Facts

The request for a preliminary ruling on the interpretation of the InfoSoc Directive has been made in proceedings between Austro-Mechana, the Austrian collective management organization for musical works, and Strato AG, a provider of cloud storage services, concerning the private copy levies payable by Strato in respect of the provision of those services, under Austrian law. Austro-Mechana issued proceedings in the Austrian courts for an order allowing it to take payment from Strato as compensation for the works that were being copied to and stored on the cloud by Strato’s non-commercial customers. Strato denied infringement and argued that cloud storage services and physical storage media were not comparable. It also said that its customers had already paid a copyright fee for their devices used to upload content on the cloud.

The Austrian court referred two questions to the CJEU. First, on the scope of the private copying exception in article 5(2)(b) of the InfoSoc Directive and its applicability to providers of cloud computing services, and second, on the requirement for member states to provide a fair compensation scheme applying to cloud storage when they implement the private copying exception.

CJEU’s decision

First question. The CJEU first held 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 CJEU noted that the concept of “reproduction” must be construed broadly and covers saving a copy of a work in storage space made available to a user on the cloud. Additionally, the words “any medium” refer to any media on which a protected work may be reproduced, including servers such as those used in cloud computing. Such interpretation is consistent with the objective that copyright protection in the European Union shall not become outdated and obsolete as a result of technological development. There is accordingly no distinction between the reproduction of a protected work being carried out on a server or being made on a physical recording medium.

Second question. The CJEU confirmed that the private copying exception is made conditional on providing for a system of fair compensation intended to compensate rightsholders, but that member states enjoy broad discretion in determining who must pay that compensation, in what form and according to which level.

The court held that it is, in principle, for the user of cloud services to finance the compensation paid to the copyright holders, but that a system whereby a levy was raised against those who make digital reproduction equipment (including cloud-based servers) available to private users or provide copying services, falls within the discretion allowed to the national legislature for defining the various elements of the fair compensation system.

Impact on tech and media companies

While this decision specifically focuses on cloud service providers, tech and social media companies that facilitate reproduction of protected works by their private users should be aware of the CJEU’s broad interpretation of the private copying exception and monitor the response of any relevant collecting societies in the jurisdictions in which they operate.

As EU member states have discretion in terms of implementing and defining the nature of such fair compensation schemes, which can vary significantly, businesses offering online content storage should be mindful of the domicile of their customers, and – most importantly – of the location of their servers, and the compensation regimes applicable in those countries.

Client Alert 2022-382