CJEU renders landmark decision on private copying levies
The Directive 2001/29 holds a number of exceptions and limitations regarding the position of copyright holders. Those are to be seen in the light of the overall aim of the European legislator to pave the way for a so-called “Information Society” with adequate access to copyright-protected works. One of the explicitly permitted acts is the copying of works for private, non-commercial purposes. We speak of the “Private Copying Exception”. A key element of this exception is the requirement of the right holder to receive fair compensation for the use made of his work. Such compensation is only dispensable under circumstances where the prejudice to the right holder is minimal. The compensation is provided for by levies, collected mainly though collecting societies and – depending on the relevant Member State – imposed on blank storage media (e.g. DVDs) and technical equipment (e.g. printers).
Copydan, a Danish collecting society, demanded payment of levies from Nokia Danmark A/S for detachable memory cards as contained in some of Nokia’s mobile phones. Those memory cards allow users to store copyrighted works such as music and video files, as well as personal data. Thus, they may be called “multifunctional” media carriers. Nokia disputed its liability for payment of copyright levies. Eventually, the Danish Court (Østre Landsret) stayed the main proceedings and referred a number of questions for preliminary decision to the CJEU.
The CJEU takes the view that, in principle, it is irrelevant whether a medium is unifunctional or multifunctional. Copyright levies may be imposed, if at least one function allows for private copying, even if this function is of ancillary nature. However, the primary function of the carrier is to be taken into account whilst assessing what might be a fair compensation. Member States may further distinguish between storage media which is detachable (like in Nokia’s case) and media which is non-detachably integrated in a device. However, the differentiation must be reasonably justified.
A particular problem exists where storage media is sold to business customers without a clear picture of whether those are sold on to private individuals only or also to business customers. The latter do not fall under the private copying exemption and hence the compensation requirement does not apply (see: CJEU, Case Ref.: C‑467/08). Manufacturers and importers may also be required to pay copyright levies. However, this is only justified if practical difficulties ask for such regulation. Those may arise from, for instance, the impossibility of or at least practical severity associated with identifying the final users of the relevant medium. Further, adequate exemption schemes must be in place allowing manufacturers and importers to prove that Article 5(2)(b) of Directive 2001/29 and thereby the private copying exception does not apply to their sales.
Furthermore, with regard to the requirement of fair compensation, it is irrelevant whether the right holder has given his explicit consent for private copying. Such consent is without effect on the compensation requirement (see also: CJEU, Case Ref.: C‑457/11). Also, the implementation of technical protection measures to prevent unauthorized copying is without effect in this respect. Such measures may nevertheless be taken into consideration by the Member States when deciding on the actual amount of compensation being due.
Compensation is, however, dispensable, where the prejudice caused to the right holder is minimal. In deciding this level, it is at the Member States’ discretion where to set the threshold, as long as it is applied in a manner consistent with the principle of equal treatment. The CJEU further emphasizes that no compensation has to be paid for copies of works made from unlawful sources (see CJEU, Case Ref.: C-435/12).
The current ruling shines light on a number of truly important questions relating to private copyright levies. It is now for the Member States to revisit their national implementation of Article 5(2)(b) of Directive 2001/29 and to verify whether the CJEU’s guidance is adequately reflected. The key message is that multifunctionality does not free the manufacturer or importer from the obligation to pay copyright levies. However, particularly in cases where sales remain in the business world, Member States must provide for opt-out solutions allowing for reasonable differentiation. In the end, it is the manufacturer’s or importer’s obligation to provide the evidence in order to take advantage of an exemption. However, they will surely appreciate that such exemptions are a mandatory requirement that needs to be implemented in national law if not yet available. In conclusion, the system is inevitably complex; however, it must be so in order to safeguard a just outcome in each individual matter.