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Scarlet wins in European Court

Posted by malcolm on Thursday, November 24th, 2011 at 11:06

Scarlet Extended SA has won its protracted legal battle in the European Court, against a Belgian Court ruling forcing it to impose network level content filtering to prevent copyright infringement on peer-to-peer networks.

Background to the case

The case, SABAM v Scarlet Extended SA, first went to court in Belgium in 2004. It quickly became seen all over Europe as a test case for the efficacy of the Electronic Commerce Directive, which purported to protect ISPs as “mere conduits” from liability for the traffic on their networks and prevented Member States imposing a general duty to monitor their networks on ISPs.

The Belgian court ordered Scarlet to begin filtering traffic on its network in 2007, following a report from a court appointed expert that, despite numerous technical obstacles, the feasibility of filtering and blocking the unlawful sharing of electronic files could not be entirely ruled out. Scarlet tried to comply with the court order, using technology and support from Audible Magic, as recommended by the music industry. When it found it impossible to implement effective filtering on a ISP-scale network, it applied to the court to have the order set aside as impossible to carry out.

The Belgian Court of Appeal decided that before determining whether filtering is technically impossible, it should first confirm that the court order was lawful in the first place. In 2010 it referred the key issues in the case to the Court of Justice of the European Union.

The European Court’s ruling

The European Court has ruled that that imposition of an obligation to filter network traffic on Scarlet is contrary to EU law.

Firstly, any such filtering requires that Scarlet inspect all peer-to-peer traffic on its network to discover which particular file transfers are of copyrighted material. This, ruled the court, constitutes a general monitoring of the network. Under Article 15 of the Electronic Commerce Directive, Member States are prohibited from imposing such an obligation on ISPs.

Secondly, although the right to intellectual property is protected by the European Charter of Fundamental Rights and Freedoms, it is not inviolable. National authorities and courts must, in particular, strike a fair balance between the protection of the intellectual property right enjoyed by copyright holders and that of the freedom to conduct a business enjoyed by operators such as ISPs, which is protected under Article 16 of the Charter. The Court ruled that requiring an ISP to install a complicated, costly, permanent computer system at its own expense infringed on the freedom of an ISP to conduct business and is not striking a fair balance between the rights of the copyright holder and the ISP.

Thirdly, network filtering infringed the rights of Scarlet’s customers. Since a filtering system might not adequately distinguish between lawful and unlawful material, it would infringe on the right of citizens to receive and impart information (the protection of freedom of expression). And the systematic analysis of all content and the collection and identification of users’ IP addresses from which unlawful content on the network is sent constitutes an unlawful processing of protected personal data, the users’ IP addresses. Those addresses are protected personal data because they allow those users to be precisely identified

Implications of the ruling

The courts ruling is very broadly based. It chose not to restrict itself to the narrow argument made by the Advocate-General that the injunction should be rejected because the court was trespassing on the role of the legislature by creating such sweeping obligations out of a mere authority to create injunctions to prevent the continuation of an infringement of copyright. Instead, it chose to rule on all the issues at the heart of the case: whether network filtering constitutes “general monitoring of the network” (it does), whether imposing the costs of copyright enforcement on ISPs is allowed (it is not), whether network blocking and filtering is contrary to the legal protection freedom of expression for EU citizens (it is) and whether collecting and analysing IP addresses to determine who might be infringing copyright breaches data protection law (it does).

The Court judgement therefore goes well beyond saying what a court may decide, by means of an injunction: it also sets out the limits of Member States’ powers to legislate to draft ISPs as copyright police. It will be a crucial precedent in future arguments about the Digital Economy Act, in the UK, HADOPI in France, various blocking requirements in Italy, and numerous other schemes across the EU.

As victories for ISPs in the copyright wars go, this one was comprehensive. It will be seen as a landmark ruling for years to come.

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