Private copying exception –
Now you see it, now you
The Queen on the application of (1) British Academy of
Songwriters, Composers and Authors (2) Musicians’ Union (3) UK
Music 2009 Limited v Secretary of State for Business, Innovation
and Skills 1
The High Court has quashed the Personal Copies for Private Use Regulations (the Regulations)2 which amended the Copyright, Designs and Patents Act 1988 (the Act) to introduce section 28B, with prospective effect. This follows its decision last month to uphold a judicial review challenging the Government’s introduction of this new statutory provision which had the effect of creating an exception to copyright based upon personal, private use. The High Court held that the Government’s decision, that the “harm” to copyright holders due to the legalisation of personal copying was de minimis
and hence that no compensation was necessary, was based on inadequate evidence and flawed.
The High Court has however declined to make an order for a reference to the Court of Justice of the European Union (the
CJEU) on the meaning of the concept of “harm” in the current litigation, but left the door open for a reference to be made
in the future.
The Government will now need to consider whether, and in what form, any further factual evidence is gathered and
whether a new private copying exception should be introduced. In so doing the Government’s position that a levy on
products and devices that facilitate personal copying is not necessary may have to be re-visited.
In the meantime as a result of the quashing of the Regulations, the making of copies of a work for private use are no
longer acts exempted by copyright unless the making of copies falls within a different exemption such as time-shifting.
1  EWHC 1723 (Admin);  EWHC 2041 (Admin).
2 Copyright and Rights in Performance (Personal Copies for Private Use) Regulations 2014 (SI 2014/2361) which came into force on 1st October 2014.
Prior to the introduction of the new section 28B of the Act,
the UK was one of only a handful of EU Member States
that had not introduced a private copying exception to
copyright. EU Directive 2001/29/EC on the harmonisation
of certain aspects of copyright and related rights in the
information society (the Information Society Directive)
gave Member States a discretion to do so, but on the
condition that if the permitted use caused more than de
minimis harm to the copyright holder then compensation
had to be payable. 21 of the 28 EU Member States had
introduced private copying exceptions coupled with
compensation schemes funded through levies. In Malta and
Cyprus the harm resulting from private copying was treated
as de minimis.
Following a lengthy and wide-ranging consultation
process that started in 2010, the UK Government
concluded that there was no need for a compensation
scheme. It concluded that the value of the copying that
would occur under the new private use exception had
been and would in the future be “built into” the initial
price of the copyright work (the “pricing-in principle”),
and hence there was no, or de minimis, harm to
rightholders for which a compensation scheme would
A number of claimants representing segments of the music
industry3 (the Claimants) challenged this decision,
essentially on five grounds: (a) the Government had
misunderstood the meaning of “harm” for the purposes of
the Information Society Directive (b) the pricing-in
principle was irrational and inapplicable (c) the evidence
relied on to justify the conclusion about harm was
manifestly inadequate (d) the Government had unlawfully
predetermined the outcome of the consultation and (e) the
introduction of section 28B constituted unlawful State aid
within the meaning of Article 107 of the Treaty on the
Functioning of the European Union (the TFEU) which
should have been notified to the Commission.
The meaning of “harm” under the Information Society
The Government took lost sales as the metric in order to
determine the existence of any “harm” to rightholders. This
was on the basis that the endemic copying currently
carried out by users did not in any material degree
thwart duplicate sales which might otherwise have been
made by the purchaser had copyright law been
rigorously enforced in the UK (“the lost sales test”).
The Claimants argued that the measure of their loss or
“harm” was the total licence fee that might have been
charged upon the hypothesis that every violation of
copyright deprived the rightholder of some value (“the
licensing test”). They adduced evidence that in a
counterfactual world of viable enforcement, consumers
would be willing to pay £9 more for a CD which would
permit them to make unlimited licensed copies. They
calculated the loss in revenue between 2006 - 2012 as
Green J held that since “harm” was not a defined notion
under EU law, Member States had a discretion when
Private copying exception – Now you see it, now you don’t!
deciding which particular test to apply to identify harm.
Viewed overall, the Government’s choice of a lost sales
test for computing harm was within the Government’s
discretion and on the facts was a perfectly rational option
for the Government to adopt.
The pricing-in principle
The Claimants argued that across the music, film and books
market content suppliers had no real ability to price
discriminate and therefore the theory of pricing-in was
economically inapplicable. The Government argued that
the adoption of the pricing-in principle was squarely within
the margin of appreciation afforded to decision makers in
Even applying a relatively intensive standard of review,
having reviewed the various academic literature on this
subject, Green J held that the Government was entitled to
adopt the pricing-in theory.
Reliance upon manifestly inadequate evidence
The Government had asked itself the correct question: i.e.
whether there was evidence to support the conclusion that
introduction of the copyright exception would cause
minimal or zero harm. However, the independent report
commissioned by and relied on by the Government was
clearly incomplete as an exercise designed to answer the de
minimis question. In particular there was no analysis as to
whether such pricing-in that was identified was complete or
whether it left some harm unaccounted for. It raised more
questions than it answered. In the absence of a thorough
quantitative and qualitative analysis, the decision was
founded on inadequate evidence and on this basis was
The Government had stated an express intention at the
outset of the consultation to implement the exception
without introducing a levy or similar mechanism. However,
it was entitled to hold a strong predisposition and this
was not inimical to a fair consultation. It had set out
various options at the start of the consultation and there
was no evidence of actual predetermination. This
ground of challenge was therefore dismissed.
The Incorporated Society of Musicians Limited
intervened and argued that the effect of section 28B in
the absence of a compensation mechanism amounted to
unlawful State aid contrary to Article 107(1) of the
TFEU. The issue was whether there had been an aid
“through state resources”. It was argued that substantial
benefits had been conferred on technology firms (in the
order of £258m over ten years), in particular to cloud
storage providers (CSPs), from the removal of the
requirement upon them to pay rightholders for licences.
It was argued that this aid, being granted by means of
secondary legislation, was attributable to the State and
granted “through” State resources, since the lack of levy
constituted foregone potential revenues.
Green J dismissed these arguments: applying the
CJEU's judgement in Netherlands (Emissions Trading
Scheme), there was no “clear and concrete risk” to the
Government’s budget and therefore no revenue or
resource foregone to the State. In the absence of a clear
and direct nexus of a relatively formal character
between the advantage conferred and the foregoing of
revenue, the alleged advantage in this case came
nowhere near meeting the requisite test to show that any
aid was “through State resources”.
3 British Academy of Songwriters, Composers and Authors (BASCA),
Musicians’ Union (MU) and UK Music.
The final judgement4
A remedies hearing took place on 3 July 2015: the
Claimants sought a quashing order in respect of
the Regulations introducing the section 28B amendment to
the Act, and a declaration regarding the respective rights
and obligations of the parties. The Court was also asked to
consider whether a reference should be made to the CJEU
in relation to the meaning of the concept of “harm”.
Order quashing the Regulations with prospective effect
Both the Claimants and the Government submitted that the
Regulations should be quashed. The Claimants recognised
that a quashing order was the natural consequence of a
finding that the Regulations were unlawful, and both
parties recognised the importance of avoiding the legal
uncertainty that would arise if the Regulations were left in
place while further, potentially lengthy, policy decisions
The Court agreed and quashed the Regulations in their
entirety. On the basis that it considered it had the power to
impose a temporal limitation upon a quashing order it
quashed the Regulations with prospective effect (ex nunc).
The Court however refused to quash the Regulations with
retrospective effect (ex tunc). The Court held that it would
be “unattractive” as well as confusing to consumers, to
unravel the past and make the private copies of musical
and other copyright works without consent since 1 October
2014 an infringement of copyright, in circumstances
where this activity was purportedly authorised by the
No reference to the CJEU on the concept of “harm”
The Court acknowledged that as a result of the
Regulations having been quashed there was no dispute
between the parties before the English Court, about
which the CJEU could give a relevant ruling. It was
inappropriate for courts to send questions to the CJEU
simply because they are interesting or important.
The Court nevertheless recognised that as the meaning
of “harm” was not acte claire, it would probably be
subject to a reference to the CJEU in the future. It was
therefore “pragmatic common sense” to enable such an
application to return to court in a cost effective manner,
i.e. without the need for new proceedings to be
commenced. Whilst refusing to make a reference at the
present stage, the Court introduced a liberty to apply
into the final Order.
4 The Queen on the application of (1) British Academy of Songwriters,
Composers and Authors (2) Musicians’ Union (3) UK Music 2009
Limited v Secretary of State for Business, Innovation and Skills 
EWHC 2041 (Admin).
The Government’s attempt to introduce a “personal
copies for private use” exception on this occasion has
foundered due to an inadequate evidential basis. But the
Court has not ruled out that the Government may be able
to “plug the gaps” in the evidence in due course. There
is nothing to prevent the Government re-introducing the
exception if and when it receives cogent evidence
supporting the view that the pricing-in principle means
there is no or minimal harm to rightholders. In the
absence of such evidence the Government will have to
consider introducing a compensation scheme. The
creative industries generally favour a levy based on the
Private copying exception – Now you see it, now you don’t!
sales of recordable media and devices (blank CDs,
DVDs, iPods, tablets, laptops, mobile phones etc.).
There have also been discussions in other EU Member
States, and recently the EU Parliament, about the
possibility of the introduction of levies in relation to
cloud storage facilities;5 to date no such levies exist. The
Spanish alternative of providing fair compensation to
rightholders through annual public grants via the State
budget6 has been challenged by a number of collecting
societies and is currently the subject of a reference to the
5 Following the report on private copying levies (2013/2114 (INI)) to
the European Parliament (EP) by Francoise Castex of 17 February
2014, the EP adopted a non-legislative Resolution on private copying
levies, and included: “Calls on the Commission to assess the impact on
the private copying system of the use of cloud computing technology
for the private recording and storage of protected works, so as to
determine whether these private copies of protected works should be
taken into account by the private copying compensation mechanisms
and, if so, how this should be done”.
6 Royal Decree 1657/2012, of 7 December 2012.
7 The Spanish Supreme Court referred two questions to the CJEU
asking whether fair compensation for private copying secured through
annual public grants via the State budget is compliant with
Article 5(2)(b) of the Information Society Directive. Case C-470/14:
EGEDA and others.
Commercial implications of the
This judgement will have ramifications for firms
offering products and services based on the copying and
storage of digital content. Whilst rightholders do not in
general enforce their copyright against consumers for
reasonable acts of private copying8 this may not extend
to the seeking of licence fees from these new technology
firms, such as, for example CSPs.9 The introduction of
the private copying exception by the Regulations was
aimed at encouraging the development of new cloud
business services amongst others, as well as growth
benefits arising from preventing blocking of the market
due to refusal to licence, or licence bundling. Consumers
were deemed to benefit from greater certainty. The
quashing of the Regulations may affect the growth of
these products and services in the UK. It also arguably
puts their providers at a disadvantage when compared to
international competitors based in markets where such
private copying is lawful (such as the United States,
Australia, Canada, and most European countries).10 It
may well accelerate the uptake of competing business
models that are moving away from the owning of
content, to paid streaming services.
8 Impact Assessment No BIS 1055, “Copyright Exception for Private
Copying”, pg. 3 footnote 3.
9 Although evidence suggests that cloud storage was already licensed
prior to the Regulations with cloud storage licenses usually bundled
with cloud content licences (which were not affected by the private
10 Impact Assessment No BIS 1055, “Copyright Exception for Private
Copying”, pg. 3.
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