Case C-435/12, ACI Adam – calculating private-copy ‘fair compensation’ in EU copyright law [judgment 2014, ECLI:EU:C:2014:254]
For the purposes of the EC’s InfoSoc Directive 2001/29, should the rate of ‘fair compensation’ payable by importers and makers of blank recording-media in Holland include the harm right holders suffer from people making, for example, illegal downloads?
Facts
Companies which either make or import into Holland CDs, CD-Rs and other such blank recording-media are obliged by Dutch legislation to pay a ‘private copy levy’ to a Dutch collecting society known as the Stichting de Thuiskopie. The law stipulates that the rate of compensation must be fair. And what is ‘fair’ is set by a different Dutch organisation known as the SONT. Both the Stichting de Thuiskopie and the SONT were made the defendants in an action started by a dozen companies, including Fuji, Maxell, Philips, Sony and Verbatim who sought a judicial declaration that the rate at which the ‘fair compensation’ was calculated for the private copy levy was in effect incorrect.
In support of their application for the judicial declaration, the claimants submitted that fair remuneration was intended to compensate for the harm suffered by right holders from acts of reproduction falling purely within the scope of Article 16c(1) of the Dutch Copyright Act (DCA). That is to say, the compensation was for acts of reproduction that have no direct or indirect commercial ends and are made exclusively by a natural person for their practice, study or use. Accordingly, when it came to setting the level of fair remuneration no account should have been taken of compensating right holders for the harm that arises from reproductions made from illegal sources. Reproductions made from illegal sources fall outside of the scope of Article 16c(1) DCA; therefore, the right holders still retain the right to prohibit the making of those reproductions.
At first instance, and within the confines of a truncated legal procedure known in Holland as a ‘kort geding’, the District Court of The Hague refused to issue the claimant companies with the judicial declaration. The matter was appealed to The Hague Court of Appeal but that court’s legal reasoning was then criticised by the Dutch Supreme Court. After having read the Opinion of Advocate General Huydecoper, the Dutch Supreme Court decided to ask questions of the CJEU.
Questions Referred
According to the website of the UK Intellectual Property Office, the Dutch Supreme Court has asked:
1. Should Article 5(2)(b) be interpreted as meaning that the limitation on copyright applies regardless of whether the works became available to the natural person concerned lawfully or does the limitation only apply when the work has become available without an infringement of copyright?
2. If the answer is that it applies only when work becomes available without infringement:-
a) Can the application of the three stage test form the basis of the expansion of the scope of Article 5(2) or can its application only lead to the reduction of the scope?
b) Is a national law that provides for payment of fair compensation for reproductions as above contrary to Article 5?
3. Is the Enforcement Directive (Directive 2004/48/EC) applicable to these proceedings – where a Member State has imposed an obligation to pay fair compensation under 5(2)(b)?
Outcome. On 10 April 2014 the Court ruled (ECLI:EU:C:2014:254) that the private-copying exception does not cover reproductions from unlawful sources, and that levy systems must not factor unlawful copying into the fair compensation collected from everyone — a Dutch levy calculated on piracy-inclusive harm violated both copyright law and the fair balance.
Comment
The Questions published on the UK IPO’s website differ from those asked by the Dutch Supreme Court. The referring court had also asked about ‘technological measures’. An unofficial translation of the Dutch Supreme Court’s questions reads:
1 Should Article 5(2)(b), whether read in conjunction with Article 5(5) of the InfoSoc Directive or not, be interpreted as meaning that the exception on copyright applies to reproductions that correspond to the requirements of that article, irrespective of whether examples of the work from which the reproductions were made available to the natural person concerned were done so lawfully – that is to say, without infringing the copyright of the right holder, or does the exception only apply to reproductions of works that are made available to the person concerned without copyright being infringed?
2a If the answer to Question 1 is that it applies only when works have been been made available to the person concerned without copyright being infringed, then does an application of the ‘three step test’ in Article 5(5) of the InfoSoc Directive give rise to widening the scope of the exception in Article 5(2), or does its application merely lead to the reduction of the scope of the exception?
2b If the answer to Question 1 is that it applies only when works have been been made available to the person concerned without copyright being infringed, then is a rule of national law contrary to either Article 5 of the InfoSoc Directive or any other rule of EU law, when that national rule means that where reproductions are made by a natural person for private use and without either direct or indirect commercial ends, it is required to pay fair compensation – irrespective of whether the making of those reproductions is permitted under Article 5(2) of the InfoSoc Directive, and that that rule is without prejudice to the right of the right holders to prohibit reproductions and their claim to compensation.
In light of the three-step test in Article 5(5) of the InfoSoc Directive, is it important for the answer to this question that technological measures which are designed to hinder the making of unlawful private copies, are not yet available?
3 Is the Enforcement Directive applicable to a dispute such as the present one in which, on the basis of Article 5(2)(b) of the InfoSoc Directive, a Member State imposes an obligation on producers and importers of ‘carriers’ that are designed for the reproduction of works to pay fair compensation to an organisation designated by the state and charged with the collection and division of that fair compensation, when a judge is petitioned for a judicial declaration in circumstances such as those in the present case which are important to the fixing of the rate of fair compensation, and where the latter organisation raises a defence?
It is worth noting that the issue of private-copy ‘fair compensation’ and the implications of the CJEU’s ruling in Padawan is also the subject of a reference from the Austrian Supreme Court to the CJEU, see Case C-521/11, Amazon – Austrian private-copy ‘fair compensation’ and EU copyright law.
Equally, the private-copy ‘fair compensation’ levy is also the subject of a reference from the Danish Østre Landsret, see further Case C 463/12, Copydan Båndkopi – Danish private-copy ‘fair compensation’ and EU copyright law.