EU Private Copying: Situation Report - Germany

09 Jun 2015

Credits: marfis75@flickr

With a UK High Court Appeal ruling expected any day on the issue of fair compensation for rightsholders for private copying – and ahead of our forthcoming 25th June industry debate proposing a new artist compensation model for private copying – MusicTank continues its analysis of private copy compensation systems within the EU, this time turning its attention to Germany

Representing the largest recorded music industry in Europe, Germany has been highly influential in laying the foundations for private copy exception, and as such, takes a polar opposite view to Spain and the UK when it comes to compensating rights holders for private copying.


History

Historically, private copying wasn’t an issue for music and other creative industries.  The tools once required to produce a copy of an artform were too costly, with the copy itself of poorer quality and bearing little resemblance to the original artefact.  Private copying was considered de minimis – and act carried out in private and causing only minimal harm, if any, to the authors of the art form. It was even believed that authors’ rights “…should not impinge upon what is done in the purely private sphere…” (Ricketson, 1987).

The tide turned in 1955, with the advent of home-taping becoming widespread and governments of the day noticing that rightsholders were indeed experiencing loss of income because of it.  The German Supreme Court ruled that home-taping constituted copyright infringement because it was not covered by the German Copyright Act of 1901.

Yet despite having acknowledged home-taping as an act of copyright infringement, the German government couldn’t adopt a remedy immediately.  In 1964, the German collecting society GEMA made an appeal requesting purchasers of audio recording equipment to show their identification papers (‘Personalausweise’) to the sellers of the equipment to prove that they possessed a (paid-for) license for home-taping.

The German Supreme Court responded by ruling that such a measure would represent a violation of the constitutional right to privacy according to Article 13 of the German Constitution.  Therefore, another alternative approach to combat private copying had to be taken.

In 1965, the German legislature passed the statutory right for equitable remuneration to combat the economic harm done to rightsholders by private copying resulting in the implementation of a consumer levy on home-taping, with the collected levy re-distributed to rights holders through collecting societies.  In so doing, Germany became one of the first EU member states to implement a compensation system for private copying.  Thus the concept of ‘fair compensation’ – an integral and controversial component of the EU Parliament’s Copyright Directive – has its intellectual origin in these rulings, with Germany’s model becoming the blueprint for compensation systems that many other EU countries subsequently adopted.nland


Present Situation

Germany imposes a fixed-rate levy on the sale of devices that can be used for private copying and is renowned for having one of the highest levies on recording devices of all EU member states.

However, it is also interesting to note the relationship between retail price and levy.  In a 2011 study, Professor Martin Kretschmer found that for a 64GB iPhone, regardless of the high indirect tax imposed (the levy), German consumers still paid a competitive price for the product, compared to France and Scandinavian countries where it cost much more.  This study revealed that a product’s retail price is not necessarily dependent on the level of indirect tax but rather on the market conditions and the consumers’ willingness to pay.  While some argue that the levy puts too much burden on consumers, it is not the only factor affecting consumer behaviour.

In January 2014, the Federal Association for Information Technology, Telecommunications and New Media (BITKOM) and the Central Organisation For Private Recording Rights (ZPÜ) concluded an extensive legal debate and agreed on implementing different copyright levy rates to differentiate between copying for private and commercial use.

This agreement was influenced by the decision of the Court of Justice of the European Union in the Padawan vs. SGAE case, in which a distinction between commercial and personal use of computers was drawn.  The decision saw that imposing a levy that does not discriminate between personal and commercial use does not comply with the EU Parliament’s Copyright Directive, the legal base for copyright rules of EU member states.

Subsequent reviews of copyright laws in Germany, including the ‘Second Basket’ of revision that includes all devices capable of duplicating content including mobile phones and computers, have similarly set precedents for other member states.


Comparison With The UK

The UK has just recently conducted a judicial review of its adoption of Private Copy Exception without ‘fair compensation’ to rightsholders.  Undoubtedly, the UK is very late to the party with the majority of EU member states having long since implemented some form of compensation system for private copying and the UK’s current pre-judicial review stands in stark contrast to that of Germany.

Private copying was technically unlawful in the UK until the introduction of the recent exemption.  Making copies of lawfully purchased music was itself an act of copyright infringement and by definition, there was no conversation to be had concerning ‘fair compensation’.

However, implementation of the Private Copy Exception on the 1st October 2014 without compensating rights holders represents a huge swing from one extreme to the other. Germany went through several revisions of its copyrights laws.  Most of them were made due to pressures from the music and device industry, such as the BITKOM and ZPÜ case. Having those changes allow Germany to substantiate its copyright laws using real cases.  In contrast, the UK doesn’t have that experience.

One of the criticisms of the levy model is that the amount taxed is based on seemingly arbitrary decisions.  Germany imposes a fixed-rate levy on devices that can be used for private copying; other states used a percentage-based levy.  However, there is no uniform factor or set of criteria used to determine the level of a levy across the EU.

Without any compensation system currently place, and considering the advent of access-based models of consumption, the UK is in a position where it can adopt a new, more suitable model of compensation, which could set a precedent for other member states.

The physical format still dominates the German music market.  According to the IFPI, ‘physical’ makes up 70% of the German recorded industry market share.  These sales are mainly driven by box sets/ gifts and the purchase of heritage artists’ back catalogue by an older consumer demographic.  These factors contribute to the German Government’s rationale for the imposition of a high levy on devices that facilitate private copying.

Here in the UK, digital sales have overtaken those of physical which now accounts for 48.8% of the recording industry, providing the UK with more of an incentive to pioneer changing the fundamentals of private copy compensation systems.


So why didn’t the UK follow Germany’s example? 

The answer to this remains contentious, but there are two points consider.

Firstly, UK Government is of the opinion that any economic harm done to rightsholders from private copying is minimal – similar to Germany’s stance before introducing the levy.  Secondly, they also claim that rightsholders can benefit from the additional value that consumers derive from private copying by increasing the price or sales of their work. However, there is no empirical evidence to support this argument – and in the UK at least, the unit price of formats such as CDs has fallen significantly in the last decade.

It is also worth mentioning that Germany’s engineering prowess meant that it was at the forefront of private copying law because some of their innovations facilitated private copying.  In this context, it is perhaps understandable why its government has such a stringent approach to private copying law, although some argue that it is too static to respond to technological changes.


To sum up…

Considering its history, the levy system seems to be the most viable option at present for Germany.  It is even seen by some as a ‘last-resort compromise’ to compensate rights holders.  Added to this is the fact that physical format sales are still very important to sustain its record industry.

It is by no means the ideal system, given how the German government receive constant appeals from collection societies and trade associations who seek to completely abolish the levy.  As for the consumers, although there is no specific data about consumers’ knowledge on levies, German consumers still pay a competitive price for devices compared to other member states with similar levies.

From the EU’s perspective, the levy’s suitability as a compensation system is being questioned.  Some member states, such as Spain, have abandoned the levy for other, arguably less robust or transparent modes of compensation to rightsholders.  It remains speculative if Germany will change its compensation system when an EU-wide re-evaluation of compensation system fundamentals takes place.

Influence from the UK, a country with a huge recording industry (like Germany), and now awaiting a High Court Appeal ruling on the issue, could be one of the defining factors.

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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