25 November 2011

P2P Filter Schmilter

The 'Scarlet Case' in Europe has attracted most attention for the rejection by the Court of Justice of the European Union of a comprehensive P2P filtering regime sought by some copyright interests. The decision is of interest, however, because of the Court's comments on privacy.

The judgment is C‑70/10, Scarlet Extended SA v Société belge des auteurs, compositeurs et éditeurs SCRL (SABAM); Belgian Entertainment Association Video ASBL (BEA Video), Belgian Entertainment Association Music ASBL (BEA Music) and Internet Service Provider Association ASBL (ISPA) intervening.

SABAM is a collective rights administration body, ie a not-for-profit nongovernment entity that represents authors, composers and editors of musical works in authorising use of their copyright-protected works by third parties. Customers of Belgian ISP Scarlet used peer-to-peer - described as a "transparent method of file sharing which is independent, decentralised and features advanced search and download functions" to download works in SABAM’s catalogue from the internet, without authorisation and without paying royalties. SABAM identified that activity in early 2004, bringing interlocutory proceedings against Scarlet before the President of the Tribunal de première instance in June 2004. It argued that the ISP was best placed to take measures that would stop copyright infringement by Scarlet's customers. That argument is similar to claims advanced by record and film industry interests in Australia, notably the Iinet case currently before the High Court.

SABAM sought a declaration that copyright in its musical works had been infringed, in particular the right of reproduction and right of communication to the public. As a corollary it sought an order requiring Scarlet to end those infringements by blocking (or making it impossible for the ISPs customers to send or receive) files containing a musical work using peer-to-peer software without the permission of the rightholders. That order would involve Scarlet providing SABAM with details of the measures.

The Court found that copyright had been infringed. However, it appointed an expert to investigate the feasibility of the technical solutions proposed by SABAM, in particular whether it would be possible to exclude only unlawful file sharing and whether there were other ways of monitoring the use of peer-to-peer. The expert's report concluded that filtering and blocking unlawful sharing of electronic files might be feasible. In June 2007 the Court consequently ordered Scarlet to prevent the ISPs customers from sending/receiving files containing a SABAM musical work by means of peer-to-peer software.

Scarlet appealed, arguing that
• compliance was impossible because the effectiveness and permanence of filtering and blocking had not been proved and there were numerous practical obstacles such as network capacity and performance;
• attempts to block the files in the immediate term were doomed because there were several peer-to-peer software products that made it impossible for third parties to check their content;
• the injunction was contrary to Article 21 of the Law of 11 March 2003 on certain legal aspects of information society services, which assimilates Article 15 of the EU E-Commerce Directive (ie Directive 2000/31) into Belgian law, because it would impose a general obligation to monitor all the communications on Scarlet's network
• deployment of a filtering system would breach of European Union law regarding the protection of personal data and the secrecy of communications, given that filtering involves processing of IP addresses, claimed as personal data.
The Belgian Court accordingly stayed the proceedings and referred questions to the European Court of Justice. Those questions were -
Q1 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 & Fundamental Freedoms, 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: They [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 an [ISP] to install, for all its customers, in abstracto and as a preventive measure, exclusively at the cost of that ISP and for an unlimited period, a system for filtering all electronic communications, both incoming and outgoing, passing via its services, in particular those involving the use of peer-to-peer software, in order to identify on its network the movement of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold rights, and subsequently to block the transfer of such files, either at the point at which they are requested or at which they are sent?

Q2 If the answer to the [first] question ... is in the affirmative, do those directives require a national court, called upon to give a ruling on an application for an injunction against an intermediary whose services are used by a third party to infringe a copyright, to apply the principle of proportionality when deciding on the effectiveness and dissuasive effect of the measure sought?
In responding the European Court referred to Directives -
• 2000/31 (Directive on electronic commerce) on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market;
• 2001/29 on harmonisation of certain aspects of copyright and related rights in the information society;
• 2004/48 on the enforcement of intellectual property rights;
• 1995/46 on the protection of individuals with regard to the processing of personal data and on the free movement of such data; and
• 2002/58 (Directive on privacy and electronic communications) concerning the processing of personal data and the protection of privacy in the electronic communications sector
It concluded that in relation to those Directives the injunction was impermissible, ie the ISP should not be required to install and maintain a filtering system that -
• involves all electronic communications passing via its services, in particular those involving the use of peer-to-peer software;
• applies indiscriminately to all customers;
• is a preventive measure;
• is exclusively at its expense;
• 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 intellectual property rights, with a view to blocking the transfer of files the sharing of which infringes copyright.
The Court commented that -
The protection of the right to intellectual property is indeed enshrined in Article 17(2) of the Charter of Fundamental Rights of the European Union. There is, however, nothing whatsoever in the wording of that provision or in the Court’s case-law to suggest that that right is inviolable and must for that reason be absolutely protected.

As ... Case C‑275/06 Promusicae [2008] ECR I‑271 make clear, 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 ... 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 ... 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 ISPs pursuant to Article 16 of the Charter.
The Court went on to higlight privacy concerns. It commented that -
In the present case, the injunction requiring the installation of the contested filtering system involves monitoring all the electronic communications made through the network of the ISP 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 future 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 ISP concerned to conduct its business since it would require that ISP 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, it must be held that the injunction to install the contested filtering system 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 ISPs.

Moreover, the effects of that injunction would not be limited to the ISP concerned, as the contested filtering system may 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 are rights safeguarded by Articles 8 and 11 of the Charter respectively.

It is common ground, first, that the injunction requiring installation of the contested filtering system 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. Those addresses are protected personal data because they allow those users to be precisely identified.

Secondly, 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. Moreover, in some Member States certain works fall within the public domain or can be posted online free of charge by the authors concerned.
It concluded that -
in adopting the injunction requiring the ISP to install the contested filtering system, the national court concerned would not be respecting the requirement that a fair balance be struck between the right to intellectual property, on the one hand, and the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information, on the other