The future of levies in a digital environment: final report

Copyright levy systems have been premised on the assumption that private copying of protected works cannot be controlled and exploited individually. With the advent of digital rights management (DRM), this assumption must be re-examined. In the digital environment, technical protection measures and DRM systems make it increasingly possible to control how individuals use copyrighted works. Rights holders are now in a position to apply such systems to identify content and authors, set forth permissible uses, establish prices according to the market valuation of a particular work, and grant licenses directly and automatically to individual users. Unlike levies, DRM makes it possible to compensate right holders directly for the particular uses made of a work. Where such individual rights management is available there would appear to remain no need, and no justification, for mandatory levy systems. Where levies coexist with such technical measures, consumers may end up paying twice for the right to make a private copy of a work - once by paying the levy, and once again by paying the right holder for the right to copy the work. Or consumers may end up paying a levy for a work that cannot be copied, for example, a motion picture on a copy-protected DVD. The EC Copyright Directive, which was adopted in May 2001, takes an ambivalent approach towards this issue. Art. 5.2(b) of the Directive attempts to reconcile the existing system of private copying levies with a future of individual digital rights management, by prescribing that in calculating the amount of 'fair compensation' for acts of private copying the 'application or non-application of technological measures' be taken into account. This provision suggests a gradual phasing-out of levies on digital media or equipment, as digital rights management systems enable content owners to control private copying, and set conditions of private use, at their discretion. This study examines existing levy systems in the European Union in the light of the advent of digital rights management systems. The study's principal aim is to interpret the Directive's 'phase-out' provision of Art. 5.2(b), and to suggest possible ways of mplementing it in the national laws of the Member States.