On 22 September 2016, the European Court of Justice (“ECJ”) issued a decision that addressed the Italian law on copyright levies claimed on private copying on devices and media, establishing the unlawfulness of the collection of levies on products purchased for professional use (ECLI:EU:C:2016:717).

This decision was issued following the recourse made by the Italian Council of State to the ECJ after it was itself invested of an appeal procedure on the subject. The action was brought by a group of digital device and media producers that challenged the Italian legislative decree which introduced the private copy levy calculation criteria, so called "Bondi" Decree, in application of the principle introduced by EU Directive 2001/29/EC.

The ECJ decided that: (1) the private copy payment should be addressed to consumers, and not also to professional users, (2) exemptions to the levies should be based on transparent principles and equal treatment, and (3) there must be an easy mechanism to obtain exemption or reimbursement of the private copy levy when it turned out not to have been due.

Following the decision of the ECJ, the Italian Council of State will now have to issue its own decision on the appeal. It remains to be seen whether the whole system will be challenged (as happened in Spain a couple of years ago after the “Padawan” judgment of the ECJ), or if only levies for devices and media sold to professional users will be abolished and respective refund claims established. In any case, after the decision, the Italian Ministry of Culture and Tourism and the Italian Collecting Society (SIAE) will likely have to amend the "Bondi" Decree.

The Private Copying levy is applied to any digital reproduction device, recording equipment and digital memory (such as personal computers, recorders, recording media, mobile phones, hard discs and music and video recording devices), and is aimed at compensating the opportunity to use these devices to make copies of works protected by copyright. The levy was conceived to allow the digital device owner to make a copy of any copyrightable work it already legitimately possessed.

The ECJ issued its decision following the request for a preliminary ruling presented by the Italian Council of State, which was called to judge on the appeal filed by eight producers, importers or distributors of technical-information technology devices for the reproduction of sound and video (Nokia Italy/Microsoft Mobile Sales International Oy, Hewlett-Packard Italy, Telecom Italia, Italy Samsung Electronics, Dell, Fastweb, Sony Mobile Communications and Wind Telecomunicazioni). On the other side of the dispute there was the Italian Ministry of Cultural Heritage and Tourism, the Italian Collecting Society (SIAE), the Institute for the protection of the rights of performing artists, in liquidation, the national Association of Audio-visual and multimedia film industries and the Association of television manufacturers.

The object of the original appeal was the annulment of the so-called "fair compensation for private copying" principle, contained in the "Bondi" legislative decree of 2009.

After the action was dismissed by the competent Italian Administrative Court, the plaintiff companies agreed to present a recourse to the Council of State, which, to settle the matter, turned to the ECJ.

On this point the ECJ confirmed the previous case law (in particular the judgments of 11 July 2013, Amazon.com International Sales and Others, C‑521/11, EU:C:2013:515, paragraph 31, and 5 March 2015, Copydan Båndkopi, C‑463/12, EU:C:2015:144, paragraph 45), and indicated that the fair compensation levy is in line with the European Directive 2001/29/EC only if it is justified by practical difficulties, and if the person responsible for payment has a right to obtain the reimbursement of the levy when it is not due.

According to the ECJ precedents (judgment of 21 October 2010, Padawan, C‑467/08), the system of fair compensation must balance the rights and interests of authors, on one hand, and those of the users of the protected materials, on the other, "only if the digital reproduction equipment, devices and media concerned are liable to be used for private copying and, therefore, are likely to cause harm to the author of the protected work" and "there is therefore a necessary link between the application of the private copying levy to those digital reproduction devices and media and their use for private reproduction[1]".

The Court was also critical of the lack of reimbursement systems where the products had been purchased, and the levy unduly paid by a person who should not be subject to the levy: "such a system must provide for a right to reimbursement of the private copying levy which is effective and does not make it excessively difficult to obtain repayment of the levy paid. In that regard, the scope, the effectiveness, the availability, the public awareness and simplicity of use of the right to reimbursement allow for the correction of any imbalances created by the private copying levy system, in order to respond to the practical difficulties observed[2]".

The Court criticized the fact that the legislation "contains no generally applicable provision exempting from payment of the private copying levy producers and importers who show that the devices and media were acquired by persons other than natural persons, for purposes clearly unrelated to private copying[3]".

The conclusion of the ECJ was that these provisions may not be applied if the device is not purchased to be used by a private individual.

On those grounds, the Court stated that EU Directive 2001/29/EC must be interpreted as precluding national legislation, such the Bondi decree, to impose the levy without providing for a reasonably easy system to obtain reimbursement in cases where the levy is not due.

The decision, was welcomed by "Confindustria Digitale", the device manufacturing representative body, but was not well received by SIAE, which minimized the scope of the Court's judgment stating that it does not in any way question the legitimacy of private copying levy or the entire "Bondi" decree, nor the correctness of SIAE behavior.

It is too early to say the final consequences this decision will have on the Italian legislation. However, it is foreseeable that the levy system will at least be modified to include a new exemption mechanism for digital support acquired for professional use. It remains to be seen whether the system can survive in the meantime or whether Italian courts will deny copyright levy claims until the system is changed (as the Spanish courts did after the Padawan judgment of the ECJ). In any case, collecting societies and, devices and media manufacturers, importers and dealers need to reevaluate their position in Italy. Finally, the guidance given by the ECJ in the judgment may also have an impact on ongoing disputes in other countries such as France and Germany.