Copyright holders enjoy certain exclusive rights over their creations to ensure that they control how their creation can be used and communicated to the public, and receive remuneration for it.
Copyright, however, is not absolute and certain acts in relation to a copyrighted work are permitted without the right holder’s permission.
The EU directive on copyright and related rights in the information society (the InfoSoc directive) protects the reproduction rights of authors, performers and producers in relation to their audio, visual and audiovisual material. Yet the directive allows private copying, according to which a natural person is permitted to make copies of lawfully acquired copyright works for non-commercial use. This exception is provided subject to the condition that the rightholders are adequately compensated for the use made of their protected works.
Member states have a wide discretion to set the minimum threshold when a levy is payable
This compensation typically takes the form of a private copying levy, charged on blank media, such as CDs, DVDs or MP3 players, on to which protected material is copied and stored. That levy is then distributed through collection societies to the right holders, thus ensuring an appropriate reward for the use of their protected work. It is also worth noting, however, that the InfoSoc directive provides that where there is minimal or de minimis harm, no fair compensation is required.
Although the European Commission organised several consultations over the past decade in an attempt to streamline copyright levies in Europe, the system remains largely dysfunctional, with legal disputes cropping up both at national level and EU level.
In a landmark ruling delivered recently by the Court of Justice of the European Union (CJEU), answers have been given to some of the more debated issues surrounding copyright levies in the EU, especially in regard to levies on data storage media. At the heart of the dispute that made its way to the CJEU were mobile phones sold by Nokia, a Finland-based company and Copydan, a Danish collecting society.
Many mobile phones, including some manufactured and distributed by Nokia, use detachable memory card to supplement the phone’s internal memory on which data can be stored. The data stored on these memory cards can vary from contact details and photos to copyrighted audiovisual works, such as music or films, which can be downloaded from online shops or from storage media.
Copydan demanded that Nokia pay the Danish private copy levy in respect of the reproduction of content on mobile phone memory cards imported by Nokia, arguing that these memory cards are multifunctional media with the capacity to be used for private copying. Nokia contended that no compensation should be payable owing to the minimal harm that private copying on memory cards can cause.
The Danish High Court made a reference to the Luxembourg Court for a preliminary ruling regarding the imposition of private copying levies on mobile phone memory cards.
The Court held that multifunctionality does not exonerate an importer or manufacturer from the payment of levies: copyright levies may be imposed if at least one function of the device allows for private copying, even if this function is of ancillary nature. When imposing the levy, the Court considered that the levy charge must be linked to the harm caused to the right holder through copies made for private use, and the primary function of the memory card is to be taken into account when assessing what might be a fair compensation. Whether or not right holders have used technological protections measures does not affect the obligation to pay compensation as such. However, it is possible to take this into account when deciding on the level of compensation.
The CJEU confirmed that member states have a wide discretion to set the minimum threshold when a levy is payable, provided this is applied in a manner consistent with the principle of equal treatment. Compensation is, however, dispensable, where the prejudice caused to the right holder is minimal.
The CJEU further emphasised that no compensation is payable for copies of works made from unlawful sources, that is works that are made available to the public without the right holder’s consent.
In summary, the Court has now decided that, as a main rule, private copying levies must be paid for all sales of devices with a digital reproduction function, including memory cards.
jgrech@demarcoassociates.com
Josette Grech is legal adviser on EU law at Guido de Marco & Associates.