Judgment of the Higher Regional Court of Munich dated February 2, 2024 – Case No.: 38 Sch 60/22 WG e
Clouds are not considered remuneration-required storage media or duplication devices. Therefore, providers are not required to pay a copyright royalty. This was decided by the Higher Regional Court of Munich in its judgment dated February 2, 2024 (Case No.: 38 Sch 60/22 WG e).
IT law repeatedly intersects with copyright law. With increasing digitization, the issue of copyright royalties has become increasingly significant. Manufacturers of certain storage media or duplication devices are required to pay a copyright royalty, according to the business law firm MTR Legal Attorneys, which advises, among other things, in IT law.
However, it is contentious whether cloud providers are also obligated to pay a copyright royalty. The Higher Regional Court of Munich has negated this in its judgment dated February 2, 2024.
Lawsuit Against Cloud Provider
The Central Office for Private Copying Rights (ZPÜ) filed a lawsuit against a cloud provider. The ZPÜ’s role includes, among other things, asserting claims for compensation for the duplication of copyright-protected works against manufacturers or dealers of devices with storage media used for duplications. In the underlying case, the ZPÜ argued that cloud providers offering storage for private copies should also pay a copyright royalty and asserted copyright information and compensation claims.
The defendant cloud provider allows users to store and share files, collaborate on projects, and connect the content and tools used for work. Services include, among others, file hosting, communication, sharing, searching, or image thumbnails and document previews. The provider offers a hybrid cloud infrastructure, which the user does not have physical access to. Users can only access the website or app and use the functions.
The plaintiff argues that the cloud is also used for making private copies of copyright-protected works. Technically and functionally, the cloud should be considered as a storage medium and a “device” under § 54 of the Copyright Act (UrhG), thereby making the defendant provider liable for payment.
Higher Regional Court of Munich Dismisses Lawsuit
The lawsuit was unsuccessful before the Higher Regional Court of Munich. The court stated that only devices and storage media are subject to a payment obligation according to §§ 54a, 54b UrhG. The cloud in question, however, is to be understood as a service that provides access to online storage space.
In general language usage and also in the legislative justification, a device is understood to be a physical object. Similarly, storage media are meant to be physical data carriers such as USB sticks, smart cards, CDs, etc. The provision of an internet-based usage option like a cloud is not covered by the statutory regulation. By the term carrier of information and data, a physical object is meant, as explained by the Higher Regional Court of Munich.
Cloud Is Not a “Device” or “Storage Medium”
This interpretation of the terms “device” and “storage media” is also in line with European Union law. Although the European Court of Justice decided in the case C-433/20 in 2022 that a server providing online storage space can be a carrier and therefore compensation claims can exist, the cloud provider does not necessarily have to bear the costs. The ECJ declared that a national regulation, according to which the cloud provider does not have to pay compensation, is in accordance with European law if a fair compensation is already made in another way. When determining a fair compensation, member states have a wide margin of discretion. In particular, they can determine who must pay the compensation.
According to German legislation, the compensation claims exist only against manufacturers, importers, and dealers of devices and storage media, as well as against operators of duplication devices, as stated by the Higher Regional Court of Munich. Since a user of a cloud always initially needs an end device, such as a computer or smartphone, to create private copies, the compensation for copyrights should be tied to these devices, the Higher Regional Court of Munich made clear. The judgment is not yet legally binding, and the Higher Regional Court did not allow for an appeal to the Federal Court of Justice.
There is now widespread expectation that politics will be called upon to modernize the legal regulations.
MTR Legal Attorneys advise in IT law.
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