It’s not about what consumers should do, it’s about what the UK legislator did and what device manufacturers don’t do. And it all comes down to private copying.
In an independent report from 2011, Professor Ian Hargreaves wrote: ‘The copyright regime cannot be considered fit for the digital age when millions of citizens are in daily breach of copyright, simply for shifting a piece of music or video from one device to another.’ True, as consumers, we weren’t exactly living on the edge when we were ripping our own CDs onto our PCs and then copying the music onto our Mp3 players, although this was illegal.
One of the recommendations which Professor Hargreaves made in his report was to extend copyright exceptions as far as possible within the confines of the EU copyright framework in order to make the law fit for the digital age.
That is what the UK Government aimed to do, but the introduction of the private copying exception (section 28B CDPA 1988, effective as of 1st October 2014) in particular sparked a lot of controversy which just yesterday culminated in an application for a judicial review of the exception.
The key questions are: what does the new exception allow and is it compliant with the EU copyright framework? How did the UK Government argue that it is and what are the arguments put forward by the industry stakeholders who have launched the legal challenge against the newly introduced private copying exception?
What does the new exception allow?
Section 28B CDPA 1988 allows individuals to copy media which they own (CDs, eBooks, etc.) from one medium or device that they own to another, for their own private use. Individuals can only copy content which they have lawfully purchased or been gifted on a permanent basis (it therefore excludes streamed content or works which have been rented out) and the copy may not be shared with a third party (friends or family) or used for commercial purposes. The exception is technology neutral. This means that it permits copying to all types of personal storage, including remote cloud storage.
Is the new exception in compliance with EU copyright law?
Well, that is the question. The UK Regulations which introduced the private copying exception were implementing Article 5(2)(b) of the Information Society Directive. Pursuant to Article 5(2)(b) of the Directive, Member States may introduce an exception for private copying on condition that the right holders receive fair compensation. In most EU countries where private copying is allowed, their respective governments have also put levy schemes in place as a form of compensation for rights holders. Such levies have traditionally applied to sales of blank cassettes and CDs, and more recently MP3 players and other devices. A study looking into copyright levies in Europe was commissioned by the UK Intellectual Property Office and reported in 2011. It was found that the levy schemes operating across Member States varied in a number of respects, from the type of media and equipment which they applied to the ultimate beneficiaries of the levy.
When the UK introduced its private copying exception it did not provide for any compensation scheme. What is more, the explanatory memorandum (at para 3.2.4) accompanying the new Regulations made clear that the UK Government does not intend to introduce levies or taxes on media and devices as they exist across the rest of the EU.
How did the UK Government argue that a compensation scheme was not necessary?
The Government essentially argued on the basis of Recital 35 of the Information Society Directive. This recital provides among other things that in cases where right holders have already received payment in some other form, for instance as part of a licence fee, no specific or separate payment may be due. It concludes that in certain situations where the prejudice to the right holder would be minimal, no obligation for payment may arise.
The Government argued that private copying was and could be factored into the purchase price of creative works. It also asserted that because the UK private copying exception is very narrow it may only cause minimal harm to right holders, which would not require compensation as per Recital 35.
How do industry stakeholders argue that the new exception will cause more than minimal harm to right holders?
The first thing that the Musicians’ Union (MU), the British Academy of Songwriters, Composers and Authors (BASCA) and UK Music, the 3 industry bodies which applied for judicial review of the exception, always stress is that the issue of private copying is not about whether consumers should be entitled to make private copies or not. In its response to the 2012 Public Consultation on Copyright, UK Music, the umbrella body representing the collective interests of the UK’s commercial music industry, explicitly reiterated (paras 50 and 116) that it wholeheartedly agrees that the law should be changed to allow consumers to make private copies of their legitimately-purchased CDs to their MP3 players.
What music organisations do assert is that the value of copying music on a CD was not priced into the CD and that current economic realities effectively prohibit copyright owners from retrospectively factoring copying into the purchase price of a CD.
Moreover, industry stakeholders underline that there is a distinction to be made between copying that is authorised under a license, and thereby priced into the purchase, and copying that is not. Copyright owners are increasingly negotiating with various technology companies which offer or are developing ‘cloud’ services. For music-based could services, UK Music explains in para 61 of their Consultation Response, the cloud provider negotiates directly with music copyright owners to store copies of their entire repertoire in an external database (the cloud). The service provider then offers an onward service to their customers by allowing them, for instance, to stream the tracks that they have purchased, directly from the provider’s cloud service.
BPI, the British recorded music industry’s trade association argued in its own Consultation Response that if private copying to cloud services were included in the statutory exception (as it is), it would be impossible for record labels to agree licensing deals with these services, and as a result licensing revenues would decline (para 59 of BPI’s response). The legal argument behind this is that the UK private copying exception does not meet the Three Step Test, introduced in the Berne Convention in Article 9(2) and manifested in Article 5(5) of the Information Society Directive.
Pursuant to the Three Step Test, an exception to the exclusive rights provided by copyright may not conflict with a normal exploitation of the work and may not unreasonably prejudice the legitimate interests of the right holder. It is claimed that the UK exception does both.
In the opening sentence of this blog post I wrote: It’s not about what consumers should do, it’s about what the UK legislator did and what device manufacturers don’t do.
Consumers should be able to make private copies.
The UK legislator enacted an exception which may not comply with EU law.
What about device manufacturers? What is it that they do not do?
Manufacturers of MP3 players, tablets and other devices build successful businesses partly on the back of unauthorised reproduction of music without sharing this value with copyright owners. This is what UK Music and the other industry bodies argue and are attempting to fight. In preparation of the Consultation Response in 2012, UK Music commissioned Oliver & Ohlbaum, a media advisory firm, to conduct research in order to isolate the proportion of the value of MP3 devices that consumers attribute directly to the ability to store and play music copied from CDs. The research showed, as reported in paras 98ff of UK Music’s Response, that consumers attribute 44% of the price of a basic MP3 player directly to the ability to copy music from CDs.
“It is critically important that the Government consider the monetary benefits that have accrued to technology firms from the unlicensed private copying of CDs […]. Music copyright owners in the UK are not compensated by a private copying levy. Yet this value is what copyright owners should have been able to realise.” (UK Music Consultation Response para 103)
Will the UK private copying exception remain unchanged? Does it or does it not comply with EU Copyright law? Something tells me that it may not be the UK courts which make this decision…