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Trade body says ECJ ruling could undermine private copying law reforms

Out-Law News | 14 Nov 2011 | 11:43 am | 6 min. read

UK copyright reform could be "undermined" if the European Court of Justice (ECJ) rules that copyright levies must still be charged when rights holders have given their permission for work to be copied, an IT trade association has said.

Intellect said that if the ECJ ruled in an upcoming case that rights holders were not fairly compensated in instances where they had "expressly or implicitly authorised reproduction of their works" then it could lead to a "ludicrous situation" where rights holders were paid twice.

Intellect has called on the UK's Intellectual Property Office (IPO) to "intervene" in the case, which will review questions on fair compensation owed to copyright owners under a copyright levy system. It said attempts to introduce a private copying exception into UK copyright law could be hampered depending on the outcome of the ECJ case.

Some European countries allow the unauthorised copying of material that a person legitimately owns, as long as that is for private use. Under the EU's Copyright Directive this is permitted as long as there is 'fair compensation' to the copyright holders. In a ruling by the ECJ last year, the Court said that what constitutes 'fair compensation' must be determined by the "harm suffered by the author".

Countries which allow private copying ensure this fair compensation by charging a levy on the media – discs and media players for example – that material is typically copied on to. That levy is then distributed through collection societies to rights holders.

Although the UK does not operate a copyright levy system, Intellect said the questions posed by the German Supreme Court could have a "broad reach" and affect UK policymaking on copyright. The German Supreme Court has asked the ECJ if right holders' right to 'fair compensation' for private copying is "abrogated where the right holders have expressly or implicitly authorised reproduction of their works".

Earlier this year the UK Government announced plans to create new exceptions to copyright laws, which would include a "limited" right to copy legitimately purchased copyrighted material for private use. The Government's plans endorsed a recommendation by Professor Ian Hargreaves in his Government-commissioned review of IP law earlier this year.

Hargreaves had said that individuals should be allowed to change the medium on which they play music they have bought. They should, for example, be able to save music from CDs to computers or music players, the review had said.

Academic Martin Kretschmer subsequently published a report for the IPO into the issue of private copying and fair compensation in which he advised the creation of a licensing system for private copying. Kretschmer, director of Bournemouth University's Centre for Intellectual Property Policy & Management, said that people should be able to buy a licence that allows them to download and pass on copyright material for personal use, non-commercial adaptation and distribution within networks of friends.

These state-regulated licenses could help free up copyrighted works for private copying whilst ensuring the rights holders are fairly compensated for the economic harm that causes, Kretschmer said in his report. He said that the levy systems used by 22 EU countries caused piracy because they "incentivise" rights holders to restrict access to their works.

Intellect said that the ECJ case could undermine attempts at reform if the Court said that a levy should still be charged in relation to material belonging to rights holders who had given permission to copy.

"If the condition relating to fair compensation is not abrogated where the rights holders have expressly or implicitly authorised reproduction of their works, it would imply that entitlement to fair compensation (i.e. copyright levies) is not exhausted when a license is in place authorising the private copying use in question," Intellect said in its submission to the IPO seen by Out-Law.com.

"This would be in contradiction to the general principles of copyright that the right holder has the right to decide about the extent of the usage of its work," it said. "Put another way, [the ECJ question] addresses the so-called 'imperative status' of the reprography and private copying exceptions and is premised on the somewhat dubious legal theory that a statutory exception (and the corresponding levy) have superiority over a license agreement (and the corresponding license fee, if any)."

"If this were held to be the correct legal position, it would result in the ludicrous situation of rights holders being entitled to a copyright levy on top of a paid-for license, a practice known as ‘double-dipping’. If the 'priced into purchase' argument is undermined by this case, it would open the opportunity for ‘double dipping’, i.e. claiming additional compensation on top of the paid license fee, or the purchase price under EU, if not UK, law," it said.

Kim Walker, copyright law expert at Pinsent Masons, said that 'double dipping' would be a problem if the ECJ ruled that levies should be applied even in relation to material when permission to copy had been given.

“In the recent Hargreaves Review of the UK intellectual property framework the point was made, as it was in the Gower Review before it that the cost to rights holders of private copying is factored into the price of content already,” Walker said. "It strikes me that artificially applying a levy in the circumstances where the market is already in effect charging a form of levy in the form of the licence cost charged to consumers as part of the price of CDs and the like does not make sense."

"The pressing of CDs and other media already takes into account private copying and its cost to rights holders. The administration costs associated with establishing and running a levy system is also a negative, as I would have thought that this is an inefficient way of collecting money compared to the market based licensing system outlined by Kretschmer. A levy system is another bit of bureaucracy adding costs which the industries concerned cannot afford, least of all in the current retail climate,” Walker said.

Intellect claimed that any ruling by the ECJ that said 'fair compensation' is not settled through rights holder authorisation "could be a back-door way for the EU application of a copyright levy tax on all digital products capable of copying in the UK". The Government has previously announced its opposition to the copyright levy system, claiming that it would have "adverse impacts on growth and inconsistent with its wider policy on tax”.

Intellect said that UK plans to reform the private copying laws will have to "second guess" the ECJ judgment and that any new private use exceptions introduced under law "are deemed not to give rise to significant harm" and therefore do not trigger rights holder's right to 'fair compensation' through a levy. The group said the ECJ could "undermine" any new UK laws that are passed.

"If it transpires the Court’s decision is handed down only after UK legislation was implemented it might even undermine the new UK law, impacting the credibility of the Government’s implementation of Hargreaves recommendations, soon after enactment," the group said in its submission.

"A negative answer to [the German Supreme Court's question] would also imply that a bona fide license cannot legitimately authorise acts of private copying and exhaust entitlement to compensation.  This means that licences would not be 'full scope' in the sense that they would not actually authorise end users to do what the license purports they are authorised to do.  Put differently, acts of private copying would not technically be licensed or licensable. This would have potentially serious adverse implications for the thriving, dynamic, innovative content licensing market in the UK," Intellect said.

Intellect also said that the ECJ would be going against EU copyright law and policy and previous ECJ rulings on private copying if it answered the German Court's question negatively.

EU member states have two months to submit evidence for consideration in ECJ cases after the ECJ issues notification about them. The IPO has until 30 December to submit any observations on the case brought by the German Supreme Court, but it placed a 7 November deadline on initial external comment submissions.

The IPO said it usually takes at least five weeks for it to draft observations for sending to the ECJ and that it therefore imposes strict deadlines on comment submissions. The IPO has said that "failure to meet the deadline means that we may be unable to take your interest in the reference into account when deciding whether or not to intervene [in cases]" but that more detailed comments submitted after the deadline "can be taken into consideration" if it has decided to submit evidence.