The High Court has ruled that the new copyright exception that permits personal copies to be made for private use without a compensation scheme for rights-holders is unlawful (R (British Academy of Songwriters, Composers and Authors and others) v Secretary of State for Business, Innovation and Skills  EWHC 2041 (Admin), 17 July 2015.
The applicants argued that section 28B of the Copyright Designs and Patents Act 1988 ("CDPA") was incompatible with European law, which requires that if an exemption to allow copying for private use causes any harm then that harm must either be zero or minimal, or be compensated for by a fair and adequate compensation scheme for rights-holders ((Article 5(2) (b) Directive 2001/29/EC (the "Copyright Directive")).
The High Court has now quashed the Copyright and Rights in Performances (Personal Copies for Private Use) Regulations 2014 (SI 2014/2361) (the "Regulations") that amended the CDPA in this regard, with prospective effect.
The British Academy of Songwriters, Composers and Authors (BASCA), the Musicians' Union (MU) and UK Music sought judicial review of the exception arguing it was unlawful because it failed to provide fair compensation to rights-holders in line with European law. Section 28B of the CDPA was introduced in October 2014 to allow members of the public to copy for their own private use CDs and other materials subject to copyright, on the basis that it would cause no or minimal harm to rights-holders. The lawfulness of section 28B was dependant on whether there was evidence of harm beyond a minimal level. If there was harm beyond this level then there would need to be a mechanism for compensation.
The applicants estimated that the introduction of the exception, without the introduction of any mechanism for fair compensation for rights-holders, would cause a loss of £58 million per year for rights owners of the various intellectual property rights falling under the legislation.
The Secretary of State for Business, Innovation and Skills, when implementing the Copyright Directive in national law, was required to consider the competing interests of consumers, rights-holders and manufacturers of copying devices to gain evidence that the harm would be minimal.
The evidence asserted by the Secretary of State was found by the High Court to show that the harm caused by the private copying exception was not minimal and this was the only reason for which the Secretary of State could avoid the introduction of a fair compensation scheme. Its justification for not introducing the scheme was:
- the only harm that would need to be compensated for was the risk to rights-holders of a loss of duplicate sales. The Secretary of State did not feel there was a direct correlation between the ability to make private copies and a loss of sales and therefore did not predict an impact on duplicate sales.
- sellers included an amount to take account of consumers making private copies in the price of first sale (the "Pricing-In Principle") regardless of the legislation in place. The Secretary of State concluded that any harm would in future be compensated for by Sellers extending this principle to cover for any lost duplicate sales.
The High Court found that, whilst there was reasonable literature to support the Secretary of State's position in relation to the Pricing-in-Principle, it still needed to provide evidence that the harm caused by the introduction of the exception would be none or minimal. The High Court found that the evidence relied upon by the Secretary of State did not support its conclusions, and therefore the introduction of the exception without the compensation mechanism was unlawful.
The High Court then ruled that the Regulations be quashed with prospective effect, and any private copying of copyright works in future would not benefit from the exception contained at sections 28B of the CDPA. It is once again the position that any copies of copyright works made for personal use will be infringing. No reference has been made to the European Court of Justice for consideration of the meaning of "harm" at this stage, but a final order has been made permitting a referral in future.