time, including security updates. The consumer must be notified when new updates becomes available. The length of time for which updates must be provided for digital products supplied on an ongoing basis and in all other cases depends on the reasonable expectation of the consumer. As a result, companies may be required to provide updates for much longer than was previously the case. The handling of security gaps may also be significantly altered by the new provisions.

Defect rights expire after two years

If a defect exists, the consumer would have a right to subsequent performance in accordance with § 327i of the Civil Code. If other requirements are met, the consumer may also be entitled to termination of the contract, reduction in compensation or damage claims. Like most "conventional defects," these claims would expire after two years pursuant to § 327j of the Civil Code. For products supplied on an ongoing basis, the limitation period for defect claims would begin at the end of the supply period; otherwise, the period would begin once the product is supplied. The draft statute also contains new provisions with regard to reversal of the burden of proof for the presence of a defect. In accordance with § 327k(1) of the Civil Code, there would be a general presumption that products which prove to be defective within one year of the time they were supplied were already defective at the time they were supplied.

Impact of data privacy actions

§ 327q(1) of the Civil Code would clarify that data privacy statements by the consumer and the exercise of rights by data subjects, such as the right of access in accordance with Article 15 GDPR, generally have no impact on the validity of the contract after it is concluded. However, § 327q(2) of the Civil Code would provide that the supplier may terminate the contract without notice if the user revokes consent or objects to further processing of his or her personal data. But this is only the case if, "taking into account the scope of data processing which remains allowable and with due regard for the interests of both parties, the supplier cannot be reasonably expected to continue the contractual relationship through the agreed-upon expiration date or until the expiration of a statutory or contractual notice period for termination." Damage claims for the product supplier due to the exercise of data privacy rights would, however, be excluded in accordance with § 327q(3) of the Civil Code.

Possible recourse claims in the supply chain

§ 327u of the Civil Code would enable recourse claims in the supply chain, like § 445a of the Civil Code. In accordance with In accordance with § 327u(1) of the Civil Code, companies would be able to seek reimbursement from their distribution partners if the latter were responsible for the failure to supply a product. In accordance with § 327u(2) of the Civil Code, such claims would expire within 6 months. Pursuant to § 327u(4) of the Civil Code, the distribution partner would in this case be unable to invoke agreements which deviate from this arrangement to the detriment of the product supplier and circumvention of this provision would be declared impermissible. As a result, even companies which do not supply digital products to consumers and merely operate as distribution partners may be indirectly affected by the new provisions and should therefore acquaint themselves with them.

New types of contracts

A whole series of new provisions will be incorporated into the Civil Code once the Digital Content Directive is implemented into German law. For example, § 516a of the Civil Code would define rules for consumer contracts relating to the donation of digital products and § 548a of the Civil Code would address the lease of digital products. In addition, § 650(2) of the Civil Code would create a "consumer contract for the manufacture of digital products." Such a contract would exist, alongside contracts for works and services, if one of the parties owes a specific result, such as the production of digital content.

Much to do for affected companies

Given the considerable scale of the new provisions, companies have a lot of work to do. To successfully implement the new rules, it is indispensable for companies to consider which requirements the new provisions impose for each of their products, and which processes will have to be changed. As part of this process, it may also be necessary and sensible to examine and make changes to existing contracts and/or model contracts. Companies should also initiate a dialogue with their distribution partners about the new provisions and the associated requirements. Given the scale of the new provisions, companies should take the necessary steps without delay. Although the Ministry has called upon professional groups and industry associations to comment on the published draft (PDF), it is in any case to be expected that the Digital Content Directive will be implemented into German law. While the details could still change, the basic framework of the new provisions has long since been firm.

[November 2020]