The European Commission said it is proposing a directive to protect the copyright of music, film, video and written material, distributed via discs and online services.
The proposal would "adjust and complement" the existing EU copyright framework and stimulate creativity and innovation for online services as well as for CDs, CD-Roms and digital video discs, the EC said.
"This eagerly awaited proposal will not only ensure a level playing field in the single market for products and services containing intellectual property," said internal market commissioner Mario Monti. "It will also guarantee the high level of protection of intellectual property necessary to encourage creativity and investment within the EU, both of which are crucial for job creation and long term competitiveness."
Monti said the proposal represents "a fair balance" between the divergent and often conflicting rights and interests concerned.
The International Federation of the Phonographic Industry, representing record producers, has complained in the past days about a series of aspects they expected to be included in the proposal.
European telecomms operators have been lobbying to prevent themselves being exposed to piracy claims where digital data is temporarily stored.
The Commission said the proposal meant no copyright royalties would be payable on cache copies of data arising during the transmission of material over the Internet.
The proposed directive does not include provisions making online service providers liable for breach of copyright of material they carry and provided by their suppliers, the EC said.
"This is because liability is a horizontal issue concerning not only copyright, but also such issues as defamation, privacy, unfair competition, pornography and racist and violent content."
Commission officials said they plan to propose a directive on this liability aspect of electronic commerce in the first months of 1998.
Exceptions from payment of royalties would apply to private copying and copying by public libraries and museums where this is not for economic or commercial advantage.
The Commission does not plan to require member states to introduce blank tape levies to compensate right holders for private copying but will hold consultations next year on the issue, it said.
The directive would require member states to provide adequate legal protection against equipment designed to circumvent latest copyright management systems to control copyright on digital networks. But the IFPI said earlier this week the proposal was not strong enough in this respect.
Commission officials said the proposal is aimed at providing protection for rightholders as video-on-demand, Internet and electronic publishing is developed and before widespread piracy becomes a habit.
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