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29/07/2016

Private copying in Spain: A slap in the face for authors

Innovation & Industry

Private copying in Spain: A slap in the face for authors

Before MP3 trading, home cassette copying was the bane of the music industry.

[Shutterstock]

The Spanish government’s decision to limit the amount of compensation payable to rightsholders is a slap in the face to authors, as well as to the culture industry, writes Fernando Carbajo Cascón.

Fernando Carbajo Cascón is a Professor in Commercial Law at the University of Salamanca in Spain.

Following an unwise election pledge, one of the first measures that the Spanish government adopted when it entered into office in December 2011, was the “liquidation” of the traditional compensation system for private copying.

This system had been in force since 1992 and was based on imposing levies on recording equipment and media and passing its costs on to its consumers. The vast majority of member states have similar compensation systems in place, and the Court of Justice of the European Union (CJEU) has endorsed it (albeit with some important corrections). It was replaced by a new system funded from the National Budget (through a decree intended to reduce the deficit!).

Subsequently, the amount of fair compensation and the procedure for its payment were established by law on the basis of an estimate of the harm caused to rightsholders by private copying, although this compensation had to remain “within the budgetary limits established for each financial year”. Against a background of diminishing public resources, the National Budget for the year 2012 set the amount of compensation at €five million (in contrast to €115 million calculated for the previous financial year). The same amount (barely equivalent to €0.1 per inhabitant/year) was budgeted for successive financial years.

Although the levels of private copying and compensation in Spain were similar to those prevalent in France or Germany, the government soon reached the conclusion that it was necessary to limit the amount of compensation payable to rightsholders. This lead to a level of compensation, which was very far from being “fair” to safeguard a balance between the rights and interests of different categories of rightsholders and users, as required by the EU legislation on copyright and related rights (Directive 2001/29).

This was a slap in the face to authors and performers as well as to the culture industry and collective management organisations (another blow was the increase of VAT on cultural goods and services to 21%, at a time of rampant music and film piracy).

The switch to a new system and the obvious intention to reduce the amount of compensation were given full legal backing through the enactment of Law 21/2014 of 4 November, amending the Law on Intellectual Property (despite a negative vote by all other political groups). This new law limited the scope for private copying exceptions and restricted the private copying compensation system to a smaller number of uses of copyrighted works for private purposes.

This was a disgraceful decision, whose sole purpose was to provide a rationale for suggesting that rightsholders incur only a small loss through private copying. This in turn served to legitimise the arbitrary move to limit a priori the amount of fair compensation and thus significantly reduce it.

Furthermore, the decision went against the grain of prevailing policies, given that the government was well-aware of the reports – endorsed by the European Commission and the European Parliament – upholding the validity of the levy on recording equipment and media (which it considered “virtuous and balanced”) and warning against the risks associated with switching to a different system. Lastly, the government’s decision was iniquitous, as it took no account of the criticisms levelled against the new system by the General Council of the Judiciary and the Council of State, nor did it address the question raised by Spain’s Supreme Court before the CJEU as to whether financing fair compensation for private copying through the National Budget – as well as fixing the amount of compensation within the budgetary limits established for each financial year – is in line with European legislation.

The government ignored all of these facts and adopted a system applied in only a few countries (Norway, Finland and Estonia), where both the production of audiovisual works and music and the sales figures for recording equipment and media are at much lower levels (in spite of which a higher level of fair compensation is provided in these countries to rightholders). In other words, the government decided to include the compensation for private copying in public expenditure and leave out the legitimate interests of righstholders.

Here it should be noted that the abolition of the levy did not result in an appreciable reduction in the prices of recording equipment and media to the advantage of consumers.

On 19 January 2016, the Advocate-General of the CJEU set out his conclusions on the question referred for a preliminary ruling by the Spanish Supreme Court (these conclusions being a non-binding opinion prior to the judgment to be rendered by the CJEU a few months from now).

The Advocate-General considers that funding fair compensation for private copying from the National Budget does not, in principle, contravene European legislation nor does it run counter to CJEU case law; even though fixing, a priori, the compensation within the budgetary limits established for each financial year, without taking into account the estimated potential harm incurred by rightsholders, runs counter to Directive 2001/29.

The Ministry of Culture has argued that the conclusions of the Advocate-General do not run counter to the regulations in force in Spain, contending that it is necessary to establish a budget item a priori in order to be able to proceed to the payment of compensation, without prejudice to the possibility of making subsequent adjustments to cover the annual amount yielded by the legally established system to calculate compensation.

This is an astonishing argument, completely at odds with the criticisms advanced by the Advocate-General, in whose view the budget estimates must be made on the basis of accurate and reliable data on economic impacts, which ought to have been rigorously calculated before deciding to change the fair-compensation financing system.

The fact is that the government appears to be determined to keep “its” system in place, come what may. It is showing an alarming obstinacy in denying rightsholders fair compensation calculated in accordance with a transparent procedure. Thus going against the ultimate goals of European law and undermining the incentives required to promote culture and foster investments in this sector – forgetting, in short, that – as T.S. Eliot said – a society that fails to protect its culture lapses into barbarism.