According to Article 5(2)b of the EU Copyright Directive, copyright owners are entitled to a fair compensation if private copying is exempt from copyright protection by national law. In the Netherlands, copyright holders are compensated by a system in which manufacturers of carriers are required to impose levies on their products. The revenues of these levies are paid to Stichting De Thuiskopie, which divides the revenues among all copyright holders as compensation.
The dispute between ACI Adam and other manufacturers of carriers and De Thuiskopie is centred on the question: when determining the amount of the levy, should only the copies from lawful sources be taken into account?
The Dutch Copyright Act does not differentiate between lawful and unlawful sources. When adopting a private copying levy system, the Minister of Justice held that collecting remuneration from consumers who are copying is, in addition to the privacy concerns, in practice impossible. Because of this statement, the Dutch Court of Appeal was of the opinion that the exemption also applies to copies from unlawful sources. The Supreme Court, however, ruled that the interpretation of the Directive is decisive and referred questions to the ECJ on whether the private copying exception includes copies from unlawful sources.
First and foremost, the ECJ stated that according to the settled case law of the Court, the provisions of a directive which derogate from a general principle established by that directive must be interpreted strictly. If the member states had the option of adopting legislation which also allowed reproductions for private use to be made from an unlawful source, the result of that would clearly be detrimental to the proper functioning of the internal market. Similarly, the objective of proper support for the dissemination of culture may not be achieved by sacrificing strict protection of copyright or by tolerating illegal forms of distribution of counterfeited or pirated works. Consequently, the ECJ held that national legislation which makes no distinction between private copies made from lawful sources and those made from counterfeited or pirated sources cannot be tolerated.
The ECJ also argued that the levy system introduced by the member state concerned must safeguard a fair balance between the rights and interests of authors, who are the recipients of the fair compensation, on the one hand, and those of users of protected subject-matter on the other. The condition of a fair balance is not satisfied when users have to pay a private copy levy which also includes compensation for the harm caused by reproductions from an unlawful source.
The strict and formal ruling seems to ignore the enforcement in practice and leaves important issues unanswered.
What about the privacy aspects? If the private copy exemption does not include reproductions from an unlawful source, the only way for copyright holders to receive remuneration will be the enforcement of their exclusive right. This will give rise to privacy-invasive enforcement of copyright against consumers, such as continuous monitoring and deep packet inspection of data traffic of consumers, which would surely be undesirable.
The ECJ’s reasoning regarding the fair balance between the rights and interests of authors and those of users of protected subject-matter is remarkable. The ECJ argues solely from the angle of the users. Users should not pay for harm caused by private copies made from unlawful sources at all. Here the ECJ seems to lose sight of the fact that users also profit from downloading from unlawful sources. The reality is that a lot of times it is not obvious for users if the reproduction stems from an unlawful source.
The ruling does not have an impact on the revenues from the private copy levy in the Netherlands. These revenues are in line with other EU countries, where private copies from unlawful sources are not taken into account. However, it could lead to liability of the Dutch state for copies made from illegal sources, because of the Dutch State failing to implement the copyright protection prescribed by the Copyright Directive. Also, if courts were to apply the Dutch Copyright Act differently as a result of this ruling, this could mean that downloading from illegal sources is an infringement in the Netherlands, as of today.
Tobias Cohen Jehoram and Vivien Rörsch of De Brauw represent De Thuiskopie before the Supreme Court and the European Court of Justice.