McFadden vs. Sony Entertainment – ECJ prohibits anonymous open WLANs

By Maria Sturm

On 15 September 2016 the ECJ presented its judgement in the case Tobias McFadden vs. Sony Entertainment Germany. The judgement is interesting for two reasons: 1) it clarifies some questions about the liability of WLAN providers and 2) the judges deviated from the opinion of advocate general Szpunar, delivered on 16 March 2016.

In this case, the ECJ had to give a preliminary ruling according to Article 267 TFEU in a case brought before the district court I in Munich. Mr. McFadden operated an anonymous access to a wireless local area network (WLAN) free of charge in the vicinity of his business of selling and leasing lighting and sound systems. He did so, because he wanted to draw the attention of customers of the shops nearby. Through his open WLAN  a musical work owned by Sony Entertainment Germany was made available to customers, but without Sony’s consent.

The district court of Munich had several questions related to EU law which it could not answer without the prior interpretation of the ECJ. So it requested the Court to give a ruling according to Art. 267 TFEU. The most important explanations of the ECJ covered three areas:

 

  1. Can a service free of charge still be an economic activity?

Making a network available to the general public free of charge can be an information society service according to Article 12 (1) of Directive 2000/31 (Directive on electronic commerce) if it is provided for purposes of advertising. In the case in question, Mr. McFadden offered the free WLAN to draw the attention of passers-by to his shop. This is important, because the relevant directives only cover economic activity. However, we talk about economic activity in the context of EU law only when the service provided is not free of charge. Here, the ECJ sees an indirect remuneration via advertising, and therefore held that this is economic activity.

 

  1. How far goes the limitation of liability of access providers according to Directive 2000/31?

Article 12 (1) of Directive 2000/31 limits the liability of access providers. Therefore, if its preconditions are fulfilled, the provider does not have to compensate rightsholders for the infringement of their rights. That includes also reimbursement of the costs of giving formal notice and court costs. However, rightsholders may still claim injunctive relief against the continuation of the infringement against the provider. And in this case, they can also claim the costs of giving formal notice and court costs. Costs of giving formal notice and court costs are accessory claims. They can only be granted, if the main claim is successful. Without liability, no accessory claims to the liability claim exist. But if there is an injunctive relief claim, the accessory claims to the injunctive relief claim can be enforced. The ECJ made this clear distinction in interpreting Article 12 (1), because before how far the provider liability limitation extended was in dispute.

 

  1. How can an equilibrium between the different basic rights with regard to the internet be achieved?

The ECJ had to decide about an equilibrium of three different basic rights affected in the case of the infringement of copyrights via the internet: first, there is the right to intellectual property of the rightsholder, second, the provider has a right to entrepreneurial freedom, and third, the user has a right to access free information. Closing internet access completely would of course protect the rightsholder’s copyright most effectively, but would also excessively harm the two other rights. One could require the access provider to monitor all of the information transmitted. However, this measure would harm the access providers right to entrepreneurial freedom as it would require too much time and effort. Apart from that, this measure is already forbidden by Art. 15 (1) of Directive 2000/31. According to the advocate general, securing the WLAN with a password would harm the fair balance of the affected rights, too. In contrast, the ECJ decided that the only feasible measure would be to protect the WLAN via a password. This measure harms the entrepreneurial freedom and the right to free information to a smaller degree and offers at least some protection to the copyright, because the access is no longer anonymous and thus may deter possible  infringers. However, concerning this last point we must keep in mind another consideration: the McFadden case was a preliminary ruling. This means that the ECJ only answered the questions the district court of Munich posed and the district court of Munich only asked, if the password solution was admitted by EU law. However, there are other technical measures, e.g. the blocking of certain ports[1], which might have the same effect and might offer an equilibrium between the affected rights, too.

[1] In the internet protocol suite, a port is an endpoint of communication in an operating system.

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