In a judgment of March 2 2011 (Appeal 822/2007) the Barcelona Court of Appeal denied the right to collect the private copying levy when digital reproduction equipment, devices and media suitable for recording are purchased by companies and professionals.
Sociedad General de Autores y Editores (SGAE), a Spanish entity dedicated to the collective management of IP rights, filed a suit against Padawan SL, the owner of an establishment which markets digital storage equipment, claiming payment of the private copying levy under Article 25 of the IP Law (1/1996) for digital devices and media (CDs, CD-RWs, DVD-Rs and MP3 players) marketed by Padawan between September 2002 and September 2004.
Padawan opposed the indiscriminate application of a levy to such digital devices and media on the grounds that it was contrary to the EU Copyright Directive (2001/29/EC).
By a decision of June 14 2007 Barcelona Commercial Court No 4 fully considered SGAE's claim and ordered Padawan to pay SGAE the amount of €16,759.25 as a private copying levy. The award was calculated by taking into account the digital reproduction devices and media that Padawan had acquired during the period covered.
Padawan appealed this decision, insisting that the indiscriminate application of the private copying levy was contrary to the directive. The court submitted its preliminary ruling to the European Court of Justice (ECJ), asking it to rule on:
- the interpretation of fair compensation under Article 5.2(b) of the directive;
- whether the indiscriminate application of the private copying levy to companies and professionals that clearly purchase digital reproduction devices and media for purposes other than private copy was in accordance with the EU concept of fair compensation; and
- whether the system adopted by the Spanish government to apply the private copying levy to all digital reproduction equipment, devices and media indiscriminately infringed the directuve.
The ECJ's judgment of October 21 2010 (C-467/08) stated as follows:
- The concept of fair compensation as set out in Article 5.2(b) of the directive should be considered an autonomous concept of EU law and must be interpreted in the same way in all EU member states that have established a private copying exception.
- Fair compensation must be calculated by reference to the fair balance between the persons concerned and, therefore, on the basis of the harm caused to authors of protected works by the reproduction for private use of the protected works without their authorisation. This is consistent with the fair balance requirement that the debtors of the fair compensation are those individuals who make digital reproduction equipment, devices and media available to private users.
- Article 5.2(b) of the directive must be interpreted in such a way that a link between the application of the levy and the deemed use of the digital reproduction equipment, devices and media for the purposes of private copying is necessary. Consequently, the indiscriminate application of a private copying levy in relation to equipment, devices and digital media playback which are not available to private users and are clearly reserved for uses other than private copying is not in accordance with the directive.
Following the guidelines provided by the ECJ judgment, in its March 2 2011 judgment the Barcelona Court of Appeal interpreted Article 25 of the IP Law in relation to Article 5.2(b) of the directive, providing as follows:
- Taking into account only the harm derived from the potential use for private copying, the digital levy can be applied only to digital reproduction devices and media for consumer use, which can be presumed to be intended for private copying.
- Padawan was sued because it owned a computer store which bought and sold digital reproduction devices and media between 2002 and 2004. Undoubtedly, some of these items must have been sold to individuals because it was open to the public, but Padawan has shown that many of its customers were not individuals and that the digital reproduction devices and media were also sold to companies and professionals; therefore, it could not be assumed that they would be used for digital private copying.
- As a result, SGAE had the right to apply only a levy reflecting the fair balance of the affected parties, concerning the digital reproduction devices and media were marketed to individuals and not companies and professionals.
However, since the levy claimed by SGAE was calculated taking into account the total volume of digital media purchases made by Padawan, regardless of their possible destination (in terms of subsequent acquisition by individuals or companies and professionals), and for procedural reasons it was not possible to clarify this issue, the levy for sales of digital media for individuals did not apply. However, the court did recognise SGAE's right to claim such levy.
For further information on this topic please contact Antonia Torrente at Grau & Angulo by telephone (+34 93 202 34 56), fax (+34 93 240 53 83) or email ([email protected]).