AG Hogan advises CJEU to rule that private copying exception also applies in the cloud but that an additional private copying levy might be unavailable

Kat cloud

Does the private copying exception and, with it, the fair compensation requirement under Article 5(2)(b) of the InfoSoc Directive apply to reproductions carried out by using cloud-based recording services? If so, can rightholders request the providers of such a service to impose a levy even if their customers (natural persons) have already paid one when purchasing the devices (eg, computers, smartphones, tablets) subsequently used to undertake acts of reproduction covered by that provision?

These, in essence, are the issues that the Court of Justice of the European Union (CJEU) has been called upon to decide in Austro-Mechana, C-433/20, a pending referral from Austria.

IPKat readers interested in all things private copying (who’s not …) will be aware that private copying in the cloud is not an entirely novel issue for the CJEU.

A few years ago, in fact, in VCAST, C-265/16 [here] the Court was asked questions relating to reproductions made through cloud-based recording services. Eventually, in that referral from Italy the focus shifted to consideration of the very lawfulness of VCAST’s services in the first place: in lieu of reproduction aspects, the CJEU developed an analysis focused on the interplay between the territoriality of copyright and propaedeutic activities to customers’ acts of reproduction, notably VCAST’s own unlicensed acts of communication/making available to the public. Ultimately, the CJEU ruled that, lacking a licence to communicate/make available to the public TV programmes outside of the relevant territory (in that case: Italy), the provider of a cloud-based recording service would be in itself infringing copyright and related rights.

In Austro-Mechana, the question is once again one of private copying in the cloud. More specifically: does the expression “on any medium” in Article 5(2)(b) of the InfoSoc Directive also include reproductions made on the servers of a cloud computing service? If so, what payment (if any) is due to the concerned rightholder?

Earlier this week, Advocate General (AG) Hogan delivered his Opinion, in which – unsurprisingly – he answered the first question in the affirmative and advised the Court to rule that, in relation to the second question, a separate/additional fair compensation (eg, a levy) may not be payable if the a Member State has already opted to apply a levy system in respect of the devices/media through which the cloud-based service is accessed and the natural person is able to undertake the reproduction at issue.

Let’s see a bit more in detail how AG Hogan reasoned.

Applicability of private copying to cloud-based reproductions

In relation to the question whether private copying applies to reproductions in the cloud, the AG referred to earlier CJEU case law to determine the freedom that Member States enjoy if they decide to transpose Article 5(2)(b) into their own laws.

While recalling that AG Sharpston in VG Wort, C-457/11 to 460/11 supported the conclusion that Member States may opt to have a narrower private copying exception than what is allowed at the EU level, he also noted that in Copydan Båndkopi, C-463/12 the CJEU held that Member States are prohibited from unduly discriminating between different economic operators and users.

All this means that, yes, “Member States do enjoy broad discretion in respect of the manner in which they avail of the Article 5(2)(b) exception in their national laws”. However, they “cannot legislate for this purpose in a manner which would contradict or would be otherwise at variance with the underlying purpose of Directive 2001/29 itself. It would, for example, be important to stress that Member States who elect to avail of the Article 5(2)(b) exception must do so in a technologically neutral fashion.”

While there is a principle of strict interpretation of copyright exceptions, the InfoSoc Directive also seeks to tackle technological advancement and thus avoid that copyright rules become obsolete (see recital 31 of the InfoSoc Directive).

In light of both a literal and teleological interpretation of Article 5(2)(b), it follows that its language, which refers to reproductions “on any medium”, does not allow Member States to unduly discriminate between different types of goods and services:

[T]he exception [in Article 5(2)(b) of the InfoSoc Directive] is not restricted to reproductions on physical media or substrate or, indeed, in an analogue or non-digital form. The exception thus covers, inter alia, reproductions [from lawful sources only: see Aci Adam, C-435/12] in both analogue and digital form and, reproductions on a physical substrate such as paper or CDs/DVDs or in a somewhat more intangible media/substrate such as in the case in the main proceedings storage space or capacity made available in the cloud by an internet service provider. [para 35]

AG Hogan

It follows that the private copying exception may extend to a situation like the one at issue in the background proceedings. In any case, as it is already clear from VCAST, such an exception does only cover acts of reproduction made at the conditions indicated in Article 5(2)(b) and does not extend to the doing of other acts restricted by copyright, including communication/making available to the public of protected content.

Fair compensation: what for?

The AG turned to consideration of the second question (payment of fair compensation) and explained how this question resulted from uncertainties relating to the interpretation of the wording of the Austrian private copying exception.

Having recalled the principles first established in Padawan, C-467/08, the AG emphasized that:

• Member States “enjoy broad discretion in regard to the parameters” of fair compensation under national law;
• Although current systems of compensation are “necessarily imprecise”, fairness of the compensation entails that rightholder are not over or under compensated for the harm suffered due to the unauthorized reproduction of their content;
• Recital 35 in the preamble to the InfoSoc Directive inter alia indicates that, where rightholders have already received payment “in some other form, for instance, as part of a licence levy”, no specific or separate payment may be due;
• The three-step test in Article 5(5) also serves to identify what compensation is to be regarded as being fair.

Consumers who access a cloud-based recording service have already paid a levy to undertake acts of private copying when they purchased devices and media (in Austria, however, only the latter come with a levy) with copying and storage capacity.

So the question becomes: would a separate, additional levy be justified? 

The AG warned against determinations made without sufficient empirical evidence of further harm and concluded that [paras 72-73]:

[A] separate levy or fee is not payable in respect of the reproduction by a natural person for their own personal purposes based on cloud computing services provided by a third party provided that the levies paid in respect of devices/media in the Member State in question also reflects the harm caused to the rightholder by such reproduction. If a Member State has, in fact, elected to provide for a levy system in respect of devices/media, the referring court is in principle entitled to assume that this in itself constitutes ‘fair compensation’ in the sense of Article 5(2)(b) of Directive 2001/29, unless the rightholder (or their representative) can clearly demonstrate that such payment would in the circumstances of the case at hand be inadequate.

This assessment – which requires considerable economic expertise and a knowledge of a range of industries – is one which must be carried out at national level by the referring court.

Comment

The AG Opinion in this case reaches a sensible conclusion, which is in line with (abundant) CJEU private copying jurisprudence. It is likely that the CJEU will follow the core of his analysis and recommendations.

AG Hogan’s final remarks regarding the need to provide robust evidence of harm are also nothing new (let’s for instance think of the Vitorino Report). They nonetheless represent a welcome reminder. Too often compensation levels for private copying (or lack thereof: let’s for instance think about the UK private copying exception and its fate) have been and still are determined without the required degree of transparency (for consumers) and consistency across different sectors and territories.