On 27 March 2015, Mr Justice Cregan sitting in the Irish Commercial Court held that an injunction can be granted against an Internet service provider ("ISP"), UPC Communications Limited, for it to implement and adopt a graduated response scheme to assist in the enforcement by music companies of copyright infringement against the ISP’s subscribers.

The precise scope of the scheme is not yet known as the parties have been requested to make further submissions to the Judge on the form of the order and the exclusions and safeguards in that order. However, the order will involve at least two letters being sent to subscribers that are identified by the music rightsholders as infringing copyright on the ISP’s network.

This is the first occasion that a court ordered or “common law” graduated response system has been imposed anywhere in the world.

The business impact of the decision is as follows:

  1. An ISP may be ordered to engage with its subscribers by issuing letters following complaints from rightsholders on a systematic basis;
  2. An ISP cannot be ordered to sanction its customers accused by rightsholders of copyright infringement without the guarantee of a “prior, fair and impartial procedure”, which must operate outside the ISP organisation; and
  3. The Court held that an element of cost sharing is appropriate for the ISP implementing any injunction sought by music rightsholders.

The action commenced in January 2014, when the main sound recording companies, Sony, Universal and Warner issued injunctive proceedings against UPC seeking an order that UPC implement a graduated response scheme (“GRS”) in response to alleged copyright infringement as a result of illegal filesharing on the UPC network. This proposed GRS required that UPC write to its customers accused of file-sharing, and ultimately, after a designated number of repeat warnings, disconnect their subscription.

These proceeding have a deep rooted history. In 2010, the music companies unsuccessfully brought similar High Court proceedings against UPC seeking that it implement identical measures voluntarily agreed to by eircom, as part of a settlement agreement between the music industry and eircom. UPC successfully defended the proceedings where it was held by Mr Justice Charleton on that occasion that the Irish provisions of the Copyright and Related Rights Act 2000 relied upon at the time dealt with notice and takedown scenarios and did not empower a court to order a graduated response scheme or otherwise block, divert or interrupt Internet access. Subsequently, the Irish copyright act was amended by regulations which permitted copyright owners to seek injunctions against intermediaries such as ISPs but was not specific as to the form of the relevant relief.

However, the GRS sought by the music companies in these proceedings proceedings was more elaborate and complicated than previous injunctions such as website blocking orders. All other ISPs, other than eircom, had taken a similar stance and refused to implement a GRS voluntarily without a court order sanctioning it. UPC was the only defendant in these proceedings notwithstanding the music companies stating that it was taken to arrive at an industry solution as it was accepted that the issue of illegal filesharing is prevalent across the industry. Prior to that, website blocking orders had been sought against six ISPs.

The GRS sought by the music companies lacked many of the consumer safeguards prevalent in jurisdictions where government supported legislative and /or voluntary pan industry arrangements are in place. UPC argued in the case that Irish and European law maintains a careful balance between the rights and obligations of copyright owners, internet users and ISPs. In particular, UPC argued that any suspension or disconnection by an ISP could not be ordered by a court without the guarantee of a “prior, fair and impartial procedure” as required under Article 1(3a) of the Framework Directive (2002/21/EC) as amended. Mr Justice Cregan agreed with this submission and has requested that the parties make further submissions on whether an independent adjudicator could be put in place to make an assessment prior to any sanction being imposed on the subscriber or whether the order could envisage a streamlined process for the rightsholders to apply for a Norwich Pharmacal order to identify subscribers who had reached a certain stage of notifications. Such subscribers would then be pursued through the Court system by the music companies in respect of the infringements.

Mr Justice Cregan held that an Irish Court could grant an injunction against an innocent intermediary to prevent copyright infringement as provided for under Article 8(3) of the Copyright in the Information Society Directive (2001/29/EC). Such jurisdiction could be exercised by a Court in the State as long as the injunction was “fair and equitable” and otherwise complied with the requirements for injunctions under various EU Directives such as Article 3 of the IP Enforcement Directive (2004/48/EC). As a result of the latter provision, injunctions must not be “unnecessarily complicated or costly” and must be effective, proportionate and dissuasive amongst other things. Mr Justice Cregan held that the situation enabled the Court to grant the relevant injunction and that the case could be distinguished from the Court of Justice decision in Case C-70/10 SABAM where an injunction was not ordered because it was exclusively at the cost of the ISP and for an unlimited time. It is interesting to note that this is the first graduated response system that has been ordered by a court in Ireland or elsewhere. Previously in the Australian decision ofRoadshow Films Pty Ltd & others v iiNet Ltd, the Australian High Court held that an ISP could not be ordered to write to and sanction its customers under a common law graduated response scheme even if its terms and conditions provided for it.

Another point of dispute between the parties was whether UPC should be required to pay for the cost of implementing the injunction even though it was an innocent intermediary. Evidence was given to the Court that a sizeable investment was required to build the relevant IT infrastructure to automate the receipt and processing of subscriber IP addresses and recording the various interactions with subscribers at various stages in the process. The music companies argued that this should be a cost borne by UPC as a regulated entity. Mr Justice Cregan held that an element of cost sharing could make the injunction fair and equitable and held that the rightsholders must pay 20% of the capital expenditure required by the ISP in setting up the GRS. In arriving at the figure, the Judge took into account certain expenditure incurred by the music companies in the operation of the scheme. In order to reduce the operating expenditure of the ISP, a cost which it was held it must bear, the limit on infringement notifications has been set at 2,500 per month.

The final order of the Court is not known but certain aspects have been decided. The parties will make submissions to the same Judge on 29 April 2015 regarding the form of the order and the exclusions and safeguards to be applied. It is also possible that either side may appeal the decision at that point. We are representing UPC in the proceedings.