In the space of a few weeks, the Court of Justice of the European Union ("ECJ") has given two judgments defining the powers of Member States to impose levies as compensation for the private copying of copyrighted works.

"German" Ruling

On 27 June 2013, the ECJ handed down a ruling in a case concerning private copying and the imposition of levies. The Court held that a levy for the reproduction of protected works, to compensate authors for the replication of their works without authorisation, can be imposed on the sale of a printer or computer, with Member States enjoying a broad discretion to determine who must pay the levy.

According to Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society, Member States should grant the exclusive right to permit or prohibit reproduction of protected works to the author and holder of the copyright.

Exceptions and limitations may nonetheless be allowed by Member States. Indeed, they may permit:

the making of private copies, and

reproduction on paper or any similar medium, using any kind of photographic technique or by some other process having similar effects.

The copyright holders should, in turn, receive fair compensation for the reproduction of their protected works without being sanctioned. To provide for such fair compensation, some 20 EU Member States currently impose a levy on reproductive devices such as CDs, DVDs and multifunctional devices.

In relation to proceedings concerning fair compensation owed for the reproduction of protected works made with the use of a chain of devices, specifically a printer and a computer, where the two are linked together, the Bundesgerichtshof(Federal Court of Justice, Germany) was called on to give judgment.

The authorised copyright collecting society representing authors and publishers of literary works in Germany, VG Wort (the plaintiff in the proceedings), requested that Canon, Epson, Fujitsu, Hewlett-Packard, Kyocera and Xerox provide information on the nature and quantity of printers that they had sold since 2001. Furthermore, it asked that they should be ordered to pay VG Wort remuneration by way of a levy on personal computers, printers and plotters marketed in Germany from 2001 to 2007. The ECJ was requested to provide the Bundesgerichtshof with an interpretation of the relevant provisions of EU law under those circumstances.

In its judgment of 27 June 2013, the ECJ held that the "reproductions on paper or any similar medium, effected by the use of any kind of photographic technique or by some other process having similar effects" does include reproductions that are made using a printer or personal computer.

In such a case, Member States are allowed to put into place a system according to which fair compensation is paid by the persons possessing a device that contributes to the single reproduction of the protected work on the given medium, to the extent that those persons have the possibility to pass the cost of the levy on to their customers. The ECJ also held that the overall amount of fair compensation owed for the harm suffered by the author at the end of that single process should not be disproportionate.

Interestingly, the ECJ found that an act by which a right holder may have authorised the reproduction of his work has no influence on the fair compensation owed.

In addition, the fact that technological measures that are designed to prevent or restrict unauthorised reproduction have not been applied by the right holder cannot have the effect that no fair compensation is due for private copying. The application of such measures by the right holder is on a voluntary basis. It is open to the Member State concerned to make the actual level of compensation owed to the rightholder conditional on whether or not such technical measures are applied in order to encourage those rightholders to make use of them, and in this manner, voluntarily contribute to the proper application of the private copying exception.

Lastly, the ECJ ruled against the double imposition of the levy, as it is the printer that makes the copy and the computer that assists it as part of one single reproduction process.

"Austrian" Ruling

On 11 July 2013, the ECJ handed down a further ruling on private copying and the imposition of levies in a case where, this time, recording media were the subject of the questions referred for preliminary ruling. The ECJ held that the indiscriminate collection of a private copying levy on the first sale of recording media may, under certain conditions, be compatible with EU law. It also considered that, under certain conditions, there may be a rebuttable presumption that recording media sold to individuals will be used for private purposes.

According to Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society ("Directive 2001/29"), when Member States decide to introduce a private copying exception into their national law, they are required to provide for the payment of "fair compensation" to holders of the exclusive right of reproduction.

In Austria, pursuant to Article 42b(1) of the Austrian Law on copyright (Urheberrechtsgesetz), fair compensation takes the form of a private copying levy which is collected on the first sale of recording media suitable for reproduction, such as blank CDs and DVDs, memory cards and MP3 players (the levy is called "blank cassette levy").

The ECJ was requested to give judgment in relation to proceedings in which Austro-Mechana, an Austrian copyright collecting society, had required Amazon to pay the blank cassette levy for recording media placed on the market in Austria between 2002 and 2004. In its interim judgment, the Handelsgericht Wien granted the application for an order to produce accounts and reserved its decision on the claim for payment. As this judgment was upheld on appeal, Amazon brought the matter before the Oberster Gerichtshof (Austrian Supreme Court) on the grounds that the Austrian levy on recording media is contrary to European legislation.

In its judgment of 11 July 2013, the ECJ considered that, given the practical difficulties in identifying private users, Member States can establish a "private copying levy" for the purposes of financing fair compensation, chargeable not to the private persons concerned, but to those who make the digital reproduction media available to private users. However, the Austrian system implies the indiscriminate collection of the blank cassette levy on the first sale of recording media. It therefore also applies to cases where the final intended use is not the making of private copies. The question therefore arose as to whether the fact that a possibility of reimbursement of the levy is created allows for the restoration of the "fair balance" which is to be struck between the interests of the rightholders and those of the users of the protected subject-matter.

The ECJ held that a system of fair compensation consisting in the indiscriminate application of a private copying levy on the placing on the market of recording media suitable for reproduction, together with a right to reimbursement, may prove to be consistent with Directive 2001/29, when practical difficulties justify such a system of financing of fair compensation and when the right to reimbursement is effective and does not make repayment of the levy paid excessively difficult.

The ECJ also held that EU law does not preclude the establishment by that Member State of a rebuttable presumption of private use of such media where they are marketed to natural persons, provided that two conditions are fulfilled: (i) the practical difficulties of determining whether the purpose of the use of the media in question is private justify the establishment of such a presumption; and (ii) it must be ensured by the Member State that the presumption established does not result in the imposition of the private copying levy in cases where those media are clearly used for non-private purposes.

Furthermore, Austrian law provides for the payment of half of the levied amount not directly to those entitled to compensation, but to social and cultural establishments. The ECJ held this system to be compatible with EU law as long as those establishments actually benefit the rightholders on a non-discriminatory basis, which is for the national court to verify.

Finally, the ECJ determined that the obligation to pay a levy such as the blank cassette levy cannot be automatically ruled out by the fact that a comparable levy has already been paid in another Member State. Yet, if a levy has been paid in the Member State which was not territorially competent to collect it, a reimbursement must be provided by national legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.