Written by Jim Dennis, David Marchese
Last week the Court of Justice of the European Union (CJEU) delivered its eagerly awaited judgment in Copydan Båndkopi v Nokia (Copydan). It was hoped that the case would finally give an answer to a number of questions surrounding the private copying exception and help lead to greater harmonisation of the implementation of the Information Society Directive 2001/29 (InfoSoc).
The issue concerns Article 5 (2) (b) of InfoSoc which permits a natural person to make copies of copyright works for personal use, but subject to fair compensation for the rights holder. However, one also needs to take account of Recital (35) which provides that there is no obligation for a payment if the harm is minimal. Both of these have raised a number of questions and led to wide discrepancies in how InfoSoc is applied across the EU. Some member states allow copies to be shared with family and friends, however these countries tend to apply a levy on the goods as fair compensation to the copyright holders for any harm caused.
The UK Government’s implementation of InfoSoc, the Copyright and Rights in Performances (Personal Copies for Private Use) Regulations 2014 (the Regulations), has been narrower than in other member states. The UK government has taken the stance that no levy is required. Copying for personal use is only allowed where the copying is for private non-commercial use, the original copy is not an infringing copy, and the content was lawfully acquired on a permanent basis.
The UK music industry have clearly indicated that they feel that their content is not adequately protected when it comes to copying, and that the UK is out of step with Europe on this issue by not providing for fair compensation. They have launched a judicial review into the Government’s decision to introduce the private copying exception without providing fair compensation for right holders. If it can be shown that the Government’s decision was unlawful, then a provision for fair compensation may have to be introduced.
The decision in Copydan was expected to offer much needed clarity on the issue, aid harmonisation in Europe and provide guidance for the judicial review.
This case revolves around Nokia’s selling of mobile phones to business customers in Denmark who in turn sold them to both individuals and business customers. Whilst all the phones had an internal memory, some had an additional detachable memory card. These cards are seen as multifunctional media with capacity to be used for private copying.
Copydan, a collective rights management organisation in Denmark, asked Nokia to pay nearly £1.6million as a private copying levy for the reproduction of music and videos over the memory cards for mobile phones imported and marketed in Denmark from 2004 to 2009.
Nokia refused, arguing that there is a distinct difference between the use by business customers and individuals, and that it would be unjust for them to pay a levy where they are unable to determine who the end user of the device will be. Nokia’s refusal resulted in the CJEU having to examine a number of questions referred to it by the Danish court.
The questions and the rulings given by the CJEU were as follows:
1. In relation to media with a range of functions and which includes the ability to copy content, to what extent does its function affect the requirement to pay compensation?
The CJEU held that the member state may implement a scheme as fair compensation for any harm caused, even if only one of the functions enables copying. The court did state, however, that the actual compensation would be affected by whether the function is primary or ancillary to the media. If the harm is minimal, Recital (35) would apply and there would be no obligation for payment.
2. Is it permissible for legislation to distinguish between internal and external storage?
The CJEU held that it is permissible to distinguish between internal and external storage, but when making such a distinction, any exception must be applied in a manner that is consistent with the principle of equal treatment, which requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless it is objectively justified. It is up to the member state itself to decide if the storage is comparable and if not, if it can be objectively be justified to treat the same way regardless.
3. As the devices used by business customers would not be subject to the levy, can the member state apply the levy to the producer (or the importer) who sells to business resellers where they are unable to determine who the end user will be?
The CJEU held that: (a) it is permissible to levy in this way so long as it is justified by practical difficulties; (b) it is exempt from levy if can be identified that the end user is a business customer; (c) it must not be difficult to get a refund of the levy; and (d) it should be the purchaser that gets the refund.
4. What counts as minimal harm?
The CJEU has not provided any guidance on this point other than that when the member state is setting its own threshold, it must do so in line with the principle of equal treatment.
5. Where the right holder consents to copying of their content, should this have any impact on the levy?
The CJEU held that this will have no bearing in determining the levy.
6. Does use of DRM or any technological restriction on the ability to copy make a difference to how much the levy should be?
The use of such technology will have no impact on whether or not fair compensation should be paid, but the member state may take account of it when calculating the amount of fair compensation.
7. Should fair compensation be provided in relation to copies of works made by an individual with a device owned by a third party?
The CJEU held that as the legislation made no reference to this issue at all, it is not relevant to EU law. Again, the member state is free to determine its own approach.
8. Can a member state allow for fair compensation to be required where the reproduction is from an unlawful source?
The directive does preclude the member states from providing for fair compensation in respect of reproductions made using unlawful sources, namely from protected works made available to the public without the rightholder’s consent. Such a system would not strike a fair balance between the interests of the rights holder and the user, as it would lead to all users being indirectly penalised for the actions of a few.
The CJEU seems to have taken a “hands off” approach and given as much flexibility to the member states as possible, at least in the context of the questions to hand. Where the flexibility may be noticed most, and potentially provide for a variation in application between jurisdictions, is the concept of what qualifies as “minimal harm”. Whatever method is applied by member states, they will need to show that the decision is consistent with the principle of equal treatment.
The decision is unlikely to halt the judicial review proceedings in the UK so there may still be room for the music industry to challenge the Regulations. While the music industry may be able to protest against the lack of levy for legally sourced content, they will need to show that there is sufficient harm caused by the copying.
One point on which the decision provides a welcome level of clarity is that the levy cannot be used by copyright holders to compensate for losses as a result of illegally sourced content. The CJEU feel it would be unjust to penalise all consumers for the actions of some who do not have their own copy but instead use someone else’s, be it by copying a friend’s, or downloading it online.
Contact the Author
I graduated from Oxford University before qualifying as a solicitor at Herbert Smith. I went on to work at Richards Butler and then Davenport Lyons, before joining Gordon Dadds in 2014. I have extensive experience advising on the law of intellectual property, information technology and commercial contracts. I am the author of Business Licensing Agreements (Longman, 1995), the section on Supply of Goods and Services in Practical Commercial Precedents (Sweet & Maxwell) and several published articles including Joint Ownership of Intellectual Property (EIPR, 1999) and Warranties and Covenants in IP Licences (OUP, 2009).