The Decision of the Court of Justice dated 21 October 2010 in Case C-467/08 dealt with different questions referred by Barcelona Provincial Court for a preliminary ruling in the proceedings between Padawan, SL, and the General Society of Authors and Editors of Spain (SGAE) on the "private copying levy” supposedly owed by Padawan for the CD, DVD and MP3 players it sells. In particular, Padawan had refused to pay as it argued that the application of the private copying levy regardless as to whether the devices are to be used for private copying is not compatible with Directive 2001/29.

The preliminary ruling concerns the interpretation of the concept of 'fair compensation' in Article 5, paragraph 2, letter b) of Directive 2001/29/EC, which stipulates that Member States may provide for exceptions or limitations to the reproduction right on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation.

This exception was enacted in national law by Article 25 of the consolidated version of the Intellectual Property Act (Texto Refundido de la Ley de Propiedad Intelectual: ‘TRLPI’) entitled "Equitable compensation for private copying", which provides that the reproduction made exclusively for private use will lead to a single equitable compensation.

The primary issue raised by Barcelona Provincial Court within the five questions and which has been widely discussed, is as follows:

Should a fee system be necessarily linked to the presumed use of reproduction equipment and materials benefit from the private copying exception? Therefore, does the system adopted by the Spanish government to apply the private copying levy to all computers, devices and digital reproduction materials given their mere suitability for copying, regardless of whether the companies and professionals buy them for purposes other than private copying, counteract Directive 2001/29/EC?

The Court found that it is necessary that the reproduction equipment, devices and media to which the levy applies, are presumably used for private copying. The Court thus concluded that the indiscriminate application of a private copying levy is not compatible with the Directive 2001/29, and cited the example of the digital reproduction devices and media for purposes other than private copying.

Last 2 March 2011 Barcelona Provincial Court has estimated the appeal filed by PAPANAN SL absolving it from all the claims. It, therefore, seems that it is now time to modernize the system of fair compensation for private copying for two reasons:

  • First, as the ruling itself so requires it. Some meetings have therefore been held between the Ministries for Industry and Culture, Ametic (Electronic Multi-Sector Association) and the eight management institutions in Spain.
  • Second, due to the imperfection of an “equitable compensation for private copying” system that only takes into account hardware and distribution mechanisms associated with them, ignoring other increasing realities, such as “streaming” where audio or video is distributed by Internet and stored in the buffer of computer but without the contents being downloaded or copied. If the system of “fair compensation for private copying” is based on the copy, how will it survive in a future where no copies are made?