French Industry Attacks Private Copy Fees As Levy Debate Grows

By Dugie Standeford for Intellectual Property Watch
Makers and distributors of digital storage products and audiovisual media last week urged France’s highest administrative court to kill private copy levies on technologies for transferring data such as USB keys, external hard disks and memory cards.

The challenges, filed 9 November in the Conseil d’Etat by e-merchant Rue du Commerce and the Syndicat des Industries de Matériels Audiovisuels Electroniques (SIMAVELEC), contend that the lack of harmonised levies among European Union countries violates EU law and hurts online sellers.

The legal action came one day after the European Grouping of Societies of Authors and Composers (GESAC) argued that non-payment of levies should be made a criminal offence.

Legal arguments

Rue du Commerce’s challenge alleges, first, that the Private Copy Commission, which imposed the levies, is unrepresentative, favouring copyright owners to the detriment of consumers and distributors of audiovisual media products.

Rue du Commerce also argues that the levy rates are not harmonised in Europe, making them illegal under the European Community concept of “fair compensation of harm.” The damage to rights-holders from consumers making private copies is the same whether someone burns a CD in Brussels, Munich, Strasbourg or Madrid, the source said, but the levy rate varies widely from country to country. In addition, while artists’ compensation is constantly recalculated, levies on blank CDs and DVDs never change, Rue du Commerce said.

SIMAVELEC believes that levies amount at least in part to a tax because 25 percent of the amount collected finances activities which should be supported by the state budget, the source said. Industry also argues that levy rates are overestimated because illegal downloading is taken into account, and that collecting societies, which receive payment for media used for counterfeiting as well as for authorised private copies, are benefiting from a criminal activity, the source said.

France’s levy rate is so much higher than in other EU countries that French consumers are turning to foreign websites for their blank audiovisual media, prompting some French e-tailers to stop selling those types of products, Fédération E-Commerce et Vente à Distance Delegate General Marc Lolivier wrote in a November newsletter.

The Conseil d’Etat cases join a growing list of challenges to the levy system.

Rue du Commerce is appealing a reversal by the Paris Appeals Court of a decision ordering foreign websites to notify consumers that they must pay levies and to stop advertising “unbeatable prices,” the knowledgeable source said. The case is now in the commercial division of the Cour de Cassation, the country’s highest civil law court, and should be argued in January, the source said.

Rue du Commerce has asked the court to seek a preliminary ruling from the European Court of Justice on whether France’s intellectual property code complies with EU treaty provisions requiring free circulation of goods.

Despite its reversal of the lower court order, the appeals court recognised that private copy levies distort the e-commerce market and that the problem cannot be solved by French consumers and competition rules alone, the source said.

Imation Europe, which sells blank optical media, has taken a different tack. On 31 October, it filed a complaint with the European Commission’s Trade and Industry Directorate General charging that the Dutch government’s levy system harms EU interstate trade and is unfair and “dysfunctional.”

The negative effect of levies on cross-border trade could have been avoided if member states had properly implemented the Copyright Directive, Imation Director of Legal Affairs for Europe Joe Gote said in a letter to the European Commission. He urged it to jump-start talks on levy reform stalled last year by Commission President Jose Manuel Barroso.

GESAC Recommendations

GESAC, meanwhile, welcomed an 8 November economic report by ECONLAW finding that private copy remuneration systems (PCRS) promote creative industries, benefit consumers and boost the development of the information and communication technology and consumer electronics sectors.

The study concluded that digital rights management is a “very poor substitute” for PCRS, in part because it runs against consumer interest, GESAC said. PCRS amounts to only around five percent of the sales of consumer electronics products, hardly making them unprofitable even if manufacturers choose not to pass the cost on to buyers, the study said.

Nevertheless, GESAC proposed that the system be streamlined.

One of the main problems is that operators liable for payment of private copy remuneration constantly try to circumvent it, GESAC said. Among other changes, EU countries should consider non-payment of the fee as criminal offence subject to penalties with ” a true dissuasive effect,” it said. Moreover, in addition to makers and importers of items subject to fees, any outlet marketing such products – including trade shows, retailers and Internet resellers – should be held liable for non-payment.

GESAC also proposed that member states require importers to declare to the appropriate private copy remuneration manager all products that have crossed the national border and are subject to payment of fees. Managers should have access to value-added tax information related to the cross-border movement and sales of products subject to the fees, and to audit those who owe them, the organisation said.

Member states should ensure that distance sellers, not consumers, are subject to the payment of private copying fees applicable in the country where the customer is located, GESAC said. EU countries should take steps to keep intermediary service providers from granting access to Internet sites where such products are being sold without payment of fees due in the country where a customer is located, GESAC said.

The report talks about remuneration for private copying but never mentions fair compensation, the principle on which, under the Copyright Directive, any levy system must be based, Gote told Intellectual Property Watch. Rights-holders are entitled to remuneration, or royalties, for use of their works, he said, but only to fair compensation for any loss of revenue arising from private copies.

Asked if the GESAC proposals could spark renewed attempts to reform Europe’s levy system, a European Commission spokeswoman said there is “nothing new at the moment.”

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