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Online Service Provider liability - Key developments in a new sphere of copyright enforcement


IP owners have sometimes found efforts to prevent online infringement of their rights expensive, time consuming and of limited effectiveness. Online infringers may enjoy a high degree of anonymity, can base themselves in hard to reach jurisdictions, and can disappear easily, making enforcement difficult.

This has caused IP owners to seek alternative ways to enforce their rights. One such method involves forcing ISPs, or other online service providers, to block access to infringing material over their services.
This note summarises the key cases in this area to date and the main points which can be drawn from them. It is not intended to provide an in-depth analysis of the decisions reached in the cases citied, or the legislation governing this area.
 
Key legislation
The E-Commerce Directive[1] protects online service providers in the EU from claims of IP infringement where they do not control the content on their systems. The defence is often called the mere conduit defence as, in order to qualify, service providers must have had no involvement in the infringing act, other than the passive provision of their services. Similar defences exist in other major jurisdictions.
 
However, EU member states are required to provide rights holders with the ability to seek orders compelling service providers to terminate or prevent specific instances of IP infringement. But this is counterbalanced by provisions which prohibit member states from implementing legislation which would place on service providers a general obligation to monitor information transmitted through or stored on their networks by their users.
 
In the UK, the availability of injunctions against ISPs is enacted through section 97A of the Copyright Design and Patents Act 1988 (“Section 97A”). This provision allows rights holders to seek injunctions against internet service providers which have actual knowledge that their users are using their services to commit copyright infringement.
 
Development of the right in the UK: Newzbin  1[2] and 2[3]
The first cases to test section 97A in the UK involved claims brought by a group of major film studios in connection with a website accused of major copyright infringement.
 
Newzbin was a UK registered company that provided an online indexing facility which allowed fee paying users to search ‘Usenet’ (in simple terms, an amalgamation of email and internet forums) for content including music, movies, TV shows, and computer software, which could then be downloaded. The claimant film companies (the “Studios”) alleged that Newzbin was liable for copyright infringement in its own right. In its defence, Newzbin argued that it was effectively a search-engine and could claim the mere conduit defence; therefore, any copyright infringement was the sole responsibility of the parties sharing and downloading pirated material from Usenet.
 
In its judgment the Court found Newzbin liable for copyright infringement and granted an injunction against Newzbin requiring it to cease offering content belonging to the Studios. The injunction was ordered to restrain Newzbin itself from infringing the Studio’s copyright; however the Judge hinted that such an injunction could have been granted under Section 97A against Newzbin as a service provider.
 
Newzbin 1 was indicative of the difficulties rights holders face when pursuing online copyright infringers; a short time after the trial, Newzbin entered voluntary liquidation and the website was briefly taken offline.  However, a few months later a new site, Newzbin 2, appeared using the same code and database as the original website. This site was hosted in Sweden and the domain name was registered to a company based in the Seychelles, effectively placing the new website beyond the reach of the UK courts.
 
Reacting to this, the Studios sought an order under section 97A against BT, one of the major UK ISP’s, requiring BT to prevent its customers from accessing the Newzbin2 website.
 
In a landmark ruling, the Studios were granted the injunction, making this the first case in which an order requiring an ISP to block access to a particular website was made in the UK. The Judge made the following points which served to clarify the circumstances in which such an order is justified:
  • Under section 97A the service provider must have actual knowledge of another person using their service to infringe copyright.  However, it is not necessary to have knowledge of specific acts of infringement by specific individuals. The service provider must have actual knowledge that some of its users are using its services to infringe copyright in the manner alleged. This will be a question of fact in every case and the more information the service provider has as to acts of infringement, the more likely it is to have actual knowledge.
  • Users downloading infringing material from the Newzbin2 website were using both Newzbin2’s and BT’s services to infringe; it is a false dichotomy for an ISP to argue that its services are not themselves being used for the purposes of infringement where a pirate website is used to access the relevant material.
  • Injunctions requiring the blocking of access to specific URL’s impose specific obligations in respect of specific domains; such injunctions are not therefore prohibited under the prohibition on imposing a general obligation to monitor.
  • The right to freedom of expression under Article 10(2) of the ECHR is not violated by website blocking injunctions, where these are necessary, proportionate and prescribed by law.
  • The order would not be unduly costly or complicated to implement as BT had existing technology (its ‘cleanfeed’ system) which could be adapted for this purpose.
Having determined whether the injunction was lawful, the Judge decided that, taking into account the legitimate rights of the Studios to protect their IP, the injunction proposed was justified.  Arguments that website blocking tools were likely to be ineffective were rejected; the Judge held that even if only a minority of users were prevented from accessing the site, the order would be justified.
 
The limits of the third party approach
The Newzbin cases represent a great step forward for rights holders by confirming that injunctions against service providers to block or remove copyright infringing content were available. However, the Court of Justice of the European Union (the “CJEU”) has recently provided two rulings which delineate the boundaries of these injunctions.
 
Scarlet v SABAM[4]
SABAM is a rights management company based in Belgium. Scarlet is an ISP based in Belgium. In 2004 SABAM became aware that a large number of Scarlet’s users were using peer to peer (p2p) services to download songs and other media owned by SABAM’s members without licence.
 
In 2007 SABAM was granted an order by the Brussels Court of First Instance requiring Scarlet to prevent its users from using p2p services to download SABAM’s members’ content.  Scarlet appealed against the decision. The Brussels Court of Appeal referred the case to the CJEU, asking whether the injunction granted by the Court of First Instance was lawful under European law.
 
The CJEU ruled that the injunction ordered by the Court of First Instance was not lawful. In contrast to Newzbin (which related to the blocking of access to a specific website) the injunction against Scarlet required it to monitor all communications through its network and filter out infringing content on an on-going basis. This represented an unlawful general obligation to monitor content passing through Scarlet’s network and would have a severe impact on Scarlet’s freedom to conduct its business.
 
The cost and complication of the system that Scarlet would be required to procure and install also violated the IP Enforcement Directive[5], which requires that the remedies for IP infringement are not unnecessarily complicated or costly. Furthermore, such a filtering system might not be able to properly distinguish between lawful and unlawful material. The order was therefore an unlawful interference with Scarlet’s users’ freedom to receive or impart information.
 
Finally the order would require Scarlet to monitor all of its customers’ data, which could breach data protection legislation.
 
SABAM v Netlog[6]
SABAM once again received a lesson in the limits of third party orders in February this year. In this case, SABAM sought an injunction against Netlog, the operator of a social networking site.  SABAM alleged that Netlog’s users were uploading content owned by its members to their ‘social profiles’ and sought an injunction requiring Netlog to prevent such infringements.
 
The CJEU ruled that, as in the Scarlet case, such an injunction was unlawful. The injunction would involve a level of active monitoring of content which amounted to a general obligation to monitor. The complex filtering system which would be required was disproportionately complicated and costly to implement, thus interfering with Netlog’s freedom to carry out its business. Finally, there were similar concerns as to whether such a system would be able to distinguish between lawful and unlawful content, with the consequential potential to interfere with freedom of information.
 
Further Developments in the UK
The Newzbin cases set a clear precedent for rights holders as to the availability of Section 97A orders against other parties. Following on from the injunction against BT, the Studios in the Newzbin case have obtained similar orders against other major UK ISP’s, TalkTalk and Sky Media.
 
Furthermore, a similar action has recently been taken by nine major record companies against the six main retail ISPs in the UK in respect of the infamous file sharing website, The Pirate Bay.[7] The PirateBay offers a bit-torrent tracking service which enables its users to search for and then download files using p2p services. It does not itself host any files.
 
In an interesting sign of the utility that rights holders perceive in orders under Section 97A, the action did not include proceedings against either The PirateBay, or its users directly. On 20 February 2012, the UK High Court was asked by agreement of the parties, to rule on the narrow issue of whether The Pirate Bay and its users were each committing acts of copyright infringement. The arguments mirrored those of Newzbin 1, and the Court had no difficulty in establishing infringement on the part of the website and its users.  Now that this is settled, the way is open for the claimants to obtain the blocking order they seek against the ISPs. How far the ISPs will seek to defend such an order remains to be seen. However, this case is extremely similar to that of Newzbin2, and it is hard to see any general obligation to monitor, mere conduit, or freedom of speech arguments carrying much weight.
 
Comment
Following Newzbin it is clear that UK Courts are prepared to grant injunctions under Section 97A against ISPs requiring them to block access to websites which infringe third party IP, where it is clear that the ISP has actual knowledge of the infringement. Injunctions to prevent infringement may also be obtained against other service providers.
 
However rights holders will have greater difficulty where the order they seek would involve a general obligation to monitor. For example, websites such as social media or video sharing sites can be used to share infringing content, but are often not predominantly aimed at encouraging infringement and will contain large amounts of legitimate content.  An order against an ISP blocking the entire website would almost certainly be rejected as disproportionate and unfairly affecting the freedoms of the ISP and its customers.  The IP owner would therefore have to seek an order requiring the service provider (most likely the website operator itself) to prevent its services being used to share infringing content on an on-going basis. However, as the SABAM cases show, orders which require a service provider to actively sift through content to identify infringements are likely to be prohibited under EU law.
 
It is also unclear whether a court would order an injunction under Section 97A against an ISP where that ISP does not already own technology to block a URL. All of the ISPs currently blocking Newzbin already had systems to achieve site blocking. In the SABAM cases, one of the factors the CJEU considered was that the defendants would have had to develop or procure such a system themselves, and that this would be unduly costly and complicated.
 
Finally, there remains a risk that copycat sites, not covered by the original site blocking injunction, will appear once the original pirate site is blocked. Rights holders are therefore trying to exert pressure on search engines to demote or block pirate websites appearing in search results. The UK government is actively looking into such measures in its forthcoming Communications Bill.
 
In the US, SOPA and PIPA the draft Bills subject of recent controversy, envisage a wide range of powers against third party service providers. SOPA and PIPA allow not only site blocking orders against ISPs, but also the removal of pirate websites from search engine search results and the prevention of advertising networks and credit card processors from dealing with infringing websites. Whilst these Bills are stalled for now, Democrats and Republicans have vowed to return to SOPA/PIPA in the near future. The ACTA trade agreement, ratified by a large number of countries including the US and much of the EU, also envisages increased rights for rights holders against third party intermediaries whose services, either directly or indirectly, aid pirate websites.
 
It seems therefore that rights holders, legislators and courts are largely in agreement that action by service providers to prevent infringement is a key part of an effective online IP enforcement framework. The arguments that have prevented site blocking or search engine removal to-date (such as free speech and technical infeasibility), appear, at least in part, to have been overcome.
 
For further information, please contact Peter Dalton or Jeremy Harris

[1] Directive 2000/31/EC
[2] Twentieth Century Fox Film Corporation & Anor v Newzbin Ltd [2010] EWHC 608 (Ch)
[3] Twentieth Century Fox Film Corp & Ors v British Telecommunications Plc [2011] EWHC 1981 (Ch)
[4] Scarlet Extended SA v Société Belge des auteurs, compositeurs et éditeurs ( SABAM) (Case C-70/10)
[5] Directive 2004/48/EC
[6] Belgische Vereniging van Auteurs, Componisten en Uitgevers CVBA (SABAM) v Netlog NV (Case C 360/10)
[7] Dramatico Entertainment Ltd and Others v British Sky Broadcasting Ltd [2012] EWHC 268 (Ch)