Barcelona - the copyright levy on digital devices: private vs. professional/official use.

On 15 September 2008 the Barcelona Commercial Court of Appeals stayed an action between the major collecting society in Spain (known as SGAE) and Padawan, S.L. to refer a judicial question to the ECJ. Questions referred to the ECJ are always of general interest, but this one is especially important because of the economic implications it may have for manufactures, distributors and resellers of digital devices subject to the copyright levy.

The question raised by the Barcelona Court can be simply stated as: is a professional/official use of a digital device subject to the copyright levy? Responding to this question might not be easy for the ECJ. The Barcelona Court framed its question extensively by requesting that the ECJ also decide upon: i) the nature of copyright levy itself (is it a Community concept that must be harmonised?); ii) the very last ratio of its existence (is the fair compensation set with the aim of keeping the IP rights holder fully compensated?); and iii) the methods to accrue such compensation (is the Spanish system incompatible to such ratio if we apply the copyright levy to all digital devices irrespective of professional/official use – as opposed to private use?).

Facts

SGAE commenced a civil action requesting the Court to impose a payment for the copyright levy generated by Padawan, S.L.’s marketing of blank media (DVD-R, DVD-RW, CD-R, CD-RW) and MP3 from September 2002 to September 2004. At first instance, the case resulted in the court granting €16,759.25 plus costs to SGAE.

Padawan, S.L. appealed the decision and argued before the Barcelona Court of Appeals that imposing the copyright levy on digital devices without taking consideration of the purpose (whether it be for private or professional/official use) is contrary to the EU Directive 2001/29/CE.

Fair compensation as a Community concept

The Barcelona Court of Appeals is concerned by the wide scope of the copyright levy in Spanish internal regulation. It wants to know whether it can affect the nature of the levy itself, i.e. whether it can establish whether there a relationship exists between the levy and the damage for which the levy is intended to compensate. The Court is doubtful that (i) a levy should be generated where no private copy actually exists (because it considers that professional or official use does not qualify as a copy for levies, so there would be no reason for compensation); and (ii) if the copyright levy, as it is currently applied, is contrary to EU Directive 2001/29.

In it statements, the Court expressly stated its support of the opinion issued by Internal Markets Commissioner Charlie McCreevy before the EU Parliament on 19 September 2007.

Making express reference to the ECJ ruling on 6 February 2003 (C-245/2000), Sena, the Barcelona Court of Appeals wished to know whether the ability of each Member State to establish a private copying exception to copyright infringement should be limited by an harmonised concept for fair compensation. In the Sena case1 the ECJ considered that the concept of equitable remuneration under Article 8.2 of the EU Directive 92/100/EC should be construed following ECJ doctrine in cases Linster (C-287/1998, para. 43) and Yiadom (C-357/1998, para. 26). In these cases the ECJ ruled that the terms of a provision of Community law which makes no reference to the law of the Member States for the purpose of determining its meaning and scope, must normally be given an autonomous and uniform interpretation throughout the Community. Such interpretation must take into account the context of the provision and the purpose of the legislation in question.

Although the Court of Appeals accepts as starting point that “fair compensation” and “equitable remuneration” are different concepts, it also considers that both are linked since each remuneration must have a “compensatory nature”.

Harmonisation in the respect sought by the Barcelona Court would not affect the Court’s understanding of its internal regulations in respect to collecting methods as long as they do not alter the true (and harmonised) nature of the copyright levy.

Although the Advocate General’s opinion is expected sooner, the ECJ will not render a decision in less than two years. In the meantime, the collecting societies may encounter some difficulties from manufacturers, importers or resellers who, attending to the circumstances, may choose a third party (consignor) to collect the monies so that they are either released to the collecting societies or revert back to manufacturers, etc. depending on the final opinion. Alternatively they may elect to avoid payment or claim the monies back after payment.

In any event, as different as the internal regulations (in respect of the copyright levy) are, and the eventual impact that this reference to the ECJ may have on the principle of free movement of goods within the EU, the harmonisation of the concept and implications of the copyright levy seems a sensible response.