On the 31st December 2011 the Royal Decree-Law 20/2011, of December 30th, concerning urgent budget, tax and financial measures for the reduction of the public deficit was published in the BOE (Official State Bulletin). In this decree-law the private copying levy was abolished from the 1st January 2012, with the levy henceforth to be deducted from the National State Budget.

Thus, since 1st January, 2012 the private copying levy on all equipment, appliances and recordable media having the capacity of making copies of copyright protected works, and in the end paid by purchasers of these items, will no longer imposed.  Instead once the payment procedure, by deduction, from the National State Budget has been determined, all Spanish citizens will pay the levy.

The specific amount to be deducted from the National State Budget destined to cover this new expense has still not been determined although the Royal decree-law states that it will be based on an estimation of the economic losses incurred.

Although the industry breathed a sigh of relief when the announcement was published on the 31st December 2011, the fact remains that the landscape of uncertainty concerning the levy continues.

Earlier rulings by the European Court of Justice and the Barcelona Provincial Court, Section 15, had determined that the indiscriminate application of the levy did not conform to European rules as the private copying levy on equipment, devices and recordable media had been applied to companies and professionals rather than private individuals who have a different final use than private use. This had raised doubts as to how to determine the amount of levy that manufacturers, importers and others in the chain should pay, as it is not until the product is purchased that it can be clearly determined whether a private user, a company or a professional purchased it, whereas the levy was payable as soon as the manufacturer or importer transferred the ownership of the product in question.

These uncertainties had to be resolved by the new regulation, becoming necessary from when these rulings were made. The industry practices concerning the levy were variable, going from paying it religiously and waiting for (or rather hoping for), an eventual reimbursement of the levy on products not purchased by private users for private use, to declaring products that presumably would be purchased by companies or professionals to the royalty collecting societies but without paying the levy, facing the risk of not being able to recover it later.

The new regulation, far from shedding light on the situation highlighted by the aforementioned rulings, opts for a totally novel and, to a degree, unexpected route: to abolish the fair compensation (levy) for private copies as was contained in Article 25 of the consolidated text of the Intellectual Property Act and envisages compensation payments deducted from the National State Budget.  Doubts linger about the amounts payable in relation to the equipment and recordable media on sale and purchased by people other than private individuals, at least since the date of European Court of Justice ruling and until the 31st December 2011.

However the regulatory changes to the private coping levy still has a final last effect on the levy collection system in force until the 31st December 2011, which causes another uncertain situation: what is the position regarding products that manufacturers and importers sold during the last three months of 2011 and therefore were in the distribution chain but which the industry (wholesalers and retailers etc.) had in stock on 31st December 2011 and so had not been purchased by the end-user before the abolition of the levy?

According to the regulation change by Royal decree-law 20/2011, as from the 1st January 2012 the relevant products cannot be sold under application of the private copying levy. This poses a new question:

Should the wholesalers, retailers etc. endure a levy (and the collecting societies receive it), which, according to the regulation change, cannot ever be passed on to the end consumer, who in reality, is the one who makes the private copies referred to in the Act and because of which the compensation payments system to the copyright holders was planned?

The answers, as well as the choices made by the various players in the distribution process, are varied: from the most cautious, choosing to declare and pay the due amounts to the royalty collecting societies, faced with the possibility of these societies possibly trying to claim later if they are not paid, to the most direct, and in a certain way, risky (although it is arguable that this carries so much risk), choosing not to pay the due amount and reimburse the party in the chain that paid for it.

As can be seen, the private copying levy is still alive and everything seems to indicate that with the new regulation determining that these royalties will be deducted from the National Budget, the matter will carry on being debated.

Mònica López