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Analysis of the IP Enforcement Directive Report

My intent initially was to publish this in January, but as the preceding posts make clear, there was considerable digging to be done to get a better picture of the context. In what follows, I begin with some comments with regard to shaky basis for the enforcement project, and then move on to a more detailed review of the Commission’s report.

1. The most noteworthy element of the Commission’s Report on the IP Enforcement Directive is what is absent. The Directive itself mandated the review, under Article 18, titled ‘Assessment’:

Three years after the date laid down in Article 20(1), each Member State shall submit to the Commission a report on the
implementation of this Directive.

On the basis of those reports, the Commission shall draw up a report on the application of this Directive, including an assessment of the effectiveness of the measures taken, as well as an evaluation of its impact on innovation and the development of the information society (my emphasis).

Those interested in reading about ‘impact on innovation and the development of the information society’ will be disappointed, as such a section does not exist. Late transposition by several member states is offered as explanation for its absence. Yet this tardiness was no obstacle to a commentary on the efficacy of the Directive’s enforcement measures. A strange anomaly, but easily explained:

“… in the context of the European Observatory on Counterfeiting and Piracy, DG Internal Market and Services works with experts from the private sector to assess the application of the Directive and to complete the information received from the Member States.”
Commission Staff Working Document, p.5 (hereinafter CSWD)

So we’re in good hands. Elsewhere the Report relies on work commissioned by copyright industry players in support of its assertions, such as that produced by Tera consultants, whose methodology was questioned by the Social Sciences Research Network (SSRN).

2. Questioning the innovation impact is not mere pedantry on my part, in fact the basis for EU innovation policy has been in a sort of quiet turmoil in the ten years since the launch of the Lisbon Agenda in 2000. This plan had a heavy emphasis on the importance of innovation, and in its initial period treated statistics such as total spend on R&D and the number of patent applications as yardsticks to achieving the innovation targets. Failure to make significant progress towards its objectives provoked a rethink in 2005, and more recently this whole approach to measuring innovation has been challenged by the very organization contracted by the Commission, the Center for European Reform, to benchmark member states performance on the Lisbon index.

Patents at most tell a story about a subset of innovative activity. They do not, for example, capture almost any information about new models in the service sector, which in countries like the UK is the dominant part of the economy. Even in product manufacturing, design and user-friendliness has formed the spine of recent success stories from Apple to Moleskine. These companies are reliant on IPRs, especially trademarks, but not in the same manner as the ‘knowledge oligopolies’ crowding the patent and copyright sectors. Then there are the fields where user innovation is key, and that’S without even starting on peer production of information goods, free software etc.

Substance
3. Sections 3.1 and 3.3 address the obligations of online intermediaries’:

“3.1 …
Many online sites are either hosting or facilitating the online distribution of protected works without the consent of the right holders. In this context, the limitations of the existing legal framework may need to be clearly assessed.”

and

“3.3 …
The Directive leaves it to Member States to determine when and how an injunction can be issued against an intermediary. For this to work efficiently, it could be useful to clarify that injunctions should not depend on the liability of the intermediary. Furthermore, the findings reported in the Staff Working Paper that accompanies this Report indicate that the currently available legislative and non-legislative instruments are not powerful enough to combat online infringements of intellectual property rights effectively. Given intermediaries’ favourable
position to contribute to the prevention and termination of online infringements, the Commission could explore how to involve them more closely.”

Three separate querstions are at issue here.

The first is whether ISPs have an obligation to cut off access to websites identified as infringing, and whether those infringement must have been already been the result of a court decision. A combined reading of the Directives suggests that this is possible under EU provisions, and this reading has been at the base of decisions such as the regarding blocking of the Pirate Bay in Denmark. whether it can be done in a specific case however depends also on the nature of national implementation, so that for example in Ireland the court found that there was no basis to shut down access to TPB.

The second issue is whether the safe harbours provided in articles 12-14, and the exemption from general system monitoring under A. 15, of the ecommerce directive apply to other services, specifically those offering search and indexes of hyperlinks. Again this depends on the national implementation. but it will also depend on the conduct of the service provider. Rapidshare, for example, have now won a series of cases in Germany, where on the basis of having installed a system that checks md5 hashes against a database of infringing files, and of having been responsive to rightsholder complaints and requests for takedowns, and having significant non-infring use, their site’s legitimacy has been upheld. In some states legislation explicitly does extend the safe harbours to search and hyperlink providers (eg Spain), whilst in Germany there have been contradictory responses from the courts as to the extent of host’s responsibilities. Rapidshare, however, remains at the centre of this uncertainty with conflicting decisions emanating from appellate courts in the Hamburg and Dusseldorf.

The final question relates to ISP obligations more generally, and is condensed in the questions before the ECJ in the Scarlet v Sabem litigation. The Belgian courts initially found in favour of the rightsholders and issued an order requiring the enablement of a genral system of filtering capable of preventing p2p transactions of works belonging to the rightsholders. On its face, the answer seems clear: there is no general obligation to monitor, and the ISPO functions as a ‘mere conduit’ which neither or initiates nor plays any other role in the transaction other than providing the material infrastructure.

4. No mention if made of ‘over-enforcement’: ISPs, often anxious simply to minimise the cost and simplicity of regulatory compliance, are themselves placed in the position of having to adjudicate with regard to complaints from copyright holders as to the use of their works. Studies by the user group Bits of Freedom, following up work by researchers from Oxford Center for Socio-Legal studies, have chronicled how many ISPs took down materials in cases where even a minimum of diligence would have demonstrated that the complaints were unfounded. The Bits of Freedom experiment involved complaints made from a hotmail address, claiming to be the copyright owner of a text by a 19th century Dutch author.

While the legalities of the above cited case are unambiguous, Outside of the general question about the copying of entire works, it is obvious that there is a wide area of contested uses of music, video and text on websites as extracts, elements of collages etc alleged to be infringing by rightsholders but with a solid claim for protection as transformative expression whose purpose is criticism, commentary or parody. The danger here is that even uses which are legally defensible will be prevented due to risk aversion on the part of intermediaries afraid of being sued. Google’s operation of youtube is a case in point, where automated procedures combined with fingerprint look-ups are combined, with the result that works are censored preemptively.

5. Section 3.4 deals with the ‘right of information’or rather the rightsholders right to identify internet users accused of infringements.

Here the is plainly to seek to overrule the Promusica decision at the ECJ, where the decision to require identification or not in civil cases is left to national courts to determine on the basis of proportionality, ie an assessment which balances the seriousness of the alleged infringement with data protection law, a matter which continues to block the online enforcement campaigns in Austria and Spain.

6. 3.5 contains a proposal for greater damages and is pretty vague.

“The main aim of awarding damages is to place the rightholders in the same situation as they would have been in, in the absence of the infringement. Nowadays, however, infringers’ profits (unjust enrichment) often appear to be substantially higher than the actual damage incurred by the rightholder. In such cases, it could be considered whether the courts should have the power to grant damages commensurate with the infringer’s unjust enrichment, even if they exceed the actual damage incurred by the rightholder. Equally, there could be a case for making greater use of the possibility to award damages for other economic consequences and moral damages.”

The Commission should specify whether individuals convicted for uploading or sharing files ought to be subject to greater damages awards. For example, would damages on the scale of the 1.92 million dollars made against p2p user Jamie Thomas in the US be appropriate?

Similar questions arise with regard to actions against generic drug manufacturers who have suffered from nineteen seizures in Germany and the Netherlands since 2008. these are goods seized in transit in the EU, legitimately produced out of patent and shipped to countries where the patent does not apply. These seizures take place under Customs Regulations but are intimately related to the Enforcement mechanism as a whole. These rules, as well as the Enforcement directive itself are now the subject of a complaint to the WTO on the part of India and Brazil. Should shippers and generics manufacturers be subjected to damages awards? The Report makes no comment.

7. 3.7 is concerned with the effects of the ‘commercial scale’ concept:

“The link between the ‘commercial scale’ requirement (i.e. the requirement that the infringing act is carried out for direct or indirect economic or commercial advantage) and the right of information in Member States’ rules could also be explored further.”

‘Commercial scale’ has in fact been devised so as to remove the requirement that an activity be commercial in order for it to be treated as a major infringement, introducing the idea that online infringements are of an equivalent ‘scale’. German Courts, for example, have held that uploading a recently released album qualifies as a ‘commercial scale’ infringement, although recital 14 of the Directive states that it encompasses acts:

… “carried out for direct or indirect economic or commercial advantage and that this would normally exclude acts carried out by end-consumers acting in good faith”.
CSWP p.10

Categorisation of an act as on a ‘commercial scale’ simplifies demands for identification, enables orders for financial information and for the seizure of movable property. to avoid deployment of such disproportionate tools against end-users it is important to be vigilant in ensuring that the definition creep of ‘commercial scale’ is prevented.

8. Provision for criminal sanctions is not mentioned in the Report, only in the accompanying Staff Working Document, and even there only in passing. But it is certain that a directive proposal on this matter is on its way.

March 28, 2011 - Posted by | /, copyright, enforcement, european directives, european union, intellectual property, ipred, patent

1 Comment »

  1. Seems to me that companies are pushing harder than before to compete with competitors without doing the actual work of inventing new things rather just building on the work of others I think as this trend continues so will the cases of patent infringement and patent enforcement increase.

    Comment by Jared | April 13, 2011 | Reply


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