The Digital Economy Act 2010 was rushed through Parliament and into law to clear the decks for the general election in May 2010. The most controversial aim of the act is to reduce online copyright infringement. The act imposes significant obligations on internet service providers (ISPs). Under the act's regime, copyright owners can identify and report internet protocol (IP) addresses through which they believe their copyright has been infringed to the relevant ISP, which is then bound by two "initial obligations": (i) to notify the subscriber to the internet access service that his or her IP address has been reported as infringing copyright within one month of receiving a report; and (ii) to provide copyright infringement lists to a copyright owner following a request by that copyright owner. Such lists contain a record of subscribers who have been the subject of copyright infringement reports which have reached a certain threshold.
More detail on how these obligations will work is to be the subject of a code of practice issued by the ISP regulator, Ofcom. The cost involved in complying with the initial obligations will be considerable – and who will bear the brunt of these costs has been one of the most contentious issues during the act's gestation. It was left to a government minister to specify how the costs will be shared between ISPs and copyright owners and, in relation to appeals brought by aggrieved subscribers, the subscribers concerned.
The government has consulted on the issue of costs sharing and recently published its response.
In March 2010 the government business department opened a consultation on its proposals for the sharing of costs of the initial obligations:
- Copyright owners and ISPs would share the costs borne by Ofcom in its role under the act.
- Copyright owners would bear their own costs to:
- identify infringing subscribers;
- produce copyright infringement reports; and
- take legal action against subscribers.
- Copyright owners and ISPs would share the cost, in the ratio 75:25, of ISPs:
- processing copyright infringement reports;
- maintaining copyright infringement lists; and
- issuing notifications to subscribers.
The majority of ISPs that responded to the consultation rejected the government's proposals, arguing that as sole beneficiaries of the process, copyright owners should be forced to pay the entirety of the costs. The ISPs contended that the effect of costs sharing would cause undue prejudice to the majority of subscribers who do not infringe copyright law.
The ISPs also argued that:
- existing commercial pressures and competition already ensure that processes are completed in a timely and cost-effective manner;
- copyright owners should not be treated any differently to law enforcement agencies, which are obliged to pay the entirety of costs in complying with ISPs' obligations under the Regulation of Investigatory Powers Act 2000; and
- ISPs will be liable to contribute towards costs for other parts of the process (in which they are not directly involved), but will not be able to control these costs.
Copyright owners have similarly expressed concern over the proposals, including that:
- they already pay for the detection and enforcement of copyright law and so should not be liable for any additional costs;
- the 75:25 split in costs sharing is an arbitrary ratio and a 50:50 split with ISPs would be the fairest solution;
- costs should lie where they fall; and
- the proposed ratio would disincentivise many copyright owners from reporting infringers.
Copyright owners also warned of the risk of vexatious appeals if no fee is imposed on subscribers who choose to appeal. They foresaw the process becoming clogged with a large number of frivolous appeals. However, consumer groups contended that in the interests of fairness, fees should not be imposed on subscribers.
On September 14 2010 the government published its conclusions:
- A split in costs of 75:25 will be implemented, and will include the appeals process.
- The appeals process should be free to subscribers.
- An appeal fee will be imposed on subscribers if the level of vexatious appeals becomes unsustainable.
All stakeholder groups have reacted unfavourably towards these conclusions.
The Internet Service Providers Association has denounced the conclusions as contrary to the promotion of the digital economy. ISP TalkTalk has gone further and issued a statement on its online blog criticising the rulings as "absolutely outrageous". Together with BT, it is seeking judicial review of the act on the basis that various obligations of EU law have not been followed.
Consumer groups have similarly criticised the conclusions on the grounds that subscribers will inevitably pick up the tab through increased broadband service charges.
Copyright owners have been less scathing of the conclusions. The Federation Against Software Theft has called the 75:25 costs sharing split "a sensible compromise".
Notwithstanding the strong reaction from stakeholders on costs, the notification and appeals process is a dramatic step towards combating online copyright infringement. However, those who intend to breach copyright laws are likely to continue to do so through the use of data encryption to avoid detection of their IP address. The act's regime is likely to level the playing field initially, but the reality is that technology often develops faster than regulatory processes.
There is a concern that, in the short term at least, large copyright owners will take up the process, with smaller copyright owners holding back to see whether the system works. The regime's success is dependent on the participation and cooperation of both copyright owners and ISPs, but it is uncertain whether these two very different stakeholders will operate together effectively enough for it to work and reduce online copyright infringement in the United Kingdom substantially.
For further information on this topic please contact Oliver Bray or Tom Cadwaladr at Reynolds Porter Chamberlain LLP by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected] or [email protected]).