The Protection of Intellectual Property Rights vs. the rights of Internet Service Providers

A delicate balancing act

Case Over the last couple of years, it has become clear that Trademark and Copyright owners have a tense relationship with the Internet Service Providers.

The Internet has proven to be a vast platform, accessible worldwide, making it easier to violate intellectual property rights on a large scale. Since it is often difficult to seek action against the original infringer, Intellectual Property Right Owners frequently try to hold the Internet Service Providers liable for hosting infringed content and for facilitating the illegal distribution of protected works. By doing so, they repeatedly ask the courts for extensive measures, which can contravene fundamental rights such as privacy or freedom of expression.  Hence, the courts often have to perform a balancing act between the protection of intellectual property rights and freedom of information.

The recent case law of the European Court of Justice has clarified the extent of the liability of the Internet Service Providers when it comes to Intellectual Property violations and has set out basic principles regarding this matter.

1. The Case ebay / L’Oréal

This judgment, rendered by the European Court of Justice on July 12th 2011, has tackled several issues concerning trademark infringements.

This case has its origin in a dispute between L’Oréal, the famous manufacturer of cosmetic products, and eBay, the online marketplace.

L’Oréal has sought action against eBay, arguing that the latter has committed various trademark infringements. One in particular concerned eBay’s liability for condoning trademark violations committed by the users of the online marketplace. According to l’Oréal, eBay should be held liable, given that she is to be considered “involved” in the aforementioned infringements and that she does not take appropriate actions in order to end the illegal practices.

Ebay on the other hand maintained that she could rely on the exemption as foreseen in article 14 of the E-commerce Directive (2000/31).

The Court had to interpret the extent of the exemption of liability provided by article 14. In its judgment, the Court stated that an Internet service provider can rely on the safe harbor provision, when it can be established that the operator has (i) no actual knowledge of illegal activities or information, (ii) it is not aware of facts or circumstances from which the illegal activities or information is apparent, and (iii) having obtained such knowledge or awareness, it has acted expeditiously to remove, or disable access to, the information.

Moreover, in order to apply article 14, it is required that the operator has not played an active role, allowing it have knowledge or control of the illegal information or activities. The Court further specified that the operator plays such a role when it provides assistance which entails, in particular, optimizing of the offers for sale in question or promoting them. Although it is left to the national courts to decide whether eBay, or any other operator for that matter, falls under the scope of article 14, The European Court hinted that eBay has not played a neutral role given that she actively provided assistance to her users so they could boost their commercial activities.

2. The Case Scarlet / Sabam

This case takes it one step further, since the key question concerned which measures an operator has to take in order to avoid liability for intellectual property infringements committed by its users, and more in particular, if a provider can be compelled to monitor the traffic on their network for illegal content.

Sabam, the Belgian Society for authors, composers and publishers filed a complaint against Scarlet, based on the fact that a number of users of Scarlet’s services were illegitimately downloading works of the Sabam catalogue from the Internet. Therefore, Sabam sought an injunction and asked the court to order Scarlet to implement a filtering system that would make an end to all current infringements and that would prevent all future violations.

The European Court of Justice has ruled explicitly on November 24th 2011 that such an injunction, requiring the installation of a general filter, cannot be ordered by the Court since it involves monitoring all the electronic communications that run trough the network of the Internet Service Provider.

Given that the monitoring would have no limitation in time, would be directed at all future infringements and is intended to protect not only existing works, but also future works that have not yet been created at the time when the system would be introduced, it could not be deemed proportionate.

If this particular obligation would be imposed on Internet Service Providers, it would result in a serious infringement, not only of the fundamental rights, but also of the freedom of the Internet Service Provider to manage its business. After all, it would require the Internet Service Provider to install a complicated, costly, permanent computer system at its own expense, which would be contrary to both the provisions of the E-Commerce Directive (2000/31), as to the Enforcement Directive (2004/48) which lays on that those measures shall not be unnecessarily complicated and costly.

National courts have the authority to grant a specific injunction or they can hold Internet Service Providers liable when the circumstance presents itself. However, by ordering so, a fair balance must be struck between the protection of intellectual property rights and the safeguard fundamental rights.

Only recently, on February 16th 2012 the European Court has firmly confirmed these principles in the case Sabam / Netlog.

3. Conclusion

National Courts will still be able to issue orders against online operators to take measures not only against existing infringements but also to prevent future violations. However, such an order must be effective, proportionate, dissuasive and must not create barriers to legitimate trade.

In sum, the European Court, as the legislators continue to balance the interests of the Intellectual Property holders and those of the public in order to safeguard the rights of both. The future will show how Intellectual Property Owners can adequately preserve their rights in ever changing circumstances without stripping the Internet of its fundamental values.