The EU directive on copyright and related rights in the information society protects the reproduction rights of authors, performers and producers in relation to their audio, visual and audio-visual material.
Yet the directive allows private copying as long as member states ensure that rightholders are adequately compensated for the use made of their protected works.
This compensation typically takes the form of a levy charged on media, such as blank CDs or MP3 players, onto which protected material is copied. That levy is then distributed through collection societies to the rightholders, thus ensuring an appropriate reward for the use of their protected work.
In a recent judgement, the European Court of Justice ruled that this levy is compatible with EU copyright law when charged on goods sold to private individuals, holding that it can reasonably be assumed those goods will be used for copying. On the other hand, the ECJ held that businesses do not have to pay this levy when purchasing copy-enabling media on the grounds that no such assumption can be made.
In laying down such a distinction between private and professional use, the ECJ argued that natural persons are presumed to benefit fully from any equipment they purchase including, therefore, taking full advantage of the functions associated with that equipment. In fact, in imposing such a levy, it would be unnecessary to show that the private individuals have made private copies with the help of that equipment and have therefore actually caused harm to the author of the protected work.
In exempting businesses from forking out such a levy, the court maintained that when businesses buy media there could be no assumption that direct harm or the possibility of harm could be caused to the author of works.
This ECJ ruling was brought about by a claim made by Spanish rights management agency against Padawan, a distributor of discs, devices and other electronic storage media, for unpaid copyright levies in the amount of €16 759.25 in respect of storage media marketed by it between September 2002 and September 2004.
Padawan argued that the Spanish law, which applied indiscriminately the levy on purchases of media by businesses and individuals, was incompatible with EU law. Padawan lost the case and appealed. The appeals court made a preliminary reference to the ECJ for guidance.
The ECJ ruling was preceded, as usual, by the opinion of the Advocate General. The Advocate General opined that a link is necessary between the application of the levy intended to finance fair compensation with respect to digital reproduction equipment, devices and media and the deemed use of them for the purposes of private copying.
Broadly accepting the line of thought of the Advocate General’s opinion, the ECJ held that private individuals are likely to use material to copy and that a levy was a reasonable mechanism for getting those individuals to pay for the harm caused to authors. It held however that such a levy cannot be applied indiscriminately and could not be made to apply to other sales.
As a consequence of this decision, levies imposed by member states will only affect equipment, devices and digital reproduction supports that are capable of and will be used for private copying rather than all products that have the capacity to do so. Professionals, companies and public institutions are thus directly excluded from the obligation to pay any such royalties.
Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.