Case C-110/15, Nokia Italia – professional-use media equipment and Italian private-copy rules [judgment 2016, ECLI:EU:C:2016:717]

In Italy, copyright holders are paid ‘fair compensation’ for copies of their works made by people for ‘private use’. The payments are raised on the back of levies slapped on a wide range of electronic equipment such as personal computers, blank DVDs, memory sticks, and mobile telephones. While such levies for ‘private use’ copies can be legal under Article 5(2)(b) of the EU’s InfoSoc Directive 2001/29/EC, the questions here are the detailed Italian rules governing the setting of the levy and the possibilities for reimbursement in respect of electronic equipment that was intended only to be used by professionals.

Background
Copyright holders have the right to control the reproduction of their works. However, their right is not absolute. For example, there is an exception to the right to allow people to make copies of works for their ‘private use’ so long as copyright holders are paid ‘fair compensation’.

Accordingly, copyright holders in Italy are paid ‘fair compensation’ via schemes that are financed by state-authorised levies on electronic equipment such as personal computers, blank DVDs and memory sticks, and even mobile telephones.

In December 2009, the Italian State issued a decree in respect of private copies made of videos and records and set the rate of fair compensation. The effect of the decree was to extend the scope of the legal regime for records and videos dating from 2003 to cover a range of devices, including ‘multifunctional’ devices.

Industry responded to the State’s decree by challenging the decree’s legality. Hewlett-Packard Italia, Dell, Samsung Electronics, Sony Mobile Communications, Fastweb, Wind Telecommunications, and Telecom Italia all sued the relevant Ministry of State, the collecting societies, plus sundry other legal actors. Their legal actions were escalated all the way up to Italy’s highest court for administrative law matters, the Italian Council of State.

At the Italian Council of State
The relevant legislation is the EU’s InfoSoc Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society (OJ [2001] L167/10).

Article 5 of the InfoSoc Directive stipulates:

Member States may provide for exceptions or limitations to the reproduction right provided for in Article 2 in the following cases:…
(b) in respect of reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation which takes account of the application or non-application of technological measures referred to in Article 6 to the work or subject-matter concerned;…

The Article can be read with the aid of Recitals 9, 10, 31, 32, 35, 38 and 39.

Moreover, the Article can also be read in light of Recital 31, about ‘a fair balance’, and provides:

A fair balance of rights and interests between the different categories of rightholders, as well as between the different categories of rightholders and users of protected subject-matter must be safeguarded. The existing exceptions and limitations to the rights as set out by the Member States have to be reassessed in the light of the new electronic environment. Existing differences in the exceptions and limitations to certain restricted acts have direct negative effects on the functioning of the internal market of copyright and related rights. Such differences could well become more pronounced in view of the further development of transborder exploitation of works and cross-border activities. In order to ensure the proper functioning of the internal market, such exceptions and limitations should be defined more harmoniously. The degree of their harmonisation should be based on their impact on the smooth functioning of the internal market.

In accordance with the latitude given to the Member States, Italy had decided to implement the obligation by dint of, for example, Article 71 sexies of the Italian Legge sul Diritto d’autore (Law on copyright). This decree extended the scope of the levy to cover a plethora of technical recording devices including videos and records. The detailed drafting of that decree also extends the scope of the scheme to cover multifunctional devices.

However, there were also exemptions to those Italian rules, for example for media and electronic equipment bought for use by professionals, such equipment clearly not being bought for the purposes of making private copies of copyright-protected works.

There were in essence two difficulties with the Italian rules. First, the criteria associated with the ex ante exemption from the levy, for professional-use equipment, was left to private negotiation, or ‘free bargaining’, but without any rules guaranteeing equal treatment between on the one hand, the de facto monopolist, the Italian collecting society known as the SIAE; and on the other, the people that would be obliged to pay the compensation.

The second difficulty concerned the SIAE’s ex post refund mechanism. The problem here was that the SIAE’s rules left it to the end user rather than the manufacturer to request a refund from the fair compensation levy.

Padded with more than 27 000 words, and recalling aspects of the litigation such as competition law, state aid law and EU internal market law more generally, Judge De Felice’s referring order admits to not knowing whether the Italian set-up constitutes what the Recital 31 refers to as ‘A fair balance of rights’. It was decided to make a preliminary reference to the CJEU.

Questions Referred
According to the website of the UK’s Intellectual Property Office, the questions referred read:

1. Does Community law, and in particular recital 31 in the preamble to, and Article 5(2)(b) of, Directive 2001/29/EC, preclude national rules (in particular Article 71 sexies of the Italian Legge sul Diritto d’autore (Law on copyright), in conjunction with Article 4 of the [Decree of] 30 December 2009) that provide that, in the case of media and devices acquired for purposes clearly unrelated to private copying (that is to say, for professional use only), determination of the criteria for ‘ex ante’ exemption from the levy is left to private negotiation, or ‘free bargaining’, with particular regard to the ‘application protocols’ referred to in Article 4 above, failing any general provisions and any guarantee of equal treatment between the SIAE and persons obliged to pay the compensation, or their trade or professional associations?

2. Does Community law, and in particular recital 31 in the preamble to, and Article 5(2)(b) of, Directive 2001/29/EC, preclude national rules (in particular Article 71 sexies of the Italian Law on copyright, in conjunction with the [Decree of] 30 December 2009, and the instructions on reimbursement given by the SIAE, that provide that, in the case of media and devices acquired for purposes clearly unrelated to private copying (that is to say, for professional use only), reimbursement may be requested only by the final user rather than the producer of the media and devices?