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PUBLIC FUNDING OF THE SPANISH COPYRIGHT EXCEPTION FOR PRIVATE COPIES IS STRUCK DOWN

The EU court of Justice has ruled that the Spanish method of compensation for private copying, funded by the general budget, is contrary to EU law because it is not capable of guaranteeing that the cost of fair compensation is borne by the users of the copies.

Jose A. Suarez, senior partner in LAWorld’s Madrid member firm of Suarez de la Dehesa,was recently lead  counsel for the plaintiffs in a very significant case concerning the harmonization of Spanish copyright law with European Union copyright law.  The case, No. C-470/14, styled Entidad de Gestion de Derechos de los Productores Audiovisuales v Administración del Estado in the EU Court of Justice (“EUCJ”) is a significant upheaval to Spain and potentially to other EU members that are struggling with the issue of how to provide for fair compensation for non-commercial, private use of copyrighted materials.  

Most EU member states have implemented a system based on a private copying levy, which is, in broad terms, a charge on media and/or devices that enable the person who acquires them to make private copies. The amount collected by this way is usually distributed later among the right holders by the copyright collecting societies.

That system was in force in Spain from 1987 to 2011. Manufacturers, suppliers, importers, exporters and distributors of the devices and recording media paid the private copying levy, and afterwards were allowed to pass on the payment to consumers, who were the true debtors of the private copy compensation.

In December 2011 the Spanish Government approved a new compensation scheme by which the private copy compensation would be funded from the state budget and according to an allocation previously made, provided funding was available.  This meant not only that everyone in Spain, individuals and corporations alike, had to pay the compensation, but also that it would be the State who would determine the quantum of its own debt to the right holders.  How does that scheme mesh with EU Article 5.2.b)?  Not very well, it appears. 

Article 5.2b) allows Member States to establish an exception to the exclusive reproduction right that the article 2 grants to authors and producers in case of reproduction made by a natural person, by any means, and only for private and non-commercial use. Article 5.2.b) conditions the establishment of such exception by mandating that right holders receive fair compensation for those type of reproductions. The applicable directive further provides that moral persons are excluded from such benefit and, therefore, should not pay it.

On January 2013, several Intellectual Property Rights Management Societies requested the Spanish Supreme Court to repeal the aforementioned rule. The legal ground for that claim was that the plaintiffs considered the new Spanish system to be in conflict with article 5.2.b) of the Directive, as interpreted by the EUCJ.

On September 2014 the Spanish Supreme Court sent to the EUCJ two preliminary questions:

“1.- Is a scheme for fair compensation for private copying compatible with Article 5.2.b of Directive 2001/29 where the scheme, while taking as a basis an estimate of the harm actually caused, is financed from the General State Budget, it thus not being possible to ensure that the cost of that compensation is borne by the users of private copies?

2.- If the first question is answered in the affirmative, is the scheme compatible with Article 5.2.b of Directive 2001/29 where the total amount allocated by the General State Budget to fair compensation for private copying, although it is calculated on the basis of the harm actually caused, has to be set within the budgetary limits established for each financial year?”

On 9th June 2016, the EUCJ answered the first question in the negative by holding that the current Spanish private copy exception system is contrary to article 5.2.b) of Directive 2001/29/EC. The opinion states:

article 5.2.b) must be interpreted as precluding a scheme for fair compensation for private copying which, like the one at issue in the main proceedings, is financed from the General State Budget in such a way that it is not possible to ensure that the cost of that compensation is borne by the users of private copies.”

The EUCJ ruling did not state that compensation cannot be paid from public funds, what it found objectionable was that moral persons (as, i.e., businesses) which cannot benefit from the exception must also pay for it. And to that extent, in obiter dictum, the court suggest that per person tax might be acceptable. But would it be workable? A special tax to collect an average of €1 to €2 per citizen is an extremely inefficient means of paying for private, non-commercial copyright usage.  You still must determine how you calculate actual harm from such copying, and who gets to do so?

The majority of EU countries have payment systems that use a levy paid by commercial intermediaries.  Those remain compliant.  But not all do so.  The effect of the Court ruling is unsettling to nation states that desire to solve this problem in alternative ways, whether for political, cultural or historical reasons.  For them, as in Spain, it is back to the drawing board. 

Blanca López de la Osa.

Associate Lawyer

Suarez de la Dehesa Abogados

 28003 Madrid, Spain

blopezdelaosa@sdanet.com  T: +(34) 91 559 59 99

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