EU Private Copying: Situation Report - Finland

23 Jun 2015

Credits: Skley@flickr

In the lead up to MusicTank’s forthcoming event Private Copy Exception: Rightsholders And Remuneration, we’ve been looking at other EU member states’ approaches to compensating rights holders for private copying.  The country of focus for this post is Finland.

Unlike Germany, Finland has abandoned the levy system in favour of a government remuneration scheme – a system similar to that of Spain.  Many have praised Finland’s move as it is encouraging other EU member states away from what is increasingly perceived as an anachronistic levy on devices and blank media.

But is the Finnish Government’s scheme any better?  In order to answer that question, let us first look at how Finland has dealt historically with the issue of private copying and how its compensation systems have evolved.

 

History

Like most EU member states, Finland originally used the levy to compensate rights holders for private copying.  Finnish performance rights organisation Teosto was highly influential in the implementation of the levy, which became law on the 15th June 1984.  Ten years prior to implementation, Teosto suggested that surveys on home-taping be conducted, which were later to be followed by other Nordic countries.

The result justified the need for levy on blank cassette tapes whose adoption in Finland was incredibly rapid, with three out of four Finns able to play them at their home.  This adoption rate was higher than most other industrialised countries, where on average two out of three people owned a cassette player.

Unlike England, where home-taping consisted of copying a mix of radio and recordings, the speed of adoption was partly due to the increase in airtime for popular mu sic in radio, especially from European publicly funded stations, the availability of illegal music broadcast stations operating around the coastlines of northern Europe, and the relative high cost of vinyl and record players.

Young Finns and rock fans in particular were now able to overcome the seven-hour per week cap on broadcast rock music by the Finnish Broadcasting Company, as they turned to affordable cassette tapes to record and listen to their favourite music.

At that time, Finland exhibited a direct relationship between sales of blank tapes and the amount of private copying.  Consequently the levy became a justifiable and effective tool.  In 1985, only a year after the blank tape levy was introduced, the collected revenue amounted to US $5.3 million, exceeding the revenue collected for mechanical rights in the same year, with the revenue increasing to US $7 million the following year.  Compact cassettes and VHS tapes were the first media to be levied and as technology improved, the levy was broadened to also include devices and media that are ‘suitable for recording’.

In order to comply with the 2001 European Union Copyright Directive, the Finnish Copyright Act underwent revision and was accepted by Finnish Parliament in 2005.  It was the twenty first amendment of the Act and the first to address the issue of ‘digital’ head-on.  One of the elements of the 2005 revision included defining the leviable media as being that which ‘to a significant extent’ is used for private copying.

 

Finding The Right Fund

For several years Finland tried to find the most suitable compensation model for private copying.  In November 2010, the Ministry of Education and Culture published a report titled The Need To Develop The Copyright Levy System.  While the report suggested that the levy system should remain unchanged for the time being, it proposed the improvement of private copying surveys, enhancing the transparency and public credibility of the compensation system and to find ways to ease the administrative burden and decision-making inherent in any new system.

Indeed, transparency and bureaucratic processes are two major drawbacks of all levy systems.  Intellectual property lawyers Arto Linnervuo and Otto Markkanen wrote that on average, 40% of the collected levies were allocated for collection and administration purposes rather than compensating individual rights holders themselves.

In May 2012, the Ministry issued another report that proposed several new compensation systems.  At the time of the report’s publication, the proposed ‘three dot model’ was the most talked about (and criticised).  What the model fundamentally sought to achieve was to broaden the scope of the levy.  Instead of focusing only on devices, it was proposed that network-based content storage services and certain content providers be taxed, too.

The Finnish government has shown an interest in making Finland an attractive market for cloud-based industries; the three-dot model would go against that objective, as the levy could be seen to discourage cloud-based innovation.  As a result, the three dot model never came into force.

On 10th December 2014, the Finnish Parliament voted in favour of replacing the levy on devices and blank media altogether with a government remuneration scheme.  Like Spain, it was a radical change, meaning that the compensation system would no longer be based on market forces but rather on public funding, with the government allocating 11 million Euros in 2015 and again in 2016 for the compensation scheme.

Finnish MEP Henna Virkkunen described the new system as fairer for consumers and better for artists because they will get more compensation this way.” Unlike the market-based levy, the government remuneration scheme is technologically neutral and future-proof as the scheme does not discriminate against devices and blank media and would not create an uncertain and unequal market environment for upcoming technologies.

The scheme also has its critics.  General manager of authors’ rights society GESAC, Veronique Desbrosses, noted that since the scheme relies on a government budget, any cuts can lead to a decrease in the level of remuneration to rights holders.  Desbrosses also noted that after having the tax removed, device manufacturers might not necessarily pass on their saving to the consumer, instead continuing to charge the same price as when the levy was operating.

Legal advisor to the Federation of Finnish Technology Industries, Veli Sinda, highlighted that the scheme might face challenges in 2017 as the government has not allocated a compensation fund from that year, on.  Indeed, 2017’s budget will be based on a study of the development of private copying, its harm and effects, by a neutral negotiation group consisting of music industry, public authority and copyright groups.

Considering that some terms such as ‘harm’ and even ‘development’ remain vague, the budget rests upon the balance of the negotiation group.

 

Summing up…

Finland serves as a good case study on how compensation systems have evolved.  Once considered a very effective compensatory tool, the levy has since seen itself losing relevance in the digital age.

The amendments to Finland’s copyright act, where definitions are being broadened, is evidence that technology is always ahead of the regulations.  The proposed ‘three dot’ model nearly followed this pattern.  Now that the levy is scrapped, Finland need no longer rely on changing definitions.

However, the government remuneration scheme is not without fault.

While the scheme is hailed as being independent of the market forces, unlike a levy, government spending is subject to the prevailing economic conditions at any given time.  Therefore, should market forces demand the Finnish government to make budget cuts, remuneration to rights holders could decrease.

It also raises a central question about the appropriateness of government being solely responsible for fairly compensating rightsholders for private copying – blurring the boundary between free market enterprise, interbention and the State.  And with the levy system now abolished, what measures need to be taken to ensure that manufacturers pass on their savings to consumers?

Following some member states recently updating their respective copyright laws, pursuing an EU-wide reform of copyright may take on more emphasis in coming years.  Finland was long waiting a solution from Brussels on private copying, the absence of which motivated Finland to seek its own solution.  The move illustrated the urgent need to re-evaluate what constitutes ‘private copying’ in the age of streaming and cloud-based services.

Ultimately, any compensation system that member states adopt rests upon whether private copying and the resulting economic ‘harm’ done can be proved.  Unless an EU-wide solution can be agreed upon, individual member states have no choice but to maintain their own systems, creating a legal dissonance that may continue to harm rights holders.


Arya Rinaldo
, MusicTank Intern
[Edited by Jonathan Robinson, Programme Director, MusicTank]

 

ADDITIONAL READING:

EU Private Copying: Situation Report

EVENT – JOIN THE DEBATE: June 25th: Private Copy Exemption: Rightsholders And Remuneration

References

 

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