The UK Government, following a review of intellectual property law, sought to amend copyright legislation to make it lawful for an individual to copy a work for personal use. Its view was that, given the rise of digital private copying (for instance, transferring music from a lawfully-acquired CD to a computer or phone), the current legal prohibition on such copying was out of step with reality and consumer expectations.
Article 5.2(b) of the Copyright Directive (2001/29) requires that any exception to copyright law in respect of private copying can only be introduced “on condition that the rightholders receive fair compensation” for the loss caused by private copying which is made lawful by it. Many EU Member States who have implemented such an exception have therefore introduced a levy of some sort, for instance on manufacturers of blank media, with the proceeds distributed to rightholders.
The UK Government, taking the view that a levy was undesirable in principle, concluded that no compensation was necessary because (i) there was no reason to believe that rightholders were losing sales as a result of the unlawful private copying with which its proposed exception was concerned, and (ii) to the extent that they were, they would have recovered the value of those lost sales through market forces, since the price consumers were willing to pay for copyright works would take account of the widespread belief that such copying was lawful or in any event fair. It therefore relied on a recital to the Directive which suggested that no compensation may be necessary if “the prejudice to the rightholder would be minimal”.
Three organisations representing the interests of the UK music industry challenged the decision to introduce the exception without any compensation, and succeeded.
Apart from a legal issue specific to the Directive (as to what forms of “prejudice” were relevant to the assessment of whether prejudice to rightholders would be minimal), there were two major issues which are of potentially wider application: (i) what standard of review should be applied in assessing the Secretary of State’s decision that prejudice to rightholders would be minimal, and (ii) whether the Secretary of State’s conclusions were vitiated by his conclusion at the outset of the process that he would only introduce the exception if he did not have to make any provision for compensation.
On the first issue, Green J concluded that the Secretary of State had a “discretion over the evaluation of the evidence”, but that it was “a modest one which indicates that the Court must conduct a relatively intensive and thorough review of the fact finding and reasoning”. He characterised the issue as one in relation to which the “policy content […] can fairly be described as micro, not macro”, and rejected the suggestion that the Court should in principle be more reluctant to interfere in economic issues. He also reiterated comments he had made in R (Gibraltar Betting and Gaming Association Ltd) v Secretary of State for Culture, Media and Sport  EWHC 3236 to the effect that a decision may be undermined by an obvious error even if the error only becomes obvious on close analysis. Following that approach, he reviewed the evidence and concluded that the Secretary of State’s conclusions were “not remotely supported by the evidence”.
On the second issue, he concluded that the Secretary of State was entitled to have a strong predisposition against the introduction of a compensation scheme: “A decision maker may consult upon an issue that he has a firm view about.” He found that the evidence, which related primarily to the views of civil servants, did not establish that the Secretary of State had predetermined the outcome. He also concluded that the nature of the Secretary of State’s predisposition, which was that he would either introduce the exception if no compensation scheme was required, or decline to introduce it at all if it would not be lawful to introduce it without compensation, was lawful.
Judgment was handed down on Friday 19 June 2015 and the Court will hear submissions in the next few days about what relief should be ordered.
The full judgment can be read here: http://www.bailii.org/ew/cases/EWHC/Admin/2015/1723.html
Ian Mill QC, Tom de la Mare QC and Tom Cleaver acted for the Claimants.
Pushpinder Saini QC acted for the Government (Defendant).
Brian Kennelly and Tom Richards acted for The Incorporated Society of Musicians (Intervener).