Case C-521/11, Amazon – Austrian private-copy ‘fair compensation’ and EU copyright law

Is the private-copy levy system of Austrian copyright law compatible with the EC’s InfoSoc Directive 2001/29 when national law: (a) puts the levy on all blank recording-media irrespective of whether the media are marketed to intermediaries, to natural or legal persons and for use other than for private purposes; (b) offers refunds in some circumstances but not others; and (c), only pays authors half of the net ‘fair compensation’ monies collected and gives away the other half to Austrian cultural organisations?

Facts
From 2003, Amazon supplied customers in Austria with blank recording-media in the form of CDs, DVDs, memory cards, and MP3 players. Amazon was sued by an Austrian collecting society, the Austro-Mechana Gesellschaft zur Wahrnehmung mechanisch-musikalischer Urheberrechte Gesellschaft m.b.H..

The claim against Amazon totalled nearly 2 million euro. According to the collecting society, this was the amount owing on unpaid private-copy levies on recording-media sold in Austria during the first six months of 2004. Amazon.com, whose registered corporate seat is in Seattle, was the primary defendant. The co-defendants in this action were other Amazon companies registered in Luxembourg, the German towns of Bad Hersfeld and Munich, and one company that had gone into liquidation in Vienna. The co-defendants were responsible for various tasks such as warehousing and running internet websites and platforms.

Amazon not only refused to pay the bill but also denied the collecting society access to its books because that data would then be used by the collecting society to calculate the value of amounts due in respect of subsequent years of unpaid private-copy levies.

Legal proceedings ensued and in 2010 the Commercial Court in Vienna ordered access to the books, an order upheld on appeal six months later, but itself subject to a further appeal to the Austrian Supreme Court.

The Austrian Supreme Court heard the dispute and identified several issues on which it was uncertain how to interpret EU law, and to that end asked 4 broad questions of the CJEU.

Question 1 relates to the characteristics of the Austrian private copy levy. Amazon submitted that the Austrian legal regime for blank recording-media contravened EU law. The applicable Austrian rules made no differentiation as to the use of such media. This was contrary to the approach of the CJEU in Case C-467/08, Padawan. An indiscriminate application of the private copy levy to digital reproduction equipment that was not available to private users was clearly incompatible with the InfoSoc Directive. Furthermore, as result of Padawan, the levy should only be collected from traders and not from sales partners or suppliers of logistical services.

The Austrian Supreme Court noted that unlike the situation in Padawan, the Austrian system allowed for reimbursements to be made in some circumstances. For example, the levy would be reimbursed where there was export prior to sale to end users located abroad. Equally, reimbursement could be claimed where the right holder had given his permission to the use of the recording-media so that reproductions of his work could be made with his consent – beneficiaries of the refund were normally commercially active end-users which were therefore not making a ‘free use’ of a copyright-protected work.

The Austrian Supreme Court brought these issues together in Question 1, and introduced a set of alternatives in Question 2.

Question 3 deals with another aspect of the CJEU’s judgment in Padawan, namely, the rule that the rate of fair compensation must be calculated on the basis of the harm which authors suffer. In contrast, the applicable Austrian legislation required the collecting society to pay half of the monies collected to social or cultural organisations. Amazon questioned why right holders, who were suffering harm, needed to put up with the situation where they only received half of the amount of money and for the rest could only potentially make use of the social and cultural organisations benefiting from the payments made by the collecting society. Moreover, Amazon raised doubts about a legal situation in which Austrian collecting societies benefit Austrian right holders but also represent foreign right holders in Austria – were not foreign right holders in fact being disadvantaged under this regulatory set up?

Question 4 addresses Amazon’s claim to have paid an equivalent levy in Germany.

Questions Referred
According to the Curia website, the Austrian Supreme Court has asked:

1. Can a legislative scheme be regarded as establishing ‘fair compensation’ for the purposes of Article 5(2)(b) of Directive 2001/29/EC, where

(a) the persons entitled under Article 2 of Directive 2001/29/EC have a right to equitable remuneration, exercisable only through a collecting society, against persons who, acting on a commercial basis and for remuneration, are first to place on the domestic market recording media capable of reproducing the works of the rightholders,

(b) this right applies irrespective of whether the media are marketed to intermediaries, to natural or legal persons for use other than for private purposes or to natural persons for use for private purposes, and

(c) the person who uses the media for reproduction with the authorisation of the rightholder or who prior to its sale to the final consumer re-exports the media has an enforceable right against the collecting society to obtain reimbursement of the remuneration?

2. If Question 1 is answered in the negative:
2.1 Does a scheme establish ‘fair compensation’ for the purposes of Article 5(2)(b) of Directive 2001/29/EC if the right specified in Question 1(a) applies only where recording media are marketed to natural persons who use the recording media to make reproductions for private purposes?

2.2 If Question 2.1 is answered in the affirmative: Where recording media are marketed to natural persons must it be assumed until the contrary is proven that they will use such media with a view to making reproductions for private purposes?

3. If Question 1 or 2.1 is answered in the affirmative:
Does it follow from Article 5 of Directive 2001/29/EC or other provisions of EU law that the right to be exercised by a collecting society to payment of fair compensation does not apply if, in relation to half of the funds received, the collecting society is required by law not to pay these to the persons entitled to compensation but to distribute them to social and cultural institutions?

4. If Question 1 or 2.1 is answered in the affirmative:
Does Article 5(2)(b) of Directive 2001/29/EC or other provision of EU law preclude the right to be exercised by a collecting society to payment of fair compensation if in another Member State – possibly on a basis not in conformity with EU law – equitable remuneration for putting the media on the market has already been paid?

Comment
The Austrian Supreme Court referred these questions in 2011. In 2012, another case came before it only this time the defendant was an importer of computer equipment and accessories. The legal issue is whether computer hard drives fall within the scope of the Austrian private-copy levy regime. The Austrian Supreme Court has suspended these proceedings pending the outcome of the CJEU’s judgment in Case C-521/11, Amazon.

In Holland, the implications of the CJEU’s ruling in Padawan have also formed the subject of a reference from the Dutch Supreme Court. The questions concern the compatibility of the Dutch private levy system with the InfoSoc Directive, see Case C-435/12, ACI Adam – calculating private-copy ‘fair compensation’ in EU copyright law.

In Denmark, the CJEU’s ruling in Padawan was mentioned in the context of a recent reference made by the Østre Landsret, see further Case C 463/12, Copydan Båndkopi – Danish private-copy ‘fair compensation’ and EU copyright law.

Update
The case was heard by the Second Chamber on 6 December 2012. Advocate General Mengozzi’s Opinion is scheduled for 7 March 2013.

Update – 23 March 2014
According to the EUR-Lex website, the operative part of the judgment reads:

1. Article 5(2)(b) of Directive 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 must be interpreted as meaning that it does not preclude legislation of a Member State which indiscriminately applies a private copying levy on the first placing on the market in its territory, for commercial purposes and for consideration, of recording media suitable for reproduction, while at the same time providing for a right to reimbursement of the levies paid in the event that the final use of those media does not meet the criteria set out in that provision, where, having regard to the particular circumstances of each national system and the limits imposed by that directive, which it is for the national court to verify, practical difficulties justify such a system of financing fair compensation and the right to reimbursement is effective and does not make repayment of the levies paid excessively difficult;

2. Article 5(2)(b) of Directive 2001/29 must be interpreted as meaning that, in the context of a system of financing of fair compensation under that provision by means of a private copying levy to be borne by persons who first place recording media suitable for reproduction on the market in the territory of the Member State concerned for commercial purposes and for consideration, that provision does not preclude the establishment by that Member State of a rebuttable presumption of private use of such media where they are marketed to natural persons, where the practical difficulties of determining whether the purpose of the use of the media in question is private justify the establishment of such a presumption and provided that the presumption established does not result in the imposition of the private copying levy in cases where the final use of those media clearly does not fall within the case referred to in that provision;

3. Article 5(2)(b) of Directive 2001/29 must be interpreted as meaning that the right to fair compensation under that provision or the private copying levy intended to finance that compensation cannot be excluded by reason of the fact that half of the funds received by way of such compensation or levy is paid, not directly to those entitled to such compensation, but to social and cultural institutions set up for the benefit of those entitled, provided that those social and cultural establishments actually benefit those entitled and the detailed arrangements for the operation of such establishments are not discriminatory, which it is for the national court to verify;

4. Article 5(2)(b) of Directive 2001/29 must be interpreted as meaning that the obligation undertaken by a Member State to pay, on the placing on the market, for commercial purposes and for consideration, of recording media suitable for reproduction, a private copying levy intended to finance the fair compensation under that provision may not be excluded by reason of the fact that a comparable levy has already been paid in another Member State.

Comment
The ruling in Amazon is now a feature of a reference made by the Brussels Court of Appeal. See further, Case C-572/13, Hewlett-Packard Belgium – objecting to a Belgian copyright rule ‘the faster the printer, the more you owe’.

Update – 6 April 2014
In the German courts, Amazon has claimed that it does not need to pay any import tax on its Kindle devices. At the end of 2013, the German Federal Fiscal Court made a reference to the CJEU to clarify this area of EU law. See further, Case C-58/14, Amazon EU – installing dictionaries to kindle import taxes going up in flames.