The illegal distribution of copyright protected works via internet file sharing platforms is pervasive. Based on the information claims provided by the German IP laws, in particular based on Sect. 101 Copyright Act, the rights holders have a reasonable chance to identify the internet subscribers whose connection was used for the illegal distribution of the copyright protected work. Obviously, the subscriber is not necessarily the same person who uploaded the content at issue. In order to identify the actual infringer, the rights holders usually have to incur costs, in particular legal costs necessary for persuading the subscriber to disclose the actual infringer’s identity. Courts have been very reluctant to afford rights holders a claim for reimbursement of such costs. This reluctance cannot be maintained any longer.
The Federal Court of Justice issued an important and judicious decision strengthening the rights holders’ position. It held that if, in the event that a copyrighted work is made publicly available via an internet file sharing platform, the right holder issues a warning letter to the subscriber who then names the infringer, the damages to be paid by the actual infringer include the costs of this warning letter.
In the case at hand, the plaintiff owned the exclusive rights to use the computer game "Dead Island - Riptide". The defendant made this computer game available for download twice via his father's internet connection. The plaintiff became aware of the infringement and issued a warning to the defendant's father incurring lawyer’s fees in the amount of approximately EUR 860,00. The defendant's father issued a cease-and-desist declaration and informed the plaintiff that the infringement had been committed by the defendant. He did not reimburse the plaintiff’s legal fees.
The plaintiff filed suit and, inter alia, sought a payment order against the actual infringer covering the legal costs spent for issuing the warning letter to the infringer’s father. The Dusseldorf District Court and the Dusseldorf Higher Regional Court dismissed the claim. The Federal Court of Justice reversed and remanded.
The Federal Court of Justice based its judgment, inter alia, on the objective set out in the first sentence of Article 13(1) of Directive 2004/48/EC of 29 April 2004 on the Enforcement of Intellectual Property Rights (“Enforcement Directive”), namely that the right holder must obtain reasonable compensation for the actual damage suffered as a result of the infringement. Consequently, the Federal Court of Justice pointed out that, contrary to the opinion of the Dusseldorf Higher Regional Court, sending a warning letter to the internet subscriber is a necessary reaction of the rights holder, so that the costs incurred constitute a damage to be reimbursed by the actual infringer.
The Court held that the lawyer's fees were caused by the infringement and necessary and expedient from the point of view of the injured party in order to exercise their rights. In the circumstances of the case, the necessity of a warning letter resulted from its function as a means of clarifying the facts of the case. The rights holder’s only means of investigating the case is to obtain information from the subscriber. Contrary to the opinion of the Dusseldorf Higher Regional Court, the rights holder does not need to refrain from incurring legal costs by first submitting an informal request for information to the subscriber. The Federal Court of Justice rightfully points out that such an informal request is not sufficient as the recipient of the request is not legally obliged to respond. Therefore, if the request remained unanswered, the right holder would nevertheless need to contact the subscriber again – now with a warning letter incurring legal costs – before any legal action is taken against the unresponsive subscriber. According to the Federal Court of Justice, this delays the enforcement of the infringed rights unduly. If the rights holder immediately issues a warning to the subscriber and signalizes his willingness to enforce claims in court, the subscriber will be more likely to provide rapid information about other users. In this respect, the warning letter has the function of an insistent request for information.
This is an important shift in the case-law, which gives the rights holders more leeway to incur reasonable expenses in order to facilitate the enforcement of their rights. It justly allocates the risk to bear costs of an expedient investigation of an infringement to the party who deserves to bear it, to the infringer. This is good news for rights holders in Germany.