Exemptions and compensation schemes for commercial users: Private copying levies after the CJEU’s ruling in bluechip v ZPÜ (C-822/24)

In bluechip Computer Aktiengesellschaft v Zentralstelle für Überspielungsrechte (ZPÜ), the Court of Justice of the European Union (CJEU) further determines the conditions under which EU Member States can implement the exception or limitation  for reproduction of protected works for private uses under art. 5(2)(b) of the InfoSoc Directive.

Article 5(2)(b) permits Member States to provide in their national copyright laws an exception to permit natural persons to make reproductions of protected works or subject matter ‘for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation’.

Facts of the dispute

The dispute arose in proceedings between the ZPÜ, a German association entitled by law to assert claims for reproduction of audio and audiovisual works, and bluechip, a company that manufactures, imports and trades in computers with built-in hard drives.

In the domestic proceedings the Oberlandesgericht Munich (Higher Regional Court, Munich) had ruled that, in principle, remuneration collected to ensure fair compensation could be collected from vendors in relation to devices sold to commercial end users (OLG München, 01.12.2023 - 38 Sch4 6/22 WG)). It can be presumed – a presumption that can be rebutted – that devices sold to commercial end users would also be used, directly or indirectly, for private reproduction subject to the exception or limitation of art. 5(2)(b) InfoSoc Directive. As a result, and having failed to provide evidence against the rebuttable presumption, bluechip was ordered to pay remuneration for devices sold between 1 January 2014 and 31 December 2017 based on rates set out in the relevant collective management contracts.

On appeal on a point of law, the Bundesgerichtshof (German Federal Court of Justice) made a preliminary reference to the CJEU (AZ I ZR 1/24), inquiring whether EU Member States can require manufacturers, importers or traders of storage media to pay remuneration as fair compensation within the meaning of art. 5(2)(b) InfoSoc Directive, unless these manufacturers, importers or traders can prove that reproductions with those devices ‘were, in fact made, at the very most, on a small scale by a natural person for private use on any medium, or are made in the normal course of events’.

Obligations to collect fair compensation and enable recovery of overpaid levies

The Court underlines that art. 5(2)(b) InfoSoc Directive permits Member States to require remuneration only when the devices subject to the reproduction levy are used by natural persons for uses that are not directly or indirectly commercial. The legislative ratio of this provision is to compensate for harm created by private reproductions without prior authorization from the rightholder. To strike a fair balance between the interests of rightholders and users, the existence of harm can be presumed and the mere availability of reproduction equipment to private users justifies the application of fair compensation to equipment that is made available, directly or indirectly, to private users.

Member States that implement art. 5(2)(b) into national law incur an obligation to achieve a certain result, which is to ensure that compensation for harm caused by private reproductions is actually collected. However, national legislators enjoy a large margin of discretion how and to what extent they ensure collection of compensation. This discretion also allows Member States to establish a system whereby the compensation is collected from natural or legal persons who make reproduction devices available to private users and thereby require payment of the copyright levy indiscriminately of the eventual use of that equipment. Providers of reproduction equipment can then recover those levies from private end users.

An indiscriminate application of the remuneration requirement, that under art. 5(2)(b) InfoSoc Directive can only be imposed on private users for the making of non-commercial reproductions necessitates an exemption for users who make reproductions for non-private purposes. This can take the form of an exemption from the remuneration requirement or a reimbursement scheme, the latter of which cannot be excessively burdensome or difficult. In addition, Member States can create an exception to the remuneration requirement for private reproduction where the harm caused to rightsholders is minimal (Seven.One Entertainment Group, paras 38-40). However, compensation for private reproduction can only be imposed on sellers of storage media (or any other equipment for that purpose) when it is impractical to collect the compensation directly from private users. In addition, non-private users must either be exempt from the compensation or have access to an effective reimbursement system. This applies where it can be shown that the equipment is used for purposes clearly unrelated to private copying.

Difficulties in identifying end users

The sale of reproduction equipment to commercial end users gives rise to such practical difficulties. Nevertheless, the mere sale of such equipment to commercial end users does not de facto exclude that this equipment will not be used at any point in time for private reproduction subject to the exception under art. 5(2)(b) InfoSoc Directive. Even when sold to commercial users, the actual use of a device or a storage medium will always be performed by natural persons. According to the Court’s case-law, it can be presumed that end users, even when they purchased the equipment as commercial users, ‘will make full use of those media, including the making of reproductions for private use and for ends neither directly nor indirectly commercial.’ (Copydan Båndkopi, para. 91, see here).

There are several possible scenarios here. First, reproduction equipment may be used in commercial contexts on a scale other than minimal to make reproductions subject to the private copying exception. Second, equipment purchased by commercial end users may be sold before the end of its average lifespan to private end users who then make reproductions for private uses. Trid, self-employed persons might use such equipment in commercial and private contexts. All these scenarios illustrate that determining the eventual end users and the relevant uses at the time of sale of the relevant equipment can be difficult and it is for the referring court to determine this.

Exemptions for manufacturers, importers and traders of reproduction equipment

Similarly, the national court must determine whether manufacturers, importers or traders of reproduction equipment can either be exempted from payment of compensation or can obtain reimbursement if they can present evidence that the relevant equipment will not be used for purposes covered by art. 5(2)(b) InfoSoc Directive. It is, according to that provision, possible for a dealer to benefit from an exemption if they can provide a written declaration from a commercial end user which declares that the purchased equipment will not be used for private reproductions. The veracity of such declarations must be effectively verifiable in order to ensure the effective collection of fair compensation (Ametic, paras 42 and 70). In addition, Member States that operate an exemption-based system should also ensure that they maintain an effective system for reimbursing unduly paid compensation that is not excessively difficult to navigate.

Step-by-step refining the parameters of collection modalities

The Court’s ruling is certainly one of the more unspectacular ones, as it situates the questions referred by the BGH in a well-established body of case-law on compensation for private copies. It highlights the necessity to ensure that rightholders are recompensed for harm suffered through private reproduction, which creations can be presumed – apparently – in most cases in which reproduction equipment (devices or media) is put on the market. Where Member States decide to levy equipment sold to commercial end users with such presumed-harm-based remuneration, purchasers incur the burden of proof to demonstrate that it is very unlikely that the equipment will be used for non-commercial, purely private reproductions, or at least for uses that generate minimal harm. Key to the lawfulness of such a presumption-based system are effective procedural rules and low evidentiary hurdles that enable commercial purchasers to be exempted from or at least reimbursed for private reproduction levies.

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