By Giuseppe Colangelo
Almost ten years have passed since the Commission began its proceeding against Intel. However, the lawfulness of Intel’s practices remains inconclusive. In its recent judgment (Case C-413/14 P), the Grand Chamber of the Court of Justice of the European Union (CJEU) set aside a previous ruling in which the General Court affirmed the decision of the Commission to prohibit Intel’s practices, and referred the case back to the General Court.
The judgment turns on efficiency-enhancing justifications. The Grand Chamber of the CJEU, just as in Post Danmark I (Case C-209/10), reiterates that antitrust enforcement cannot disregard procompetitive effects even in the case of unilateral conduct, such as loyalty rebates. Although Article 102 does not reproduce the prohibition-exemption structure of Article 101, for the sake of consistency there must be room to allow unilateral practices as well. Therefore, like agreements restrictive by object, unilateral conduct which is presumed to be unlawful, as loyalty rebates are, can also be justified and rehabilitated because of the efficiency and consumer welfare benefits it can produce. The General Court’s formalistic approach towards Intel’s rebates demonstrated the need for the CJEU to clarify the role that assessing procompetitive effects must play in the analysis of dominant firms’ practices.
To this end, the CJEU suggests ‘clarifying’ the interpretation of Hoffman-La Roche (Case 85/76), one of the totems of EU antitrust orthodoxy. Unfortunately, it accomplishes exactly the opposite. Intel clearly supports the economic approach by denying a formalist, or per se, shortcut to the authorities. The abusive character of a behavior cannot be established simply on the basis of its form.
In Hoffman-La Roche, the CJEU pronounced that it considered any form of exclusive dealing anathema. To make the link to the exclusive dealing scenarios depicted in Hoffman-La Roche apparent, the General Court introduced a class of ‘exclusivity rebates’ in its ruling on Intel’s pricing practices. This is a new category of discounts different from the previously defined classes of quantity and fidelity rebates.
However, in its judgment the CJEU offers a different interpretation of the law on fidelity rebates. For those cases where dominant firms offer substantive procompetitive justifications for their fidelity rebates, the CJEU requires the Commission to proffer evidence showing the foreclosure effects of the allegedly abusive practice, and to analyze: (i) the extent of the undertaking’s dominant position on the relevant market; (ii) the share of the market covered by the challenged practice as well as the conditions and arrangements for granting the rebates in question, their duration and their amount; (iii) the possible existence of a strategy aimed at excluding from the market competitors that are at least as efficient as the dominant undertaking. As expressly acknowledged by the CJEU, it is this third prong – that is, the assessment of the practice’s capacity to foreclose – which is pivotal, because it “is also relevant in assessing whether a system of rebates which, in principle, falls within the scope of the prohibition laid down in Article 102 TFEU, may be objectively justified.”
The Intel ruling is also a significant step towards greater legal certainty. In addition to being able to effectively assert efficient justifications to overturn the presumption of anti-competitiveness, firms also know that for the CJEU the ‘as efficient competitor test’ (AEC test) represents a reliable proxy (although not the single or decisive criterion) of analysis that cannot be ignored, especially when used by the Commission in its evaluations.
The application of the effect-based approach to all unilateral conduct of dominant firms brings the European experience closer to the rule of reason analysis carried out under Section 2 of the Sherman Act. As indeed is explained by the Court of Appeals in Microsoft [253 F.3d 34 (D.C. Circuit 2001)], when it comes to monopolistic conduct, where the task of plaintiffs complaining about the violation of antitrust law is to show the exclusionary effects of the conduct at stake and how this has negatively affected consumer welfare, the task of the dominant firm is to highlight the objective justifications of its behavior.
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.
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.
By Gabriel M. Lentner
On 13 December 2017, an international investment tribunal delivered its decision on expedited objections, accepting jurisdiction to hear the trademark dispute in the case of Bridgestone v Panama. The dispute arose out of a judgment of the Panamanian Supreme Court of 28 May 2014, in which it held the claimants liable to a competitor to pay US $5 million, together with attorney’s fees, due to the claimants’ opposition proceedings regarding the registration of a trademark (”Riverstone”). The claimants argued that the Supreme Court’s judgment weakened and thus decreased the value of their trademarks (“Bridgestone” and ”Firestone”). The tribunal rejected most of the expedited objections raised by Panama. The decision is particularly interesting because it is the first detailed exploration of the question whether and under what conditions a trademark and license can be considered covered investments.
Trademarks are investments
On this issue, the tribunal first followed the text of the definition of investment under the applicable investment chapter of the United States—Panama Trade Promotion Agreement (TPA) (Article 10.29 TPA). It held that the investment must be an asset capable of being owned or controlled. The TPA also included a list with the forms that an investment may take, including ”intellectual property rights”, as many BITs do (paras 164 and 166). However, the TPA also requires that an investment must have the ”characteristics” of an investment, giving the examples of commitment of capital or other resources; expectation of gain or profit; assumption of risk (para 164). The tribunal also noted that other characteristics, as those identified in the case of Salini v Morocco, are to be found, such as a reasonable duration of the investment and a contribution made by the investment to the host state’s development. In this respect, the tribunal held that “there is no inflexible requirement for the presence of all these characteristics, but that an investment will normally evidence most of them” (para 165).
In deciding this issue, the tribunal reviewed the way in which trademarks can be promoted in the host state’s market. The tribunal found that ”the promotion involves the commitment of resources over a significant period, the expectation of profit and the assumption of the risk that the particular features of the product may not prove sufficiently attractive to enable it to win or maintain market share in the face of competition.” (para 169) However, the tribunal noted that “the mere registration of a trademark in a country manifestly does not amount to, or have the characteristics of, an investment in that country” (para 171). According to the tribunal, this is because of the negative effect of a registration of a trademark. It merely prevents competitors from using it on their products and does not confer benefit on the country where the registration takes place. Nor does it create any expectation of profit for the owner of the trademark (para 171).
The exploitation of a trademark is key for its characterization as an investment (para 172). This exploitation accords to the trademark the characteristics of an investment, by virtue of the activities to which the trademark is central. It involves a “devotion of resources, both to the production of the articles sold bearing the trademark, and to the promotion and support of those sales. It is likely also to involve after-sales servicing and guarantees. This exploitation will also be beneficial to the development of the home State. The activities involved in promoting and supporting sales will benefit the host economy, as will taxation levied on sales. Furthermore, it will normally be beneficial for products that incorporate the features that consumers find desirable to be available to consumers in the host country.” (para 172)
Licenses are investments, too
Another way of exploiting a trademark is licensing it, i.e. granting the licensee the right to exploit the trademark for its own benefit (para 173). The tribunal then brushes aside the following counter-argument raised by Panama:
“Rights, activities, commitments of capital and resources, expectations of gain and profit, assumption of risk, and duration do not add up an ‘investment’ when they are simply the rights, activities, commitments, expectations, and risks associated with, and the duration of, cross-border sales.” (para 175)
The tribunal responded that Panama did not provide any authority for this argument and only rebuts that the “reason why a simple sale does not constitute an investment is that it lacks most of the characteristics of an investment.” (para 176 It further noted that ”[i]t does not follow that an interrelated series of activities, built round the asset of a registered trademark, that do have the characteristics of an investment does not qualify as such simply because the object of the exercise is the promotion and sale of marked goods.” (para 176).
The problem with this argument is that it is precisely the point raised by Panama that the legal requirement for characteristics of investments were developed to distinguish an investment from a mere cross-border sale of goods. Arguably, the tribunal did not explain how the characteristics related to the trademarks at issue differ from those related to the marketing of ordinary sales of goods.
Against this background, the finding of the tribunal that trademark licenses are also investments is even less convincing. Here the tribunal refers to the express wording of Article 10.29(g) of the TPA, which provides that a license will not have the characteristics of an investment unless it creates rights protected under domestic law of the host state (para 178). After reviewing the arguments and expert testimony presented during the proceedings, the tribunal concluded that the license to use a trademark constitutes an intellectual property right under domestic law (para 195), and is thus capable of constituting an investment when exploited (para 198). It reasoned that ”[t]he owner of the trademark has to use the trademark to keep it alive, but use by the licensee counts as use by the owner. The licensee cannot take proceedings to enforce the trademark without the participation of the owner, but can join with the owner in enforcement proceedings. The right is a right to use the Panamanian registered trademark in Panama” (para 195).
In conclusion, it will be interesting to see how future tribunals will deal with this question and react to the precedent set in this case.
By Nikolaos Theodorakis
The European Commission (“Commission”) recently launched the EU Blockchain Observatory and Forum (“Observatory”) with the support of the European Parliament. The Observatory aims to highlight relevant developments and facilitate collaboration between the EU and involved stakeholders.
What is the blockchain technology? What are its benefits?
Blockchain is a distributed ledger technology. In essence, it is a database that keeps a final and definitive record of transactions that no one can penetrate or alter. As a result, Blockchain technology increases trust, traceability and security.
Distributed Ledger Technology (“DLT”), which is the backbone of blockchain technology, was introduced about a decade ago, aiming to develop new financial applications and facilitate decentralized data storage and management. The decentralization of the Internet has been an idea discussed for several decades since it allows for user freedom and democracy in the web. The implementation effort in practice involves avoiding one centralized location, and the need for intermediaries to perform transactions. Blockchain information is shared, verifiable, public, and accessible.
The abovementioned traits can increase accountability. Blockchain has the potential to lead this technological breakthrough. The enhanced trust that it creates can be used for legal services (e.g. smart contracts), financial services, transportation services (e.g. bill of lading disputes), energy, or healthcare issues.
Naturally, the European Commission wishes to further investigate blockchain’s potential, consolidate expertise, and address the challenges created by new blockchain paradigms. To achieve this, it created the Observatory within the Financial Technology pillar, and plans to further help develop the single market, Banking Union, the Capital Markets Union and retail financial services.
As an example of blockchain’s game-changing potential, 10% of global GDP could be stored, via digital assets, through this technology in less than 10 years. This means that governments can take advantage of blockchain to issue IDs that cannot be replicated, or monitor taxation reporting in a unique and transparent way. Insurance companies can utilize automatic execution of contracts, financial bodies can secure money and financial asset transfers, and the intellectual property sector can distribute IP rights pertinent to music, videos or other protected content.
Even if only a fraction of the above benefits materializes, blockchain can significantly change the way digital services are communicated. The European Commission needs to assess, in the form of a feasibility study, whether this technology is fully compliant, particularly with EU law (more on this below). Despite recognizing blockchain as a key emerging trend, it is equally important to manage it in a compliant way.
In essence, the Commission wants to build on existing initiatives launched by the EU members that relate to offering blockchain-based solutions. The broader role of the Observatory is to help Europe fully grasp and exploit the opportunities that this technology offers and allow the continent to remain on the forefront of technological developments. The blockchain will enable cross border cooperation and regulator to discuss and develop new ideas to learn, engage and contribute in an open way.
In a nutshell, the Observatory aims to:
- map key existing initiatives in Europe and beyond;
- monitor developments, analyze trends and address emerging issues;
- become a knowledge hub on blockchain;
- promote European actors and reinforce European engagement with multiple stakeholders;
- represent a major communication opportunity for Europe to set out its vision and ambition on the international scene;
- inspire common actions based on specific use-cases of European interest.
Despite the multiple benefits of blockchain, and its use for cryptocurrencies and multiple other options, this technology comes with a number of drawbacks. For instance, blockchain is in direct conflict with an upcoming EU privacy legislation (the General Data Protection Regulation), which has strict privacy requirements (including privacy by design and by default, encryption, enhanced subject rights etc.). Blockchain makes it more difficult to attribute liability, due to its decentralized nature, and practically impossible to comply with certain privacy rights, like the right to be forgotten (since the blocks cannot be erased, once generated). This direct conflict with EU regulatory standards may cause some bumps in the future development of this technology.
Further, other concerns pertinent to the use of blockchain relate to broader skepticism about security – and whether this technology can remain immune to attacks in the long-run, lack of regulation that leads to unsafe exchange environments particularly regarding cryptocurrencies, and funding of illicit activities and circumvention of international sanctions.
 World Economic Forum Surbey on Technological Tipping Points
By Nicole Daniel
The proceedings between Apple and Qualcomm began in January 2017 in the U.S. District Court in San Diego when Apple filed suit against Qualcomm over its allegedly abusive licensing practices with its wireless patents. Qualcomm then filed unfair competition law counterclaims. This case is being overseen by U.S. District Judge Gonzalo Curiel.
Apple then sued Qualcomm for similar violations in the UK, China, Japan, and Taiwan.
In July 2017 Qualcomm filed patent claims against Apple also in the U.S. District Court in San Diego. This case is being overseen by U.S. District Judge Dana M. Sabraw. At the same time Qualcomm filed a complaint with the U.S. International Trade Commission accusing the Apple iPhone of infringing five Qualcomm patents.
District Court Case I
In November 2017, Judge Curiel issued a split decision in the first patent and antitrust case between Apple and Qualcomm.
Apple has been seeking a declarative judgment that it had not infringed the nine Qualcomm patents at issue and asked the court to decide on a fair and reasonable licensing rate. Judge Curiel denied those claims, holding instead that no detailed infringement analysis as to the Additional Patents-in-Suit had been conducted.
Judge Curiel further held that Qualcomm had not adequately pleaded claims against Apple based on California’s Unfair Competition Law. These allegations stemmed from Apple’s decision to use both Qualcomm and Intel chips in its iPhone. Before, Apple exclusively used Qualcomm’s chips in earlier versions of the iPhone.
In a hearing in October 2017 the lawyers for Qualcomm claimed that Apple executives threatened to end their business relationship if Qualcomm publicly claimed that its own chipsets were superior to Intel’s. In his order judge Curiel held that Qualcomm had not adequately pleaded the specific facts indicating its own reliance on an alleged omission or misrepresentation by Apple. Accordingly, Qualcomm lacked standing under Unfair Competition Law.
District Court Case II
In the district court patent case, Apple filed counterclaims arguing that Qualcomm infringed patents relating to enabling extended battery life in a smartphone or other mobiles devises by supplying power only when needed. This technology serves to maximize battery life.
Apple further argued that it created the smartphone as its own product category in 2007 when it introduced the iPhone. Qualcomm merely developed basic telephone technology which is now dated.
Qualcomm, on the other hand, argued that the success of the iPhone is due to its technology as Qualcomm has developed high-speed wireless connectivity over decades.
The discussion of who essentially invented the smartphone is of importance since under U.S. President Trump the term “innovator” has become very significant. On 10 November 2017 Makan Delrahim, the new chief of the Department of Justice’s antitrust division, made a policy speech and stated that the government aims to rebalance the scales in antitrust enforcement away from implementers who incorporate the inventions of others into their own products. There will be more emphasis on the innovators’ rights so as to protect their patent-holder rights in cases concerning patents essential to technology standards.
Further Cases filed and the Case at the US International Trade Commission
In November 2017, Qualcomm filed three new district court patent cases against Apple as well as one new complaint for the case pending before the U.S. International Trade Commission. In sum, Qualcomm accuses Apple of infringing 16 non-standard essential patents for technology implemented outside the wireless modern chip.
Despite this litigation, Qualcomm has so far remained a key supplier of chips to Apple.
By Giuseppe Colangelo
On November 29, 2017, the European Commission released the much-awaited Communication on standard essential patents (SEPs) licensing [“Setting out the EU approach to Standard Essential Patents”, COM(2017) 712 final].
The Communication comes in the wake of the UK judgement Unwired Planet v. Huawei, recently delivered by Mr. Justice Birss and analyzed in our previous newsletter. As highlighted by the UK decision, after the judgment in Huawei/ZTE (Case C-170/13), in which the European Court of Justice identified the steps which SEPs owners and users must follow in negotiating a FRAND royalty, there are still several unresolved questions. Notably, the different approaches adopted by Germany and the UK have spurred the Communication to set out “key principles that foster a balanced, smooth and predictable framework for SEPs”.
The key principles reflect two stated objectives: incentivizing the development and inclusion of top technologies in standards by providing fair and adequate returns, and ensuring fair access to standardized technologies to promote wide dissemination.
First, the Commission takes the view that the quality and accessibility of information recorded in standard development organizations (SDOs) database should be improved. Therefore, the Commission calls on SDOs to ensure that their databases comply with basic quality standards, and to transform the current declaration system into a tool providing more up-to-date and precise information on SEPs. Moreover, the Commission stated that declared SEPs should be scrutinized to assess their essentiality for a standard, and will launch a pilot project for SEPs in selected technologies in which an appropriate scrutiny mechanism will be introduced.
Second, the Commission sets out certain general principles for FRAND licensing terms, stating that it is necessary and beneficial to establish a first set of key signposts on the FRAND concept, so as to provide for a more stable licensing environment, guide parties in their negotiations, and reduce costly litigation. In this regard, provided that the parties are best placed to arrive at a common understanding of what are fair licensing conditions and fair rates, the Commission states that:
- there is no one-size-fit-all solution on what FRAND is: what can be considered fair and reasonable can differ from sector to sector and over time;
- determining a FRAND value should require taking into account the present value add of the patented technology: that value should be irrespective of the market success of the product which is unrelated to the value of the patented technology;
- to avoid royalty stacking, parties must take into account whether the aggregate rate for the standard is reasonable;
- the nondiscrimination element of FRAND indicates that rightholders cannot discriminate between implementers that are ‘similarly situated’ (see Unwired Planet);
- for products with a global circulation, SEP licenses granted on a worldwide basis may contribute to a more efficient approach and therefore can be compatible with FRAND (see Unwired Planet).
A third part of the Communication is devoted to providing guidance in order to achieve a balanced and predictable enforcement environment. With regards to the availability of injunctive relief, the FRAND process requires both parties to negotiate in good faith, including responding in a timely manner. The willingness of the parties to submit to binding third-party FRAND determination – should the (counter-)offer be found not to be FRAND – is an indication of a FRAND behavior. Furthermore, in terms of the timeliness of the counter-offer, no general benchmark can be established, as case-specific elements play a role. Nonetheless, there is a probable trade-off between the time considered reasonable for responding to the offer and the detail and quality of the information provided in the SEP holder’s initial offer.
Even if injunctive relief can be sought against parties acting in bad faith (i.e. parties unwilling to take up a license on FRAND terms), courts are bound by Article 3(2) of the IPR Enforcement Directive, and notably the requirement to ensure that injunctive relief is effective, proportionate, and dissuasive.
Finally, the Commission states that patent assertion entities should be subject to the same rules as any other SEP holder.
  E.W.H.C. 711 (Pat).
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?