The Personal Copies for Private Use exception to copyright infringement came into force in October 2014 to permit copying of lawfully acquired copyright works by individuals for their private use (see our earlier newsflashes here and here). The legislation was challenged by The Musicians' Union and others on the basis that it failed to provide "fair compensation" for copyright owners for the permitted copying by way of a levy on blank media or equipment used for recording as required by the Copyright Directive. Whilst the Court upheld that the legislation as drafted was within the discretion provided under the Copyright Directive, ultimately it was unlawful as there was insufficient evidence to support the conclusion that the private copying permitted would cause zero or de minimis harm to the copyright owners, such that no compensation was needed. 

Business Impact

Although the case does not strike down the legislation, it leaves the Government to reconsider whether to introduce compensation for copyright owners of content which may be copied for private use, despite the Government being against such a scheme, and also the opposition voiced by manufacturers of blank media and equipment which can be used for copying during the original consultation process. Given the number of recent cases referred to the CJEU concerning the permitted scope and operation of such compensation schemes, to draft such a scheme may amount to trying to hit a moving target.

Of interest is what will happen next. The Government could attempt to rectify the evidential issues so that the legislation may remain in force, or could repeal the exception and revert to the position previously, whereby individuals regularly copied content for their own use, and content providers usually did not take action against them, despite it being an infringement of copyright. Alternatively, they could accept that the harm to copyright owners is greater than de minimis and introduce a compensation levy.

This case adds to the lack of clarity about the permitted private copying exception and the various methods of applying a levy or compensation scheme in force across Europe which has seen several cases referred to the CJEU for interpretation, including most recently in the Copydan case, Case C‑463/12, and also the Nokia Italia reference, case C-110/15. A reference remains one option available to the court in this case when the relief is considered.

Background to the challenge

Article 5(2)(b) of Directive 2001/29 on copyright and related rights in the information society ("The Copyright Directive") permits Member States to introduce an exception to copyright where a purchaser or lawful acquirer of content wishes to copy it for private use. However, if the permitted copying causes more than de minimis harm to the copyright owner, then under the Copyright Directive, compensation has to be paid.

Prior to 2014, the UK had not implemented this exception, leading to circumstances where most individuals considered that they had the rights to copy lawfully acquired material and did so, and despite it constituting infringement, the copyright owners usually took no action. This was highlighted as part of the Hargreaves review of intellectual property and the digital market in May 2011, and following consultation and draft legislation, the UK implemented the private use exception in October 2014. The Copyright and Rights in Performances (Personal Copies for Private Use) Regulations 2014 brought in an amendment to section 28 of the Copyright Designs and Patents Act 1988 implementing a narrow exception which provided no compensation for copyright owners for the copying permitted.

The Decision

Mr Justice Green's decision dated 19 June undertakes a detailed and lengthy examination of the grounds of challenge raised by the Musicians' Union and other music bodies. Of the six issues identified by the Judge, he found for the Government on all but one. The decision confirmed that

  • The UK has a discretion whether or not to implement the private usage exception and if so, whether to implement a narrow or wider private usage right.
  • If a private use right is implemented and it causes harm to copyright holders which is more than de minimis then compensation must be paid.
  • It is for the Member States to define "de minimis" but it must strike a fair balance between consumers, rights holders and manufacturers of copying devices.
  • Article 5(2)(b) of the Copyright Directive did not have direct effect and needed implementation before rights holders could rely upon it.
  • It was legitimate for the Government to assess "harm" by reference to the costs lost by rights holders attributable to lost sales due to the introduction of private copying, rather than looking at the total of a hypothetical licence fee had every instance of infringement been claimed for.
  • The Government had concluded that any harm which the rights holders might suffer through lost sales had already been "priced in" to the cost of the original content purchased by the consumer, so any loss was only de minimis.  

However, the key issue was that the conclusion drawn by the Government that harm would only be de minimis was NOT supported by the evidence it said it relied upon when determining that there was no need for a compensation scheme. The Judge reviewed all the evidence said to be relied upon in the Government's Updated Impact Assessment and decided that it fell a long way short of what was required. Further the Government had failed to explain what it understood to be "de minimis" and so it had not addressed properly the key question of whether pricing-in was so extensive as to render residual harm minimal or non-existent. The Judge stressed that Government did not have to prove on a balance of probabilities that harm was minimal, but a proper exercise was needed to collate and review the evidence before the conclusion could be drawn.

The parties are due to go back to the Judge with proposals for what happens next, including whether a reference to the CJEU is required on interpretation of the provisions of the Copyright Directive.