European Court of Justice, Second Chamber: The Bench of A. Arabadjiev, President of the First Chamber, acting as President of the Second Chamber, I. Ziemele (Rapporteur), T. von Danwitz, P.G. Xuereb and A. Kumin, Judges, held that, Right holders must receive fair compensation, which, however, need not necessarily be imposed on cloud providers.
Present proceedings were in between Austro-Mechana, copyright collecting society, and Strato AG, a provider of cloud storage services, concerning the remuneration for copyright payable by Strato in respect of the provision of that service.
Austro-Mechana applied to the Handelsgericht Wien (Commercial Court, Vienna, Austria) for an order to allow it to invoice for, and take payment of remuneration in respect of, ‘storage media of any kind’, on the ground that Strato provides its business and private customers with a service known as ‘HiDrive’, by which it makes cloud computing storage space available to them.
Strato contested the application on the ground that no remuneration was due in respect of cloud computing services. That company stated that it had already paid the required copyright fee in Germany, the Member State in which its servers are hosted. Further, it added that the users in Austria had also already paid a levy for the making of a private copies (the private copying levy) on the terminal equipment necessary to upload content to the cloud.
The Commercial Court, Vienna dismissed the Auto-Mechana’a application, holding that Strato does not make storage media available to its customers, but provides them with an online storage service.
The above-said decision was appealed to Higher Regional Court, Vienna Austria, wherein the Court referred to the following questions:
(1) Is the expression “on any medium” in Article 5(2)(b) of Directive [2001/29] to be interpreted as meaning that it also includes servers owned by third parties which make available to natural persons (customers) for private use (and for ends that are neither directly nor indirectly commercial) storage space on those servers which those customers use for reproduction by storage (“cloud computing”)?
(2) If so: is the provision cited in Question 1 to be interpreted as meaning that it is applicable to national legislation under which the author is entitled to equitable remuneration (remuneration for the exploitation of the right of reproduction on storage media), in the case:
– where a work (which has been broadcast, made available to the public or recorded on a storage medium produced for commercial purposes) is by its nature likely to be reproduced for personal or private use by being stored “on a storage medium of any kind which is suitable for such reproduction and, in the course of a commercial activity, is placed on the market in national territory”,
— and where the storage method used in that context is that described in Question 1?’
Bench in the present matter expressed that,
“…upload of a work from a user’s connected terminal to a cloud storage space made available to that user in the context of a cloud computing service involves making a reproduction of that work, since that service consists of, inter alia, storing a copy of that work in the cloud. Moreover, other reproductions of that work may also be made, in particular where the user accesses the cloud by means of a connected terminal in order to download onto that terminal a work that was previously uploaded to the cloud.”
Observation of the Court
Directive 2001/29 provides that the private copying exception applies to reproductions on any medium. The Court rules on the applicability of that exception to copies of works in the cloud.
As regards the concept of ‘reproduction’, the Court stated that the saving of a copy of a work in storage space in the cloud constitutes a reproduction of that work. The upload of a work to the cloud consists in storing a copy of it.
With regard to the words ‘any medium’, the Court observed that these refer to all of the media on which a protected work may be reproduced, including the servers used in cloud computing. In that regard, the fact that the server belongs to a third party is not decisive. Accordingly, the private copying exception may apply to reproductions made by a natural person with the aid of a device belonging to a third party. In addition, one of the objectives of Directive 2001/29 is to prevent copyright protection in the European Union from becoming outdated or obsolete as a result of technological developments. That objective would be undermined if the exceptions and limitations to copyright protection were interpreted in such a way as to exclude digital media and cloud computing services.
Subjection of providers of cloud storage services to the payment of fair compensation
Member States which implement the private copying exception are required to provide for a system of fair compensation intended to compensate right holders.
Regarding the person liable to pay the fair compensation, it is in principle for the person carrying out the private copying, namely the user of cloud computing storage services, to finance that compensation.
Member States may introduce a private copying levy chargeable to the producer or importer of the servers by means of which the cloud computing services are offered to natural persons. That levy will be passed on economically to the purchaser of such servers and will ultimately be borne by the private user who uses that equipment or to whom a reproduction service is provided.
When setting the private copying levy, Member States may take account of the fact that certain devices and media may be used for private copying in connection with cloud computing. However, they must ensure that the levy thus paid, in so far as it affects several devices and media in the single process of private copying, does not exceed the possible harm to the right holders.
Lastly, the Court held that Directive 2001/229 does not preclude national legislation that does not make the providers of cloud storage services subject to the payment of fair compensation. [Austro-Mechana v. Strato AG, C-433/20, decided on 24-3-2022]