Private copying levy

A private copying levy (also known as blank media tax or levy) is a government-mandated scheme in which a special tax or levy (additional to any general sales tax) is charged on purchases of recordable media. Such taxes are in place in various countries and the income is typically allocated to the developers of "content". (A distinction is sometimes made between "tax" and "levy" based on the recipient of the accumulated funds; taxes are received by a government, while levies are received by a private body, such as a copyright collective.)

Levy system may operate in principle as a system of collectivisation, partially replacing a property approach of sale of individual units.

A common misconception

Levies are often considered a compensation for illegal downloading and file sharing. This is a mistake however: levies are not an advance for fines. Levies only intend to compensate for copies in the private sphere that are legally allowed in many jurisdictions. A notable exception in Europe is the UK, that does not allow private copies. But generally legislators allow private copies for two reasons: firstly, because otherwise the enforcement would be unfeasible for private reasons, and secondly because the administrative burden would be disproportional.

Questions on fairness

If one buys a CD, and makes a copy on a MP3 player to listen to it when outdoors, should the author be compensated once more for this copy? According to age-old copyright principles the answer is affirmative: any copy represents a "multiplication" in the sense of copyright law. Those principles date from an era when copying required expensive, professional equipment. Should the old legal rule be maintained now that copying technology is pervasive? Some people find it hard to believe that payments are due for private copies of legally obtained material. Yet, that is the basis for levies.

A difficulty that immediately arises is the practical impossibility of devising a mechanism for distributing the proceeds to copyright holders that is considered "fair" by all copyright holders and consumers. Implemented systems are typically restricted to music and may distribute the proceeds proportionally to a measurement of sales of CDs in music shops or amount of air-play on radio or the like. This ignores other distribution channels such as the Internet, and it disproportionally benefits popular artists and publishers of the related products. Fairer methods would arguably involve extensive sampling of purchasers to determine actual recording behaviour, or alternatively paying all musicians at a simple flat-rate (the preferred method will depend on ones political views).

While the prime purpose of levy systems is to compensate authors, some part of the collected money is also used for general cultural funding purposes. In Germany this is even required by law. It acknowledges the purpose of cultural diversity - which is not necessarily identical to free market effects. This funding is usually executed by the same entities (collecting societies) that distribute the levy money to individual authors. One may question however whether these entities are properly qualified to make culture policy.

Perhaps more fundamentally, a copyright owner is entitled to decide how his work should be exploited: it is a property, and property is protected by human rights principles. Levy systems assume that all authors want to exploit their work for money. realistically this is not nearly true however on the Internet. Many authors do not write to entertain, but to inform readers, listeners and viewers. Often their purpose is to reach the widest possible audience rather than make the maximum profit from the copyrighted work by itself. The discrepancy between reality and the assumption underlying a levy system is growing as "web 2.0" matures, with pervasive user-supplied content, from Wikipedia to YouTube. Of course, some of that material may violate copyright, but most of it is completely original in the copyright sense, and protected under copyright. But not intended for commercial exploitation.

A further problem is to find a proper tariff base for levies. Conceivably the levy may be a percentage of storage media sales price (e.g. 3% in the US). The implication of such a scheme is however that the author gets ever less as technology proceeds and becomes less expensive. But a price based on units of information (bits, or megabits) is not fair either, as for instance a DVD can be used to store a film, a computer game, a large amount of documents, or measurement data. The cost of producing a certain amount of bits widely varies by type of information. Measurement data is even not copyrighted at all. Yet in today's world of converging technology, storage media can be used for a wide range of purposes.

An implementation question that arises is whether the tax applies to any type of copyrighted work or is restricted to a limited field such as music. If it is restricted then the issue arises of how to collect the tax on media which can also be used for other purposes. The options include:

• Collecting the tax on all media, regardless of the end use, and ignoring the injustice to purchasers with non-covered uses.
• Allowing taxed and untaxed media to be sold, but with only the taxed media providing the copyright-relaxation benefits.
• Collecting the tax on all media but allowing purchasers to claim a refund for media applied to non-covered uses.

Legal effects

It is theorized that such levy may be linked to a corresponding relaxation of copyright law, by permitting the recording of copyrighted works on media for which the tax has been paid. However, there is little evidence to support this theory. On the contrary, lobbyists representing publishers and copyright holders have increased pressures to implement more restrictive laws, even on countries that have implemented private copying levy. In 2007, it was reported that International Intellectual Property Alliance put 23 of the world's 30 most populous countries into Priority Watch List, even though the United States, which was not in the list, has laws that are more liberal than the laws from the countries within the list.

Even when restricting levy system to devices that primarily play music, this itself creates loopholes that prevents collecting levies from cellphones, PDAs, and other all-in-one portable electronic devices. As a result, copyright holders will have to rely on even more laws to collect levy, and to increase rates of already levied product to recover perceived losses, which run against the political trends toward eliminating levy systems.

Regulations

Examples of countries operating such schemes:

Australia

Australia does not have a private copying levy. Although legislation to create one was passed in 1989, it was declared unconstitutional in Australian Tape Manufacturers Association Ltd v Commonwealth.

Belgium

In Belgium a fee is charged on both blank media and recording equipment which is passed on to "Auvibel", which is in charge of distributing the funds.

• Audio
  • Audio recording equipment, such as a tape recorder: 3% of the sales price
  • Integrated audio equipment, such as a Radio-tape recorder or HIFI: 1.5% of the sales price
  • Analogue media, such as an Audio tape: € 0.10/hour
  • Digital media, such as an Audio CD or Minidisc: € 0.23/hour
• Video
  • Video recording equipment, such as a VHS or DVD-Recorder: 3% of the sales price
  • Integrated video equipment, such as a DVD player with video recorder: 1.5% of the sales price
  • Analogue media, such as a video tape: € 0.10/hour
  • Digital media, such as digital tape (Digital8, DV, etc): € 0.1239/hour
• Multimedia
  • blank CD-R, CD-RW: € 0.12/disc
  • blank DVD-R, DVD+R, etc: € 0.59/disc

Canada

A blank media levy was introduced in Canada in 1997, by the addition of Part VIII, "Private Copying", to the Canadian Copyright Act. The power to set rates and to set the distribution allocation is vested in the Copyright Board of Canada. The Copyright Board has handed the task of collecting and distributing the funds to the Canadian Private Copying Collective, which is a non-profit private organization.

In Canada:

• The levy applies to "blank audio recording media", such as CD-Rs.
• The levy is paid by importers and manufacturers of such media sold within Canada (and typically passed on to the retailer, and passed on to the purchaser).
• The levy is collected regardless of the purchaser's end use of the media.
• The private copying levy is distributed as per the Copyright Board's allocation as: 66% to eligible authors and publishers,18.9% to eligible performers and 15.1% to eligible record companies.
• The Canadian Private Copying Collective has developed a methodology by which the proceeds are distributed to rights holders based on commercial radio airplay and commercial sales samples, ignoring radio/college airplay and independent record sales not logged by Soundscan. This methodology has been criticized as favouring major-label artists at the expense of the long-tail. As of September 7, 2007 over one hundred million dollars has been distributed.
• In conjunction with the levy, the Copyright Act allows individuals to make copies of sound recordings for their own private, non-commercial use. They may not distribute the copy.
• On December 17, 2004, a Canadian judge ruled that the blank media tax no longer applied to MP3 players such as Apple Inc.'s iPod. Before this, the rates were $2 for players with less than 1 GB of capacity, $15 for players up to 15 GB, and $25 for players 15 GB and over.
• On 2007-2-12, CPCC asked the Copyright Board of Canada to reintroduce the levy of $5 to $75 into the sale price of MP3 players in Canada.[1] In addition, CPCC also proposed levies of $2 to $10 for memory cards (since withdrawn), 8 cent increases to CD, CD-R Audio, CD-RW Audio and MiniDiscs.[2]
• On 2007-9, Canadian Recording Industry Association filed lawsuit to Federal Court of Appeal to repeal private copying levy, claiming it legalizes copying for the private use of the person making the copy, regardless of whether the source is non-infringing or not.[3] On 2007-10-26, the court granted CRIA's request to intervene in the private copying/iPod levy judicial review.[4]
• On 2008-01-11, The Federal Court of Appeal rejected the Copyright Board of Canada's proposed new levy on MP3 players, stating that the board erred in law, ruling that they do not have the regulatory authority to impose such levies. [5]

Canada's current levies are as follows: $0.24 per unit for Audio Cassette tape (40min or longer); $0.21 per unit for CD-R Audio, CD-RW-Audio & MiniDisc; $0.21 per unit for CD-R, CD-RW (non audio). In 2009 the levy on CDs and MiniDiscs will rise to $0.29.

Finland

It has been said that Finland's blank media fee is one of the highest. As of 2008, the fees are (in Euros):

• €0.005/min for analog audio tapes (e.g. €0.30 for a 60 minute cassette)
• €0.0076/min for analog video tapes (e.g. €1.37 for an E180 tape)
• €0.20 per disk for CD and MiniDisc (capacity: up to 1 GB)
• €0.60 per disk for DVD, DVD-RAM, DVD-R DL and DVD+R DL (capacity: from 1 GB to 10 GB)
• €1.20 per disk for Blu-ray Disc and HD DVD (capacity: over 10 GB to 25 GB)
• €1.80 per disk for Blu-ray Disc and HD DVD (capacity: over 25 GB)
• €4 to €21 depending on capacity of digital audio players or personal video recorders.
  • €4, memory up to 512 MB
  • €7, over 512 MB to 1 GB
  • €10, over 1 GB to 20 GB
  • €12, over 20 GB to 50 GB
  • €15, over 50 GB to 150 GB
  • €18, over 150 GB to 250 GB
  • €21, over 250 GB

There is no levy fee on mobile phones, computers, memory cards, USB memory and 8 cm CD/DVD disks.

Germany

The world's first private copying system was created in Germany in the 1960s. It was a result of earlier successful litigation by GEMA against an audio equipment manufacturer in GEMA v. Grundig.

Netherlands

In the Netherlands a fee is charged on blank media which is passed on to "Stichting Thuiskopie" (Foundation Homecopy), which is in charge of distributing the funds. Fees for February 17, 2007 until January 1, 2009 are as follows;

• Data CD-R/RW: € 0.14 per disc
• Audio CD-R/RW: € 0.42 per hour (€ 0.52 per 74 minutes)
• Blank DVD-R/RW: € 0.60 per 4.7 gigabyte
• Blank DVD+R/RW: € 0.40 per 4.7 gigabyte
• Blank DVD-RAM: exempt
• Video analog (video tapes): € 0.33 per hour
• Audio analog (cassette tapes) € 0.23 per hour
• MiniDisc: € 0.32 per hour
• HI-MD: € 1.10 per carrier

Sweden

In Sweden there is a fee called "privatkopieringsersättning" (private copy retibution) earlier called "kassettersättning" (cassette tape retribution) on compact cassettes, blank CDs, blank minidiscs and other storage media. The fee is 2.5 öre (0.025 SEK) per minute of storage for analog media or 0.4 öre per MB for re-recordable media or 0.25 öre per MB for write once media. The money collected (224436151 SEK as of 2005) is handled by Copyswede.

United States

Audio home recording in general

17 USC 1008, from the Audio Home Recording Act of 1992, says that non-commercial copying by consumers of digital and analog musical recordings is not copyright infringement. Non-commercial includes such things as resale not in the course of business, perhaps of normal use working copies which are no longer wanted. It's unlikely to include resale of copies in bulk and Napster tried to use the Section 1008 defense but was rejected because it was a business.

From House Report No. 102-873(I), September 17, 1992: "In the case of home taping, the [Section 1008] exemption protects all noncommercial copying by consumers of digital and analog musical recordings" .

From House Report No. 102-780(I), August 4, 1992: "In short, the reported legislation [Section 1008] would clearly establish that consumers cannot be sued for making analog or digital audio copies for private noncommercial use".

The AHRA was based on the understanding that consumers were not liable for copies to taxed blank media using taxed digital audio tape recorders. It is a logical stretch to assume that this attempt at exemption covers copying using untaxed media and untaxed devices.

The United States music industry does very well in administering Audio Home Recording Act and foreign hometaping royalties for artists on US sound recordings as well as US record labels. These royalties are administered by The Alliance of Artists and Recording Companies for featured artists and copyright owners, ASCAP/BMI/SESAC for writers, and Harry Fox Agency for publishers. AFM and AFTRA also contribute to retrieving foreign funds.

Blank music CDs and recorders

17 USC 1008 bars copyright infringement action and 17 USC 1003 provides for a royalty of 3% of the initial transfer price. The royalty rate in Section 1004 was established by the Fairness in Music Licensing Act of 1998. This only applies to CDs which are labeled and sold for music use; they do not apply to blank computer CDs, even though they can be (and often are) used to record or "burn" music from the computer to CD. A similar royalty applies to stand-alone CD recorders, but not to CD burners used with computers.

Thanks to a precedent established in a 1998 lawsuit involving the Rio PMP300 player, MP3 players are deemed "computer peripherals" and are not subject to a royalty of this type in the U.S.

External links

• Copyright Act of Canada
• Copyright Board Canada
• Canadian Private Copying Collective
• CopySwede
• The Finnish site for Private copying levy