In proceedings between an Austrian copyright collecting society, Austro-Mechana, and a German company, Strato AG, that provides cloud data storage services, Austro-Mechana issued proceedings in the Austrian courts for an order allowing it to invoice for, and subsequently take payment in settlement of, the remuneration it said was owing by Strato for the exploitation of the copyright works that were being copied to and stored on the cloud by Strato’s customers. Strato denied infringement and argued that cloud-based storage services and physical storage media were not comparable. It also said that its customers had already paid a copyright fee for their devices without which content could not be uploaded to the cloud in the first place.

The case was dismissed at first instance and Austro-Mechana appealed. The Austrian appeal court said that the question of whether Article 5(2)(b) of the Copyright Directive, which provides for the private copying exception, covers the storage of copyright-protected content in the cloud was not entirely clear. It has therefore asked the CJEU two questions concerning Article 5(2)(b), which provides that “reproductions on any medium” by a natural person for private use and for ends that are neither directly nor indirectly commercial can be made without breaching the copyright holder’s reproduction right under Article 2, as long as the copyright holder receives “fair compensation”. The Austrian court asked:

1. whether the expression “on any medium” in Article 5(2)(b) includes reproductions made by customers for private use on cloud computing services provided by a third party; and
2. if so, whether the author of the copyright material is entitled to equitable remuneration for exploitation of the right of reproduction on storage media where the copyright work in question, which has been broadcast, made available to the public or recorded on a storage medium produced for a commercial purpose, is likely to be reproduced for personal/private use by being stored on the cloud.

The CJEU held that the saving of a copy of a work in storage space in the cloud constitutes a “reproduction” of that work under the 2001 Directive. The upload of a work to the cloud consists in storing a copy of it.

As for the meaning of “any medium”, the CJEU said that this refers to all the media on which a protected work can be reproduced, including servers used in cloud computing. Therefore, the fact that the server belongs to a third party is not decisive. Accordingly, the private copying exception can apply to reproductions made by a natural person with the aid of a device belonging to a third party. In addition, one of the objectives of the 2001 Directive is to prevent copyright protection in the EU from becoming outdated or obsolete as a result of technological developments. That objective would be undermined if the exceptions and limitations to copyright protection were interpreted in such a way as to exclude digital media and cloud computing services.

Consequently, the concept of “any medium” covers a server on which storage space is made available to a user by the provider of a cloud computing service.

As for whether providers of cloud storage services are subject to the payment of fair compensation, the CJEU said that, as EU law currently stands, this is for the national legislature to determine under its system of fair compensation. Member States that implement the private copying exception are required to provide for a system of fair compensation to compensate rights holders.

As for who is liable to pay fair compensation, the CJEU said that, in principle, the person carrying out the private copying, i.e., the user of cloud computing storage services, is liable.

However, where it is not practical to identify the end users, Member States can introduce a private copying levy chargeable to the producer or importer of the servers used to provide cloud computing services. That levy will be passed on to the purchaser of such servers and will ultimately be borne by the private end user who uses that equipment or to whom a reproduction service is provided.

Further, the CJEU said, when setting the private copying levy, Member States can take account of the fact that certain devices and media may be used for private copying in connection with cloud computing, but they must ensure that the levy paid does not exceed the possible harm to the rights holders.

Therefore, the CJEU concluded, the 2001 Directive does not preclude Member States from not making providers of cloud storage services subject to the payment of fair compensation, provided that the legislation allows for the payment of fair compensation in some other way. (Case C-433/20 Austro-Mechana Gesellschaft zur Wahrnehmung mechanisch-musikalischer Urheberrechte Gesellschaft mbH v Strato AG EU:C:2022:217 (24 March 2022) — to read the judgment in full, click here).