The matter at hand
Copydan is the Danish collecting society responsible for the collection and distribution of the private copying levy. It has brought proceedings against Nokia claiming that Nokia should be ordered to pay a levy in respect of memory cards imported in the period from 2004 to 2009. These memory cards are contained in mobile phones and can be used to store copyright protected files such as music, films and other works. The mobile phones containing the memory cards are sold to business customers who sell them on to both individuals and other business customers. Nokia contends that a private copying levy is not payable where the reproduction is not lawful or where use of the reproduction is authorised by the rightholder. According to Nokia, only lawful reproductions for private use that are not authorised by the rightholder should be subject to the fair compensation system. Nokia claims that mobile telephone memory cards rarely contain such copies.
The Danish court refers a number of questions to the ECJ regarding, inter alia, the private copying levy in connection with licensed content, the use of which has been authorised by the rightholder; the effect of technological measures on the amount of fair compensation; the question what constitutes minimal prejudice which does not call for a compensation; how to handle a situation where private copying is not the primary or most essential function of mobile telephone memory cards; and how to apply the private copying levy system when it comes to professional use of storage media.
The judgment of the ECJ
The ECJ first establishes, referring to previous case law, that Member States which have decided to introduce the private copying exception into their national law, are required to provide for the payment of fair compensation to rightholders. Since Member States enjoy broad discretion in that regard, it is for them to determine who must pay the compensation and to establish the level of compensation. However, the level of compensation must be linked to the harm resulting for the right holder from the making of copies for private use (paragraphs 19 to 21).
In principle, the person reproducing a work for his own private use is liable to finance the compensation. The ECJ has however accepted that, given the practical difficulties in identifying private users and obliging them to compensate the rightholders, it is open to the Member States to establish a system where the private copying levy is not charged to private persons, but to those who make available the digital reproduction equipment, devices and media (paragraphs 22 and 23).
It is subsequently considered that ''it is unnecessary to show that natural persons in fact make copies for private purposes with the aid of such equipment. Those persons are rightly presumed to benefit fully from the making available of that equipment, that is to say, they are deemed to take full advantage of the functions associated with that equipment, including copying. It follows that if digital reproduction equipment, devices and media are made available to natural persons as private users, the simple fact that that equipment is able to make copies is sufficient in itself to justify the application of the private copying levy'' (paragraph 25)
For these reasons the ECJ concludes that ''it is irrelevant whether a medium is unifunctional or multifunctional or whether the copying function is ancillary to the other functions, as the final users are deemed to take full advantage of all the functions provided by the medium'' (paragraph 26). However, the significance of the copying function as opposed to other functions of the device in question can be relevant for the amount of compensation. Where the harm caused to rightholders is minimal, no obligation to pay a compensation will arise (paragraphs 27-28). It is within the discretion of the Member States to set the threshold for what is considered minimal prejudice, it being understood that that threshold must be applied in a manner consistent with the principle of equal treatment.
The ECJ also elaborates on the application of the private copying levy in situations where the use of recording media does not meet the criteria of the Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (e.g. professional use). The ECJ reiterates that the private copying levy may be applied indiscriminately, irrespective of the final use of recording media, provided that (i) this is justified by practical difficulties, such as difficulties associated with identifying the final users, and (ii) that the persons responsible for payment have an effective right to reimbursement of the levy where it is not due. Further, (iii) the levy cannot be applied to the supply of reproduction equipment, devices and media to persons other than natural persons for purposes clearly unrelated to private copying. It is up to the national courts to determine whether the private copying levy system meets these requirements (paragraphs 49 and further).
The ECJ further investigates the effects of the fact that the rightholder has given his consent to make private copies of files containing protected works, in particular in so far as concerns fair compensation. The ECJ considers that where a Member State has decided to introduce a private copying exception and exclude ''any right for rightholders to authorise reproduction of their works for private use, any authorising act a rightholder may adopt, will be devoid of legal effects. Consequently, such an act has no effect on the harm caused to rightholders due to the introduction of the measure depriving them of that right and cannot, therefore, have any bearing on the fair compensation owed. Neither can it give rise to an obligation to pay remuneration of any kind in respect of the reproduction for private use by the user of the files concerned to the rightholder who authorised such use'' (paragraph 66).
With regard to the implementation of technological measures the ECJ recalls that such measures are of a voluntary nature and that ''the non-application of those measures cannot have the effect that no fair compensation is due'' (paragraph 71). It concludes that ''it is open to the Member States to make the actual level of compensation dependent on whether or not such technological measures are applied, so that rightholders are encouraged to make use of them and thereby voluntarily contribute to the proper application of the private copying exception'' (paragraph 72).
With regard to reproductions from an unlawful source, the ECJ reiterates that the Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society precludes national legislation which does not distinguish the situation in which the source from which a reproduction for private use has been made, is lawful from that in which that source is unlawful (ACI Adam, C-435/12). That would ''not respect the fair balance to be struck between the interests of the copyright holders and those of the users of protected subject-matter since all the users who purchase recording media subject to that levy are indirectly penalised'' (paragraph 77), since they ''inevitably contributing towards the compensation for harm caused by reproductions which are not permitted under the Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society'' (paragraph 78).