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Cloud storage subject to private copying copyright levy rules according to the CJEU

The CJEU held that private copy levy is due to rights holders in relation to cloud storage which has a relevant impact on the matter.

In its recent judgment in Case C-433/20 (“Austro-Mechana”), the Court of Justice of the European Union (“CJEU”) ruled on the so-called “private copy” exception in copyright law, ruling that this exception also applies to cloud storage of a copy of a protected work made for private purposes.

Rightsholders are thus entitled to receive fair compensation (“private copyright levy”) as provided in the legislation, but this need not be paid by cloud service providers.

Private copying is an exception to copyright law and allows intellectual works to be reproduced in any medium for private use and for purposes neither directly nor indirectly commercial, provided that the owners of the rights to the reproduced work receive fair compensation that takes into account the possible application of technological protection measures to the work.

The appeal stems from a dispute brought by Austro-Mechana, an Austrian copyright collecting society that is responsible for collecting royalties under the private copying exception, which sought payment of such royalties from a cloud storage service provider. Austro-Mechana’s claim was rejected by the Austrian Court of First Instance, and subsequently, on appeal, the Vienna Higher Regional Court appealed to the CJEU to clarify whether the storage of content in the context of cloud services falls under the private copying exception in Article 5(2)(b) of Directive 2001/29/EC (“Infosoc Directive”).

The Court held that the private copying exception governed by the Infosoc Directive must be interpreted “as meaning that the expression ‘reproductions on any medium,’ includes the making, for private purposes, of backup copies of works protected by copyright on a server where the provider of a computer cloud service has made storage space available to a user.”

The copy saved in the cloud thus constitutes a reproduction of a protected work, since the uploading to the cloud consists of storing a copy of the same. It is, therefore, possible to include the cloud server in the category of “any medium” to which the private copy exception applies, with the fact that the server belongs to a third party also being irrelevant.

This broad and “future proof” interpretation of the expression “any medium” is dictated by the need to ensure compliance with the objectives set by the Infosoc Directive, which aims to keep European copyright protection in step with technological evolution.

With regard to subjecting the cloud service provider to the payment of the fair compensation provided for in the legislation, the Court ruled that it is within the discretion of the Member States implementing the private copying exception to determine the elements of the fair compensation system intended to compensate copyright holders, thus remaining free to determine the persons who must pay such compensation as well as set the form, manner and level of the latter.

Although financing the remuneration would generally fall to the person making the private copy (i.e., the user of the cloud storage services), the Court stated that in the event of practical difficulties in identifying end users, member states may still provide that the private copy levy be placed on the producer or import of the servers, through which the cloud services are offered to individuals. The levy would fall economically on the party purchasing such servers and, consequently, be passed on to the private user who uses such equipment or to whom a copying service is provided.

Finally, the CJEU provided that when determining the private copying levy, member states may take into account the fact that certain devices and media may be used to make private copies in a cloud storage space. In any case, the levy paid, if levied on multiple devices and media for a single contribution, shall not exceed the potential harm suffered by right holders.

In conclusion, there is no obstacle to the introduction of national legislation that does not subject cloud storage service providers to the payment of fair compensation, provided that such fair compensation is paid in other ways.

On a similar topic, you might be interested in the article “The CJEU rules on the liability regime of Internet service providers under the EU Copyright Directive“.

Photo by Markus Spiske on Unsplash

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