11 December 2011

Injunctions against ISPs Part II: the CJEU's Judgment in Scarlet

In Injunctions against ISPs I discussed Mr. Justice Arnold's judgment in Twentieth Century Fox Film Corporation & Others v British Telecommunications Plc [2011] EWHC 2714 (Ch) (26 Oct 2011) where he ordered BT to use Cleenfeed to hinder its subscribers from accessing the website known as Newzbin II. That judgment was applauded by those who lobby on behalf of the film, recording, games, publishing and other creative industries though by no means everybody in the industries themselves. I saw such lobbyists at work some years ago during consultations at the Patent Office on the implementation of the enforcement directive. For convenience I refer to them as Big Copyright.

Scarlet
Less than a month afterwards the Court of Justice of the European Union delivered its judgment in C-70/10 Scarlet Extended SA v SABAM [2011] EUECJ C-70/10 (24 Nov 2011) that a number of Council directives precludes an injunction that compels an ISP to install monitoring software "which is capable of identifying on that provider’s network the movement of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold intellectual-property rights, with a view to blocking the transfer of files the sharing of which infringes copyright." Big Copyright's reaction to Scarlet was that it had nothing to do with Newzbin (see Phil Muncaster "European court rules that ISPs can't be forced to block pirated content" 24 Nov 2011 V3). For instance, Kiaran Whitehead, BPI's General Counsel is reported as saying:"The European Court found that the injunction against Scarlet was too broad and imposed a general obligation to monitor all information. The measures being adopted in the UK to reduce piracy are entirely different."

The Connection
Well maybe and then, again, maybe not. I was in court for the whole of the argument in Twentieth Century Fox Film Corporation & Others v British Telecommunications Plc [2011] EWHC 2714 (Ch) (26 Oct 2011) and I can confirm that the decision of the Belgian Court of Appeal and the opinion of the Advocate-General were mentioned in argument. But more importantly, Mr. Justice Arnold discussed the case at length between paragraphs [165] and [177] of his first judgment, Twentieth Century Fox Film Corp and Others v British Telecommunications Plc [2011] EWHC 1981 (Ch) (28 July 2011). I think Scarlet does impact on applications similar to the film studios' in Newzbin II in two respects. First, in the context in which it was raised by BT, namely the balancing of the film companies' and BT's subscribers rights under the European Convention on Human Rights. Secondly, in relation to the need to show that the information service provider has "actual knowledge" of infringement for the purposes of s.97A of the Copyright Designs and Patents Act 1988.

Convention Rights
BT's argument was summarized conveniently by the judge at paragraph [163] of his first judgment:
"Counsel for BT submitted that section 97A did not provide an adequate legal basis for the order sought by the Studios. Although he did not articulate it in precisely this way, the essence of the submission is that the order sought would be contrary to Article 10 ECHR because it is not "prescribed by law".
The ISP's counsel relied on the opinion of the Advocate-General in Scarlet which at that time was available only in French, Spanish and Latvian in support of that proposition. His lordship dealt with that authority as follows at paragraph [177]:
"Even if it is assumed that the Court of Justice will entirely endorse the Opinion of the Advocate General in Scarlet v SABAM, I consider that the present case is clearly distinguishable from that case. Quite simply, the Studios are not seeking an order that BT 'introduce, for all its customers, in abstracto and as a preventive measure, exclusively at the cost of that ISP and for an unlimited period, a system for filtering all electronic communications, both incoming and outgoing, passing via its services, in particular those involving the use of peer-to-peer software, in order to identify on its network the sharing of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold rights, and subsequently to block the transfer of such files, either at the point at which they are requested or at which they are sent'. On the contrary, the order sought by the Studios is clear and precise; it merely requires BT to implement an existing technical solution which BT already employs for a different purpose; implementing that solution is accepted by BT to be technically feasible; the cost is not suggested by BT to be excessive; and provision has been made to enable the order to be varied or discharged in the event of a future change in circumstances. In my view, the order falls well within the range of orders which was foreseeable by ISPs on the basis of section 97A, and still more Article 8(3) of the Information Society Directive. I therefore conclude that the order is one "prescribed by law" within Article 10(2) ECHR, and hence is not contrary to Article 10 ECHR."
The Facts
SABAM stands for Société belge des auteurs, compositeurs et éditeurs SCRL. In other words it is a collecting society. Scarlet Extended SA is an ISP in Belgium just like BT. In 2004 SABAM concluded that Scarlet's subscribers were sharing its members' works using peer-to-peer networks and that, as their ISP, Scarlet was in the best position to stop them and applied to the President of the Tribunal de Première Instance at Brussels for a declaration that its members' copyrights had been infringed and injunctions "requiring Scarlet to bring such infringements to an end by blocking, or making it impossible for its customers to send or receive in any way, files containing a musical work using peer-to-peer software without the permission of the rightholders" and an order that "Scarlet provide it with details of the measures that it would be applying in order to comply with the judgment." The President held that SABAM's members' copyrights had indeed been infringed but appointed an expert to consider the ways in which the infringement could be stopped.

For reasons that were clear neither to Mr. Justice Arnold nor to me the expert took over two years to deliver the report. When he did he
"identified 11 solutions for filtering P2P, of which seven were applicable to Scarlet's network. Of those seven, the expert concluded that only one, CopySense by Audible Magic, sought to identify the protected music content in P2P flows and hence tried to respond specifically to the problem."
Mr. Justice Arnold noted at paragraph [167] of his judgment that there were four problems with that solution. First, "it was targeted to the education industry and not designed for the volume traffic of an ISP such as Scarlet". Secondly, "recourse to this technique by an ISP would entail high acquisition and operating costs. Thirdly, "the technique might only be viable for 2-3 years given the increasing use of encryption in P2P exchanges". Fourthly, it involved DPI (deep packet inspection) with detailed, invasive analysis of the contents of data packets. Despite those problems the President ordered Scarlet to bring to an end the copyright infringements established in the judgment of 26 Nov 2004 "by making it impossible for its customers to send or receive in any way files containing a musical work in SABAM’s repertoire by means of peer-to-peer software".

Scarlet appealed on the following grounds:
  • First, it contended that it was impossible to comply with that injunction since the effectiveness and permanence of filtering and blocking systems had not been proved and that the installation of the equipment for so doing was faced with numerous practical obstacles, such as problems with the network capacity and the impact on the network;
  • Secondly, it argued that any attempt to block the files concerned was doomed to fail in the very short term because there were at that time several peer-to-peer software products which made it impossible for third parties to check their content.
  • Thirdly, Scarlet also claimed that that injunction was contrary to Article 21 of the Law of 11 March 2003 on certain legal aspects of information society services, which transposes Article 15 of Directive 2000/31 into national law, because it would impose on Scarlet, de facto a general obligation to monitor communications on its network, inasmuch as any system for blocking or filtering peer-to-peer traffic would necessarily require general surveillance of all the communications passing through its network.
  • Lastly, Scarlet considered that the installation of a filtering system would be in breach of the provisions of EU law on the protection of personal data and the secrecy of communications, since such filtering involves the processing of IP addresses, which are personal data.

The cour d’appel de Bruxelles decided to stay the proceedings and to refer the following questions to the CJEU for a preliminary ruling on the following questions:
"(1) Do Directives 2001/29 and 2004/48, in conjunction with Directives 95/46, 2000/31 and 2002/58, construed in particular in the light of Articles 8 and 10 of the European Convention on the Protection of Human Rights and Fundamental Freedoms, permit Member States to authorise a national court, before which substantive proceedings have been brought and on the basis merely of a statutory provision stating that: ‘They [the national courts] may also issue an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right’, to order an [ISP] to install, for all its customers, in abstracto and as a preventive measure, exclusively at the cost of that ISP and for an unlimited period, a system for filtering all electronic communications, both incoming and outgoing, passing via its services, in particular those involving the use of peer-to-peer software, in order to identify on its network the movement of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold rights, and subsequently to block the transfer of such files, either at the point at which they are requested or at which they are sent?

(2) If the answer to the [first] question … is in the affirmative, do those directives require a national court, called upon to give a ruling on an application for an injunction against an intermediary whose services are used by a third party to infringe a copyright, to apply the principle of proportionality when deciding on the effectiveness and dissuasive effect of the measure sought?"

The Court of Justice answered those questions as follows:

"Directives:
– 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’);
– 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society;
– 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights ;
– 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data; and
– 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications),
read together and construed in the light of the requirements stemming from the protection of the applicable fundamental rights, must be interpreted as precluding an injunction made against an internet service provider which requires it to install a system for filtering
– all electronic communications passing via its services, in particular those involving the use of peer-to-peer software;
– which applies indiscriminately to all its customers;
– as a preventive measure;
– exclusively at its expense; and
– for an unlimited period,
which is capable of identifying on that provider’s network the movement of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold intellectual-property rights, with a view to blocking the transfer of files the sharing of which infringes copyright."

Mr. Justice Arnold's injunction against BT may not have gone quite so far as the President's injunction in Scarlet but it went quite a long way. More importantly, nothing in the CJEU's judgment that actually endorsed Mr. Justice Arnold's approach and the Court had a golden opportunity to do so had it thought it right so to do.

Ratio in Scarlet
What should really concern Big Copyright are the reasons for the CJEU's decision. At paragraph [43] the Court held:
"The protection of the right to intellectual property is indeed enshrined in Article 17(2) of the Charter of Fundamental Rights of the European Union (‘the Charter’). There is, however, nothing whatsoever in the wording of that provision or in the Court’s case-law to suggest that that right is inviolable and must for that reason be absolutely protected."
"Accordingly", it argued at paragraph [46] "in circumstances such as those in the main proceedings, national authorities and courts must, in particular, strike a fair balance between the protection of the intellectual property right enjoyed by copyright holders and that of the freedom to conduct a business enjoyed by operators such as ISPs pursuant to Article 16 of the Charter" (my italics).

Balancing those rights, the Court concluded at paragraph [48] that an injunction in the terms proposed
"would result in a serious infringement of the freedom of the ISP concerned to conduct its business since it would require that ISP to install a complicated, costly, permanent computer system at its own expense, which would also be contrary to the conditions laid down in Article 3 (1) of Directive 2004/48, which requires that measures to ensure the respect of intellectual-property rights should not be unnecessarily complicated or costly."
Secondly, it would also infringe data subjects' rights under the Data Protection Directive and national legislation that implements that directive such as the Data Protection Act 1994.

Actual Knowledge
S.97A (1) off the 1988 Act provides:
"The High Court (in Scotland, the Court of Session) shall have power to grant an injunction against a service provider, where that service provider has actual knowledge of another person using their service to infringe copyright."
In his first judgment, Mr. Justice Arnold said at paragraph [148] of his first judgment:
"I consider that what must be shown is that the service provider has actual knowledge of one or more persons using its service to infringe copyright. The more information the service provider has about the infringing activity, the more likely it is that the service provider will have actual knowledge. Thus it may well be relevant to consider whether or to what extent the service provider has knowledge of particular copyright works (or at least classes of copyright works) being involved, of particular restricted acts (or at least types of restricted act) being committed and of particular persons (or at least groups of persons) committing those acts; but it is not essential to prove actual knowledge of a specific infringement of a specific copyright work by a specific individual."
The whole purpose of
"filtering
– all electronic communications passing via its services, in particular those involving the use of peer-to-peer software;
– which applies indiscriminately to all its customers;
– as a preventive measure;
– exclusively at its expense; and
– for an unlimited period,
which is capable of identifying on that provider’s network the movement of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold intellectual-property rights"
was to ensure that the ISP does get "actual knowledge" of the infringement for the purposes of s.97A as explained by Mr. Justice Arnold. If you can't force an ISP to monitor internet usage then how can you show actual knowledge and indeed how can you police whatever injunction that the court may grant you?

Conclusion
The CJEU's decision in Scarlet means that there is everything to play for in future s.97A applications. Should anyone wish to discuss this note or indeed s.97A in general he or she should not hesitate to call me on 0800 862 0055 or get in touch through my contact form.