BREAKING: AG Szpunar says that fair compensation for private copying can be funded through state budget but amount cannot be established ex ante

Private copying levies? Surely a sexy topic of conversation, but also a very contentious issue.

This morning Advocate General (AG) Maciej Szpunar issued his Opinion [not yet available in English] in EGEDA C-470/14 [here], a reference for a preliminary ruling from the Spanish Supreme Court seeking clarification as to the following:

"Is a scheme for fair compensation for private copying compatible with Article 5(2)(b) of Directive 2001/29 [the InfoSoc Directive] where the scheme, while taking as a basis an estimate of the harm actually caused, is financed from the General State Budget [as is the case in Spain, but also Norway, Estonia, and Finland], it thus not being possible to ensure that the cost of that compensation is borne by the users of private copies?

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?"

The response of the AG in a nutshell? Yes, such a scheme is not incompatible with the InfoSoc Directive and, no, the amount cannot be calculated ex ante.

Background

EGEDA and VEGAP are Spanish collective management organisations (CMOs) that, back in 2013, filed an application with the Spanish Supreme Court (Tribunal Supremo) seeking a declaration of invalidity of Royal Decree 1657/2012, by which Spain provided that part of the fair compensation for private copying would be financed through the state budget. 

In particular the two applicant CMOs contended that: 

(1) Article 5(2)(b) of the InfoSoc Directive requires that compensation for private copying is to be paid by those who cause a prejudice to relevant rightholders, not others; and 

(2) Being subject to a maximum threshold, the state funding mechanism would not compensate for the prejudice actually caused to relevant rightholders.

The Spanish Supreme Court decided to stay the proceedings and seek guidance from the Court of Justice of the European Union (CJEU).

But do rightholders do?

Today's AG Opinion

The rationale of the private copying exception

To address the first question the AG deemed it necessary to review not just the content of relevant provisions in the InfoSoc Directive, but also CJEU case law on private copying levies [the most recent instalment was the Reprobel decision last November].

He noted at the outset how in continental Europe the private copying exception is basically as old as copyright itself. 

Its rationale is two-fold: on the one hand, the possibility to copy a work for private use stems from the very possibility of enjoying such work; on the other hand, controlling what use of a certain work a person does in his/he private sphere would not be possible, and would also amount to an undue intrusion into one's own private sphere [in this Kat's view this passage of the Opinion - paragraph 15 - is particularly interesting in that: (1) the AG balanced copyright protection with the respect of private life, and also questioned whether private copying, rather than an exception to copyright, is instead a natural limit to it; and (2) stated that copyright protection only encompasses the exploitation of a certain work in the public sphere].

The AG continued his historical excursus noting how back in the day the private copying exception did not come with any fair compensation requirement, as it was common belief that no harm was suffered by rightholders for copies made by users. 

State-funded fair compensation?
OK, but budget cannot be set in advance

Things changed with the introduction of technical means that allow the massive and automated reproduction of protected works.

It was in this context that the InfoSoc Directive attempted a harmonisation of Member States' laws. 

The first question 

According to the AG the CJEU should respond the first question in the sense of the compatibility of the Spanish system with EU law for three main reasons: (1) First, the InfoSoc Directive says who the beneficiaries of the fair compensation are [this was indeed addressed in Reprobel] but is silent as regards how fair compensation should be funded; (2) Secondly, previous CJEU case law, including the judgment in Padawan, cannot be read in the sense of considering fair compensation funded through a state budget incompatible with the InfoSoc Directive; (3) Thirdly, technological evolution is such that discourse around fair compensation for private copying should not crystallised around the topic of levies [it is interesting to note how at paragraph 47 the Opinion suggests that levies were OK during a certain phase of technological evolution but that now things might have changed: so are levies outdated? IPKat readers will know that this has been indeed a controversial issue for a while now].

The second question

As regards the question whether a budget set ex ante to fund fair compensation for private copying is compliant with the InfoSoc Directive, the AG noted that the level of fair compensation must be calculated in light to the prejudice actually suffered by relevant rightholders. 

As such, a system where the level of compensation is calculated without taking into account the level of harm actually suffered [yet another issue addressed in Reprobel] cannot be considered compatible with EU law.

Conclusion

The AG Opinion in EGEDA looks reasonable to this Kat, but let's now await the CJEU decision. Stay tuned!

[Originally published on The IPKat on 19 January 2016]