Clifford Chance

A little bit of history (background):

Others may have a different view, but copyright afficionados who have followed the evolution of copyright legislation in Spain in recent years will join us in agreeing that the regulation of the fair compensation for private copying has been nothing short of a roller coaster ride. If one had to choose the topic that has caused the Spanish legislator the most headaches for decades now, the regulation of the private copying limitation and the fair compensation for private copying would by far top the list.

In this regard, we must remember that the Court of Justice of the European Union ("CJEU") dealt the first blow to Spain's former system of fair compensation for private copying in the "Padawan case" (case C-467/08, judgment dated 21 October 2010), where it concluded that "the indiscriminate application of the private copying levy, in particular with respect to digital reproduction equipment, devices and media not made available to private users and clearly reserved for uses other than private copying, is incompatible with Directive 2001/29".

As a result of the Padawan case, the Spanish Government enacted Royal Decree-Law 20/2011, which removed the traditional fair compensation for private copying system established in article 25 of the Spanish Copyright Act (Royal Legislative Decree 1/1996, of 12 April 1996 - "SCA") and stated that payment of such fair compensation must be made from the General State Budget. A year later, Royal Decree 1647/2012 established the process and criteria for determining the annual amount of the fair compensation for private copying and payment thereof from the General State Budget.

However, the process of payment from the General State Budget clearly brought more problems that it solved, since the CJEU stated in its judgment of 9 June 2016 (C-470/14), that "Article 5(2)(b) of Directive 2001/29/EC […] must be interpreted as precluding a scheme for fair compensation for private copying which […] is financed from the General State Budget in such a way that it is not possible to ensure that the cost of that compensation is borne by the users of private copies".

In light of this rejection by the CJEU, the Spanish Government had to back down and, by means of Royal Decree 12/2017 and Royal Decree 1398/2018, reinstated in article 25 of the SCA a traditional fair compensation for private copying system aligned with the case law of the CJEU.

Bearing all the above in mind, this past July 2022, the Spanish Government began to write what would be the final episode of the Spanish "saga" on the fair compensation for private copying: it made public a draft Royal Decree that, in implementing Royal Decree 12/2017, is designed to supplement the fair compensation established in article 25 of the SCA. In particular, paragraph 4 of article 25 of the SCA, which establishes that the equipment, devices and material media subject to the fair compensation for private copying payment, the amount to be paid for each equipment, device or material medium and the distribution criteria under the different reproduction modalities will be determined in a proposal by the Spanish Government. This is the mandate that the draft Royal Decree comes to develop.

Content of the new draft Royal Decree:

In Spain, the fair compensation for private copying is a standalone payment mechanism applicable to the reproduction of certain works, which only applies when such reproduction is made for private use (any professional or corporate usage being expressly excluded). Moreover, the private copy must be made from a licit source without violating the conditions of access to the work or subject matter, and it can only be executed by a natural person not performing any collective or lucrative activity, nor conducting the distribution of such copy for any price.

The new draft Royal Decree, in line with article 25 of the SCA, confirms that creditors or beneficiaries of this fair compensation payment are the authors and, in the case of certain reproduction modalities, the editors of the affected works, the producers of phonograms and videograms, as well as the performers whose performances have been embedded in such phonograms and videograms. On the other hand, the debtors of such payment are: (i) those manufacturers in Spain who act as commercial distributors; and (ii) those equipment, device and material media acquirers established outside Spain but who carry out commercial distribution or utilisation activities within Spanish territory. Furthermore, distributors, wholesalers and resellers are jointly and severally liable, as they are deemed subsequent purchasers of these products, unless they can prove that they have properly paid the compensation to the debtors who provided them with said goods.

However, what is paramount about the draft new Royal Decree is that it provides the full list of equipment, devices and material media subject to the fair compensation for private copying payment and the amount to be paid for each of such equipment/device/media, as well as the distribution criteria under the different reproduction modalities. Such list is contained in an Annex that accompanies the draft Royal Decree and that "may be revised at any time, as a result of technological developments and market conditions" and, in any event, "at least every three years". Just to give some relevant examples, the Annex states that tablets, smart phones, personal computers and smart watches are subject to payment of the amount of 3.75 euros, 3.25 euros, 5.33 euros and 2.50 euros, respectively.

Moreover, to cover transitional scenarios, the draft Royal Decree establishes that all reproduction equipment, devices and material media acquired before the date of its entry into force, but commercialised after that date, will be governed by the former system established in Royal Decree-Law 12/2017, provided that such circumstance can be proven by means of the corresponding invoice.

Finally, with regard to the distribution criteria for the fair compensation under the different reproduction modalities, the draft Royal Decree establishes that (i) such distribution will be made according to the figures provided in its Annex, which could be amended at any time by agreement with the relevant collecting entities ratified by the Spanish Ministry of Culture and amending Royal Decree 1398/2018, and that (ii) the distribution of the fair compensation under each modality of reproduction will be as follows:

• Phonograms and other sound media: authors: 40%, performers: 30%, producers: 30%.
• Videograms and other visual or audiovisual media: one third for the authors, another third for the performers and one third for the producers.

• Books and similar publications: authors 55% and editors 45%.