In two landmark judgments of 6 December 2007 and 30 January 2008, the German Federal Supreme Court ("FSC") has ruled that the so called "reprographic copyright levy"– implemented by the German legislator to compensate for licence-free copying made with traditional photocopiers – does not apply to single function printers. The levy was applied to multifunctional printers which have a photocopying function under the old German Copyright Act in effect until 31 December 2007, which thus applies to all products manufactured, imported or sold before 31 December 2007.

The rejection of reprographic levies on (single purpose) printers and the expected rejection of reprographic levies on PCs may mark a turning point in the excessive application of reprographic levies on digital devices in Germany. The reasoning of the first judgment also indicates that no reprographic levies apply to PCs under the law applicable until 31 December 2007. However, the application of the so called "audio and video recording copyright levy" – implemented to compensate for licencefree copying made with traditional analogue audio and video recorders – is still a major threat for many digital devices and storage media sold in Germany and elsewhere in the EC (such as PCs, mobile phones with music functions, memory cards or TV set-top-boxes). In addition, the new German copyright levy regime applicable from 1 January 2008 has reopened the discussion on printer levies.

The copyright law applicable in Germany until 31 December 2007, and the copyright law applicable in some other European jurisdictions, provides for two different levies: an "audio and video recording copyright levy" originally aiming to compensate for private recordings made with analogue audio and video recorders and the respective storage media, and a "reprographic copyright levy" originally aiming to compensate for reprographic copying made with photocopying machines. In most European countries, it is disputed whether copyright levies also apply to modern digital IT and entertainment hardware and storage media (such as PCs, handheld computers, single function printers, multifunctional printers, mobile phones or navigators with music function, MP3 players, TV set-topboxes, memory cards and USB sticks) and, if so, which levy amounts are applicable. Copyright levies are usually payable by the manufacturers, importers and/or dealers of the devices and media concerned by the levies.

1. FSC decision on single function printer levies

The decision, given in a test case between Hewlett-Packard and the German collecting society, VG Wort, is that no reprographic copyright levies and, thereby, no copyright levies at all apply to single function printers under the German Copyright Act applicable until 31 December 2007 (judgment of 6 December 2007, ref. no. I ZR 94/05). This decision is of major economic importance. The collecting societies claimed reprographic levies of €10 to €300 (depending on the printing speed) for each single function printer sold between 2001 and 2007. In total, the judgment saved the printer industry several hundred millions of Euros.

In its reasoning, the FSC stated that single function printers can only be used for "reprographic" copying if used together with a PC and a scanner in a similar manner as a traditional photocopier. However, in this scenario only the scanner is subject to the reprographic levy (cf. judgment of the FSC of 5 July 2001, ref. no. I ZR 335/98, regarding copyright levies on scanners). In all other cases, there is no reprographic, but only digital copying. The FSC argued that the situation of digital copying cannot be compared with reprographic copying (in particular with respect to the harm which right holders suffer). Copying of books, magazines and other hardcopy text and picture works by photocopiers are normally not permitted by right holders, but cannot be prevented by them. However, the print-out of digital works is often expressly licensed or, by publishing the works without any copy protection, impliedly allowed by the right holders. In case of an express or implied licence, no copyright levies apply. Therefore, the FSC decided that single function printers cannot be compared with traditional photocopiers and are thus not subject to the "reprographic copyright levy".

These arguments used by the FSC in its judgment of 6 December apply equally to the question of whether PCs are subject to reprographic levies. PCs can be used for reprographic copying together with a scanner (where only the scanner is subject to the levy). In cases of digital copying, the arguments set out with respect to printers are just as valid with respect to PCs. Thus, it is expected that in proceedings on the point now pending the FSC will reject the application of reprographic levies on PCs. The collecting societies claim a reprographic levy of €30 per PC put onto the market in Germany (irrespective of price and PC capacities) and the economic importance of this decision is as high as the importance of the single function printer decision. The judgment of the FSC is expected to be rendered in autumn of this year.

Finally, it should be noted that the collecting society is considering filing a constitutional complaint before the German Constitutional Court against the judgment of the FSC in the single function printer case. The chance that such a constitutional complaint is successful is rather low, but can not be absolutely excluded at the outset. It may take a couple of years until the Constitutional Court renders its decision.

2. FSC decision on multifunctional printer levies

The FSC has further decided that the multifunctional printers marketed by Hewlett-Packard until 31 December 2001, which can photocopy, are subject to the same reprographic levy amounts as traditional photocopiers under the German Copyright Act applicable until 31 December 2007 (judgment of 30 January 2008, ref. no. I ZR 131/05). These amounts are high (€76.70 to €613.56 for multifunctional printers which can make colored copies). They exceed the manufacturer's margins by far in the years until 2001 and even exceed the end-user purchase prices of low-end ink-jet multifunctional printers today. Therefore, Hewlett-Packard may consider filing a constitutional complaint before the German Constitutional Court against the judgment of the FSC.

The reasoning of the judgment has not been issued. In its press release, the FSC stated that it is bound in principle by the legislator's decision to set concrete statutory tariffs for all devices which enable acts of reprographic copying. In the oral hearing, the FSC acknowledged that the statutory tariffs are too high in light of the decreasing device prices and the changed use of such devices. The FSC expressly said that it was a "mortal sin" of the legislator to introduce inflexible fixed tariffs. However, both in the oral hearing and in the press release, the FSC argued that a court can only deviate from statutory tariffs in very extreme cases. The FSC stated that such an extreme scenario was not presented in the case at hand. Therefore, it is not yet clear whether the FSC holds the opinion that the full photocopier levy amounts also apply after 31 December 2001 when device prices dramatically decreased. The industry and the collecting societies hope that the reasoning of the judgment (which is expected to be issued within the next few months) will give unambiguous indications for the application of the reprographic levy to multifunctional printers also after 31 December 2001. However, it is not sure that the reasoning of the judgment will contain such clear guidance for the years following 2001 since that was not the question before the court.

Outlook

The two recent decisions of the FSC only deal with reprographic levies under the old law. Nevertheless, they give certain indications with respect to the disputed application of the audio and video recording levy to PCs, mobile phones with music functions and mobile phone memory cards under the old German Copyright Act applicable until 31 December 2007 and even some indications for the applications of levies under the new law applicable from 1 January 2008. In particular, the arguments of the FSC regarding the differences between analogue and digital copying suggest that the levy amounts for digital devices and storage media must be substantially lower than the amounts set out for reprographic copying devices, analogue audio and video copying devices and storage media under the old law.

In the European Union, the situation on copyright levies substantially differs in the individual Member States. Whereas some countries such as the United Kingdom or Ireland have no copyright levies at all and further countries such as the Scandinavian States and Greece do not apply levies to multipurpose devices such as PCs and mobile phones, collecting societies in other countries such as Germany, France, Spain and Hungary currently request levies even on mobile phones with music functions, memory cards and/or PCs.

An earlier initiative of EC Internal Markets Commissioner Charlie McCreevy to harmonise copyright levies was stopped after political pressure from certain Member States in December 2006. McCreevy and the commission re-launched the consultation process on "Private Copying Levies" on 14 February 2008. The re-launch raises hope for harmonisation and for the introduction of clear EC limits to the excessive application of levies in certain Member States.

If the initiative for harmonisation is successful, it will still take some years until the respective decisions have been implemented by the Member States and an agreement on the European level is reached. Accordingly, the uncertainty and inequality will remain for several years yet.