After a judicial review challenge by BT and TalkTalk delayed it by two years, Ofcom has now published its updated draft Initial Obligations Code (the Code). The Code will regulate the operation of the controversial provisions in the Digital Economy Act 2010 which are designed to force Internet Service Providers (ISPs) to assist copyright owners in combating online copyright infringement in general and file sharing in particular.

Obligations upon ISPs

The Digital Economy Act imposes three main obligations upon ISPs, numbered below. In respect of each we set out the key provisions of the Code. Ofcom’s Code and its accompanying consultation documents are long – more than 250 pages between them – so we present only a summary here.

  1. The obligation to notify their subscribers where they are alleged to have committed copyright infringement:
  • Only providers of fixed internet access supplying services over more than 400,000 broadband lines will initially be subject to any obligations under the Code. At present this covers BT (including PlusNet), Virgin Media, TalkTalk (including AOL), Sky, Everything Everywhere (Orange and T-Mobile) and O2 (including Be).
  • Not all copyright owners can participate in the scheme. Copyright owners must effectively “sign up” in advance (either directly or via an authorised agent, perhaps a representative body) and pay their share of the costs of the scheme before ISPs will be obliged to send out notices. Copyright owners will also need to have their systems and processes for detecting infringements in the first place approved by Ofcom.
  • A participating copyright owner who wishes an ISP to notify a subscriber must gather evidence demonstrating that there are “reasonable grounds” to believe that the subscriber’s connection has been used to infringe. They then report the alleged infringement to an ISP within one month by way of a Copyright Infringement Report (CIR).
  • Receipt of CIRs will trigger the notification obligation. ISPs will send three infringement notices to subscribers as follows:
  1. the first notice will be sent in response to the first CIR;
  2. the second notice will be sent in response to the first CIR received one month after the sending of the first notice; and
  3. the third notice will be sent in response to the first CIR received one month after the sending of the second notice (although the third notice will only be sent if the subscriber has received two earlier notices within the previous 12 months).
  • In each case the ISP will have one month from receipt of the CIR to send the relevant notice to the subscriber by first class post. The evidence upon which the second and third notices are based must have been gathered at least 20 working days after the date of the previous notice. This permits subscribers the opportunity to “change their ways” before they receive further notices. It is worth noting that receipt of a notice has less to do with how much a subscriber infringers, and more with how often he or she infringes.
  1. The obligation to maintain a copyright infringement list (CIL) recording all notifications of infringements to subscribers, and to make that list available to copyright owners upon request:
  • Once a subscriber receives three notices in a 12 month period, the subscriber will be placed on the CIL by the ISP. The subscriber’s third infringement notice will inform him or her of this. CIRs do not have to come from the same copyright owner to trigger second and third notices, and so three CIRs from any copyright owner reported over the relevant periods would be enough for the subscriber to find himself or herself on the list.
  • A copyright owner may request a copy of the relevant part of the CIL, which must match notifications made for the past year as a result of the owner’s CIRs with a particular user, who will be listed anonymously by a unique identifier. The ISP must provide the list within 10 working days. The CIL will not list CIRs submitted by other copyright owners.
  • It is intended that CILs will assist copyright owners in choosing whom to pursue further action against by highlighting the repeat offenders. Before taking any such action (such as suing for infringement), copyright owners will still need to apply to court for an order for disclosure of the subscriber’s identity, as has always been required.
  1. The obligation to impose “technical measures” upon subscribers who are identified as repeat offenders, for example to slow down or even suspend their internet connection:
  • The most controversial element of the Digital Economy Act is not dealt with by the Code. Under the Act, technical measures may not be imposed until the Code has been in force for a minimum of 12 months. Additional secondary legislation would also be required to set up a framework for technical obligations. As the timetable below indicates, it is likely to be some years before we see technical measures, if we are ever to see them at all.

Appeals by subscribers

A subscriber who receives a notice will have 20 working days to appeal to an independent appeals body. The appeal may be made only on the grounds that (a) there was in fact no infringement by the subscriber; (b) the relevant CIR does not relate to the subscriber’s IP address at the time of the infringement; or (c) someone else committed the infringement and the subscriber took reasonable steps to prevent other persons infringing copyright using his or her connection.

The ability to appeal on “any other ground”, originally proposed by Ofcom, has been scrapped at the request of the Government.

Costs

Although BT and TalkTalk’s judicial review action failed in both the High Court and the Court of Appeal, they did succeed in reducing the proportion of the costs of the scheme that ISPs will be expected to pay.

It is now proposed that copyright owners bear the brunt of the costs, paying all of the costs incurred by Ofcom (setting up and running the scheme), all of the costs of the appeals body (save as below) and 75 percent of the costs “efficiently and reasonably” incurred by ISPs in carrying out their obligations. ISPs will pay the remaining 25 percent of those costs. Costs paid by copyright owners will be shared amongst them in proportion to the number of CIRs they submit.

Although appeal costs will be mostly paid for by copyright owners, a £20 appeal fee will be payable by the appealing subscriber. The subscriber will receive a refund if the appeal succeeds.

Timetable

Although in a near final form, the Code remains in draft and Ofcom is consulting on its contents for one month until 26 July 2012. It is consulting for a slightly longer period in respect of costs, until 18 September 2012. Following this, Ofcom envisages the following rough timetable:

  • Late summer/autumn 2012 – Code referred to the European Commission for approval under the Technical Standards Directive
  • Late 2012 – Code laid in Parliament
  • January 2013 – Code in force
  • November 2013 – Appeals body to be ready and operational
  • March 2014 – First notifications to be sent
  • Around September 2014 – Ofcom to begin review of which ISPs are covered by the Code
  • January 2015 – Earliest date at which technical measures could be imposed (although likely to be somewhat later than this).