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«MEDIATION ON PRIVATE COPYING AND REPROGRAPHY LEVIES António Vitorino Brussels, 31 January 2013 INTRODUCTION The divergent national ways of imposing ...»

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RECOMMENDATIONS

resulting from the

MEDIATION ON

PRIVATE COPYING AND REPROGRAPHY LEVIES

António Vitorino

Brussels, 31 January 2013

INTRODUCTION

The divergent national ways of imposing and administering private copying and reprography

levies have been a source of friction with the Internal Market principles of the free movement of goods and services for quite some time. At the same time, levies have been, and to a large extent still are, a relevant source of income for rightholders. This important and sensitive subject has been debated for decades at both European and national level, and several attempts have been made to tackle the problem.

In its Communication of 24 May 2011, “A Single Market for Intellectual Property Rights Boosting creativity and innovation to provide economic growth, high quality jobs and first class products and services in Europe”1, the European Commission announced the launch of a mediation process with stakeholders in order to explore possible new approaches with regard to the imposition and the administration of private copying and reprography levies.

Commissioner Barnier gave me the honour to preside over this mediation2. I started my mediation by calling on stakeholders to overcome entrenched positions and invited all interested parties to submit constructive contributions in writing3. Many of the numerous contributions that I have received contained innovative ideas and helpful information. I also conducted a series of bilateral meetings with stakeholders. These meetings helped me deepen my understanding of the issues and interests at stake. Drawing both on written contributions and the outcome of the bilateral meetings, I held a second round of meetings in order to bring stakeholders with diverging interests together and to try to develop workable solutions.

Most stakeholders were very constructive during the mediation process. Nonetheless, the interests at stake are conflicting and often prevented stakeholders from exploring common ground. The current state of affairs, with important CJEU rulings on this subject pending and the start of discussions in some Member States on possible alternatives to the device based levy system, also conditioned discussions to some extent. Although stakeholders were not yet able to bring their views closer on the most contentious issues, my aim remains to facilitate and advance future discussions as much as possible. In my recommendations, I will therefore try to build upon the issues that were raised in the mediation process by the different stakeholders, even if these issues were often presented from opposite angles. Drawing the divergent positions closer will ultimately depend on the willingness of all stakeholders to commit themselves to finding workable compromise solutions.

In addition to what I learned through the mediation itself, I analysed the relevant information that resulted from previous consultations, as well as the existing case law of the CJEU. I think that certain issues, especially those related to the setting and payment of levies in cross border transactions, can be settled on the basis of that case law. In particular the Court´s rulings in Cases C-467/08 (Padawan vs SGAE) and C-462/09 (Stichting de Thuiskopie vs Opus) contribute significantly to the clarification of many of the debated issues. I am convinced that http://ec.europa.eu/internal_market/copyright/docs/ipr_strategy/COM_2011_287_en.pdf http://ec.europa.eu/commission_2010-2014/barnier/docs/speeches/20111123/statement_en.pdf http://ec.europa.eu/commission_2010-2014/barnier/docs/speeches/20120402/statement_en.pdf the best way forward is to build on this case law. I will address the consequences of these judgments in detail, in the relevant parts of my recommendations.

Moreover, in an unprecedented number of new cases (Cases C-457/11 – C-460/11, VG Wort vs Kyocera Mita et al.; Case C-521/11, Austro Mechana vs Amazon; Case C-314/12, Constantin Filmverleih vs UPC Telekabel; Case C-463/12, Copydan Båndkopi vs Nokia and Case C-435/12 ACI Adam et al. vs Stichting de Thuiskopie) many other important questions on private copying and reprography levies have been referred to the Court. I expect the answers of the CJEU to these questions to provide further guidance on some essential issues, as I will mention later on in my recommendations.

Some stakeholders have put forward ideas to replace the current hardware based levy systems with other forms of fair compensation. It seems to me, however, that the alternatives that were put forward have not been sufficiently worked out in detail yet, and therefore do not justify the "phasing out" of hardware based levies in the immediate future; such a "big-bang" does not seem advisable. Some of these alternatives may also not be in conformity with the applicable legal framework. In particular, I think that the link between the persons causing the harm and benefitting from the exception and the persons financing a system of fair compensation should not be severed. That being said, I do believe that some of these alternatives deserve further consideration.

Although the remit of my mediation did not foresee a consultation with Member States, I think that such discussions will be needed to find a sustainable and future-proof solution to the problems identified in my recommendations. Stakeholders should nonetheless remain involved in the process, and assume their responsibility for finding workable compromise solutions. It is also essential to take proper account of current and evolving market developments. While it may be too early to determine which business models will be preferred by consumers in the long term, many stakeholders expect a shift from ownership based to access based models. The latter, combined with widespread and ubiquitous Internet access, have the potential of significantly decreasing the overall amount of copying undertaken by end users and, as a consequence, also the amount of levies required to compensate for acts of private copying. Moreover, existing and new online services should normally be based on licensing agreements and are often supported by technical measures, allowing rightholders to be remunerated directly for all forms of consumption of their creative content. In cases where rightholders are remunerated via licensing agreements, for the use (including the copying, as the case may be) of their works, it does not seem justified to make consumers pay a second time, in the form of levies. These and any other forms of double payment should be avoided. In my view, they are to the detriment not only of consumers but also of the functioning of copyright as a system to incentivise and reward creativity and investment. I will address these issues in the first part of my recommendations and indicate what a possible adjustment of the system to take account of new services and consumption patterns could look like.





While it is true that the cases of private copying requiring compensation by means of levies are, on account of new business models and changing content consumption patterns, likely to decline, they will not vanish from one day to the next. Therefore, levy systems will, in my view, remain relevant in the immediate future. In these circumstances, the most pressing objective is to ensure the greatest possible consistency, effectiveness and legitimacy of the levy systems that are in place today. Accordingly, the second part of my recommendations should be viewed as a critical analysis of these systems, providing targeted solutions to identified cross-border issues. Although most of my recommendations do not distinguish between private copying and reprography levies, it is important to take into account the specificities of the latter. I will indicate when these specificities require a different approach.

The evolution of the copyright system and its adaptation to the XXIst century is not an easy process. Copyright remains an essential element of our society and our economy. In this connection, I have noted with satisfaction that the Commission has recently adopted a Communication on Content in the Digital Single Market, which aims to ensure that copyright and copyright-related practices, such as licensing, stay fit for purpose and provide for effective solutions in this new digital context.

EXECUTIVE SUMMARY

These are the core elements of my recommendations:

In order to favor the development of new and innovative business models in the I) digital single market, based on licensing agreements between service providers and

rightholders, I recommend:

–  –  –

In order to simplify the functioning of the levy systems and ensure the free movement II)

of goods and services in the Internal Market, I recommend that:

–  –  –

 The liability for paying levies should be shifted from the manufacturer's or importer's level to the retailer's level while simplifying the levy tariff system and obliging manufacturers and importers to inform collecting societies about their transactions concerning goods subject to a levy

–  –  –

I. NEW BUSINESS MODELS, LICENSED SERVICES AND

THE PRIVATE COPYING EXCEPTION

New business models in the digital environment Digital technology and the Internet have changed the distribution of copyright protected content. Consumers increasingly expect to have access to content through multiple devices, when and wherever they please. Business models are evolving to meet these new expectations. Especially in the online market, which is expected to be by far the most important distribution channel in the future, there is a broad variety of new services.

The market is moving fast and still developing. It is too early to talk about a consolidated model preferred by the majority of consumers. Nevertheless, most stakeholders identify a clear tendency towards services that offer a comprehensive package of features to consumers.

These features include copying possibilities that go far beyond what would be allowed under the private copying (or any other) exception. They include the use of content on multiple devices, often via synchronisation possibilities. Many services, notably in the area of music, allow for the making of playlists and the sharing of such playlists with others. Services may also include the offering of "storing and matching services" to ensure access to content libraries by different devices and from any location. It is important to note that the latter services are increasingly access-based, in the sense that copyright protected content is not stored anymore on the customers' devices but rather centrally in the "cloud", on server storage space provided by the service operator.

These complex new services have in common that they need to be based on licensing agreements with rightholders, as only very few elements of the service are potentially covered by an exception. The numerous examples of licensed services existing today prove that such licensing agreements are a reality in the market, benefitting consumers, rightholders and service providers alike.

Some of the operators in the market may attempt to broaden the interpretation of the private copying exception, with a view to bypassing the necessity to conclude licences with rightholders. In this context, one should keep in mind that the private copying exception is limited to the private sphere, and that its intended purpose was never to serve as a basis for the commercial activities of third parties. Such attempts are therefore not only to the detriment of rightholders and legal offers based on licence agreements, but also legally questionable and should, in my view, not be supported. Moreover, they could bring along, as a logical counterpart, more and higher levies.

Copies made in the context of licensed services While there is no doubt in my mind that the above-mentioned services must be licensed, the question arises as to how to treat the making of copies, as the case may be, in the context of these licensed services, by end users for private purposes. Usually, a service provider acquires a licence from the rightholder that covers all copyright relevant acts involved in the provision of the service, including the reproduction of copyright protected content by the end user. Such licensing agreements also reflect the view and the expectations of the end user. A person paying for e.g. the download of a song expects that this payment does not only cover the first download of that song onto his or her personal computer but also the subsequent copying of that song to a certain number of his or her mobile devices, as determined by the usage rules of the service provider. Similarly, a person subscribing to a music streaming service is usually not only paying for the online streaming to his or her device/s but also for the possibility to create "playlists" that can be listened to when "offline".

Some stakeholders, however, argue that the consent of e.g. an author to the reproduction of his or her work for private purposes does not have any legal effect, even if explicitly given in a licence agreement. They say that a rightholder's consent, if given within the scope of an exception, is null and void. This view seems to be heavily related to the functioning of the levy system. Arguing that the making of a copy for private purposes can never be allowed by the rightholder but only by way of the private copying exception paves the way for further argument that all such copies require fair compensation in the form of levies, regardless of whether they are already covered by a licence agreement or not.

Other stakeholders warn that this would mean that levies would be due on top of the licence fee that was contractually agreed between the service provider and the rightholder and intended to pay for all copyright relevant acts which are part of a given service. Moreover, they are of the view that rightholders should not be bound to a levy regime against their explicit will, but rather be allowed to choose a contractually agreed form of remuneration instead. Stakeholders in favour of giving rightholders such a choice also stress that this has nothing to do with the question of whether an exception can be contractually overridden, i.e.



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