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UK: Copyright exception ruled to be out of tune by denying the music industry ‘fair compensation’

By Sean Godfrey and Sam Churney

On 19 June 2015 Mr Justice Green handed down a judicial review decision in the High Court in favour of music industry organisations (UK Music 2009 Limited, the British Academy of Songwriters, Composers and Authors (BASCA) and the Musicians’ Union) (the “Claimants“) ruling that the UK Government’s decision to introduce a private copying exception to the Copyright, Designs and Patents Act 1988 (the “Act“) in the absence of a compensation mechanism for copyright holders was unlawful. 

The private copying exception (section 28(b) of the Act) introduced by the UK Government following a wide ranging consultation allows individuals who acquire content (music, film, books) to make a copy of that work provided that the content has been legitimately acquired and that the copies are ‘for own private use[1]. Format shifting (converting files from CD to MP3), storing personal copies in the cloud or making backup copies are permitted under this exception. The purchaser cannot however copy that content and give it to a family or friend and cannot copy it for any commercial use.

As previously discussed on this blog, under the Copyright Directive (2001/29/EC) the UK Government has the power to implement such changes, so long as compensation is paid to copyright holders. However, compensation is not due where the exception ‘either caused no (zero) harm to rightholders or de minimis harm[2]. By limiting the copyright exception to private use, the UK Government argued that two economic premises applied which meant  that compensation was not due. Firstly, because most people already assumed they were entitled to copy content they had acquired, they were not likely to go out and purchase additional copies of the same content, ‘in other words there was no automatic correlation between the desire to copy and lost sales’[3]. Secondly, the copyright industries already priced-in private copying. Thus, again, the loss caused by legalising private copying was minimal.

Mr Justice Green found in favour of the UK Government on four of the five substantive issues he identified – the meaning of ‘harm’, the alleged irrationality and/or inapplicability of the pricing-in principle, whether the Secretary of State predetermined the outcome of the consultation, and whether the introduction of the exception constitutes unlawful state aid which was not notified to the European Commission and so is unlawful. However, crucially, the fifth substantive issue was found in favour of the Claimants, which was that ‘the evidence relied upon (by the UK Government) to justify the conclusion about harm was inadequate/manifestly inadequate’[4]. This one substantive point was material to the legality of the private copying exception coming into force and ‘sufficient therefore to result in the decision being rendered unlawful’[5].

Mr Justice Green ruled that the evidence provided did not support the conclusion of the UK Government about the level of harm caused to copyright holders. He considered in particular two reports submitted on behalf of the UK Government – the Updated Impact Assessment and the IPO Research Report. With regard to the Updated Impact Assessment Report, several of the surveys and pieces of research were never actually completed – these were supposed to provide the underlying data showing why pricing-in already took place in the industry and as such the change in law only caused minimal harm. Therefore, Mr Justice Green concluded that ‘the Updated Impact Assessment does no more than provide explanations as to why investigations were not pursued’[6]. He found that the IPO Research Report provided some useful analysis on pricing-in but  failed to deal with the key question of whether any harm not covered currently by pricing-in is only de minimis.

Mr Justice Green found that although the Secretary of State posed the correct question in terms of looking at ‘de minimis’, the term was never really properly addressed. In other words, there was not enough evidence that pricing-in reduced residual harm to such a low amount as to be de minimis- as Mr Justice Green summarised ‘it is one thing to say that “to some extent” harm is avoided by pricing-in; it is altogether another thing to say that it is avoided so completely as to pass a de minimis threshold’[7].

This is clearly not the end of the road for the copyright exception, but it does mean the UK Government  is back to the drawing board in terms of where to take this law next. The Secretary of State will now either need to come up with more convincing research for the negligibility of the harm the private copying exception would cause to copyright holders or it will need to introduce a compensation scheme to reflect the harm caused to them. A third option would be to repeal the relevant section of the law altogether.

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[1] R. (on the application of British Academy of Songwriters, Composers and Authors) v Secretary of State for Business, Innovation and Skills [2015] EWHC 1723 (Admin) para 1

[2] Ibid para 10

[3] Ibid para 12

[4] Ibid para 18

[5] Ibid para 21

[6] Ibid para 256

[7] Ibid para 271

Permanent link to this article: https://blogs.dlapiper.com/mediaandsport/2015/06/uk-copyright-exception-ruled-to-be-out-of-tune-by-denying-the-music-industry-fair-compensation/