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Austria: Copyright levy system declared unlawful by Court of Appeal

Whilst the Austrian courts have provided some clarity on copyright levies, clear and definitive rules are still lacking.

April 2016

Copyright levy systems operated in many EU Member States, pursuant to which levies are payable by manufacturers, importers and, in some cases, dealers of digital devices and storage media that could be used for private copying. These systems have come under intense scrutiny in recent years in terms of their suitability and sustainability in the digital age due to perceived unfairness in their operation and lack of harmonisation across the EU. Whilst there is no "right" to make private copies under any of the international copyright conventions, it has been allowed in many EU countries for practical reasons and justified through the operation of the levy system.

In 2006, the EU Internal Markets Commissioner Charlie McCreevy launched an initiative aimed at harmonising levies across the EU and reining in their use in certain Member States which were perceived as being over-zealous in their application. Whilst this initiative was discontinued that same year, it was relaunched in early 2008 with significantly more support and reviews of the systems at an EU level are ongoing.

At a national level, certain collecting societies have vigorously and tenaciously continued their pursuit of levy payments. One particularly drawn out battle has been played out in Austria where, in 2007, the Austrian collecting society Austro-Mechana sued Amazon for payment of copyright levies for all storage devices sold to customers in Austria, for the period 2002 - 2004. The amount claimed by Austro-Mechana for recording media placed on the market in the first half of 2004 was €1,856,275. Austro-Mechana also filed an information request regarding the different types of storage devices sold to customers in Austria and the volume of sales of these devices, in order to quantify its claim for the remainder of the relevant period. The application for an order to produce accounts was granted at first instance, with the decision on the claim for payment being reserved. Amazon lost its appeal against this judgment. Subsequently, in 2011, the Supreme Court submitted a request for a preliminary ruling to the CJEU on Amazon's argument that the Austrian law on copyright levies and the procedures implemented by Austro-Mechana for the collection of copyright levies were not only incompatible with the InfoSoc Directive but were also contrary to CJEU jurisprudence.

The CJEU ruled that it was permissible for a member state to indiscriminately apply a private-copying levy on equipment capable of being used for private copying when first put on the market in a national territory, for commercial purposes and for consideration, with a right to reimbursement, if practical difficulties justified such a system of financing fair compensation, and the right to reimbursement was effective. The court also held that a Member State could provide that half of the private-copying levy received was paid to social and cultural institutions set up for the benefit of those entitled to compensation, so long as those social and cultural establishments actually benefited those entitled and the detailed arrangements for the operation of such establishments were not discriminatory. Further, the requirement to pay a levy in respect of recording material could not be excluded because a comparable levy had already been paid in another member state.

Following the CJEU'S ruling, the Austrian Supreme Court annulled all prior rulings against Amazon and sent the entire case back to the Vienna Commercial Court for further deliberation and fact-finding.

EU law

In August 2015 the Vienna Commercial Court dismissed the lawsuit in its entirety, a decision which was confirmed by the Vienna Court of Appeal at the end of 2015. Essentially, the Court of Appeal confirmed that the (previous) Austrian copyright levy fees system was not compliant with EU law and did not fulfil the conditions laid down by the CJEU in its preliminary ruling. Therefore, Amazon was neither obligated to provide a rendering of accounts nor to pay any levy fees for the past. Now, the case is to be decided again by the Austrian Supreme Court, although it may be that the CJEU will get involved for another time.

The judgment of the Vienna Court of Appeal also implies that copyright levy fees are not owed from 1 October 2015 onwards, as the July 2015 novella to the Austrian Copyright Act did not touch several of the issues identified in the judgment.

Between the decisions of the first and second instance, another CJEU judgment, in case referred by the Brussels Court of Appeal, Hewlett-Packard Belgium SCRL v Reprobel SCRL, with potentially far-reaching consequences arrived on 12 November 2015. The CJEU'S judgment further emphasised the concept of (actual) harm underpinning copyright levies and inter alia stating that the InfoSoc Directive was incompatible with a national levy system which foresees that levies shall vary “according to whether or not the person liable for payment has cooperated in the recovery of that remuneration”: Austro-Mechana does give a 20% discount to businesses which enter into individual agreements to ease recovery (or demands a 20% surcharge from those who do not, depending on how someone views it). Both the pan-European copyright levies saga and its Austrian part are likely to continue for some years, and it is most unfortunate that commerce still cannot rely on clear and definitive rules.

As the matter has a high political potential and economic importance, there are two agreements negotiated between the collecting societies and the industry (represented by the Austrian Chamber of Commerce):

  • a new general agreement (“Gesamtvertrag”) applicable from 1 October 2015 onwards concerning “new media” (integrated storage in diverse kinds of computers and mobile phones, hard drives as single storage media, external memory cards, digital picture frames and smartwatches); and
  • a master settlement agreement (“Rahmenvertrag”) for the time before 1 October 2015 about the levies for the previous media.

Concerning the master settlement agreement, for the time before 1 October 2015 the negotiations are, unfortunately, considered stalled. However, the first-mentioned new general agreement was concluded mid-March 2016. Now, until 31 May 2016, every company concerned will have to decide to accept the agreement by concluding an additional single contract or to take the risk and wait for the final court decision(s).

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Austria: Copyright levy system declared unlawful by Court of Appeal
Martin Prohaska-Marchried

Martin reviews the current position of copyright levy systems in Austria and beyond.

"...the InfoSoc Directive was incompatible with a national levy system which foresees that levies shall vary 'according to whether or not the person liable for payment has cooperated in the recovery of that remuneration'"