Yet another twist in compensation for private copying
In its judgement of June 9th, 2016, the CJEU ruled that the Spanish public financing of compensation for private copying is against EU Law. The Spanish Supreme Court is expected to issue a decision shortly, but the new Government may well have to reassess the system. More legal uncertainty…
– The exceptions and limitations to copyright that formed part of the law, included the private copying limitation, which allowed individuals to make private copies for personal, non-commercial use without the author’s authorization.
– In order to compensate the economic damage caused to right holders by the limitation, compensation was included in the form of a levy on reproduction media and devices. The law required manufacturers and importers to collect, declare and pay the copyright levy to collecting societies based on a list of products and devices.
– The reform of the Spanish copyright levy enacted on December 2011 (Royal-Decree Law 20/2011) abolished the copyright levy and determined that compensation was to be paid by the Government directly to CMOs out of the General State Budget. Therefore, private industry was released entirely from any obligations regarding private copying.
– The formal argument to justify abolition was to bring Spanish law into line with the requirements of EU Law: The CJEU judgment of October 21, 2010 (“Padawan”), declared that copyright levies in Spain were applied indiscriminately to both individuals (who are legitimately presumed to acquire devices for making private copies) and companies, professionals and public administrations whose purposes are, by definition, professional and not private and should not pay the copyright levy. Therefore, the Spanish levy system was considered to be against EU law.
– The amendment of the Spanish Copyright Law operated through Law 21/2014 of November 4 maintained the State budget funding and significantly narrowed the exceptions to private copying. As a result, compensation to be paid by the State to CMOs was drastically reduced from €115 million to €8,636,728.09.
– CMOs filed an appeal with the Supreme Court seeking the annulment of Royal Decree 1657/2012. Doubts were raised as to the compliance of the new compensation system with EU law, and the Supreme Court referred the matter to the CJEU.
B. Judgement of the CJEU of June 9, 2016
– In its recent judgment of June 9, 2016, the CJEU has held that Directive 2001/29 does not preclude Member States from financing the private copying compensation from their national State budget (a solution which has also been adopted in Estonia, Finland and Norway).
– However, the private copying exception is intended exclusively for natural persons who make, or have the capacity to make, copies of protected works for private use and for non-commercial purposes. It is individuals who cause harm to the right holders and who should, in principle, be required to finance the fair compensation. By financing compensation from the State budget, though, both individuals and legal entities were actually contributing to pay the private copying.
– According to the CJEU, although Member States are free to establish a scheme under which legal persons are, under certain conditions and for practical reasons, required to finance fair compensation, such legal persons should not be ultimately liable for payment of that burden.
– Accordingly, the Spanish public financing system is incompatible with EU law. The CJEU clarifies that the financing scheme from the General State Budget is not contrary “per se” to the Directive. The validity of this compensation scheme depends on the possibility of companies, professionals and public administrations of being excluded from the scope of the compensation.
C. What are the consequences of the judgment?
– Following the CJEU judgement, the Spanish Supreme Court must now hand down a decision In our opinion, it is likely that the Supreme Court will rule that the compensation system envisaged by Royal Decree 1657/2012 is incompatible with article 5(2)(b) of the Directive.
– However, the Supreme Court may leave the door open to condition its validity to the implementation by the Government of a series of corrective measures which ensure that the compensation is not applied indiscriminately (i.e., to both legal persons and individuals).
– After the Supreme Court ruling, the Government that emerges from the elections must adapt Spanish law to the requirements of the Directive. The new Government may as well abolish the exception of private copying outright and, consequently, the need for compensation.
– From a practical point of view, IT and technology companies will not be subject to any obligations regarding compensation for private copying in the short term. In addition, the economic impact of Spain’s narrow definition of private copying is expected to be minor in the years to come, as very few people actually acquire CDs and blank media for private copying purposes.