ECJ finds order requiring ISP to filter and block infringing files incompatible with EU law | Practical Law

ECJ finds order requiring ISP to filter and block infringing files incompatible with EU law | Practical Law

The ECJ has held that an order imposed by a Belgian court, which required an internet service provider to filter and block access by its customers to files containing infringing copies of musical works, was incompatible with EU law. (Scarlet Extended SA v Société belge des auteurs, compositeurs et éditeurs SCRL, Case C-70/10, 24 November 2011.) (Free access.)

ECJ finds order requiring ISP to filter and block infringing files incompatible with EU law

Practical Law UK Legal Update Case Report 0-513-6404 (Approx. 6 pages)

ECJ finds order requiring ISP to filter and block infringing files incompatible with EU law

by PLC IPIT & Communications
Published on 24 Nov 2011 • European Union
The ECJ has held that an order imposed by a Belgian court, which required an internet service provider to filter and block access by its customers to files containing infringing copies of musical works, was incompatible with EU law. (Scarlet Extended SA v Société belge des auteurs, compositeurs et éditeurs SCRL, Case C-70/10, 24 November 2011.) (Free access.)
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The ECJ has held that an order imposed by a Belgian court, which required an internet service provider (ISP) to introduce a system to filter electronic communications passing via its services and block access by its customers to files containing infringing copies of musical works, was incompatible with EU law. The court ruled that the injunction would require the ISP to monitor its customers' data, so as to be contrary to Article 15(1) of the E-Commerce Directive (2000/31/EC), which provides that member states must not impose a general obligation on information society services providers acting as mere conduits, caches or hosts of information, to monitor the information which they transmit or store. The injunction was also not consistent with EU law, taking account of the requirements that stemmed from the protection of the applicable fundamental rights, because, in adopting measures to protect intellectual property rights, the national authorities and courts had to strike a fair balance between protecting those rights and protecting the fundamental rights of individuals protected by those measures. In this case, the injunction did not strike the required fair balance because it would result in a serious infringement of the ISP's freedom to conduct its business by requiring it to install a complicated, costly, permanent computer system at it own expense, and would also infringe the fundamental rights of the ISP's customers to protect their personal data and their freedom to receive or impart information. (Scarlet Extended SA v Société belge des auteurs, compositeurs et éditeurs SCRL, Case C-70/10, 24 November 2011.)
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Background

E-Commerce Directive

The Directive on certain legal aspects of information society services (ISS), in particular electronic commerce, in the Internal market (2000/31/EC) (E-Commerce Directive) limits the liability of ISS providers (essentially those who provide online services, including internet service providers (ISPs)) where they act as mere conduits (Article 12), caches (Article 13) or hosts of information (Article 14). Article 15(1) of the E-Commerce Directive provides that member states must not impose a general obligation on ISS providers when providing the services covered by Articles 12, 13 and 14, to monitor the information for which they transmit or store.

Copyright Directive

The Directive on the harmonisation of certain aspects of copyright and related rights in the information society (2001/29/EC) (Copyright Directive) provides that member states must:
  • Provide appropriate sanctions and remedies in respect of infringements of the rights and obligations set out in it, and take all the measures necessary to ensure that those sanctions and remedies are applied. The sanctions thus provided must be effective, proportionate and dissuasive.
  • Ensure that rights-holders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right.
(Article 8(1) and (2), Copyright Directive.)

IP Enforcement Directive

The Directive on the enforcement of intellectual property (IP) rights (2004/48/EC) (IP Enforcement Directive) provides that it shall not affect the Community provisions governing the substantive law on IP or the E-Commerce Directive, in general, and Articles 12 to 15 of the E-Commerce Directive in particular (Article 2(3)). The IP Enforcement Directive requires member states to:
  • Provide for the measures, procedures and remedies necessary to ensure the enforcement of IP rights, which shall be fair and equitable and shall not be unnecessarily complicated or costly (Article 3(1)). These should be effective, proportionate and dissuasive. (Article 3(2)).
  • Ensure that, where a judicial decision is taken finding an infringement of an IP right, the judicial authorities can issue against the infringer an injunction aimed at prohibiting the continuation of the infringement, and that rights-holders can apply for an injunction against intermediaries whose services are used by a third party to infringe an IP right (Article 11).

Facts

The Société belge des auteurs, compositeurs et éditeurs SCRL (SABAM) is a management company which represents authors, composers and editors of musical works in authorising the use of their copyright-protected works by third parties. Scarlet Extended SA is an ISP.
In the course of 2004, SABAM concluded that internet users using Scarlet's services were downloading works in SABAM's catalogue from the internet, without authorisation and without paying royalties, by means of peer-to-peer (P2P) networks. SABAM brought interlocutory proceedings against Scarlet before the President of the Tribunal de première instance, Brussels seeking:
  • A declaration that the copyright in musical works contained in its repertoire had been infringed.
  • An order requiring Scarlet to bring such infringements to an end by blocking, or making it impossible for its customers to send or receive in any way, files containing a musical work using P2P software without the rights-holders' permission, on pain of a periodic penalty.
The President of the Tribunal de première instance found that copyright had been infringed, and granted SABAM the order sought.
Scarlet appealed, claiming that the injunction was contrary to the provision of Belgian law which transposed Article 15 of the E-Commerce Directive into national law, because it would impose on Scarlet, de facto, a general obligation to monitor communications on its network; and that the installation of a filtering system would be in breach of EU law provisions on the protection of personal data and the secrecy of communications, since such filtering involves the processing of IP addresses, which are personal data.
The cour d'appel de Bruxelles stayed the proceedings and referred various questions to the ECJ for preliminary ruling.

Questions referred

The ECJ explained that the national court was asking, in essence, whether the E-Commerce Directive, the Copyright Directive, the IP Enforcement Directive, the Data Protection Directive (95/46/EC), and the E-Privacy Directive (2002/58/EC), read together and construed in the light of the requirements stemming from the protection of the applicable fundamental rights, had to be interpreted as precluding an injunction imposed on an ISP to introduce a system for filtering all electronic communications passing via its services (in particular those involving the use of use of P2P software) that:
  • Applies:
    • indiscriminately to all its customers;
    • as a preventive measure;
    • exclusively at its expense; and
    • for an unlimited period.
  • Is capable of identifying on that provider's network the movement of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold IP rights, with a view to blocking the transfer of files the sharing of which infringes copyright (the contested filtering system).

Advocate General's ruling

Advocate General Cruz Villalón recommended that the ECJ declare the injunction to be contrary to EU law (see Legal update, Advocate General considers Belgian orders requiring filtering and blocking of infringing files contrary to EU law).

Decision

The ECJ concluded that the Directives, read together and construed in the light of the requirements stemming from the protection of the applicable fundamental rights, had to be interpreted as precluding the injunction. The ECJ's reasoning is summarised below.

Powers of member states to impose injunctions for IP-rights infringement

The court noted that Article 8(3) of the Copyright Directive and Article 11 of the IP Enforcement Directive, provided that IP rights-holders could apply for an injunction against intermediaries, such as ISPs, whose services were being used by a third party to infringe their rights. ECJ case law established the jurisdiction conferred on national courts had to allow them to order those intermediaries to take measures aimed not only at bringing to an end infringements already committed against IP rights using their ISS, but also at preventing further infringements.
The rules for the operation of the injunctions (for example, the conditions to be met) were a matter for national law. However, those national rules and their application by the national courts, had to observe the limitations arising from the Copyright Directive and IP Enforcement Directive and from the sources of law to which those directives referred, including Article 15(1) of the E-Commerce Directive.
The ECJ had already ruled in L'Oréal SA and others v eBay International AG and others, Case C-324/09 that the prohibition in Article 15(1) applied to national measures which would require an intermediary provider, such as an ISP, to actively monitor all the data of each of its customers in order to prevent any future infringement of IP rights. Furthermore, such a general monitoring obligation would be incompatible with Article 3 of the IP Enforcement Directive, which states that the measures referred to by the Directive must be fair and proportionate and must not be excessively costly. (See Legal update, ECJ rules on L'Oréal v eBay reference.)

Did the injunction require the ISP to monitor its customers' data?

In those circumstances, the court had to examine whether the injunction at issue, which required the ISP to install the contested filtering system, would require the ISP to actively monitor all its customers' data in order to prevent future IP-right infringement. The ECJ concluded that the system would require the ISP to do this, so as to be contrary to Article 15(1) of the E-Commerce Directive, because the contested filtering system would require the ISP to:
  • Identify, within all of the electronic communications of all its customers, the files relating to P2P traffic.
  • Identify, within that traffic, the files containing works in respect of which holders of IP rights claim to hold rights.
  • Determine which of those files are being shared unlawfully.
  • Block file sharing that it considers to be unlawful.

Was the injunction consistent with EU law?

In order to decide whether that injunction was consistent with EU law, the court said that it also had to take account of the requirements that stemmed from the protection of the applicable fundamental rights.
The injunction in issue was aimed at pursuing the protection of copyright, an IP right. The protection of IP was enshrined in Article 17(2) of the Charter of Fundamental Rights of the EU. However, there was nothing in that provision or the ECJ's case law to suggest that the right was inviolable. It was clear from the ECJ's judgment in Productores de Música de España (Promusicae) v Telefónica de España SAU, Case C-275/06, that the protection of the fundamental right to property, including rights linked to IP, had to be balanced against the protection of other fundamental rights. More specifically, in the context of measures adopted to protect copyright holders, national authorities and courts had to strike a fair balance between the protection of copyright and the protection of the fundamental rights of individuals who are affected by such measures. (See Legal update, ECJ considers whether EC law requires ISPs to disclose file-sharers' details.)
The injunction in issue involved monitoring all the electronic communications made through the ISP's network in the interests of the rights-holders, without limitation of time, in order to protect not only existing works but future works not yet created. This would result in a serious infringement of the ISP's freedom to conduct its business, provided for under Article 16 of the Charter, since it would require that ISP to install a complicated, costly, permanent computer system at its own expense. This would also be contrary to the conditions laid down in Article 3(1) of the IP Enforcement Directive.
Moreover, the effects of that injunction would not be limited to the ISP concerned, as the contested filtering system could also infringe the fundamental rights of that ISP's customers, namely their right to protection of their personal data and their freedom to receive or impart information, which were safeguarded by Articles 8 and 11 of the Charter respectively, because the injunction:
  • Would involve a systematic analysis of all content and the collection and identification of users' IP addresses from which unlawful content on the network is sent, which were protected personal data.
  • Could potentially undermine freedom of information, since the contested filtering system might not distinguish adequately between unlawful content and lawful content, which could lead to the blocking of lawful communications.
Therefore, the injunction did not respect the requirement that a fair balance be struck between, on the one hand, the protection of the IP right enjoyed by copyright holders, and, on the other hand, that of the freedom to conduct business enjoyed by operators such as ISPs, the right to protect personal information, and the freedom to receive or impart information.

Comment

The ECJ's decision is significant insofar as it confirms that an injunction of the nature imposed by the Belgian court, which required the ISP in issue to introduce, at its expense, a permanent electronic filtering system for all electronic communications passing via its services, which applied to all customers, would be incompatible with EU law. The ECJ's key concerns seem to have been that the filtering system would mean that the ISP was required to monitor data relating to its customers contrary to Article 15(1) of the E-Commerce Directive, and that the injunction would be inconsistent with various fundamental rights provided for under the Charter, including the ISP's freedom to conduct its business and the right of the ISP's customers to protect their personal data. It seems to have been a fairly significant factor that the measures were costly, and that the expense of taking the measures would be borne by the ISP, which the ECJ considered rendered the injunction both incompatible with Article 16 of the Charter and Article 3(1) of the IP Enforcement Directive. The ruling will certainly be welcomed by ISPs.

Case

Scarlet Extended SA v Société belge des auteurs, compositeurs et éditeurs SCRL, Case C-70/10, 24 November 2011.