A little over a week ago the European Court of Justice gave a long awaited judgement in the Scarlet v. SABAM case. It is the first ECJ case dealing with Article 15 of the E-commerce Directive, which prohibits EU Member States to impose a general obligation on Internet services providers to monitor the information transmitted by them.
SABAM, which is the Belgian copyright collection society, had sought an order requiring Scarlet, an Internet Access Provider, to bring copyright infringements by its subscribers to an end by blocking the transmission of files containing musical works through peer-to-peer software. In order to block infringing transmissions, Scarlet would have to install a filtering system scanning all electronic communications of all its subscribers passing via its services. Furthermore, Scarlet would have to pay for implementing and maintaining the system itself.
The ECJ had to answer the question whether the Copyright Directive and the Enforcement Directive, in the light of the Privacy Directive, the E-Privacy Directive, the E-commerce Directive, and Article 8 and 10 of the ECHR, permit …
“…Member States to authorise a national court, before which substantive proceedings have been brought and on the basis merely of a statutory provision stating that: ‘They [the national courts] may also issue an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right’, to order an [ISP] to install, for all its customers, in abstracto and as a preventive measure, exclusively at the cost of that ISP and for an unlimited period, a system for filtering all electronic communications, both incoming and outgoing, passing via its services, in particular those involving the use of peer-to-peer software, in order to identify on its network the movement of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold rights, and subsequently to block the transfer of such files, either at the point at which they are requested or at which they are sent?”
To put it simple: Whether Scarlet can be required to implement and pay for a filtering system to filter out copyright infringing files?
Article 9 of the Enforcement Directive instructs Member States to ensure that interlocutory injunctions may be issued against intermediaries whose services are used by a third party to infringe an intellectual property right. Also, the E-commerce Directive does not prohibit courts to lay injunctions on intermediaries as it explicitly leaves open the possibility for a court or administrative authority to require the service provider to terminate or prevent an infringement (recital 45). Article 18 of this same directive instructs Member States to “ensure that court actions available under national law concerning information society services’ activities allow for the rapid adoption of measures, including interim measures, designed to terminate any alleged infringement and to prevent any further impairment of the interests involved.” On the basis of Article 15(1) of the E-commerce Directive, injunctions may, however, never imply a general obligation to monitor the information that is transmitted or stored. The same accounts for a general obligation to actively seek facts or circumstances indicating illegal activity.
Article 15(1) of the E-commerce Directive is thus at the centre of the issue. The ECJ finds that imposing an injunction to install a filter mechanism is in fact an obligation to actively monitor all the data relating to each of its customers (general monitoring), which is prohibited by Article 15(1) of the E-commerce Directive.
The Promusicae case taught us that the fundamental right to intellectual property, as protected by Article 17 of the EU Charter of Fundamental Rights, has to be balanced with other fundamental rights. The ECJ thus also had to touch on the compatibility of an obligation to implement a filtering system, which clearly is a manifestation of the right to property, with the ISP’s freedom to conduct a business (Article 16 of the EU Charter).
Regarding the freedom to conduct a business, the ECJ holds:
“48 […]such an injunction would result in a serious infringement of the freedom of the ISP concerned to conduct its business since it would require that ISP to install a complicated, costly, permanent computer system at its own expense, which would also be contrary to the conditions laid down in Article 3(1) of Directive 2004/48, which requires that measures to ensure the respect of intellectual-property rights should not be unnecessarily complicated or costly.
49 In those circumstances, it must be held that the injunction to install the contested filtering system is to be regarded as not respecting the requirement that a fair balance be struck between, on the one hand, the protection of the intellectual-property right enjoyed by copyright holders, and, on the other hand, that of the freedom to conduct business enjoyed by operators such as ISPs.”
The ISP, however, is not the only actor that is affected by a filtering obligation. The ECJ thus also considered the right to freedom of information and the right to the protection of personal data of Internet subscribers.
The ECJ on freedom of information:
“52 […] 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.”
Regarding the right to personal data, the ECJ holds:
“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.”
The ECJ concludes that imposing a general filtering obligation does not respect the requirement that a fair balance be struck between the right to intellectual property, on the one hand, and the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information, on the other.
However, the ECJ’s assessment of the filtering obligation in relation to the Internet user’s freedom of information and right to personal data is not as strict as its assessment of the filtering obligation in the light of the ISP’s freedom to conduct a business. The ECJ calls the filtering obligation a “serious infringement” of the ISP’s freedom to conduct a business. In contrast, regarding the right to freedom of information, the ECJ only speaks of it being potentially undermined by a filtering obligation.
Regarding the right to personal data, the ECJ seems to only focus on the fact that a filtering obligation implies that IP addresses are collected and identified. The ECJ is right that identifying an IP address is processing of personal information, but it being processing of personal data does not mean that it is absolutely forbidden. The EU Data Protection Directive gives rules on how to process personal data and does not completely forbid such processing. Furthermore, the court mentions that a filtering system involves a systematic analysis of all content sent on the network, but does not qualify it as being problematic in the light of data protection law, nor other aspects of privacy such as communication privacy. After all, privacy is more than data protection and the question of the Belgian court did not refer to Article 10 ECHR without reason.
This judgement is great news for ISP’s that are targeted by copyright owners as the ECJ holds that an obligation to install a general filtering mechanism is in conflict with Article 15(1) of the E-commerce Directive. The court furthermore finds that a fair balance is lacking when an ISP has to install and pay for a general filtering mechanism. This of course does not prevent an ISP from ‘voluntarily’ installing a filtering mechanism as a part of a deal with copyright holders. In this context, it is a pity that the ECJ did not express a clear opinion on the Internet subscriber’s right to freedom of information and the right to privacy when filtering mechanisms are installed.