Time to rethink a flat rate for online content? European court decides on levies

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The Court of Justice of the European Union has produced an interesting decision regarding copyright levies in the case of Copydan Båndkopi v Nokia Danmark (C‑463/12).

Some European countries have established a copyright levy scheme for blank media, this means that whenever there is a sale of a product that can store copies of copyright works, such as blank discs or memory cards, then the manufacturer has to pay a small percentage to collecting societies. The rationale for this system is contained in Art 5(2)(b) of the Copyright Directive (2001/29/EC), which allows member states to include an exception to copyright law that permits users to create private copies of works and store them in a personal device, as long as the manufacturer pays to compensate copyright owners.

Copydan Båndkopi is Denmark’s collecting agency for such levies, and they demanded payment from Nokia because smart phones contain internal memory that can be used to store music. Nokia replied that the amount of private copies that can be stored in their phones is negligible, and therefore they owe no compensation.

The Danish court dealing with the case referred several questions to the CJEU, most of which deal with the private copying provision contained in the aforementioned Art. 5(2)(b) of the Copyright Directive. The main point asked is whether this article “precludes national legislation which provides for the payment of fair compensation in respect of multifunctional media, such as mobile telephone memory cards, irrespective of whether the principle function of such media is to make copies for private use.” The court decided here that the point of the copyright levy system is to put in place adequate compensation schemes for copyright owners if a technology can be used for storing private copies, but that such compensation should be proportional to the potential harm caused, and that national authorities should take into consideration the likelihood that the medium will be used to store private copies of works. The ruling says:

“[…] Article 5(2)(b) of Directive 2001/29 does not preclude national legislation which provides that fair compensation is to be paid in respect of multifunctional media, such as mobile telephone memory cards, irrespective of whether the main function of such media is to make copies for private use, provided that one of the functions of the media, be it merely an ancillary function, enables the operator to use them for that purpose. However, the question whether the function is a main or an ancillary one and the relative importance of the medium’s capacity to make copies are liable to affect the amount of fair compensation payable. In so far as the prejudice to the rightholder may be regarded as minimal, the making available of such a function need not give rise to an obligation to pay fair compensation.

Moreover, the court was also asked whether a member state could create an exception to the payment of compensation if the prejudice to the rightholder “would be minimal”, and it answered that it would indeed be possible to create such an exception as long as it was clear that the potential damage would be indeed minimal, and that it would be up to the relevant authorities to establish the relevant threshold.

There are other important questions about legal copies and technological protection measures, but the above seems to be the most relevant part of the decision for the argument that I would like to make. I believe that the Copydan case has clearly delineated the question of private copies, and has added some much needed rationality to the application of levies.

The decision has opened again in my mind the potential for the creation of an online copyright levy system. We know that there is rampant copying online, and although we might argue about the level of copyright infringement online, it is still considerable. Wouldn’t it be logical to try to apply the levy system to the Internet, and not just to physical media? As more infringement and private copying goes into streaming, it seems archaic to insist on a compensation scheme that ignores where the technology is headed.

Under my proposal, we would be paying a bit more for broadband, and this extra money would be sent to copyright owners as compensation, making it a more fair system than the one we have in place. This would not stop piracy, but it would at least allow owners a manner to recuperate some remuneration, as opposed to the present situation in which they get nothing.

Unworkable? Probably, but surely we need ideas that go beyond papering over the cracks.