In its judgment of 3 July 2014[1], the German Federal Court of Justice ("FCJ" or "Court") delivered its long awaited decision on the issue of whether copyright levies could be imposed on printers and plotters (collectively "printers"). Although the judgment relates to the compensation payable under the old German Copyright Act (which was in force between 2001 and 2007) ("the old GCA")[2], the decision may nevertheless be of significance to the printer industry.

The case proceeded through the lower courts and eventually was heard by the German Constitutional Court ("GCC") and the Court of Justice of the European Union ("CJEU"), until the FCJ in its recently released decision[3] eventually held that printer could be subject to copyright levies under the old GCA. Namely in connection with a computer, printers could be used to make analog reproductions of copyright works.  The FCJ, however, did not decide the level of compensation payable and sent the case back to the lower court. The Higher Regional Court of Düsseldorf will now have to decide on the final amount to be paid for the period of time in question. Estimates suggest that printer manufacturers could be liable for up to 100 Million Euros.

Background

Under German copyright law, an author is entitled to an absolute right over his or her work. In some circumstances, however, copyright works may be legitimately reproduced without the permission of the copyright owner. This is the case, for instance, where the reproduction is made for private use without circumvention of copy protection measures.[4] To compensate the copyright owner for his or her loss, the GCA imposes levies on devices which are used for the private copying. The law imposes such copyright levies on the manufacturer, importer or seller of the particular copying device, on the assumption that they will pass on these costs to the end consumer.

Article 54 of the current GCA imposes copyright levies on all devices which were intended to be used for private copying.  No distinction is made between physical and digital methods of reproduction.  Therefore the provision is sufficiently broad to cover printing devices. 

In contrast, the old GCA retained a distinction between physical and digital methods of reproduction.  Article 54 of the old GCA only concerned devices which were intended to be used for the recording of broadcasts of sound and images or for the transmission of sound and images from one (digital) storage medium to another. It followed that a computer, being capable of copying digital sound and images was subject to the levy under this provision, whereas printers, only being capable of making physical reproductions, were not.

Article 54a of the old GCA on the other hand granted the copyright owner a right to obtain compensation with respect to those devices which were intended to reproduce a copyright work by means of photocopying or by any processes having a similar effect. Printers were considered to form part of a process similar to photocopying when they were used as part of a chain of devices which consisted of a scanner, a computer and a printer.  Devices connected in this manner were regarded as a functional unit which could make physical reproductions of a copyright work. In such an arrangement, only the device which was most decisively intended to reproduce the copyright work would be subject to the levy. In this instance, only the scanner would be liable for the copyright levy. However, it has long remained uncertain whether Article 54a of the old GCA applied to only the reproduction from an underlying physical version of the work (say a page of text in a book) or whether the provision could also apply to the mere printing out of a digital work (say a page of text on the internet).

The Parties

The plaintiff was the German collecting society Verwertungsgesellschaft Wort ("VG Wort") which administers licensing schemes in respect of literary works and represents over 400,000 authors and 10,000 publishers. In addition, the VG Wort also represents the German collecting society Bild-Kunst ("VG Bild-Kunst"), which administers licensing schemes with respect to photograph, images and graphics.

The defendants were a number of German printer manufacturers and distributors.

Proceedings

In its claim, the plaintiff sought to be provided with sales figures for the number of printing devices sold or otherwise placed on the German market from 1 April 2001.  It also sought declaratory judgment that the copyright levy was payable on these printing devices in accordance with the amount agreed in a collective agreement with VG Bild-Kunst in 2001, which had been published for public consultation at the time[5]

The Regional Court of Düsseldorf initially granted judgment for the plaintiff.[6]  However, the defendants made a successful appeal of this decision to the Higher Regional Court of Düsseldorf.[7] The Higher Court was of the view that a printer alone or one interacting with a computer did not satisfy the requirement of a reproduction by means of photocopying or a similar process, since this arrangement did not allow for a physical work to be reproduced in a way that results in a physical copy of that work. A print out of a digital copy, however, would only constitute a copy of an already existing copy of that reproduction which is the result of a previous connection between a scanner and a computer. When the FCJ rejected plaintiff’s appeal from the Higher Court's decision,[8] the plaintiff appealed to the GCC which quashed the decision of the FCJ and sent the case back to the FCJ for further decision.[9] On the basis that the dispute raised fundamental questions concerning European Community Law, the FCJ then referred certain questions derived from the Directive 2001/29/EC to the CJEU for a preliminary ruling. In its judgment[10] of 27 June 2013 the CJEU emphasised that it was for member states to determine whether devices were subject to levies because they contributed to the reproduction process as a part of a chain and not in an independent manner. However, the total amount of compensation payable must not differ substantially from that which had been set for the reproduction by means of only one device.

The FCJ's Decision

In wake of the CJEU's decision, the FCJ in its judgment of 3 July 2014 concluded that a functional unit consisting of a computer and a printer would constitute a procedure with similar effect like a photocopy as envisaged by Article 54a of the old GCA. 

The FCJ overruled its previous decision to the effect that a "procedure with similar effect like a photocopy" required a physical printed work, like a book, to be reproduced in a physical form, namely on paper. The Court now emphasised that, independently of whether the underlying work is in physical or digital form, any means of reproduction which result in a physical copy of the work fall within the scope of Article 54a of the old GCA. Therefore not only would a chain of devices consisting of a scanner, a computer and a printer be considered as a means of analogue reproduction, but also would a chain of devices consisting only of a computer and a printer. For the FCJ, the critical factor was whether the chain of devices was intended to make physical reproductions of copyright works. It made no difference, however, whether the original version of the copyright work existed in physical or digital form.

Further, the FCJ held that in the device chain the printer should be regarded as the device which was definitively intended to reproduce the work. This is because a printer could only be used in combination with a computer, whereas a computer could also be used as an individual device for other copying purposes which were already subject to a levy under Article 54 of the old GCA. 

The FCJ also considered whether its decision was in breach of the requirement of Directive 2001/29/EC that the copyright owner could only be compensated for private copying. Although applying the levy to business devices would be in breach of the Directive, European case law allows member states to provide rebuttable presumptions that the devices were used for private copying. The Court therefore concluded that such a presumption could apply to a printer.   

Implications  

So far, the decision only relates to the provision of sales figures for the number of printing devices sold during a particular period of time.  The level of compensation payable is still to be determined by a lower court. 

The FCJ, however, indicated the factors which should be taken into account when calculating the amount payable. According to the FCJ, a printer would be subject to levies as part of a functional unit if that unit only consisted of a computer and a printing device; however, a levy would not be payable where that functional unit consisted of a scanner, a computer and a printer.  One way of calculating the amount due would be to use the standard rate of compensation provided in Article 54d of the old GCA as it would apply to a functional unit consisting of a computer and a printer. This amount should then be reduced by an accepted statistical percentage for printers which would form part of other functional units. The calculation ought therefore to take into account the statistical use of printer in each functional unit. It is likely that the lower court will have difficulties in determining the actual level of compensation payable in accordance with the FCJ guidelines, since it seems doubtful that sufficient reliable data exists for the relevant period as it is more than 10 years ago.

* The present article benefited from the valuable assistance of Mr. Robert Grohmann, LL.M. (Cardozo), 
 Trainee (Rechtsreferendar) at Clifford Chance Düsseldorf.
1 German Federal Court of Justice, judgment of 3 July 2014, case no. I ZR 28/11.
Since the German Copyright Act was amended (effective from 1 January 2008) printers are clearly subject to 
 copyright levies.
3 The Courts decision was delivered on 25 August 2014.
4 Section 53 of the German Copyright Act
Published in Federal Gazette (Bundesanzeiger) no. 63 of 30 March 2001, page 5667. 

6 Regional Court of Düsseldorf, judgment of 25 January 2006, case no. 12 O 110/05.

7 Higher Regional Court of Düsseldorf, judgment of 23 January 2007, case no. I-20 U 38/06.
8 German Federal Court of Justice, judgment of 6 December 2007, case no. I ZR 94/05.
9 German Constitutional Court, court order of 21 December 2010, case no. 1 BvR 2760/08.
10 Court of the European Union, judgment of 27 June 2013, case no. C-458/11, C-469/11, C