No UK 'three strikes' until 2017? Perhaps never?

I'm going to give you a damn good thrashing!

James Firth, writing on the Slightly Right of Centre (SRoC) blog, has said that its unlikely that a UK ‘graduated response’ – or ‘three strikes’ scheme, set out in the Digital Economy Act 2010 to limit internet access to persistent online copyright infringers, will be in place before 2016 at the earliest.

Noting that two Statutory Instruments will be needed to flesh-out how the copyright infringement warning letters will be dispatched, paid for and appealed, the a so-called Initial Obligations Code, and a shorter Cost Sharing Order defining how the cost of scheme will be split between copyright owners and internet service providers, are nowhere near reaching the statute books, Firth also notes that both of these relatively ‘simple’ pieces of legislation have so far only got to the ‘notification’ stage. Citing contacts at Westminster, adds that “Two separate sources told me not to expect the remaining secondary legislation this side of the general election” with one source described the copyright provisions in the Digital Economy Act as "unimplementable".

Firth cites three different causes for the possible delay: firstly a spat between the Treasury and the Department of Culture, Media and Sport; secondly disagreements between Internet Service Providers and content owners over who pays for the cost of the scheme; and thirdly ‘politics – not least the recent growth in digital revenues for music, TV and film (which might be seen to negate the need for a three strikes approach) and concerns raised by ISPs and civil rights groups over issues such as privacy and liability with shared internet access.

Firth also adds “Additionally the Communications Bill, originally planned for 2014, is rumoured to have been postponed until after the general election.  This Bill would be a natural place to overhaul the primary legislation if amendments are require to the Digital Economy Act in order for it to be implemented.  But this would likely push warning letters out to 2017 or beyond.”

http://www.sroc.eu/2013/05/sources-no-digital-economy-act.html

Image: From an episode of  'Fawlty Towers' entitled 'Gourmet Night' (BBC) when Basil's car breaks down just once too often - and this time at a critical moment.in his disastrous 'Gourmet' evening at the hotel. He warns the car to start, calls it a 'vicious bastard', gives it a count of three to start, and then launches into a full on assault.

From Jaw-Jaw to JR: TalkTalk, BT get judicial review of DigiBill

"Net providers get Digital Economy Act judicial review" is the title of a news item on the BBC website. The story is that ISPs TalkTalk and BT have been granted judicial review of the Digital Economy Act by the High Court (see Ben's post here for background).  The Beeb's take on things runs like this:

A judge will now scrutinise whether the Act is legal and justifiable, and could make wide-ranging recommendations [If I were a judge, that's the last thing I'd do unless I could divorce any suggestions entirely from the realm of legislative policy, which is where most of the controversy lives]. BT and TalkTalk argued that the legislation had been "rushed through parliament" before the election [this is beyond doubt: the Bill was subject to a dramatic wash-up process: see John's post here].

Internet service providers (ISPs) are unhappy with the part of the Act that requires them to take action against suspected illegal file-sharers. Depending on the judge's ruling, the government may be forced to change or even scrap the legislation.

... During the parliamentary debate about the Digital Economy Bill, held in the final days before the parliament was dissolved before May's general election, some MPs [but not very many -- only 6% of the country's elected representatives turned up for it] complained that it needed more debate because of its complex nature.

...  A judge will conduct a full review in February, considering whether the parts of the Act that deal with illegal file-sharing are in breach of the E-Commerce Directive, which rules that ISPs cannot be held liable for traffic on their networks. The Act will also be measured against EU privacy and technical standards legislation.

... Ofcom has been working on a final code of practice [see eg Jeremy's post here] for how the process of monitoring file-sharing will work in the UK. It has the power to slow down the net connections of persistent pirates or even cut them off completely, although such measures would not come into force until at least 2012.

A caveat added at the last minute stipulated that new legislation and several rounds of consultation would be required before such a course of action was taken. A spokeswoman for the regulator said it was "business as usual" as far as the code of practice was concerned.

The regulator is expected to publish its final code later this week ..."

Early responses can be gleaned from Which?, The Guardian, Information Age and The Telegraph

Questions that Media CAT leaves hanging in the air…

In yesterday’s judgment in Media CAT Ltd v Adams, His Honour Judge Birss QC said that the case raised the following issues:

i) Does the process of identifying an IP address in this way establish that any infringement of copyright has taken place by anyone related to that IP address at all. The technical issues raised by Mr Davey (and Mr Stone) relate to this point. [See para 7 of the judgment.]

ii) Even if it is proof of infringement by somebody, merely identifying that an IP address has been involved with infringement then encounters the Saccharin problem. It is not at all clear to me that the person identified must be infringing one way or another. The fact that someone may have infringed does not mean the particular named defendant has done so. Perhaps the holder of the account with the ISP has a duty to assist along the lines of a respondent to another Norwich Pharmacal order but that is very different from saying they are infringing. [See paras 27–31 of the judgment.]

iii) The damages claimed deserve scrutiny. If all that is proven is a single download then all that has been lost is one lost sale of one copy of a work. The sort of sum that might represent would surely be a small fraction of the £495 claimed and the majority of that sum must therefore be taken up with legal costs. If so, a serious question of proportionality arises but again this has not been tested. Clearly if the defendant has infringed on a scale as in the Polydor case then would be a very different matter but there is no evidence of such infringement here.

TorrentFreak says that the judgment has implications for the Digital Economy Act as right owners will be relying on similar processes to identify infringements before sending out reports to ISPs. However, it would not be correct to say that the architects and implementers of the Digital Economy Act have been oblivious to questions of evidence.

Ofcom’s draft code states: ‘For the notification process to be credible, effective and fair for consumers it is essential that the allegations of copyright infringement are evidentially robust and accurate … We are also proposing that Copyright Owners must act on an Ofcom direction to take specified steps in relation to the maintenance or enhancement of the evidence gathering procedures.’ The Patents County Court says that it has not yet investigated whether Media CAT’s processes were adequate but insisted that it would be perfectly able to do so. Ofcom is also presumably able to carry out such an assessment. However yesterday’s judgment certainly emphasizes the need to justify why a particular process of identifying an infringer may be considered sufficiently reliable and what evidence a right owner will have to produce to convince the appeals body that a subscriber has infringed copyright. Presumably the detection process wouldn’t need to be 100% watertight, but reliable on the balance of probabilities?

Last week, Ofcom was asked to investigate whether the DEA’s s. 17 site-blocking provision is practically feasible and the copyright provisions of the Digital Economy Act are also to be judicially reviewed, so these are just a few more questions to which a plausible response may be required.

See the Telegraph here for another angle.

Splitting the load: good news for infringers, ISPs

The UK government's Department for Business, Innovation and Skills (BIS) has issued a press release today with the intriguing title "Rights holders to bear 75% of Online Digital Economy Act copyright infringement costs". The text goes like this:

"The Government today set out how costs would be shared as part of the Digital Economy Act’s measures to tackle online infringement of copyright. The decision will see costs resulting from these measures split between rights holders and internet service providers (ISPs) at a ratio of 75:25 [rights holders wanted 50:50] respectively [this being the case, I wonder whether the government would have done better to entitle this news "ISPs to bear 25% of Online DEA costs" ...].

Responding to its consultation on sharing costs for implementing the initial obligations to send notifications to consumers who have infringed online copyright, the Government also announced no fee will be charged to consumers who want to appeal a notification [might this prompt an outbreak of brazen and unconscionable appeals in unmeritorious cases, just for the hell of it, as the statement recognises later? Why not a presumption of no-fee-payable, coupled with discretion to waive it where appropriate?]. Minister for Communications, Ed Vaizey, commented:

“Protecting our valuable creative industries, which have already suffered significant losses as a result of people sharing digital content without paying for it, is at the heart of these measures ['these measures' presumably being the DEA itself and not the cost-sharing mechanism]. The Digital Economy Act serves to reduce [identifiable and detectable] online copyright infringement through a fair and robust process and at the same time provides breathing space to develop better business models for consumers who buy music, films and books online [Business models for consumers? Isn't it the 'valuable creative industries' whose business models are at stake, since the old ones aren't working any more?].

“We expect the measures will benefit our creative economy by some £200m per year [that's less than one-fifth of football club Manchester United's debt] and as rights holders are the main beneficiaries of the system, we believe our decision on costs is proportionate to everyone involved.”

The costs sharing decision applies to both the notification and appeals process. Following serious consideration of the issue of appeal costs, it has been decided that no fee should be charged to internet subscribers who wish to use the appeal system to refute a notification. However as a free system risks the possibility of large numbers of unnecessary appeals, the Government will monitor the situation closely, and reserves the right to introduce a small fee at a later stage [retrospectively?].

The decision will now be notified to the European Commission before being introduced in Parliament as a Statutory Order. Ofcom’s Online Copyright Infringement Initial Obligations Code will implement the notifications process and will also reflect the decision on costs. This will come into force in the first half of 2011".

We await further developments with interest.

BBC report here

Music and IP conference report: 1

Some forms of sharing
incur no liability at all ...

This year's Music and IP conference, organised by CLT Conferences, took place as usual in the splendid setting of London's Prudential Building, now fortuitously reconstituted as a suite of offices and conference facilities. First to speak was Fredericka Argent (IFPI), who took the audience through the problems in copyright enforcement which led to the passage of the UK's Digital Economy Act 2010. The Act was predicated on statements in EU Directives to the effect that internet service providers (ISPs) were often better placed than copyright owners to deal with infringements. Fredericka explained the basis of the Act's graduated response to file-sharing. Using date-and-time stamps, ISPs can identify which subscriber is the owner of an IP address at the time of infringement, which enables the right person to be targeted. Once targeted, responses can be ratcheted up, from educational notifications to full-blown legal action.

After outlining the key provisions of the Act, Fredericka reviewed the intended cost-splitting aspects of enforcement: 75% of the enforcement cost is generally to be borne by rights owners, the other 25% by the ISPs. She also reviewed provisions of the Ofcom code which seek to address the regulatory aspects of enforcement, time limits, the content of notification (giving some examples) and the record-keeping responsibilities of ISPs which will enable copyright owners to bring proceedings. Data must be deleted after 12 months, regardless of whether proceedings have been brought in respect of an IP address's owner or not.

Everything, said Fredericka, has been "completely mired in process" and there has been no progress at all in implementing the Act's provisions.  This is not surprising, given further government reviews of online copyright issues and the legal challenge to the Act's scheme by ISPs BT and TalkTalk (on which you can read Fredericka's post on the IPKat here). Fredericka reviewed the grounds of challenge by a judicial review -- and the grounds on which they have so far almost entirely failed (an appeal is now pending, adding to the sense that we are all in limbo).

Fredericka then turned to website blocking, which is increasingly used as a popular alternative to blocking internet access to users. The British version of this was the order Newzbin2, though the UK government doesn't propose to bring forward website blocking measures since rights owners can obtain such orders through a court of law -- even though this is very expensive.

Following Fredericka was Robert Lundie-Smith (McDermott Will & Emery), on "What's New ,What's on the Way: a European Perspective". Robert covered three topics relating to references made to the Court of Justice of the European Union for preliminary rulings. Starting with the topic of fair remuneration of rights holders for private copying -- which remains an option within the EU (and one which the UK has not opted for) -- Robert explained the recent ruling in Case C-462/09 Thuiskopie v Opus on whom should fall the onus of collecting a levy where blank media were "exported" from Germany to the Netherlands by being "imported" by each individual purchaser. The Court of Justice reasoned that the foreign seller should be made to pay, since by charging individual Dutch purchasers for the purchase of their recording media they would be making the individual purchasers pay. The fact that the seller was not located in the levy-collecting country was irrelevant. The Dutch law requires the manufacturer or importer" to pay the levy, so Dutch law will have to be applied or amended in order to effectuate the Court of Justice ruling. This ruling, Robert felt, could have implications for post-Hargreaves treatment of private copying.

The next case discussed was Case C-70/10 Scarlet v SABAM, in which the Court of Justice had to consider the validity of a Belgian court order that an ISP monitor the content of sites it hosted in order to determine whether file-sharing infringed copyright or not. There were also some non-IP arguments here, relating to the freedom of businesses to conduct their business and to data protection. The Court of Justice had no doubt that the Belgian order had gone too far, as its ruling makes plain.  But how far does this ruling affect the pending judicial review of the Digital Economy Act? We shall soon find out.

The third issue discussed by Robert was that of "communication to the public", as reflected in Case C-162/10 I v Ireland (on which see earlier post here).  PPI objected that Irish law exempted hotels etc from paying for music piped into guests' bedrooms under the Rental Directive. The Advocate General, following the Court's ruling in Case C-306/05 SGAE, considered that there is communication to the public by making music available to guests and that hotels, by supplying the equipment by which guests received the music, were the users who were liable to make the payment. The Irish government's argument that, since one payment had already been received for broadcasting a work, no further payment was necessary, was rejected. On the same issue, Case C-135/10 SCF Consorzio Fonografici v Marco Del Corso, a reference from Italy regarding the playing of music in dentists' surgeries, was also discussed. Do the facts that the music is ancillary to dental work, and are not chosen by the patient, lead to a different conclusion? No, it appears: the patient in the dental chair and the guest in his hotel room are essentially the same.

Young Guns Go For It

On Thursday Night (8th July) Berwin Leighton Paisner kindly hosted one of the regular bi-monthly BLACA meetings (British Literary and Artistic Copyright Association) and this one had a particular twist – the topic was copyright but seen through the eyes of two young copyright professionals, the joint winners of BLACA’s 2010 competition, the prize being the chance to make this presentation!

Chaired by Professor Alison Firth (University of Surrey), the first presentation was from Mark Smith, a newly qualified solicitor at Osborne Clark, and was simply titled “Copyright in the Digital Age”. I won’t dwell on the detail as this and the following presentation will both be available soon on BLACA’s website at http://www.blaca.org/ . Suffice to say, they are both well worth a read and Mark gave a professional speech in a wide ranging presentation. The second presentation was by Ed Cameron , who comes from a science background and has just completed a MSc in the Management of Intellectual Property at Queen Mary College, University of London. Ed focussed on the Digital Economy Act in a presentation titled “The Digital Economy Act - are ISPs under Attack?”. This Blogger has to admit he has not really looked at the finer details of the enforcement provisions of the DEA (particularly those referred to as the ‘three strikes’ system), and Ed did, where there was clarity in the Act, makes some sense of what look like rather complicated enforcement provisions. As with Mark’s presentation, read the detail online.

The sometimes challenging question and answer session was deftly handled by Prof. Firth and a recurring theme was the role of the collection societies in new business models, along with the need to educate the consumer and some comment on the failure of domestic and even the pan-European copyright regimes to provide effective enforcement tools for content owners in the global digital age. I have to say I thought both of the speakers did really well – a brave challenge for two young men who were students this time last year – faced with a room that included some well seasoned copyright lawyers ..... and a few less seasoned ones as well!

Details on this year's BLACA prize can be found at http://www.blaca.org/prize.htm

DEA Judicial Review (largely) fails

Hot off the press is the news that BT and TalkTalk's judicial review application has been rejected on the four main grounds. Apparently, the only claim that was upheld was a small technical point relating to whether ISPs can be made to share certain of Ofcom's general costs in administering its obligations under the Act. As can be expected, rightsholders and the government were happy.

According to the FT, a spokesperson for the Department for Culture, Media and Sport said: “We are pleased that the court has recognised these measures as both lawful and proportionate. The government remains committed to tackling online piracy and so will set out the next steps for implementation of the Digital Economy Act shortly.”

Meanwhile, in a press release, Geoff Taylor of the BPI said “This judgment gives the green light for action to tackle illegal downloading in the UK. It confirms that the DEA is proportionate and consistent with European law. Shareholders and customers of BT and TalkTalk might ask why so much time and money has been spent challenging an act of parliament to help reduce the illegal traffic on their networks. It is now time for BT and TalkTalk to work constructively with government and with rights holders to implement the Digital Economy Act.”

It is now down to the Government and Ofcom to move the implementation process forwards.

But what of British Three Strikes?

Following on from Iona's last post, more on the same topic: Unlike New Zealand, the 'three strikes' provisions in the UK's Digital Economy Act are still some way off implementation (if ever?), which seems to have prompted a group of celebrities including Andrew Lloyd-Webber, Sir Elton John, Simon Cowell, The Who's Roger Daltrey and Pete Townshend, Queen's Brian May and Roger Taylor along with Robert Plant, Professor Green and Tinie Tempah to write an open letter calling on the UK government to bring the relevant DEA provisions into force and also to put more pressure on search engines and others to block unlicensed music sites getting traffic and earning advertising revenue. 


On the latter point, I noted yesterday that a number of big UK ISPs including Virgin, Talk Talk and Sky have agreed to do more to block the rather notorious The Pirate Bay site, widening the scope of URLs and links they will block, notably to include newer IP addresses TPB has migrated too. 


Back to the letter which says: "As the world's focus turns to the UK this summer, there is an opportunity to stimulate growth in sectors where the UK has a competitive edge. Our creative industries represent one such sector, which creates jobs at twice the speed of the rest of the economy. Britain's share of the global music market is higher than ever with UK artists, led by Adele, breaking through to global stardom" adding "As a digitally advanced nation whose language is spoken around the world, the UK is well positioned to increase its exports in the digital age. Competition in the creative sector is in talent and innovation, not labour costs or raw materials. We can realise this potential only if we have a strong domestic copyright framework, so that UK creative industries can earn a fair return on their huge investments creating original content. Illegal activity online must be pushed to the margins. This will benefit consumers, giving confidence they are buying safely online from legal websites" and "The simplest way to ensure this would be to implement the long-overdue measures in the Digital Economy Act 2010; and to ensure broadband providers, search engines and online advertisers play their part in protecting consumers and creators from illegal sites" (emphasis added).


http://www.telegraph.co.uk/comment/letters/9421416/Musicians-need-strong-copyright-laws-to-excel-globally.html#

The Digital Economy Act – a technical point

As BT and TalkTalk Broadband prepare for the judicial review of the Digital Economy Act, the Act itself continues quietly to prepare itself for life post-JR. The statutory instrument that apportions costs for the Initial Obligations (right owners pay 75% and ISPs the rest) has now been laid before Parliament. The cost split needs to be approved for inclusion in the Code for Initial Obligations, which has a completion deadline, I think, of 8 March.

The consultation over costs took place in Spring last year and the Government published a draft SI in the autumn, which then disappeared for three months. The Government had decided the SI had better be notified to the European Commission under the Technical Standards Directive separately from the Code. The Directive requires Member States to send the Commission ‘draft technical regulation’ (including requirements relating to the provision of electronic services) in case it presents barriers to trade.

Compliance with the Directive is one of the key grounds for JR – the ISPs say the Government should have notified the Digibill itself to the Commission (JR grounds here). Is the Government’s notification too little, too late?

I wonder what readers think? The Technical Standards Directive doesn’t apply to rules relating to matters covered by EU telecoms legislation – Art 1(5). Doesn’t telecoms law cover the DEA’s areas? The Authorization Directive allows governments to impose conditions on ISPs in accordance with the E-Commerce Directive (Art 15 covers requiring service providers to inform about illegal activities) and the Framework Directive covers measures restricting end users’ access to the internet.

The CopyKat - new ways to deal with those pesky pirates

The ever marvellous Out-law reports that in the United Kingdom parliamentary under-secretary of state for culture, media and sport Ed Vaizey has said in a statement in the House of Commons that the 'voluntary copyright alert programme’ (VCAP) could be operational later this year. Vaizey said that "significant technical obstacles" had held the government back from implementing new legislation, under the Digital Economy Act (DEA), which would, if established, see the creation of a new framework for enforcing copyright involving ISPs and rights holders. Whilst the government has not given up on implementing the new regime through new regulations, Vaizey said he welcomed the proposed VCAP plans saying ""It has been difficult to implement the details of the Digital Economy Act," Vaizey said, adding "The government have not resiled from it, but there are significant technical obstacles, including the fact that we were being sued by BT and TalkTalk for at least two years from the time when it was passed."


In a bid to protect authors, composers and performers of local artists a special Police team has been set up in Fiji to conduct investigations specifically looking at the issue of copyright infringements. Acting Commissioner of Police Ravi Narayan says local artists have been losing out to pirates which is why a team has been tasked to deal with local cases to bring those who are continuously breaching the Copyright Act to justice saying "We now have a team that have undergone training and have the capacity to deal with cases of copyright infringements and we will work closely with the Fiji Performing Right Association to protect local artists from losing their hard earned money”.

Research firm NPD Group has thrown the spotlight on the rising trend of smartphone-based music piracy, suggesting that it's on the humble mobile device that record companies and music publishers are facing their next big piracy challenge, as an increasing number of apps appearing on the scene that enable users to tap into free and usually unlicensed sources of music content. the most popular of these Android apps, Music Maniac, has been downloaded more than 10 million times — and affords free access to all 10 of the top songs listed on the current Billboard’s Hot 100 list. The Recording Industry Association of America said it has sent notices to Google requesting the app’s removal, claiming it enables song piracy. Google has thus far refused.

And the Department of Justice and the FBI have successfully concluded a case against two targeted high-profile Android app pirates: Nicholas Anthony Narbone and and Thomas Allen Dye, both formerly of the well-known piracy site Appbucket.net, were charged with one count of copyright infringement, and both entered guilty pleas. Dye will be sentenced on June 12th, Narbone on July 8th; the maximum possible sentence is five years in prison, but androidpolice.com say that both will probably receive a reduced sentence for their pleas. One alleged co-conspirator, Thomas Pace, has entered a not guilty pleas as has Kody Jon Peterson of Florida, who was allegedly associated with the SnappzMarket piracy site.

Michael Robertson, the former chief executive of defunct online music storage firm MP3tunes has been ordered to pay an estimated $41 million  after being found liable for infringing copyrights owned by record companies and music publishers once part of EMI Group Ltd (now Sony ATV). The verdict included $7.5 million in punitive damages, although it should be noted that the figures came from the claimant's lawyers. 

Merpel recently mentioned Finnish on the IPKat - and as luck or perhaps bad luck) would have it - it seems that Finland is now facing an invasion of "copyright trolls". TorrentFreak reports "Citizens of Finland are now being subjecting to pay-up-or-else letters, but the decision to target this Scandinavian country isn’t the most obvious one, thanks to less favorable laws than those in the US". Letters that have recently gone out to some Finnish Internet subscribers (translated example below, from a DNA customer)  accuse them of downloading porn using BitTorrent and include an offer to settle for ‘only 600 euros’ (about US$825). A "vague reference" to the police is also included,  "ratcheting up the pressure to comply" says TorrentFreak.

BoingBoing tells us that in Florida, District Court Judge Ursula Ungaro has dismissed a suit "brought by notorious porno-copyright trolls Malibu Media on the grounds that an IP address does not affirmatively identify a person, and so they cannot sue someone solely on the basis of implicating an IP address in an infringement." 

Back in the UK, the Bookseller reports that CILIP (The Chartered Institute of Library Professionals), the Wellcome Trust and the British Library, are among 50 organisations to sign an open letter urging business secretary Vince Cable to implement key reforms to copyright legislation, which they says they fear “could now be subject to delay”. The letter said the proposed new UK copyright exceptions were essential to allowing “today’s technology start-ups to compete with their European and US rivals” but that it seemed “highly likely that the government’s own deadline for the introduction” of legislation on copyright exceptions would be missed." Well yes, they admitted that themselves! And the lovely Eleonora (or e-LAWnora as we must now refer to our friend) updated us on  where Parliament is with all of this yesterday - The Regulations are set to come into force on 1 June, having been approved by a vote in both Houses of Parliament after Easter.

BT and Talk Talk win right to appeal DEA judgment

The BBC reports that British Telecom and Talk Talk have been given permission to appeal against the High Court's judgment against them over their challenge to the provisions of the Digital Economy Act. Under the provisions of the DEA, Internet Service Providerss would be compelled to send out warning letters, at the behest of rights holders such as film and record companies, warning about illegal downloading. The Act also allows for sanctions, known as "technical measures", which could include disconnection - although the exact nature of technical measures and the circumstances under which they could be imposed have not as yet been determined. The Guardian add this "The decision means that there will now be a hearing at the Court of Appeal – likely to be in the new year – which means that the government's plans to send thousands of warning letters to alleged illegal downloaders will probably be pushed back by about six months. The government had planned to start sending the letters in the first half of next year, but it will now have to hold off until the challenge by Britain's two largest ISPs is resolved."

Lord Justice Lewison granted BT and TalkTalk leave to appeal the DEA on four grounds. Both companies have raised concerns about how the legislation works alongside EU directives on technical standards, authorisation, e-commerce, as well as privacy and electronic communications.

http://www.guardian.co.uk/technology/2011/oct/07/bt-talktalk-digital-economy-act?newsfeed=true

The Digital Economy Act is in line with EU law, says the Court of Appeal

It's not always easy to understand
how "digital economy" works

Yesterday the Court of Appeal for England and Wales published its 115-paragraph decision in judicial review proceedings concerning -- inter alia -- the compatibility of the online infringement of copyright provisions of the UK's controversial Digital Economy Act 2010 ("DEA") with a number of EU directives (earlier posts on this story here and here).

Background

Telecom companies and ISPs BT and TalkTalk had asked Arden, Richards and Patten LJJ to overturn the 2011 decision of Kenneth Parker J of the High Court. Their appeal was, however, unsuccessful, since Richards LJ, giving judgment for the court, found that the decision of the High Court was "extremely thorough, clear and cogent".


As is well known, the DEA had inserted new sections 124A to 124N into the Communications Act 2003 as a response to the growing problem of subscribers to internet services who were infringing copyright by uploading and accessing material online. These provisions impose "initial obligations" on ISPs to notify subscribers of copyright infringement reports received from copyright owners, and to provide copyright infringement lists to copyright owners, if an "initial obligations code" is in force. These also provide for the possible future introduction of additional "technical obligations" on ISPs, together with a "technical obligations code". 

This case was concerned, however, only with the initial obligations, the initial obligations code and the related provisions as to costs. More specifically, BT and TalkTalk had been granted permission to appeal the decision of the High Court on grounds which covered four areas:

(1) whether the contested provisions should have been notified to the EU Commission in draft pursuant to Directive 98/34 ("the Technical Standards Directive"), with the result that they are unenforceable for want of notification

(2) whether the contested provisions are incompatible with provisions of Directive 2000/31 ("the E-Ccommerce Directive").

(3) whether the contested provisions are incompatible with provisions of Directive 95/46 ("the Data Protection Directive") and/or of Directive 2002/58 ("the Privacy and Electronic Communications Directive").

(4) whether the contested provisions are incompatible with provisions of Directive 2002/20 ("the Authorisation Directive" or "the AD").

The response of the Court of Appeal

(1) the Technical Standards Directive

The broad aim of the notification requirement under Article 8(1) of the Technical Standards Directive is to enable the Commission and other Member States to comment on draft legislation and for those comments to be taken into account, as Article 8(2) requires them to be, in the subsequent preparation of the technical regulation itself. 

Richards LJ rejected this first ground of appeal, in that (paras 39 and 42)

"the key question is whether the legislation in issue [ie the DEA] has "legal effects of its own" ...: the fact that the legislation refers to further rules which have not yet been made will not prevent it from being a technical regulation if the legislation itself has legal effects. Unless it has actual legal effects, the legislation is not capable of impacting on those seeking to exercise the freedom of movement of services or other freedoms ... The judge was right to find that the contested provisions do not have the "legal effects" described by the [CJEU]'s case-law. The "initial obligations" of ISPs under sections 124A and 124B are conditional on there being a code in force under section 124C or 124D. The word "if" in section 124A(2) is important, even though the provisions contemplate that there must in due course be a code: until such time as the Code comes into being, the provisions impose no obligations on ISPs. Moreover the Code is to be made for the purpose of regulating the initial obligations, and the scope of those obligations will be dependent on the detailed content of the Code. Whilst the statute prescribes various basic features of the Code, it leaves very considerable freedom for the working out of the detail."

(2) the Ecommerce Directive

Good old times times when
service providers didn't have to worry
about the Digital Economy Act ...

The appellants had advanced a twofold case of breach of the Ecommerce Directive: (1) that the effect of the contested provisions was to render ISPs potentially "liable for the information transmitted", contrary to Article 12 of the Directive; and (2) that the contested provisions amount to restrictions on the freedom to provide information society services from other Member States, "for reasons falling within the co-ordinated field", contrary to Article 3 of the Directive. 

Richards LJ rejected this ground of appeal too, in that the High Court was right when it held that liability "for the information transmitted" as per Article 12 of the Directive is a carefully delineated and limited concept. As regards copyright material, this language broadly contemplates a scenario in which a person other than the ISP has unlawfully placed the material in the public domain or has unlawfully downloaded such material, and a question then arises whether the ISP, putatively a mere conduit for the transmission of the information, also incurs a legal liability in respect of the infringement. That liability could take the form of a fine (in criminal or regulatory proceedings) or damages or other compensation payable to the copyright owner, or some form of injunctive relief. The liability could be joint and several with the other person, or it could simply be a default liability if the other person could not be found, or was not worth pursuing, or was insolvent.

Nothing in the liabilities of ISPs under the DEA is such as to render them "liable for the information transmitted" within Article 12(1) of the Ecommerce Directive. In relation to Article 12(3) of the Directive, Kenneth Parker J was right when he found that (para 58)

"it is conceivable that the copyright owner might in certain cases be able to draw the attention of the ISP to the fact of a present infringement, or to the likelihood of a specific infringement occurring in the future, and to invite the ISP to terminate or prevent such an infringement. In these circumstances, if the ISP was liable to terminate or prevent the present or future infringement, a real question could arise as to whether the ISP was being made liable 'for the information transmitted', or was rather simply coming under an obligation to use its technical facilities to terminate or prevent an infringement, in respect of the information transmitted, committed by another person. The 'careful balance' struck by the Community legislator settles that issue, and removes all uncertainty, by allowing Member States to authorise the courts or competent administrative authority to order the ISP to terminate or prevent the infringement, so long as the ISP is not made liable (by way of fine or compensation) in respect of the infringement itself".

The High Court was right also when rejected the claim based on Article 3 of the Ecommerce Directive.

(3) the Data Protection Directive and the Privacy and Electronic Communications Directive

... or data protection issues

Article 8(2) of the Data Protection Directive, which relates to the processing of special categories of data expressly allows the processing of personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, trade-union membership, and data concerning health or sex life, when this relates to exercise or defence of legal claims.

Richards LJ agreed with the conclusions of Kenneth Parker J that the processing of data by the copyright owners, ie the processing involved in their identifying apparent infringements, together with relevant IP addresses and subscriber details, for the purpose of compiling copyright infringement reports would be compatible with the Directive.

Indeed, Richards LJ found that (para 77)

"the processing [of personal data] is plainly necessary for the establishment, exercise or defence of legal claims even if the beneficial consequence of the sending of a notification by the ISP pursuant to a copyright information request will be that in the majority of cases the infringing activity ceases and no further action is required." 

Richards LJ also rejected the claim based on the Privacy and Electronic Communications Directive. The data processed pursuant to the contested provisions in the DEA are "traffic data" as defined in Article 2 of the Directive, namely "any data processed for the purpose of the conveyance of a communication on an electronic communications network or for the billing thereof". Articles 5 and 6 of the directive impose obligations on Member States in relation to such matters as the confidentiality of traffic data, subject in each case to the derogation in Article 15(1), which provides that Member States may adopt legislative measures to restrict the scope of the rights and obligations provided for in Articles 5 and 6 of the Directive.To this end, Member States may, inter alia, adopt legislative measures providing for the retention of data for a limited period, also for the protection of property rights, including copyright.

(4) the Authorisation Directive

The aim of the Directive was to implement an internal market in electronic communications networks and services through the harmonisation and simplification of authorisation rules and conditions in order to facilitate their provision throughout the European Union. To this end, it provides in part for schemes of "general authorisation" which allow any person who wishes to provide electronic communications networks and services to do so in accordance with a publicly available set of conditions. Such schemes replaced individual licensing arrangements which were commonly found in national systems of regulation and which could create significant barriers to new entrants. In the UK, Ofcom has drawn up and published "General Conditions of Entitlement" in accordance with the Directive. 

The main issue under ground 4 was whether the contested provisions in the DEA are required to form part of a general authorisation and, if so, whether they impose conditions permitted within a general authorisation. The Court of Appeal rejected the claim.

A final area of complaint related to the proposed exclusion of smaller ISPs and mobile network operators from the scope of the initial obligations and the associated costs. Also this claim was rejected.

Conclusion

In dismissing the appeal, Richards LJ also refused to make a reference to the CJEU, in that, as previously stated by Kenneth Parker J, 

"the questions of European Union law raised by this judicial review admit of clear answers, and I do not believe that any useful purpose would be served by my making a reference" (para 112).

As to the costs, Richard LJ said that ISPs will have to pay 25% of the qualifying costs incurred by media regulator Ofcom in running and setting up an appeals body for alleged illicit filesharers. He also confirmed that the ISPs should pay 25% of relevant costs, which are operating fees incurred when identifying which subscribers are accused of illegal downloading. However, the Court of Appeal overturned the decision of the High Court which had said that the ISPs have to pay 25% of case fees which are charged by the proposed appeals body. Finally, the Court of Appeal ruled that BT and TalkTalk must pay 93% of the costs of the legal challenge. 

Press coverage of the decision here, here and here.

Jingle Bells, Jingle Bells, Jingle All The Way, Oh What Fun We Had, With Safe Habour and the DCMA!

Here’s hoping that my headline doesn’t offend post Meltwater and Infopaq, but this is my (personal) take on copyright and the business of music in 2011, a busy busy year around the globe with a mixed bag of results for the different sectors in the music industry.

A number of threads emerged, most notably the battleground over what (if any) responsibility Internet Service Providers (ISPs) and another web intermediaries should have for the infringing acts of their users – something considered by the US Ninth Circuit Court of Appeals in UMG v Veoh, by the British High Court in Newzbin2, The Australian Full Federal Court in the iiNet case and by the European Court of Justice in Scarlet v SABAM with legislation pending in a number of countries including Spain and the UK. A second thread was the future role of collection societies in monetising music copyrights and the potential for enhanced but streamlined societies – at least on a pan-European basis, And finally, IF music copyrights can be monetised in the digital age with the “can pay won’t pay” generation of users, then battles remain over who gets what share of the pie with artistes beginning to challenge the accounting practices of the recorded music sector in particular.

It is no secret that music is important in almost everyone’s life, but the music industry has thus far been fairly ineffective at designing workable business models fit for the digital age – whilst others such as ISPS and companies such as Amazon, Google, YouTube and Apple have reaped huge benefits from their association with music. It’s been an interesting year!

In January, the first news was bad news for the recorded music sector with new data showing that US recorded music sales fell 2.4% in 2010 to $1.5 billion, as CD sales plummeted nearly 20% while digital track sales were up just 1%. at 1.17 billion. While CD sales fell dramatically last year, digital album sales rose 13% and the report noted that digital music accounted for 46% of all U.S. music purchases in 2010, up from 40% in 2009 and 32% in 2008, and digital track sales broke the 1 billion sales mark for the third straight year. The picture was similar in the UK where sales of digital singles and albums continued to boom in 2010 but overall recorded music sales continued to fall. Digital album sales in 2010 were up 30.6% on 2009, and singles sales - mainly digital - were at an all time high. But overall album sales were down 7%, with CD sales declining 12.4%. Better news came from Google who announced a number of new initiatives to help combat copyright infringement online, including the promise of 24-hour turnaround on takedown requests, and preventing terms associated with piracy from appearing in its "autocomplete" search results. Google also promised to improve its AdSense anti-piracy review, and expel infringing sites making money off infringing content and also said that it will experiment to make authorised preview content more readily accessible in its search results. Also in January, Limewire finally gave up the ghost and the company said that it would close its remaining businesses. Finally the legal battle between EMI and Pink Floyd seemed to have run its course. Earlier the Court Of Appeal had upheld a High Court ruling against EMI which determined the way Pink Floyd's music could be sold online and how the label should account to the band. Pink Floyd had objected to the sale of the band's albums on a track-by-track basis on digital services like iTunes and claimed that their 1967 contract with EMI prohibited the record company from selling their music in this way. But the parties agreed to a new five year deal - and EMI were able to sell individual Pink Floyds tracks as digital downloads after all. EMI’s recorded music division was sold to Universal at the end of 2011.

In February the Spanish Parliament passed reintroduced legislative proposals that will make it easier for content owners to target copyright infringing websites, The so called Sinde Law will offer a fast-track system through which content owners can force commercial websites that exist primarily to assist others in their illegal file-sharing offline. Amid a high profile campaign by some internet service providers, websites and consumer groups, including the accusation that the legislation was ‘US influenced’, the House of Representatives originally voted against the proposals but the legislation was reintroduced with new safeguards which include a judicial stage in the shut down process. The French government also had to add in a judicial stage into their Hadopi three-strike law. A January poll in France indicated that 49% of French Internet users continue to illegally download music and video and it remains to be seen how Spain’s new government will implement the Sinde law. Also in early February, news broke that Andrew Crossley, the lawyer behind controversial law firm ACS:Law, had withdrawn from pursuing 26 alleged illegal filesharers, blaming “criminal attacks” and bomb threats as reasons. And in speech in London, EU Digital Commissioner Neelie Kroes called on content owners to create “a simple, consumer-friendly legal framework” for making digital content available across borders in the EU.

In March, The Australian Federation Against Copyright Theft (AFACT) lost its appeal against Australian ISP iiNet. In the absence of specific legislation in Australia, AFACT, representing the TV and movie industries, had argued that net companies had an obligation under Australian copyright laws to take a proactive role in policing online piracy and that the Australian ISP was responsible for illegal content downloading by its users. Australian courts had previously found that web company Kazaa was liable for ‘authorising’ infringement and clearly content owners were hoping that the courts would extend copyright law to include a duty on ISPs to monitor and filter unlicensed content on their networks, and/or to find that that a failure to do so would make them guilty of authorising. A majority of the three judge appeal panel in the full Federal Court dismissed the appeal holding that even though iiNet was dismissive of copyright infringement complaints, that fact alone did not mean it was liable for authorizing infringement. That said, all 3 justices in the appellate court found that in appropriate circumstances it was appropriate to disconnect customers (one even outlined a potential termination strategy) and in a dissenting judgment, Justice Jagot held iiNet liable for authorising users’ acts of copyright infringement and that the trial Judge had erred in holding that the relevant test was whether iiNet had provided the ‘means’ of infringement. The Australian High Court will now hear the case. In better news for the content industries, credit card companies including MasterCard and Visa are working with the City of London Police and the recorded music sector to extend cooperation in tackling illegal online services selling unlicensed music worldwide.

In April another Australian case hit the headlines when the Federal Appeals court in Australia upheld a Federal Court ruling that said Larrikin Music, publishers of Australian children's classic 'Kookaburra Sits In The Old Gumtree', were due a share of all songwriting royalties on the Men At Work classic 'Down Under', because the short but distinctive flute sequence in the 1981 pop hit was borrowed from the folk tune. The Federal Court ruled that Larrikin should get 5% of all 'Down Under' royalties dated paid back to 2002. EMI must also cover Larrikin's legal costs in relation to the appeal. Also in April, the giant Chinese search engine Baidu said that they had reached an agreement with the Music Copyright Society of China to start paying a publishing royalty on any MP3s downloaded or streamed via the search platform.. Under the new agreement with MCSC, Baidu will pass a share of advertising revenue on for every track accessed via the search platform from a new music service that Baidu plans to launch in May.

In May there were cloudy skies – as Google announced that it would join Amazon in launching a new music-based cloud digital locker service - despite not have any licensing deals in place with the record companies or music publishers. Amazon had previously argued that its digital locker service did not require licences from with record labels or music publishers because all its digital locker does is allow users to upload their own MP3 collections to remote servers and suddenly all eyes turned to the US case of EMI v MP3tunes which would clearly significant in determining the legality of these unlicensed platforms. More on that later! Also in May, Professor Ian Hargreaves, charged by David Cameron with independently reviewing UK intellectual property law and the environment to promote e-businesses in the UK, published his Report Digital Opportunity and his recommendations included: legalising format shifting; looking at copyright exceptions at national level to realise all the opportunities within the EU framework, including exceptions for parody, non-commercial research, and library archiving; proposals for a new system for licensing so called ‘orphan works’; the appointment of a senior figure (now confirmed as Richard Hooper) to oversee the design and implementation of a “cross sectoral Digital Copyright Exchange” and support for EC moves to establish a framework for cross-border licensing within the EU.

In June a report from the United Nations said that provisions of the UK’s Digital Economy Act (which had already been unsuccessfully challenged by ISPS in a judicial review) that could see music and film pirates cut off from the internet were disproportionate. Frank La Rue, the report’s author and UN special rapporteur on freedom of expression, called on the government to “repeal or amend” the legislation. He said he was “alarmed by proposals to disconnect users from Internet access if they violate intellectual property rights”. In The USA the Senate Judiciary Committee approved a bill that would make it a felony to stream copyrighted movies and TV episodes online and in Germany two computer hackers who targeted pop stars and record companies in a bid to secure personal information and distribute pre-release tracks online were handed down prison sentences by a court in Duisberg. And back in the UK Video Performance Limited, the audio-visual arm of collection society PPL (Phonographic Performance Limited) lost a major case in the Court of Appeal against a decision of the Copyright Tribunal that said that that the correct royalty rate payable by TV channel operator CSC should be somewhere in the region of 10% to 15% rather than the higher rate set in an earlier licence between VPL and BSkyB. And Neelie Kroes outlined the Digital Agenda for the EU saying "Too many barriers still block the free flow of online services and entertainment across national borders. The Digital Agenda will update EU Single Market rules for the digital era".

In July Mr Justice Arnold reached his decision in Newzbin 2, where the Motion Picture Association succeeded in an action which it brought against telecoms giant BT to invoke Section 97A of the Copyright, with Arnold J saying “in my judgment it follows that BT has actual knowledge of other persons using its service to infringe copyright: it knows that the users and operators of Newbin2 infringe copyright on a large scale, and in particular infringe the copyrights of the Studios in large numbers of their films and television programmes, it knows that the users of Newzbin2 include BT subscribers, and it knows those users use its service to receive infringing copies of copyright works made available to them by Newzbin2.”. Newzbin blocked!

In August Online music service Grooveshark had to face a new action from music publishers. The online service allows users to post their own tracks to their site while sharing them with the world was sued by a number of songwriters and music publishers. Filed in the U.S. District Court for the Middle District of Tennessee, the plaintiffs claim the music illegally violates many copyright laws, and therefore is liable for contributory infringement, copyright infringement and vicarious infringement saying “Defendant neither sought nor obtained a license, permission, or authorization from plaintiffs”. The company claims to abide by all rules of the Digital Millennium Copyright Act (“DCMA”) and that it is protected from any copyright violations committed by its users. Also in August, YouTube’s takedown procedure came under the spotlight for seemingly being too effective with videos by Justin Bieber, Rhianna, Lady Gaga, Beyonce and Shakira after “iLCreation” managed to get videos by all of these artistes and many more taken down from YouTube. Seemingly rather easily. And finally the much anticipated ruling in EMI v MP3Tunes was announced and in a potentially highly damaging day for the US content industries, the New York district court has ruled that digital music lockers don't need licences from record labels to store recorded music and that the operators of digital locker services are protected by the ‘safe harbor’ provisions of the DCMA.

In September a number of newspapers carried stories about moves by US songwriters and recording artistes to ‘reclaim’ copyrights from music publishers and record labels - including Bruce Springsteen’s “Darkness on the Edge of Town,” Billy Joel’s “52nd Street,” the Doobie Brothers’ “Minute by Minute,” Kenny Rogers’s “Gambler” and Funkadelic’s “One Nation Under a Groove” thanks to a till then little-noted provision in United States copyright law that meant that those artists — and thousands more — now have the right to reclaim ownership of their recordings after 35 years, so long as they apply at least two years in advance. Recordings and songs such as the Village People’s YMCA from 1978 are the first to fall under the law, but in a matter of months, hits from 1979, including “The Long Run” by the Eagles and “Bad Girls” by Donna Summer, will be in the same situation — and then, as the calendar advances, every other master recording once it reaches the 35-year mark. In Europe the European Commission announced the extension of the copyright term for sound recordings from 50 years 70 years which was agreed by the EU on the 12th September, following an earlier meeting of the European Union's Committee of Permanent Representatives. The new Directive included some provisions which might aid artistes (rather than labels) receive a share of new revenues, although many remain unconvinced that the major labels will be able to tear themselves from traditional business models which artistes claim are simply unfair, or a widespread attempt to underpay recording artistes” or even a sometime “criminal” enterprise. Less welcome news for the music industry was a decision by a court in Germany which followed on from the record industry’s fairly unsuccessful attempt to block digital cloud locker service MP3Tunes in the USA. In Germany EMI failed to force a German ISP to block access to file-sharing service eDonkey. The court in Cologne ruled that the net firm HanseNet was not liable for the actions of its customers in accessing Russian illegal file swapping services. In the see-saw world of US copyright damages for illegal downloading and file-sharing, a federal appeals court reinstated the $675,000 judgment against Boston University post graduate student Joel Tenenbaum, who had already admitted to downloading music on Internet file-sharing sites. In an earlier hearing a judge had reduced the previous jury award at the same level by 90%.

In October the U.S. Supreme Court denied an appeal against an appellate court’s ruling that a traditional Internet download of sound recording does not constitute a public performance of the recorded musical work or the composition under federal copyright law. The Supreme Court denied the appeal without comment. Also a number of major artistes faced infringement claims with Bob Dylan accused of replicating several famous photographs in his new art show, The Asia Series, which includes paintings that seem like acrylic reproductions of images by Henri Cartier-Bresson, Dmitri Kessel and Léon Busy and Beyoncé was accused of copying the choreography of Belgian choreographer Anne Teresa De Keersmaeker for the video to her track 'Countdown' . In the UK, Campbell Cowie, Director Of Internet Policy at media regulator OfCom, said that warning letters under the three-strikes style anti-piracy system put in place by the Digital Economy Act were now not likely to go out until 2013. And significantly, the European Court of Justice handed down a preliminary ruling decision in the linked cases of MPS v Murphy and FAPL v QC Leisure holding that national legislation which prohibits the import, sale or use of foreign decoder cards for pan-European satellite channels are contrary to the freedom to provide services and cannot be justified either in light of the objective of protecting intellectual property rights or by the objective of encouraging the public to attend (live football matches) football stadiums. And yes, EU competition law 'trumps' copyright !

In November a class action between a number of recording artistes and Universal Music over how digital royalties are calculated was given the green light by a federal judge in California. The action, headed up by a number of long established artists, led by White Zombie, Chuck D, Whitesnake, and the estate of Rick James will be a major test of how artiste digital royalties are calculated by record labels in the absence of specific contract wording: The label would like to calculate the royalty based on the same accounting process as a normal (physical) sale – whilst artistes want a share of the income which will almost certainly be a substantially greater share of the revenue. There is a precedent here, the so called ‘Eminen’ case that actually involved FBT Productions, the production house involved in some early Eminem recordings, who took Universal to court over digital royalties and succeeded in achieving the higher royalty rate: FBT argued they had a right to a 50/50 split of profits with Universal on sales of digital music and ring tones through online retailers such as iTunes and Sprint as these 'Master Licensing' deals attracting the higher royalty. The contract did not specifically mention income from download stores like iTunes, or what share the artist (and therefore FBT) should get from such sales but Universal have been treating download sales as being equivalent to CD sales paying a lower rate of 12-20%% as if these were physical sales. Whilst a district court refused summary judgment saying the agreement was ambiguous, The U.S. Ninth Circuit Court of Appeals in San Francisco agreed with FBT saying that the higher royalty should apply and the US Supreme Court then declined to hear an appeal by the Universal Music Group. A number of artistes including Cheap Trick and the Allman Brothers have brought a similar case against Sony BMG to gain a greater and they say fairer share of revenues. The European Court of Justice added to the jurisprudence on the role of ISPs in the Scarlet v SABAM case saying “EU law precludes the imposition of an injunction by a national court which requires an internet service provider to install a filtering system with a view to preventing the illegal downloading of files" adding “Such an injunction does not comply with the prohibition on imposing a general monitoring obligation on such a provider, or with the requirement to strike a fair balance between, on the one hand, the right to intellectual property, and, on the other, the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information”

And Finally in December, The Swiss Government decided that downloading music and movies would remain legal. With an estimated one in three of the Swiss population admitting to downloading content without permission, Swiss policy will now be that downloading for personal use WILL be legal since people eventually spend the money saved on entertainment products. And in the USA the Ninth Circuit Court of Appeals handed down its decision in UMG v Veoh, the case addressing copyright liability for ISPs that host infringing works. The court affirmed the lower court’s interpretation of the DCMA and extended ‘safe harbour’ protection to Veoh and meaning that the onus to first identify infringing materials is on rights owners and the Court said that it is copyright holders who know precisely what materials they own, and are thus better able to efficiently identify infringing copies than service providers like Veoh, who cannot readily ascertain what material is protected by copyright and what is not

I am sure next year will be equally fascinating – and can I wish all of our readers a happy, healthy and prosperous 2012.