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. 

Retrospective - Parody and Fair Use

Imitation is the greatest form of flattery. A phrase that resonates even today, despite being written by Charles Colton as far as the early 1800s, yet where does one draw the line between mere imitation and copying of another's work? This line is often tread when dealing with parody and copyright, as distinguishing when a work is copied for the sake of utilizing it as a basis for humor, and when it is used as a means for personal gain or notoriety. The issue was brought back into the court's determination in 1994, after the Court of Appeals did not rule on the matter due to division within the bench in Benny v Loew's.

The case of Campbell v Acuff-Rose Music dealt with a song by 2 Live Crew, a rap group, titled "Pretty Woman" which was claimed to being parody of the iconic 1960s song "Oh Pretty Woman" by Roy Orbison. Prior to releasing the song the members of 2 Live Crew sought permission from the publisher of the original to release their version of the song, which was promptly refused by the publisher. Regardless of the denial for permission 2 Live Crew released the song as a part of their album in 1989, still identifying Mr. Orbison and Acuff-Rose in the materials provided with the album. After over 250,000 copies were sold of their new album almost a year later, Acuff-Rose sued the band and their publisher for copyright infringement. The case went all the way to the US Supreme Court after several years of litigation.

What the court had to assess was whether 2 Live Crew's use of the song fell under fair use. The vocal point of the matter was well condensed by the court: "...the need simultaneously to protect copyrighted material and to allow others to build upon it". In this the court had to look at the four factors relating to fair use: the purpose and character of the use; the nature of the copyrighted work; the amount used; and the effect the use had on the potential market value of the original work.

The purpose and character of a work is essentially determining whether the new work adds anything new or substantial to the original, with a further purpose or difference character by altering the first; often mentioned as a 'transformative' work. The more transformative the new work is, the less likely it is that other factors, such as commercialism in this instance, would weigh against in. The court accepted that parody is indeed a transformative function in the creation of new works, and that it could fall under fair use. 

2 Live Crew showcasing just how amazing the 1990s were

The second factor was the assessment of the nature of the original work, meaning whether the original should be protected by copyright. The less 'value' a song has, the more likely it is that the work has not been infringed should it be parodied. The court accepted that Mr. Orbison's original song had value to it and thus could be infringed by 2 Live Crew should their infringement be significant enough. However the court did express that the factor "...is not much help in this case, or ever likely to help much in separating the fair use sheep from the infringing goats in a parody case, since parodies almost invariably copy publicly known, expressive works". The core of parody is the use of the original work as a means to deliver the humorous approach to the work itself. 

The third factor is one where the amount used, often referred to as substantiality, has to be looked at. Better expressed by Justice Story: "...the quantity and value of the materials used"; the quantity and quality of the material which was used in the creation of the parody. The court tried to approach the issue in recognizing its uniqueness to other instances of fair use: "Parody's humor, or in any event its comment, necessarily springs from recognizable allusion to its object through distorted imitation. Its art lies in the tension between a known original and its parodic twin. When parody takes aim at a particular original work, the parody must be able to "conjure up" at least enough of that original to make the object of its critical wit recognizable". The court laid down the foundations for a test to be used in future cases in determining instances of parody, where the original song should be recognizable in the parody, however not too much of the original can be copied. The court saw that 2 Live Crew had not taken a substantial amount of the song, having only used the recognizable bass riff from the beginning of the song and then creating something of their own through the rest of the song. Had they copied Mr. Orbison's song completely, both musically and lyrically, to a degree where it would be hard to distinguish the two, the copying could have been substantial.

Roy forgot he was indoors

The fourth and final factor is the potential impact on the original work's market. This effect has to be a negative one for there to be infringement, for example detracting from the sales of the original song or the image of the song through adverse conduct. The court did finally decide that 2 Live Crew's rap version of the song did not harm the market of the original, due to them belonging to completely different markets to begin with; the original to a more rock-oriented market, and the latter to a rap market. The court did however mention that a parody could potentially still cause harm to the original's market should the right circumstances befall it. A possible example of this is a similar song parodying another in a similar style, in this instance had 2 Live Crew made a rock version it could potentially cause harm. Any effects to that market would then count against finding the use as one that falls under fair use. 

Through Campbell v Acuff-Rose the court unanimously said that parody is a fully accepted form of fair use, should the actual copying of the work be done for a legitimate parody purpose. An artist cannot copy another's work merely in the guise of parodying the song, while still attempting to profit from the potential confusion as to the original song. As stated by Justice Kennedy in his separate opinion:

"Fair use is an affirmative defense, so doubts about whether a given use is fair should not be resolved in favor of the self proclaimed parodist.We should not make it easy for musicians to exploit existing works and then later claim that their rendition was a valuable commentary on the original... If we allow any weak transformation to qualify as parody, however, we weaken the protection of copyright. And underprotection of copyright disserves the goals of copyright just as much as overprotection, by reducing the financial incentive to create".

Thoughts on the Canadian Copyright Modernization Act 2012

In the wake of highly impacting cases in the Canadian courts, one of which was discussed on this very blog not too long ago, the Canadian Parliament enacted a piece of legislation aiming to bring the Canadian copyright laws to the 21st century; the Copyright Modernization Act 2012.

The worst copyright abusers of them all

The Act made several changes to the existing Copyright Act, adding a categorical exception for educational use, one which is absent from its Australian counterpart for example. This exception bares significant weight in today's world, providing a means for schools to give students copied materials from copyrighted works and to teach more efficiently and broadly. There clearly is no competing interest in doing so, and allows for both poorer schools and students alike to utilize materials otherwise not in their means to acquire.  Several copyright collectives opposed the education provisions, and much to their chagrin, they were enacted and the breadth of the provisions is quite substantial. The addition of this exception makes sense both from a legal and a human perspective. After the decision of Alberta (Education) v Canadian Copyright Licensing Agency, which extended the previous fair dealing exceptions to cover educational purposes through some clever legal argumentation, there seemed to be no reason to attempt to prevent this exception from being enacted. Also looking at things from the perspective of a potential parent some day, the freer use of material in an educational setting will enable future generations to learn more effectively.

The second exception added in the Act is one which is yet to see an equal in any legislature in the world; the use of copyrighted material in non-commercial content made by users. What the provision allowed was the creation of new works using older copyrighted material such as songs, videos etc, so long as the the use of those works is for non-commercial purposes. Often cited as the "mash-up" provision, it provides a great tool for users to create a variety of works without the fear of legal repercussions. Some questions do remain however:

What is a non-commercial purpose, and could the purpose of the work change over time? A perfect example of this would be videos on YouTube. One might initially make a hilarious video of your cat meowing along to a popular song or yourself hilariously singing along to one, for the purpose of sharing your pet's or your own escapades with that of a select few or just the comedy appreciating populous at large. When posting that video your intention was probably not commercial, or at least you didn't believe or think you'd make money off of that video. But what if it goes viral and all of a sudden you have the opportunity to make a few bucks? Would the purpose of that video change at that point and become a commercial one, even after it would explode in terms of viewership years later? This presents a scenario that would clearly be one for judges to look at pertaining to each given situation, but it does present some ambiguity as to the application of this particular exception.

High Schoolers mashing it up

Second is the effect that websites have as the sharing platforms for content, potentially impacting its commerciality. Lets look at another scenario: A new start-up website encourages and helps distribute disseminated content, using the Canadian provision as the means to allow users to do so. The users themselves don't get paid for the content, but the large amounts of shared content containing copyrighted works used in user-created works does spur and increase in website traffic, profiting the website and its owners. The purpose for the videos was not, much like in the YouTube example, commercial in itself, but purely one where other users wished to share their videos with other users in that platform. Would that purpose constitute as a commercial one if it profits the website? Would the encouragement to disseminate and share content change their purpose in itself? Again, questions like this would remain for the judiciary to decide should they become contested in the courts.

Overall the Copyright Modernization Act does expand and allow for better and wider uses of content, both on a personal user level and on a wider scale. It does address issues which have evolved through the use of mediums such as the Internet, but still some ambiguity remains. There have been no cases dealing with the shiny new provisions, but with content sharing being such a big part of modern Internet interaction, they undoubtedly will be litigated on in the future.