April 25, 2018

This article was first published in the April 2018 edition of Managing Intellectual Property Magazine. 

The importance of the Internet in facilitating the dissemination of knowledge and information; in enabling access to culture; and encouraging political debate in democratic societies is not in doubt.  However, the rise of the Internet has brought with it opportunities for those engaged in illegal activities, and for those intent on inciting others to act unlawfully.

Enforcing rights in the online environment is challenging.  Those engaged in unlawful activities can target a global audience at scale, taking advantage of the relative anonymity that the online environment offers and the jurisdictional hurdles that rightholders face.  Those challenges are well-documented.  That Internet intermediaries have a role to play in tackling unlawful online activities is also not new.  The extent of the role and responsibilities of Internet intermediaries in this context has though come under renewed scrutiny.  In part, this has been driven by concerns around terrorist content and campaigns aimed at increasing societal divisions but the conclusion that online service providers should do more to address illegal content online also applies to infringements of intellectual property.

The European framework

Internet intermediaries comprise a diverse range of entities which facilitate Internet communications and/or offer associated or ancillary services.  These include broadband access providers, which connect users to the Internet; hosting services, including entities that host user-generated content; search engines which aggregate, index and enable searches of online content and locations; and entities that facilitate online transactions or otherwise provide services that help to fund online operations (such as payment processors and advertisers).

Under EU law online intermediaries that provide “information society services” benefit from exemptions from liability when carrying out certain passive activities.  These immunities (or safe harbours) are contained in the E-Commerce Directive (2000/31/EC).  Safe harbours are provided for “mere conduits” (Article 12); those providing “caching” services (Article 13); and “hosts” (Article 14).

The conditions for the application of each safe harbour differ.  However, the essentially passive nature of the service provider’s role is common to each of them: the activity must be “of a mere technical, automatic and passive nature” (Recital 42, E-Commerce Directive).  Hosting providers will lose the benefit of the Article 14 exemption if, upon obtaining actual knowledge of illegal activity or information, or awareness of facts or circumstances from which the illegal activity or information is apparent, they fail to act expeditiously to remove or disable access to the information.

Online service providers are under no general obligation either to monitor the information which they transmit or store or to actively seek facts or circumstances indicating illegal activity, when providing hosting, caching and/or mere conduit services (Article 15, E-Commerce Directive).

The safe harbours operate to bar a claim for damages but do not prevent the grant of injunctive relief “to terminate or prevent an infringement”.  Intermediaries (whether or not they fall within the E-Commerce Directive safe harbours) may therefore be susceptible to injunctions pursuant to Article 11 (third sentence) of the Enforcement Directive (2004/48/EC) and/or Article 8(3) of the Information Society Directive (2001/29/EC) where their services are used by a third party to infringe an intellectual property right.  The underlying rationale is that intermediaries are often “best placed to bring such infringing activities to an end” (Recital 59, Information Society Directive).

The diligent economic operator & knowledge

The ambit of the hosting safe harbour has been considered by the Court of Justice of the European Union (CJEU) in two key cases.

In Google France (Cases C-236/08 to C-238/8), concerning Google’s provision of the “AdWords” ad referencing service, the CJEU held that “it is necessary to examine whether the role played by that service provider is neutral, in the sense that its conduct is merely technical, automatic and passive, pointing to a lack of knowledge or control of the data which it stores”.  Google was not liable for trade mark infringement in respect of its storage, as a keyword, of signs identical with, or similar to, a trade mark and its organisation of the display of advertisements on the basis of that keyword:  “The fact of creating the technical conditions necessary for the use of a sign and being paid for that service does not mean that the party offering the service itself uses the sign”.  

In L’Oréal v eBay (Case C-324/09) the CJEU singled out content optimisation as a factor indicative of knowledge and control.  The court held that generalised knowledge of infringing activity and/or failure to act will not in itself take a service provide outside Article 14.  However, to be fixed with requisite knowledge “it is sufficient…for it to have been aware of facts or circumstances on the basis of which a diligent economic operator should have identified the illegality in question.”

The joint tortfeasorship claim in L’Oréal v eBay ultimately failed.  Whilst Arnold J was in no doubt that it would have been possible for eBay Europe to do more to prevent, or at least minimise, sales of counterfeit and other infringing products on its marketplace, he concluded that “[t]he fact that it would be possible for eBay Europe to do more does not necessarily mean that they are legally obliged to do more” (see [2009] EWHC 1094 (Ch)). Where a service inherently leads to infringement the conclusion is likely to be different.

A marketplace operator that is commercially involved in the sale of goods via its platform and/or the fulfilment of orders may not escape liability.  In Cosmetic Warriors Ltd v Amazon.co.uk Limited [2014] EWHC 181 (Ch), John Baldwin QC, sitting as a Deputy Judge, considered Amazon’s use of the “lush” mark to direct customers to webpages on its marketplace which offered competing products to those of the claimant.  The judge held that whilst Amazon may just be an online marketplace in respect of goods owned by third parties where the sale is fulfilled by that third party, these items were mixed up with goods which were owned by Amazon in respect of which Amazon sold the goods and fulfilled the orders; and goods owned by a third party where Amazon provides the fulfilment service.  In relation to the latter two categories of goods, the judge considered that Amazon’s involvement in the transactions was more than sufficient for it to be commercially involved in the offering for sale and selling.

Interestingly, the judge also noted, in the context of arguments advanced by Amazon that focused on the benefit of its search facilities to consumers, that “[the] right of the public to access technological development does not go so far as to allow a trader such as Amazon to ride roughshod over intellectual property rights, to treat trade marks such as Lush as no more than a generic indication of a class of goods in which the consumer might have an interest.”

In the copyright context, knowledge has been the focus of a developing line of case law concerning communication to the public under Article 3(1) of the Information Society Directive.  In Case C-306/05, SGAE v Rafael Hoteles SA, the key question in differentiating between “mere provision” and “communication” was stated to be: (i) whether there is an intervention by an organisation, in full knowledge of the consequences of its action, to give access to the protected work to its users; and (ii) whether the provision of the physical facilities makes public access to copyright works technically possible.  Subsequent case law concerning hyperlinking has introduced a rebuttable presumption of knowledge where the linker operates for profit (see Case C-160/15 GS Media BV v Sanoma).  The thrust of the case law in this area is perhaps epitomised by the CJEU’s finding in Case C-610/15 Stichting Brein v Ziggo that “as a rule, any act by which a user, with full knowledge of the relevant facts, provides its clients with access to protected works is liable to constitute an ‘act of communication’”.

The relevance of knowledge to the hosting safe harbour and knowledge as an element in establishing infringement of the communication to the public right are, of course, distinct concepts.  However, the level of conduct expected of the “diligent economic operator” may have relevance to both.

A need to re-balance the status quo?

In 25 January 2018, Theresa May addressed the World Economic Forum in Davos and stressed that “the same rights people have offline should be protected online…technology companies still need to do more in stepping up to their responsibilities for dealing with harmful and illegal online activity”. She stated that “[t]he status quo is increasingly unsustainable as it becomes clear these platforms are no longer just passive hosts”.

Those comments followed the European Commission’s Communication entitled “Tackling Illegal Content Online – Towards an enhanced responsibility of online platforms” (COM(2017) 555 final, 28 September 2017).  The Communication contains guidelines and principles for online platforms to step up efforts to prevent, detect and remove illegal content online.  The Commission’s position is that online platforms have an “increasingly important role to play” and need to “step up their social responsibility”, whilst acknowledging the need for appropriate safeguards.  The Commission’s position is that concerns relating to the loss of the hosting safe harbour should not deter or preclude the application of effective, proactive voluntary measures:  online platforms should “do their utmost to proactively detect, identify and remove illegal content online“.  These objectives are further reflected in the Commission’s Recommendation (C(2018) 1177 final, 1 March 2018).

On a legislative front, obligations on online platforms to take steps to tackle copyright infringement are being considered as part of the Digital Single Market project.  Article 13 of the draft Directive currently envisages that certain online platforms will be required take measures to (i) ensure the functioning of agreements (such as licences) with rightholders; and (ii) prevent the availability on their services of infringing content.  The measures envisaged include filtering and content recognition technology.  At the time of writing, the final positions of both the European Parliament ad the European Council on this legislative proposal are still awaited.

Against this backdrop, and in the face of pressure from copyright and brand owners, online platforms are developing systems to assist further with the detection and/or prevention of IP infringements.  Amazon’s Brand Gating program and Brand Registry Tool, and Facebook’s Commerce and IP tool, provide some examples.

Intermediary injunctions

As the EU legislative framework identifies, intermediaries may be best placed to take action to prevent (or at least reduce) infringements of intellectual property rights.  The UK has led the way in developing precedents and procedures for requiring broadband access providers (ISPs) to impede access by their subscribers to online locations that are focused on the provision of unauthorised copyright content or the sale of counterfeit goods.

These orders (granted pursuant to section 97A of the Copyright, Designs and Patents Act 1988 or section 37(1) of the Senior Courts Act 1981) have proved both efficacious and adaptable to new infringement models.  The grant of so-called “live blocking” orders directed to streaming servers delivering infringing live streams of football matches demonstrate not only the flexibility of the remedy but also the importance of technology as a tool to address online infringements (see FAPL v BT [2017] EWHC 480 (Ch); FAPL v BT [2017] EWHC 1877 (Ch); and UEFA v BT [2017] EWHC 3414 (Ch)).

An outstanding issue that will be determined shortly by the UK Supreme Court is which party should bear the costs of implementing site blocking orders.  The current position in the UK is that the applicant bears the costs of preparing the application and the costs of monitoring the target locations following grant of the order; and the ISPs bear the infrastructure costs of their blocking systems and the implementation costs of complying with the order.  The majority of the Court of Appeal held that implementation costs should be borne by the respondent ISPs (Cartier v BT [2016] EWHC 339 (Ch)).  In part, the wider legislative scheme (and the benefits conferred on ISPs under the E-Commerce Directive) underpinned the court’s reasoning.  However, the Court of Appeal also had regard to the profits made by the ISPs by providing services used by third parties to infringe and considered the implementation costs of such orders to be a cost of doing business.

Conclusion

Those seeking to protect and enforce their intellectual property rights need to adapt and review their online enforcement programmes to keep apace with the ever-changing digital environment.  The cooperation of intermediaries is essential to any enforcement strategy.  Identification of the relevant intermediaries; knowledge of the steps that the various types of intermediaries can and/or are willing to take to address online infringements; and familiarity with the tools and notification mechanisms operated by online platforms are all important elements.  Intermediary injunctions are a tool to be considered in appropriate cases and no doubt this is a remedy that will be further adapted as infringing operations mutate and diversify.