Filtering is not for social networks, says the CJEU

Today the Court of Justice of the European Union published its long-awaited judgment in Case C-360/10 SABAM v Netlog (notice of the referral to the CJEU was reported in this Blog here).

Imposing certain filtering systems for information
circulating over the Internet may not be very handy, 
argues the CJEU 

As our readers will remember, the facts of the case were not dissimilar from those in Scarlet (with the difference that Netlog is a social network, while Scarlet is an internet service provider which provides its customers with access to the internet without offering other services such as downloading or file sharing).

As reported in the Court’s press release, SABAM is a management company which represents authors, composers and publishers of musical works. On that basis, it is responsible for, inter alia, authorising the use by third parties of copyright-protected works of those authors, composers and publishers.

SABAM claimed that Netlog’s social network (where every person who registers acquires a personal profile which the user can complete himself and which becomes available globally) also offers all users the opportunity to make use, by means of their profile, of the musical and audio-visual works in SABAM’s repertoire, making those works available to the public in such a way that other users of that network can have access to them without SABAM’s consent and without Netlog paying it any fee.

Following unsuccessful attempts to conclude an agreement aimed at obtaining payment of a fee by Netlog for the use of the SABAM repertoire, in 2009 SABAM had Netlog summoned before the President of the rechtbank van eerste aanleg te Brussel (Court of First Instance, Brussels) in injunction proceedings. SABAM sought, inter alia, to obtain an order that Netlog cease unlawfully making available musical or audio-visual works from SABAM’s repertoire. In response to this, Netlog submitted that granting SABAM’s injunction would have been tantamount to imposing on Netlog a general obligation to monitor. This would have been contrary to Article 21(1) of the Law of 11 March 2003 on certain legal aspects of information society services, which transposes Article 15(1) of the Ecommerce Directive into Belgian law. In addition, Netlog claimed that the granting of such an injunction could have resulted in the imposition of an order introducing, for all its customers, in abstracto and as a preventative measure, at its own cost and for an unlimited period, a system for filtering most of the information which is stored on its servers in order to identify on its servers electronic files containing musical, cinematographic or audio-visual work in respect of which SABAM claims to hold rights, and subsequently blocking the exchange of such files.

The Court of First Instance decided to stay the proceedings and refer the following question to the Court of Justice for a preliminary ruling:

"Do Directives 2001/29 and 2004/48, in conjunction with Directives 95/46, 2000/31 and 2002/58, construed in particular in the light of Articles 8 and 10 of the European Convention on the Protection of Human Rights and Fundamental Freedoms [signed in Rome on 4 November 1950], permit Member States to authorise a national court, before which substantive proceedings have been brought and on the basis merely of a statutory provision stating that “[the national courts] may also issue an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right”, to order a hosting service provider to introduce, for all its customers, in abstracto and as a preventive measure, at its own cost and for an unlimited period, a system for filtering most of the information which is stored on its servers in order to identify on its servers electronic files containing musical, cinematographic or audio-visual work in respect of which SABAM claims to hold rights, and subsequently to block the exchange of such files?"

Today the Court provided its response and, in compliance with its earlier ruling in Scarlet, held that the owner of an online social network cannot be obliged to install a general filtering system, covering all its users, in order to prevent the unlawful use of musical and audio-visual work.

After having stated that Netlog is a hosting service provider as per Article 14 of the E-Commerce Directive, the Court found to be common ground that implementation of a filtering system would require the hosting service provider to identify, within all of the files stored on its servers by all its service users, the files which are likely to contain works in respect of which holders of IP rights claim to hold rights. Next, the hosting service provider would have to determine which of those files are being stored and made available to the public unlawfully, and, lastly, it would have to prevent files that it considers to be unlawful from being made available. Such preventive monitoring would therefore require active observation of the files stored by users with the owner of the social network. Accordingly, the filtering system would require that owner to carry out general monitoring of the information stored on its servers, something which is prohibited by Article 15(1) of the E-Commerce Directive. 

Though the protection of the right to intellectual property is enshrined in Article 17(2) of the Charter of Fundamental Rights of the European Union, says the Court, there is nothing whatsoever in the wording of that proviso or in the Court’s case law to suggest that that right is inviolable and must for that reason be absolutely protected. Indeed, pursuant to the Court's judgment in Case C‑275/06  Promusicae, the protection of the fundamental right to property, which includes the rights linked to intellectual property, must 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 must strike a fair balance between the protection of copyright and the protection of the fundamental rights of individuals who are affected by such measures. Accordingly, in circumstances such as those in the main proceedings, national authorities and courts must, in particular, strike a fair balance between the protection of the intellectual property right enjoyed by copyright holders and that of the freedom to conduct a business enjoyed by operators such as hosting service providers pursuant to Article 16 of the Charter.

As such, the injunction requiring the installation of the contested filtering system involves monitoring all or most of the information stored by the hosting service provider concerned, in the interests of those rightholders. Moreover, that monitoring has no limitation in time, is directed at all future infringements and is intended to protect not only existing works, but also works that have not yet been created at the time when the system is introduced.  Accordingly, such an injunction would result in a serious infringement of the freedom of the hosting service provider to conduct its business since it would require that hosting service provider to install a complicated, costly, permanent computer system at its own expense, which would also be contrary to the conditions laid down in Article 3(1) of Directive 2004/48, which requires that measures to ensure the respect of intellectual-property rights should not be unnecessarily complicated or costly. 

In those circumstances, such an injunction is to be regarded as not respecting the requirement that a fair balance be struck between, on the one hand, the protection of the intellectual-property right enjoyed by copyright holders, and, on the other hand, that of the freedom to conduct business enjoyed by operators such as hosting service providers. Moreover, the effects of that injunction would not be limited to the hosting service provider, as the contested filtering system may also infringe the fundamental rights of that hosting service provider’s service users, namely their right to protection of their personal data and their freedom to receive or impart information, which are rights safeguarded by Articles 8 and 11 of the Charter respectively. Indeed, the injunction requiring installation of the contested filtering system would involve the identification, systematic analysis and processing of information connected with the profiles created on the social network by its users. The information connected with those profiles is protected personal data because, in principle, it allows those users to be identified. Moreover, that injunction could potentially undermine freedom of information, since that system might not distinguish adequately between unlawful content and lawful content, with the result that its introduction could lead to the blocking of lawful communications. Indeed, it is not contested that the reply to the question whether a transmission is lawful also depends on the application of statutory exceptions to copyright which vary from one Member State to another. In addition, in some Member States certain works fall within the public domain or may be posted online free of charge by the authors concerned.

Jolly times for Facebook and similar
operations in the EU ... but will it last?

The ruling is not surprising, given the approach taken by the Court in Scarlet. However, readers of this Blog may be interested in discussing the implications of such an interpretation of intermediaries' obligations in light of the recent signature by the EU of ACTA. In particular, one may wonder how it is possible to reconcile CJEU's recent jurisprudence on ISPs with ACTA's provisions, in particular Article 12(1)(a), according to which "Each Party shall provide that its judicial authorities have the authority to order prompt and effective provisional measures ... against a party or, where appropriate, a third party over whom the relevant judicial authority exercises jurisdiction, to prevent an infringement of any intellectual property right from occurring, and in particular, to prevent goods that involve the infringement of an intellectual property right from entering into the channels of commerce".