Hewlett Packard Will Pay GEMA for Piracy

In what may be the precursor to a deluge of lawsuits against electronics manufacturers, computer giant Hewlett-Packard has agreed to pay fees to German music licensing organization GEMA for revenue supposedly lost to piracy. Hewlett-Packard was targeted by GEMA last May, because the Palo Alto, Calfornia-based company's CD burners dominate the German market, and was originally asked to pay 30 marks ($12.90) for each unit sold in Germany since February, 1998.

HP settled Thursday, November 23, in a Frankfurt court on a lower judgement: 3.60 marks ($1.54) for each unit sold since the 1998 date, and 12 marks ($5.16) for each one sold in the future. GEMA (Gesellschaft für musikalische Aufführungs- und mechanische Vervielfältigungsrechte, the Society for Musical Performance and Mechanical Reproduction Rights), Germany's equivalent of ASCAP, had argued that the widespread use of CD burners cost European Union nations around $72 million in lost tax revenues over the past year.

Quoting figures supplied by the International Federation of the Phonographic Industry, GEMA lawyers argued that as many as 500 million CDs are pirated annually by people making copies of CDs from authorized recordings or from tunes downloaded from the Internet. Such practices put a 5-10% dent in the bottom line for Europe's $10 billion music industry last year, they claimed. Other manufacturers of CD burners will also be paying fees for products sold in Germany, with the rates to be determined by agreements they reach with GEMA.

HP executives declined to put a dollar value on the judgment. Company spokeswoman Jeannette Weisschuh criticized the settlement, saying it put her company at a disadvantage against foreign retailers who can sell cheaper CD burners over the Internet, thereby avoiding the fees. "This was a trial to set an example for the whole market," Weisschuh remarked. "It's unfair to the consumers who have to pay more and unfair to the manufacturers because it gives us a competitive disadvantage."

The trial's outcome was widely perceived as updating German copyright law, which was formulated when analog tape recorders ruled the market. Electronics manufacturers now pay 2.50 marks ($1.07) for each cassette recorder and 18 marks ($7.74) for each video recorder sold in Germany. GEMA collects the fees and distributes the money to copyright owners through record labels and music distributors. Sister organizations in other countries may pursue similar cases against manufacturers in the wake of GEMA's success at getting an equipment maker to pay for copyright violations that its customers may or may not have committed.