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Update on EU Copyright Reform – Audiovisual Media Services and Copyright in the Digital Single Market

By Martin Miernicki

Two important legislative projects in the field of European copyright law have recently undergone substantial developments. The revision of the Audiovisual Media Services Directive (AVMSD) is likely to be adopted later this year, whereas the proposed Directive on Copyright in the Digital Single Market (CDSMD) will be subject to an extended debate in the European Parliament.

 

Background

In 2015, the Commission adopted its Digital Single Market Strategy for Europe, calling for a better harmonization of the copyright laws of the EU member states as well as for an enhanced access to online goods and services. Against this background, the proposal for a revision of the AVMSD as well as the proposal for the new CDSMD were made in 2016. The amendment to the AVMSD pursues a variety of policy goals, aiming at creating a clear level playing field for the provision of audiovisual content in the EU, especially addressing online services. The CDSMD contains provisions on the (collective) licensing of certain works and exceptions and limitation to rights of right holders provided for in other European directives on copyright, among these Directive 2001/29/EC. Title IV’s Art 11 and 13 of the proposed directive appear to be most controversial, providing for a right of publishers of press publications in the digital use of their press publications (so-called “link tax”) and an increased obligation of certain platform operators to monitor the content uploaded to their sites (so-called “upload filter”). Both reform projects have been intensely discussed and have yet to be adopted.

 

Current state of the reform projects

On 26 April 2018, the Commission announced a breakthrough in the negotiations with the Council and the European Parliament about the revision of the AVMSD, stating that a “preliminary political agreement” had been reached. This agreement was subsequently confirmed in June 2018. As regards the CDSMD, the Council’s permanent representatives committee agreed to its position on the draft directive on 25 May 2018 for the negotiations with the European Parliament. On 20 June 2018, the Parliament’s Legal Affairs Committee voted to start the negotiations, upholding controversial parts of the proposed CDSMD. However, the European Parliament rejected this decision in early July.

 

What can be expected?

Against the background of these developments, the revised AVMSD is likely to be adopted in autumn or winter, starting the period for the transposition of its rules into national law. It should be noted that Brexit also affects audiovisual media services, and it caused the Commission to publish a notice to stakeholders on this matter earlier this year. The future development of the CDSMD is less clear, as the proposal might be amended as a result of the upcoming debate. At this point, it is expected that the European Parliament will discuss the issue in September.

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Full-work Licensing Requirement 100 Percent Rejected: Second Circuit Rules in Favor of Fractional Licensing

By Martin Miernicki

On 19 December 2017, the Second Circuit handed down a summary order on the BMI Consent Decree in the dispute between the Department of Justice (DOJ) and Broadcast Music, Inc. (BMI). The court ruled that the decree does not oblige BMI to license the works in its repertoire on a “full-work” basis.

 

Background[1]

ASCAP and BMI are the two largest U.S. collective management organizations (CMOs) which license performance rights in musical works. Both organizations are subject to so-called consent decrees which entered into force 2001 and 1994, respectively. In 2014, the DOJ’s Antitrust Division announced a review of the consent decrees to evaluate if these needed to be updated. The DOJ concluded the review in August 2016, issuing a closing statement. The DOJ declared that it did not intend to re-negotiate and to amend the decrees, but rather stated that it interpreted these decrees as requiring ASCAP and BMI to license their works on a “full-work” or “100 percent” basis. Under this rule, the CMOs may only offer licenses that cover all performance rights in a composition; thus, co-owned works to which they only represent a “fractional” interest cannot be licensed. In reaction to this decision, BMI asked the “rate court” to give its opinion on this matter. In September 2016, Judge Stanton ruled against the full-work licensing requirement, stating that the decree “neither bars fractional licensing nor requires full-work licensing.”

 

Decision of the court

On appeal, the Second Circuit affirmed Judge Stanton’s ruling and held that fractional licensing is compatible with the BMI Consent Decree. First, referencing the U.S. Copyright Act – 17 U.S.C. § 201(d) –, the court highlighted that the right of public performance can be subdivided and owned separately. Second, as fractional licensing was common practice at the time the decree was amended in 1994, its language does indicate a prohibition of this practice. Third, the court rejected the DOJ’s reference to Pandora Media, Inc. v. ASCAP, 785 F. 3d 73 (2d Cir. 2015) because this judgment dealt with the “partial” withdrawal of rights from the CMO’s repertoire and not with the licensing policies in respect of users. Finally, the Second Circuit considered it to be irrelevant that full-work licensing could potentially advance the procompetitive objectives of the BMI Consent Decree; rather, the DOJ has the option to amend the decree or sue BMI in a separate proceeding based on the Sherman Act.

 

Implications of the judgement

The ruling of the Second Circuit is undoubtedly a victory for BMI, but also for ASCAP, as it must be assumed that ASCAP’s decree – which is very similar to BMI’s decree – can be interpreted in a similar fashion. Unsurprisingly, both CMOs welcomed the decision. The DOJ’s reaction remains to be seen, however. From the current perspective, an amendment of the decrees appears to be more likely than a lengthy antitrust proceeding under the Sherman Act; the DOJ had already partly toned down its strict reading of the decree in the course of the proceeding before the Second Circuit. Yet, legislative efforts might produce results and influence the further developments before a final decision is made. A recent example for the efforts to update the legal framework for music licensing is the “Music Modernization Act” which aims at amending §§ 114 and 115 of the U.S. Copyright Act.

[1] For more information on the background see Transatlantic Antitrust and IPR Developments Issue No. 3-4/2016 and Issue No. 5/2016.

 

Is Embedding a Tweet on a Web Site Copyright Infringement?

By Marie-Andrée Weiss

A 5-page copyright infringement complaint filed last April in the Southern District of New York (SDNY) is being closely watched by copyright practitioners, as it may lead the court to rule on whether a Twitter post incorporating a copyrighted photograph, without permission of the author, is copyright infringement. The case is Goldman v. Breitbart News Network LLC et al., 1:17-cv-03144.

In the summer of 2016, Justin Goldman took a picture of the Boston Patriots quarterback, Tom Brady, walking in the streets in the Hamptons, in New York, with members of the basketball team the Boston Celtics. The picture was of interest as it could be implied from it that Tom Brady was helping the Celtics to acquire star player Kevin Durant.

The picture was published by several Twitter users on the microblogging site, and these tweets were then embedded in the body of articles about Tom Brady’s trip to the Hamptons published by Defendants including Yahoo!, Time, the New England Sports Network, Breitbart and others.

Justin Goldman registered his work with the Copyright Office and filed a copyright infringement suit against the platforms which had reproduced his photograph. Defendants moved to dismiss, claiming that the use was not infringing because it was merely embedding, and also because it was fair use. Judge Katherine B. Forrest denied the motion to dismiss on August 17, 2017, because whether embedding a tweet is equivalent to in-line linking could not be determined at this stage of the procedure.

Defendants, minus Breitbart, then filed a motion for partial summary judgment on 5 October 2017. Plaintiff moved to oppose it on 6 November 2017.

 

The Exclusive Right to Display a Work

Section 106(5) of the Copyright Act gives the copyright owner the exclusive right “to display the copyrighted work publicly.” Section 101 of the Copyright Act defines displaying a work as “to show a copy of it, either directly or by means of a film, slide, television image, or any other device or process or, in the case of a motion picture or other audiovisual work, to show individual images nonsequentially.” Plaintiff argues that “embedding” is one of the processes mentioned in Section 106(5).

 

Is Embedding a Tweet Just Like In-Line Linking?

Defendants claimed that incorporating an image in a tweet is not different from ‘in-line linking,’ which the Ninth Circuit found to be non-infringing in Perfect 10, Inc., v. Amazon.com, Inc.. In this case, the issue was whether the thumbnail versions of copyrighted images featured by Google on its image search result pages were infringing.

The Ninth Circuit had defined “in-line linking” in Perfect 10 as the “process by which the webpage directs a user’s browser to incorporate content from different computers into a single window”. In this case, Google had provided HTML instructions directing a user’s browser to access a third-party website, but did not store the images on its servers. This was found not to be infringing, as Google did not store the images as it not have a have a copy of the protected photographs, and thus did not display then, since to “display” a work under Section 101 of the Copyright Act requires to show a copy of it. This reasoning is known as the “Server Test”.

Plaintiff distinguished the facts in our case from Perfect 10, claiming that his photograph was shown in full size, that it was not “framed” and that it was featured prominently on Defendant’s websites. He argued that the thumbnails in Perfect 10 were low-resolution pictures which users had to click in order to access the full photos, whereas an embedded tweet allows the user to see the full high-resolution image without further maneuvers.

Defendants argued instead that, similarly to the Perfect 10 facts, tweets were embedded using code which directed user’s browsers to retrieve the Tom Brady picture from Twitter’s servers, and the picture was indeed framed, with a light gray box. They had, as publishers, merely provided an in-line link to the picture already published by the Twitter users, and this was not direct copyright infringement. They argued that the embedded tweets were not stored on, hosted by or transmitted from servers owned or controlled by them.

 

Meanwhile, in the European Union…

Defendants argued that an embedded tweet functions as a hyperlink, since clicking on it brings the user to the Twitter site. This case is somewhat similar to the European Court of Justice (ECJ) GS Media (see here for our comment) and Swensson cases. In Swensson, the ECJ had found that posting a hyperlink to protected works which had been made freely available to the public is not a communication to the public within the meaning of article 3(1) of the InfoSoc Directive, which gives authors the exclusive right of public communication of their works. Recital 23 of the Directive specifies that this right covers “any… transmission or retransmission of a work to the public by wire or wireless means, including broadcasting.” The ECJ reasoned that providing a hyperlink is not a communication to a new public and is thus not infringing.

In GS Media, the ECJ found that posting hyperlinks to protected works, which had been made available to the public, but without the consent of the right holder, is not a communication to the public within the meaning of article 3(1) of the InfoSoc Directive either. However, if the links were posted by a person who knew or could have reasonably known that the works had been illegally published online, or if they were posted for profit, then posting these hyperlinks are a new communication to the public and thus infringing.

Could ECJ case law on hyperlinks inspire U.S. courts to revisit Perfect 10?

Remote Recording, Cloud Services, and Private Copying: ECJ Rules on Services by Third Parties

By Martin Miernicki

On 29 November 2017, the ECJ gave its opinion in VCAST v. RTI (C-265/16). The court ruled on the compatibility of an online service (offered by VCAST) – which provides users with cloud storage space for free-to-air terrestrial programs of TV organizations – with Directive 2001/29/EC (the so-called Copyright Directive), and in particular with its article 5(2)(b) (the so-called private copying exception). Upon the selection of the user, the service autonomously picks up the television signal and records the indicated content in the “cloud”.

 

Background & questions referred

The case involved questions relating to the private copying exception as well as the concept of the communication to the public, contained in article 3 of the Copyright Directive. The ECJ has repeatedly given its opinion on both matters. Relevant case law includes Padawan v. SGAE (C-467/08), ACI Adam v. Stichting de Thuiskopie (C-435/12), and Copydan Båndkopi v. Nokia Danmark (C-463/12) (on the private copying exception), as well as ITV Broadcasting v. TVCatchup (C-607/11), Reha Training v. GEMA (C-117/15), and AKM v. Zürs.net (C-138/16) (on the communication to the public). In essence, the referring (Italian) court asked the ECJ whether an online cloud service as described above was compatible with the Copyright Directive.

 

The decision of the court

The ECJ reached the same result as proposed by Advocate General (AG) Szpunar in his opinion and held VCAST’s cloud service is incompatible with EU law. First of all, the court recalled its case law and stated that natural persons can benefit from the private copying exception also in situations where the copying services are provided by a third party (para 35). However, in the opinion of the court, the service at issue did not merely assist users in making lawful reproductions but also, by picking up the television signals, provided access to the protected content (para 38). For this reason, the services in question also qualified as a communication to the public within the meaning of article 3 of the Copyright Directive. Since this act required the consent of the rightholders, the provision of the services at issue infringed their exclusive rights and was hence not permissible under EU law.

 

What does the judgment mean?

The judgement gave the court the opportunity to reconfirm and clarify its opinion on two recurring issues of the more recent copyright case law: First, the lawfulness of the source of the reproduction which is made under the private copying exception; second, the concept of the communication to the public. With regard to the former, the ECJ held that the private copying exception cannot be invoked where the third party provides access to the protected content (para 37). In principle, this is in line with the prior case law of the court. With regard to the latter, the court referred to the principles established in ITV Broadcasting, holding that acts of communication to the public – different than the original transmission – carried out under specific technical conditions using different means of transmissions are subject to the right holder’s consent (para 48). In such circumstances, the new public criterion is irrelevant (para 50). Obviously, the principles established in AKM were, as indicated by the AG, not relevant for the court (para 52-56 of the AG’s opinion).

In this light, providers of online services will have to assess whether they merely enable natural persons to obtain private copies or whether they also provide access to protected content. As illustrated by the court’s decision, this requires a delineation of the different exclusive rights involved. In this context, it is noticeable that the answer given to the national court appears to be broader than might be expected from the grounds of the judgement. The ECJ stated that cloud services as described above conflict with the Copyright Directive where the provider “actively [involves] itself in the recording, without the right holder’s consent”. Apparently, one way to be “actively involved” in the recording is to communicate the work to the public, thereby providing access to the copyrighted content. However, other ways are also conceivable. For instance, it is unlikely that the private copying exception applies to cases where the service provider takes the initiative to make reproductions, or defines its object and modalities (para 25 of the AG’s opinion). It will be up to the court to shed further light on such questions in future cases.

ECJ Rules on Excessive Licensing Fees for Copyrights

By Martin Miernicki

On 14 September 2017 the Court of Justice of the European Union (“ECJ”) handed down its decision in AKKA/LAA v. Konkurences padome (C-177/16). The case originated in a fine imposed on the Latvian collective management organization (CMO) AKKA/LAA – which possesses a legal monopoly in Latvia – by the national competition authority. The authority asserted that the CMO had abused its dominant position by charging excessively high license rates. In the following, the Latvian Supreme Court made a reference for a preliminary ruling, asking the ECJ, inter alia,[1]

  1. whether it is appropriate to compare the rates charged by a national CMO to those rates charged by CMOs in neighboring and other member states, adjusted in accordance with the purchasing power parity index (PPP index);
  2. whether that comparison must be made for each segment of users or the average level of fees;
  3. above which threshold the differences between the compared fees indicate abusive conduct; and
  4. how a CMO can demonstrate that its license fees are not excessive.

 

Background

Article 102(a) of the TFEU declares the imposition of “unfair purchase or selling prices” as an abuse of a dominant position. The seminal case for the interpretation of this provision is United Brands v. Commission (case 27/76). Furthermore, the ECJ has repeatedly been asked to gives its opinion on this matter in the context of copyright management services. Relevant case law includes Ministère public v. Tournier (case 395/87), Kanal 5 v. STIM (C-52/07) and OSA v. Léčebné lázně Mariánské Lázně (C‑351/12). In contrast, U.S. antitrust doctrine does not, as a principle, recognize excessive pricing as an antitrust violation.

 

Decision of the court

The ECJ largely referred to the opinion of the Advocate General and confirmed that a comparison of fees charged in other member states, relying on the PPP index, may be used to substantiate the excessive nature of license rates charged by a CMO. However, the reference member states must be selected according to “objective, appropriate and verifiable” criteria (e.g., consumption habits, economic factors and cultural background) and the comparison must be made on a consistent basis (e.g., similar calculation methods). For this purpose, it is, in principle, permissible to refer to a specific segment of users if indicated by the circumstances of the individual case (paras 31-51). With regard to the level license fees, the ECJ ruled that there is no minimum threshold above which a license fee can be considered abusive; yet, the differences between the compared fees must be both significant (not a minor deviation) and persistent (not a temporary deviation). CMOs can justify their rates by reference to objective dissimilarities between the compared member states, such as differing national regulatory regimes (para 52-61).

 

Implications of the decision

The court reconfirmed its approach taken in the former decisions which introduced the comparison of fees charged in different member states as well as the “appreciably higher” standard. In the case at hand, the court further elaborated on this general concept by providing new criteria for the analysis which should assist competition authorities and courts in assessing excessive pricing under the EU competition rules. Clearly, however, it will still be challenging to apply those guidelines in practice. Furthermore, it seems that the ECJ does not consider the method of comparing license fees in other member states to be the only method for the purposes of Article 102(a) of the TFEU (see also paras 43-45 of the AG’s opinion); this might be of special relevance in cases not related to CMOs. In this connection, it is noteworthy that the ECJ expressly permitted authorities to consider the relation between the level of the fee and the amount actually paid to the right holders (hence, the CMO’s administrative costs) (paras 58-60).

Lastly – although the finding of abusive pricing appears to be the exception rather than the rule in European competition law practice – the decision supplements the case law on CMOs which is especially important since the rules of the Collective Management Directive 2014/26/EU (CMD) are relatively sparse in relation to users. Nevertheless, it should be noted that said directive contains additional standards for the CMOs’ fee policies. Article 16(2) states that tariffs shall be “reasonable”, inter alia, in relation to the economic value of the use of the licensed rights in trade and the economic value of the service provided by CMOs. These standards may be, however, overseen by national authorities (CMD article 36) which are not necessarily competition authorities. A coordinated application of the different standards by the competent authorities would be desirable in order to ensure the coherence of the regulatory regime.

[1] Focus is put here on the most important aspects of the decision.

U.S. Appeals Court for the Ninth Circuit Affirms a Preliminary Injunction against Movie Filtering Service on Copyright Grounds

By Valerio Cosimo Romano

On 24 August 2017, the U.S. Court of Appeals for the Ninth Circuit (“Appeals Court”) affirmed a preliminary injunction from the U.S. District Court for the Central District of California (“District Court”) against the defendant in an action under the Copyright Act and the Digital Millennium Copyright Act (“DMCA”).

 

The parties

Disney Enterprises, LucasFilm Limited, Twentieth Century Fox Film Corporation, and Warner Brothers Entertainment (“Studios” or “Plaintiffs”) produce and distribute copyrighted motion pictures and television shows through several distribution channels. The Studios employ technological protection measures (“TPMs”) to protect against unauthorized access to and copying of their works.

 

VidAngel, Inc. (“VidAngel” or “Defendant”) operates an online streaming service that removes objectionable content from movies and television shows. It purchases physical discs containing copyrighted movies and television shows, rips a digital copy and streams to its customers a filtered version of the work.

 

The lawsuit

The Studios filed suit against VidAngel, alleging copyright infringement and circumvention of technological measures controlling access to copyrighted works in violation of the DMCA. At the moment of filing suit, Defendant offered more than eighty copyrighted works, which it was not licensed or otherwise authorized to copy, perform, or access. VidAngel denied the statutory violations and raised affirmative defenses of fair use and legal authorization by the Family Movie Act of 2005 (“FMA”).

The Studios moved for a preliminary injunction, and the District Court granted the motion, enjoining Defendant from copying and streaming, transmitting, or otherwise publicly performing or displaying any of Plaintiff’s copyrighted works, circumventing technological measures protecting Plaintiff’s copyrighted works or engaging in any other activity that violates, directly or indirectly.

 

The District Court found that Defendant had circumvented the technological measures controlling access to the Studios’ works and violated the Studios’ exclusive right to reproduce and publicly perform their works. The District Court rejected instead Defendant’s FMA defense, holding that the service did not comply with FMA (which requires a filtered transmission to “come from an ‘authorized copy’ of the motion picture) and (ii) that Defendant was not likely to succeed on its fair use defense.

VidAngel appealed, claiming that FMA exempts VidAngel from liability for copyright infringement and that anti-circumvention provision of the DMCA does not cover the plaintiffs’ technological protection measures.

 

Merits of the case

First, the Appeals Court found that the District Court had not abused its discretion in concluding that Defendant’s copying infringed the Studios’ exclusive reproduction right, because lawful owners of a copy of the copyrighted work are only entitled to sell or otherwise dispose of the possession of that copy, and not to reproduce it.

The Appeals Court also found that the District Court had not abused its discretion in finding that the Studios are likely to succeed on their DMCA claim because VidAngel had offered no evidence that the Studios had either explicitly or implicitly authorized DVD buyers to circumvent encryption technology to access the digital contents of their discs.

The Appeals Court then moved to VidAngel’s defenses. It found that The FMA exempts compliant filtered performances, rather than the processes that make such performances possible. Moreover, the Court found that FMA  has been created to provide for the protection of intellectual property rights, which would not be preserved by VidAngel’s interpretation of the statute. Indeed, VidAngel does not stream from an authorized copy of the Studios’ motion pictures: it streams from the “master file” copy it created by ripping the movies from discs after circumventing their TPMs. Therefore, the District Court had not abused its discretion in concluding that VidAngel is unlikely to succeed on the merits of its FMA defense to the Studios’ copyright infringement claims.

In order to exclude infringement on copyright, Defendant also relied on the fair use theory.  In determining whether the use of a copyrighted work is fair, the Appeals Court considered again: (i) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (ii) the nature of the copyrighted work; (iii) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (iv) the effect of the use upon the potential market for or value of the copyrighted work. The Appeals Court sided again with the District Court, affirming that VidAngel’s service simply omits portions that viewers find objectionable, and transmits them for the same intrinsic entertainment value as the originals. Therefore, VidAngel’s use is not transformative (and thus it cannot be protected by fair use).

VidAngel also raised a defense related to the economic effects of its business. It argued that its service actually benefits the Studios because it purchases discs and expands the audience for the copyrighted works to viewers who would not watch without filtering. However, the Appeals Court confirmed the District Court’s view that VidAngel’s service is an effective substitute for Plaintiff’s unfiltered works and that neither the fact that VidAngel purchases the discs excuses its infringement, because any allegedly positive impact of Defendant’s activities on Plaintiffs’ prior market in no way frees defendant to usurp a further market that directly derives from reproduction of the plaintiffs’ copyrighted works. Thus, and a market harm caused by the infringing activity can be presumed.

 

Irreparable harm and balance of equities

As for irreparable harm, the Appeals Court sided with the District Court in determining  that VidAngel’s service undermines the value of the Studios’ copyrighted works, their business model, their goodwill and negotiating leverage with licensees and that the loss of goodwill, negotiating leverage, and that non-monetary terms in the Studios’ licenses cannot readily be remedied with damages. The Appeals court therefore concluded that the eventual financial hardship deriving from discontinuance of infringing activities does not outweigh the irreparable harm likely to befall the Studios without an injunction.

For these reasons, the Appeals Court affirmed the preliminary injunction from the District Court.

CJEU: Online Sharing Platforms like “The Pirate Bay” May Constitute Copyright Infringement by Indexing BitTorrent Files

By Katharina Erler

The Second Camber of the Court of Justice of the European Union (CJEU) ruled on 14 of June 2017 that the making available and management of a sharing platform on which user-generated BitTorrent files related to copyright protected works are indexed may constitute copyright infringement. In particular, the concept of Article 3 (1) EU InfoSoc Directive (2001/29/EC) “communication to the public” must be interpreted as covering situations, where the protected works are not hosted by the sharing website operators themselves, but by users through a peer-to-peer network, given that the operators of the sharing platform play an essential role in making those works available. The case is Stichting Brein v. Ziggo and XS4ALL Internet BV, C-610/15.

Stichting Brein, a Netherlands foundation which safeguards the interests of copyright holders, has initiated proceedings before the courts in the Netherlands requesting that the internet access provider Ziggo and XS4ALL shall be ordered to block the domain names and IP addresses of the online sharing platform “The Pirate Bay”. A significant number of the subscribers of Ziggo and XS4ALL use the online platform The Pirate Bay.

The Pirate Bay is a website, which allows its users to share music and video files, much of which, according to the opinion of Advocate General Szpunar of 8 February 2017 90 % to 95 %, contain protected works distributed without the consent of the authors. Since Pirate Bay is a website that offers the possibility for content-sharing in the context of a peer-to-peer network based on a BitTorrent protocol, the shared files are generated by its users and downloaded, divided into segments, from several peer computers in a decentralized way. In order to generate and share these files, users must first download a specific software called “BitTorrent Client”, which is not provided by Pirate Bay. Pirate Bay allows its users to find other users (“peers”) available to share the desired file by indexing torrent files related to the video or audio files on its website. The works to which those torrent files refer may be downloaded onto the users’ computers in segments through their “BitTorrent Client” software.

The Court of first instance upheld Stichting Breins request. However, the internet access providers filed an appeal against this decision. The Hoge Raad der Nederlanden (Supreme Court of the Netherlands) noting that in the present case it has been established that (1) the actions of Pirate Bay make protected works available to the public without the authors consent and that (2) subscribers to Ziggo and XS4ALL, through Pirate Bay, make protected works available without the consent of the authors and thus infringe the copyright of those right holders.

The Hoge Raad, however, referred two questions to the CJEU: (1) whether Pirate Bay itself “communicates” works to the public within the meaning of Article 3 (1) of EU InfoSoc Directive (2001/29/EC) and if question (1) is answered in negatively, (2) whether Article 8 (3) of EU Directive 2001/29 and Article 11 of EU Directive 2004/48 offer any scope for obtaining an injunction against an intermediary, of that intermediary facilitates the infringing acts of third parties in the way referred to in question (1).

 

Legal context

Recital (23) of of EU InfoSoc Directive 2001/29/EC of the European Parliament and of the Council on the harmonization of certain aspects of copyright and related rights in the information society (InfoSoc Directive) states expressly, that author’s right of communication to the public should be understood in a broad sense and should cover any such transmission or retransmission of a work to the public by wire or wireless means, including broadcasting.

Recital (27) of EU InfoSoc Directive (2001/29/EC) states that the mere provision of physical facilities for enabling or making a communication is not covered by communication within the meaning of this Directive.

Article 3 (1) (“Right of communication to the public of works and right of making available to the public other subject matter”) of EU InfoSoc Directive (2001/29/EC) stipulates that Member States shall provide authors with the exclusive right to authorize or prohibit any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access them from a place and at a time individually chosen by them.

 

Consideration of the questions referred to the CJEU

Of two questions referred to the CJEU by the Hoge Raad der Nederlanden, the CJEU only explicitly addressed the question whether there is a “communication to the public” within the meaning of Article 3 (1) of the EU InfoSoc Directive by the operator of a website, if no protected works are available on that website, but a system exists by means of which metadata on protected works which are present on the users’ computers are indexed and categorised for users, so that the user can trace and upload and download the protected work by the basis thereof.

In essence, the CJEU answered the question, whether the operators of an online sharing platform themselves commit copyright infringment by managing and indexing BitTorrent files, thereby allowing users to share user-generated and user-stored files containing protected works.

First and in view of its past case-law, the CJEU emphasized, as a general rule, that any act by which a user, with full knowledge of the relevant facts, provides its clients with access to protected works is an “act of communication” for the purposes of Article 3 (1). To determine this general rule for user-liability, the CJEU explicitly referred to its recent series of decisions on copyright infringement via links (CJEU, GS Media, C-160/15) and/or add-ons (CJEU, Fimspeler, C-527/15), which refer to protected works.

With regard to the liability of Pirate Bay – the core question in the case at hand – the CJEU – in line with the opinion of Advocate General Szpunar – noted that it is common knowledge that copyright-protected works are made available through Pirate Bay in such a way that users may access those works from wherever and whenever.

Most importantly the CJEU highlighted, although video or audio files have not been placed online by the platform operators themselves but by its users, the operators of Pirate Bay play an essential role in making those works available. The CJEU hold that by making available and managing an online platform the Pirate Bay operators intervene with full knowledge of the consequences of their conduct, to provide access to protected works, especially by indexing on that platform torrent files, which allow users to locate and share those works.

It is worth mentioning that in line with its Filmspeler decision, the CJEU in this case further broadened the scope of the copyright holders’ right of communication to the public. According to the CJEU “full knowledge” of the communication party with regard to “the consequences of their conduct”, is sufficient to hold the operators themselves liable.

By referring to the opinion of Advocate General Szpunar, the CJEU additionally found, as a main criterion for finding the operators of a sharing platform themselves liable for copyright infringement, that without making such a platform available and managing it, the works could not be shared by the users or, at the very least, sharing them would prove to be more complex.

In that context, the CJEU emphasized that the website “The Pirate Bay” cannot be considered to be making a “mere provision” of physical facilities for enabling or making a communication within the meaning of recital 27 EU InfoSoc Directive (2001/29/EC). According to the CJEU, this is not only true because the platform indexes the torrent files in such a way that the works may be shared easily, but also because the platform offers an index classifying the works in different categories based on i.a. the genre. Moreover, the operators of Pirate Bay delete obsolete or faulty torrent files and actively filter the user-hosted content.

As to the question of whether the protected works were communicated to the public, the CJEU on one hand referred to the order of reference, which reveals that a large number of Ziggo and XS4ALL subscribers have downloaded media files through Pirate Bay. On the other hand, the CJEU noted that the operators on their sharing platform, explicitly claimed to have several dozens of million users (“peers”). This large number of users can potentially and at any time access the protected works, which are shared through Pirate Bay.

As a core matter, the CJEU discussed whether the Pirate Bay operators communicated to a “new” public, which is a public that was not taken into account by the copyright holders when they authorized the initial communication. This raises the decisive question of whether the operators were aware of the missing authorization of the copyright holders. In contrast to the opinion of Advocate General, the CJEU held that the operators of Pirate Bay may simply be found liable because they: (1) were informed that this platform, which they make available to users and manage, provides access to works published without authorization of the copyright holder and (2) were aware that the operators display, on blogs and forums available on their website, their purpose of making protected works available and encouraging their users to make copies of that works. In fact, the CJEU found that, if the operators are aware of the possibility of infringing copyrights through their own conduct, managing their website, they may be found liable of infringement themselves. Under this ruling a concrete knowledge of the illegality of an individual shared work is no longer required to justify the liability for platform operators.

Furthermore, the CJEU noted, that there can be no dispute that the online sharing platform is carried out with the purpose of obtaining profit therefrom, which is clear from the considerable advertising revenues generated by Pirate Bay.

For these reasons, the Court held that the concept of “communication to the public” must be interpreted as covering the making available and managing of a sharing platform. The Pirate Bay, which by indexing of BitTorrent files and providing a search engine, allows its users to locate and share protected works in the context of a peer-to-peer network without the consent of the copyright holders. In the light of the answer to this first referred question, the CJEU saw no need to answer the second question.

It is, however, worth mentioning that the CJEU just answered the referred preliminary question of whether the managing of the website Pirate Bay is covered by the concept of “communication to the public” and therefore may constitute copyright infringement. It did not take position as to Stichting Breins’ principle request in the main proceedings that in consequence of these considerations the internet access provider Ziggo and XS4ALL be ordered to block the IP addresses and domain name of The Pirate Bay.