Friday, December 17, 2004

Dec. 17, 2004. 06:54 AM
Court rejects $25 levy on MP3 players
iPods exempt from charge, panel rules
Fee is okay on blank recording devices

TYLER HAMILTON
TECHNOLOGY REPORTER

The Federal Court of Appeal has overturned a controversial $25 levy applied last December to all iPods and other MP3 digital music players.

At the same time, the court rejected claims the levy as it applies to blank recording media, such as cassette tapes and recordable CDs, is unconstitutional.

"The issue has to do with what kind of media the levy's attached to," said Michael Geist, an Internet law professor at the University of Ottawa. "It overturned the applications of the levy on iPods and upheld the constitutionality of the system itself."

Retailers including Wal-Mart Canada, Staples Business Depot and Future Shop Ltd. asked the federal appeals court in January to declare "unconstitutional and invalid" the section of the Copyright Act that first created the levy, which has been applied to blank recording media for several years.

They argued the section is too vague and the levy is a tax in disguise that violates sections of the Constitution Act, which only allows Parliament to impose a tax.

In a second appeal filed the same day, a group of electronics and computer manufacturers — including Apple Canada Inc., Dell Computer Corp. and Intel Corp. — asked the court to dismiss the Copyright Board's Dec. 12 decision to extend the levy to "digital audio records," such as the popular Apple iPod and similar devices.

Their concern with the levy was that it raised the prices of their products and encouraged the creation of a cross-border grey market for the products.

The appeals court ruled the Canadian private copying regime is valid copyright legislation and does not constitute a tax. At the same time, it said the Copyright Board does not have the power to impose levies on digital memory that's embedded directly into electronics products.

The case could be appealed to the Supreme Court. Meanwhile, it's unclear if consumers can expect to see a price reduction.

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