Today the High Court of the United Kingdom handed down an excellent decision—excellent because the result is so unreasonable, so out of touch with reality, and so divorced from the needs and expectations of ordinary users, that it provides a textbook illustration of the need for urgent reform of the outdated and unbalanced European Copyright Directive.

In a nutshell, the court struck down the UK government's decision to allow users to lawfully make copies of content that they have purchased for personal use, given the absence of a compulsory levy to compensate copyright owners for the “harm” that they suffer from such copying. The government's choices are now to remove the private copying exception—making personal copying illegal again, or to supply additional evidence that copyright owners suffer no or minimal “harm” from personal copying, or else to begin imposing a new tax on users to compensate the industry for that “harm”.

The notion that every use of copyright works by users (which for digital works, generally involves a technical act of copying) is a use that rightsholders must be compensated for, is not a notion with any historical foundation in copyright law. Copyright law is a limited monopoly right that is bestowed by statute, and therefore it can be limited or taken away by statute just as easily. Thus, the limitations and exceptions to copyright law are as much an integral part of it as the exclusive rights of copyright owners are.

However, in May 2001, with the adoption of European Union Copyright Directive (2001/29), what had been a well-settled principle of British copyright law was suddenly made subject to a new restriction: that no new copyright limitations and exceptions could be introduced without compensation to rightsholders, unless its introduction would cause them minimal or no harm.

Seizing on the opportunity to use this supranational directive to overturn a democratically-enacted law, music industry groups (the Musicians' Union, UK Music, and the British Academy of Songwriters, Composers and Authors) sued the UK government arguing that yes, by making a copy of content that you have purchased, in your own home and for your own use, you are indeed causing them to suffer harm.

In a 107-page judgment [PDF] that is long on economic theory and short on common sense, the High Court examined the industry's assertion that because content that can be copied has more value than content that can't—we agree with that part—the rightsholder ought to be able to capture that added value—a far more dubious claim, but one to which the unbalanced European Copyright Directive gives some credence.

The government's response was that the added value that consumers receive from being able to make personal copies is already being captured, because it is built in to the purchase price of the original works, resulting in no or minimal loss to rightsholders. The problem, as found by the court, was that the government hadn't actually done its homework to demonstrate that this was indeed the case.

Whilst accepting that the Copyright Directive does not require “that sellers must be able to extract the very last gram of value from the copyright,” the court found that the personal copying exception might have resulted in some loss of sales (for example, some hypothetical consumer might have refrained from buying an extra copy of their favorite CD for their car, in reliance on the new exception), and that the government had failed to present any evidence that these lost sales were zero or minimal.

This decision is so bad, that it isn't even wrong. Not because we think that the government did produce the economic evidence that the court was looking for, but because the fact the government should even be required to produce that sort of evidence before allowing users to make personal copies of purchased works shows how completely detached copyright law has become from the real world.

In the digital age, the ability for copyright works to be legally copied is not something that can be characterized in any sensible way as an additional value, over and above the value that those works possess in splendid, uncopiable isolation. For many digital works, it is impossible to make use of copyright works at all without making copies; perhaps many times over, and it is absolutely right and proper that the making of those copies ought to be permitted by the law, without relying on a levy or on a license from the copyright owner.

Demanding that each such lawfully-made copy be somehow carved into its own sliver of value, and ensuring that rightholders have been afforded the maximum opportunity to extract rents from that value, is nonsense on every level: it is administratively unworkable, acts as a barrier to fair use and innovation, and has no justifiable legal or moral basis as a matter of copyright policy.

Whilst we therefore think that the court got it wrong by buying into the industry's argument that it was entitled to share in the value of personal copying, the court is not alone in carrying the blame for this momentously bad precedent. As suggested above, the fault must also be shared by the inflexible and one-sided European Copyright Directive.

Neither can we fully absolve the rightsholders from blame; although a stupid law is an open invitation for anyone to take advantage of it, it still takes a special kind of mercenary greed to use it to strike down an exception that allows people to freely make personal copies of CDs, videos and personal photographs in the privacy of their own homes. (And let's not kid ourselves that the recording industry in the United States wouldn't pull the same stunt if they thought they could.)

Today's decision puts the very worst features of copyright law on full display, and to that extent is an excellent illustration of the need for change. It bolsters the argument that thousands of European citizens have made that the Copyright Directive must be urgently reviewed, though measures such as the introduction of a fair use-style exception. Unfortunately this week's refusal by the European Parliament's Legal Affairs Committee to recommend just such an exception as proposed by Member of Parliament (MEP) Julia Reda does not bode well for the success of the pending review.

But perhaps a stupid decision like this is just what is needed to turn the temperature up a notch, and place more British users on the offensive. After years of lobbying for a free personal copying exception, its loss at the hands of the music industry clearly outlines the incursions that unbalanced copyright law makes upon users' freedom to make reasonable, private (and public) uses of copyright works. It's high time to bring European copyright law back into line with reality.