Executive summary

On 24 March 2022 the Court of Justice of the European Union issued a judgment in Austro-Mechana v Strato AG case (C-433/20).¹ The Court held that:

1. the private copying exception applies to copies of works on a server in storage space made available to a user by the provider of a cloud computing service;
2. such exception may apply on condition that the copyrights holder receives fair compensation;
3. it is within the Member States’ discretion to establish a system for the purpose of ensuring fair compensation;
4. fair compensation need not be collected from providers of online cloud storage services;
5. the system of fair compensation must ensure not only its efficiency but also that fair compensation is linked to the harm resulting from the reproduction for private use.

The Court correctly pointed out that fair use reproduction, which does not make the work available to the public, also includes storing by cloud computing service. The Court also rightly underlined the need to maintain balance between different interests and to take into account the actual harm of copyrights holders. The ruling may stop attempts to further expand the catalog of reproduction levy.

Background

Austro-Mechana is an Austrian copyright collecting society which exercises the legal rights to remuneration that is due under the private copying exception. It sued Strato AG – a German company providing a service called ‘HiDrive’ (virtual cloud storage to store photos, music and films in one central location) – demanding payment of the aforementioned remuneration.

The copyright collecting society claimed that the remuneration for exploitation of the right of reproduction on storage media is payable where storage media of any kind are, in the course of a commercial activity, ‘placed on the market’ – by whatever means and in whatever form – within national territory, including in situations involving the provision of cloud-based storage space.

Strato argued that the applicable version of the copyright law (Paragraph 42b(1) of the Austrian Urheberrechtsgesetz) does not provide for remuneration for cloud services and that the legislature, being cognizant of the technical possibilities available, made a deliberate choice not to take up that option. Moreover, the German company stated that Austrian users had already paid a copyright fee for the devices, without which content cannot even be uploaded to the Cloud.

The Austrian Court of First Instance (Handelsgericht Wien) dismissed the claim on the ground that Strato does not supply storage media to its customers but provides them with an online storage service.

Hearing the case on appeal, the Austrian Appeal Court referred to the Court of Justice the question of whether the storage of content in the context of cloud computing falls within the scope of the private copying exception provided for in Article 5(2)(b) of Directive 2001/29 and whether that provision precludes legislation that implements the private copying 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.

Judgment

The Court of Justice ruled that the private copying exception applies to copies of works on a server in storage space made available to a user by the provider of a cloud computing service. In particular, it stressed that Directive 2001/29 provides that the private copying exception applies to reproductions on any medium with (i) the saving of a copy of a work in storage space in the cloud constituting a reproduction of that work, and (ii) ‘any medium’ referring to all media on which a protected work may be reproduced, including the servers used in cloud computing (the fact that the server belongs to a third party is not decisive).

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.

The Court of Justice noted, however, that the Member States are not obliged to make the providers of cloud storage services subject to the payment of fair compensation under the above-mentioned exception, in so far as the payment of fair compensation to rightholders is provided for in some other way.

As the rule, the person carrying out private copying should finance the compensation paid to the holder.

The Court upheld earlier case-law that, due to difficulties in identifying private users, it is within the Member States’ discretion to establish a system for the purpose of financing the compensation chargeable not to private persons, but e.g. to those who make reproduction equipment available to such users or provide copying services for them.

Difficulties may also arise from the dematerialized nature of cloud computing services and the possibility that the service may be offered from Member States other than the one concerned or from third countries. As long as the compensation is collected and that the persons responsible for payment have a right to reimbursement of that levy in cases where it is not due, it is therefore not necessary for fair compensation to be collected from providers of online cloud storage services.

The Court underlined that compensation as well as the level of compensation must be linked to the harm resulting for the rightholders from the making of copies for private use. While it is open to the Member States to take account of the fact that certain devices and media may be used for the purpose of private copying in connection with cloud computing, they must ensure that the levy thus paid, in so far as it affects several devices and media in that single process, does not exceed the possible harm to the rightholders resulting from the act in question, as stated in recital 35 of Directive 2001/29.

1. Judgment of 24 Mar 2022, C-433/20, Austro-Mechana Gesellschaft zur Wahrnehmung mechanisch-musikalischer Urheberrechte Gesellschaft mbH v Strato AG; ECLI:EU:C:2022:217