GERMAN PC INDUSTRY RILED BY GOVT. PROPOSAL FOR COPYRIGHT LEVY

Proposal would slap levy of 12 euros ($13.20 at $1.10 to euro rate) on each PC to compensate content owners and artists for royalties lost from unauthorized copying. Although copyright levy has been in place in Germany since 1950s for audio and video recorders and blank media, computer industry argues PCs have other noninfringing uses and not all PCs are used to dub copyrighted material. Those arguments, as well as fair rights use of content, are essentially same as presented by U.S. PC industry in winning exemption from 1992 Audio Home Recording Act (AHRA), which imposed royalty levy on digital recording devices and blank media.

In counterpoint to Schroeder, head of Germany’s key IT industry trade group used CeBIT keynote to argue against PC royalty. Volker Jung, pres. of BITKOM (Assn. of Telecom & New Media), said what IT economy needed most after last 12 devastating months was “freedom to breathe in the very volatile market.” He said he expected “black zero” for IT industry for 2003 and was slightly optimistic for 2004, but warned of additional burdens through new regulation. As for copyright law, he asked for much quicker pace and decision against levies on PCs. “We expect an additional burden of 250 million euros for copyright levies,” Jung said. That figure includes levy on other peripheral equipment such as printers, fax machines, photocopiers and scanners in addition to PCs. Actual levy for PCs would be about $78 million based on 5.9 million sold last year.

Battle follows recent decision by German Patent & Trademark Office’s Dispute Resolution Center (DRC) that fee of 12 euros per new PC must be paid to German Collecting Societies in order to satisfy copyright royalties that Collecting Societies distribute to their member artists. Decision went over like lead balloon with PC makers. “We will not accept the decision,” said spokeswoman for Fujitsu Siemens, which had argued case before DRC. Procedure following DRC’s recommendation allows complaint to be filed if parties don’t agree. “It could end up at Germany’s Federal Supreme Court for a final decision,” DRC Chmn. J?rg D?rdelmann said. He said fee was based on long-standing German law, and in dispute procedure DRC panel found 12 euros to be reasonable amount.

BITKOM announced it would back Fujitsu Siemens in complaint. “The PC is a universal machine, which in many cases is not used for copies,” said Susanne Schopf, legal expert at BITKOM. Ruling would hit PCs in production area that might have nothing to do with copyright issues and fees, she said. New German copyright act, which is being drafted to adapt current law to principles of European Union law, would ban even private use of PCs by company staff, Schopf said. German PC industry is backing copyright laws because they embrace growing number of digital rights management (DRM) systems that enable pay-per-click downloading of copyrighted content. As argument goes, putting royalty levy on PCs would result in those purchasing copyrighted content paying twice. Schopf said DRM would better solve copyright problem for content producers.

“We could accept DRM systems, but they first have to work,” said Frank Thoms, section head of collecting society Print. When digital content is paid for individually on “per-click basis” PC royalty fee should be rethought, Thoms said: “But at this time we are far from that situation.” He pointed to large movement of civil rights organizations that wanted to retain right to make private copies based on principle of fair use. “We have joined the groups who ask for the right to make private copies,” he said.

Collecting societies were set up in early 1950s. Germany was birthplace of magnetic recording, and govt. decided then it was impossible to forbid private copying of copyrighted content. So collecting societies were established to compensate content producers yearly with funds collected from different sources, such as sales of audio and video. Update of law, which was written before PCs, scanners or fax machines became common, would clarify situation for those devices, officials said. German consumers already pay levy for CD burners and blanks: 7.5 euros for hardware, 8? per hour on discs.

Industry and collecting societies are lobbying German Ministry of Justice to issue clarification. Raddatz said German users would be losers because manufacturers would shift cost to them. Schopf warned against massive administrative overhead that would arise, for example, in case of exports and imports. Importers would have to pay 12 euro levy while exporters could reclaim fee, but someone who privately ordered PC would sail around provision. BITKOM urged govt. to explicitly exclude PCs as well as printers and multifunction machines (print, fax, scan) from new law. Assn. also pointed out that flat levy might be absorbed without much pain in higher-priced equipment, but would represent larger percentage of cost for promotional and entry- level products that were more price-sensitive and with lower profit margins.

Case in point is CD burners, which have dropped dramatically in retail price worldwide but still carry fixed levy in Germany. Under AHRA in U.S., royalty is levied as percentage of product cost, with dollar cap. For recorders, it’s 2% of factory cost with $8 cap on single recorder, $12 for dubbing deck or recorder built into audio system. Levy on blank media is 3% of factory cost. From beginning of collections in 1992 through 2001, total paid to artists was $15,628,864. Amounts collected have increased in recent years owing to growth in volume of home audio CD recording, even as price of recorders and blanks has dropped.