Padawan case – Legal assessment

Purpose of “fair compensation” (de)

‘Fair compensation’ within the meaning of Article 5(2)(b) of Directive 2001/29 is not aimed at compensating the rightholder for illegal actions in connection with the unauthorised reproduction of works and other subject‑matter. There is only a claim to compensation in connection with private copying, provided that such copying is permitted according to the copyright laws of the Member States. The fact that – for instance on the internet via so-called ‘P2P’ (peer-to-peer) file sharing – widespread infringement of the essentially comprehensive reproduction rights of the author may be observed is not relevant in connection with that provision of the directive, and neither can it be regarded as a factor for the purpose of ensuring a balance between the interests of the rightholder and of the user. Copies which are made illegally in that way in fact mostly serve commercial purposes. In any case, they serve purposes other than ‘private use’ within the meaning of Article 5(2)(b) of Directive 2001/29 and are therefore not covered by the limiting provision.

The right to ‘fair compensation’ within the meaning of Article 5(2)(b) of Directive 2001/29, as the German Government correctly points out, primarily has the character of a reward. This is apparent from the first sentence of recital 10, pursuant to which if authors or performers are to continue their creative and artistic work, they have to receive an ‘appropriate reward’ for the use of their work. Recital 35 makes clear that ‘fair compensation’ should also be classified in this category of rewards, where it is stated that in certain cases of exceptions or limitations, rightholders should receive fair compensation to compensate them adequately for the use made of their protected works or other subject-matter.

On the other hand, legal categorisation of the legal concept of ‘fair compensation’ as a straightforward claim for damages, as the referring court apparently assumes, may not readily be confirmed. Of course, the exclusive reproduction right established in Article 2 of Directive 2001/29 constitutes an expression of the intellectual property of the author. An exception or limitation to that right under Article 5(2)(b) of the directive may therefore be regarded as interference with that fundamental right which is protected by Community law. However, the criterion of harm does not necessarily have to be taken as a basis for determining fair compensation. The directive merely permits harm or prejudice to be taken as a guide, but does not make them binding criteria.

Thus, it must be inferred from the second sentence of recital 35 in the preamble to the directive that when determining the form, detailed arrangements and possible level of such fair compensation, account should be taken of the particular circumstances of each case; in evaluating those circumstances, a ‘valuable criterion’ may be the possible harm to the rightholder. That suggests that possible harm, as the Spanish Government correctly observes, should not be regarded either as the sole criterion for determining such fair compensation or as the decisive criterion, but instead constitutes just one of a number of criteria, which the Member States may take as a basis for determining fair compensation. Further criteria, which are listed in recital 35 in the preamble to the directive, may be added, for instance payment already received in some other form, the degree of use of technological protection measures or the minimal nature of the prejudice suffered. However, that list should not be regarded as exhaustive.

The concept of ‘fair compensation’ in Article 5(2)(b) of Directive 2001/29 must be understood as a payment to the rightholder which, taking into account all the circumstances of the permitted private copying, constitutes an appropriate reward for the use of his protected work or other subject-matter.