Mediator’s Report On EU Copyright Levies Recommends Major Changes

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Copies made by end-users for private purposes in the context of a service previously licensed by copyright holders don’t cause harm that should be subject to private copying levies on reproduction devices such as MP3 players, blank DVDs and photocopiers, a European Commission-appointed mediator said in recommendations published on 31 January. António Vitorino suggested major changes to Europe’s copy levy system to align it with the digital world, but said at a press briefing that “there is still some way to go” to bring stakeholder positions together.

Vitorino’s report on mediation on private copying and reprography levies brought cautious approval from consumers and reproduction rights organisations which, nevertheless, said they have reservations.

The report is available here [pdf].

[Update:] European rightsholders said on 6 February that they “strongly disagree” with Vitorino’s main recommendations. If accepted by the EC, they will harm consumers; damage the interests of rights owners, and make licensing arrangements more complex, said AEPO-ARTIS, the Association of European Performers’ Organisations; EUROCOPYA, the European Federation of Joint Management Societies of Producers for Private Audiovisual Copying; GESAC, the European Grouping of Societies of Authors and Composers; and SAA, the Society of Audiovisual Authors. “Our main concern is that licensing is seen as a way of eradicating private copyihg levies,” they said. The organisations also panned the ideas of making retailers liable for the levies and leaving it to govenrments to decide which products should be subject to the assessments. [end update]

Vitorino was appointed to mediate the fractious debate about copy levies after a 24 May 2011 European Commission (EC) communication on “A Single Market for Intellectual Property Rights Boosting creativity and innovation to provide economic growth, high quality and first class products and services in Europe.”

“Most stakeholders were very constructive during the mediation process,” he wrote, but “interests at stake are conflicting, and often prevented stakeholders from exploring common ground.” While players weren’t able to come closer on the most contentious issues, Vitorino said he hopes to advance the discussion as much as possible. Some issue may be settled on the basis of case law decided by the European Court of Justice (ECJ), he said.

“Embrace New Direct Licensing Opportunities”

To favour the development of new and innovative business models in the digital single market based on licensing agreements between service providers and rightsholders, Vitorino recommended that levies not be set on copies made by end-users for private purposes in the context of services that have been licensed by rightsholders, because there’s no harm requiring remuneration.

Most new digital services offer a comprehensive package of services to consumers that includes copying possibilities that go far beyond copy and other exceptions, he said. These new services usually involve a service provider acquiring a licence from the rights owner that covers all copyright-relevant acts involved in the provision of the service, including reproduction of copyright-protected content by the end-user, he said.

A user who pays for the download of a song expects that payment to cover not only the first download onto her personal computer but also subsequent copying onto mobile devices, Vitorino said. Similarly, a person who subscribes to a music streaming service is usually paying for the online streaming to his devices(s) as well as the possibly to create playlists that can be listened to offline, he said.

The levy system on copying devices was set up in the offline environment to give rights owners the possibility to be compensated for copies made by end-users, Vitorino wrote. Things are different in the digital world, he said, adding, “I am convinced that it would be best for rightsholders to fully embrace the new direct licensing opportunities” there.

To impose levies on devices as well as licensing fees would “pave the way for double payments,” he said. “Consumers cannot be expected to show understanding for such double payments.” That conclusion appears to be in line with past and upcoming rulings by the EU high court, he said.

Major Changes to Levy System Broached

Vitorino recommended significant changes to simplify the levy system and ensure the free movement of goods and services in Europe’s internal market.

He wants levies in cross-border transactions to be collected in the EU member state in which the final customer resides, not, as is true now in some countries, where the manufacturer or importer is located. Responsibility for paying the tax should shift from manufacturers and importers to retailers, he said, and the system should be simplified. Reproduction device makers and importers should have to tell collecting societies about transactions concerning goods subject to a levy, or, alternatively, there should be clear, predictable “ex ante” (in advance) exemption regimes. In the area of reprography, there should be more emphasis on operator levies than hardware-based fees.

The report also recommended that consumers be given more information about what fees are imposed on devices they buy. It also said the process of setting the levies should be made more coherent by defining “harm” to rightsholders uniformly cross the EU as the value consumers attach to the additional copies in question (lost profit); and by setting up a procedural framework that reduces complexity, guarantees objectivity and ensures the observance of strict time-limits in setting levies.

Consumers Mostly Pleased But Wary

Vitorino’s “recognition that copyright levies sit uneasily, if at all, with the modern digital environment is reassuring,” said European Consumers’ Organization (BEUC) Communications Officer John Phelan. A basic tenet of levies is consumers pay twice, first for the content and then for the device itself, and that’s unjustifiable, he said.

But the recommendations don’t touch up the “key issue of the purpose of tech devices,” Phelan said. Levies are currently derived from the capacity of the device, not the actual use. As more and more multi-function devices hit the market, such as cameras that can record MP3 or mobiles which download, “it becomes all the more prudent only to charge levies for the media used,” he said. Such devices offer a range of functions unrelated to private copying and should be gauged on their primary usage, he said.

“Outstanding Questions Need Clarification”

Vitorino’s intent to advance future discussions on levies, and his acknowledgement that the levy system is here to stay for the immediate future, are welcome, said International Federation of Reproduction Rights Organisations (FRRO) CEO Olav Stokkmo. It’s also helpful that the report explicitly noted that alternative forms of compensation touted by some stakeholder aren’t sufficiently thought out, he said. Stokkmo said he agrees with the “country of destination” approach to collecting levies across borders, and that the recommendations leave it to individual governments to decide which products should be covered.

But some parts of the report raise reservations and questions, Stokkmo said. IFRRO opposes making retailers responsible for paying the levy, he said. And even if the argument for shifting liability holds for private copying, his proposal to extend it to reprography “seems to be based mainly on a desire for a neatly uniform system,” he said.

While there are positive elements in the recommendations, “there are outstanding questions that need clarification,” Stokkmo said. IFRRO wants further explanation before committing itself, he added.

Asked at Thursday’s press briefing whether the EC will now propose harmonizing levies, Internal Market and Services Commissioner Michel Barnier said his first move will be to send the recommendation to EU governments for formal opinions. He also promised to make sure that the recommendations are taken into account in any further steps on private copying and reprography levies, in particular the ongoing review of the EU copyright system.

There’s an obvious need for legislation updating and harmonising the current levy system, said Phelan. Allowing the patchwork of national laws on copyright levies to persist is a “clear hindrance” to a true digital single market. Until that is addressed, consumers will continue to pay the unclear price, he added.

Dugie Standeford may be reached at info@ip-watch.ch.

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