The storage in the cloud of a copy of a protected work is tantamount to the reproduction of that work for copyright purposes, the Court of Justice of the European Union has recently affirmed. Should such act benefit from the ‘private copying exception’ in terms of EU and national law, then what is crucial is that right holders receive fair compensation, irrespective as to who is made liable to affect such payment.
The EU’s copyright and related rights directive seeks to harmonise key rights granted to authors and neighbouring right holders. These rights relate mainly to the reproduction right, the right of communication to the public and the distribution right. This same directive also sets out an exhaustive list of exceptions and limitations to such rights. This, with the aim of facilitating the use of protected content in specific circumstances.
Among others, member states are given the option to make provision for an exception or limitation to the exclusive right of authors to authorise or prohibit the reproduction of their works. Such an exception applies to reproductions on any medium made by a natural person for private use and for purposes that are neither directly nor indirectly commercial, provided that the right holders receive fair compensation. Such compensation must take into account the application or non-application of certain technological measures to the work in question, or the subject matter concerned.
The facts of this case were briefly as follows. A copyright- collecting society, which exercises the legal rights to the remuneration that is due to right holders in terms of the private copying exception referred to above, brought a claim for payment of such remuneration before the Austrian national courts against a provider of cloud storage services.
The intellectual property rights regime is often a delicate balancing act between the rights of right holders and those of society itself
The court dismissed the claim on the ground that the service provider does not supply storage media to its customers but provides them with an online storage service. Upon appeal, the appellate court filed a preliminary reference before the CJEU requesting guidance as to whether the storage of content in the context of cloud computing comes within the scope of the private copying exception provided for by the EU directive.
The Court of Justice observed that the EU directive provides that the private copying exception applies to reproductions on any medium. Interpreting this exception within the context of copies of works in the cloud, the court maintained that the saving of a copy of a work in storage space in the cloud does constitute a reproduction of that work since this is tantamount to storing a copy of the relevant work. The use of the words ‘any medium’ as found in the directive implies that all of the media on which a protected work may be reproduced are to be taken into consideration, including the servers used in cloud computing. The fact that the server belongs to a third party is irrelevant.
The court proceeded to point out that one of the objectives of the directive is precisely to prevent copyright protection from becoming outdated or obsolete as a result of technological developments. Such an objective would be undermined should the exceptions and limitations to copyright protection be interpreted as to exclude digital media and cloud computing services. Hence, the court affirmed that the concept of ‘any medium’ includes a server on which storage space is made available to a user by the provider of a cloud computing service.
In so far as the entitlement of right holders to fair compensation is concerned, the court maintained that the directive imposes an obligation on member states which implement the private copying exception to also provide for a system of fair compensation to right holders. However, it is within the discretion of the particular member state to determine the various elements of the system of fair compensation.
The court observed that, in principle, it should be the person carrying out the private copying, namely the user of cloud computing storage services, to finance the compensation. However, should the identification of end users pose a problem in practice, member states may introduce a private copying levy chargeable to the producer or importer of the servers by means of which cloud computing services are provided to individuals. Such levy will then be passed on economically to the purchaser of such servers and will ultimately be borne by the private user who uses the equipment or to whom a reproduction service is provided.
When setting the said levy, member states may take account of the fact that other devices and media could be used for private copying in connection with cloud computing. However, they must ensure that a balance is struck between the amount of the levy being paid on all such products and the possible harm to the right holders.
The intellectual property rights regime is often a delicate balancing act between the rights of right holders and those of society itself. Ensuring that such a balance is struck and maintained at all times is indispensable in order to encourage innovation while safeguarding the interest of the public at large.