Three UK music industry organisations, the Musician’s Union, the British Academy of Songwriters, Composers and Authors, and UK Music, have recently launched a legal action seeking leave to apply for judicial review of the UK’s new copyright exception for private copying.

The UK Exception The Copyright and Rights in Performances (Personal Copying for Private Use) Regulations 2014 came into force on 1 October this year as part of a package of new exceptions originally recommended by the Hargreaves Review. The genesis of the exception is, however, that it makes up one of the a la carte list of possible exceptions that may be introduced by member states pursuant to the EU InfoSoc Directive (the “Directive”). The UK exception is narrow in scope, only allowing an individual to make a copy of a work, as long as it has been lawfully acquired by the individual on a permanent basis, for their private and non-commercial use. In contrast, other EU member states have implemented much broader private copying rights; for example Denmark allows consumers to make copies for family or friends.

Importantly, the UK exception does not require the imposition of a levy on manufacturers of copying devices and blank media, such as MP3 players and blank CDs. Such levy systems are widely used in other EU jurisdictions as a means of ensuring “fair compensation” to rights holders in compliance with the requirement of Article 5(2)(b) of the Directive, which states that member states may provide a private copying exception “on condition that the rightholders receive fair compensation”.

The government’s position is that because the exception is sufficiently narrow, there is no harm caused to copyright owners as limited personal copying is already ‘priced-in’ to sales of content. In its report to the Joint Committee on Statutory Instruments, which reviewed the draft Regulations prior to their adoption, the Department for Business, Innovation and Skills stated its belief that recital 35 to the Directive provides it with a legal basis for excluding a levy system. The recital states:

“In certain cases of exceptions or limitations, rightholders should receive fair compensation to compensate them adequately for the use made of their protected works or other subject-matter. When determining the form, detailed arrangements and possible level of such fair compensation, account should be taken of the particular circumstances of each case…In certain situations, where the prejudice to the rightholder would be minimal, no obligation for payment may arise.”

No doubt, the government’s position was also influenced by a piece of research commissioned by the IPO in 2011, which studied copyright levies in 22 EU member states. This study concluded that there are dramatic and confusing differences in the methodology applied by the member states, which cannot be explained by an underlying concept of economic harm, and that the system as a whole is “deeply irrational, with levies for the same devices sold in different EU countries varying arbitrarily”.

The Action: Motivations and Objectives The applicants state that they do not object to the exception itself but consider that the absence of a levy damages the interests of British rights holders and fails to provide “fair compensation” for rights holders.

At the time of writing, the applicants have not been given leave to pursue the case.

A judicial review process would look at how the decision was made, rather than the result. Unless the decision is found to have been made unreasonably, the exception in its current form will stand.

CJEU Jurisprudence The concept of fair compensation in private copying cases has been the subject of a number of European disputes including the cases of Padawan (C-467/08) and VG Wort (C-457/11), in which the CJEU ruled that the relevant harm that should be analysed is that caused by the introduction of the exception.

The most recent case on this area is Copydan Båndkopi (C-463/12). This is a Danish case which was referred to the CJEU, which will consider the de minimis harm principle. Advocate General Cruz Villalón issued an opinion on the reference in July this year. An English translation of the opinion has not been made available by the Court. However, the available translations appear to suggest the Advocate General’s position is as follows:

• Compensation must be calculated in reference to the harm suffered by rights holders;
• Member States have a wide margin of discretion regarding who has to pay fair compensation, how it is paid and how much the levy should amount to;
• Copies of illegally-obtained works are not subject to fair compensation;
• The mere fact that a legally-obtained work has been privately copied does not necessarily require fair compensation; and
• Member States have a wide margin of discretion on whether to apply or exclude fair compensation to situations where harm to rights holders is minimal.

The wide margin of discretion and the de-minimis harm principle articulated by the Advocate General together with the detailed empirical studies, impact assessments and consultation process undertaken by the government prior to the introduction of the exception all suggest that the bar is set high for the applicants if the UK complaint proceeds to judicial review.

Client Alert 2014-319