Précis – Rights owners have obtained a Norwich Pharmacal order against an internet service provider requiring the provider to disclose information regarding its subscribers.

What? Golden Eye (International) Limited (“Golden Eye”) and others brought an action against Telefonica UK Ltd trading as O2 (“O2”) in relation to the infringement of copyright in the claimants’ films through P2P networks.  The case is Golden Eye (International) Ltd and others v Telefonica UK Ltd [2012] EWHC 723(Ch) (26 March 2012).

So what? The case is an example of one method available to rights holders in the ongoing battle against internet piracy.  It also provides useful guidance regarding the use of Norwich Pharmacal orders, “speculative invoicing”, and how a court will balance the interest of internet service subscribers and rights holders.

The applicants were the exclusive licensees of copyright in a series of adult films, and various copyright owners. Under the terms of the relevant licences, the first claimant had the exclusive right to take action in relation to copyright infringement in relation to P2P networks. The claimants alleged that copyright in various films had been infringed by individuals subscribed to O2, for example by copying the films without consent.

A Norwich Pharmacal order is a court order which requires a respondent to disclose documents or information. In order to obtain a Norwich Pharmacal order, the applicant (in this case, Golden Eye and others) must demonstrate that the respondent (O2) is involved or mixed up, even innocently, in some form of wrongdoing. The respondent need not be a party to potential proceedings. O2 did not oppose the application in this case, but required a court order before disclosing information about its subscribers.

The use of Norwich Pharmacal orders, and rights holders’ use of information disclosed in accordance with Norwich Pharmacal orders, has been subject to recent scrutiny by both courts and consumer groups.  Consumer Focus (acting as intervener in this case) argued that Golden Eye’s application was an example of “speculative invoicing”. (Consumer Focus, the trading name for the National Consumer Council of England, Wales and Scotland and a statutory body, represents the interests of consumers, particularly low income and vulnerable consumers.)

“Speculative invoicing” was succinctly described by Arnold J [at paragraph 36 of his judgment] as follows:

“In essence, it involves the sending of letters before action to thousands of internet subscribers whose internet connection is alleged to have been used for small-scale copyright infringement and whose names and addresses have been obtained by means of Norwich Pharmacal orders against their ISPs [internet service providers]. Without seeking to confirm whether the internet subscriber was the person responsible for the uploading/downloading of the copyright work that has been detected, the internet subscriber is requested to pay a substantial sum which has no relation to the actual damage caused by the alleged copyright infringement or the costs incurred. Typical sums demanded are in the range £500 to £1000… The tactic is to scare people into paying the sums by threatening to issue court proceedings. If this does not work, proceedings are not normally issued. This is because the economic model for speculative invoicing means that it is more profitable to collect monies from those who pay rather than incur substantial costs in pursuing those who do not pay in court. Where proceedings are issued, they are not pursued if a default judgment cannot be obtained.”

Speculative invoicing was the subject of the high profile case of ACS: Law. (ACS: Law stopped trading in February 2012; the solicitor involved has been suspended from practice for two years.) Consumer Focus pointed to the fact that Golden Eye had failed to pursue infringement actions against infringers identified following Norwich Pharmacal orders obtained by Golden Eye against BT and BSkyB in 2009 and 2010 respectively. Golden Eye intended to send letters of claim to up to 9,124 individuals.

Notwithstanding those arguments, the judge, Arnold J, granted an order. Arnold J found that the application was a genuine attempt to redress a wrong; and confirmed that it is not a requirement for the grant of a Norwich Pharmacal order that the applicant undertakes or even intends to take formal action against the wrongdoers identified as a result of disclosure in accordance with that order.

Arnold J emphasised that one of the key factors in deciding whether or not to grant a Norwich Pharmacal order in a file-sharing case is how to balance the rights of copyright owners/licensees, and the right of subscribers to an internet service provider to data protection and privacy.

The applicants had employed a tracking service to identify the IP addresses from which individuals were making available the applicants’ copyright films over P2P networks.  Arnold J found that the applicants had a good arguable case that file-sharing did take place on the IP addresses the applicants identified; that many (but not all) of those IP addresses were allocated to O2 subscribers; that O2 was mixed up in the infringements perpetrated by those subscribers; and that disclosure of the subscriber information requested was necessary in order for the applicants to protect their intellectual property rights.

On the issue of proportionality, Arnold J referred to various case law and statute, at national and EU level, which provided that his judgment must strike a balance between protecting the applicants’ intellectual property rights, and protecting the fundamental rights of individuals affected by the requested order, including the right to privacy and to the protection of personal data. Arnold J concluded that the order was proportionate, provided that the order and Golden Eye’s proposed letter of claim were drafted appropriately. Arnold J’s amendments included removing recitals in the order which he said could give uninformed recipients an incorrect understanding of the order and cause unnecessary stress; and amending the letter to make clearer that the letter’s recipient may not be the person responsible for the infringing acts at that IP address.  Arnold J’s detailed comments will be helpful to both applicants and respondents in this type of case in future.