EU High Court Upholds Private Copy Levies On First Sale Of Blank Media

Setting general private copying levies on the first sale of blank media such as CDs and DVDs does not necessarily breach EU law, Europe’s highest court said on 11 July. The law does not allow the levy to be collected where the intended use of the recording media clearly isn’t for making private copies. But it doesn’t bar a general levy system that includes the option of reimbursement where the intended use is not private copying, the European Court of Justice (ECJ) said.

The case, Amazon.com International Sales Inc. and Others v Austro-Mechana Gesellschaft zur Wahrnehmung mechanisch-musikalischer Urheberrechte Gesellschaft mbH, involves a claim by Austrian copyright collecting society Austro-Mechana for payment of the so-called “blank cassette levy” for recording media sold in Austria from 2002 to 2004, the ECJ said. The society claimed Amazon owed it €1,856,275 euros for the first half of 2004, and sought a court order requiring the internet retail giant to provide the accounting data needed to support its claim for the rest of the period.

The Commercial Court in Vienna ordered Amazon to produce the requested accounting data, which was upheld on appeal, the ECJ said. Amazon, however, challenged the order in the Supreme Court on the ground that Austria’s blank cassette levy violates European Union law. That court asked the ECJ to interpret the relevant provisions of EU law.

The ruling is available here.

General Levies Legal if Reimbursement Possible

The ECJ pointed out that EU countries may grant an exception to copyright law for the making of private copies, provided that rightsholders receive “fair compensation” for the unauthorised reproduction of their protected works. In Austria, that fair compensation takes the form of a private copying levy imposed on the original, commercial placing into the market of blank CDs, DVDs, MP2 players, memory cards and other reproduction media, the court said.

EU law bars private copying levies in cases where the intended use of the reproduction media is clearly for non-private uses, the ECJ said. However, under certain conditions the law allows such a general levy if there is the possibility that any levy paid can be reimbursed where the intended use is not for private copies, it said. The Austrian courts must decide whether a system that finances fair compensation that way raises practical difficulties and whether the right to reimbursement is effective and doesn’t make repayment of levies too difficult, it said.

There may be a rebuttable presumption that people are using recording media for private purposes if two conditions are met, the ECJ said. Practical problems in determining whether the media is being used for private purposes must warrant establishment of such a presumption; and the presumption must not result in private copy levies being set where those media are clearly used for non-private purposes.

The EU high court also ruled that the fact that half of the income from blank media is paid to social and cultural establishments set up for rights owner’s benefit, and not to copyright owners themselves, doesn’t exclude the right to fair compensation. It also said that levies on blank media may be imposed even if a similar levy has already been paid in another EU member state.

Industry Reaction

European authors, producers and editors of musical, audiovisual and written works “rejoiced” in the decision, saying it upheld the right of governments to fund cultural actions out of levy monies. The ruling validates the system put in place in France in 1985, which allows 25 percent of the sums collected for private copying to be dedicated to cultural uses such as helping artists and financing festivals, 11 rightsholder groups said in a joint statement. The ruling also pushes back against the Vitorino report, which they said largely addresses concerns by Apple and other equipment importers to dismantle the private copy system.

Meanwhile, a digital technology industry source told Intellectual Property Watch that the decision is important for the ongoing debate on private copy levies but doesn’t go “in the right direction.”

The judgment is off-track for several reasons, the industry source said. It confirms that part of the money collected through private copy levies can be used indirectly to fund cultural activities, which industry believes has nothing to do with compensating for acts of private copying, and which amounts to a form of subsidy to the cultural sectors.

Not only does 50 percent of the money collected in Austria not go to artists themselves in the form of remuneration, but the system leaves collecting societies free to fund whatever activities they want, with no real control in many EU countries, the source said. This indirect use of the levies is used in several member states to pay collecting societies’ legal and lobbying fees, or for social benefits for society members, he said.

Another concern is that even though the ECJ said that reimbursement for professional users of the media must be effective and easier to obtain in practice, “this judgment will help keep an absurd system in place” in which professional will continue to have to pay private copying levies they shouldn’t pay in the first place. The source pointed to the 21 October 2010 ECJ decision in Padawan SL v Sociedad General de Autories y Editores, which held that application of the private copying levy to digital reproduction equipment, devices and media not made available to private users and clearly reserved for uses other than private copying was incompatible with EU law.

Most professional users of blank media don’t know they can claim reimbursement, and those who try rarely succeed because the scheme is so complicated, the industry source said. A growing number of companies which need to buy devices or products subject to copyright levies now choose to buy them in European countries that don’t have levy systems, because the products are cheaper and getting reimbursed in their own countries is very difficult, the source said.

ECJ Ruling “Doesn’t Follow” Vitorino Report Logic?

In his 31 January 2013 report, European Commission-appointed mediator António Vitorino recommended several major changes to the copy levy system to align it to the digital age.

The report also sought more transparency and efficiency in the whole system, the industry source said. The ECJ judgment “doesn’t follow this logic” because European consumers are still going to pay for a “very opaque system” of cultural funding which has no relation to private copying, he said.

Among other things, Vitorino recommended that the liability to pay levies be shifted to retailers, who are in a better position to judge who is a professional or a private user, or that there be a clear “ex ante” (in advance) exemption from the levies for professionals. These are both “forward-looking, common-sense recommendations,” the source said.