The Irish Court of Appeal has dismissed an appeal against a court ordered or “common law” graduated response, or three strikes, system. The decision provides clarification on what steps the courts may require internet service providers (“ISPs”) to adopt in order to assist rightsholders in tackling online copyright infringement.

On 28 July 2016, the Irish Court of Appeal upheld a decision of Judge Cregan in the Irish Commercial Court which ordered the implementation of a graduated response system in an effort to curtail online copyright infringement by ISP subscribers.

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 of Appeal held that an element of cost sharing is appropriate for the ISP implementing any injunction sought by music rightsholders.

Background to the proceeedings

The proceedings initially commenced in January 2014, when Ireland’s main sound recording companies, Sony, Universal and Warner issued injunctive proceedings against UPC Communications Ireland Limited, now Virgin Media Ireland, seeking an order that UPC implement a graduated response system (“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.

On 27 March 2015, at first instance, Judge Cregan sitting in the Irish Commercial Court held that an injunction could be granted against an ISP for it to implement and adopt a GRS to assist in the enforcement by music companies of copyright infringement against the ISP’s subscribers. This was the first occasion that a court ordered or “common law” GRS had been imposed anywhere in the world. The jurisdiction to grant such an order was Article 8(3) of the Information Society Directive.

The appeal

The decision of Judge Cregan was appealed on a number of grounds including the following:

  • The trial judge made an order which involved formulation and determination of matters of policy which were matters more appropriately determined by the legislature; and
  • The trial judge erred in making an Order that an innocent intermediary must build and install a hardware and software system at considerable expense and over a significant period of time in order to operate a GRS and predominantly at its cost.

In addition, UPC submitted that the trial judge ought to have sought guidance from the Court of Justice of the European Union (“CJEU”) on the interaction between the various EU directives invoked before determining the application.

The Court of Appeal Judgment

The Court of Appeal ultimately upheld the decision of the High Court. Judge Hogan, noting that this was the first GRS order of its kind made anywhere in the EU, considered that Article 8(3) of the Information Society Directive provided a relief for injunctions to be granted against non-infringing parties such as the ISP in this case. Section 40(5A) of the Copyright and Related Rights Act 2000 is the Irish equivalent of Article 8(3). It was considered by Judge Hogan to represent a “major change in the law” in permitting the grant of injunctions against persons who had committed no legal wrong or threatened to do so.

Judge Hogan acknowledged that the GRS order being sought “might be thought to be open to the objection that inasmuch as the Court was being invited to make a highly prescriptive mandatory order”. However, it was held that the EU legislature has provided jurisdiction to national courts to grant such injunctions. Judge Hogan held that once that “legal rubicon” was crossed it became a matter of degree.

One of the grounds of appeal related to the fact that the relief was considered “unnecessarily complicated and costly”. With regard to whether UPC should be required to pay for the cost of implementing the injunction even though it was an innocent intermediary, Judge Hogan re-emphasised the comments of Judge Cregan that “because the defendant is the company which profits – albeit indirectly – because it derives revenues from its subscribers who are engaged in this practice, it is the defendant who should, in my view, be primarily liable for the costs.”

The GRS as ordered in the High Court was therefore considered lawful. One factor taken into account by the Court of Appeal in upholding the relief was the fact that other solutions did not appear to be viable.

However, Judge Hogan did amend two features of the High Court order. The requirement for a five-year review was removed from the Order as the liberty to apply provision already contained in the Order was sufficient to address any fundamental changes in circumstances or technology which may warrant a future application or deviation from the Order. Secondly, the Court of Appeal removed the provision in the Order that UPC would not seek its costs in relation to any future Norwich Pharmacal applications made on foot of the information disclosed to rightsholders under the GRS.

A CJEU reference?

Finally, regarding the potential for a reference to the CJEU, the Court of Appeal held that the appeal involved the application of principles already determined by the CJEU in cases such as L’Oreal SA, Scarlet Extended and UPC Kabel Wien, and on that basis no question of interpretation of EU law arose. Further, the Court of Appeal was not a court of last resort as the Irish Supreme Court performed that function and as such is the only court that must make a reference if matters of EU law are not sufficiently clear. On this basis the need for a preliminary reference was dismissed by the Court of Appeal. Should leave to appeal to the Supreme Court be granted then this issue of a reference may be revisited.

The Court of Appeal judgment confirms that national courts have jurisdiction to grant injunctions against innocent intermediaries such as Internet service providers. As Judge Hogan indicated in the judgment, it then becomes a question of degree as to how elaborate such orders can be. This is the first court ordered GRS in the EU and may provide the basis for future applications by rightsholders for similar relief in Ireland and other EU jurisdictions. The issue of the burden of cost in respect of such remedies remains very much a live issue as can also be seen from the recent UK Court of Appeal decision in Cartier International AG v British Sky Broadcasting Limited where the cost of website blocking was held to be a matter for ISPs.