Turning the Tide on Intermediary Liability?

The Court of First Instance in Brussels ruled at the end of June that an ISP has a legal obligation to implement technology on its network to filter and block the sharing of copyright infringing content via peer-to-peer (P2P) file sharing networks. This ruling raises serious questions about the responsibility of intermediaries, such as ISPs, in Europe for the content that they transport, cache and host on behalf of third parties, especially in the copyright space.

 

Background

 

The E-Commerce Directive (2001/31/EC) contains four key provisions addressing the liability of ‘information society service’ providers for content supplied by third parties:

 

·         no liability for the content transmitted or accessed by their customers – the ‘mere conduit’ defence (Article 12)

·         no liability for automatic, intermediate and temporary storage of illegal material – the ‘caching’ defence (Article 13)

·         no liability for illegal material stored on behalf of a customer, where the service provider is unaware of its illegal nature and acts expeditiously to remove access to such content on gaining such knowledge – pthe ‘hosting’ defence (Article 14)

·         Member States shall not impose a ‘general obligation’ on service providers to monitor the information they transmit or store, nor to actively seek out facts indicating illegality (Article 15).

 

These provisions were designed to facilitate the provision of such services in Europe, by shielding service providers from liability for the actions of users. A similar defence against liability was provided for under the Copyright in the Information Society Directive (2001/29/EC), in respect of ‘transient or incidental’ acts of reproduction.

 

As implemented in national law, these provisions are relied upon by a range of intermediaries – from traditional ISPs and mobile network providers to providers of new and innovative Web 2.0 services, such as social networking sites – as a legal foundation for doing business in Europe. It is argued that these provisions draw an appropriate and practical balance between competing interests.

 

However, as part of this balancing exercise, the ‘mere conduit’, ‘caching’ and ‘hosting’ provisions also provide that national courts or administrative authorities may require a service provider ‘to terminate or prevent an infringement’, subject only to the restriction on the imposition of a ‘general obligation’ to monitor. Likewise, the Copyright in the Information Society Directive provides that rightsholders can apply for ‘an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right.’ (Article 8(3)).

 

To date, it has been commonly argued by intermediaries that any action for infringing or other illegal content should, pursuant to the E-Commerce Directive and the implications of Article 15 in particular, be taken against the specific user of their conduit, caching or hosting services who is infringing third-party rights or the law; resisting calls for them to be forced to take steps to counter infringing or illegal use of their services more generally. It is this issue that the present case addresses.

 

SABAM v Scarlet (29 June 2007)

 

In this case, the Belgian Society of Authors, Composers and Publishers (SABAM) had issued proceedings against a Belgian ISP – Scarlet Extended Ltd (Tiscali’s former Belgian arm) – seeking that Scarlet implement technological measures to filter and block P2P file-sharing of copyright infringing music over its network. SABAM’s case was premised on the Belgian implementation of the Information Society Directive and Article 8.3 in particular. SABAM argued that Scarlet had a general obligation to take measures to at least stem the tide of infringement by users of its network. SABAM obtained a preliminary ruling in its favour in 2004, at which time the Court appointed an expert to identify potential technological solutions that Scarlet might be forced to implement. The expert identified seven such possible solutions, including Audible Magic’s ‘digital fingerprint’ technology recently adopted by MySpace. He concluded that Audible Magic’s solution was the only one of the seven that addressed the problem with any sort of specificity; the other six blocked all P2P traffic without discrimination. However, the expert concluded that the Audible Magic solution would not be suitable to deal with the volume of traffic handled by an ISP.

 

Notwithstanding the expert’s conclusion that Audible Magic’s solution would not be suitable, the Belgian Court has now held that Scarlet has six months to implement the Audible Magic technology or it will face a 2,500€ fine for every day it delays. The Court relied on evidence that MySpace and an Asian ISP were using Audible Magic’s solution to reject the expert’s finding on unsuitability.

 

The Court also rejected Scarlet’s argument that it could lose the protection of the ‘mere conduit’ defence by implementing the measures, since the Court held that such filtering would not constitute selection of the content by Scarlet. The Court further held that the ruling did not impose a ‘general obligation’ on Scarlet in violation of Article 15, stating that:

 

‘…the provisions of this [the E-Commerce] Directive relating to liability should not preclude

the development and effective operation, by the different interested parties, of protection

and identification and of technical surveillance instruments made

possible by digital technology.’

 

The Court similarly rejected arguments based on the right to privacy, secrecy of correspondence and freedom of expression. Finally, the Court held that the cost of the solution to Scarlet was ‘not excessive’, being less than 50 Euro cents per month per Scarlet customer.

 

Comment

 

In the UK, the E-Commerce Directive liability provisions (Articles 12-14) were implemented by the Electronic Commerce (EC Directive) Regulations 2002; while the Information Society Directive provision (Article 8.3) was implemented in 2003 by s. 97A of the Copyright, Designs and Patents Act 1988. To date, there has been no case exploring the scope of the injunction that might be orderable against an intermediary under either provision or how such an injunction might comfortably co-exist with the E-Commerce Directive provisions, particularly the Article 15 provision.

 

The present Belgian case provides a very interesting insight into how a UK court could approach the issue were it to be asked. In Universal Music Australia Pty Ltd v Sharman License Holdings Ltd [2005] FCA 1242, the Australian Federal Court reached a similar conclusion against the operator of the Kazaa file-sharing platform, but it is a much bigger step to take that logic and apply it to a truly ‘genuine’ intermediary like Scarlet. The fact that a European court has come to this conclusion will be extremely worrying to all intermediaries if it is the start of a trend towards greater responsibility being put on them to act as the gatekeepers for Internet. That is certainly the hope of rightsholders; IFPI Chairman and CEO John Kennedy said of the decision:

 

‘This is an extremely significant ruling which bears out exactly what we have been saying for the last two years – that the internet’s gatekeepers, the ISPs, have a responsibility to help control copyright-infringing traffic on their networks. The court has confirmed that the ISPs have both a legal responsibility and the technical means to tackle piracy. This is a decision that we hope will set the mould for government policy and for courts in other countries in Europe and around the world.’ (see http://www.ifpi.org/content/section_news/20070704b.html)

 

That having been said, this decision is only a first instance decision of a court in a Continental jurisdiction and, therefore, would not be binding on future courts in Belgium or otherwise. It may well be appealed, possibly all the way to the European Court of Justice. If it is, or if this case were brought in the UK, there would be strong arguments that the placing of such obligations on intermediaries requires legislative intervention because it runs counter to the E-Commerce Directive and the balance it draws. In any event, it serves as a warning to intermediaries that the risk profile under which they currently offer their services in Europe may well be under attack.

 

 

Ben Allgrove is an Associate with Baker & McKenzie. Dr Ian Walden is Professor of Information and Communications Law and head of the Institute of Computer and Communications Law in the Centre for Commercial Law Studies, Queen Mary, University of London; he is also of Counsel at Baker & McKenzie.