Асоціація підприємств інформаційних технологій України

(copyright fees paid by manufacturers and distributors of the copy and storage media)

Legal framework

In 1996, the Law on Copyright and Neighboring Rights introduced the concept of “compensatory remuneration for private copying” intended to exclusively cover any prejudice that holders of copyright or neighboring rights may suffer as a result of private copying. The Law established that the manufacturers or importers must pay this compensatory remuneration for devices facilitating the reproduction of works fixed on a graphic or analogous physical medium. The tax was due at the time these devices were distributed on the national territory, amounting to 5% of the value (selling price or value registered in the customs documents, for imported devices). This Law was drafted without consulting the sector directly affected by these provisions and without an economic substantiation of the value set for royalties.

The sector’s initiative for improving the legislation in force

Despite the fact that this royalty is paid by manufacturers, importers or distributors to the organizations of collective administration of copyright and neighboring rights, its value is actually included in the selling price, and therefore supported by the end consumer. Realizing that the lack of regulatory mechanisms for royalties due to the organizations of collective administration would directly impact sales, the Association of Producers and Distributors for Information and Communications Technologies Equipments (APDETIC) started in 2004 a series of discussions and negotiations intended to balance the need for copyright protection with the needs of its members (and implicitly those of the consumers). Workgroups appointed by the Culture Comission and the ICT Comission of the Romanian Parliament, with the help of the Culture Ministry (Mona Muscă) and of the ICT Commission’s President (Varujan Pambuccian), drafted amendments to the law in order to:
•     Provide a definition of the private copy
•     Create a list of the equipment intended to be used for reproducing the work
•     Establish limits on the compensatory remunerations to be paid to the organizations of collective administration.

These negotiations and the process of the Romanian Parliament adopting the amended law lasted one year, and the new law became effective in 2005.

The amendments adopted provided that:

•     Compensatory remuneration for the private copy shall be paid by the manufacturers and importers of media and devices (the physical materials on which sound or audiovisual recordings may be made, and for independent devices, regardless of their intended use, designed for the making of copies, allowing for the reproduction of these works) by analogous or digital means.
•     Importers and manufacturers of media and devices may carry out their respective import or production activities only after obtaining a Registration Certificate from the Romanian Copyright Office, within the National Register of Private Copy. This certificate will be issued by the Romanian Copyright Office based upon evidence of its legally declared activity scope and the possession of a sole Registration Certificate from the National Trade Register Office.
•     The list of media and devices used for private copying that trigger the compensatory remuneration requirement, as well as the amount of this remuneration will be negotiated annually between the organizations of collective administration representing each category of beneficiaries and associations of the importers and manufacturers of media or devices.
•     The negotiation must take place within a commission consisting of:
    a)     one representative of the collective administration bodies operating in a given field;
    b)     one representative of each of the main associations of manufacturers and importers of devices or, in the absence thereof, one representative from each of the three major importers or manufacturers in the field, determined on the basis of revenues.
•     For negotiating purposes, the organizations of collective administration and the associations of manufacturers and importers will forward to the Romanian Copyright Office, in the last month of the year prior to the negotiations, proposals regarding the list of media and devices, as well as proposed compensation amounts.
•     The remuneration negotiated by the parties is expressed as percentages and must fall within the following limits:
    A. for media:
    a)     paper sheets for the copy machine, format A4: from 0,5% to 1%;
    b)     other media: from 3% to 7%;
    B. for devices: from 0,5% to 1,5%.
•     Compensatory remuneration for private copying will be calculated based on the Customs value in the case of imports and on the invoiced value without VAT when the product is placed on the market by the producer; the compensatory remuneration must appear separately on the invoice and must be paid within one month after the invoice is issued.
•     In case negotiations are not successful, parties may defer to a mediation commission, and if that fails, to the Bucharest Court of Appeal.

The enforcement of the new legislation

After the amended law took effect, the first negotiations regarding both the list of media and devices triggering payment of compensatory remuneration took place, and the new percentage grid was issued. The negotiated list included devices such as audio-recorders, video-recorders, CD-recor¬ders and DVD-recorders (as HI-FI devices operating independently), as well as photocopy machines and multifunctional devices performing also copying functions. APDETIC opposed the inclusion on the payment list of the CD and DVD writers, of MP3 players with storage medium and lacking recording capacity, and of printers, scanners and multifunctional devices lacking copying capacity. The association’s motivation was that these devices do not meet the conditions required by the law regulating the private copy system. The decision of a new Mediation Commission was needed in this case.

APDETIC motivated its position by the fact that the means of using CD-writers and DVD-writers exclude them from the category of devices designed for personal use copies, that is, for private copying. APDETIC showed that these devices are utilized in two ways in Romania:

• for business activity (data and information storage).
• for pirating copies (according the International Intellectual Property

Alliance 2005 Special 301 Report for Romania, the pirating rate in the musical field was 78% and that in the audiovisual field was 55% of the total number of copies present on the market in that year.)

APDETIC stated that the presumption of guilt cannot be applied to all end consumers, and that there are mechanisms of civil liability in order to remedy and compensate for the harm caused by pirating activities.

With respect to printers, scanners and multi¬func¬tional devices, APDETIC specified that most of these are acquired by companies to support current activities, and not for the private copying of works. Another essential aspect highlighted by the association was that this equipment does not meet one of the conditions imposed by the law: operating as independent devices (since they all require a computer connection.)

Despite these arguments, the Arbitration Commission decided in favor of the collective administration bodies, so that the CD-writer and the DVD-writer, the MP3 player with a storage medium and lacking recording capacity, printers, scanners and multifunctional devices were included on the list of devices on which a private copying tax is imposed.

New challenges in the field

In 2005, the new minister of culture, Adrian Iorgulescu (also the President of the Society of Composers from Romania) proposed to the Government a new copyright law (Emergency Ordinance no. 123 of 19 September), which was approved. The regulation eliminated the percentage margins established for the tax on private copying.

The ICT sector associations, faced with losing what they had obtained by amending the old law (the percentage thresholds established through negotiations between the interested parties) opposed the new law, arguing that taxes that are much too high and arbitrarily established may lead to an increase in price and implicitly cause a decrease in sales of equipment. According to the associations, the conflict occurred against the backdrop of a copyrights market where large amounts of money were being circulated: 8.1 million Euros in 2004, of which the Society of Composers from Romania had cashed 3.9 million Euros. Moreover, the associations accused the organizations of collective administration of lacking the transparency required by law in the process of administering the collected amounts.

The associations’ objections were supported by the ICT Commission of the Romanian Parliament, led by Varujan Pambuccian, who strongly opposed the change. Following discussions in the Parliament, the Ordinance was rejected and the provisions of the law amended in 2005 remained in force.

In 2007, the sector was confronted with a new problem. The collective body of written works’ copyrights – COPYRO – requested the retroactive payment of a 5% remuneration of the import price for copying products sold between 2002-2005. According to APDETIC, manufacturers and distributors of copy machines and multifunctional machines were asked to pay a tax at a 5% level, although this had been established at maximum 1%, starting with 2005. The companies refused to retroactively pay a 5% tax, arguing that the first version of the law was unclear on which devices were subject to payments for private copying (‘devices allowing reproduction’), so that they had not established provisions to cover such expenses. Photocopy machines, scanners, printers and multifunctional machines were listed among the devices for which compensatory remunerations are paid for private copying only, in accordance with the Arbitral Decision of May 23, 2005. Manufacturers and distributors of copy machines and multifunctional machines claimed that an obligation to pay this 5% tax would increase the price of the IT products by 7-10%, and these costs could only be recovered over a period of 1-3 years. Moreover, companies fear that they may be at a risk of becoming bankrupt (as seen in the case of an IT company – ROMUS - which became bankrupt after having lost the lawsuit brought against it by COPYRO).

Of all the collective administration bodies of the copyright and related rights, only COPYRO requested retroactive payment. The other bodies have applied the new regulations starting with 2005.

At present, the percentages due by the manufacturers and importers of media and devices destined for private copying can be seen here.

Even though the parties involved took divergent positions and conflicts ignited, the existence of legal regulations is nonetheless a positive aspect, due directly to the associates’ efforts and to the support of the ICT Commission of the Romanian Parliament.