We have previously reported on CJEU rulings regarding private copying levies (see here). This week AG Wahl provided his opinion on the legitimacy of the Italian private copying levy system in proceedings between Nokia, HP, Samsung, Sony, Dell (amongst others) and SIAE (an Italian collecting society).
Article 5(2)(b) of the InfoSoc Directive (2001/29/EC) provides for an exception to the exclusive "reproduction right" of rights-holders in respect of private copying provided that rights-holders are compensated fairly for the use of the copyright material.
In Copydan, the CJEU held that a private copying levy cannot be applied where it can be established that the person liable to pay compensation has supplied devices and media to persons other than natural persons for purposes unrelated to private copying. The supply of equipment, devices and media to business customers falls outside the scope of Article 5(2)(b).
Private copying is allowed in Italy (cf the UK) and compensation takes the form of a private copying levy for equipment, devices and media suitable for copying protected works and other material. This levy applies to mobile phones, computers and other equipment, even though these devices are not designed specifically for the reproduction, recording and storage of content. There is no ex ante (before the event) exemption to the levy for any equipment acquired for purposes unrelated to private copying and a request for reimbursement of a levy may only be made by the end user and is subject to private negotiation with SIAE.
1. The need for an ex ante exemption from the private copying levy
At the outset the AG noted that the concept of "fair compensation" is based on the idea that private copying harms the copyright holder. A necessary link is presumed to exist between the compensation and the (potential) harm suffered by the rights-holder as a result of private copying. No such link exists where the devices and media are intended for use clearly unrelated to private copying. Accordingly, in the AG's view, Art 5(2)(b) precludes a system, such as the Italian system, under which a private copying levy is charged on equipment devices and media acquired for purposes clearly unrelated to private copying and an exemption is left to private negotiation between the collecting society and person obliged to pay the compensation.
2. The ex post (after the event) reimbursement of the private copying levy
The AG highlighted that Member States enjoy considerable discretion in devising the details of a system for a private copying levy. Under Amazon, Member States may take as a starting point a rebuttable presumption that the devices and media are intended for private use if: (i) practical difficulties exist in determining whether the final use of the media is private or professional (e.g. because the manufacturers employ intermediary retailers to distribute their products, as in Copydan); and (ii) the presumption only relates to products marketed to natural persons.
No difficulties exist in determining the final use of media where equipment is sold directly to business customers or public entities. Accordingly, a levy can be applied indiscriminately to equipment, devices and media suitable for private copying in the context of a retail sale ONLY IF an effective ex post system of reimbursement is in place for unduly paid levies. In the AG's view, the Italian system of reimbursement is inadequate because:
- Its implementation is left to SIAE's discretion;
- Natural persons are excluded, which doesn't take into account self-employed people who may copy for business purposes;
- The reimbursement is subject to additional conditions (e.g. codes of conduct); and
- The procedure is based on the instructions on reimbursement given by SIAE, which SIAE can freely modify.
Overall, the AG concluded that the Italian system is ineffective because, if the levy is charged for professional use through a retailer, it must be genuinely possible for the final user to obtain reimbursement. That possibility must be actual and real to ensure that the compensation paid does not exceed what is necessary to offset the harm potentially caused by private copying. Accordingly, he advised the CJEU to rule that, where there is no system of ex ante exemption for equipment supplied for non-private purposes, Article 5(2) doesn’t allow a system under which reimbursement can only be requested by the end user.
The importance of the case can be seen by the number of observations submitted by major manufacturers of and retailers of PCs, CDs, recording devices, mobile phones and cameras. Written submissions were submitted by HP, Nokia, Samsung, Sony, Telecom Italia and the Italian Government and Commission. In addition, oral arguments were presented by Dell and the French Government.
Unlike the UK, most EU countries have a private copying levy system and questions of how the levies should be applied are hotly debated. This guidance will therefore be welcomed and rights-holders will be pleased that the AG wants to exclude the application of the levy to natural or legal persons obviously not engaging in acts of private copying. The AG also appears to have agreed with their criticism of the powers and discretion afforded to the collecting society in relation to the levy.
We wait to see if the CJEU follows the AG's opinion.