Thoughts on VCAST and private copying

On the 29th November 2017, the CJEU purported to hand down its judgment in the VCAST case.[1] What was meant to be another judgment on article 5(2)(b) of the InfoSoc Directive—the private-copying exemption—[2] turned into another ruling on the making available right under article 3. Rather than addressing the specific questions referred to it from the Tribunale di Torino (District Court, Turin, Italy), the CJEU took the peculiar step of analysing the business “service” of VCAST holistically.[3] Consequently, rather than analysing the applicability of article 5(2)(b) in light of the right of reproduction under article 2 (which the Directive requires), the CJEU foregoes a full analysis of article 5(3)(b) because VCAST has a dual functionality, consisting in ensuring both the reproduction and the making available of the works and subject matter concerned”.[4] Finding that VCAST’s service required the clearance of the making available right, which was not covered by the article 5(2)(b) exempted private uses, the CJEU concluded that: “Accordingly, such a remote recording service cannot fall within the scope of Article 5(2)(b) of Directive 2001/29”.[5]

The CJEU’s decision is disappointing for those who are particularly interested in the functioning of exceptions and limitations to EU copyright law. Discussing the issue in only seven paragraphs, the judgment seemingly gives no new detail as to how article 5(2)(b) operates. The CJEU recounts four principles that should be taken into account when assessing the application of the private-copying exemption, namely two from the case of Padawan and another two from ACI Adam. To understand these four principles and their potential relevance in VCAST, this blog post will first recap the salient points of Padawan and ACI Adam. Having done so, it will investigate the appropriateness of applying these factors to the reproduction element of VCAST’s business (this blog post is not concerned with the making available aspect of the case). First, it will be shown that rather than following the wording of their previous judgements, the CJEU opted to follow the spirit of the judgements. This is especially true when it comes to principles derived from Padawan; a case concerned with the definition of ‘fair compensation’ that the CJEU uses in VCAST to make generalised statements about article 5(3)(b). Second, in restating these principles in VCAST, the CJEU states that three of the four principles are mandatory—they must be followed. Considering that the two musts derived from ACI Adam fail to take account of the CJEU’s broader interpretation of exceptions and limitations, this blog piece will conclude that the CJEU might want to loosen up a little on their strict confinement of private copying in certain circumstance.

 

Padawan

In the Padawan case, the CJEU held that ‘fair compensation’ is an autonomous concept of EU law, which requires an independent and uniform interpretation of its meaning and scope throughout the European Union taking into account the context and objective of article 5(2)(b).[6] This finding is supported by recital 32 of the InfoSoc Directive, “which calls on the Member States to arrive at a coherent application of the exceptions to and limitations on reproduction rights, with the aim of ensuring a functioning internal market”.[7] As to how ‘fair compensation’ is to be calculated, the CJEU turned to the recitals of the InfoSoc Directive.[8] Under the InfoSoc Directive, ‘fair compensation’ must be adequate to compensate rightholders for the use made of the work. This is not to be mistaken for any form of absolute or maximalist protection; minimal prejudice to rightholders is permissible in certain situations and no obligation for payment may arise. When evaluating adequate compensation and above-minimal prejudice, the InfoSoc Directive suggests that “a valuable criterion would be the possible harm to the rightholders resulting from the act in question”.[9] The CJEU took this to mean that “fair compensation must be regarded as recompense for the harm suffered by the author… [It must] be calculated on the basis of the criterion of the harm caused to authors of protected works by the introduction of the private copying exception”.[10] In addition, rather than reading “possible harm” as meaning ‘the harm that might be cause to the author if the article 5(2)(d) was implemented into national law’, the CJEU understood “possible harm” as meaning ‘the potential that a user might use copying equipment or media to make private copies’.[11]

With this framework in mind, the CJEU questioned whether “[c]opying by natural persons acting in a private capacity” is an act likely to cause harm for the purposes of the ‘fair compensation’ calculation.[12] They answered, in principle, yes. The person who carries out the act of reproduction of a copyright protected work without authorisation causes harm to the interests of the rightholder. It is for this person “to make good the harm related to that copying by financing the compensation which will be paid to the rightholder”.[13] However:

[G]iven the practical difficulties in identifying private users and obliging them to compensate rightholders for the harm caused to them, and bearing in mind the fact that the harm which may arise from each private use, considered separately, may be minimal and therefore does not give rise to an obligation for payment… it is open to the Member States to establish a ‘private copying levy’ for the purposes of financing fair compensation chargeable not to the private persons concerned, but to those who have the digital reproduction equipment, devices and media and who, on that basis, in law or in fact, make that equipment available to private users or who provide copying services for them. Under such a system, it is the persons having that equipment who must discharge the private copying levy.[14]

Technically, under a levy system, it is not the person who commits the harm that compensates the rightholder (ie the private copier). Instead, it is the person who purchases the copying equipment that pays the levy. [15] The purchasing of copying equipment and media, however, “is the factual precondition for natural persons to obtain private copies” and, [16] therefore, is a good opportunity for Member States to obligate a levy be paid to later finance ‘fair compensation’.

 

ACI Adam

Rather than focusing purely on the notion of ‘fair compensation’, the ACI Adam case interpreted the scope of article 5(2)(b). Peculiarly, the CJEU began its analysis of the scope of article 5(3)(b) by considering the impact of article 5(5) (aka the three-step test). The CJEU held that article 5(5), in this instance, served no purpose in determining the scope of article 5(2)(b). Article 5(5) could not be used to either extend nor affect the substantive content of article 5(2)(b).[17] Instead, article 5(5) “takes effect only at the time when they are applied by the Member States”—whatever this might mean?[18] That said, the CJEU made it clear that article 5(2)(b) delimited the outer most scope of the private copying exempted use. Member States are permitted to implement a narrower exception or limitation at the national level, but could not go beyond the scope of article 5(2)(b) as set out in the InfoSoc Directive and interpreted by the CJEU.[19]

In light of these framework issues, the CJEU repeated its mantra: “As regards the scope of those exceptions and limitations, it must be pointed out that, according to the settled case-law of the Court, the provisions of a directive which derogate from a general principle established by that directive must be interpreted strictly”.[20] The settle case law the CJEU was referring to beings with the case of Infopaq. Here it was held that the ‘general principle’ established by the InfoSoc Directive is the requirement of authorisation from the rightholder for any reproduction of a protected work.[21] As the exceptions and limitations of the InfoSoc Directive derogate from this principle—they, by their nature, exempted certain uses from the requirement of authorisation—Infopaq states that these exceptions and limitations must be interpreted strictly.[22] Yet, this interpretive standard is anything but settled-case law. At the next hearing following Infopaq whereby the CJEU was called upon to clarify the standard by which exceptions and limitations should be interpreted, the FAPL case, the CJEU held:

It is clear from the case-law that the conditions set out above must be interpreted strictly, because Article 5(1) of the Copyright Directive is a derogation from the general rule established by that directive that the copyright holder must authorise any reproduction of his protected work … None the less, the interpretation of those conditions must enable the effectiveness of the exception thereby established to be safeguarded and permit observance of the exception’s purpose as resulting in particular from recital 31 in the preamble to the Copyright Directive and from Common Position (EC) No 48/2000 adopted by the Council on 28 September 2000 with a view to adopting that directive (OJ 2000 C 344, p. 1).[23]

The caveat on interpretation is crucial and should be remembered at all time (even if the CJEU itself appears to forget it from time to time, as with ACI Adam). Of quick note, it is interesting that the CJEU felt that it needed to resort to ‘the preamble to the Copyright Directive and from Common Position (EC) No 48/2000 adopted by the Council on 28 September 2000’ to establish this caveat. This retort to the legislative history of the InfoSoc Directive suggests (to me at least) that the CJEU recognised the severity of the Infopaq interpretative standard and, to correct this, relied on an earlier draft of the Directive to fashion the FAPL reinterpretation. This is certainly an alternative to stating that they misinterpreted the Directive in Infopaq.

For current purposes, however, this conjecture is moot; the CJEU failed to cite the FAPL caveat in ACI Adam and, therefore, on the face of it only the ‘strict interpretation’ standard applies. Applying on the ‘strict interpretation’ standard, the CJEU held that:

Such an interpretation requires Article 5(2)(b) of Directive 2001/29 to be understood as meaning that the private copying exception admittedly prohibits copyright holders from relying on their exclusive right to authorise or prohibit reproductions with regard to persons who make private copies of their works; however, it precludes that provision from being understood as requiring, beyond that limitation which is provided for expressly, copyright holders to tolerate infringements of their rights which may accompany the making of private copies.[24]

In light of this, the CJEU stated that article 5(3)(b) only permitted the private copying of works that had been lawfully source.[25] Copyright law should not tolerate illegal forms of distribution of counterfeited or pirated works.[26] Consequently, article 5(3)(d) should not afford exemption to any user who intends to make a private copy of a work that had been sourced illegally.[27]

 

VCAST

With these concepts in place, attention is turned to the private-copying aspects of VCAST. As alluded to in the introduction to this blog post, the CJEU stated four principles relevant to the application of article 5(3)(d). The first three of these principles must be followed: i) article 5(2)(b) is a derogation from the general principle established by the InfoSoc Directive and must be interpreted strictly;[28] ii) unauthorised private copying by natural persons must be regarded as an act likely to cause harm to the rightholder concerned, and;[29] iii) article 5(2)(b) must not be understood as requiring the copyright holder to tolerate infringements of his rights which may accompany the making of private copies.[30] However, how appropriate are these statements to the case in hand? The fourth principle states “that, in order to rely on Article 5(2)(b), it is not necessary that the natural persons concerned possess reproduction equipment, devices or media. They may also have copying services provided by a third party, which is the factual precondition for those natural persons to obtain private copies”.[31] This statement is uncontentious and, therefore, will not be further analysed.

Take principle one: article 5(2)(b) is a derogation from the general principle established by the InfoSoc Directive and must be interpreted strictly.[32] This principle stems from ACI Adam.[33] Yet, as already shown, ACI Adam failed to include the FAPL caveat: “None the less, the interpretation of those conditions must enable the effectiveness of the exception thereby established to be safeguarded and permit observance of the exception’s purpose”.[34] Categorically stating that national courts must follow the Infopaq standard of interpretation without any consideration of FAPL runs the risk of reducing the effectiveness of article 5(3)(b).

As for principle two: unauthorised private copying by natural persons must be regarded as an act likely to cause harm to the rightholder concerned.[35] At first blush, this statement seems reasonable enough. However, it must be pointed out that the CJEU are extending an aid on the construction of ‘fair compensation’ under Padawan into an aid on the construction of article 5(2)(b) on the whole. When combined with the requirement to interpret article 5(2)(b) strictly, using the notion that article 5(2)(b) in of itself is harmful risks further reducing the effective of the private copying exemption—especially online. It is best to keep the concept of author ‘harm’ limited to the construction of ‘fair compensation’, as per the guidance of the InfoSoc Directive. We have already seen that in ACI Adam that article 5(5) can also be used to interpret the applicability of article 5(2)(b). Questions of the three-step test such as ‘what is a normal exploitation?’ and ‘what causes unreasonable prejudice to the legitimate interests of authors?’ are inherent author-centric. Is it not a little overkill to also have to read article 5(2)(b) in an author-centric way, interpreting the whole provision in light of any potential harm caused to the author? After all, at some point national courts have to ask ‘why might the defendant is to rely on private-copying?’

Onto principle three: article 5(2)(b) must not be understood as requiring the copyright holder to tolerate infringements of his rights which may accompany the making of private copies.[36] It will be recalled from the early discussions of ACI Adam that this principle is closely related to the question of whether article 5(2)(b) extended to permit the private copying of unlawfully obtained works. It is submitted that this principle remains wedded to its underlying question on lawfulness. As such, the ACI Adam guidance sends a clear principle to national courts that the exceptions and limitations of the InfoSoc Directive should not be used to further promote counterfeiting or privacy. It seems, however, that the CJEU might be extending the concept of ‘unlawfulness’ to mean ‘unauthorised use of a permitted act’; this is the exact purpose of an exception and limitation. In so far that additional incidental infringements might occur to enable the effectiveness of article 5(2)(b), the FAPL standard of interpretation would have likely permitted these uses. Perhaps this is why the Infopaq standard was be chosen?

In light of these three musts, it seems that the CJEU are trying to restrict the private copying exception as far as possible. On the one hand, this is understandable. Let the exemption grow too big and run the risk of the reproduction right losing all relevance. That said, was there need to repeat the restrictions of article 5(2)(b) as categorical musts in a case that will be nonetheless concluded under article 3? Having decided to turn attention to the making available right, was it really necessary to repeat that the CJEU’s case law that the scope of exceptions and limitations must be restricted? Today we now have yet another judgement indicating that this is the CJEU’s intent, when it was not truly necessary for the CJEU to say so. Perhaps the CJEU favours the management of copyright through the scope of well-defined rights (rather than through exceptions and limitations). If so, this would-be a plus. But until such time that the CJEU makes this clear, would it not be best to ensure that exceptions and limitations can be effectively applied in appropriate circumstances?

Thoughts?

 

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[1] Case C‑265/16 VCAST v RTI ECLI:EU:C:2017:913.

[2] Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society [2001] OJ L167/10 (‘ InfoSoc Directive ‘), art 5(2)(b).

[3] VCAST, [52].

[4] Ibid, [38].

[5] Ibid, [52].

[6] Case C-467/08 Padawan SL v Sociedad General de Autores y Editores de España (SGAE) ECLI:EU:C:2010:620, [32]–[33].

[7] Ibid, [35].

[8] Ibid, [38]–[42].

[9] InfoSoc Directive, retical 35.

[10] Padawan, [40].

[11] Ibid, [57].

[12] Ibid, [44].

[13] Ibid, [45].

[14] Ibid, [46].

[15] Ibid, [47].

[16] Ibid, [48].

[17] Case C-435/12 ACI Adam BV and Others v Stichting de Thuiskopie and Stichting Onderhandelingen Thuiskopie vergoeding ECLI:EU:C:2014:254, [26].

[18] Ibid, [25].

[19] Ibid, [27]. Also InfoSoc Directive, retical 44.

[20] ACI Adam and Others, [22].

[21] Case C-5/08 Infopaq International A/S v Danske Dagblades Forening ECLI:EU:C:2009:465, [57].

[22] Ibid, [56].

[23] Joined Cases C-403/08 and C-429/08 Football Association Premier League v QC Leisure and Karen Murphy v Media Protection Services ECLI:EU:C:2011:631, [162]–[163] (emphasis submitted).

[24] ACI Adam and Others, [31].

[25] Ibid, [41].

[26] Ibid, [36].

[27] Ibid, [41].

[28] VCAST, [32].

[29] Ibid, [33].

[30] Ibid, [34].

[31] Ibid, [35].

[32] Ibid, [32].

[33] ACI Adam and Others, [22].

[34] FAPL v QC Leisure, [162]–[163] (emphasis submitted).

[35] VCAST, [33].

[36] Ibid, [34].

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