Copyright Caselaw | Paraguay | Supreme Court Clarifies Nature of Copyright Royalties

Late last year, Constitutional Chamber of the Supreme Court, in Paraguay, dismissed an action of unconstitutionality filed by Paraguayan company Atlantico Importación – Exportación S.A. (hereinafter, Atlantico) against Decree 6780/2011, prescribing regulations associated with copyright royalties for private copies and Article 23 of Resolution 1021, which regulates Decree 6406/05 associated with the payment of taxes applicable to imports of certain goods for commercialization; and in doing so clarified the specific nature of copyright royalties.

Atlantico argued that both the subject Decree and article were unconstitutional as they “arbitrarily restricted the possibility of fully exercising free trade under equal conditions” and that government had infringed upon the rule of law, as applied to taxes, by overreaching its powers and “prescribing a tax by way of a Decree”.

The Constituional Chamber’s decision was issued unanimously by the three judges analyzing the action of of unconstitutionality

In its decision of November 23, the Chamber found that Atlantico had erred when pleading its case, by conflating the notions of taxes and copyright royalties, which comprise different obligations. Whereas taxes are a financial obligation of a public nature, prescribed in the law and whose purpose is to satisfy the State’s objectives; copyright royalties are a form of compensation, of a civil or private nature, in favor of authors, composers, artists, interpreters or producers for the use or copying of their works, and are in no way similar to taxation.

The Chamber found that Decree 6780/2011 could not have infringed the rule of law, as applied to taxes, nor could it be deemed confiscatory, since it does not prescribe for a tax, but the specific amount of a royalty, as provided for under the Copyright Act No. 1328/98.

On the other hand, and regarding Resolution 1021, the Chamber noted that it regulated Decree 6406/05 which was repealed by the enactment of Decree 1931/19, a fact that further made Atlantico’s case unfeasible, as it did not make sense to challenge a resolution that was no longer in force; and as a result, dismissed it.

Click here to request a copy of Chamber’s decision or in case you wish any additional information.