The European Court of Justice has held that national private copying levies under the Copyright Directive (2001/29/EC) (the Directive) must exclude unlawful copies.
Under Article 2 of the Directive (Article 2), authors, performers and producers enjoy an exclusive reproduction right in relation to certain types of creative work.
Article 5(2) of the Directive (Article 5(2)) allows EU member states to make exceptions to, or impose limitations on, the reproduction right provided for in Article 2 in particular situations. These include reproductions on any medium made by a natural person for private use and for ends that are non-commercial, on condition that the rights holders receive fair compensation that takes account of the application or non-application of technological measures referred to in Article 6 of the Directive to the work or subject matter concerned (Article 5(2)(b)).
Article 5(5) of the Directive (Article 5(5)) provides that the exceptions and limitations provided for in Article 5(2) will be applied only in certain special cases that do not conflict with a normal exploitation of the work or other subject matter and that do not unreasonably prejudice the legitimate interests of the rights holder.
In Infopaq International A/S v Danske Dagblades Forening, the ECJ held, among other things, that the exceptions under Article 5(2) must be interpeted strictly (www.practicallaw.com/2-422-4217).
A were importers and manufacturers of blank data media, such as CDs and CD-Rs. Under Dutch national law, A were required to pay a private copying levy to one of the defendants. A claimed in the Dutch court that the amount of the levy wrongly took into account the harm suffered by copyright holders from copies made from unlawful sources. The Dutch court referred a number of questions to the ECJ.
The ECJ held that EU law, and in particular Article 5(2)(b) read together with Article 5(5), prevents national legislation that does not distinguish the situation in which the source from which a reproduction for private use is made is lawful, from that in which the source is unlawful.
Following Infopaq, the Article 5(2) exceptions must be interpreted strictly. The three-step test in Article 5(5) was not intended to affect the scope of the exceptions (only how they were applied by member states). Therefore, Article 5(2)(b) could not be understood as requiring rights holders to tolerate infringements that might accompany the making of private copies.
National legislation that did not draw a distinction as to source might infringe Article 5(5). For example, accepting that private copies could come from an unlawful source would inevitably reduce the sales or other lawful transactions relating to copyright works, so the normal exploitation of those works would be adversely affected.
Also, a private copying levy system that did not distinguish between lawful and unlawful sources did not safeguard the fair balance between the rights and interests of authors (the recipients of compensation) and those of the users of protected material. For example, users who bought equipment, devices and media subject to the levy would have to pay a levy the level of which would be determined without regard to the extent to which private copies were made from unlawful sources.
The Intellectual Property Rights Enforcement Directive (2004/48/EC) was concerned solely with the enforcement of intellectual property rights by rights holders. It therefore did not cover proceedings that related to the scope of the private copying exception scheme and its impact on the collection and distribution of fair compensation.
The decision is unsurprising since an alternative result would have meant that users would have effectively been required to subsidise private copyright infringement actions. National legislation must be clear on its face that the private copying exception applies only to lawful copies; legislation that is not so expressed, even though it may be interpreted by the national court as having that effect, will not suffice.
Unlike most other European member states, the UK's proposals to introduce a private copying exception are not, as currently drafted, accompanied by a private copying levy. The wording of the private copying exception is currently being finalised and it is understood that the absence of private copying levies is likely to be a controversial issue as far as rights holders are concerned.
Case: ACI Adam BV and others v Stichting de Thuiskopie and others C 435/12.
First published in the April 2014 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.