The Spanish scheme for fair compensation for private copying is not consistent with the European Union law

The Court of Justice of the European Union has declared that the Spanish scheme for fair compensation for private copying financed from the General State Budget is incompatible with European Union law, since such scheme does not guarantee that the levy will be paid solely by the persons who may potentially make private copies of protected works or subject matter.

In June 2011, with the entry into force of the Directive on the harmonisation of certain aspects of copyright and related rights in the information society, Member States were allowed to establish exemptions to the full and exclusive right to authorise the reproduction of works by a natural person for private use, on condition that the rightholders received fair compensation. This was popularly known as canon digital (blank media levy).

As not all reproductions fall within the legal concept of private copy, it is essential to determine what is meant by private copy and which reproductions do not benefit from such protection. The legal concept of private copy covers any copy made from a lawfully acquired original or obtained through a lawful act of public communication, on condition that they are made for private use and for non-commercial ends. Thus, any contents downloaded from sites that do not have the required rights or reproductions made by legal persons are excluded because, according to the very definition of the concept of private copy, they do not fall within the private copying exception.

Until 2011, the Spanish scheme for fair compensation for private copying consisted in charging a certain amount on the purchase price of equipment, devices and media acquired for digital reproduction. Thus, the burden of the private copying levy was ultimately borne by the purchaser of such reproduction devices. However, the rulings passed by the Court of Justice of the European Union (the “CJEU“) and the Spanish judicial bodies shortly before the adoption of the current compensation scheme financed from the General State Budget established the presumption that, until that date, the levy was applied indiscriminately, on the grounds that such compensation scheme did not take into account if such devices and media for digital reproduction were purchased by professionals, companies or public administrations, to whom the private copying exception were not applicable and who, therefore, should not be required to pay that controversial levy.

The scheme for fair compensation for private copying financed from the General State Budget did not seem to satisfy the intellectual property rights collecting societies which, among others, are entitled to collect the fair compensation for the use of protected works or subject matter. Thus, a few months after the entry into force of the regulation that governs the current scheme for fair compensation for private copying, certain intellectual property rights collecting societies brought an action before the Spanish Supreme Court with a view to obtaining a decision that annulled this legislative provision. The claimants argued that the scheme for fair compensation for private copying was incompatible with Directive 2001/29 because the fair compensation was borne by all taxpayers (both natural and legal persons) and its payment was not limited to those persons that caused or may cause harm to the copyright holders as a result of such copying. They also stated that the scheme did not guarantee the fairness of that compensation since the sums allocated for payment of  that fair compensation were predetermined for each financial year.

Against this background, the Spanish Supreme Court decided to suspend the proceedings and refer two questions to the CJEU for a preliminary ruling. The high court, through its resolution of 9 June 2016, gives answer to the first question, as this is the only question deemed to be appropriate. It sought to determine if the scheme for fair compensation for private copying financed from the General State Budget is in conformity with Directive 2001/29, taking into account that it is not possible to ensure that the cost of that compensation is ultimately borne by the users of private copies.

In its judgment, the high court highlights that it falls to the Member States to provide for the private copying exception to the reproduction right as they will have to implement a compensation scheme to offset the prejudice to rightholders. This means that they will have to guarantee adequate compensation for rightholders, determine the persons who have to pay it, and determine the form, detailed arrangements and level of such compensation. Directive 2001/29 does not prohibit per se that the compensation for private copy is financed from the General State Budget, since the Member States can choose the collection procedure they deem fit, provided that the payment guarantees fair compensation for rightholders and that the levy is borne by those persons who may potentially make copies of the protected works or subject matter.

However, the problem arises when a part of the General State Budget is used for paying the fair compensation for private copying without having a particular expenditure item or distinguishing the taxpayers that may potentially make private copies, since there is not a particular measure allowing legal persons to request to be exempted from such obligation. This is the reason why the CJEU opposes that scheme for fair compensation for private copying.

In the light of the CJEU’s answer to the question referred for a preliminary ruling, the Spanish Supreme Court should annul the current scheme for fair compensation for private copying, and this raises an endless number of questions about the concept of private copy and its legal status.