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CJEU: Storage of private copies in the cloud triggers copyright levies

Rights holders of creative works have rights under European copyright law if copies of their work are stored in the cloud for private use, the Court of Justice of the European Union (CJEU) has ruled in an Austrian case.

In these cases, copyright levies may be charged by the cloud service provider, the CJEU said.

Under European copyright law, only the persons holding the rights to a work - for example to a piece of music or a movie - may create a copy of it. There are some exceptions to this general rule. For instance, the private copying exception under Article 5 of the EU's InfoSoc Directive provides that individuals may save copies of copyrighted works on "any medium" as long as it is for private use only.

If a member state chooses to implement this exception into national law, it has to make sure that the rightsholders receive "fair remuneration" for the copying of their works. In Austria, this compensation is charged via a storage media levy, which is charged when someone buys a physical data carrier – for example hard disks or smartphones. However, the CJEU has ruled in a recent judgment that copies of works stored in a cloud are also subject to the private copying exception.

Dr Nils Rauer, an expert in copyright at Pinsent Masons, said the decision of the CJEU does not come as a surprise: "The application of the copying exception cannot depend on which technical means are used to produce a private copy. The European copyright law is generally agnostic to technological choices and developments. What is decisive is the fact that the work is copied and that such copying can be deemed 'private' due to the specific circumstances."

The case to which the CJEU judgment refers was brought by the Austrian collecting society Austro-Mechana against the German cloud provider Strato. Austro Mechana collects the storage media levy that is due under the private copying exception in Austria and distributes it to rights holders.

In the case now decided by the CJEU, Austro Mechana had demanded payment of a storage media levy from Strato AG for offering cloud storage space. Strato refused the payment on the grounds that it did not sell physical storage media, but only offered storage space on German servers. The Handelsgericht Wien (Commercial Court, Vienna, Austria) dismissed the claim "on the ground that Strato does not supply storage media to its customers, but provides them with an online storage service."

The court of appeal, the Oberlandesgericht Wien (Higher Regional Court, Vienna), asked the CJEU for an interpretation of the InfoSoc directive. It wanted to know whether the private copying exception, which allow member states to impose their own rules on remuneration for the private storage of works, also apply to works stored in the cloud. The CJEU decided that it does and highlighted that if a member state decides to implement the private copying exception - as Austria did - it is required to provide for a system of fair compensation to the rightholders.

The CJEU explained that, in principle, the person carrying out the private copying - in this case the user of the cloud service - has to pay the compensation. However, in circumstances where it is difficult to identify the specific user, the member state may charge a private copying levy from the provider of the servers used for the cloud service. Economically, such a levy would be passed on to the cloud service user anyway. "Thus the financial burden ultimately lies with the user as intended by the law", Dr. Rauer said.

"It is certainly true that member states enjoy some discretion as to how copyright levies are collected," Emmanuel Gougé, a Paris-based IP expert at Pinsent Masons, said. "As long as it is safeguarded that the fair remuneration is ultimately paid by the person making use of the work, the actual process of collecting the money may differ in terms of who actually pays the levies to the copyright collecting society."

The judge explicitly stated that levies may not be collected twice from different persons involved in the very same copying procedure. "Despite the obvious fact that double-charging is not allowed, organising this might be a little bit tricky," Dr Rauer said. "It might not be transparent to the copyright collecting society whether various service providers are involved in the same activity or not. So, whilst the CJEU’s message is clear and correct, the implementation might need some thought in order to always fit."

Austria is not the only EU member state where the scope of rules on private copying fees is being called into question. The French private copying levy recently caused a debate during the adoption of the law on the reduction of the environmental footprint of digital technology. There had been suggestions that the levy should also apply to reconditioned cell phones, but this amendment was eventually deleted in the version of the law as enacted.

"The law also provides that the French government shall submit to the parliament a report on private copy levies no later than 31 December 2021 - which has not been published yet - and more specifically, a study of the economic impact of private copy levies with a focus on second-hand recording media and with a suggestion of different scenarios for the possible evolution of this remuneration", Gougé said. This second study is due to be published by 31 December 2022.

Regarding cloud storage, the SACEM (French copyright management society) had urged the Senate to extend the private copy levy to cloud services back in 2015, but without success.

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