Fundamental Rights and Service Provider Obligations – Two Rulings from the CJEU

(IPRinfo 2/2012)

Heikki Kemppinen
Associate, Attorneys at law Borenius Ltd

The Court of Justice of the European Union (CJEU) has handed two interesting rulings regarding the interplay between fundamental rights and content filtering obligations directed at service providers.

During the last year, the contested issue of illegal file-sharing has received a new point of focus with the question of how and to what extent can a service provider be obligated to either prevent its customers’ access to websites in which file-sharing takes place or to monitor the sharing of files in their own networks.

The question is problematic in many ways, as copyright holders wish to see a more effective way of stopping the sharing of files through services which are difficult to reach directly due to the anonymity of their administrators or due to the service being located in a state where enforcement of intellectual property rights is difficult.

The service providers are not happy about implementing any such actions, which are held as ineffective and unfeasible in terms of dealing with the actual problem of file-sharing.

Even though getting at the file-sharing services through intermediaries, namely service providers (the liability of which is of course not an issue), would seem to present an effective way of preventing further infringements, the obligations directed at service providers can raise serious questions of responsibility, costs and effectiveness.

In addition, such obligations can raise issues related to the fundamental rights of both the service providers and their customers. These issues were also subject to two cases ruled on by the CJEU in November 2011 and February 2012, respectively.

Two similar cases from Belgium
The two cases heard by the CJEU, C-70/10 (Scarlet Extended SA v Societe belge des auteurs, compositeurs et editeurs SABAM) and C-360/10 (Belgische Vereniging van Auteurs, Componisten en Uitgevers SABAM v Netlog NV) were for many parts similar. Both references for a preliminary ruling originated from Belgium and involved the management company SABAM, representing authors, composers and publishers of musical works.

The main difference between the cases was that the first involved an Internet Service Provider (Scarlet Extended) and the second a Hosting Service Provider operating a social networking platform (Netlog).

In the background of both cases was a request by SABAM for an injunction preventing the unauthorized sharing of works through the respondent’s service. In case C-70/10, the Brussels Court of First Instance had ordered Scarlet Extended to introduce a filtering system to make it impossible for its customers to share musical works in SABAM’s repertoire.

The reference to CJEU was then made in the appellate court. In case C-360/10, the reference for a preliminary ruling was made already in the first instance, where SABAM’s claim against Netlog was largely similar to the Scarlet case.

The main issues: the extent of service providers´obligation
The main issues of both cases related to the extent of the obligation SABAM was requesting the service providers to carry out in order to prevent the sharing of protected works. Both Scarlet Extended and Netlog held that such a general obligation as claimed by SABAM raises several issues related to the E-commerce directive (2000/31), the Charter of Fundamental Rights as well as the data protection legislation of the EU.

The CJEU’s opinion was requested on whether EU law (ie. Directives 2000/31, 2001/29, 2004/48, 95/46 and 2002/58) permits Member States to authorize a national court to order a service provider to install, on a general basis, as a preventive measure, exclusively at its expense and for an unlimited period, a system for filtering all electronic communications in order to identify illegal file downloads.

Thus, the question was not of the possibility of injunctions against service providers per se, or on whether prevention of further intellectual property rights infringements makes injunctions possible (already answered in the affirmative in case C-324/09, L’Oreal and others) but on the scope of such injunctions.

Fundamental rights come into play
In addition to approaching the referring Court’s question in terms of the E-commerce directive and the directive’s provisions on service providers, the CJEU considered at some length the implications of the contested filtering system in terms of fundamental rights.

This makes the decisions especially interesting, as there is still quite a small amount of CJEU case law on the Charter of Fundamental Rights (CFR), especially in relation to intellectual property rights. The incompatibility of general monitoring obligations with service providers had also been dealt with previously in relation to the E-commerce directive in case C-324/09.

The starting point of the CJEU was that intellectual property is explicitly protected in article 17(2) of the CFR. However, in situations such as the two at hand, a fair balance needs to be found between the protection of intellectual property and the fundamental rights of others, namely the service providers’ freedom to conduct a business (Art. 16 CFR) and the service users’ right to protection of personal data and freedom to receive or impart information (Art. 8 and 11 CFR).

An unlimited blanket obligation not possible
In its rulings, the CJEU held in both cases that EU law precludes injunctions in which a service provider is required, in order to prevent copyright infringement, to install a system filtering (a) all electronic communications, (b) applying indiscriminately to all customers, (c) as a preventive measure, (d) exclusively at its own expense and (e) for an unlimited period.

The CJEU held that the installation of a complicated, costly and permanent computer system at the service provider’s expense would result in a serious infringement of the service provider’s freedom to conduct its business. As the injunction would also involve systematic analysis and identification of the service users’ content and IP addresses and potentially cover lawful content in addition to unlawful content, it would also be incompatible with the fundamental rights of the service users.

It was thus held that the imposition of an unlimited blanket obligation as claimed by SABAM would not strike a fair balance between the protection of intellectual property and the fundamental rights of the service provider and its customers.

Court rulings good news for service providers
As the filtering obligation of service providers is a contested topic in many parts of Europe, the aforementioned rulings were especially welcomed by service providers.

On the other hand, it could be said that the decisions can have little effect on the issue of filtering obligations in general, as the contested obligations in the two cases were quite extensive and drastic and the rulings leave the door open for more balanced injunctions.

All in all, it is clear in light of the rulings that issues related to fundamental rights deserve serious consideration also in respect of intellectual property rights. Finding a fair balance between different fundamental rights in the rapidly developing online environment is surely an issue that is going to keep the courts in Europe busy for years to come.

References

Rulings by The Court of Justice of the European Union:

C-70/10 Scarlet Extended SA v Societe belge des auteurs, compositeurs et editeurs SABAM
C-360/10 Belgische Vereniging van Auteurs, Componisten en Uitgevers SABAM v Netlog NV

Official Journal of the European Union:

Charter of Fundamental Rights of the European Union, OJ C 83, 30.3.2010, p. 389-403.
Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (’Directive on electronic commerce’), OJ L 178, 17.7.2000, p. 1-16.
Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society, OJ L 167, 22.6.2001, p. 10-19.
Directive 2004/48/EC of the European Parliament and of the council of 29 April 2004 on the enforcement of intellectual property rights, OJ L 157, 30.4.2004, p. 45-86.
Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications), OJ L 201, 31.7.2002, p. 37-47.