Hardware vendors sue Dutch government over copyright levies

The planned levies are way to high and disproportionate to the losses of the music and movie industries, the companies said

Hewlett-Packard, Acer, Dell and Imation are suing the Dutch government over new levies on hard disks, smartphones, tablets and MP3 players that are meant to compensate the music and movie industries for losses caused by home copying.

"The companies now hold the State liable for all damages caused by the levies," the hardware vendors said in a joint news release on Wednesday. Trade association FIAR Consumer Electronics, which has as members companies such as Samsung, Sharp, Sony and LG, is also a party to the litigation. The lawsuit was filed Wednesday in the District Court of The Hague.

The entertainment industry estimates lost income of ¬40 million, which is much too high, according to the hardware companies. "That amount is excessive and completely unfounded," they said. The ¬40 million also incorporates damages for illegally downloaded music and movies which, according to the companies, legally cannot be recovered by a levy on devices. Furthermore the Dutch government established a levy on all devices including devices for professional use that are not used for private copying, they said.

The companies are also suing the Dutch Home Copying Foundation (Stichting de Thuiskopie), which is responsible for the collection of the levies, demanding that the foundation pay collected levies back to the hardware makers.

The Dutch government will introduce a levy of up to ¬5 (US$6.40) for devices and discs in January 2013 to comply with a European regulation.

An 8 GB iPad for example will become ¬5 more expensive as will all laptops and PCs as well as smartphones and HDD recorders with more than 160GB of storage. Devices with a lower storage capacity will have a lower levy, with the lowest being a ¬0.03 levy per DVD or CD-R.

The lawsuit comes just two days after Dell, HP and Imation sent a letter of concern to the State Secretary for Security and Justice, Fred Teeven, that was also signed by Fujitsu, Intel, Nokia, Panasonic, RIM, Samsung and Digital Europe. Acer, a party to the court action Wednesday, did not sign the letter.

Implementing the levy will harm the companies' ability to serve customers in the Netherlands and raise the cost of digital technology, the companies said in the letter. "Furthermore, it will cause trade barriers and serious disincentives to operating logistics hubs and distribution centers in the Netherlands," they said, adding that they have serious doubts about the legality of the decision.

"It is likely to be in conflict with the [European] Copyright Directive. It does not live up to the requirement that fair compensation be based on assessment of harm of private copying, and it seems to include compensation for illegal copies," they said. Furthermore, the system lacks a workable system for exempting products sold to professional users, and there are several points of uncertainty and ambiguity in the decision that would make it extremely difficult and costly to implement in practical terms, they added.

In the letter, the companies had said some of them were seeking legal advice, but also said that they were "keen to work with" Teeven and his staff to find constructive solutions and urged him to reconsider the decision and at a minimum to postpone the implementation.

"The ultimate objective should be the abolition of media/device-based levies systems, both in the Netherlands and in other European countries," they said, adding that it is not only in the Netherlands that levies on ICT products cause difficulties.

The Ministry of Security and Justice could not be immediately reached for comment on the lawsuit.

Loek is Amsterdam Correspondent and covers online privacy, intellectual property, open-source and online payment issues for the IDG News Service. Follow him on Twitter at @loekessers or email tips and comments to loek_essers@idg.com

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Tags intellectual propertyregulationcopyrightlegalDutch Home Copying FoundationlegislationgovernmentacerHewlett-PackardimationDell

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