Judicial Review of the Copyright Exceptions: British Academy of Songwriters, Composers and Authors and Others v Secretary of State for Business Innovation and Skills

Jane Lambert

On 16 July 2015 my heads of chambers, Tim Straker QC and Robert Griffiths QC together with my colleagues, Richard Clayton QC, Charles Morgan, Christopher Forsyth and Lee Parkhill presented our chambers annual judicial review conference. By all accounts it was a great success.

Ending rhe Personal Copy for Private Use Exception
"But what has that to do with intellectual property?" I hear you say. More than you might suppose for on the day after the conference Mr Justice Green quashed The Copyright and Rights in Performances (Personal Copies for Private Use) Regulations 2014 SI 2014 No. 2361 which had inserted a new s.28B into The Copyright Designs and Patents Act 1988 (see British Academy of Songwriters, Composers and Authors and Others v Secretary of State for Business etc  (No. 2) [2015] EWHC 2041 (Admin) 17 July 2015). The section inserted by those regulations had created the following exception to copyright:

"28B Personal copies for private use
(1) The making of a copy of a work, other than a computer program, by an individual does not infringe copyright in the work provided that the copy—

(a) is a copy of—

(i) the individual’s own copy of the work, or
(ii) a personal copy of the work made by the individual, 

(b) is made for the individual’s private use, and
(c) is made for ends which are neither directly nor indirectly commercial. 

(2) In this section “the individual’s own copy” is a copy which—

(a) has been lawfully acquired by the individual on a permanent basis,
(b) is not an infringing copy, and
(c) has not been made under any provision of this Chapter which permits the making of a copy without infringing copyright. 

(3) In this section a “personal copy” means a copy made under this section.
(4) For the purposes of subsection (2)(a), a copy “lawfully acquired on a permanent basis”—

(a) includes a copy which has been purchased, obtained by way of a gift, or acquired by means of a download resulting from a purchase or a gift (other than a download of a kind mentioned in paragraph (b)); and
(b) does not include a copy which has been borrowed, rented, broadcast or streamed, or a copy which has been obtained by means of a download enabling no more than temporary access to the copy. 

(5) In subsection (1)(b) “private use” includes private use facilitated by the making of a copy—

(a) as a back up copy,
(b) for the purposes of format-shifting, or
(c) for the purposes of storage, including in an electronic storage area accessed by means of the internet or similar means which is accessible only by the individual (and the person responsible for the storage area). 

(6) Copyright in a work is infringed if an individual transfers a personal copy of the work to another person (otherwise than on a private and temporary basis), except where the transfer is authorised by the copyright owner.
(7) If copyright is infringed as set out in subsection (6), a personal copy which has been transferred is for all purposes subsequently treated as an infringing copy.
(8) Copyright in a work is also infringed if an individual, having made a personal copy of the work, transfers the individual’s own copy of the work to another person (otherwise than on a private and temporary basis) and, after that transfer and without the licence of the copyright owner, retains any personal copy.
(9) If copyright is infringed as set out in subsection (8), any retained personal copy is for all purposes subsequently treated as an infringing copy.
(10) To the extent that a term of a contract purports to prevent or restrict the making of a copy which, by virtue of this section, would not infringe copyright, that term is unenforceable.”

His lordship's order has the effect of repealing the section with prospective effect.

The Directive
The application arose out of the Secretary of State's decision to extend the exemptions to the reproduction right that had been allowed by art 5 (2) of the Directive on the harmonisation of certain aspects of copyright and related rights in the information society (Directive 2001/29/EC).

The purpose of the Directive had been to harmonization of the implementation of the WIPO Copyright Treaty and the WIPO Phonograms and Performances Treaty throughout the EU. The Directive required member states to confer reproduction, communication and distribution rights on authors and performers in so far as those rights did not already subsist in the laws of those member states. "Reproduction right" was defined by art 2 as "the exclusive right to authorise or prohibit direct or indirect, temporary or permanent reproduction by any means and in any form, in whole or in part." The Directive was implemented in the UK by The Copyright and Related Rights Regulations 2003 SI 2003 No 2498 which amended the Copyright, Designs and Patents Act 1988.

Art 5 of the Directive provided for a number of exceptions and limitations to those rights some of which has to be implemented in full and others of which were discretionary. Art 5 (2) permitted member states to provide exceptions to reproduction right in a number of cases one of which was allowed by sub-paragraph (b):

"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 right holders receive fair compensation which takes account of the application or non-application of technological measures referred to in Article 6 to the work or subject matter concerned."

The government of the day decided not to implement this exception because it required compensation to be paid to right holders. Instead, reg 8 inserted a much narrower exemption into the Act that allowed temporary copies.

Hargreaves
In his report Digital Opportunity A Review of Intellectual Property and Growth Prof. Ian Hargreaves had recommended that "copying should be lawful where it is for private purposes, or does not damage the underlying aims of copyright"  He added:

"The UK has chosen not to exercise all of its rights under EU law to permit individuals to shift the format of a piece of music or video for personal use and to make use of copyright material in parody. Nor does the UK allow its great libraries to archive all digital copyright material, with the result that much of it is rotting away. Taking advantage of these EU sanctioned exceptions will bring important cultural as well as economic benefits to the UK. Together, they will help to make copyright law better understood and more acceptable to the public. In addition, there should be a change in rules to enable scientific and other researchers to use modern text and data mining techniques, which copyright prohibits."

The Secretary of State for Business accepted all Hargreaves's recommendations including implementing art 5 (2) (b) and began a consultation process on how best to do it.

The Challenge
Following the consultation the Business Secretary drew up the 2014 regulations that purposed to implement art 5 (2) (b) but provided no compensation for right holders. The Business Secretary justified the government's decision stance on the ground that

"it intended only to create an exception which either caused no (zero) harm to right holders or de minimis harm and this meant that the exception would be strictly limited to private own, non-commercial, use by legitimate bona fide purchasers of content."

The British Academy of Songwriters, Composers and Authors Limited, Musicians Union and UK Music Ltd  challenged that view and applied to set aside the regulations. There was also an intervention from the Incorporated Society of Musicians. The action came on before Mr Justice Green in British Academy of Songwriters, Composers and Authors and Others v Secretary of State for Business Innovation and Skills (No 1) [2015] EWHC 1723 (Admin), [2015] WLR(D) 268.

The Issue
The issue that Mr Justice Green had to decide was:

"Would the introduction of a limited private use exception cause no more than minimal or zero harm?"

The government based its contention that there would be zero or minimal harm on  the following premises which are summarized in  paragraphs [12] and [13] of his lordship's judgment:

"[12] The first premise was that the only relevant "harm" that would, in principle, need to be compensated for was the risk to right holders of lost, duplicate sales i.e. the only harm for which compensation would be due were the sales that were lost as a consequence of legitimising what were hitherto unlawful acts. As to this the Secretary of State concluded that whilst consumers considered that they should be entitled to copy content they had acquired they were not, to any material degree, prepared to go out and purchase duplicate copies in order to be able to achieve multiple use. In other words there was no automatic correlation between the desire to copy and lost sales; if the former was constrained the latter would not necessarily occur. And as such if a limited exception to copyright was introduced this would not impact upon duplicate sales.
[13] The second premise was that either fully, or very substantially, sellers of content had already priced-in to the initial sale price the fact that consumers treated content that they purchased as fair game when it came to copying for personal use; in other words when a purchaser acquired content the seller had already factored into the price an assumption that the consumer would in fact copy that work even if it was, in law, unlawful so to do. This has become known as the 'pricing-in' principle."

In the consultation the Intellectual Property Office (which had carried out the process on behalf of the government) had asked for evidence to prove or disprove those premises and it also instructed consultants who carried out research into the music, film and book trades.

Was there evidence of harm beyond the de minimis level?

After referring to the Directive, the evidence before Hargreaves, the consultation and the evidence that was considered by the IPO and the Department for Business the judge concluded at paragraph [140] that "this case boils down to the narrow question: Whether on the facts there is evidence of harm beyond the de minimis level for which no compensation mechanism has been provided?" 

Review Process

In order to determine this issue, his lordship decided at paragraph [148] to review, carefully and thoroughly, the evidence relied upon by the Business Secretary to justify the decision to introduce section 28B. He made clear he was not conducting that exercise to see, for instance, whether he agreed with the conclusion arrived at by the experts who advised the government. Rather he was concerned with "the process of evidence collection; its fairness and thoroughness; any acknowledgements as to its inherent limitations; and the inferences drawn from the evidence by the [government] which ultimately led to the decision in issue."

Between paragraphs [237] and [244] the judge set out the principles that a court should apply in determining whether the decision making process was fair and thorough:

"[237] There are, in my view, 7 points to make about the evidence in this case which bear upon the outcome.
[238] First, the court must examine the inferences drawn in the light of the relevant legal issue. In the present case the legal issue is whether pricing-in will lead to "minimal or zero" harm since if it does not then, in law, a compensation scheme must in law be introduced. The legal issue guides the exercise: The evidence accepted by the Secretary of State must be sufficient to enable a reasonable inference to be drawn from it that this de minimis threshold has been met.
[239] Second, a court will examine the evidence to see if there are, logically, gaps in it. Such might well be the conclusion if experts selected by the Government to collect and analyse evidence themselves identify questions and queries and matters requiring further investigation which are not then followed up or which are ignored; or if consultees identify issues which the decision maker accepts are relevant but which for no identified reason are not followed up.
[240] Third, a court will, even in relation to a narrow question such as whether the evidence established a de minimis threshold, accord to the decision maker an appropriate margin of discretion. So, if the evidence had suggested that (say) 93% of harm was obviated by pricing-in then the court might well conclude that it had no remit to quibble as to whether 95% or 97% should be treated as the relevant de minimis threshold. But the conclusion might be very different if the evidence either fails to address what is to be understood by de minimis at all or suggests an answer that (say) between 40-50% of right holders would be deprived of compensation if the exception were introduced. In short the court will look to see if the inferences drawn are within the range of reasonable and rational inferences which are capable of being drawn from that evidence.
[241] Fourth, the court must recognise that relevant evidence may be qualitative and/or quantitative. Experience shows that, even in areas of technical or economic complexity, decisions may, of necessity, be properly taken upon the basis of a mix of quantitative and qualitative evidence. Indeed, a decision maker might well adopt a particular proposition because it is simply intuitive economic common sense: See Sinclair Collis (ibid) at paragraphs [237], [238] and [242], and, Gibraltar Betting & Gaming (ibid) at paragraphs [110], [119], [120], [163] – [168].
[242] Fifthly, when appraising the reasons in the decision based upon the evidence a court should not construe the decision as if it were a statute. The Court is concerned not to pick holes in infelicitous or badly chosen language but, rather, with seeking to understand and review the true substance of the reasoning. The courts have adopted this approach in relation to reports of the Competition Commission (Tesco Plc v Competition Commission [2009] CAT6 at paragraph [79] ("Tesco")); and officers' reports in the context of planning (e.g. South Somerset District Council v Secretary of State for Environment [1993] 1 PLR 80 per Lord Justice Hoffmann at page 83). In the present case, the critical and final reasoning is found in the Updated Impact Assessment of March 2014. Evidence before the Court demonstrates how that reasoning evolved over time. The task is to focus upon pith and substance and to avoid the temptation to pick holes in loose language.
[243] Sixthly, a court needs to exercise care in placing too much store by witness statement evidence from decision makers, prepared for the purposes of litigation. In many cases claimants submit that the challenged decision should stand or fall upon its own merits and after the event ("boot strapping") attempts in witness statements to add new or supplemental reasons, caveats or "spins" must be ignored: See, for example,Ermakov v Westminster City Council [1995] EWCA Civ 42; Lanner Parish Council v The Cornwall Council [2013] EWCA Civ 1290 at paragraphs [61] and [64]; and per Ouseley J in Ioannou v Secretary of State for Communities & Local Government [2013] EWHC 3945. In the present case, a different approach has been adopted by the Claimants who submitted that the Defendant's witness statement evidence should be taken to reflect the reasoning of the Defendant and that it disclosed errors of law and evidence of predetermination. In my view, the reasoning the Defendant accepted has been set out comprehensively in the Updated Impact Assessment of March 2014 and it is to that document that I must primarily turn to identify the Defendant's reasoning.
[244] Finally and seventhly, even if the court concludes that there is an error a remedy will not be ordered if that error is not material to the outcome: see in this regard R v MMC ex parte National House Building Council [1993] ECC 388 at [398] (upheld on appeal: [1995] ECC 89); Tesco (ibid) at paragraph [79]; Gibraltar Betting and Gaming (ibid) at paragraphs [100] – [102]."

Applying these principles, Mr Justice Green considered the evidence upon which the Business Secretary relied and, in particular, the Updated Impact Assessment which in turn relied heavily on an IPO research report. The judge concluded at paragraph [269] that the inferences drawn in that Impact Assessment about whether the harm that right holders would suffer would be de minimis were not remotely supported by the evidence. Consequently, the decision to introduce section 28B in the absence of a compensation mechanism was unlawful.

Consequences
His lordship made clear at paragraph [21] that his conclusion did not necessarily result in that section being struck down.  It was in theory, possible for the Secretary of State to re-investigate the issue in order to address the evidential gap which now prevails. If he did that then one possible outcome would be that the gap that the court had identified could be plugged and the decision would become justified. Another outcome might be that following further investigation the gap in the evidence remained un-plugged in which case the Secretary of State could either repeal section 28B or introduce a compensation scheme. A third possibility was that the Secretary of State might simply decide to introduce a compensation scheme without more ado. He therefore invited further submissions from the parties.

At the hearing on 17 July 2015 the Secretary of State accepted that the 2014 regulations should be quashed:

"[4]. The Secretary of State welcomes the guidance which the Court has provided as to the correct approach to be adopted as a matter of law when considering the introduction of a private copying exception, and as to the scope and nature of the factual enquiries which are necessary. He will now take the opportunity to reflect further and in due course take a view as to whether, and in what form, any further factual enquiries should be carried out and whether a new private copying exception should be introduced. The Secretary of State has not decided on any specific course at this stage and wishes to take time to reflect before making any further decisions. He would not wish to create any uncertainty in the law by submitting that the Regulations remain in force while further policy decisions are made.
[5]. Given that the Secretary of State submits that a quashing order is appropriate at this stage, there is no necessity for a reference to the CJEU. As is made clear in the body of the Judgment, the Judge's conclusion leading to the ruling that the decision was unlawful did not depend on his conclusions on issues of EU law, in particular as to the meaning of "harm" (the issue identified by the Judge is a matter for a potential reference)".

The rights holders' representatives had argued that the regulations should be quashed with retrospective effect. The judge refused to make such an order:

 "It seems to me that the declaration sought raises potentially complex and far reaching issues which it is appropriate to address in the circumstances of private law litigation between a specific right holder and an alleged infringer. It will be for a defendant in future proceedings to explore and raise this issue, including whether the effect of the fact that they relied at the time upon Section 28B creates some species of estoppel, legitimate expectation or fair use defence in private law and whether, if such exists, this goes to the cause of action or the remedy or both."

He thus quashed the regulations with prospective effect. In view of the Secretary of State's concession and as he had made the decision in accordance with English as opposed to Community legal principles the judge declined to make a reference to the Court of Justice of the European Union. The judge acknowledged there may be a need for clarification of the harm for which compensation would be awarded under art 5 (2) (b) but that was not a sufficient reason for a reference on that issue at this time.

Comment
It is important to stress that the rights holders did not win on everything. In particular, the judge rejected their contention that art 5 (2) (b) was directly applicable giving rise to an action for damages against Her Majesty's government under the principles set out in Cases C-6/90 and C-9/90 Francovich v Italian Republic [1991] ECR I-5403. He accepted the government's argument that it would be pointless to set up a compensation scheme if it really was clear that nobody would ever have a case for compensation. He also rejected the submission that the denial of compensation was tantamount to state aid. Instead of awarding the claimants their costs outright he allocated costs on an issue by issue basis.

As Hargreaves has recommended that intellectual property policy should be evidence based it may be that applications of this kind will become more common in future. Having said that, the legislation that gave rise to this application was unusual in that it allowed member states a discretion as to whether to introduce the exemption at all but gave no guidance as to the nature or amount of, or the triggering factor for, the award of compensation. Moreover, the judge declined to rule on the validity of s.28B up to now. All these questions will require expertise in both intellectual property and public law and there not many places other than my chambers where such expertise is to be found.

Should anyone wish to discuss this case, the copyright exceptions and directive, judicial review or copyright law and related rights generally, he or she should not hesitate to call me during office hours on 020 7404 5252 or use my contact form.