Fair compensation for copyright holders—the UK’s personal copying exception

Just how fair is the personal copying exception, implemented in the UK last year? Not very—the High Court has found that the government’s decision to not provide fair compensation, for example to cover sales lost when consumers take advantage of this exception, was based on inadequate evidence and is therefore unlawful. The case is R (on the application of British Academy of Songwriters Composers and Authors and others) v Secretary of State for Business Innovation and Skills (The Incorporated Society of Musicians intervening) [2015] EWHC 1723 (Admin)

What is the background to the personal copying private use copyright exception?

The Copyright and Rights in Performances (Personal Copies for Private Use) Regulations 2014, SI 2014/2361 have introduced a new exception to copyright, implementing Directive 2001/29/EC, art 5(2)(b) (InfoSoc Directive). The personal copying for private use exception came into force on 1 October 2014 by the Copyright, Designs and Patents Act 1988, s 28B. As a result, any person who legitimately acquires content (music, film, books) can copy that work for his or her own private use without infringing copyright. It can be copied onto other formats or stored in the cloud provided it is for private, non-commercial use.

A condition attached to the right of member states to exercise the discretion under the InfoSoc Directive was that if the now permitted use caused more than de minimis harm to the copyright owner, for example, through sales lost when consumers take advantage of this exception, then compensation had to be payable.  21 out of the 28 EU member states who chose to introduce private copying exceptions, coupled the exception with schemes for compensation funded through levies. The UK did not.

What is the background to this application for judicial review?

In November 2014, the Musicians’ Union (MU), the British Academy of Songwriters, Composers and Authors (BASCA) and UK Music applied for a judicial review of the private copying exception on the basis that it does not include a mechanism for fairly compensating rights holders for the act of private copying as part of the new regime, in accordance with  Directive 2001/29/EC, art 5(2) (b).

Why didn’t the government provide for fair compensation?

In many member states where an exception for private copying had been introduced, the exception has generally stretched beyond personal private copying and covers copying to family and friends and by way of gifts, i.e. a wider variety of non-commercial copying. The UK chose to introduce a more limited exception based on personal use.

The government wanted to avoid having a compensation scheme which it thought would be cumbersome and a burden. Its aim was to create an exception which either caused zero harm to right holders or de minimis harm and this meant that the exception would be strictly limited to private own, non-commercial, use by legitimate purchasers of content. For such use any ‘relevant’ harm to the rights holders was deemed to have been already priced-in to the initial sale price of each work by the sellers of the content.

Before introducing the exception, the government had launched a consultation to evaluate a series of options for the introduction of the new exception to copyright. As part of the consultation, the Intellectual Property Office (IPO) was instructed to conduct a series of detailed impact assessments.

In the application for judicial review, the claimants challenged the:

  • assumptions adopted by the government in the consultation
  • inferences and conclusions drawn from the evidence actually collected
  • procedure adopted in the consultation

It was submitted that the Secretary of State was so determined to introduce the copyright exception without any compensation scheme that he predetermined the consultation and closed his mind to the evidence and generally acted unfairly in that consultative process.

The six main issues are summarised in para 18 of the judgment.

What did the High Court rule?

If the Secretary of State could not get home on the legal issue of whether pricing-in would lead to only ‘minimal or zero’ harm then a compensation scheme should, in law, have been introduced as part of the personal copying for private use exception.

The court considered whether the evidence relied on to justify the conclusion about harm was ‘inadequate’ or ‘manifestly inadequate’ and found that the conclusions and inferences drawn from the evidence that the Secretary of State relied upon were not warranted or justified by that evidence. For example, the terms of reference of the IPO Research Report were insufficiently precise; they did not focus the researchers upon the very specific de minimis question that the Secretary of State had to answer.

In relation to music, the IPO research report failed to provide an evidence base for the Secretary of State’s conclusion but raised instead a series of questions which were never pursued and answered. In relation to both films and books, the IPO research report found evidence of pricing-in but there was no analysis of how this related to the de minimis question.

The updated impact assessment purported to rely on ‘other’ evidence but it turned out that this was not evidence but, instead, a series of explanations as to why certain pieces of evidence were not probative, or why other possible avenues of research were not pursued or why other lines of inquiry were potentially valuable but were not conducted.

Credible evidence had been provided which cast doubt on the correctness of inferences drawn by the Secretary of State in relation to films, but which was ignored. The Secretary of State also ignored an entire potentially relevant category of harm.

On the other issues, the claimants’ claims failed.

What is the significance of the court’s ruling?

The significance of the court’s ruling is that the decision to introduce section 28B in the absence of a compensation mechanism is unlawful.

However this does not necessarily result in section 28B being struck down. It is, in theory, possible for the Secretary of State to re-investigate the issue in order to address the evidential gap identified. The Court suggested that it is possible for this evidential gap to be ‘plugged’ and therefore for the present decision to become justified.

Another outcome might be that following further investigation, the gap in the evidence remains un-plugged in which case the Secretary of State could either repeal section 28B or introduce a compensation scheme. A third possibility is that the Secretary of State simply decides to introduce a compensation scheme without more investigation.

The court also concluded that the questions of law raised in the application are of significance both in the UK and in the EU. It is considering the possibility that questions should be referred to the Court of Justice of the European Union (CJEU) and has invited submissions on questions and on appropriate relief.

It is only three months since the CJEU’s decision in Copydan Bandkopi, (Copydan Bandkopi v Nokia Danmark A/S C-463/12 [2015] All ER (D) 80 (Mar)) regarding how rights holders should be compensated when their works are copied under the personal copies for private use exception. The third question of that reference focussed on Recital 35 of the InfoSoc Directive which states: ‘in certain situations where the prejudice to the right holder would be minimal, no obligation for payment may arise’—and asked, what is minimal?

The CJEU’s response was that member states may set the threshold for what is minimal but that threshold must be consistent with the principle of equal treatment. See our News Analysis: The private copying exception—compensating the creators.  It will be interesting to see how the government reacts to the High Court’s ruling in the light of Copydan Bandkopi and cases like it.  The CJEU, in cases like Copydan Bandkopi, is suggesting that it is for the member state to determine who must pay the compensation and to establish the form, detailed arrangements for collection and the level of compensation. However they must do this based on proper evidence and investigation.

It seems to me that there is room for the government to plug the gap and for there to be no fair compensation provided for in the UK in relation to this exception. However there are and have been many referrals to the CJEU on the subject of  of fair compensation and if fair compensation is not provided for in the UK it seems likely that this position will become a focus for future challenges.

 

Relevant Articles
Area of Interest