On March 24, 2022, the ECJ ruled that a copy of a copyrighted work made for private purposes and stored in a cloud is subject to the “private copying” exception of the Copyright Directive 2001/29/EC (ECJ Judgement of March 24, 2022 Ref.: C-433/20). The act of copying, uploading the work to the cloud, can thus be justified. However, the rightholders must be paid fair compensation for this, which the cloud user does not necessarily have to pay for.
Background
Austro-Mechana is an Austrian collecting society for mechanical-musical copyrights which administers rights of use and remuneration in trust. Austro-Mechana sued the German Strato AG before the Commercial Court of Vienna for payment of a storage media fee for offering storage space via cloud computing.
The Commercial Court of Vienna dismissed the action on the grounds that Strato AG did not hand over embodied storage media to its customers. Cloud-based storage as a service was not covered by the exception for “private copies” and thus did not have to be remunerated.
Regulations for private copying are found in Art. 5 of the Copyright Directive 2001/29/EC. Member states may provide for exceptions for private copies of works protected by copyright. Private individuals may be allowed to store and reproduce works for private purposes on “any medium”. The authors must be paid fair financial compensation for this. The Austrian legislator has made use of this exception in the national copyright law (see § 42b Copyright Act). In Germany, the regulation is found in § 53 UrhG.
By order of 07.09.2020 (Ref: 33 R 50/20w), the Vienna Higher Regional Court, which is hearing the appeal, referred questions to the ECJ for a preliminary ruling. The court wants to know whether the expression “reproduction on any medium” in Art. 5(2)(b) of Directive 2001/29 also covers the storage of copyright-protected works in the context of cloud computing and thus whether the exceptions on private copying apply.
Private copy exception also applies to storage of protected works in the cloud
The ECJ first clarifies that the creation of a backup copy of a work constitutes an act of reproduction. This is because when a copyright-protected work is uploaded to the cloud, a copy is stored there. A further reproduction takes place when a user downloads this work onto his or her terminal device. In addition, the wording “any medium” covers all media on which a work can be reproduced. This also includes storage space in a cloud, regardless of whether the storage space is on a server or belongs to a third party. The private copy exception in Article 5(2)(b) of the Copyright Directive is therefore not limited to physical media, but also covers the storage of private copies in the context of cloud computing.
The ECJ based its reasoning on the principle of technology neutrality. This states that laws that designate the rights and obligations of persons in general must be formulated in such a way that no technology is preferred over another. In addition, the Court refers to the aim of the Copyright Directive, which is to ensure that copyright protection does not become obsolete or obsolescent in the course of new technologies.
Right holder’s right to compensation
If member states implement the private copying exception, they must ensure that rightholders receive fair compensation for the reproductions of their works. The amount of compensation is to be measured against the harm caused by the making of a reproduction. According to the ECJ, in principle, the persons who made the copy in question, i.e. the users of the cloud service, have to finance the compensation. In this way, they financially compensate the rightholder for the damage they have caused. However, deviating regulations can be made in particular if it is difficult to identify the private users or the damage is small in detail. Therefore, the EU member states can decide individually whether or not to levy financial compensation on these private copies. It is therefore up to the Member States to determine the amount of the levy and to decide which party has to pay the compensation.
For example, in Germany, manufacturers and importers of equipment, devices and cloud services can be obliged to pay the compensation. In German law, an obligation to pay compensation to the manufacturers of devices and storage media can be found in Section 54 UrhG.
It is now the turn of the Vienna Higher Regional Court to rule on the dispute and determine whether, under Austrian law, cloud computing providers are already covered by the levy regime on private copying and what level of levy is sufficient to compensate rightholders for the damage.