The Reprobel decision: fair compensation justified by actual harm (so is it OK to have a levy-free private copying exception?)

Yesterday Jeremy reported on the latest addition to the (abundant) case law of the Court of Justice of the European Union (CJEU) on Article 5(2) of the InfoSoc Directive. This was Case C‑572/13, Hewlett-Packard Belgium SPRL v Reprobel SCRL, Epson Europe BV intervening [earlier Katposts here], a reference for a preliminary ruling from Belgium seeking clarification on a number of issues, including whether:

(1) The term ‘fair compensation’ contained in Articles 5(2)(a) and 5(2)(b) of the InfoSoc Directive must be interpreted differently depending on whether the reproduction is carried out by any user or by a natural person for private use and for ends that are neither directly nor indirectly commercial;

(2) Member States can allocate half of the fair compensation due to rightholders to the publishers of works created by authors, the publishers being under no obligation whatsoever to ensure that the authors benefit, even indirectly, from some of the compensation of which they have been deprived;

(3) Articles 5(2)(a) and 5(2)(b) must be interpreted as authorising the Member States to introduce an undifferentiated system for recovering the fair compensation due to rightholders in the form of a lump-sum and an amount for each copy made, which, implicitly but indisputably, covers in part the copying of sheet music and counterfeit reproductions.

(4) Articles 5(2)(a) and 5(2)(b) preclude national legislation which combines, in order to finance the fair compensation granted to rightholders, two forms of remuneration, namely, first, lump-sum remuneration paid prior to the reproduction operation by the manufacturer, importer or intra-Community acquirer of devices enabling protected works to be copied, at the time when such devices are put into circulation on national territory, the amount of which is calculated solely by reference to the speed at which such devices are capable of producing copies, and, second, proportional remuneration, recovered after the reproduction operation, determined solely by means of a unit price multiplied by the number of copies produced, which also varies depending on whether or not the person liable for payment has cooperated in the recovery of that payment, which, in principle, is to be made by natural or legal persons who make copies of works.

 

Background

This reference originated in the context of litigation between Hewlett-Packard (HP) and collective management rights organisation Reprobel.

In 2004 the latter informed HP that the sale of multifunction devices entailed payment of a levy of EUR 49.20 per printer, and - from what this Kat understands - this should apply retrospectively. 

In 2010 HP summoned Reprobel before the Court of First Instance of Brussels, seeking a declaration that no remuneration was owed for the printers which it had offered for sale, or, in the alternative, that the remuneration which it had paid corresponded to the fair compensation owed pursuant to the Belgian legislation, interpreted in the light of the InfoSoc Directive.

Following a number of claims, counterclaims, and issues of (lack of) compatibility of Belgian law with EU law, the Court of Appeal of Brussels decided to stay the proceedings and seek guidance from the CJEU regarding the issues above.

The Court's response

(1) A distinction must be made depending on the user of the multifunction device, because the amount of fair compensation depends on actual harm

The Court answered the first question in the affirmative.

It distinguished between Article 5(2)(a) and Article 5(2)(b) situations, although it acknowledged that there are cases in which these overlap, eg reproductions made by natural persons for private use and for ends that are neither directly nor indirectly commercial.

 

Then the Court recalled that the notion of 'fair compensation' is an autonomous concept of EU law, and the relevant amount must be calculated on the basis of the criterion of the harm caused to authors of protected works. It is clear(er) that this is to be intended as actual, rather than potential harm [this conclusion also appears supported further by what is stated at paras 48 and 49, as well as 70]. At para 35 the Court noted how:

"It is apparent from recitals 35 and 38 in the preamble to [the InfoSoc Directive] that the notion and level of fair compensation are linked to the harm resulting for the author from the reproduction of his protected work without his authorisation. From that perspective, fair compensation must be regarded as recompense for the harm suffered by that author".

The CJEU added that such finding is supported by the argument based on the requirement that Member States be consistent in the application of the exceptions.

The Court then considered whether reproductions made for private use and for ends that are neither directly nor indirectly commercial by natural persons and those made by other users and/or for other ends would cause rightholders different degrees of harm. The CJEU concluded in the affirmative, and held it appropriate to draw a distinction, in the context of the reprography exception, as regards fair compensation, between the making of reproductions by natural persons for private use and for ends that are neither directly nor indirectly commercial and the making of reproductions by natural persons but for a use other than private use or for ends that are directly or indirectly commercial or the making of reproductions by other categories of users.

Poor Mabel:
Actual harm? It's (sadly) required

(2) Publishers should not be entitled to any fair compensation because they do not suffer any harm

As IPKat readers might remember, this point of the Reprobel reference generated an Opinion of the European Copyright Society [here, holding the view that only authors should be the beneficiaries of fair compensation], and a response from IFRRO, the International Federation of Reproduction Rights Organisation [here]. 

The Court noted at the outset [para 47] how publishers are not among the reproduction rightholders listed in Article 2 of the InfoSoc Directive. It then highlighted how the rationale of the fair compensation requirement is intended to compensate for the harm suffered by rightholders as a result of the reproduction of their works without their authorisation. Not only are not publishers exclusive reproduction rightholders pursuant to Article 2 of the InfoSoc Directive, but they are not subject to any harm for the purpose of those exceptions. As such, they cannot be the beneficiaries of any fair compensation.

(3) Sheet music excluded from Articles 5(2)(a) and (b), and reproductions from unlawful sources are not OK

The CJEU then addressed the question whether EU law prevents national law (like the Belgian one) that has an undifferentiated system for recovering fair compensation which also covers the copying of sheet music and counterfeit reproductions made from an unlawful source.

The Court began its analysis by noting that sheet music is expressly excluded from the scope of Article 5(2)(a), and must be also excluded from the scope of Article 5(2)(b). The latter is necessary to prevent that the joint or parallel application of the private copying exception and of the reprography exception by Member States ends up being inconsistent.

The CJEU concluded that Articles 5(2)(a) (b) preclude, in principle [but there may be exceptions pursuant to what is stated sub para 56], national legislations which introduce an undifferentiated system for recovering fair compensation which also covers the copying of sheet music.

The Court then addressed the issue of reproductions from unlawful sources [already discussed in relation to Article 5(2)(b) in ACI Adam, on which see Katposts here]. The Court recalled how these are outside the scope of the private copying exception, and would also conflict with the three-step test in Article 5(5) of the InfoSoc Directive [if you are interested in the three-step test, you can find a more detailed discussion here].

According to the Court the reasoning in ACI Adam is applicable to Article 5(2)(a) situations.

Publishers getting fair compensation?
Not OK

(4) Ex ante lump sum remuneration that only takes into account copying speed not OK. However combined levy system not incompatible per se

As a final issue, the Court addressed the compatibility with EU law of a remuneration system that combines remuneration fixed prior to the reproduction operation by reference to the speed at which the device in question technically produces copies and remuneration fixed after the reproduction operation by reference to the number of copies produced.

The CJEU answered the question by recalling once again the rationale underlying the fair compensation requirement, as well as levy systems. The Court noted how a distinction should be made in principle depending on the types of reproduction at issue.

It follows that Articles 5(2)(a) and 5(2)(b) preclude lump-sum remuneration paid prior to the reproduction operation by the manufacturer, importer or intra-Community acquirer at the time at which a device is put into circulation on national territory, in a situation in which the amount of that remuneration is fixed solely by reference to the speed at which that device is technically capable of producing copies.

The Court also ruled out the validity of a criterion that depends on whether those liable to pay levy cooperate in the recovery of such levy.

Finally, the Court examined the compatibility with EU law of a levy system that combines lump-sum remuneration fixed in advance and proportional remuneration fixed after the fact. According to the Court such system cannot a priori be regarded as incompatible with Article 5(2)(a) or Article 5(2)(b) of the InfoSoc Directive.

Will the UK re-introduce
a private copying exception?

Conclusion

This is a that is likely to generate more than a headache in the world of collective rights management.

This Kat wonders what implications the requirement of an 'actual' harm might have, especially in the UK following the quashing of the private copying exception pursuant to section 28B of the Copyright, Designs and Patents Act [here]. It is worth recalling that the decision of Green J was motivated on grounds that UK Government had failed to provide adequate evidence to justify the lack of a fair compensation requirement/introduction of a levy system, not that lack of a fair compensation requirement would be per se inadmissible.

Following this latest installment in the private copying world and the earlier decision in Copydan [Katposts here], it would appear that in principle there is not much that prevents a Member State from drafting a tight private copying exception that does not produce any actual harm, ie above de minimis pursuant to Recital 35 in the InfoSoc Directive, and - as such - does not envisage a fair compensation/levy system ... What do readers think?