Data in the Clouds - CJEU Accepts the Use of the Private Copying Exception in Relation to Cloud Storage

The use of cloud storage is near ubiquitous these days, with both companies and consumers using it at increasing amounts to store both their private data and even multimedia content, making it accessible without having all of the data copied onto a given device at all times. However, even though it's not something that most people will consider at the time (or at all), the copying of copyright protected content even onto cloud storage could potentially infringe on the rights of rightsholders, which could result in payments being due for the same. With that in mind as a starting point, could you use a private copying exception to avoid liability for such copying? Luckily, the CJEU has recently handed down its decision on the matter, clarifying the position for current and prospective copiers alike.

The case of Austro-Mechana Gesellschaft zur Wahrnehmung mechanisch-musikalischer Urheberrechte GmbH v Strato AG concerned Austro-Mechana, who is a copyright collecting society in Austria acting in a fiduciary capacity for the interests of its members and asserting the legal rights they have in their works on their behalf. Austro-Mechana made an application in court for the invoicing and taking payment for "storage media of any kind" from Strato, as they provide their customers a service called 'HiDrive', which allows for the storage of files through cloud computing. Strato contested this and the matter progressed through the Austrian courts, ultimately ending up with the CJEU.

The CJEU were faced with two questions on the matter, with the first one asking "...whether Article 5(2)(b) of Directive 2001/29 must be interpreted as meaning that the expression ‘reproductions on any medium’ referred to in that provision covers the saving, for private purposes, of copies of works protected by copyright on a server on which storage space is made available to a user by the provider of a cloud computing service". In short, does the exception under Article 5(2) include private copying onto cloud storage. 

The first consideration, according to the CJEU, was whether a 'reproduction' could include copying onto cloud storage. The Directive and its recitals make it amply clear that the phrase should be interpreted very broadly. The court noted that copying onto cloud storage includes both the reproduction through the uploading of a file for storage, and when a given file is accessed by the user subsequently and downloaded into any device. This means that copying onto cloud storage indeed constitutes 'reproduction' under Article 5(2). 

The second consideration is whether 'any medium' covers the provision of cloud computing servers for the storage of files in the cloud. In the broadest sense the phrase includes all media from which a protected work could be copied from, which includes cloud computing. 

Additionally, the Directive's purpose is to create a general and flexible framework at EU level in order to foster the development of the information society and to create new ways to exploit protected works. This is underpinned by technological neutrality. The same applies to the protection of copyright protected works, and the legislation is intended to not become obsolete and to apply to as much of new technology in the future as possible. 

The CJEU therefore concluded that the concept of ‘any medium’ includes a server on which storage space has been made available to a user by the provider of a cloud computing service. 

In summary, the CJEU set out their answer to the first question that "...Article 5(2)(b)… must be interpreted as meaning that the expression ‘reproductions on any medium’... covers the saving, for private purposes, of copies of works protected by copyright on a server on which storage space is made available to a user by the provider of a cloud computing service".

The second question posed to the CJEU asked "...whether Article 5(2)(b)… must be interpreted as precluding national legislation that has transposed the exception... and that does not make the providers of storage services in the context of cloud computing subject to the payment of fair compensation in respect of the unauthorised saving of copies of copyright-protected works by natural persons, who are users of those services, for private use and for ends that are neither directly nor indirectly commercial". In short, whether any national legislation that has transposes the exception, and doesn't impose a payment of royalties for the unauthorized copies, is excluded in relation to non-commercial private copying. 

This expressly refers to Article 2 of the Directive which provides an exception to reproductions made by people for a non-commercial purpose, provided that the rightsholder is fairly compensated. 

The CJEU notes that when Member States decide to transpose the exception to their national legislative framework they are required to provide for the payment of fair compensation to rightholders. They also note that the copying of copyright protected works by individuals can cause harm to rightsholders, which the compensation is attempting to remedy. 

As was already answered above, the phrase 'reproductions on any medium' includes cloud computing, but Member States still have wide discretion on the compensation of rightsholders in relation to copying that is covered by the exception. This includes who pays and how the monies are collected. Additionally, case law has set out that "...in principle, for the person carrying out private copying to make good the harm connected with that copying by financing the compensation that will be paid to the copyright holder", which in this case would be the users of the cloud storage systems.

However, there are practical difficulties in identifying individual users and obliging them to pay any requisite fees, especially since the potential harm suffered may be minimal and may therefore not give rise to an obligation for payment, so Member States can impose a private copying levy to cover this more broadly. Even so, this will have an impact on both the users and the fees for the cloud storage services they may be purchasing, impacting the 'fair balance' requirement as set out in the Directive. This is left to the national courts and the Member States to ensure it is in place. 

The CJEU therefore concluded that the answer to the second question is that "Article 5(2)(b)... must be interpreted as not precluding national legislation that has transposed the exception... and that does not make the providers of storage services in the context of cloud computing subject to the payment of fair compensation in respect of the unauthorised saving of copies of copyright-protected works by natural persons, who are users of those services, for private use and for ends that are neither directly nor indirectly commercial, in so far as that legislation provides for the payment of fair compensation to the rightholders". 

The decision gets cloud storage providers off the hook for any compensation that might be payable to rightsholders, and it is up to Member States to impose a levy, if any, for such copying by private individuals. This writer has never heard of such levies even being considered, and any such levies could deter innovation in this space due to the public's lack of desire for its implementation due to costs. If you are not a consumer of cloud storage services, you would undoubtedly not be happy to pay for them either. Nevertheless, this is the CJEU's proposed position which leaves the option very much on the table.