## Facts

- Padawan SL sold digital recording media and devices (e.g., CD-R, DVD-R, MP3 players) in Spain.
- Sociedad General de Autores y Editores de España (SGAE), a collecting society, sought payment from Padawan under Spain’s private-copying levy scheme.
- Spain implemented the private-copying exception in Directive 2001/29/EC (InfoSoc Directive) by funding “fair compensation” through a levy on digital reproduction equipment, devices, and media.
- The levy was applied broadly without distinguishing between purchases by private individuals and acquisitions by professional/commercial users.
- SGAE claimed levies for products marketed by Padawan between 2002 and 2004; Padawan refused, arguing the indiscriminate levy was inconsistent with the Directive.
- A Spanish appellate court referred interpretive questions to the Court of Justice of the European Union (CJEU) regarding the meaning of “fair compensation” and the permissibility of an indiscriminate levy.

## Issues

1. Whether “fair compensation” in Article 5(2)(b) of Directive 2001/29/EC is an autonomous concept of EU law requiring uniform interpretation.
2. Whether “fair compensation” must be linked to the harm suffered by rightholders from private copying.
3. Whether a levy imposed indiscriminately on all digital reproduction equipment/media, including items clearly intended for professional uses unrelated to private copying, is compatible with the Directive.
4. Whether the levy may be imposed on intermediaries (e.g., sellers/distributors) who make such equipment available to private users.

## Decision

- The CJEU held that “fair compensation” is an autonomous EU-law concept that must be interpreted uniformly in Member States that adopt the private-copying exception.
- The Court held that fair compensation must be calculated by reference to the harm caused to rightholders by private copying permitted under the exception.
- The Court ruled that Member States may require intermediaries who make equipment/media available to private users to finance the compensation, because the cost can be passed on to private users.
- The Court held that an indiscriminate levy is incompatible with the Directive insofar as it applies to equipment/media not made available to private users and clearly reserved for uses other than private copying.
- The Court required a necessary link between the levy’s application and the deemed use of the equipment/media for private copying.

## Legal Principles

- “Fair compensation” under Article 5(2)(b) of Directive 2001/29/EC is an autonomous EU-law concept subject to uniform interpretation.
- Fair compensation must reflect actual or potential harm to rightholders caused by the private-copying exception and must maintain a fair balance between rightholders and users.
- A levy system may place payment liability on manufacturers, importers, or distributors who make equipment/media available to private users, provided the economic burden can be shifted to private users.
- A levy must have a necessary link to the equipment/media’s presumed use for private copying; indiscriminate levies on items clearly intended for professional, non-private purposes are unlawful under the Directive.
- Member States retain discretion over the form, financing method, collection arrangements, and level of compensation, but only within the limits set by EU law and the harm-based rationale.

## Conclusion

The CJEU interpreted “fair compensation” for private copying as a uniform, harm-based EU concept and held that while intermediaries may be charged to fund compensation, a private-copying levy cannot be applied indiscriminately to equipment and media clearly reserved for professional uses unrelated to private copying.


Padawan SL v. Sociedad General de Autores y Editores de España (SGAE), Case C-467/08 (C.J.E.U. 2010)