Owners of intellectual property rights have long claimed that internet service providers (ISPs) ought to help in cracking down on piracy on the internet. ISPs have responded by saying that they have no control over what their services are used for and cannot be required to monitor all their traffic for IP infringement.
This thorny issue has now been addressed by Arnold J in the High Court in a test case brought by the Hollywood studios for an order against BT under section 97A of the Copyright, Designs & Patents Act 1988 (CDPA). The judgment is a significant victory for the studios. All is not gloom for the ISPs though, as there will be stringent requirements for rights-owners wishing to obtain such orders in the future.
Background to the case
Newzbin Ltd was a UK company operating a website that allowed its members to upload and download a wide range of copyright material including film, TV, books, games and apps. In the year to December 2009 it had a turnover in excess of £1 million and a profit of more than £300,000. In Twentieth Century Fox v Newzbin Ltd (2010), (Newzbin1) the studios successfully sued Newzbin for primary and secondary infringement and obtained an injunction from Kitchin J to restrain further infringements.
Newzbin closed down its website and went into voluntary liquidation. Shortly afterwards, a team of individuals using pseudonyms started operating an essentially identical website, Newzbin2, from servers located in Sweden. The domain name is registered to a company in the Seychelles. The Newzbin2 site is thus outside the jurisdiction of the High Court and continues to infringe the studios' rights.
The studios then wrote to BT asking whether it would agree either to block access to the Newzbin2 site or not to oppose an application for a court order that it should do so. BT responded to say that it did not support infringement but that it required a court order to block a service in view of its own business exposures, including potential legal liabilities.
BT, in common with other ISPs, uses a 'Cleanfeed' filtering system in co-operation with the Internet Watch Foundation to block child sex abuse and obscene websites.
The studios applied for an order against BT under section 97A CPDA which gives the High Court power to grant an injunction against a service provider, where it has 'actual knowledge of another person using their service to infringe copyright.'
This was the first case under that provision and was treated as a test case by the parties and the judge. This involved extra work and costs that should not be necessary in the future. It also resulted in a 101-page judgment.
Section 97A is the UK implementation of a provision in the EU Information Society Directive. The court also considered the IP Enforcement Directive. BT's case relied heavily on Article 12 of the E-Commerce Directive which provides that a service provider is not liable for the information transmitted by its users. This is often referred to as the 'mere conduit' defence to liability. However, it goes on to say that this does not prevent a court from 'requiring the service provider to terminate or prevent an infringement.' BT also relied on Article 15 of the same directive which prohibits a 'general obligation' to monitor traffic from being imposed on service providers.
Note that these legislative provisions apply to 'service providers' which is wider than just ISPs and will include other web-based services such as eBay.
The fundamental rights under Article 10 of the European Convention on Human Rights (freedom of expression) and Article 1 of its First Protocol (peaceful enjoyment of possessions) were also relevant. The court applied the approach set out in a House of Lords case (Re S  UKHL 47) on a conflict between Articles 8 and 10 in balancing the conflicting fundamental rights in this case.
What did Arnold J decide?
The argument centred around four questions:
- Was BT's service used to infringe the studios' copyrights? This involved a long technical discussion about the way the films were transmitted. The judge relied on the findings in Newzbin1 that the BT users were infringing to answer this question in the affirmative
- Did BT have 'actual knowledge'? This question occupies the longest section of the judgment. Arnold J held that what has to be shown is "that the service provider has actual knowledge of one or more persons using its service to infringe copyright" but does not require actual knowledge of a specific infringement of a specific work by a specific individual. A service provider can be given actual knowledge by means of a sufficiently detailed notice and a reasonable opportunity to investigate. As the studios had written to BT giving details of Newzbin1 and providing evidence of the infringement nearly three months before commencing the application, BT did have the required actual knowledge.
- Did Article 12(1) or 15(1) of the E-Commerce Directive exempt BT from liability? Article 12(1) got fairly short shrift from the judge in the light of Article 12(3) permitting the type of order sought by the studios. At the time of the hearing, the Court of Justice of the European Union (CJEU) was considering the interpretation of Article 15(1) in the case of L'Oréal SA v eBay so judgment in this case was delayed to allow it to deliver its ruling. The CJEU decided that a prohibited 'general obligation to monitor' meant active monitoring by the service provider of all the traffic on its network to prevent future infringement. Arnold J found that the order sought by the studios was specific and limited and so was not a 'general obligation'.
- Would any order breach the fundamental right to freedom of expression? There was a very extensive consideration of EU and national jurisprudence and the court took a great deal of care to balance the competing fundamental rights. The main issue was whether the order sought was 'prescribed by law' within Article 10(2) of the European Convention on Human Rights and so not a breach of the fundamental right. As the terms of the order were specific and limited and it was expressly that BT could apply to vary it if circumstances changed, the judge held that the order was within Article 10(2). He also considered the question of proportionality and on essentially the same grounds, found the order to be a proportionate, effective and dissuasive remedy.
What are the implications for the future?
BT has said that it will not seek to appeal the judgment so this is now a settled legal position. The judgment clarifies the extent of the 'mere conduit' defence. There has been a tendency for service providers to rely on this defence as the answer to all claims against them. Their scope to do so has been severely limited by this judgment.
The studios have said that they will seek similar orders from the other UK ISPs in relation to the Newzbin2 site. What is not yet clear is how the other ISPs will respond to this. They will have to consider their business exposure before deciding whether to agree to instigate monitoring, consent to a court order or insist on defending the applications.
It seems likely that the studios may then seek to rely on this judgment in bringing applications against other EU ISPs where there are substantial markets for this or similar infringing websites.
In the less immediate future, we can expect rights-owners to ask for similar orders against ISPs in relation to egregious infringers who use the internet. It is clear that they will have to prove infringement as well as that making the order would be a proportionate, effective and dissuasive remedy. In practice, this may mean bringing two actions: the first against the infringer to prove infringement; and the second under section 97A for a blocking order against the ISPs. Such second actions are in future likely to name all UK ISPs as respondents, rather than just one as here. It will also be necessary to frame the order sought carefully to avoid imposing a 'general obligation to monitor' on the service providers.
This approach will be fairly expensive, especially if, as Arnold J hinted strongly, costs may be dealt with along Norwich Pharmacal lines. This would mean the applicant pays its own costs and those of the respondent and can only recover them from the primary infringer. It therefore seems unlikely that the judgment will lead to a flood of such applications, as some had feared.
Whether in the longer term, ISPs and other service providers set up administrative processes akin to the take-down procedures of some websites remains to be seen. Further, the studios and other rights-owners may form a sort of 'internet infringement watch' group to provide services similar to those provided for child sex abuse by the Internet Watch Foundation.
Does this affect websites or service providers outside the UK?
Yes. It is clear that orders will be granted in relation to sites hosted outside the UK so long as the site is 'aimed at' the UK. Moreover, this judgment is made under the provisions of various EU Directives (and refers to a large number of judgments of the court of other Member States where similar orders have been made). It will thus form part of EU jurisprudence and can be referred to elsewhere in national courts in the EU.
What about IP rights other than copyright?
Under Article 11 of the IP Enforcement Directive, member states must provide a remedy against 'intermediaries' whose services are used by a third party to infringe an intellectual property right. So for rights other than copyright, performers' and database rights (where there is specific provision under CDPA) the IP owner would rely on Article 11 and the High Court's discretionary ability to grant an injunction wherever it seems just to do so. The same principles as set out in this case seem likely to apply.