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Digital Business Lawyer
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The ‘Dutch trilogy’ of piracy cases and the impact on the ‘value gap’ debate

The ‘Dutch trilogy’ of piracy cases and the impact on the ‘value gap’ debate In the latest decision in what could be called the ‘Dutch trilogy’ of referrals from the Dutch courts involving copyright infringement online, the Court of Justice of the European Union (‘CJEU’) has ruled on a case involving the infamous The Pirate Bay (‘TPB’) website, holding that the operation of a platform which allows users to locate and share copyright works, by indexing metadata relating to works and providing a search engine, constitutes copyright infringement. The contribution of the TPB case to EU case law in this area, alongside previous decisions in GS Media and Filmspeler, has developed a standard on whether a website communicates to the public. Ted Shapiro, Partner at Wiggin LLP,  discusses in detail the TPB case, its wider implications for online copyright, and what it means for the legislative debate around what is referred to as the ‘value gap.’

Introduction

On 14 June 2017, the CJEU handed down its judgment in the TPB case1, holding that the operation of a platform which allows users to locate and share copyright works, by indexing metadata relating to works and providing a search engine, constitutes copyright infringement. This judgment completes a Dutch trilogy of cases addressing copyright infringement online. The TPB, GS Media2 and Filmspeler3 cases, which were all referred from the Dutch courts, have far-reaching implications not only for online copyright licensing and enforcement, but also for the ongoing legislative debate over the so-called ‘value gap4.’

This article summarises the case and the judgment and then considers the impact of the judgment on the value gap.

Facts

The platform at issue is the notorious Pirate Bay. TPB indexes BitTorrent files. BitTorrent is a protocol through which users (known as peers) share files, by dividing the files into small segments, thus reducing the burden on each individual server involved. Consequently, the files can be downloaded by peers from each other’s computers, without the need for a central server where the files are stored. The files indexed by TPB include films, music and software.

Users wishing to make a file available to other users create torrent files, which are uploaded to a platform, such as TPB, which then indexes them so that they can be found and the works to which the torrent files refer can be downloaded by users.

By way of further background, TPB is a very widely used file-sharing website. It was set up and originally operated by four Swedish individuals who were convicted of criminal offences of aiding and abetting copyright infringement by the Swedish courts. TPB, which has also been the subject of litigation before the European Court of Human Rights5, is subject to site blocking orders in twelve EU Member States6. Presumably, the Netherlands will soon be added to the list. The platform carries advertising which generates very significant revenue for the operators.

Stichting Brein, the Dutch content protection organisation, alleged that TPB infringed copyright by making works available to the public without authorisation and brought an action against internet access provider (‘ISP’) Ziggo (later joined by XS4ALL), seeking an order requiring it to block access to TPB pursuant to Article 8(3) of the Copyright Directive (2001/29). The case was referred to the CJEU by the Dutch Supreme Court.

Questions referred

Two questions were referred for preliminary ruling by the CJEU:

1. Is there a communication to the public within the meaning of Article 3(1) of the Copyright Directive by the operator of a website, if no protected works are available on that website, but a system exists [as described in paragraphs 13 to 30 [of the Supreme Court’s judgment]] by means of which metadata on protected works which is present on the users’ computers is indexed and categorised for users, so that the users can trace and upload and download the protected works on the basis thereof?

2. If the answer to Question (1) is negative: Does Article 8(3) of the Copyright Directive and Article 11 of the Enforcement Directive offer any scope for obtaining an injunction against an intermediary as referred to in those provisions, if that intermediary facilitates the infringing acts of third parties in the way referred to in Question 1?

The judgment: the first question

The Court of Justice begins by recalling the nature of the communication to the public right in Article 3(1) of Copyright Directive (2001/29). This exclusive right is “preventive in nature.” In other words, an effective exclusive right is far more than a mere right to remuneration; it can be used to authorise (license) or prohibit (enforce) the exploitation of protected works.

Of course, the concept of ‘communication to the public’ is not defined in the Copyright Directive. Therefore, its interpretation is based on the Directive’s objectives and the particular context. This means basically that the assessment of whether a particular activity implicates the communication to the public right tends to be done on a case by case basis. From its now rather long line of cases, the Court refers to the now famous Recitals 9, 10 and 23 for the proposition that the Directive’s principal objective is to establish a high level of protection for the author and that the concept of ‘communication to the public’ must be interpreted broadly.

The test that has emerged is rather straightforward; a communication to the public involves two cumulative criteria:

1. an ‘act of communication’ of a work; and,

2. the communication of that work to a ‘public.’

However, there are several - not so straightforward - complementary criteria. These include:

1. the indispensable role played by the user; this refers to a user undertaking an act of communication;

2. ‘public’ refers to an indeterminate number of potential viewers and implies a fairly large number of people;

3. a protected work must be communicated using specific technical means which is either a/ different from those previously used; or, b/ to a new public.

4. Profit-making is “not irrelevant.”

Communication

As to whether TPB’s activity of “making available and managing an online sharing platform” is a communication in the sense of Article 3(1), the Court recalls that “the author’s right of communication to the public, provided for in Article 3(1), covers any transmission or retransmission of a work to the public by wire or wireless means, including broadcasting.” It is clear from earlier cases that the concept of communication is very broad - all that is required is “that a work is made available to a public in such a way that the persons comprising that public may access it, from wherever and whenever they individually choose, irrespective of whether they avail themselves of that opportunity.” Thus, for example, the provision of clickable links on a website (without restrictions) is a communication that affords users access to works. More recently in Filmspeler, the same applied to a multimedia player containing pre-installed add-ons, available on the internet, containing hyperlinks to websites (also freely accessible to the public) which make available unauthorised copies of protected works.

The Court in TPB confirms rather categorically the broad nature of the concept of ‘communication,’ which is as a rule, any act by which a user, with full knowledge of the relevant facts, provides its clients with access to protected works is liable to constitute an ‘act of communication.’ While these works were placed online by its users rather than the TPB operators, the Court took the view that their conduct of the platform amounted to an intervention “with full knowledge of the consequences” i.e., the provision of access to protected content by indexing torrent files that permits users to find protected works and share them on a peer-to-peer network. The Court found this amounted to playing an essential role in making works available as, without the website, the sharing of works would be more difficult. As such, knowledge of the infringing nature of the works is an important consideration in certain circumstances.

Moreover, it could not be said that their activity was limited to the mere provision of physical facilities as described in Recital 27 of the Directive. The platform is engaged in the following activities:

• indexation of torrent files in such a way that the works to which the torrent files refer may be easily located and downloaded by the users of that sharing platform;

• provision of a search engine; 

• classification of the works under different categories, based on the type of the works, their genre or their popularity, within which the works made available are divided;

• checks to ensure that a work has been placed in the appropriate category; 

• deletion of obsolete or faulty torrent files; and,

• active filtering of some content.

As a result, the Court finds that “the making available and management of an online sharing platform” such as TPB is an act of communication for the purposes of Article 3(1) of Directive 2001/29. The next question is whether that communication is to a public.

Public

Regarding this determination, the Court first looks at the quantitative aspects of the concept of ‘public.’ It excludes “groups of persons concerned which are too small, or insignificant.” The Court then, in order to make the determination, requires that the cumulative effect of making the works available to potential recipients is taken into account. Thus, what matters is not “how many persons have access to the same work at the same time, but also how many of them have access to it in succession.”

The referring Court had established that a large number of the ISPs’ subscribers have downloaded media files using TPB. The observations submitted to the Court also bear out the fact that TPB is used by a “considerable number of persons.” Indeed, TPB operators have asserted that they “have several dozens of millions of ‘peers.’” As a result, the Court considered that communication covered “at the very least, all of the platform’s users.” These users are able to access the protected works “at any time and simultaneously” via the platform. All this adds up to a “communication that is aimed at an indeterminate number of potential recipients and involves a large number of persons.”

So, there is a communication to a public. But was it to a new public? A new public is “a public that was not taken into account by the copyright holders when they authorised the initial communication.”

For the Court, TPB operators were clearly informed that their platform provides access to protected works without the authorisation of the rightsholders. Indeed, the operators flaunted the fact that their raison d’etre was distributing unauthorised works and they openly induce their users to make copies of those works. In light of the fact that “a very large number of torrent files on the online sharing platform TPB relate to works published without the consent of the rightholders […] it must be held that there is communication to a ‘new public.’” Moreover, it was done for profit as the platform generates considerable advertising revenues.

The Court therefore finds that the exclusive right of communication to the public in Article 3(1) of the Directive covers:

• in circumstances such as those in the case,

• the making available and management,

• on the internet,

• of a sharing platform which, by means of indexation of metadata referring to protected works and  the provision of a search engine, 

• allows users of that platform to locate those works and to share them in the context of a peer-to-peer network.

The judgment: the second question

The second question concerned the availability of site-blocking injunctions pursuant to Article 8(3), a remedy which has proven to be an effective means of addressing online copyright infringement across the European Union7.

In view of its response to the first question, the Court considered that it was not necessary to reply to the second question. As a result, the question as to whether national courts can issue an injunction requiring an intermediary to block access to a website if that website does not infringe copyright directly is left open; potentially an important question in those EU Member States that lack secondary liability concepts for copyright infringement.

There is no theory of secondary liability in EU copyright acquis (it is a matter for national law and the situation varies considerably in the Member States). In the instant case, it probably does not matter - as subscribers were also using the ISPs’ services to infringe. The broad approach in this decision may have rendered the question moot, but it is of course possible that the question may again come before the Court.

Comment

The Court of Justice has ruled that TPB infringes the exclusive right of making available. This holding ends a debate that has raged since TPB first came before the criminal courts in Sweden. Websites, including torrent and link sites, cannot rely on the argument that it is their users which infringe but not them. It is now clear that both the sites and the uploaders infringe. The question of course is how far does this go?

What about the type of sites targeted by Article 13 of the proposed Directive which was intended by the European Commission to bridge the so-called ‘value gap’?

In the European Commission’s legislative proposal for a Directive on Copyright in the Digital Single Market, Article 13 requires certain platforms to take measures to: (i) ensure the functioning of agreements with rightsholders; or (ii) prevent the availability on their services of works unauthorised by rightsholders. Such measures must be appropriate and proportionate and may include content recognition technologies.

The ‘value gap’ provision was introduced to address what recording industry body IFPI has described as “a legislative issue caused by the misapplication of the so-called liability ‘safe harbours’ to user upload services. This, quite simply, allows them to negotiate music licences in a way that is grossly unfair and devaluing of music. As a result, they have an unfair advantage over other digital services, as well as depriving artists and labels of fair revenues.”

Article 13 and its supporting Recital 38 have come under a great deal of criticism from many stakeholders - not to mention a savaging at the hands of the European Parliament’s Internal Market and Consumer Affairs Committee. However, the Commission’s proposal appears to be a careful attempt to thread the needle through current law and Court of Justice case law. This includes, in particular, the communication to the public right and the so-called hosting safe harbour of Article 14 of the E-Commerce Directive (2000/31), which provides a liability limitation for certain activities involving the hosting of content. Indeed, in certain respects the Commission’s proposal is a codification of this case law. It would now seem that this proposal can take considerable comfort in the Court of Justice’s most recent addition to its jurisprudence.

While it is clear from the above analysis that the question of whether a website communicates to the public remains a case by case determination, following the Dutch trilogy (GS Media, Filmspeler and TPB), a clear standard has emerged. Online platforms that knowingly make protected works available via their sites risk direct liability for copyright infringement.

Article 13 pertains to platforms that ‘store and provide to the public access to large amounts of works.’ Recital 38 suggests that by doing so such platforms may be ‘going beyond the mere provision of physical facilities and performing an act of communication to the public […] unless they are eligible for the liability exemption provided in Article 14 of the [E-Commerce] Directive […].’

Recital 38 recognises that what these platforms do may amount to communication to the public. The TPB judgment supports this conclusion, emphasising certain factors important in the determination of what amounts to communication to the public, which are equally applicable to platforms such as YouTube. In particular, the large number of users, the indispensable intervention made by the platform, and the knowledge that the works made available are not authorised by their rightsholders.

The Article 14 hosting privilege could of course still apply. In this regard, Recital 38 encapsulates the relevant Court of Justice case law and confirms that ‘it is necessary to verify whether the service provider plays an active role, including by optimising the presentation of the uploaded works or subject-matter or promoting them, irrespective of the nature of the means used thereof.’ Even if a given platform does qualify for the safe harbour, it is still subject to injunctive relief. For this reason, it is not unreasonable that, per Article 13, the platforms must take measures even where they fall within the safe harbour.

Ted Shapiro Partner

ted.shapiro@wiggin.co.uk

Wiggin LLP, Brussels

1. Stichting BREIN v. Ziggo BV and XS4ALL, Case C-610/15, Judgment of the Court (Second Chamber) of 14 June 2017.

2. GS Media BV v. Sanoma Media and Others, Case C-160/15, Judgment of the Court (Second Chamber) of 8 September 2016.

3. Stichting Brein v. Jack Frederik Wullems, Case C-527/15, Judgment of Court (Second Chamber) of 26 April 2017.

4. See Article 13 and Recitals 37-39 of the Proposal for a Directive of the European Parliament and of the Council on copyright in the Digital Single Market, COM(2016) 593 final, 14 September 2016.

5. ECHR Decision of the ECtHR (5th section) of 19 February 2013. Case of Fredrik Neij and Peter Sunde Kolmisoppi (The Pirate Bay) v. Sweden, Appl. nr. 40397/12 dismissing the complaint by two of the co-founders that their copyright conviction violated human rights.

6. TPB is subject to Article 8(3) injunctions in at least the following 12 EEA Member States: Austria, Belgium, Denmark, Finland, France, Iceland, Ireland, Italy, Norway, Portugal, Spain, and the UK.

7. See Cartier International AG, Montblanc-Simplo GMBH, Richemont International SA v. British Sky Broadcasting Limited, British Telecommunications plc, EE Limited, Talktalk Telecom Limited, Virgin Media Limited [2014] EWHC 3354 (Ch), at 226 and see generally 220-236. Following blocking orders, traffic to the sites subject to orders decreases significantly. The UK has experienced a significant decrease in traffic to blocked websites (-71.2%), whereas the rest of the world has experienced an increase in traffic to those websites (27.8%).

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