The Court of Appeal of Milan recently issued a very important decision in the Yahoo! v. RTI case. The Court overturned the First Instance decision and held that Yahoo! can rely on the hosting provider exemption under the E-Commerce Directive and Italian implementing Legislative Decree.

  • The case

The dispute dates back to 2009, when RTI (the largest Italian broadcasting company) sued Yahoo! Italia (and Italia On Line, “IOL”, in a separate proceeding) for copyright infringement in connection with its video-sharing platform allowing user to upload and share videos, including television shows protected by RTI’s copyright.

The Court of Milan held that Yahoo! could not rely on the hosting provider exemption under the E-Commerce Directive and introduced a distinction between ‘active’ and ‘passive’ hosting providers. According to the Court, Yahoo! could not be considered a ‘passive’ provider within the meaning of Recital 42 of the E-Commerce Directive, i.e. a provider whose activity is limited to the technical process of operating and giving access to a communication network over which information is made available by third parties. Yahoo! should instead be deemed an ‘active’ hosting provider on the following grounds: (i) the terms and conditions of the website included users obligation to indemnify Yahoo! for damages related to the videos uploaded and shared by them; (ii) the website included a service to report infringement of third parties’ rights, which confirmed that Yahoo! undertook to monitor the uploaded videos; (iii) a search engine service allowed the indexing of the uploaded videos and their contents, thus amplifying their visibility; (iv) user terms and conditions included a licence according to which users granted Yahoo! inter alia the right to display the uploaded videos.

In light of the above, the Court concluded that Yahoo! was liable for copyright infringement.

  • A hosting provider is a hosting provider!

The Court of Appeal overturned the First Instance decision and held that the distinction between ‘active’ and ‘passive’ hosting providers is misleading and was envisaged in neither the E-Commerce Directive nor in the Italian implementing Legislative Decree.

Instead, such regulations provides that a hosting provider is not liable for the information stored at the request of a recipient of the service, on condition that: (a) the provider does not have actual knowledge of illegal activity or information, (b) as regards claims for damages, is not aware of facts or circumstances from which the illegal activity or information is apparent, and (c) upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information, unless when recipient of the service is acting under the authority or the control of the provider.

As a consequence, a hosting provider is not subject to any general obligation to monitor in advance the information which it transmits or store nor to actively seek facts or circumstances indicating any illegal activity carried out through its website. A provider is in a neutral position with respect to its users and contents uploaded by them, in accordance with the freedom of expression and information on the Internet. A hosting provider’s liability shall be triggered only in case it fails to remove the illicit contents after having notice of them.

The fact that an hosting provider (i) enables a search functionality on the website, (ii) manages the website and (iii) gains an economic benefit, does not make it an ‘active’ hosting provider, according to the definition provided by the Court of Milan. 

Therefore the Court of Appeal concluded that Yahoo! could rely on the hosting provider exemption under the E-Commerce Directive.

This interpretation is in line with the case law of the CJEU’s on the subject matter (e.g. L’Oreal v. eBay, C-324/09) but marks a significant change of approach with respect to a common orientation of the Italian courts about ISPs liability (e.g. the recent decision of the Court of Turin).

  • Hosting provider’s liability is triggered by a cease and desist letter?

Yes, said the Court of Appeal. A detailed cease and desist letter, including the URL of the pages where the contents are hosted or the link to such pages, is sufficient to trigger hosting provider’s obligation to remove the content and, in case of failure, its liability for contributory infringement. 

In this respect, the Court of Appeal went even further implementing Legislative Decree, which provides that ISPs must remove the infringing content pursuant to an order issued by a judge or the competent administrative authority.

This decision certainly clarified the scope of hosting provider’s liability and aligned the Italian case law to the CJEU. There is no doubt that it will play a pivotal role in future disputes concerning ISPs liability.