I. Introduction
The preceding speakers have provided us with interesting, partly
diverging, views and a lot of information. Discussions should, indeed,
be based on information. One gets the impression that the ongoing debate
about the continued existence of levies in the digital environment of
the Information Society has been guided, at least at times, by emotions
rather than by what seems to be needed most, also in this context: a
pragmatic approach and sound knowledge of the facts.
I am hardly in a position to present a solution or a perspective for
the future of DRM systems
and levies, which seems to be the main driver of today's workshop.
Instead, let me highlight certain parameters and principles - "the
facts" that should be kept in mind when discussing such perspectives:
what is "private copying"; what is the legal and political background
for the "levies"; and what do
DRM systems have to do with all this.
II. Private Copying
The right of reproduction has often been described as the "crown right"
of authors and other rightholders. It is this right that has determined
the name of an entire field of law: "copyright". Reproduction rights
are, at least in principle, exclusive rights to authorise or prohibit
all kinds of acts of reproduction, be they temporary, virtual or private
reproductions. This is commonplace, based on the Berne Convention, and
is also reflected in several provisions of the
EU copyright framework.
No right without exceptions, of course. The Berne Convention allows its
Contracting States to provide for exceptions and limitations to the
right of reproduction, if the conditions of the three steps test are
met. No doubt, acts of private copying do qualify as "certain specific
cases", one of the conditions of that test. And, indeed, most
jurisdictions, one way or another, exempt or limit the application of
the reproduction right for acts of private copying.
III. The Levies
Regarding private copying, many countries around the world, including
12 out of the 15 present Member States of the
EU , have chosen to limit the reproduction right and to
"downgrade" its exclusive nature to a right of equitable remuneration.
This right is administered collectively by collecting societies and
levied upon recording equipment and/or blank recording support - hence
the expression "levies".
Consequently, the levies are no tax; they are a copyright royalty.
Their conditions and, in many cases anyway, their amount are defined by
national law. It is also national law that determines their
beneficiaries: entitled to a share in the levies are national
rightholders plus all those enjoying national treatment under the
jurisdiction in question.
Private copy levies were introduced for the first time in 1966 in one
of our Member States, where they then applied to recording equipment
only. Other countries followed this example applying levies to recording
equipment and/or to blank tapes. It is worth having a closer look at the
policy reasons for the introduction of private copying exceptions
combined with levy regimes in most EU
Member States.
- "Enforceability": It was obvious that, at least in the
analogue environment, the exclusive right of reproduction could either
not have been enforced at all individually, or at least not without
serious interference with the privacy of consumers. This lack of
enforceability of the exclusive right of reproduction in the private
sphere has, consequently, been an important reasoning for the levies. In
the digital environment, this element is less strong, to say the least.
- "Sharing the market": It is widely believed, and we have
heard it again earlier this morning, that the levies are to compensate
rightholders for the harm done by acts of private copying. Now, the
degree of such harm, in particular in terms of lost sales of
pre-recorded music or films, is obviously difficult to establish. Rather
than on this harm aspect, Member States have therefore based their
reasoning for the private copying levies on the economic argument of the
market share. They claim that the advent of private copying technology
has established a new market for the exploitation of copyright and
neighbouring rights. Economic beneficiaries of this market are, in first
instance, the manufacturers of recording equipment (reel-to-reel tape
recorders in the old days, and nowadays burners) and of blank support,
such as blank cassettes or CD-Rs. Member States have established levy
systems with a view to according rightholders their share of this
market. Therefore, levies are not - at least not only - perceived as a
compensation in the first place, and certainly not as a compensation for
acts of piracy.
- "Justice": This market-based argument presented by those
Member States that have equitable remuneration schemes (levy systems) in
place, has obviously also something to do with justice. It is directly
linked to the three steps test set out in the Berne Convention and other
conventions, which establishes the conditions for any limitation of the
reproduction right.
- "Equity": Another aspect, and another brick stone national
legislators have had in mind when designing levies, is the need to take
account of the large number of rightholders and their varying bargaining
power. In fact, European copyright laws grant intellectual property
rights to authors of all categories of works and to various neighbouring
rightholders alike. A number of genuine rightholders share the same or
similar rights. Many Member States hold that remuneration rights for
private copying, which are to be administered collectively, are more
beneficial in particular for small rightholders than exclusive rights
that the latter cannot exploit individually. In this spirit, levies are
the means to allow all rightholders (big and small) to participate in
the market and to ensure "equitable remuneration".
- "Easy Access": It is also claimed that the private copy
levies safeguard access by consumers to copying. They are presented as a
convenient means to provide consumers with the facility to make private
copies taking due account of the economic interests of rightholders.
Certainly, it is a political decision not to give rightholders full
control over copying in the private sphere and to safeguard easy access
to copying.
- "National treatment": As I have said before, private copy
levies are a royalty by nature, and based on a statutory licensing
scheme. It follows that its beneficiaries are determined by the national
law of the Member States applying them. The remuneration must be shared
with all (but only those) rightholders which are subject to national
treatment. This is another aspect Member States providing for levies
have had in mind.
IV. The Advent of
DRM Systems
Digital Rights Management (DRM)
systems enable digital solutions to license rights and administer
payments of royalty on an individual scale. They are the basis to
develop new (electronic) business models aiming at making available
digital content to users and also to receive remuneration for it.
Expectations in DRM
systems run high - some DRMs
are already applied on the market. Are
DRM systems then what Charles Clark had in mind with his famous
expression "the answer to the machine is in the machine"?
Today's Conference focuses on the relation between
DRM systems and private copy levies. And, in fact, some seem to
believe that the potential of
DRM systems as an
alternative option to the application of levy schemes will decide on the
success of DRMs. Is the
management of private copy royalties - either collectively on the basis
of levy schemes or individually through
DRMs - the catalyst for the success or failure of
DRM systems?
1. Views of the Equipment Industry
Equipment and hardware manufacturers, in particular, plead in favour of
"phasing levies out" and replacing them by
DRMs in the digital environment. They claim that private copying
levies put an undue burden on their price calculation; that they thus
have a negative impact on the EU 's
competitiveness; and that they result in consumers' paying twice for
certain digital products.
2. Views of Major Corporate Rightholders
In general, big corporate rightholders, such as phonogram producers and
film producers, also seem to prefer
DRMs to levy systems, as applying
DRM systems would
- give them more control over certain uses; and
- could facilitate the deployment of new business models
- Moreover, the differences between the national levy systems, in
their view, also have a negative impact on the functioning of the
Internal Market in protected goods and services.
3. Views of Small Rightholders, Collecting Societies, Specific User
Groups
Other interests (smaller rightholders, collecting societies, and
specific user groups) tend to plead in favour of the continuation of
levy systems, for reprography and analogue private copying in general,
which will not be affected by
DRMs, but also for digital private copying. The key arguments are
- Lack of Security and Interoperability:
DRMs, as for now, are in their view not yet sufficiently secure,
interoperable, and flexible to replace the remuneration schemes. This
view is, to some extent, shared between all rightholders, big and small.
- Lack of Justice: DRM
systems might be operated by big producers only, which may not pass on
the revenues to authors and other non-corporate rightholders as
collecting societies do according to their distribution keys. Individual
rights management based on DRMs
may, therefore, not ensure that all rightholders get their "fair share".
- Availability of Private Copies: Some users feel that
statutory exceptions for private copying combined with levies better
safeguard consumer interests than exclusive rights administered through
DRMs.
V. The EU
Copyright Framework
The question of how to deal with "private copying" under copyright
terms, has always been a highly sensitive issue among
EU Member States - legally, economically and politically.
The harmonisation of the "private copy schemes" was addressed as early
as 1988, in the Commission Green Paper on Copyright and the Challenge of
Technology. In its conclusions of the Green Paper consultation, the
Commission, in 1990, announced its intention to present a proposal for a
Directive on private copying in which it intended to propose a limited
harmonisation of the levy schemes. In view of the complexity of the
issue, such a proposal never saw the light of day.
In view of its close link to the harmonisation of copyright in the
Information Society, in particular as regards digital private copying,
it was decided to further pursue the issue in the context of the
proposal for a Directive on Copyright and Related Rights in the
Information Society.
When the proposal was prepared in the course of 1997, the Commission
decided to propose optional exceptions, such as for private copying,
but, again, not to harmonise the sensitive issue of "copyright levies".
As a reaction, the EP came
forward with a new concept, the principle of "fair compensation". Under
the Directive, MS are required to ensure "fair compensation" for three
exceptions to the reproduction right listed in the Directive, in
particular the exception for "private copying" (Article 5(2)(b)),
The new concept of "fair compensation" is not identical with (and
rather less strong than) the concept of "equitable remuneration", which
is usually used for describing the "levies". The term "fair
compensation" is obviously linked to the harm aspect, as Recital (35)
confirms. It allows Member States considerable flexibility in
determining the form, detailed arrangements or level of any scheme of
fair compensation. The Directive contains several indications on the
relation between the concept of "fair compensation" and the existing
levy schemes. It follows from Recitals (35) and (38) of the Directive
that Member States do not have to introduce levy schemes but that those
schemes do fulfil the condition of ensuring fair compensation. Moreover,
the Directive recognises that levy schemes for private copying may
continue "although differences between those remuneration schemes affect
the functioning of the Internal Market" (Recital 38).
Regarding digital private copying, Recital (38) states that this should
have a greater economic impact, and that therefore due account should be
taken of the differences between digital and analogue private copying
and a distinction made in certain respects between them. At the same
time, the Directive in its Article 6 provides for a framework, which
protects the use of technological measures, such as copy control devices
and digital rights management systems (DRMs),
which may also be designed to allow for, and to monitor, copying in the
private sphere and to ensure direct remuneration in the digital
environment. Probably the most obvious interface between digital private
copying and the levies is contained in Recital (39), which states that
"Member States should take due account of technological and economic
developments, in particular with respect to digital private copying and
remuneration schemes, when effective technological protection measures
are available".
This legal framework aims at ensuring that levy schemes and "fair
compensation" take into account the use of these technological systems,
as is reflected in Article 5(2)(b). However, it does not oblige Member
States to abandon levies once rightholders are technically able to
protect and seek payment on a licence basis. On the whole, the Directive
does not take a position in favour or against levies as compared to
DRM systems.
VI. The State of Play in Member States today
In 2001 and 2002, the Commission organised four informal meetings with
Member States to discuss the implementation of Directive 2001/29. And
though the Directive does not decide on the issue of levies in relation
to DRMs, it was discussed
at length. The state of play in Member States seems to be the following.
Those Member States which already provided for levies in the past (12
out of 15, the exceptions being Ireland, Luxembourg and the UK) are
likely to continue the practice of allowing private copying or
reprography combined with levy schemes, and to apply them also with
respect to certain digital products, at least for the time being - and
this as the result of lengthy and often complicated consultations with
interested parties at national level. Those Member States' arguments
are:
- No adequate alternatives: the application of
DRMs mentioned above are deemed by the Member States not yet to
be sufficiently widespread or accepted on the marketplace, particularly
by consumers, to justify any changes to the approach to levy schemes.
- The "old" policy reasons remain valid: Several MS seem to
take the view that DRMs
cannot by themselves ensure an appropriate balance between the interests
of all stakeholders involved, nor are they (or can they replace) policy
solutions based on the considerations I have outlined before, in
particular access to private copying, justice and equity between all
stakeholders. It is for policy reasons, therefore, that they apparently
prefer to continue to provide for exceptions in the public interest and
to ensure for adequate payment of all entitled rightholders via levy
systems.
VII. Conclusions
The constantly evolving management of copyright and related rights in
the digital environment through
DRM systems is a major achievement. I am confident that
technology will overcome the remaining security gaps; that the markets
will build up consumer acceptance; and that
DRM systems will eventually be successful and become the
established practice in many areas. At the same time, their fate, their
success or failure should not be measured against their potential to
replace schemes of equitable remuneration for private copying, the
levies.
The future of levy schemes depends on developments in the markets and,
to an even higher degree, on the policy decision of
EU Member States. For the time being, the various national
systems are likely to continue to provide for differences in application
of the levies, as regards the media or equipment to which they apply and
the amount charged, including differences in application to digital
media. This is due to the fact that the EC legislator decided against a
higher degree of harmonisation in this respect.
The Commission is carefully observing all developments to make sure
that any modifications to Member States' laws do not have a negative
impact on the proper functioning of the Internal Market, the development
of the Information Society, or the competitiveness of the European
economy as a whole.
The issues, and notably the issue of digital private copying, will also
continuously be tackled in the framework of the Contact Committee
established by the Directive, which, inter alia, is a forum for the
assessment of the digital market, including private copying and the use
of technological measures. The next meeting will take place this autumn.
(*) Presentation
delivered at the Conference on "The Compatibility of
DRM and Levies" (Brussels, 8 September 2003, organised by
Rightscom Ltd., London) by Jörg Reinbothe, Head of the Unit "Copyright
and Neighbouring Rights" of DG Internal Market of the European
Commission. The following remarks only reflect his personal views and do
not bind the Commission or its services.
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