Organisations that loan or rent copyrighted material available to the public should have to pay compensation based on the harm it does to rightsholders, the ECJ said. It said compensation levels should be determined by the number of copyrighted works organisations make available and the number of people who can access them.
"The higher the number of protected works made available by a public lending establishment, the greater will be the prejudice to copyright," the ECJ said in a ruling.
"It follows that the amount of remuneration to be paid by such an establishment should take account of the number of works made available to the public and, consequently, that large public lending establishments should pay a greater level of remuneration than smaller establishments," the ECJ ruling said.
"Furthermore, the relevant public, namely the number of borrowers registered with a lending establishment, is also equally relevant. The greater the number of persons having access to the protected works, the greater will be the prejudice to authors’ rights," the ECJ ruling said.
"It follows that the amount of remuneration to be paid to authors should be determined by also taking into account the number of borrowers registered with that establishment," the ECJ said.
The court was ruling on whether a Belgian law, the Royal Decree, violated the EU's Lending Directive. The Directive provides that copyrights holders should be compensated when their material is loaned out to the public.
Some sections of the Directive, prior to it being updated in 2006, said that copyright holders should receive "equitable remuneration" from organisations that loan or rent out their works, but one section just said that "remuneration" should be paid to compensate rightsholders.
A Belgian court asked the ECJ to consider whether that section prohibited Belgian organisations determining rightsholders' compensation based on set rates. Set rates could not be exclusively used to determine compensation, the ECJ ruled.
"The system established by the Royal Decree takes into account the number of borrowers registered with public lending establishments, but not the number of works made available to the public," the ECJ ruling said.
"Such a taking into account does not therefore have sufficient regard for the extent of the harm suffered by authors, or for the principle that those authors must receive remuneration that is equivalent to an adequate income," the ECJ ruling said.
Rules within the Royal Decree that meant that organisations did not have to pay compensation based on customers that were also registered with other lending businesses were also unlawful, the ECJ said.
"In those circumstances, that system may have the result that many establishments are, in effect, almost exempted from the obligation to pay any remuneration," the ECJ said.
"Such [an] ... exemption is, however, at variance with [the Lending Directive]," the ECJ said.
"Consequently, [the Lending Directive] precludes legislation ... which establishes a system under which the remuneration payable to authors in the event of public lending is calculated exclusively according to the number of borrowers registered with public establishments, on the basis of a flat-rate amount fixed per borrower and per year," the ECJ ruled.
The Royal Decree in Belgium sets a flat-rate of compensation that organisations must use to calculate how much they owe copyright holders for making their material publically available for loan or rent, according to the ECJ's ruling.
Under the law organisations must pay rightsholders €1 per adult who borrows material each year, and €0.50 for every child, the ruling said. The rates are payable only if the customer loans copyrighted works at least once in that year, the ruling said.
The Belgian Association of Educational and Scientific Authors (VEWA) had challenged that the Royal Decree should be annulled in the Belgian courts, the ECJ ruling said.
The ECJ had considered the meaning of how fair compensation could be determined by placing what the Lending Directive said about compensation in the same context as what the EU's Copyright Directive provides.
The Copyright Directive states that copyright owners should be "adequately" compensated for use of their works, the ECJ said.