Copyright owners have long been faced with the challenge of how to protect and enforce their rights in the light of new technologies. In the 1980s it was the humble Sony Betamax video recorder which allowed users illegally to record tape-to-tape; a major current threat comes, of course, in the form of peer-to-peer file sharing (P2P).
To protect their interests copyright holders have typically had two targets in their sights: those responsible for creating the new technology and the individuals who use it. They have had limited success with both and a recent UK case is a cautionary tale of what can go wrong when individuals are targeted. The Patents County Court’s judgment in Media CAT Ltd v Adams & Ors [2011] EWPCC 6 (see also [2011] EWPCC 10) is a stark reminder that even in cases involving new technology getting the legal and procedural basics right is essential if claimants are to succeed.
Background
Many readers will be familiar with the cases, which involved alleged infringement of copyright in pornographic films. They were brought by the company Media CAT which purported to be a ‘copyright protection society’, representing the owners of copyright in the films. It had entered into a number of agreements with copyright owners to allow it to ‘inquire claim demand and prosecute through the civil courts where necessary any person … identified as having made available for download’ a copyright-protected work. Essentially the agreement was intended to give Media CAT the sole and exclusive right to seek compensation in respect of illegal file sharing. Media CAT’s lawyers, ACS:Law, acted under a contingency fee of 65%.
Following a monitoring exercise by a company called NG3 Systems Ltd, a list of IP addresses was provided to Media CAT which linked exploitation of a particular film, an IP address and a P2P Network. Norwich Pharmacal orders were then obtained against relevant ISPs, requiring them to disclose the names and addresses of their subscribers based on the relevant IP addresses. Once in possession of this information, ACS:Law sent out letters to tens of thousands of individuals. The letters stated that Media CAT had evidence that the individual had been caught infringing copyright in a pornographic film and sought £495 by way of compensation. The letters were the subject of significant criticism by consumer groups and ACS:Law’s principal, Andrew Crossley, has been referred to the Solicitors Disciplinary Tribunal in relation to them with the first hearing due to take place in June.
Many individuals seem to have paid in response to the letters, some no doubt to avoid embarrassment or the potential legal costs involved in fighting the claim. However, at least 27 individuals are known to have refused because they became the defendants in the current cases.
Insult was added to injury when the personal details obtained via the Norwich Pharmacal orders were leaked online following an attack on ACS:Law’s website, leading to a further investigation into the firm, this time by the ICO which has levied a monetary penalty of £1,000.
Applications for default judgment
In November 2010, Media CAT applied for default judgment against eight of the defendants by way of without notice applications. Such applications, which are designed for claims for specified sums of money where no judicial decision is required, are almost unknown in intellectual property cases. A number of the applications were made on the basis that the defendants had failed to file an acknowledgement of service or defence within the requisite time limit. However, it emerged during the hearing that in a number of cases there was no evidence to demonstrate that the claims, which were to have been served by the court, had, in fact, been served. In other cases the defence and/or acknowledgement of service had been filed. In any event, the court felt that the default judgment procedure was inappropriate for complex copyright cases of this kind and refused Media CAT’s application.
The applications did, however, reveal a number of inconsistencies between Media CAT’s initial letters of claim and the subsequent Particulars of Claim. In particular, the judge found that the letters of claim misrepresented Media CAT’s standing to bring the proceedings and relied on an untested point about IP addresses. Following a further hearing, the court made an order of its own initiative for a directions hearing in respect of the 27 Media CAT cases brought in the Patents County Court.
Application to discontinue
The saga continued and in January 2011, just before the directions hearing, Media CAT took the remarkable decision to issue a notice of discontinuance of all 27 claims. Its stated intention was to discontinue and reissue the claims to ensure the claim forms were served properly and to reformulate its case. The court was suspicious of Media CAT’s motives given that the claim form had clearly been served correctly in a good number of cases because it had been validly defended, and because there was a procedure available to claimants to amend pleadings without discontinuing the claims.
Examining the chequered background to the matter, and unimpressed also by the fact that demands continued to be made of individuals whose details were obtained under the Norwich Pharmacal orders, the court found the notices of discontinuance to be an abuse of process. The judge thought that Media CAT’s likely intention throughout was to avoid judicial scrutiny of its wider and apparently continuing campaign to generate further revenue from the various agreements. It was also damning that, as the claims were (at best) brought by a person claiming to be a licensee, the claimant had failed to obtain permission from the copyright owner under s 102 of the Copyright, Designs and Patents Act 1988 before serving the notices of discontinuance. This last point is considered in more detail below.
Who is the infringer?
As well as the obvious procedural failures, the cases also touched on the complex legal problems with bringing such claims. Of particular interest was the issue of identifying who actually infringed the copyright. The case of Polydor v Brown [2005] EWHC 3191 (Ch) established that P2P file-sharing software can be used to infringe copyright. Like the Media CAT case, the defendant in Polydor was identified following a Norwich Pharmacal order. It was alleged that he had been sharing copyrighted audio files. The defendant in that case admitted to using the P2P software but said he was not aware that by doing so he was sharing music over the network. The court held that connecting a computer to the Internet while running P2P software with music files in a shared directory was a primary act of copyright infringement. It was irrelevant whether the individual knew or had reason to believe what they were doing was an infringement. The mere fact that the files were present and made available was sufficient for infringement to have been committed.
The problem for Media CAT was that, without an admission, it had no way of knowing who had actually used the P2P software. The alleged infringers were identified solely by their IP address. Given that an IP address merely indentifies an Internet connection, typically now a wireless broadband router, all that could be said was that Media CAT had identified the individual who had the contract with the ISP for access to the Internet. Even if the IP address could be linked to the infringement, Media CAT did not actually know who committed the infringing act.
It attempted to address this in its Particulars of Claim by pleading that the software was either used by the individual identified by the ISP or by someone allowed to access the Internet connection ‘due to the router having no or no adequate security’.. Section 16(2) of the 1988 Act says that copyright in a work will be infringed by a person who does or authorises someone else to do any of the acts restricted by copyright. The problem with Media CAT’s argument was that the word used in section 16(2) is ‘authorising’ not ‘allowing’ and, as the court emphasised, the two words are not the same.
What Media CAT was, in effect, asking the court to do raised complicated legal, factual and technological issues that to date remain untested in this jurisdiction. For example, does a person authorise infringement for the purposes of s 16(2) merely by authorising another to use their Internet connection in circumstances where, unknown to him, that person uses P2P software to infringe copyright? How about if an individual leaves their wireless connection unsecured and copyright is infringed by someone piggy backing the connection? If so, what level of security is required to avoid any suggestion that other person is authorised? After all, most routers offer a range of security options.
Further, it has been questioned whether the method adopted by Media CAT of linking the IP address, film and P2P network was sufficient to establish that any infringement had taken place at all. Opposing counsel submitted that the IP addresses came from a central tracking system which monitors the IP addresses from which a file is available on a P2P network. Counsel claimed that tracker lists were not kept up to date, that IP addresses can be reallocated and that addresses may end up on the list even if a file download is started but then immediately stopped before anything of substance is downloaded. The court did not provide any answers, and accepted these would all be issues to be explored with proper evidence and the assistance of computer experts.
Media CAT highlights the difficulties in linking infringement to IP addresses and it seems the waters may only have been muddied further by the passing of the controversial Digital Economy Act 2010. The 2010 Act, which received Royal Assent in April 2010 in the dying days of the last government, provides a mechanism for copyright owners to report incidents of suspected copyright infringement to ISPs. Once notified, the ISPs are then under a duty to warn users of the infringement. It was envisaged that the Secretary of State would also be able to make an order requiring ISPs, in cases of continued infringement, to take a range of measures against infringers, such as slowing down, restricting or even disconnecting the offending users’ connection. It remains to be seen the extent to which such powers will be utilised, although a recent challenge by ISPs by way of a judicial review application failed.
Who should the claimant(s) be?
Another issue to emerge from the Media CAT cases concerns who has the right to bring a claim for copyright infringement. Under the 1988 Act the right vests in the copyright owner (s 96), an exclusive licensee (s 101) and sometimes a non-exclusive licensee (s 101A). On the facts, the court was not convinced Media CAT had standing to bring the claim and, even if it did, s 102 of the 1988 Act was a problem.
Section 102 requires the copyright owner to be a party to any proceedings (subject to the court’s permission to proceed without them). Although the agreement between Media CAT and the copyright owners appeared to provide that Media CAT could litigate without the copyright owners being a party and without the need for the court’s permission, the judge held it could not have such an effect. The purpose of s 102 was to protect defendants from being targeted twice in relation to the same incident by making all parties with related rights a party to the action so that the outcome would be binding on them all. Additionally, although an exclusive licensee may have a statutory right to bring proceedings for infringement, it would have no property right as such as it does not own the copyright. Requiring the owner to be joined helps to counter allegations that the owner gave the defendant permission to do what he has done (such as by making the film available on the Internet in the first place). Accordingly, the court had serious doubts over whether Media CAT had any standing to bring the cases in the first place.
Conclusion
The Media CAT saga has yet to end, but it seems unlikely that things will turn out well for either the claimant or its representatives. In February, the court struck out Media CAT’s notices of discontinuance and gave directions that they should join the owners of the copyright works to the proceedings. The case came back before the court in March, and it was clear that no attempt had been made to join the copyright owners. Those actions which had not already settled were therefore struck out and Media CAT was ordered to pay the defendants’ costs, to be assessed on the indemnity basis and not limited to the scale costs provisions generally applicable to proceedings in the Patents County Court.
The court went on to consider the defendants’ application for a wasted costs order to be made against ACS:Law and/or Andrew Crossley, pursuant to the power under the Senior Courts Act 1981, s 51(6). The court condemned the actions of ACS:Law and, although some of the defendants’ arguments in favour of a wasted costs order were considered disproportionate, the court did consider there was a good arguable case that ACS:Law and/or Crossley would be liable for the costs of the case. The case will now progress to the next stage in the wasted costs order process.
It is likely there will always be a conflict between copyright owners and new technology and that copyright owners will do all they can to protect their interests. However, in this complicated area, it is important that claimants and their lawyers tread carefully. The Media CAT cases show that the risks of getting it wrong may well be more serious than they at first seem.
Andrew Horrocks is a partner and Benjamin Craven is a trainee in Barlow Lyde & Gilbert LLP’s professional and commercial disputes team.
