By Ezra Steinhardt and Jacqueline Clover

On September 27, 2012, the European Commission released its Communication strategy paper on cloud computing.  The strategy, in development for over a year, advocates a range of new measures to help Europe capitalise on the growth of cloud computing and increase Europe’s rate of cloud adoption.  See further below for some of the major new policies.

Private Copy Exceptions in Europe

Focusing in on the field of copyright, perhaps the most interesting question raised by the Commission’s strategy involves the future of the private copy exception and levy in the context of cloud computing.  In a number of EU Member States, levies are imposed on  media and/or devices used to copy protected works, such as hard drives, blank CDs, portable flash-memory music players, and even PCs.  The money raised from the levies is intended are used to compensate rights holders in jurisdictions where users are allowed under the “private copy exception” to copy protected works for their own private use.

The question is whether cloud services should also be subject to the levy.  On the one hand, the Commission’s paper notes that users can store their content in the cloud, and so can store copies as they would with other products subject to the levies — suggesting that perhaps the levy should apply to cloud services.  On the other hand, the cloud is centralized in a way that blank CDs are not:  if consumers stream music from the cloud, then the use of each work can be precisely measured, enabling a new system of direct compensation for rights holders.  (At least one cloud service has already adopted such a system for direct compensation.)  A more precise system of compensation based on the actual number of copies created could therefore replace the levy, at least for some cloud services.

This issue, among others, is being discussed in an on-going mediation process set up by Michel Barnier, EU Commissioner for Internal Market and Services, and led by Mr. António Vitorino.  It is also worth noting that on September 21, 2012, a group of creative industry stakeholders signed a declaration appealing for the continued application of private copy levies, on the basis that the levy has not demonstrably damaged sales of products subject to the levies.  Opponents will continue to point to the market distorting effects of a levy that applies only in some Member States and not in others, and to the fact that there often appears to be no direct link between the amount of a levy on a given product and the harm caused by private copying on that product.

Key Reforms

More generally, as expected, the Commission takes the position that cloud computing will flourish best on a pan-European platform.  Key proposals (some of which may cause cloud providers alarm) include:

  • measures to promote efforts to develop pan-European cloud computing standards and certification schemes (including potentially certifications by regulators);
  • measures to develop model service level agreements, that cloud providers and their customers may use on a voluntary basis to help to standardise contract terms; and
  • the announcement of a new European Cloud Partnership, made up of representatives from the public sector and industry, to develop new harmonized European public sector cloud procurement “requirements”.

The Commission also uses the strategy to draw attention to a number of on-going efforts to reform Europe’s rules on intellectual property, including collective licensing rules, orphan works, and the re-use of public sector information (all recently proposed Directives), that it hopes will help to build the foundation of a pan-European market for cloud services.