Under EU Directive 2001/29 on the harmonisation of copyright law, Member States grant authors, performers, producers and broadcasting organisations exclusive rights to authorise or prohibit reproductions of their own works. However, Member States may limit the exclusive rights of rightholders under Article 5(2)(b) of the Directive when the reproductions are being made by a natural person for private use and where the reproduction is neither directly or indirectly for commercial use, on condition that the rightholders receive “fair compensation”. To put this simply, European law stipulates that it is not a breach of copyright to copy someone else’s work provided that the reproduction is for your own personal use and that the person who created the work will be “fairly compensated” for the reproduction. The compensation ensures financial support for rightholders who have had their work copied without their authorisation.

Most EU Member States provide the rightholders with compensation by way of copyright levies which operate as a surcharge on equipment and/or blank media which can be used for private copying. The rules’ relating to the levies varies between Member States. In Austria the “fair compensation” obtained by a private copying levy which is collected on the first sale of recording material suitable for reproduction, including blank CDs, memory cards and MP3 players. This is called the “blank cassette levy”. Austro-Mechana, an Austrian copyright collecting society, brought an action against Amazon.com International Sales Inc. in the Austrian courts for payment of the “blank cassette levy” on all recording material sold by Amazon in Austria from 2002 to 2004. Austro-Mechana claimed the very precise sum of EUR1,856,275 for media placed on the Austrian market in the first half of 2004. Austro-Mechana also requested that Amazon be legally obliged to open its books so that it could be established what other charges were due from this time. Amazon argued that the levy was contrary to EU law and that it is unfair to presume people are using blank media for illegal recording of copyrighted works. The request for Amazon to open their books was granted by the Handelsgericht Wien (Austrian Commercial Court), a decision that was upheld on appeal. However the court reserved its decision on the payment. Amazon appealed to the Oberster Gerichtshof (Austrian Supreme Court) who referred a number of matters to the European Court of Justice for clarification. (Amazon.com International Sales Inc and others v Austro-Mechana Gesellschaft zur Wahrnehmung mechanisch-musikalischer Urheberrechte Gesellschaft mbH, Case C-521/11, 11 July 2013)

The Court of Justice of the European Union (“CJEU”) had previously held that where there is the indiscriminate application of a private copying levy to all types of digital reproduction equipment, including in the case where they are acquired by persons other than natural persons for purposes clearly unrelated to private copying, does not comply with Article 5(2) of the Directive (Padawan SL v SGAE, Case C-467/08). Therefore the collection of the private copying levy will be unlawful under EU law where the intended use of the recording media is clearly not the making of private copies. However, the CJEU responded to the questions of the Oberster Gerichtshof in its decision (Amazon.com International Sales Inc and others v Austro-Mechana Gesellschaft zur Wahrnehmung mechanisch-musikalischer Urheberrechte Gesellschaft mbH, Case C-521/11, 11 July 2013) by stating that provided the indiscriminate application of the private copying levy is balanced by the right to reimbursement, where the recording media is clearly not being used to make private copies, a general levy will not be in breach of European law. A rebuttable presumption of private use will be justified when the practical difficulties in determining whether the use is private or not warrant such a presumption. In addition, the presumption of private use will not arise (and therefore, not trigger the levy) in cases where media clearly are not intended for private purposes. The decision of the CJEU recognises the practical challenge of establishing whether or not individuals are using their recording media for purely private purposes.

The CJEU confirmed that the obligation to pay the blank cassette levy will not be excluded where an equivalent levy has already been paid in another Member State. This seems to divert from the single market ethos of the European Union. The EU was set up to allow free trade between its members and to dissolve the requirement to pay customs tax at every border throughout the economic union. To then have an obligation to pay a particular duty in more than one member state seems to put this decision of the CJEU in direct conflict with the founding principles of the Union. It remains to be seen what impact this decision will potentially have on traders and consumers and to hear if the European Commission has anything to say on the matter.

Furthermore, the CJEU found that a system where part of the levy is not transferred directly to the rightholder but goes to social or cultural institutions is acceptable provided that the rightholders are the ultimate beneficiaries and the income is shared amongst the eligible rightholders on a non-discriminatory basis. Member States are not required to provide all the “fair compensation” to the rightholders in cash but can provide indirect compensation.

The CJEU ruling does not end the matter. However, it does ensure that the matter will be heard further in the Austrian courts which is something which Amazon had hoped to avoid by challenging the compatibility of the private copying levy with EU law. The decision the Austrian Supreme Court has to make is whether the blank cassette levy currently enforced in Austria is justified by the practical difficulties faced by trying to confirm whether or not the recording media is to be used for purely private purposes and if there is an effective right of reimbursement. Although it could prove difficult for Austro-Mechana to establish, they have already won in the lower courts in Austria. The UK and Ireland are the only Member States not to have implemented Article 5(2) of the Directive. However, this decision of the CJEU will be of interest to UK businesses who export blank recording material due to the potential implications for their business.