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Association of European Performers' Organisations Bd du Régent 58 - B 1000 Brussels Phone: +32 2 280 19 34 - Fax: +32 2 230 35 07

SUBMISSION TO THE SECOND CALL FOR COMMENTS 'FAIR COMPENSATION FOR ACTS OF PRIVATE COPYING'

April 2008

Preliminary remarks AEPO-ARTIS represents 27 European performers’ collective management societies from 21 countries. These organisations totalize some 350.000 performers as members, in all cultural fields. AEPO-ARTIS appreciates the opportunity to comment on the issues raised in this second call for comments on private copying. Complementary information can also be found in our answers to previous consultations and other communications on the same topic. We would also like to point to our 2007 Study “Performers’ Rights in European Legislation: Situation and Elements for Improvement” covering notably private copying issues in both legal and technical aspects. This study compares international, European and national legal provisions and depicts the rulings in place and well as technical management practices pertaining to private copying. The study is available on: http://www.aepo-artis.org/pages/149_1.html.

• A European Commission Background document ‘Fair compensation for acts of private copying’ dated 14 February 2008 was attached to the present questionnaire. For reasons of time constraints, AEPO-ARTIS does not comment on this document in the present submission. However, we have noticed some inaccuracies as well as biased statements that may be commented in a further document.

• As a general remark, the presentation made of private copying remuneration systems seems to overemphasize possible difficulties linked to private copying-related issues without giving precise elements to feed these considerations. In particular, we would like to recall that differences in tariffs and remuneration schemes, as can exist in all types of economic businesses, do not necessarily entail obstacles to free-market activities within the European Union.

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• AEPO-ARTIS would like to recall and highlight the fact that remuneration from actual

uses of private copying is an essential part of performers’ revenues. In this respect, some key points need to be reminded in the lines below. While leaving the choice to the Member States as to whether to introduce the exception of private use on the condition of “fair compensation” (an unfortunate terminology), Directive 2001/29/EC has certainly not contributed to any harmonization of this exception. Whilst exceptions for private copying and related remuneration systems have been put in place in the huge majority of Member States, there are still some countries where no remuneration is received by right holders for acts of private copying. This is the case in countries where no exception for private copying was introduced in the law (United Kingdom and Ireland) but also in countries where such exception was introduced in the law, without any fair compensation scheme for right-holders. Performers established in these countries would be happy to benefit from a system that recognizes the value of their work and takes into account the use made of it. Remuneration for private copying is both justified – it corresponds to an actual use of copyright content – and essential for performers. On the basis of international, European and national legislations, performers are granted a number of exclusive rights (for the fixation, reproduction, rental, communication to the public, distribution and making available of the performance). However, for lack of bargaining power, most performers have no choice but to transfer these exclusive rights under contractual clauses. As regards the audiovisual domain, in most European legislations, performers are even presumed to have waived their exclusive rights to producers unless their contract stipulates otherwise. This is even encouraged by the provisions of the Directive 92/100/EEC. In counterpart for this transfer, most performers receive only a single fee. Only the most famous performers have enough bargaining power to obtain royalties as a counterpart of this transfer of rights and receive a percentage of the recording’s exploitation. However, in a limited number of countries, collective agreements succeeded in organizing additional payments as a counterpart of these transfers for national performers. Having waived all their exclusive rights, performers still enjoy mainly two types of ‘remuneration rights’: equitable remuneration for broadcasting and communication to the public and remuneration for private copying (and, in some countries, rental right). Acts of reproduction for private copying are authorized by legislations and this use is remunerated according to legislations. Contrary to exclusive rights, private copying remuneration is shared by law between the various categories of rightholders (performers, authors, producers). This right to remuneration is not transferable. The share between the rightholders is done according to legal provisions and/or approved by national authorities. In most countries, this system cannot be contractually modified. Moreover, private copying constitutes an essential and increasing use of the work of performers that must be remunerated, while at the same moment, remuneration for traditional exploitation of recordings and employment opportunities are decreasing.

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At European level, remuneration for private copying represents in average some 35% of the total remuneration collected for performers by collective management societies. Restricting this system would deprive performers of one of the few categories of rights that are not contractually transferred to co-contractors.

• AEPO-ARTIS notes that the present questionnaire is asking for a lot of detailed information, data and figures to the bodies administering private copying remuneration as a result of protests from the ICT industry, without any precise information being given by or asked to the ICT industry about the amounts, practices and economical importance of this same private copying remuneration in their activities.

• AEPO-ARTIS welcomes constructive initiatives to contribute to homogenize some criteria in the ruling of the private copying remuneration systems in place. In the present paper we make a number of suggestions for improvement. A. Main characteristics of the private copying levy systems 1) Does Table 1 on equipment and blank media levies reflect the situation correctly? Is the information contained in Table 1 still correct? Table 1 seems to reflect correctly the current situation in a number of countries like the Czech Republic, Denmark, Finland, France, Germany, Spain or the Netherlands. However, it also needs to be completed and commented: 1/ contrary to what is stated in the Background document ‘Fair compensation for acts of private copying’ dated 14 February 2008 (p.3), in Greece the private copying remuneration system is applied as regards performers’ rights. The basis for remuneration is both equipment and blank media; 2/ differentiating between equipment and media may no more be relevant in a context of technological convergence; 3/ the data contained in the table are necessarily temporary, since the basis for payment has to be regularly adjusted according to market evolutions; 4/ the table does not reflect the fact that a number of devices used for private copying are not included in the basis for collection of remuneration. Sometimes, this is simply due to the recent introduction of such devices on the market; in other cases however, this problematic situation is due to lengthy disputes and difficulties to find an agreement with the debtors on the amounts to be paid. In addition, in order to have a full picture of the situation, the situation in Malta, Luxemburg and Cyprus should be mentioned: despite the existence of a private copying exception in the law, no remuneration scheme is in place, which contradicts the conditions set down by the provisions of Directive 2001/29/EC art. 5 2(b).

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The situation in the UK, where a project for introducing format shifting without any compensation is currently put forward, is also a matter of concern. The table below gives some complementary information that illustrates the current situation. Basis for payment of private copying remuneration Included? Mobile phones MP3 players Memory sticks

or cards External hard disks

CZ YES, for memories only

YES YES YES

DE YES (MP4-Mobiles)

YES NO NO

DK NO NO YES, on memory cards

NO

ES YES, but only those devices that are able to produce music as mp3

YES YES YES

FI NO YES NO NO FR YES (from

May 2008) YES YES YES

GR NO YES YES, but faced denial by some importers

YES

NL NO NO NO NO PL NO YES YES YES SE NO YES NO NO SK NO YES YES YES Croatia1 YES YES YES YES 2) How could the legal uncertainties as to which equipment is levied in different jurisdictions be dealt with? 3) What would be the fairest method to determine the private copying levy rate that applies to digital equipment and blank media?

• The basis for private copying remuneration is dealt with at national level and therefore not harmonized at European level. This does in no case imply legal uncertainties as to which device is levied. In this respect, the question 2 is confusing. The systems applied in each country for the setting of basis for payment and of tariffs is described in detail in our study ‘Performers’ rights in European legislation: situation and

1 Despite the fact that Croatia is not a Member State of the European Union, some information regarding this country seems to be of interest since a remuneration scheme for private copying is in place in this country that may also be concerned by cross-border trade issues.

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elements for improvement’ released in June last year (also available on http://www.aepo-artis.org/pages/149_1.html) covering 10 European countries2. In certain countries (Belgium, Czech Republic, Germany, Greece, Poland, Sweden…) tariffs are set by the law or by governmental decision. Then, the tariffs applicable are usually displayed in an annex to the IP law. In other countries (France, the Netherlands…) tariffs are set by negotiation involving all parties concerned, including the debtors. In such case, the debtors are logically informed in the first place on the basis for payment and tariffs applied, since they are part in the decision-making process. Decisions are legally binding and made publicly available. In case of no agreement between the parties, an arbitration procedure is foreseen. In Spain, the new law distinguishes between analogue and digital fields. Rates in the first sector are set by law, whereas in the digital environment, decisions are taken by negotiation between representatives of beneficiaries (right-holders) and debtors (manufacturers and importers of equipment or carrier).

• As regards the “fairest method” to determine the basis for payment and rates applicable that should reflect the value of performers’ rights, we would have the following remarks: -ruling: in all European countries with private copying remuneration systems, these methods are established and ruled by law; -method: continued technological progress deters any regulation involving the definitive listing of specific types of carriers and equipment and favours general regulations. E.g. the Belgian, the Spanish and the French legislators have provided a revisable system: on a regular basis, the public authorities revise the list of equipments and blank carriers, as well as the applied tariffs. A series of conditions established in the law need to be taken into account, amongst which the level of reproduction and further private use, the extent of the prejudice caused and the applicability and efficiency of anti-copying devices. In several countries (Austria, Belgium, Finland, France, the Netherlands, Spain, Sweden…) consumer studies and polls are carried out and serve as a basis for determining the tariffs applied, whatever the decision system. To take an example in Sweden, Copyswede makes detailed market surveys on a regular basis mapping out what the copying behaviour looks like: who is copying from what sources, what is copied and how often, what devices are used etc. The surveys constitute the basis for the negotiations with the industry determining the tariffs. In certain countries like Germany, empirical studies are commissioned by the arbitration board for setting the tariffs to get a solid basis on actual private copying practices in case the parties responsible for setting tariffs could not agree.

2 Belgium, Czech Republic, Croatia, France, Germany, Lithuania, the Netherlands, Spain, Sweden and the United Kingdom.

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The storage capacity, device durability, as well as the degree of use for private reproduction purposes in the case of multi-use devices is generally taken into account in determining the level of applicable rates. As an example, in France an MP3 player of a 1 Go capacity, which is used only for the storage of music, will be charged a remuneration of €5, while a USB key of the same capacity, which is only partly used for such purposes, will only be charged €0,22. In countries where tariffs are set by law however, adaptations to technological changes and to evolutions in consumer practices may be slower than in those countries where tariffs are set by negotiation. Whilst enhanced exchange of information about national systems and homogenous criteria for calculating tariffs at European level may be desirable, there is no problem in the systems to remain national. In particular, setting unique rates throughout Europe would make no sense since the selling prices, standards of living, consumer practices, VAT rates etc. differ greatly from one country to another; -problematic situation in certain countries concerning applicable rates: contrary to the fixed prices system in application in many Member States like France, Germany, The Netherlands, Spain or Sweden, in some other countries (Belgium, Czech Republic, Greece, Lithuania, Poland…), applicable tariffs are expressed in percentages of selling prices and not as a fixed amounts. Systems for tariff setting should take account of the fact that the price of carriers is permanently decreasing while private copying keeps on developing; -comments on Tables of EC background document ‘Fair compensation for acts of private copying’ concerning levy rates: As regards comparative Tables 2 and 3 of Annex 1 showing levy rates and retail prices on CD-R and DVD-R, we would simply point out the fact that there is no reason why differences between amounts of private copying remuneration should be considered as problematic per se, considering the existence of differences in retail prices as well. Differences in prices are the result of a competitive, open market. They also reflect a number of factors, among which differences in national GDP, standards of living or VAT rates. They do not as such hamper any cross-border trade within the internal market. As regards situations depicted in Table A1 in Annex 2 of EC background document about levy rates applying to digital devices, we received the following comments or complementary information:

- In the Czech Republic the levy for digital music player with HDD is 3% of the sale price (€7,77). It is €0,22 for each 512MB (€1,76) for a digital music player with flash memory.

- In Finland the levy for 1-20 GB audio and video devices is €10. The lowest is €4 (-512 MB) and highest €21 (250GB-). Tariffs on digital media are based on recording capacity (MB or GB).

- In Spain the indicated rates are correct according with the current provision in the Law. However such provision is a transitory measure. The forthcoming approval of a joint ordinance from the Ministries of Culture and Industry containing the final rates for digital equipment and carriers will certainly introduce changes.

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-obstacles to proper implementation of rules and suggestions for improvement: Some debtors have showed excessive delays in displaying information and reluctance to pay the amounts owed. Excessive contestation of obligations to pay has especially been observed as regards multifunctional devices. Moreover, disputes over basis for payment regularly entail lengthy procedures (from expert analysis to legal actions) and delays in collection from users and further distribution of remuneration to rightholders. In some countries, users are not obliged to pay as long as no agreement is found on tariffs, not even on escrow. As a consequence, users carry on with their activities without paying until an agreement is found by arbitration or failing that by court of justice, and the remuneration owed can be very difficult to collect upon dispute settlement. In order to prevent and avoid any recourse to lengthy lawsuits, we would encourage exchange of information between companies and collecting societies and recommend some improvements to strengthen monitoring and control of the systems. Please see our detailed suggestions to solve problematic situations in this respect in answer to Questions 18-19 below.

• As regards information about applicable systems and tariffs, it is publicly available. The bodies responsible for payment can consult directly the state bodies or other organisations responsible for setting up the tariffs, depending on national situations. They can also turn to the collective management organisations responsible for collecting the remuneration. Information is also available on a number of official journals and websites, professional publications and some consumer organisations’ websites3. Below are some examples of sources of information publicly available: -Legal act / published governmental decision (in the Czech Republic, Greece, Poland, Slovakia…) -Website of the relevant Minister (ex.: websites of Ministry of culture in Denmark, Spain http://www.mcu.es...) -Organisations in charge of, administering the private copying remuneration and their websites. Below are some examples for reference: 3 In addition, the yearly International Survey on Private Copying by the Dutch organisation Stichting de Thuiskopie also provides detailed information on the situation in each country. It can be consulted on: http://145.222.172.84/assets/File/PDF/International/International_Survey_on_Private_Copying_2007.pdf

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Country Information source DE ZPÜ (body responsible for collecting remuneration) and GEMA website

http://www.gema.de ES http://www.copia_privada_si.com FI TEOSTO website (body responsible for collecting remuneration)

http://www.teosto.fi FR SORECOP and COPIE FRANCE websites

http://www.sorecop.fr/ll_supports_2.htm NL STICHTING DE THUISKOPIE (body responsible for collecting remuneration)

http://www.thuiskopie.nl/nl/tarieven SE COPYSWEDE website

http://www.copyswede.se SK SOZA and ISNA (bodies responsible for collecting remuneration)

http://www.soza.sk/download/OZNAM.XLS In the light of these explanations, alleged legal uncertainties by the ICT industry as to which equipment is levied in different jurisdictions are hardly receivable. The main source of legal uncertainty in this domain rather comes from lengthy disputes, denials of decisions by some ICT industries, refusals to pay or exaggerated delays in applying new tariffs and to pay the requested amounts. The setting up of a European database (a website for instance) displaying all European tariffs for each type of device included in the basis for payment as well national rulings and references of the bodies managing private copying remuneration would be of interest for all interested parties. 4) Have new levies on either equipment or media been introduced or abolished since 2006? See above answer to Questions 1-3. May we also indicate for reference the last edition of Stichting de Thuiskopie’s ‘International Survey on Private Copying Law and Practice’ providing detailed information. B. Economic, social and cultural dimension of private copying levies 5) Can you provide updated figures for 2007 on the amount of levies collected in those jurisdictions that apply a levy scheme? The figures for 2007 are not final in a number of organisations. For this reason, any figures for this period would be no more than rough estimates. Figures for 2005 on the amounts collected and distributed have been published in our study “Performers’ Rights in European Legislation: Situation and Elements for Improvement”. Please find them below again under Questions 9-10 and 11.

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According to latest figures for 2006, it seems that total collection for private copying in 2006 was slightly over that for 2005 in some countries but decreased in other countries. Generally speaking, the slowing down or even decrease in selling of blank CDs and DVDs without appropriate basis and implementation of new tariffs for MP3 players and other digital devices used for private reproduction has a direct negative impact on revenues for performers from private copying use. 6) Are you aware of further economic studies on the topics discussed in the Document? - Our study ‘Performers’ rights in European legislation: situation and elements for improvement’ released in June last year (also available on http://www.aepo-artis.org/pages/149_1.html); - Annual reports by the Stichting de Thuiskopie; - Econlaw study ‘Economic analysis of private copy remuneration’ of September 2007. Other studies may have been commissioned by national governments. Given the presentation laid down by European Commission consultation documents, it seems necessary to point out that studies based of actual figures that have been subject to checks by accountants and studies based on estimations or forecasts cannot be put on the same footing. Estimations presented in some studies commissioned by those bodies responsible for paying the private copying remuneration cannot be considered as actual figures. 7) Table 5 reflects the percentage of private copying levies and the resulting amounts that are allocated to cultural and social funds. Does this table summarise the situation correctly? Could you provide updated figures for 2007? As above explained, figures for 2007 are not final and would therefore be no more than rough estimates. In addition, AEPO-ARTIS representing performers’ organisations cannot give figures concerning amounts for other categories of rightholders and their organisations. As regards performers’ rights, the systems applied as well as the resulting amounts allocated to cultural and social purposes are described in a table below in our answer to Questions 8-10. 8) What kind of events are funded by the sums set aside for cultural funds in the different jurisdictions? Who are the main beneficiaries of these monies? 9) What percentages of cultural funds are spent on cultural events and what percentages on pensions or social payments? 10) Should there be a Community-wide (binding or indicative) threshold for cultural fund deductions? Detailed information on these questions was provided in our contributions to previous EC consultations on private copying.

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Information is also available in our 2007 Study “Performers’ Rights in European Legislation: Situation and Elements for Improvement”.

• Activities supported and functioning of system: In a number of Member States, a part of private copying remuneration is allocated to the cultural sector. The amount dedicated to cultural and social activities varies significantly from one country to another. In some countries such as France or Spain, collecting societies are obliged by law to dedicate part of the amount collected to cultural activities. In others such as Germany, the Netherlands or Sweden, similar decisions are made by the boards of directors or administrators of the societies, where performers are represented. Thus, such support is based either on the law, on statutory provisions or on decisions taken by rightholders. Given the variety in decision making processes, we see no reason why there should be either a maximal or a minimal threshold for cultural fund deductions. No decision could be taken that would contradict national law. Rightholders have the choice to choose among existing collective rights management societies and compare their statutory provisions and cultural policies. As for the case where decisions are taken by decision-making bodies of the organisations, rightholders also have their say via the democratic procedures in place. These amounts contribute to the financing of concerts, festivals, music schools, financial support for students’ scholarships… This represents a significant support for a high number of major cultural events, major music festivals and high quality concerts that contribute to the richness and the dynamism of the European cultural sector. To give a few examples of supported events, we can mention the Printemps de Bourges in France, Goya’s Awards in Spain, European Jazz festival in the Netherlands, as well as a huge number of other music, film, theater and other live performance festivals. Besides events, professional training for performers, master classes for music students and other activities are supported. A number of these cultural events and activities would not exist without this support. This is directly beneficial to performers, who need to tour in festivals and other major cultural events, to meet with their public, to receive professional training etc. In this sense, remuneration for private copying contributes to generating employment and income for performers in Europe. This is beneficial to the cultural sector and to European citizens who deserve access to a rich, stable, creative and flourishing cultural offer. Phasing down or suppressing such remuneration system would not only decrease the income of performers, but would also be detrimental to the cultural sector.

• Percentages of cultural funds spent on cultural and social activities: For your easy convenience, please see below a table reproduced from our study:

Percentage of total amount distributed in 2005 dedicated to cultural or social programmes

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Gross amounts in euro (VAT not included) Country Amount

dedicated to cultural/social activities

Basis for support of cultural/social activities

Belgium URADEX

0 Legal provision: The Federal State and the Communities can decide to use up to 30% of revenues from private copying to encourage the creation of works

Croatia HUZIP

140.203 No legal provision Based on the statutes of HUZIP

Czech Republic INTERGRAM

169.655 No legal provision. INTERGRAM contributes to activities of Foundation a Life Performer and Association of Performing Artists under its statutes and Clearance Regulations

France ADAMI SPEDIDAM

13.622.229

7.212.666 ADAMI

3.826.899 (private copying)

2.582.664 (non-distributable

sums) SPEDIDAM

Legal provision: - 25% of revenues from private copying - non-distributable sums used for action to assist creation and promote live entertainment and for training schemes for performers

Germany GVL

3.300.000 Legal provision. Under the statutes of collecting society and resulting from decision of its board, a certain amount of Total remuneration collected is dedicated to cultural activities. For the year 2005, the part of the amount coming from collection for private copying and further dedicated to cultural activities was estimated around 2.5%.

Lithuania AGATA

Not yet, notably since

remuneration system for

private copying is new

Legal provision: -“not more than 25% of the revenues from private copying may be used for programmes for the support of creative activities” -25% shall be withheld from the remuneration collected on imported and produced audiovisual media for the National Cinema Promotion Programme

Netherlands NORMA SENA

349.000

149.000 NORMA 200.000 SENA*

No legal provision. 15% of the revenues from private copying by De Thuiskopie + 5% NORMA – SENA (but differently calculated; for NORMA: 5% of the gross amount received from De Thuiskopie)

Spain AISGE AIE

4.352.665

2.952.665

Legal provision: 20% of the remuneration for private copying has to be dedicated in equal shares to cultural and welfare

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AISGE 1.400.000

AIE*

activities or services, training and promotion activities for rightholders.

Sweden SAMI

Approx. 1.566.000

No legal provision. - approx. 10% from the remuneration for broadcasting and communication to the public

UK No data available No legal provision. Non-distributable funds can be used after 6 years for cultural and other purposes as long as appropriate reserve is kept. Up to 1% of the total of amounts allocated to Members and affiliated societies can be donated to a number of different purposes including nurturing grass roots music creation*

Total 23.499.752 *Source: The collective management of rights in Europe, the quest for efficiency, July 2006, KEA, p.43 11) What share of individual rightholders' revenues do private copying levies represent? Given the fact that collective rights management organisations do not administer all performers’ sources of income and in the absence of complete databases on the subject, we are not in a position to evaluate this share. As regards the share of performers’ collectively managed revenues coming from private copying, we have provided very clear data on previous occasions, both in answers to EC consultations and in our publicly available study. Information is also available in our 2007 study “Performers’ Rights in European Legislation: Situation and Elements for Improvement”. The amount collected represents an essential part of the revenues received by performers from collecting societies. In 2005 it represented 38% of the total remuneration collected by the performers’ organisations of the countries under examination in our study. The amounts collected in the new Member States, the Czech Republic and Lithuania, even taking into account the smaller size of their populations, are smaller than in the old Member States. In Lithuania, where the remuneration system for private copying was set up only recently, legal disputes have been paralyzing collection. We estimate that in all European Member States having implemented a system of remuneration from private copying, such remuneration represents in average some 35% of the global collection by collective rights management organisations. For your easy convenience, please find some broken-down figures below.

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Overview of collection in 2005 for performers as a % Country Broadcasting /

Communication to the public

Making available on demand

Private copying

Rental Others

Belgium URADEX

54,07 0 45,93 0 0

Croatia HUZIP

100 0 0 0 0

Czech Republic INTERGRAM

56,53 0 7,62 0 35,85

France ADAMI SPEDIDAM

33,12 0 58,95 0 7,93

Germany GVL

66,65 0 28,97 1,04

3,34

Lithuania AGATA

85,87 0 14,13 0 0

Netherlands NORMA SENA

51,67 0 45,27 0 3,06

Spain AISGE AIE

68,90

0 28,84 0,17

2,09

Sweden* SAMI

69,83

0 12,33

0 0,94

Weighted average (SAMI not incl.)

55,87 0 39,14 0,35 4,64

Global weighted average

56.54 0 37.86 0.33 5.28

*Sweden-SAMI: The global amount indicated is the estimated collection for 2005. Some of the remunerations for 2005 were received in 2006 only, which explains the discrepancy between the various remunerations and the total. For the calculation of the balanced average, the amount corresponding to that discrepancy was transferred into ‘others’ category.

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Average collection by type of right

Broadcasting andcommunication to the publicMaking available on demand

Private copying

Rental

Others

Overview of remuneration distributed in 2005 to performers as a %

Country Broadcasting / Communication to the public

Making available on demand

Private copying

Rental Others

Belgium URADEX

67,25 0 32,75 0 0

Croatia HUZIP

100 0 0 0 0

Czech Republic INTERGRAM

60,50 0

6,00 0 33,50

France ADAMI SPEDIDAM

33,48

0 53,83

0 12,69

Germany GVL

68,41 0 29,67 1,92 0

Lithuania AGATA

100 0 0 0 0

Netherlands NORMA SENA

76,54 0 20,63 0 2,83

Spain AISGE (AIE not included)

76,76 0 21,53 1,71

Sweden SAMI

85,32 0 14,68 0 0

Weighted average (AIE not included)

61,30 0 33,10 0,97 4,62

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Average distribution by type of right

Broadcasting andcommunication to the publicMaking available on demand

Private copying

Rental

Others

By way of comparison, we would be interested to know what share of the ICT industry’s (manufacturers, retailers and importers) turnover and profits this remuneration for private copying represents. More generally speaking, AEPO-ARTIS notes that the present questionnaire is asking a lot of detailed information, data and figures to the organisations collecting and further distributing private copying remuneration as a result of protests from the ICT industry, without such precise information being given by or asked to the ICT industry. C. Cross-border trade and e-commerce issues 12) Is there a refund system available in your jurisdictions when particular equipment or media is exported to another Member State? If so, are there limitations as to the category of traders or individuals who are entitled to such a refund upon exportation? 13) What is the most suitable system of refunds upon exportation? Who is the most suitable party to claim those refunds? 14) Does Table 6 on national refund and exemption systems reflect the situation correctly? Please complete and update the table. Given the short amount of time allowed to gather accurate information, we are not able to give a full picture of the situation and systems applied in every Member State. To our knowledge, exemptions and refund systems are applicable to any country (not only EU Member States).

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• Systems applicable for import: In case of importation of devices subject to private copying remuneration, it is incumbent on importers to self declare the goods imported. Depending on the countries, declaration must be addressed to the national Copyright Office, to the concerned collective rights management societies or to the body responsible for collecting the private copying remuneration (ex.: ZPÜ in Germany, Copydan in Denmark). Declaration is done at regular times (every month in Denmark or Sweden, every 3 months in Spain or in Slovakia, every 6 months in the Czech Republic…). In some countries like Sweden it must be done at the moment of import. In others like France or Spain declaration has to be done upon putting into circulation of goods on the national market.

• Systems in case of transit of goods via a country (import followed by exportation to another country): Payment: the systems deal with possible chains of operators involved in the import and export of goods. Rights management systems have in general been shaped so as to make the successive distributors, wholesalers and retailers who acquire the goods subject to private copying remuneration, with the debtors who have supplied it, be jointly responsible for the payment of this remuneration, except where they give proof of having actually paid the remuneration to the other operators involved in the chain. Exemption: to our knowledge the systems commonly applied in Member States are designed – and this is generally stated by law - to avoid any ex post refunds by simply exempting importers from paying remuneration for private copying in the transit country in case where their goods are not put into circulation in this country but exported to another country. It is up to importers to give the proof that the goods are not commercialized in the transit country but exported abroad. These declarations have to be made to the organisations responsible for administering the private copying remuneration. Refunds: in case of a payment of private copying remuneration made in a transit country for goods that are not commercialized but only transit in this country, to our knowledge several systems of refunds are in place. In some countries (ex. Denmark) the refund system is established by law. In others, refunds are treated in practice, like any specific situation where payments have occurred for which it is further established that they were undue. Refunds are administered by the organisations responsible for administering the private copying remuneration. For example, in France, when remuneration has been paid by reason of the making in circulation of carriers and these carriers must be re-exported, the payment is reimbursed by SORECOP and COPIE FRANCE to those bodies which made the payment. As regards information displayed in Table 6, we have received the following information:

- Denmark : existence of a refund system in the law; - Germany: refund system also in practice;

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- Sweden: refund system not in the law, but well established in practice. 15) Who is the most suitable party to pay private copying levies? Should private end-consumers be exempt to self-report intra-community purchases of blank media and equipment? We are not sure about the question asked. As a general rule, AEPO-ARTIS would recall that the debtors should always be clearly identified in the law. By way of comparison, collective rights management societies encounter significant difficulties in collecting equitable remuneration for rental mainly for lack of identification in Directive 92/100/EEC and subsequent national laws of the body responsible for payment. The suitable party to pay remuneration for private copying is in general clearly indicated in the law. By way of example, please find below some information about applicable rules in a number of countries: Countries Body liable for payment Belgium Manufacturer, importer or body making an intra-Community acquisition for non-private

use of equipment or carriers (art. 55 of Law)

Czech Republic

Manufacturer , importer or the conveyor instead, unless that person allowed the identification of the manufacturer or the importer (art. 25 of Law)

France Manufacturer, importer or the body making an intra-Community acquisition for non-private use of equipment or carriers (art. L311-4 of Law)

Germany Manufacturer, importer and retailer (art.54 of Law)

Lithuania Manufacturer, importer (art.20,4 of Law)

Netherlands Manufacturer, importer (art. 16c of Law)

Spain Manufacturer, importer In addition, the distributors are liable for the payment of the remuneration, unless they prove to have paid the remuneration already to the manufacturer or importer (art. 25 of Law)

Sweden Manufacturer, importer (art. 26k of Law).

As shown in this table, remuneration is mainly collected from the manufacturer or the importer. It must be noted however, that in practice the amount payable is generally comprised in the retail price, hence charged by those bodies on consumers. End-consumers with no commercial activity based on their purchase of recordable goods subject to private copying remuneration have to self-report their intra-community purchase in countries like Denmark and Germany.

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In Spain, there is an exemption provided by the law for any natural person who acquires the good outside Spanish territory under the arrangements for travellers and in such a quantity that it may be reasonably presumed that they are intended for private use on the said territory. As to the situation regarding distance sales, where the importer in practice is a private consumer and as such not obliged to pay, and there is reason to believe that a company deliberately use this to avoid paying the private copying remuneration, we would like to promote the destination principle the way it is applied in other areas within EU commerce. Considering globalisation of the market driven notably by new technologies and the Internet in particular, and taking into account intra-community trade, the existence of a secondary responsibility to pay for those bodies in the distribution channel that sell the products to the consumers, i.e. retailers and wholesalers, as exists already in some countries, seems sound. The distance retailer should be the body liable to pay the private copying remuneration in the country of destination, i.e. where the consumer makes the purchase. D. Professional users of ICT equipment 16) How do private copying levies affect professional users (SMEs, others)? 17) How should collecting societies take into account professional users? Should professional users be exempted from payments in the first place or should such users be entitled to a refund after payment? One cannot ignore possibilities that many employees use certain professional equipment or media for private activities, including acts of private copying, as is the case for Internet access. This said, in many countries exemption systems are in place for certain categories of professional users. Such systems are generally stated in the law (as is the case in Greece, the Czech Republic, Spain…). For example in Spain, exemptions are established by the Government who shall specify by regulation the types of reproduction that should not be regarded as for private use for the purposes of the provisions of the art 25 of the Spanish intellectual property law, the equipment, apparatus and material exempted from the payment of remuneration owing to the specific nature of the use or exploitation for which they are intended. In accordance with this system, the producers of phonograms or videograms and broadcasting organizations for equipment, apparatus or material acquired in Spain intended for the pursuit of their activity are exempted to pay, provided that they have the required authorization to make the said reproduction in the course of their activities. In other countries a contractual exemption system is in place. For instance in France, the law organises a reimbursement system to the benefit of the societies buying such carriers for the need of their activity of audiovisual communication, reproduction for audiovisual and phonographic producers, reproduction made for handicapped people.

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Specific agreements have also been concluded since 1986 in order for some professional users of carriers to be exempted from paying remuneration for private copying. Currently, 1.800 agreements are applicable with SORECOP and COPIE FRANCE in this framework. Interestingly in Sweden, where according to the Swedish law, importers are not liable for payment of the levy on sales to professional users, Copyswede provides for professional users to register in a “professional user database”. Importers have access to the database and can easily control if a buyer is registered as a professional. Such system seems to have proved useful and efficient. E. Grey market 18) Has the size of the grey market increased since 2006? 19) What are the measures Member States, collecting societies and the ICT industry are taking to reduce the size of grey market in their jurisdictions? AEPO-ARTIS has no exact figure on the size of the grey market. A number of problems have been identified, some of which may be avoided in the future provided that a number of measures are introduced and implemented as good practices.

• As regards by-passing of law and unlawful practices, the main problems identified consist of the following: -some importers tend to use legislative gaps to avoid fulfilling their duties, in particular with Internet trade. In particular, the absence of private copying remuneration schemes in some Member States is used to avoid paying this remuneration in cross-border or distance selling. In the UK, whilst the reviewing procedure of Intellectual Property has so far failed to propose any introduction in the law of private copying and appropriate related remuneration scheme, the recently published Gowers report proposes to “introduce a private copying exception by 2008 for format shifting for works published after the date that the law comes into effect. There should be no accompanying levies for consumers”. This situation, where reproduction can be authorized without proper remuneration, is problematic and will not help in reducing by-passing of the law within the European Union. The situation in other Member States where an exception for private copying has been introduced in the law but without any remuneration scheme being set up is similarly problematic; - it is also reported that campaigns by those bodies liable for payment have contributed to picture the private copying remuneration system as a barely tolerable instrument; - some debtors do not register, or register poorly, their sales and distributions of reproduction equipments and media subject to private copying remuneration, using payments in cash and no

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invoice. Default of, incorrect or unreliable information are reported to concern mainly imports, including but not necessarily from intra-Community countries; - some cases have been reported of instrumental societies with no assets that act as mere distributors before declaring themselves as bankrupt or ceasing activities. Fraudulent companies distributing directly through Internet to consumers are particularly hard to chase; some have near-anonymous postal delivery services advertised on the Internet and perform "out-of-trunk" sales with companies hiding behind intermediaries. Another problem that is specific to the online market consists of distributing materials through the Internet from a Member State where no private copying remuneration is in place, thus without paying the private copying remuneration, and further directing the obligation for payment to the end-consumer or the retailer established in another Member State. Also, in some countries, remuneration for private copying is not collected on copies originating from the Internet, although under several national legislations such copies can be considered as a reproduction for private purposes that would justify the payment of compensation.

• Commendable measures to solve the problems: -modifying the law if any legislative gap has been identified; -levelling up the system at EU scale by implementing private copying remuneration systems in all EU countries; -enabling better enforcement and adequate sanctions for those who do not fulfil their duties. An appropriate control – either by law or through agreements with companies associations – of fulfilment by companies of their obligations could be ensured via systems where a collecting society may order, by decision of Court, the control by an independent auditor of a debtor’s declarations. Such system does exist in some countries but should be generalized. Also, sanctions against infringements of the rules for private copying should be designed in the same way as any infringement of an exclusive intellectual property right. -we would also praise enhanced collaboration between companies associations, rights management organisations responsible for administering the private copying remuneration and customs authorities. This would help creating good conditions for a trustworthy atmosphere and solidarity between upright companies and collecting societies against fraud.

• As for the bad practices observed and measures to reduce the size of the grey market, AEPO-ARTIS could make the following observations and recommendations: The current situation is not optimal as showed by the huge number of complaints and further legal actions before national Courts in many countries. In some countries, legal actions have even become common situation, which is regrettable, time consuming and detrimental to the sector as a whole. In the Czech Republic only, more than 20 lawsuits have been filed by collective rights management organisations against debtors.

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The complaints concern either default of necessary information (in declarations) for setting the amount payable to rightholders organisations or actions for recovery of private copying remuneration. They are addressed against all types of allegedly fraudulent debtors, whatever their size and the amounts claimed. Lengthy disputes over basis for payment and related lengthy procedures (from expert analyses to legal actions) entail delay collection from users and in distribution to rightholders.

• Commendable measure to solve the problems: In complement to preventive measures, among which, enhanced exchange of information between all stakeholders in the internal market, a system of escrow – with contested amounts kept aside in a special account as long as a dispute over applicable tariffs is not solved - as already exists in Germany for authors’ rights would enable to avoid long-pending collection of remuneration (and further delays in distribution), would certainly help resolving long-lasting disputes over claimed payments. F. Consumer issues 20) Are you aware of consumer surveys on private copying behaviour which are used as a basis for setting the levy rates? And consumer surveys on the main sources of works or sound recordings that are privately copied? Such surveys are used in several countries. See answer to Question 1-3 (“method”). 21) How should private copying levy schemes evolve to take into account convergence in consumer electronics? This convergence is already taken into account, as described in more detailed under Questions 1-3. Multifunction equipment or media resulting from technological convergence in consumer electronics are no particular case since reproduction capacity and the degree of use for private copying are taken into account in the setting of tariffs. G. Double payment 22) What are the main issues that consumers face when paying for digital downloads? The main issue consumers may be facing when paying for digital downloads is the possible lack of proper information or misleading information about the conditions attached to the product subject to download. Also, they rarely have appropriate information about the beneficiaries (performers, authors, producers...) of the payment and how it is shared among them.

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This said, exception for private copying cannot be mistaken for problems inherent to online distribution. 23) Should licensing practices be adopted to account for contractually authorised copies? Consumers may wish to buy music or a film from online stores and subsequently reproduce the download for private use. Contrary to what has sometimes been alleged, this does not constitute double payment since it corresponds to different acts. The first act is the initial download, which use is subject to an exclusive right of rightholders. The further copy/copies for private, non commercial use correspond to another type of exploitation and fall into the scope of the exception for private copying (in those countries where such exception exists). The situation is similar to that of a consumer purchasing music or a film in a store and further reproducing that film or music onto blank media, mp3-players or the like for private, non commercial use. Generally speaking, the vast majority of collective rights management societies do not license the content provider or music service against any payment for online reproduction (except for some organisations licensing mainly for simulcasting of radio and TV programs online). In this respect, improvement is urgently needed to ensure appropriate protection of performers’ rights for a number of online uses. In particular, in application of the acquis communautaire performers enjoy in principle “exclusive rights”, also called rights to authorize and to prohibit the exploitation made of performances, among which the “new” right of making available on demand introduced by Directive 2001/29/EC which is central in online environment. The right for making on-demand services available to the public has so far proved ineffective for performers. One figure sums it up: out of the 10 countries surveyed, only one collective management society succeeded in collecting an overall amount of €32 for all performers in 2005! At a time when more and more commercial services for downloading are being developed, this sum highlights the obvious gap between the protection that the acquis intended to give to performers and the impossibility of their actually enjoying it. The reason for such poor results in terms of revenues for performers lies in the fact that because of unbalanced contractual bargaining relationships, most performers have no choice but to transfer their exclusive making available right with all their exclusive rights when they sign their individual recording or employment contract (with in some countries the protection and benefit of collective agreements for some categories of performers). Against this transfer of exclusive rights performers receive a payment, most of the time taking the form of single lump fee, for the recording and for all possible exploitations of the recording, for all the term of protection.

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In particular, these performers will most likely not be entitled to receive any remuneration for the sales of his/her performance or other form of distribution through digital platforms onto computers or mobile phones. As for performers who have mandated a collective rights management organisation to administer their making available right, infringing situations have been observed; some societies have reported infringing acts by some online services commercializing music or film recordings by making them available online (for downloading) without asking for the prior authorisation from the performers or their mandated representatives. In France for instance, legal proceedings are open against 6 main commercial downloading services (including I-tunes and Fnac music) on the basis of making available on demand. Such services have failed to ask for authorization on behalf of performers, considering that the rights of these performers were transferred to the phonographic producers. Unlike the provisions adopted by European legislation for the broadcasting and communication to the public of phonograms, for instance, provisions of acquis for the online making available of recorded performances via on-demand services have failed to take into account market practices. As a result, in practice this making available right simply cannot be administered via cross-border collective management and means no benefit for most performers to date. For this reason, AEPO-ARTIS urgently calls for the introduction of a system that would enable performers, even after the transfer of their exclusive right for making available on demand, to enjoy an unwaivable right to equitable remuneration to be collected from the users and managed by performers’ collecting societies. At the same time, European legislation should encourage – as has been done already in some Directives dealing with performers’ rights – more balanced contractual relationships between performers and other contracting parties concerning the use of performances and possible transfer of performers’ rights. Performers do need safeguards in this respect. H. Alternative licensing 24) If rightholders decide that their works can be disseminated for free, how should this be taken into account when collecting private copying levies? In principle, a rightholder should not be able to renounce to his/her right to fair compensation for private copying as it is compulsory in accordance with provisions introducing an exception for private copying in the law. The fact that a performer has agreed on making available his recording on the internet for free uses does not mean that he has renounced to any remuneration. In addition, this question is mostly theoretical. In practice such occurrences seem to be very marginal. None of our performer collective rights management societies could report of having to deal with any such case at the present time.

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I. Distribution issues 25) What is the typical frequency and schedule of levy payouts? Depending on the collective rights management organisations, payment is done on a yearly to a quarterly frequency. 26) What are the main issues encountered with respect to cross-border distribution? In addition to the remarks in previous answers relating to cross-border trade (C), by-passing and unlawful practices and bad practices (E), it must be noted that when private copying remuneration is managed through bilateral agreements between collective rights management societies, administrative costs are deducted only once. Collective management of private copying remuneration through bilateral agreements therefore does not entail additional administrative deductions for performers. To date, control and monitoring systems in place are sometimes only partly efficient. Checks of declarations by custom offices on the one side, State statistics offices on the other side, as already exist in some countries, may be useful mechanisms. In general, cooperation between the collective rights management organisations in charge of administering private copying remuneration and customs authorities seems advisable. 27) What are the average administrative costs in levy administration (in per cent of collected revenue)? AEPO-ARTIS does not have detailed figures for the sole administration of private copying remuneration. It must be noted that most collective rights management societies for performers do not collect private copying remuneration directly; collection is generally done by a distinct organisation for all categories of rightholders (performers, authors, producers) and performer organisations subsequently manage and distribute the amounts owed to performers. As for administration of rights in general, management and other fees in performers’ collective rights management societies vary from 3 to 18% depending on specificities for each country, cultural domains, collection and distribution mechanisms, with a rate of 6 to 8% observed in a majority of countries. Since a wide range of performer collective rights management societies were only recently set up and some of them (like in Lithuania) have started collecting remuneration for private copying only recently, their administrative costs tend to decrease over the years.