By Alicia Martin-Santos and Dugie Standeford for Intellectual Property Watch
European Union countries are imposing copyright levies on a whole new range of digital media, including digital music players, USB flash sticks, hard drives and, potentially, mobile phones and wireless connections, as efforts to harmonise Europe’s heterogeneous copyright landscape continue to languish.

Copyright levies are imposed on blank material (such as blank CDs, DVDs or paper) or digital recording media (used to store digital content) in order to compensate authors for end-users’ private copying. They first appeared in the 1960s and were charged on paper, photocopying equipment and tapes. New recording media, such as mp3 players (like iPods) or even mobile phones are being examined for potential levying.

Authors’ societies have found in levies a way to build up revenues in the current context of growing piracy. Industry groups, meanwhile, tend to favour the use of digital rights management (DRM), which tracks only the actual use of the copyrighted material. The 2001 EU Copyright Directive specifies that they should take DRM into account when levies are calculated, but that has not happened, said Mark MacGann, director general of the European Information, Communications and Consumer Electronics Technology Industry Associations.

Levies are imposed regardless of use of the storage device, even if that use is unrelated to the copyrighted material as in the case of memory cards or USB sticks used to store private photographs or documents. Nevertheless, DRM as an alternative has been considered unfit by some recording companies that have dismissed it after some years’ trial.

Last December, European Commission President Jose Manuel Barroso pulled back a proposed recommendation by Internal Market Commissioner Charlie McCreevy reforming levies, saying it needed more thought. He was accused of bowing to pressure from the French government, which argued the levies were an important income source for creators (IPW, Copyright Policy, 16 January 2007).

Industry groups representing the consumer electronics, telecommunications, information technology and other industry sectors had lobbied for the recommendation, saying the difference in the rates or nature of the levies hinders the free flow of goods in the common market. Ireland, Luxembourg and the United Kingdom, where private copying is not permitted, do not impose levies at all.

The industry organisations, which formed the Copyright Levies Reform Alliance, sent a strongly worded letter to Barroso last February to which he has not responded, according to an alliance member. Industry is now wondering what’s next, he said. The Commission’s own impact assessment of the reform proposal showed that a problem exists and it will not go away just because it is ignored, MacGann said.

Countries Extending Levies

In the meantime, many European countries are extending levies to new devices with the support of authors’ societies and the opposition of industry and consumer groups.

In France, consumers were to pay extra for USB sticks, external hard drives and memory cards, such as those in digital cameras, from the 1st of October, according to the law. The Albis Commission, in charge of revision of private copy remuneration, may be studying the possibility of extending them to mobile phones.

The scenario is similar in Spain, where according to reports the government and the Spanish Society of Authors (SGAE) are seeking an agreement to extend levies to mobile phones and digital music players that was expected to be introduced in the next few weeks. The possibility of levies on mobile phones risks infuriating consumers, who generally pay for downloading music or ringtones into their phones, and the mobile phone industry, which is already seen as heavily taxed. The Chamber of Commerce of Madrid said it feared the rise in mobile phone prices will push consumers to buy in other countries, namely Portugal, and it estimated losses of 35 million euros.

In Germany, the Copyright Law was reformed last July in order to adapt to new technologies (IPW, Copyright Policy, 6 July 2007). With regard to levies, the government has proposed that stakeholders, namely authors’ societies and manufacturers of blank media, negotiate fixed rates which must never exceed five percent. Authors fear percentage taxation will be unfavourable for them as computer prices decrease.

Proposals by the Italian government to extend levies to other media were strongly opposed by consumers and were not adopted, said Marco Pierani of Altroconsumo. Italians now pay fees of 0.29 euros on CDs and 0.58 euros on 120-minute DVDs, and Altroconsumo is campaigning for the complete elimination of levies “since they cannot coexist with DRM in our point of view,” he said.

One key market fighting the trend is the United Kingdom. There, an independent Treasury Department study on IP, as well as a parliamentary report, and the government response to it all rejected the idea of imposing levies on copy-capable equipment. Consumers should not be forced to pay more for items they may never use for copying copyrighted materials, the government said.

Is Levy Reform Possible?

It is unclear whether the proposed EU reform package is dead or awaiting a more favourable political climate, one industry source said. Many in the Commission believe the issue is so controversial that it will not be resurrected until the next Commission is seated in 2009, the source said. There is a sense that, despite industry complaints, companies can afford levies so there is no political need to expedite a solution, the source added.

The issue is dead in the Commission’s Internal Market directorate since McCreevy’s recommendation failed, said Cornelia Kutterer, senior legal adviser to the European Consumers’ Organisation. However, she noted, the Commission is reviewing the implementation of the Copyright Directive. Whether an upcoming communication from the Information Society and Media directorate on online content will address issues such as private copying or DRM is uncertain, she said.

Collecting societies are powerful politically at the national and EU level and would lobby hard against any renewal of levy reform, the industry source said. However, France’s new business-friendly approach and the fact that it will assume the EU presidency next year, could see the main obstacle to change actually brokering an EU solution to the problem, the source added.

In the meantime, industry is focusing on consumer education, promoting the theory that levies make products more expensive, the industry source said. In some countries, such as France, consumers are becoming very vocal, the source said.

Dugie Standeford and Alicia Martin-Santos may be reached at info@ip-watch.ch.