It's not always easy to understand how "digital economy" works |
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".
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 ... |
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 |
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.
Points of information:
ReplyDeleteThere was no appeal against the High Court's decision that ISP's would not have to pay the "qualifying costs". That position remains unchanged. Taken together the two decisions mean that ISP's only have to pay their "relevant costs" - i.e. their internal running costs occasioned by the scheme.
Second, it is not entirely true to say that the Court of Appeal found the Act was in line with EU law. At paragraph 93 the court appears to hold that s16(2) which inserts new clauses (ia) and (ib) into s135(3) of the Communications Act (wrongly identified as being a section of the Digital Economy Act 2010) are not enforceable since they were not notified under the Technical Standards Directive and they impose a new regulatory liability on ISP's (to provide information to OFCOM). A minor point I know, but it may have some effect.