the matter at hand
Austro-Mechana is a copyright collecting society which exercises the right to the remuneration that is due under Paragraph 42b(1) of the Law on Copyright in Austria; the ‘private copy levy’. Austro-Mechana applied to the Handelsgericht Wien (Commercial Court, Vienna, Austria) for an order to allow it to take payment of remuneration in respect of ‘storage media of any kind’ against the German hosting provider Strato, 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. Strato stated that it had already paid the required private copy levy in Germany, in which its servers are hosted, that fee having been incorporated in the price of the servers by their manufacturer or importer. Strato added that users in Austria had also already paid a private copy levy for the making of private copies on the terminal equipment necessary to upload content to the cloud.
By judgment of 25 February 2020, the Handelsgericht Wien (Commercial Court, Vienna) dismissed Austro-Mechana’s application, holding that Strato does not make storage media available to its customers, but provides them with an online storage service. Austro-Mechana appealed against that judgment to the Oberlandesgericht Wien (Higher Regional Court, Vienna, Austria), which observes, referring to the judgment of 29 November 2017, VCAST (C‑265/16), that it is not entirely clear whether the storage of content in the context of cloud computing comes within the scope of Article 5(2)(b) of Directive 2001/29. In those circumstances, the Oberlandesgericht Wien, (Higher Regional Court, Vienna) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
“Is the expression “on any medium” in Article 5(2)(b) of Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society 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”)?
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 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?’”
the judgment of the ecj
By its first question, the referring court asks, in essence, whether Article 5(2)(b) of The Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society 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.
The ECJ, firstly, considers that article 5(2)(b) of the Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society allows Member States to make exceptions to the reproduction right for private, non-commercial use, with fair compensation to rightholders (Paragraph 15). The ECJ continues to conclude that the term 'reproduction' should be interpreted broadly to ensure legal certainty and align with the Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society's objective of providing a high level of protection for rightsholders (Paragraph 16). Storing a copy of a work in a cloud service constitutes a 'reproduction' because it involves making a copy of the work (Paragraph 17). The concept of 'any medium' is not specifically defined in the Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society but should be interpreted broadly to include servers used in cloud computing (Paragraphs 19 and 20). Refering to Nederlands Uitgeversverbond and Groep Algemene Uitgevers (C‑263/18), the ECJ thus considers that his interpretation aligns with the Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society's goal of creating a flexible framework to adapt to technological developments in the information society (Paragraph 25).The interpretation should not differentiate between saving copies on cloud servers and physical recording media (Paragraph 29). The argument that cloud storage is not separable from possible acts of communication is distinguished from previous cases, and communication is considered a distinct act, as such was also established in the ECJ’s VCAST (C‑265/16) ruling (Paragraph 31).
The ECJ rephrases the second question as “[must] article 5(2)(b) of The Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society be interpreted as precluding national legislation that has transposed the exception referred to in that provision 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”.
It is the ECJ’s ruling that article 5(2)(b) of the Copyright Direct permits Member States to create exceptions for private, non-commercial reproductions, contingent on rightholders receiving fair compensation (Paragraph 37). National laws implementing this exception must ensure the effective recovery of this compensation, as copying by natural persons for private use without rightholders' consent is deemed potentially harmful (Paragraph 39). This interpretation covers saving copies of copyrighted works in cloud storage for private use, aligning with the Copyright DirectiveDirective 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society's objective of fostering a fair balance between rightholders and users (Paragraph 40). Member States have discretion in establishing the details of fair compensation systems (Paragraphs 41 and 42), but any levies should not exceed the potential harm to rightholders (Paragraph 50).
Furthermore, the private copying levy may ultimately be borne by the private user, but Member States can impose it on equipment providers to address practical difficulties in identifying users (Paragraph 48). The compensation system must be justified by these practical difficulties, and the levy system should not exceed the possible harm to rightholders, ensuring a fair balance between their interests and those of users (Paragraph 53). This comprehensive approach allows for flexibility in implementing the private copying exception, particularly in the dynamic context of cloud computing services, provided that the fundamental principle of fair compensation and the safeguarding of rightholders' rights are upheld throughout the process (Paragraph 54).