Private Copying Levy Provisions Found Unconstitutional

The Constitutional Court has ruled that Articles 3(1) and (2) of Law 62/98, which regulates Article 82 of the Copyright Code, are in breach of Article 103(2) of the Portuguese Constitution, which establishes the principle of legality in taxation matters, and are therefore unconstitutional.

Article 82 of the Copyright Code establishes the compensation which is due to authors, performers, publishers and producers of phonograms and videograms from the sale of audio and video recording equipment. It provides that the retail price of equipment and media which enable works to be reproduced must include a sum which is payable to the authors, performers, publishers and producers of phonograms and videograms. Article 82 further provides that the amount of this sum, its collection and distribution are to be determined by legislative decree.

Pursuant to Article 82, this levy does not apply to equipment and media which have been acquired by audiovisual communication organizations or phonogram or videogram producers exclusively for use in their own productions, or by organizations which use them exclusively as aids for the visually or aurally impaired.

Article 3 of Law 62/98, the supplementary legislation enacted to give full effect to Article 82 of the Copyright Code, provides as follows:

"(1) The amount of levy to be imposed on recording media and equipment is determined annually by joint decree of the tax and culture ministers, in consultation with parties specified in Article 6.

(2) Wherever such utilization is usual, and to serve the public interest, the retail price of paper copies, electronic copies and other copying media includes a levy in an amount determined by agreement between the collecting society mentioned in Article 6 and public and private entities, whether commercial or otherwise, which use recording media and equipment as part of their operations.

(3) The levy to be included in the retail price of recording and copying equipment is equal to 3% of the sale price specified by the manufacturers and importers.

(4) The recording time of an audio or video medium is presumed to be that indicated by the manufacturer."

The levy was established because authors and performers have no way of controlling private copying of their works, and hence demand that they be compensated through a levy on equipment and media which facilitate private copying. The imposition of such a levy is envisaged by the EU Directive on Copyright and the Information Society (2001/29/EC).

While a private collecting society - the Association for the Management of Private Copying (AGECOP) - does exist, no joint decree has ever been issued stipulating the amount of the levy.

The Constitutional Court has now ruled that Articles 3(1) and (2) are unconstitutional. Having determined the levy in question to be a tax, the court found that these provisions breached Article 103(2) of the Constitution, which specifies that for each tax, the basis for determining the amount, the percentage of taxation, the benefits, the exemptions and the guarantees of contributors must be stipulated by law or authorized decree-law, and not merely by decree.

By leaving these elements to be determined by ministerial decree, Article 3 does not abide by this constitutional principle. However, pursuant to its powers under Article 282(4), the Constitutional Court has restricted the effects of this declaration of unconstitutionality to future cases only.

The scope of application of Law 62/98 is limited to analogue hardware, as it does not apply to computer programs, electronic databases or digital recording equipment and media.

According to Article 5 of Law 62/98, liability for paying the levy rests with the party which first acquires the relevant recording equipment or media within the national territory, as long as those are not destined for export or re-export.

The Copyright Code also obliges retailers to notify the competent authorities of the amounts of recording equipment imported, manufactured and sold, and establishes penalties for failure to notify. This obligation is reiterated by Article 9 of Law 62/98, which sets a higher penalty in case of infringement.

Compliance with the law is monitored by the General Inspectorate of Cultural Activities, together with the police and administrative entities.

Although the unconstitutionality of these provisions is due to a formality, they represent a significant element of the levying regime and should taken into consideration in the implementation of the EU E-commerce Directive (2000/31/EC), which proposes the extension of the levying system to digital equipment and media. While legislation on the matter is still pending, the E-commerce Directive was enacted in Portugal by Decree-Law 7/2004.

For further information on this topic please contact César Bessa Monteiro at Abreu Cardigos & Associados by telephone (+351 21 7231800) or by fax (+ 351 21 7231899) or by email (cesar.b.monteiro@abreucardigos.com).