18 February 2012

SABAM v Netlog - the Ghost of Denning stalks the corridors of Luxembourg

Netlog is a social network based in Gand in Belgium. According to the "About Netlog" page on its website it is available to 95 million users throughout Europe in 40 languages. It claims to be "page view market leader" (whatever that may mean) in  Belgium, Italy, Austria, Switzerland, Romania and Turkey and number 2 in France, Germany, the Netherlands and Portugal. I am ashamed to say until I read the decision of the Court of Justice of European Union in C-360/10, Belgische Vereniging van Auteurs, Componisten en Uitgevers CVBA (SABAM) v Netlog NV [2012] EUECJ C-360/10 I had never heard of this important continental institution but, hey, I'm South British so what do I know.

Apparently
"On Netlog, you can create your own web page with a blog, pictures, videos, events, playlists and much more to share with your friends. It is thus the ultimate tool to connect and communicate with your social network. Massive Media NV has developed a unique localization technology ensuring that all content is geotargeted and personalized to each member’s profile."
And according to the Belgian collecting society SABAM, Netlog can also "make use, by means of their profile, of the musical and audio-visual works in SABAM's repertoire, making those works available to the public in such a way that other users of that network can have access to them without SABAM's consent and without Netlog paying it any fee." In other worlds file sharing.

In Feb 2009 SABAM suggested that Netlog might like to make a payment for the use of its repertoire. Nothing came of that suggestion so SABAM demanded an undertaking from Netlog to stop using the repertoire on 2 June 2009.  When Netlog failed to give such an undertaking SABAM applied to the President of the Brussels Court of First Instance for an interim injunction to restrain Netlog from  making available musical or audio-visual works from SABAM's repertoire under art 87 (1) of the Law of 30 June 1994 on copyright and related rights.  That article implements art 8 (3) of Directive 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 ("Copyright and Related Rights Directive").  The equivalent provision of the UK Copyright, Designs and Patents Act 1988 as amended is s.97A. Netlog replied that such an injunction would be  would be tantamount to imposing a general obligation to monitor, which is prohibited by the Belgian statute that transposes art 15 (1) of the electronic commerce directive ( Directive 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) into national law.  It would also impose intolerable burdens on an internet service provider and possibly require the processing of personal data.

Faced with these arguments and in particular the apparent conflict between art 8 (3) of Directive 2001/29/EC and art 15 (1) of Directive 2000/31/EC the President referred the following question to the Court of Justice of the European Union ("CJEU") under art 267 of the Treaty on the Functioning of the European Union:
'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 [signed in Rome on 4 November 1950], 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 "[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 a hosting service provider to introduce, for all its customers, in abstracto and as a preventive measure, at its own cost and for an unlimited period, a system for filtering most of the information which is stored on its servers in order to identify on its servers electronic files containing musical, cinematographic or audio-visual work in respect of which SABAM claims to hold rights, and subsequently to block the exchange of such files?'
The CJEU re-formulated this question as follows in paragraph [26] of its judgment: 
"By its question, the referring court asks, in essence, whether Directives 2000/31, 2001/29, 2004/48, 95/46 and 2002/58, read together and construed in the light of the requirements stemming from the protection of the applicable fundamental rights, are to be interpreted as precluding a national court from issuing an injunction against a hosting service provider which requires it to install a system for filtering:
- information which is stored on its servers by its service users;
- which applies indiscriminately to all of those users;
- as a preventative measure;
- exclusively at its expense; and
- for an unlimited period,
which is capable of identifying electronic files containing musical, cinematographic or audio-visual work in respect of which the applicant for the injunction claims to hold intellectual property rights, with a view to preventing those works from being made available to the public in breach of copyright ('the contested filtering system')."
Its answer to that question was a resounding "no":
"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; and
- 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights,
read together and construed in the light of the requirements stemming from the protection of the applicable fundamental rights, must be interpreted as precluding a national court from issuing an injunction against a hosting service provider which requires it to install a system for filtering:
- information which is stored on its servers by its service users;
- which applies indiscriminately to all of those users;
- as a preventative measure;
- exclusively at its expense; and
- for an unlimited period,
which is capable of identifying electronic files containing musical, cinematographic or audio-visual work in respect of which the applicant for the injunction claims to hold intellectual property rights, with a view to preventing those works from being made available to the public in breach of copyright."
That answer was very similar to the guidance that the CJEU gave in C-70/10 Scarlet Extended SA v SABAM [2011] EUECJ C-70/10 (24 Nov 2011) which I discussed in my article "Injunctions against ISPs Part II: the CJEU's Judgment in Scarlet" on 11 Dec 2011.

While recognizing that copyright infringement was a bad thing and that national courts had been given powers to prevent such infringements including injunctions against intermediaries, the Court observed at paragraph [31] that "the rules established by the Member States, and likewise their application by the national courts, must observe the limitations arising from Directives 2001/29 and 2004/48 and from the sources of law to which those directives refer (see Scarlet Extended, paragraph 33)." Thus, in accordance with recital 16 in the preamble to Directive 2001/29 and art 2 (3) (a) of Directive 2004/48, those rules may not affect the provisions of Directive 2000/31 and, more specifically, arts 12 to 15 thereof (see Scarlet paragraph [34]). In particular, those rules must respect art 15 (1) of the electronic commerce directive which prohibits national authorities from adopting measures that would require a hosting service to carry out general monitoring of the information that it stores (Scarlet paragraph [35]).

In Netlog the collecting society sought to impose a filtering obligation which would require
"- first, that the hosting service provider identify, within all of the files stored on its servers by all its service users, the files which are likely to contain works in respect of which holders of intellectual-property rights claim to hold rights;
- next, that it determine which of those files are being stored and made available to the public unlawfully; and
- lastly, that it prevent files that it considers to be unlawful from being made available."
That would amount to a monitoring obligation that the Court had already rejected in Scarlet.

However the main reason for the Court's decision was that the protection of copyright (which was a property right guaranteed by the Charter of Fundamental Rights of the European Union had to be balanced against other fundamental rights:
"41 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 (Scarlet Extended, paragraph 43).
42 As paragraphs 62 to 68 of the judgment in Case C-275/06 Promusicae [2008] ECR I-271 make clear, the protection of the fundamental right to property, which includes the rights linked to intellectual property, must be balanced against the protection of other fundamental rights.
43 More specifically, it follows from paragraph 68 of that judgment that, in the context of measures adopted to protect copyright holders, national authorities and courts must strike a fair balance between the protection of copyright and the protection of the fundamental rights of individuals who are affected by such measures.
44 Accordingly, 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 hosting service providers pursuant to Article 16 of the Charter (see Scarlet Extended, paragraph 46).
45 In the main proceedings, the injunction requiring the installation of the contested filtering system involves monitoring all or most of the information stored by the hosting service provider concerned, in the interests of those rightholders. Moreover, that monitoring has no limitation in time, is directed at all future infringements and is intended to protect not only existing works, but also works that have not yet been created at the time when the system is introduced.
46 Accordingly, such an injunction would result in a serious infringement of the freedom of the hosting service provider to conduct its business since it would require that hosting service provider 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 (see, by analogy, Scarlet Extended, paragraph 48).
47 In those circumstances, it must be held that the injunction to install the contested filtering system is to be regarded as not respecting the requirement that a fair balance be struck between, on the one hand, the protection of the intellectual-property right enjoyed by copyright holders, and, on the other hand, that of the freedom to conduct business enjoyed by operators such as hosting service providers (see, by analogy, Scarlet Extended, paragraph 49).
48 Moreover, the effects of that injunction would not be limited to the hosting service provider, as the contested filtering system may also infringe the fundamental rights of that hosting service provider's service users, namely their right to protection of their personal data and their freedom to receive or impart information, which are rights safeguarded by Articles 8 and 11 of the Charter respectively.
49 Indeed, the injunction requiring installation of the contested filtering system would involve the identification, systematic analysis and processing of information connected with the profiles created on the social network by its users. The information connected with those profiles is protected personal data because, in principle, it allows those users to be identified (see, by analogy, Scarlet Extended, paragraph 51).
50 Moreover, that injunction could potentially undermine freedom of information, since that system might not distinguish adequately between unlawful content and lawful content, with the result that its introduction could lead to the blocking of lawful communications. Indeed, it is not contested that the reply to the question whether a transmission is lawful also depends on the application of statutory exceptions to copyright which vary from one Member State to another. In addition, in some Member States certain works fall within the public domain or may be posted online free of charge by the authors concerned (see, by analogy, Scarlet Extended, paragraph 52).
51 Consequently, it must be held that, in adopting the injunction requiring the hosting service provider to install the contested filtering system, the national court concerned would not be respecting the requirement that a fair balance be struck between the right to intellectual property, on the one hand, and the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information, on the other (see, by analogy, Scarlet Extended, paragraph 53).
52 In the light of the foregoing, the answer to the question referred is that Directives 2000/31, 2001/29 and 2004/48, 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 a hosting service provider which requires it to install the contested filtering system."
I could not resist  a muffled hurrah. This is a judgment worthy of Tom Denning.

Big Copyright does not like that decision.  SABAM's reaction  to Scarlet had been a press release headed "Authors worried about the decision by the Court of Justice of the European Union as to the general filtering of works on Scarlet's network". Its reaction to Netlog was one of resignation. In its press release of 16 Feb 2012 it said
"SABAM takes note of this ruling without surprise. Indeed, given the similarity of the issues submitted to the Court, it was to be expected that the latter would adopt the same position as regards a general filtering measure."
This decision comes just weeks after SOPA (Stop Online Piracy Act) and PIPA (Protect IP Act) were kicked into the long grass in the USA. There is a general feeling on both sides of the Atlantic that the demands of copyright and related rights owners had increased, were increasing and ought to be diminished.  There was a time before the internet when it cost a lot of money to make a film, produce a record or run a newspaper. Not any more. An awayday from the Great Wen to the National Media Museum in the magnificent Borealian cultural powerhouse of Bradford almost any day of the week will be rewarded by a chance to view excellent films made on a low budget from around the world. The arguments for legal protection of the old ways of making and distributing entertainment strike me as very similar to the arguments for continuing investment bankers' bonuses in an age of austerity.  As Professor Hargreaves noted, what the film, recording and publishing industries need are new business models to take account of new technologies.

As readers of this blog know, I have a special interest in injunctions against ISPs and other intermediaries having been in both of the s.97A cases that have come before our courts.  If anyone wants to discuss this topic with me they should call me on 0800 862 0055 or contact me through Facebook, Linkedin, twitter or Xing, or through my contact page.

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