Why Copydan may become a landmark case for the future functioning of copyright levies in Europe

Milly can't wait to receive her
early Valentines Day gift:
the Svensson judgment

Yesterday this Kat discovered (thanks to Twitter, in particular @cyberleagle) that the Court of Justice of the European Union (CJEU) will issue its judgment in Case C-466/12 Svensson [here, on which see independent opinions by the European Copyright Society (here and here) and ALAI (here)] on 13 February 2014 [this is probably because, muses Merpel, the CJEU intends it as a love gift for EU copyright enthusiasts].

Amidst excitement [or concern, depending on what your views are] for CJEU activism in the area of copyright, Svensson is certainly not the only case on which a decision is keenly awaited.

Amongst others, lovers of all things copyright levies are probably looking forward to the decision in Case C-463/12 Copydan Båndkopi [on which see 1709 Blog post here], a reference for a preliminary ruling from apparent copyright-loving Member State Denmark, seeking clarification as to copyright levies and their calculation, including consideration of technological protection measures [on TPMs, see the recent decision in Case C-355/12 Nintendo v PC Box: here and here].

Today the IPKat is delighted to host a super-sharp and thorough analysis of the Copydan case and its potential implications by Katfriend and IE Law School Professor Javier Ramirez. Although incidentally Javier is currently also Vice President for Regulatory Affairs (EMEA) at Hewlett-Packard, he wrote on a personal/professorial [is there are a difference, wonders Merpel?] capacity to tell the IPKat the following:

Javier Ramirez

"In the absence of the European Commission taking firm action to rationalise the functioning of copyright levies in the internal market, the CJEU has become the key instrument to set the principles under which copyright levy schemes must operate to conform to EU law.

Given the long line of cases already dealt by the CJEU [Case C-467/08 Padawan, Case C-462/09 Thuiskopie, Case C-277/10 Luksan, Joined Case C-457/11 to C-460/11 VG Wort, Case C-521/11 Amazon and, pending of Court judgment, Case C-435/12 ACI Adam], one may wonder whether Case C-463/12 Copydan may become a landmark judgment for the future of copyright levies and, even more, for the development of legitimate digital licensing models in Europe.

The answer is that, yes, Copydan may become a landmark case in this respect.

Firstly, the CJEU will specifically have to address some core principles not addressed in prior judgments. For example, in what cases the “de minimis” rule (Recital 35 in Directive 2001/29/EC, the 'InfoSoc Directive') applies, or whether a distinction in the application of levies is required depending if primary function of the devices is private copying (of protected works) or not.

More importantly, it is likely that the CJEU will also shed light on some core issues that were only partially addressed in earlier cases, including:

1.  Whether copying in the context of licensed online business models may be subject to additional compensation by mean of levies

In VG Wort the CJEU touched upon the role that rightholders’ authorisation plays in the requirement of fair compensation, providing some cryptic indications about the differences between exceptions and limitations. However the CJEU did not clearly deal with content licensed through digital platforms nor consider the InfoSoc Directive’s goal of fostering a legitimate digital internal market (Recital 2) where rightholders cannot be prevented from using contractual relations to ensure fair compensation (Recital 45 and Article 6, para 4, sentence 4). Furthermore, it did not deal with the role that the harm principle and the “de minimis” rule must play on

De minimis harm?

the definition of the level of compensation, and whether consent and/or payment implies that no additional compensation is due by means of levies (Recital 35); because either no harm or minimal harm is caused, or harm has been compensated by other means (eg, by the licence payment).

Consequently the Copydan judgment may be critical for the future of digital licensing models in Europe, especially if the CJEU follows Copydan and Austria’s position - and not the views of the Commission and the UK, amongst others - and concludes that rightholders are precluded from licensing their right of reproduction in Member States where a private copying exception has been transposed and, as a result, are arguably prevented from the normal exploitation of their works in the online environments, as required by the three-step test (Article 5, para 5) and Recital 45.

2.    Whether the mere ability for reproduction is sufficient to trigger application of levies

In Padawan, the CJEU resolved that use for private copying can be presumed when reproduction devices are made available to natural persons acting for private purposes. Then the CJEU referred to the “possible” harm that will be caused. However, this should not be interpreted as meaning that mere suitability for reproduction is sufficient to apply a levy to a device to compensate for any “potential” harm. The principles of harm, fair balance and the necessary link between application of compensation and the making of copies within the scope of the exception must be considered together with the prohibition of unjust enrichment and the right of property of those obliged to pay. All these imply that setting of levies must follow a two-step process:

1.  Step one: determine the categories of devices subject to payment of levies and its amount. In order to do this, it is necessary to assess statistically which device categories are actually used for private copying and make an objective quantification of harm resulting from typical use.

2.  Step two: following the determination in Step one in accordance with the criterion of harm, it is legitimate to presume and charge the levy to natural persons who acquire those devices for private purposes upon the basis that each individual is an average consumer making the average amount of private use copies.

3.    How the exoneration of business users must be practically implemented

In Amazon, the CJEU indicated its preference for the implementation of “a priori” exemptions of business users from payment of private copying levies. It provided that only if sufficient practical difficulties exist (in all cases) for such exoneration, then it can be substituted by a right of reimbursement which is effective and does not make repayment excessively difficult.

The Copydan judgment will be important because it should address how the exoneration of business users must be implemented in multi-level distribution systems, where a levy has to be paid by a producer or importer who does not sell directly to end-users but through resellers and cannot know if final users will be business or private users. Consequently the CJEU will have to decide whether the alternative option recommended by Mediator Vitorino of shifting the obligation to pay the levies to the retailer who is in direct contact with the end-user - and may filter between business users and consumers, for example by requesting VAT numbers - will be a least onerous choice, more compliant with the principle of proportionality and the principle of fair balance between concerned stakeholders.

4.    How the principle of equal treatment affects the categories of devices subject to levies and the level of compensation

In VG Wort, the CJEU provided that the fundamental right to equal treatment under Article 20 of the Charter of Fundamental Rights of the European Union must be respected, but this does not prevent applying the levy only on one of the devices that are used in a chain of devices and by taking into account the level of harm caused (whilst the harm from each reproduction may not differ substantially, the number of reproductions produced may differ, and therefore the amount of compensation should be different).

Non-discrimination principle exam question:
Should Eric and Gustave be treated differently?

In compliance with settled case-law, the principle of non-discrimination or equal treatment requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified. In the levy context, the stick yard will be whether there is an identity or not between the compared devices attending to a variety of factors (primary users being private or business users, harm resulting from average use of those devices, reproduction of works as primary or ancillary function, different technologies, etc.). This is aligned with the mandate that “when determining the form, detailed arrangements and possible level of such fair compensation, account should be taken of the particular circumstances of each case” (Recital 35).

Advocate General Cruz Villalón Opinion on the Copydan case will be delivered on 3 April 2014. Let’s stay tuned."

Thanks so much Javier for this analysis of current EU framework for copyright levies and the potential implications of the forthcoming Copydan case. What do readers think? What should the future of levies be? In any case, those who wish to engage in further discussion with Javier, can do so by emailing him at Jramirez@faculty.ie.edu.