The supply of counterfeit products and other copyright infringements online has grown rapidly during recent years. The internet is undoubtedly a favourable environment for persons that want to make a profit from illegal activity. It is both cheap and easy to open up an online channel from which counterfeits can immediately be promoted to millions of potential consumers worldwide. Further, it is relatively easy for a person to hide their identity through fake accounts or to operate through hosts and service providers in jurisdictions were enforcement is difficult.
A recent study published in 2016 by the OECD and EUIPO shows that international trade in counterfeit and pirated products could be as much as $461 billion (data from 2013). This number compares to up to 2.5% of world trade, though the actual impact is likely to be much higher as the amount does not include domestically produced and consumed counterfeit and pirated goods, and pirated digital products distributed via the internet.
The same report shows that imports of counterfeit and pirated goods into the EU amounted to $116 billion, which represents up to 5% of EU imports.
Another study, published by Frontier Economics Ltd and commissioned by INTA and ICC-BASCAP, estimates that the global value of digital piracy in movies, music and software in 2015 was $213 billion. It is nonetheless most likely that the value of total digital piracy exceeds the estimates made in the study by a considerable amount. This is due to, for example, difficulties in capturing online activity in places such as China or Russia, the fact that forms of digital piracy can change quickly from one year to another, that the study is based on US data, and that the study does not cover piracy in a number of areas such as TV series or platforms such as Netflix, eBooks, mobile gaming or piracy through user uploaded content.
Many ways of tackling online counterfeit and copyright infringement activity have been proven both ineffective and expensive. Website blocking has therefore become a more common tool in the fight against the sale of counterfeit products and copyright infringements online. At the same time, the issuance of injunctive orders on internet service providers (ISP) for the purpose of copyright and trade mark enforcement has been a highly topical and controversial legal question in Europe during recent years. A number of delicate questions have been raised concerning proportionality between the interests of IP holders on the one hand and the ISPs' freedom of establishment on the other, the balance in respect of the internet users' right to communication, the ISPs' liability for infringements and the extent to which they can be ordered to remove or prevent infringements, and last but not least the efficiency in website blocking to fight counterfeiting.
This year started with an interesting opinion on website blocking delivered by Advocate General (AG) Szpunar in Stitching Brein v Ziggo BV and another (Case C-610/15). The referral is from the Netherlands Supreme Court and concerns The Pirate Bay (TPB), which is one of the biggest and best known BitTorrent peer-to-peer (P2P) sites for sharing files containing musical and cinematographic works. Files are shared free of charge and according to the applicant, Stitching Brein, over 90% of the files contain works made available to users without the copyright owner's consent. TPB does not host the files themselves. Stitching Brein is a Dutch foundation, whose main purpose is to combat copyright infringements and related rights, and to protect in that area the interests of the right holders. The defendants in the main proceedings Ziggo BV and XS4ALL Internet BV are two internet service providers in the Netherlands.
The directives of interest are the E-Commerce Directive (2000/31/EG), the Infosoc Directive (2001/29 EG) and the Enforcement Directive (2004/48 EG). These ensure that ISPs cannot be held liable for IP infringements that originate from specific types of activity, namely mere conduit, caching and hosting, as long as the ISPs are strictly passive. However, these directives also regulate that ISPs can be obliged, within certain limits, to terminate or prevent infringements and to remove or disable access to infringing information.
Liability of operators
The first question to be examined was the liability of an operator of a P2P indexing site (such as TPB). Can those operators themselves be regarded as being the originators of copyright infringements on those networks?
The AG stated that according to established case law, two criteria are essential in order to establish copyright infringement: the act of communication and the presence of the public.
The Court has earlier ruled that in order for "an act of communication" to have taken place, the important factors are the essential role of the party originating the communication and the deliberate nature of its intervention. The AG concluded that the operators arranged the system that enabled users to access works that were made available by other users and their role could therefore be regarded as necessary.
Due to the particular set up of a P2P site, namely that the operator has, in principle, no influence over the appearance of a given work on that network, the AG emphasised that an intentional action is first at hand when the operator has actual knowledge of copyright infringements on the website and does not take action to prevent the illegal activity. In such a situation, its conduct may be regarded as being intended to allow, expressly, the continuation of the illegal making available of that work, and, hence, be an intentional action.
The AG further explicitly pointed out that the operator must have been expressly alerted by the right holders. It would not be appropriate to apply to such a site a presumption of knowledge of the facts such as was established by the Court in the GS Media case (C-160/15). In that case, a hyperlink was posted for profit. Such a presumption would amount to imposing on operators of indexing sites of P2P networks, which normally operate for profit, a general obligation to monitor the indexed content.
The AG also concluded that the second criterion, namely the "presence of the public", was fulfilled. The works were made available on the computers of the network users, so any other user could download them. The potential users of the P2P network undoubtedly constituted an undefined and significant number of persons. As the copyright owners had not consented to the sharing of their works, the users of the P2P network were a new public.
In summary, the AG considered that the answer to the first question was that the actions of the operator of a website, by indexing files and providing a search engine to find files containing works protected by copyright which are offered for sharing on a P2P network, would constitute a communication to the public within the meaning of Article 3 (1) of Directive 2001/29 on Copyright and Related Rights, if that operator were aware of the fact that a work is made available on the network without the consent of the copyright holders and they do not take any action in order to make access to that work impossible.
The AG then went on to consider the second question: whether an injunction order to block access to the website of TPB is an applicable measure, even if TPB were considered only indirectly liable to copyright infringement. He concluded that the circumstances envisaged in Article 8(3) of the Infosoc Directive presuppose the existence of a link between the subject of the injunction and the copyright infringement. A measure blocking a website implied that it had been established that the operator of that website had been held liable for copyright infringement using the services of the intermediary to which the injunction was addressed.
He stated that it is consistent with Article 8(3) to enable injunctions against indirect copyright infringements, if such liability exists under national law. Liability for indirect infringement is not harmonised at the level of EU law.
Further, it is also necessary to consider whether such a measure complies with fundamental rights. This question was analyzed in depth by the European Court of Justice (ECJ) in its judgement in UPC Telekabel Wien (Case C-314/12). In UPC Telekabel the Court indicated that a blocking injunction could be granted if three conditions were fulfilled. Firstly, the service provider to which the injunction is addressed must be able to choose which technical means to use in order to comply with the injunction, and to be discharged of its obligations, by demonstrating that it has taken all reasonable measures to do so. Secondly, the measures taken must not unnecessarily deprive internet users of the possibility of unlawfully accessing the information available. Assessment of the legality of such a measure must, in the opinion of the AG, be done on a case-by-case basis, analysing the proportionality between the measure and the result of depriving access to information and the significance and seriousness of the copyright infringements committed, which was a matter for the national courts to determine. Thirdly, the objective of the measure must be to put a stop to and prevent copyright infringement and the measure must be reasonably effective in achieving that objective.
The AG concluded that in view of the proportion of illegal content and TPB's behaviour, a blocking injunction would be a proportionate response to the significance and seriousness of the copyright infringements.
A decision that was a relief for many brand owners was L'Oréal v eBay, C-324/09, in which the CJEU found that eBay can be held to account for infringing activity taking place on its online marketplace. The decision implied that online marketplace providers and other ISPs could no longer successfully rely on the hosting exception to liability provided in the E-commerce Directive if they have had an active role in the promotion or sale of counterfeit goods, or gained knowledge of facts and circumstances that should have made them aware of that offers for sale were illegal, and they failed to act expeditiously.
The Lóreal v Ebay case was referred to by the UK High Court, and in the footsteps of the CJEU decision the UK High Court ordered several web blocking injunctions. One of the cases Cartier International AG v BskyB was appealed and a judgment was delivered in July 2016 in favour of the right holders (Court of Appeal 2016 EWCA Civ 658). In summary, the Court of Appeal stated that the conditions of a website blocking order were met; the ISPs were "intermediaries" in the sense intended by the Enforcement Directive, the target websites were using the ISPs' services to infringe and the ISPs had actual knowledge of this. Even in respect of fundamental rights, a web-blocking injunction was justified. Further, it was concluded that it was correct to impose the costs of implementing the web-blocking regime on the ISPs themselves.
Based on these cases, the general view within the European Union is apparently that website blocking can be an effective tool in the fight against piracy. But what do the statistics say? A study has been done on the effects of shutting down the popular streaming website kino.to, which was the affected website in the above-mentioned UPC Telekabel case. The conclusion from the study was that the shutdown led to significant but short-lived declines in piracy levels. The existence of alternative sources of unlicensed consumption, coupled with the rapid emergence of new platforms, led the streaming piracy market to quickly recover from the intervention and to limited substitution into licensed consumption.
Similar studies have also been done on the effects of blocking the TPB website in the UK in 2012, and the above-mentioned blocking orders directed at 19 major piracy sites in the UK in October and November 2013.The results showed that forcing broadband ISPs to block individual piracy websites had little impact, whereas blocking a larger amount of websites at the same time increased the usage of legal alternatives.
A global solution
The examples above show how difficult it is to efficiently combat piracy in a meaningful way. It also reflects that the issue of website blocking is not only a European but a global issue. The best way to reduce copyright infringements and counterfeiting online would be to remove infringing websites at the original source, in combination with the development of customer friendly legal alternatives. However, both options are in practice difficult to implement. The CJEU's decision in the Stitching Brein case is welcomed, since it will be one step further to the harmonisation of the circumstances under which websites can be blocked within the EU, which at least makes forum shopping within the EU less relevant. However, in an ideal world, these important questions would be harmonised on a global level. A global solution may well be the only way to properly tackle a truly global problem.
|Linda Granstrand Füle|
|Linda Granstrand Füle is an attorney-at-law and authorised trade mark and design attorney. Linda’s specialisation is within the legal, business and strategic aspects of IP and marketing law, as ewll as closely related legal issues. Her experience includes protection, commercialisation and enforcement of IP rights by trade mark and design filings, prosecution, drafting and negotiating agreements as well as advising on copyright. She also represents clients in opposition proceedings and in litigation matters. Linda started at Valea in 2015 and manages the legal department. She has been working with counselling within IP since 2000.|
|Monika Colak is an attorney-at-law. She works in all fields of IP law with focus on providing strategic advice in trade mark and domain name questions such as strategies, policies, investigations, agreements and infringement queries. She also handles business-related IP issues such as structuring and negotiating licensing agreements and other commercial contracts for the protection and commercialisation of IP rights. Monika joined Valea in March 2010 and has worked within the IP field since 2000.|
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