The Court interpreted the even loonier European Copyright Directive to say that the government couldn't legalise CD ripping without imposing a levy on the public.
As Jeremy Malcolm at the Electronic Frontier Foundation points out, this is good news inasmuch as the EU is presently considering a slate of reforms to its copyright directives, and this is ample evidence that the law needs fixing.
The ruling says that governments can't make exceptions to copyright law without compensating rightsholders for the "harms" from the changes; because the UK government didn't demonstrate that ripping CDs doesn't cause harm to rightsholders, and because it didn't impose a levy to compensate for "harms," the legalisation of ripping (which, incredibly, only took place in the last Parliament) is now invalid.
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.)