SABAM Knocked Out at the ECJ

The early winter sunshine is sweeter still since the announcement of the European court of Justice’s decision (full text) in the SABAM v Scarlet litigation yesterday afternoon.

This case began in 2004 with the Belgian copyright and collective rights organisation taking a legal action against the ISP Scarlet to implement measures to stop their users from violating copyright through use of p2p software. To this end they sought to oblige the ISP to institute a filtering system which would have intervened to terminate data transfers involving works identified as copyrighted.

Decisions in the Belgian courts went in SABAM’s favour, but no-one could come up with a feasible technical scheme capable of meeting the plaintiffs requirements. Eventually the national authority referred the matter to the ECJ.

The Legal Calculus
Argument at the ECJ centred around the following issues:
(1) Both Copyright directive and the Intellectual Property Enforcement Directive established that copyright owners should have access to injunctions as a means to halt ongoing infringements, the question was – and to some extent remains – to what extent and with what consequences.

(2) The eCommerce directive set out clear limitations to the liability of ISPs, including cases where they act as ‘mere conduit’ for data transactions in which they are not direct protagonists but merely instruments of their users. In addition to sveral enumerated safe harbours, the eCommerce directive also limits the legislative discretion of individual states as regards the obligations of ISPs in Article 15:

Member States shall not impose a general obligation on providers, when providing the services covered by Articles 12, 13 and 14, to monitor the information which they transmit or store, nor a general obligation actively to seek facts or circumstances indicating unlawful activity.

(3) Monitoring users’ data traffic involves the processing of personal data as protected by European Data Protection directives, which consequently must be taken into consideration in assessing the validity of any proposed filtering scheme.

(4) Multiple rights and freedoms protected under the European Convention on Human rights and the Charter of Fundamental Rights of the European Union (which became part of EU law in 2009) are implicated in the adjudication. On one side the property rights of the copyright owners, on the other the rights of privacy and freedom of expression of internet users, and the freedom to conduct business of the ISP.

Round 1: The Advocate General’s opinion
Cases sent to the ECJ are first analysed by the office of the Advocate General, who produce an advisory opinion for the Court, which is not however bound by either its mode of analysis or conclusions. The examiner in this case was the spaniard Pedro Cruz Villalón. His attention focused on the question of the consistency of such injunctive relief with the Charter, and his conclusion was that it was noncompliant and in breach of the principle of legality on several counts. At the core of his opinion (in french) was a criticism of the general nature of the surveillance system sought by SABAM, its lack of proportionality and indefinite duration. Having resolved the question by reference to the Charter, he did not delve into the conflicting provisions of the different directives.

Round 2: The ECJ decision
The ECJ however elected to approach the matter the other way around, dealing first with the question of Article 15 of the eCommerce directive. An indication of the result is already provided by the framing given by the Judges to the proposed filtering system, which abounds with red flags:

29. … a system for filtering
– all electronic communications passing via its services, in particular those involving the use of peer-to-peer software;

– which applies indiscriminately to all its customers;

– as a preventive measure;

– exclusively at its expense; and

– for an unlimited period,

Indeed it only takes another six paragraphs for the scheme to be definitively struck out:

36. In that regard, the Court has already ruled that that prohibition applies in particular to national measures which would require an intermediary provider, such as an ISP, to actively monitor all the data of each of its customers in order to prevent any future infringement of intellectual-property rights. Furthermore, such a general monitoring obligation would be incompatible with Article 3 of Directive 2004/48, which states that the measures referred to by the directive must be fair and proportionate and must not be excessively costly (see L’Oréal and Others, paragraph 139).

The Judges then proceeded to deal with the vying rights and freedoms under the Charter.

43. 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 (‘the Charter’). 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.

44 As paragraphs 62 to 68 of the judgment in 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.

45 More specifically, it follows from paragraph 68 of that judgment that, in the context of measures adopted to protect copyright holders, 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.

46 Accordingly, in circumstances such as those in the main proceedings, 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.

Reference to Article 16 caught my attention as it was not mentioned at all in the Advocate General’s opinion. In addition it is raised as the first countervailing factor weighing against any absolute vindication of the copyright owners’ rights. Next up are the rights of individual users:

50 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.

51 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.

52 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.

Ringside Reaction
SABAM have issued a press release with the somewhat misleadinbg title ‘Authors worried about the decision by the Court of Justice of the European Union’ (which authors exactly?), wherein they announced that they are going to lick their wounds in private and reflect on the options left open to them by the decision.

Meanwhile the IFPI took the opportunity to emphasise that the decision reiterated the sanctity of copyrights online and that the problem here was merely in the overbroad nature of the injunction sought by SABAM, and would not undermine either their three strikes schemes or pursuit of so-called rogue sites.

La Quadrature du Net hailed the decision:

At a time of all-out offensive in the war against culture sharing online, this decision suggests that censorship measures requested by the entertainment industry are disproportionate means to enforce an outdated copyright regime.

They also point to the more general landscape in which the decision occurs, specifically the current passage of the Anti Counterfeiting Trade Agreement and the upcoming consent vote regarding the Treaty at the European Parliament.

Naturally Belgacom, the current owners of Scarlet also expressed satisfaction with the result, which comes more generally at a time when rightsholders have been trying to corner ISPs into more intense policing of their users, an operation to which the European Commission has also been party.

It’s a Knock Out
In sum this is a rare occasion to celebrate as regards legal developments concerning online freedom. This decision will have an important impact on national jurisprudence throughout the Union, and will put pressure on legislators to tailor any further copyright enforcement measures with at least some regard to proportionality and fundamental rights. Of course there are other fronts to this battle, notably the current hysteria about so-called rogue sites. At a later point I will provide an EU-wide survey of the situation in that regard, and of course there is legislation pending on the same theme in the US.

For other coverage see Glyn Moody’s report, IP Kat, and the reaction of the European Digital Rights Initiative.