“Private copying” exception: applicability to cloud storage

In its Judgment of 24 March 2022, the Court of Justice of the European Union (“CJEU”) ruled in Case C-433/20 on the reference for a preliminary ruling made by the Oberlandesgericht Wien (Higher Regional Court of Vienna, Austria) in the proceedings between Austro-Mechana Gesellschaft zur Wahrnehmung mechanisch-musikalischer Urheberrechte Gesellschaft mbH – a copyright collecting society exercising statutory rights to remuneration under the “private copying” exception – and Strato AG, a provider of cloud storage services.

In particular, in order to resolve the dispute, the Vienna Higher Regional Court asked the Court of Justice whether the storage of content in the context of cloud computing services falls within the exception for “private copying” referred to in Article 5(2)(b) of Directive 2001/29/EC.

This exception allows the private reproduction of intellectual works for personal use, without financial gain, provided that authors and original producers, performers and their assignees are entitled to fair compensation for the private reproduction of their works and/or performances. Fair compensation which, in practical terms, consists of part of the final price of blank media, recording equipment and memories.

Article 5(2)(b) of Directive 2001/29/EC provides that the “private copying” exception applies to “reproductions on any medium made by a natural person for private use and for ends that are neither directly nor indirectly commercial, on condition that the rightholders receive fair compensation […]”.

In this regard, the Court, considering that the notion of “reproduction” must be understood in a broad sense, stated that the uploading of a work to a storage space in the cloud implies, at a technical level, the making of a reproduction of that work: this operation consists, in fact, in the storage in the cloud of a copy of the work, of which, moreover, further reproductions may be made, in particular by carrying out a downloading operation. The making of a back-up copy of a work in a storage space made available to a user in the context of a cloud computing service may therefore constitute a reproduction of that work.

Concerning the notion of “any medium”, the Court focused on the broad meaning of such a notion, which may certainly include all the media on which the protected material may be reproduced, including servers such as those used by cloud computing services, with the fact that the storage space is made available to a user on a server belonging to a third party not being the determining factor. The above considerations confirm an interpretation consistent with the principle of technological neutrality, in order to promote the development of the information society and to ensure the protection of copyright and related rights in the context of technological developments.

Lastly, regarding making providers of cloud storage services subject to the payment of fair compensation, the CJEU noted that it is for the Member States, which have wide discretionary powers, to determine who must pay such compensation, as well as the form, method and level of said compensation. Although in principle it is up to the person who actually makes the “private copy” to compensate the author for the reproduction, the CJEU considered that there are situations in which it is not easy to identify the end user directly. For this reason, Member States are allowed to impose a “private copying” levy on those who have digital reproduction equipment, devices and media and who make such equipment available to private individuals or provide them with a reproduction service.

This systemic implementation of balance between the interests of the holders of the exclusive reproduction right and those of the users of the protected material considers that the shift of the burden of the levy for “private copying” is ultimately borne economically by the end user who pays the price, and it is in line with the principle of technological neutrality.

The above, however, always ensuring that the levy paid, to the extent that it is collected on several devices and media, does not exceed the potential harm suffered by rightholders.