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Reforming of copyright in EU and one of the questions concerned: exceptions and limitations and the functioning of the internal market

In the light of coming copyright reforms in EU the draft impact assessment concerns some important copyright issues. One of them is exceptions and limitations and the functioning of the internal market.

Assuming that markets for creative works exist, market power on the part of right holders may result in a deadweight loss which could potentially be curbed by broader exceptions. However, it cannot be established on the basis of the economic theory alone whether exceptions should be narrowed or broadened in response to a reduction in the cost of making copies of creative works (brought about by technological advances).

Indeed, in this case more creative works are produced, leading to more deadweight loss arising (favouring broader exceptions), which is to be considered against the increased net welfare gain to be potentially generated from each new work (favouring narrower exceptions). Furthermore, it cannot be established on the basis of theory alone whether exceptions should be broadened or narrowed down as a consequence of the expansion of the consumption possibilities of creative material (again brought about by technological advances).

Nevertheless, there may be a case for exceptions in particular when they allow for the development of product qualities that a copyright owner could not produce herself due to transaction costs and technological constraints. Exceptions are also more likely justified in circumstances where, resulting from a potential users irreversible investment in a new use (service) that relies on access to existing copyrighted work, an increase in right holders’ bargaining power gives rise to opportunistic behaviour (also called “hold-up problem”) as this risks introducing dynamic inefficiencies (in terms of suppressing incentives to invest in creative effort).

For most existing exceptions a common theme emerges: they are optional and lacking in detail. As result there is insufficient harmonisation of the scope and conditions of the exceptions as implemented by the Member States. This leads to over-restrictive interpretation in some cases and also stands in the way of cross-border effect for Member States’ national exceptions.

More generally, with regards to the EU system of optional exceptions, some stakeholders criticize the (alleged) lack of flexibility in the EU and national copyright laws due to the system of a close list of exceptions and plead for the introduction of a supplementary degree of flexibility in the national copyright systems, as well as at EU level. Others however consider that this system, which corresponds the closest to the Member States’ legal system, provides the necessary flexibility and ensures a minimum of legal certainty for all stakeholders (including those benefiting from exceptions).


Libraries benefit from a broadly-worded exception to the reproduction right at EU level for specific acts of copying e.g. for preservation purposes. But the corresponding national implementations vary greatly, and are not always clear on the relevant conditions: the purpose, whether format-shifting is allowed, the types of works covered, the type of beneficiary institutions, the number of copies that can be made.

The sole purpose of ‘preserving and archiving’ may comprise the making of a copy to replace a work where the original is damaged, lost, destroyed (e.g. UK, EE) or unusable (LT, EE) in full or in part (e.g. FI refers to technical reconstruction); must be restored (e.g. FI, NL); or requires conversion from an obsolete format (format-shifting) or to avoid further deterioration of the work’s medium (anticipation). Most Member States expressly mention the use of digital copying technology and copying onto digital carriers, but several Member States have limited this exception to written texts. Some Member States also limit the exception for preservation purposes to those cases where a new copy is not available either from the right holders or on the market (e.g. UK, EL, FI).

E-lending is not possible under an exception in the EU. Publishers and libraries are in the early stages of experimenting with different business models for e-lending including the use of different contractual provisions to introduce “frictions” in e-lending. These are conditions designed to mimic some of the constraints associated with the lending of physical copies of books in order that e-lending does not undermine the normal channels of business since the effect of libraries providing essentially unrestricted online access to e-books (even as a “public” service) would be to supplant the normal sale of e-books. They include, variously, limiting the number of allowable simultaneous consultations, setting a maximum number of consultation before a new purchase is triggered, requiring download on the premises during business hours, or holdback periods after publication.

Private copying

Typically, levies are claimed upon either the production or importation of a product, irrespective of whether they have been paid on the territory of another Member State or whether the product will subsequently be sold to another Member State. Consequently double payments occur in the majority of such cases. In a similar vein, as the result of case-law of the CJEU levies may no longer be imposed on goods that are acquired for purposes clearly unrelated to private copying. Nevertheless, most Member States continue to apply levies indiscriminately to all sales. This can also result in undue payments.

To mitigate double and undue payments resulting from cross-border transactions, as well as the indiscriminate application of private copying levies, most Member States provide for a priori exemption or ex post reimbursement schemes. In case of the former, an upfront exemption is offered to those liable for payment. As far as ex post reimbursement schemes are concerned, those who paid levies unduly are entitled to seek reimbursement from the entity which collected a levy.

For example, in Germany manufacturers and importers if products liable for the payments of levies who entered into contractual relations with the collecting society which perceives the levy are allowed to deduct the amounts payable for products sold to professional users; however, for entities with no contractual relations with the collecting society, the reimbursement is only possible upon the presentation of a proof of payment. In a sales-chain in which a number of intermediaries are involved, it is not unlikely that the product for which a levy was paid will ultimately be sold to a professional user who he will have no possibility of reimbursement as he will hardly know the identity of the entity who paid the levy.

However, not all Member States have such schemes in place and those that exist are not always sufficiently efficient, often making it burdensome and complicated for individuals to claim back the unduly paid levies. Some of Member States apply so-called ‘mutualisation’ schemes, i.e. they continue to apply levies indiscriminately to all sales but provide for a reduction in the overall amount of tariff applicable, so as to take into account those transactions which involve ‘professional’ users not liable for payment.