UK Court decision highlights the disfunctionalities of compensation schemes for private copying exception

25 June 2015

Author: OpenForum Europe

UPDATE 23/07/15 *** On 17 July, the British High Court published a supplementary opinion to this judgement, pointing that the Personal Copies for Private Use Regulations are being withdrawn, with effect only for the future. Moreover, the Court decided not to send a preliminary ruling to the ECJ on the meaning of “harm”. However, it left this option open to the Claimants if they are willing to. The Secretary of State is now taking the time to consider all possible options and did not give an indication whether he would seek to re-introduce an exception with a different way of implementation (e.g. levies or a government fund). ***

There seems to be a wide agreement in most of the EU Member States that allowing for private copies causes harm to the rights holders, a harm that should be compensated against, according to the Article 5 (2) (b) of the  InfoSoc Directive. Throughout the EU, 22 Member States have set up some kind of compensation scheme for private copying Luxembourg, Cyprus, Malta, the United Kingdom and Ireland are the 5 Member States which lack any such scheme*.

Based on the Statutory Instrument adopted in October 2014, the UK had allowed legal copying for private use, treating it as de minimis. This meant that the harm incurred to rightholders was considered so minimal that no compensation was needed (based on Recital 35 of the InfoSoc Directive). That UK legislation allowed users to make personal copies for private use, but it still kept illegal the sharing of personal copies with family or friends. By limiting the scope of the exception, the UK government attempted to minimise the damage incurred to rightholders and thus avoid the need for a compensation mechanism, which has led to numerous critiques in other Member States (i.e. lack of transparency, multiple payments for the same benefit, failure to adapt to new ways of accessing content – such as cloud-based applications and on-demand streaming services, …). However, on 19 June 2015, the British High Court ruled that the evidence provided by the UK to justify the triggering of the de minimis clause was inadequate.

This conclusion does not invalidate the exception, but it obliges the government to revise the copyright legislation in light of the ruling. The government might re-investigate the issue and close the ‘evidential gap’ while keeping the private copying as de minimis, or the investigation might lead to the conclusion that a corresponding compensation scheme is needed. The Secretary of State could also immediately introduce a compensation scheme. Following this ruling, there will be a Court hearing, to determine whether the British Court will address the ECJ with a preliminary ruling concerning the interpretation of the InfoSoc Directive.

The policy negotiations which led to the adoption of the JURI report on the evaluation of the implementation of the InfoSoc Directive have also highlighted the difficulties in finding a common ground when it comes to the private copying exception. Although the original draft called for the adoption of harmonised criteria to define the harm caused to rightholders, the adopted report excludes any mention of that harm. Instead, it puts the focus on fair compensation, ignoring that “harm” needs to be consistently defined so that decisions about “fair” can be made and also disregarding the fragmentation and uncertainty generated by the various ways that “fair compensation” is implemented.  This report will be voted on the plenary on 9 July.

One can only hope that the levies system will be progressively phased out, as it is an antiquated system no longer adapted to how content is consumed in the current digital world. Before that time, the system should not be extended to new, innovative media through which content is shared, such as cloud computing services.  So far the Commission has remained largely silent on the private copying exception, choosing not to address it in its Digital Single Market Strategy that it published in May. This leaves the European and national courts with the challenge to tackle the disfunctionalities of this system, until a better alternative is found.

* For Luxembourg, Cyprus and Malta, private copying is treated as de minimis. Ireland does not allow private copying as such, but could be treated as “fair dealing”. Greece has a private copying levy scheme in place, but it does not currently enforce it.