Saturday 15 June 2013

UK: Speech is free - and so are private copies

On 7 June 2013 the Government published four short consultation papers, setting out for technical comment the draft statutory wording by which it proposes to implement new exceptions for private copying, parody, quotation and public administration. I should like briefly to discuss the private copying exception.

The consultation paper states that it is the Government’s intention that the exception be available to an individual, not a body corporate; that the individual must have lawfully acquired the copy from which the further copy is made and on a permanent basis; and that the further copy must be made for the individual’s private use, for non-commercial ends. The Government contends that no compensation should be payable to the right holder, on the basis that its proposal “allows for appropriate compensation to be paid at the point of sale, and ensures the exception will cause minimal harm to copyright owners”.

The Government proposes to insert the following section 28B in the 1988 Act:

28B Private copying
(1) Copyright is not infringed where an individual uses a copy of a copyright work lawfully acquired by him to make a further copy of that work provided that:
(a) the further copy is made for that individual’s private use for ends that are neither directly nor indirectly commercial;
(b) the copy from which the further copy is made is held by the individual on a permanent basis (for example it is not a copy that is rented to the individual for a specified period or borrowed from a library); and
(c) the making of the further copy does not involve the circumvention of effective technological measures applied to the copy from which it is made.
(2) Copyright is infringed where an individual who has made a further copy of a copyright work pursuant to subsection (1):
(a) permanently transfers the copy to another person; or
(b) permanently transfers the copy from which it is made without destroying the further copy
and the further copy shall in those circumstances be treated as an infringing copy.
(3) Nothing in subsection (2) prevents an individual from storing a further copy made pursuant to subsection (1) in an electronic storage facility accessed by means of the internet or similar means, where that facility is provided for his sole private use.
(4) To the extent that the term of any contract purports to restrict or prevent the doing of any act which would otherwise be permitted by this section, that term is unenforceable.
The Government will add this new exception to the list of exceptions falling within the intervention mechanism under section 296ZA of the 1988 Act.

It will be recalled that Article 5(2)(b) of the Copyright Directive 2001/29/EC permits an exception “in respect of reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation which takes account of the application or non-application of technological measures … to the work or subject-matter concerned”. Application of any exception “shall only be applied in certain special cases which do not conflict with a normal exploitation of the work or other subject-matter and do not unreasonably prejudice the legitimate interests of the rightholder” (Article 5(5)).

There are some interesting and, for right holders, concerning aspects to the proposal.

Lawful ownership
The Government was clear that the exception would apply only to copies lawfully owned by the copier. In a digital era, however, the defining of ownership requires some thought. The Government attempts to address this by providing that the original copy has been “lawfully acquired” by the copier and that it is held by him “on a permanent basis”. There is no requirement that he be the owner of the physical carrier in which the original copy is embodied. However, in digital transactions there is no transfer of a physical carrier, so it would be difficult to define the exception by using explicitly the concept of “ownership” - in the “sale” of a digital copy, nothing changes hands: the vendor performs a service which changes the condition of media in the prior possession of the purchaser. The drafting of sub-section (2), which appears to attempt to confine the use of private copies to temporary lending, can be expected to provoke much debate. 

Cloud storage
Sub-section (3) aims at legalising the use of online storage facilities for private copies. The proposed wording does not purport to insulate Cloud service providers from liability. It will be for the courts to decide who “makes” the copy when a user stores a copy in the Cloud. Cloud storage facilities usually encode the uploaded data and potentially perform various transformations upon them, all of which would appear to require a licence of the reproduction right. The problem with this draft provision is that it applies where the online storage facility “is provided for [the user's] sole private use”. This condition seems to focus on the setting up of the facility, not its use. It might be read as excepting the stored copy even if it could easily be accessed by others. Questions would then arise whether there was an infringing communication to the public and if so, by whom and in what jurisdiction.

Strictly sub-section (3) is unnecessary. If from a technical perspective the consumer is “making a private copy” within sub-section (1), it does not matter where it is stored. It might better for it simply to be omitted; or for the reference to provision of the facility amended so as to read: “where that facility is used [or “accessed”] solely by him”. In this way the copy would cease to be a private copy if the online account were accessed by others.

As mentioned above, the Copyright Directive requires that where there is a private copying exception there be “fair compensation which takes account of the application or non-application” of TPMs. In Padawan the Court of Justice of the European Union held that “[c]opying by natural persons acting in a private capacity must be regarded as an act likely to cause harm to the author of the work concerned.”

The exception would apply whether or not the original copy was made by or with the consent of the holder of the UK copyright. Clearly it is the holder of the UK copyright who is entitled to compensation (if any). If, as the Government argues, the UK right holder can “compensate” himself at the point of sale it seems inadmissible that, for example, copies could be acquired from outside the UK and then copied pursuant to this exception without compensation. It would be more logical to provide that the original copy must be one which was put in circulation or made available to the public “by or with the consent of the owner of the [UK] copyright”.

As mentioned in previous postings, the Government’s argument that the value of the private copy is “priced in” at the point of sale has been undermined by recent research, which shows that in the audiovisual sector right holders can and do segment the market for licensed copying by price, charging more for content which can be format-shifted. In any case, the right holder may have nothing to do with the setting of the price in the UK.

The Government’s justification for denying compensation ignores the requirement of Recital 35 that “account should be taken of the particular circumstances of each case”. It would deny compensation even to right holders whose works have never been the subject of a sale. As mentioned above, it ignores the fact that the UK right holder often will not be the licensor of the copy from which the private copy is made. It treats all right holders in the same way, whatever their vulnerability to the copying of their works. It would seem also to apply to the entire legacy of physical copies in the market, even thought they were sold prior to the application of any private copy exception (a point which the 2006 Gowers Review recognised as preventing retrospective application of a format-shifting exception). Arguably, to impose a private copying exception on existing copies would be an expropriation of private property, contrary to Article 1, Protocol 1 of the European Convention of Human Rights: Balan v Moldova (2008) ECHR, application no. 19247/03.

The CJEU in Padawan held the Spanish system of private coping levies incompatible with the Directive because it failed to strike the correct balance between the need to compensate right holders and the interests of persons involved in production of private copies. An indiscriminate levy on all copying media, whether used privately or professionally, was not permissible. The court also held in Thuiskopie that, having regard to the Three-Step Test, a Member State which introduces a private copying exception “must guarantee, within the framework of its competences, the effective recovery of the fair compensation intended to compensate the authors harmed for the prejudice sustained, in particular if that harm arose on the territory of that Member State”.

In the present case, the reverse applies: instead of an indiscriminately broad levy on recording media, there is an indiscriminately narrow (or rather, non-existent) levy in respect of all works. It seems possible that the present wording, if enacted in a statutory instrument, would be struck down by the English court as being incompatible with the Directive.

The closing date for comments on the proposed exceptions is 17 July 2013. The UK Intellectual Property Office will hold a series of open meetings in the week commencing 8 July 2013 for discussion of the draft exceptions.

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