Fair compensation. The ECJ on whether or not to take into account private copies made from unlawful reproductions
The Supreme Court of the Netherlands requested a preliminary ruling from the ECJ (case C-435/12) on the interpretation of art. 5 of the Directive 2001/29/CE on the harmonisation of certain aspects of copyright and related rights in the information society. The Directive prescribes that Member States can introduce an exception in their national law to the exclusive reproduction right of copyright holders to allow the so called “private copies”, providing that payment of “fair compensation” is made to copyright holders in order to compensate them adequately. In Italy, this system has been adopted since 1992, although today it’s ruled by the articles introduced by the above mentioned Directive with Decree 68/2003, and provides that copyright and related rights holders should receive a royalty on sales of devices and recording media, paid by manufacturers and importers of these products (but of course “discharged” on the final purchaser as part of the sale price) and collected and then divided by the Italian Collecting Society SIAE.
The question presented to the Court relates specifically to how the fair compensation should be calculated, in particular whether the amount of the levy payable for the private copying of a protected work should or should not take into account reproductions compiled by illegal sources, as well as those reproduced from legal sources.
The Court immediately clarified that the Directive in question cannot be interpreted such that national legislation could make no distinction between private copies made from lawful sources and those made from pirated sources. This is because to accept those kinds of copies under national legislation would be tantamount to encouraging the circulation of counterfeited or pirated works, which would inevitably reduce the volume of sales or of lawful transactions relating to the protected works. The Court, when specifically questioned on this issue, added that the fact that applicable technological measures do not exist to fight the making of unlawful private copies can have no bearing on this principle.
There can be no doubt that not including copies made from illegal sources in the compensation diminishes, de facto, the amount of compensation received by the copyright holders. The Court underlines that the levy system must ensure that a fair balance is maintained between the rights and interests of authors, as the recipients of the fair compensation, and the rights of the users of protected materials. Taking into account the prejudice possibly arising in disfavour of the copyright holders would have de facto consequences on the price that users pay for the use of equipment, devices and media playback for the creation of private copies. The cost of reproduction resulting from illegal copies would be charged indiscriminately to people who use these devices for private copies from legitimate sources, resulting in an additional cost for them.
For all the reasons specified in the judgment, the Court declared that art. 5 of Directive 2001/29/CE “must be interpreted as precluding national legislation which does not distinguish the situation in which the source from which a reproduction for private use is made is lawful from that in which that source is unlawful”.
Finally, as regards the possible consequences of this ruling for Italy, given that the Italian legislation that regulates the amount of compensation already excludes the application of the exception to private copying reproductions made from illicit sources (as specified in the conclusions of the present case by the Advocate General Pedro Cruz Villalon), Italy therefore seems to be in line with European legislation and the case law of the Court. However, a strong debate has recently arisen surrounding the notion of “fair compensation”; in fact SIAE has urged the Ministry of Heritage and Cultural Activities to update the Ministerial Decree of 30.12.2009 concerning the determination of the extent of compensation for private copying in order to adapt the amount in line with the technological developments of recent years. There is no doubt that this adjustment will be discussed and analysed at the appropriate place and time, taking into account the recent case law of the European Court of Justice.