In yet another decision in relation to the private copying exception provided for by article 5(2) (b) of Directive 2001/29/EG (“Infosoc Directive”) (C-470/14), the CJEU determined that a fair compensation scheme for private copying as provided for by the Spanish Real Decreto 1657/2012 (“Real Decreto”), which is financed by the general state budget (“General State Budget”), is not in conformity with article 5(2)(b) of the Infosoc Directive.

Spanish law provides for a system of fair compensation whereby the State (through the General State Budget) actually pays a fair compensation to the respective Spanish collective rights management organizations. Several of these organizations, despite having made use of the Real Decreto, sought its nullification before the Spanish Supreme Court, arguing that the Real Decreto in this way obliges taxpayers in general (not just users who copy for private purposes) to bear the cost of this compensation and that such a system does not guarantee the fairness of the compensation.

Following the request of the Spanish Supreme Court for a preliminary ruling, the Court decided in favour of the societies, holding that:

  • as the Member States under the Infosoc Directive are still free to decide who has to pay the fair compensation, its form, detailed arrangements and level, they can from the outset choose a compensation system financed by a levy or by their general state budget. The system chosen must allow for the payment of the fair compensation to rights holders and the detailed arrangements must guarantee actual recovery of the compensation; and
  • although legal persons can be obliged to finance the fair compensation (the payment of the compensation in that case will most likely be borne by the user, as there is nothing to stop the private copying levy being passed on to them by including it in the price charged for making available the reproduction equipment, devices and media or in the price for the copying service supplied), they cannot benefit from the private copying exception.

While this decision is certainly clear from a legal perspective, its precise implications, however, are not. Does this now mean that the Spanish State will have to effect a certain budget, with taxes levied only from “users”, for the payment of the fair compensation? Does this entirely exclude the possibility of a “state sponsored private copying compensation”? Or can another solution be found?