The ECJ has given further guidance to a Danish court on the application of the Copyright Directive in respect of the levies payable under the private copying exception. The ruling serves to further emphasise the requirement for fair compensation for rights-holders and highlights the need for the UK government to review its decision to introduce a private copying exception without an accompanying compensation scheme.
Under the Copyright Directive (2001/29/EC) (the “Directive”) member states can allow the private copying of protected works on the condition that that rights-holder receives "fair compensation" (Article 5(2)(b)) (known as the private copying exception), the rationale behind this being that the rights-holders should be compensated for lost royalties from private copying. Most member states have implemented Article 5(2)(b) of the Copyright Directive and use a system of copyright levies to provide for compensation to rights-holders. The levies usually operate as a surcharge on equipment and/or blank media which can be used for private copying such as computers, photocopiers, CD and DVD recorders and MP3 players. They are paid to collecting societies for onward distribution to the rights-holders.
On 1st October 2014, the Copyright and Rights in Performances (Personal Copies for Private Use) Regulations 2014 came into force, which introduced the private copying exception into UK law. The UK legislation allowed users to make personal copies for private use but it still remains illegal to share personal copies with family or friends. By limiting the scope of the exception the UK government attempted to minimise the damage to rights-holders and therefore avoid the need to create a complex levy system as adopted by other member states.
The claimants in Copydan Bandkopi v Nokia Denmark A/S, Case C-463/12 are a body representing the holders of copyright in audio and audio-visual works. They are authorised by the Danish Ministry of Culture to collect, administer and distribute the levy charged for the use of these copyright works. Copydan brought proceedings against Nokia in respect of memory cards imported into Denmark for use in their mobile telephones. Copydan argued that the memory cards could be used to store protected works therefore they should be covered by the fair compensation system and Nokia should be ordered to pay it a levy. Nokia contended that it is only lawful copies for private use that are not authorised by the rights-holder which are subject to the fair compensation system and that mobile telephone cards rarely contained such copies, therefore no levy may be imposed in respect of those copies.
The Eastern High Court in Denmark referred a number of questions to the ECJ on the interpretation of the private copying provisions of the Directive.
- Fair compensation in respect of multifunctional media.
It is irrelevant whether a medium is multifunctional or if the primary function of the media is to make copies. Provided that one of the functions, even if it is merely an ancillary function, enables the operator to use that media for the purpose of making copies then national legislation can require that fair compensation be paid.
- Distinction between media and components in application of private copying levy.
Removable media such as memory cards may be distinguished from fixed media such as internal hard drives/memory as removable media may facilitate the making of further copies of the same works using other devices. It is for the national court to determine whether the two forms of media should be treated differently and to justify any differences.
- Exemption from payment where prejudice minimal.
The Directive permits member states to provide for an exemption from the requirement to pay fair compensation provided that the prejudice caused to rights-holders in such cases is minimal. Member states have the discretion to set the threshold for prejudice, it being understood that the threshold must be consistent with the principle of equal treatment.
- Fair compensation where copying from unlawful sources.
The Directive does not provide for fair compensation in respect of copies made using unlawful sources, namely where protected works are made available to the public without the rights-holder’s consent.
- Third party devices.
The question as to whether a device used by a private individual to make copies for private use must belong to that person or if it can be a third party device is outside of the scope of the Directive. As such, the Directive does not stop national legislation which provides for compensation to be paid to rights-holders for private copies made by private individuals using third party devices.
THE EFFECT OF THE RULING
The ECJ’s ruling is of limited relevance to current UK copyright rules; however, with the government facing judicial review over its decision to implement a private copying exception without an accompanying compensation scheme, it is likely to bring the decision under further scrutiny. The ECJ has made it clear on several occasions that the level of compensation must be linked to the level of harm caused to the copyright holder, therefore the government’s assertion that compensation in the UK is effectively already priced in is looking increasingly questionable and in light of this latest ruling may be harder to justify going forward.