On 22 September, the Court of Justice of the European Union (“CJEU”) issued its long awaited decision in the Microsoft Mobile et al. v. SIAE case (C-110/15) which signalled an important  turning point and clear victory for Italian smartphone and computer manufacturers.

By analysing the Italian copyright levy system, the Court clarified a number of points of general relevance. First, the Court held that national legislation on copyright levies is in breach of EU law, and in particular of the principle of equal treatment, if it does not directly provide for exemptions from the obligation to pay the levy and delegates Collecting Societies to negotiate such exemptions with those liable to pay the levy.

The Court also held that EU law requires that the right to request the reimbursement of the levies, where they have been unduly paid, cannot be limited to final users and legal persons. Rather, it must be open to natural persons (when they purchase the levied devices for purposes clearly unrelated to private copying) and to producers or importers (if they establish that they have supplied the devices and media in question to persons other than natural persons for purposes clearly unrelated to private copying).

The referred case concerned the validity of a 2009 decree of the Italian Ministry of Culture, which broadened the number of levied devices, for the first time imposing a levy on typically multifunctional devices such as mobile phones and computers. The decree did not provide for any exemption or reimbursement systems, which were entirely left to private agreements between SIAE, the Italian Collecting Society, and those levied  i.e. manufacturers and importers of levied devices and media or their trade associations. The validity of the decree was challenged by a number of manufacturers and importers before the Italian Courts until the Italian Supreme Administrative Court  stayed the case and referred the proceedings to the CJEU, to establish whether the Italian system of exemptions and reimbursements was compliant with EU law.

The Court, confirming the conclusions of Advocate General Wahl’s opinion of earlier this year (May, 2016), answered the question in the negative. First, as to the exemptions, the Court found that, in the absence of generally applicable provisions setting the criteria for establishing exemptions from the obligation to pay the levy, the decree only imposed a “best endeavours” obligation on SIAE, requiring it to “promote” the execution of agreements with the levied entities, with no guarantee of equal treatment. As a consequence, manufacturers and importers in comparable situations may be treated differently, depending on whether and on what terms they have concluded an agreement with SIAE, exempting certain devices from the obligation to pay the levy.

Secondly, regarding the reimbursement system, the Court found that it was not effective (and therefore was in breach of the Court’s previous case law) as it was not open to natural persons (when they purchase the levied devices for purposes clearly unrelated to private copying) and to producers or importers  - if they establish that they have supplied the devices and media in question to persons other than natural persons for purposes clearly unrelated to private copying.

The last part of the decision is also interesting: here the Court focuses on SIAE’s request to limit the temporal effects of the decision had Court found that the Italian system was in breach of EU law. In support of its request, SIAE argued that it had always acted in good faith, assuming that the Italian system was compliant with EU law, and underlined that a finding of illegality of the Italian system would have put at risk its very financial stability, as levies had already been distributed and obtaining reimbursement from right holders would be extremely costly.

Both arguments were dismissed by the Court, noting that it had rendered several decisions on similar issues before (which excluded SIAE’s good faith) and, also, that SIAE had not provided evidence supporting its argument that it was not possible to recover undue payments from the authors. As a consequence, the Court deemed it inappropriate to limit the temporal effects of the decision, explicitly opening the doors to a new wave of actions for the restitution of unduly paid levies.