National courts obliged to find a way to impose copyright levies on those based outside of their jurisdiction.

Background: just another tax

Copyright levies are a tax on the manufacturers or suppliers of devices used by consumers to transfer media from one medium (such as a CD) to another (such as an MP3 player), imposed by those countries where consumers are legally entitled to transfer media between devices for their private use. Copyright holders are then compensated with the proceeds of the levy for the “infringement” of their copyright.

The levy is charged to manufacturers or suppliers as it is impractical to identify and collect the levy from the consumers themselves. The intention is that manufacturers or suppliers will then pass on the cost of the levy to the consumer through the overall sale price.

In the EU, Member States are authorised by the Copyright Directive (Directive 2001/29/EC) to introduce a levy. The UK has not done this – there is no legal right to transfer media between devices, and consequently no levy. The same is true of Germany and some other Member States. In contrast, the Netherlands, Finland and others have introduced a right to transfer – and therefore a levy.

The key issue

The issue that came before the Court of Justice in Case C-462/09 Stichting de Thuiskopie v Opus Supplies Deutschland GmbH, Mijndert van der Lee, Hananja van der Lee concerned a distance selling situation, where the consumer is based in a country imposing a levy (here, the Netherlands) and the supplier of the device is based in a country not imposing a levy (here, Germany).

On the facts, the Dutch levy authority argued that it was the German based supplier who should pay the Dutch levy. The supplier, however, refused to pay up, arguing (against the grain of existing judicial authority) that it was the responsibility of the Dutch consumer to pay, as it was in his or her name (under the sale contract and shipping order) that the goods were imported from Germany into the Netherlands (i.e. the consumer was the “importer”).

Referral to the Court of Justice of the European Union

The Dutch Supreme Court therefore put the following questions to the Court of Justice (re-phrased for succinctness):

  1. Does the Copyright Directive provide any assistance in determining who should be regarded under national law as owing a copyright levy?

The Court responded by re-affirming the existing principle outlined above: that consumers should ultimately pay the levy but, due to the complications of targeting them directly, it should be paid by manufacturers or suppliers of the copying devices – who can then pass on the cost.

  1. In a distance selling scenario, such as the one on the facts, does the Copyright Directive require national law to be interpreted so that the copyright levy must be collected from a supplier even if they are based in a Member State without a levy?

The Court responded that Member States that have a levy must “guarantee” the recovery of the levy for copyright holders. It is therefore for the authorities, in particular the courts, of the Member State to seek an interpretation of national law that enables it to obtain the levy from the importing supplier. It is of no bearing that they are established in another Member State.

A levy big headache

This case is somewhat of an inconvenience for those Member States – namely, their courts – that have introduced a copyright levy. Whilst the Court stated that Member States must do all that they can to enforce levies, it has not stated how they should do that where (as here) the person whom it wishes to enforce the levy against is based in a Member State where no levy exists – and over which its national courts will have no jurisdiction.

Further, the statement that Member States must “guarantee” copyright holders compensation from the levy is a strong one. Normally, one might seek payment of guaranteed sums from the guarantor if the principal is unwilling or unable to pay.

Is the levy dry?

In a recent European Commission communication, outlining its strategy for creating a better single market for intellectual property, the Commission stated its desire to see greater harmonisation amongst Member States as to levies, with comprehensive legislation at EU level by 2012. We do not expect that this would mean imposing a levy system on all Member States, but rather harmonising the levy systems of those Member States that choose to impose a levy. To that extent, it will be interesting to see if the consultation on new legislation will address the issues posed by this judgment.

Further, in the recent Hargreaves report on the future of UK intellectual property law, Professor Hargreaves advised the UK government against the introduction of a levy in the UK. Whilst the UK government has yet to officially respond, we do not expect it will take a radically different approach to Professor Hargreaves. As such, manufacturers or importers supplying to the UK consumer have less to fear from this judgment and the EU system of levies than those in other jurisdictions.