CJEU rules that private copying also applies in the cloud and warns against thinking that everything is communication to the public

Kat cloud ...

A few days ago the Court of Justice of the European Union (CJEU) rendered its judgment in C-433/20 Austro-Mechana, ruling that the notion of reproduction ‘on any medium’ extends to the cloud and, therefore, that private copying under Article 5(2)(b) of the InfoSoc Directive also applies in that context.

The judgment is in line with last year’s Opinion of Advocate General (AG) Hogan [here] and clarifies the treatment of private copying in the context of cloud computing, this being something that had been previously asked to the Court (in the context of the VCAST referral: here), but which the CJEU did not expressly address, preferring instead to focus on the qualification of providers of cloud-based storage facilities that give access to protected content to users based in territories for which no licence is in place.

Background

This referral from Austria was made in the context of litigation between copyright collecting society Austro-Mechana and cloud storage service provider Strato concerning the remuneration for private copying allegedly due by the latter.

Strato submitted that no remuneration was due since (1) it had already paid the required fee in Germany, where its servers are hosted and (2) users had also already paid the required compensation when purchasing the terminal equipment necessary to upload content to the cloud.

Following a dismissal of the action at first instance, an appeal was filed to the Higher Regional Court of Vienna. That court considered that, indeed, the earlier CJEU ruling in VCAST had not exhausted the question of private copying in the cloud. As such a referral to the CJEU appeared warranted to clarify:

• Whether the private copying exception and, with that, the fair compensation requirement apply in the context of reproductions made using cloud computing;
• Whether it is compatible with EU law to have a national law that excludes providers of cloud-based storage services from the obligation to pay the fair compensation referred to in Article 5(2) of the InfoSoc Directive.

The CJEU answered ‘yes’ to both questions above.

The judgment

Whether the private copying exception applies in the cloud

The Court noted at the outset that private copying relates to the right of reproduction which, in turn, is to receive broad interpretation also because of the InfoSoc Directive’s objective of guaranteeing a high level of protection of copyright.

Then the Court considered that the uploading of content to the cloud entails the undertaking of an act of reproduction (the same goes when that content is downloaded). As such, private copying under Article 5(2)(b) would find application in relation to the undertaking of such acts of reproduction, also because the concept of ‘any medium’ – this being an autonomous concept of EU law that is to receive uniform application across the EU – refers to “all media on which a protected work may be reproduced, including servers such as those used in cloud computing.”

This conclusion is also consistent with the consideration that the wording of Article 5(2)(b) is, on purpose, technologically neutral.

The Court also warranted that not everything is to be regarded as just and solely an act of communication to the public (🥲): the saving of a copy in the cloud is not the same thing as communicating such copy to the public. In this sense, one should not think that rulings like VCAST and Tom Kabinet [here] mean that the distinction between reproduction and communication to the public on the internet has been blurred up to the point that it no longer exists:

any communication that would result from the sharing of a work by the user of a cloudstorage service would constitute an act of exploitation that is distinct from the reproduction act referredto in Article 2(a) of Directive 2001/29, which may come within the scope of Article 3(1) of thatdirective, if the conditions for the application of that provision are satisfied.

Whether Member States can exclude providers of cloud-based storage services from the payment of fair compensation for private copying

Turning to the second question, the CJEU reflected on the rationale of the fair compensation requirement, that is to compensate rightholders for the harm suffered because of the unauthorized reproduction of their protected content (recitals 35 and 38 of the InfoSoc Directive).

While Member States are required to implement a system of fair compensation that compensates rightholders for the harm referred to above, they also enjoy broad discretion “to determine, inter alia, who must pay that compensation and to establish the form, detailed arrangements for collection and the level of that compensation”.

Ultimately, the compensation is owed by the private person who undertakes the reproduction of protected content – in the present circumstances, the private user of the cloud computing service.

It is only because of practical difficulties in identifying such private users and on consideration that the harm caused by each private use could be – when considered in isolation– minimal that Member States can introduce a private copying levy system “for the purposes of financing fair compensation chargeable not to the private persons concerned, but to those who have digital reproduction equipment, devices and media and who, on that basis, in law or in fact, make that equipment available to private users or provide copying services for them.”

Agreeing with AG Hogan, the Court concluded that:

in so far as the uploading and downloading of copyright-protected content during the use of storage services in the context of cloud computing maybe classified as a single process for the purposes of private copying, it is open to the Member States, in the light of the broad discretion which they enjoy […] to put in place a system in which fair compensation is paid solely in respect of the devices or media which form a necessary part of that process, provided that such compensation may reasonably be regarded as reflecting the possible harm to the copyright holder.

In that context, while it is open to the Member States to take account, when setting the private copying levy, of the fact that certain devices and media may be used for the purpose of private copying in connection with cloud computing, they must ensure that the levy thus paid, in so far as it affects several devices and media in that single process, does not exceed the possible harm to the rightholders as resulting from the act in question.

Comment

The judgment is in line with the (abundant) CJEU case law on private copying and the outcome, as such, is unsurprising.

The most notable part of the ruling is, therefore, the part in which the CJEU warns against conflating questions of reproduction and communication to the public: one thing is reproduction, another is communication.

... and the IPKat on a cloud

(artwork by Riana Harvey)

Over the past few years, a tendency has indeed emerged to consider communication to the public as a one-size-fits-all type of right. A recent example in this sense is Article 17 of the DSM Directive itself.

Article 17(2) provides that the authorization obtained by online content sharing service providers (OCSSPs) shall cover acts carried out by the OCSSP itself and acts of users of its service. 

Based on how Article 17(2) is formulated, the authorization that OCSSPs are required to seek from concerned rightholders shall encompass at least the activities described in Article 17(1) – that is the storage (this being inherent to the notion of OCSSP) and communication to the public of works and/or making available to the public of protected subject-matter. The authorization that an OCSSP is to seek from relevant rightholders shall cover acts of its users that fall under the scope of Article 3 of the InfoSoc Directive insofar as such users do not act on a commercial basis or where their activity does not generate significant revenues.

The doing of restricted acts other than those under Article 3 of the InfoSoc Directive, e.g., acts of reproduction engaged in uploading processes, are not expressly considered by Article 17(2). This said, in order not to deprive Article 17(2) of its effet utile, the authorization obtained by an OCSSP must also cover the acts of reproduction performed by users when they upload the content that an OCSSP subsequently stores and makes available to the public, insofar as such acts are functional and propaedeutic to the doing of the acts under Article 3 of the InfoSoc Directive.

The CJEU judgment in Austra-Mechana is, in conclusion, a welcome reminder indeed that not everything is communication to the public and that different acts may fall under the scope of application of different exclusive rights. Simple but ... seemingly not a given!