Public Affairs CJEU: private copying levies cannot be replaced with funding through general taxation
Private copying levies cannot be replaced by “fair compensation” to rightsholders through general taxation. This is the ruling of the Court of Justice of the European Union (CJEU) in a case referred by the Spanish Supreme Court to determine the compatibility of Spanish law with the EU rules on private copying. Article 5(2)(b) of Directive 2001/29 [the InfoSoc Directive] 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.
“Fair compensation” for private copying
The InfoSoc Directive allows EU Member States to establish a “private copying” exemption to the exclusive rights of copyright holders, allowing natural persons (i.e. not corporate entities) to make copies for private and non-commercial use.
system annulled in the Spanish courts. The Spanish Tribunal Supremo then referred the case to the CJEU, asking for a ruling on whether the InfoSec Directive allows compensation schemes to be “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”.
Rightsholder reasoning
Why have the Spanish collecting societies sought to challenge the decision to compensate rightsholders out of general taxation, rather than by levy? The argument put forward by the collecting societies amounts to this: Private copying exemptions apply to “natural persons”, as opposed to corporate entities. It is “the natural persons at the origin of the harm to their exclusive right of reproduction” who should have to compensate rightsholders. Compensation out of general taxation means that the cost is shared both by individuals who don’t make private copies, and by corporations, which don’t enjoy a private copying exemption.
However, the Directive requires that rightsholders receive “fair compensation”, an obligation which many EU Member States discharge by placing a levy on blank media. These levies are usually administered and collected by national collecting societies.
Though they don’t feature in the collecting societies’ arguments, there are at least two additional reasons that they might prefer a blank media levy to subsidy from general taxation.
Since 2012, Spain has compensated rightsholders from general taxation rather than a levy. But in 2013, a group of collecting societies sought to have this
Firstly, when compensation has to be paid out of the State budget, there
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LINX Public Affairs
Malcolm Hutty
LINX Head of Public Affairs
may be political pressure to reduce the amount of money allocated to rightsholders, especially at a time when many EU Member States are grappling with severe budgetary constraints. Secondly, compensation from general taxation means a diminished role for collecting societies. In Spain prior to 2012, levy debtors had to declare their sales each quarter, and collecting societies were involved in making market surveys to identify non-payers, and auditing manufacturers to make sure they were declaring correctly. Such functions, albeit costly, generate revenue, and give the appearance of value created by the collecting society, while a straightforward government subsidy is more obviously the product of political largesse.
The ruling
In its ruling, the CJEU ultimately sided with the collecting societies in concluding that, since the Spanish system does nothing to ensure that the costs are borne by the individual users of private copies, it is incompatible with the InfoSoc Directive. Nevertheless, the ruling is not a complete victory for the collecting societies, since it would in principle be possible to compensate rightsholders out of state funds while crafting a tax regime which means that the cost of this compensation is borne by the users of private copies.