Intermediary Issues
Cases
L’Oreal SA & Ors v EBay International AG & Ors
[2009] EWHC 1094 [2009] ETMR 53, [2009] RPC 21
Discussion. I have found this a difficult issue to decide. It requires the application of well-established principles to a new and rather different scenario to those to which they have previously been applied. In particular, I agree with counsel for L’Oréal that the situation in the present case is rather different to the situation which exists where the defendant sells a product or machine and the infringement is subsequently committed by the purchaser.
I confess to having considerable sympathy with the suggestion that eBay Europe could and should deal with the problem of infringement by accepting liability and insuring against it by means of a premium levied on sellers. In characterising L’Oréal’s claim as an attack on eBay’s business model, it seems to me that counsel for eBay Europe came close to the heart of the issue. As the evidence in this case graphically demonstrates, eBay and its competitors have created a new form of trade which carries with it a higher risk of infringement than more traditional methods of trade. I consider that there is much to be said for the view that, having created that increased risk and profited from it, the consequences of that increased risk should fall upon eBay rather than upon the owners of the intellectual property rights that are infringed.
Nevertheless, I have concluded that the three main points made by counsel for eBay Europe are well founded and add up to a complete answer to L’Oréal’s case. It is worth elaborating on each of them.
As to the first point, eBay Europe pleaded this at the outset in their Defence. They made a number of attempts to elicit from L’Oréal a clear and unequivocal statement as to whether L’Oréal accepted it or dissented from it, and if the latter why. In a supplementary skeleton argument for trial counsel for eBay Europe complained that no clear and equivocal statement had been forthcoming from L’Oréal. He went on to submit that L’Oréal’s position in relation to the questions as to (a) whether eBay Europe were under such a duty, and if so (b) its legal basis and (c) its scope, were unclear from L’Oréal’s skeleton argument. In response, L’Oréal served a supplementary skeleton argument contending that: (a) eBay Europe were under a legal obligation not to procure trade mark infringements, nor participate in a common design to infringe; (b) the legal basis for this was the law as to joint tortfeasorship; and (c) although trade mark infringement was a tort of strict liability, in considering whether eBay Europe were jointly liable it was relevant to consider whether eBay Europe had taken “all reasonable measures” to prevent infringement. This led to an application on the first day of trial by counsel for eBay Europe for an order requiring L’Oréal further to clarify their position. I refused that application, ruling that the answers L’Oréal had given were sufficient to define the issues.
In my judgment, the answers given by L’Oréal to the three questions are revealing. So far as the first question is concerned, it seems to me that L’Oréal’s answer either amounts to an acceptance that eBay Europe are under no duty to prevent infringements by third parties or amounts to a circular argument: eBay Europe are under a duty to prevent third parties from infringing because they are under a duty not to participate in a common design to infringe and they have participated in a common design to infringe because they have failed to prevent third parties from infringing.
As for the third answer, how can it be relevant to enquire whether eBay Europe have taken “all reasonable measures” to prevent infringement by third parties unless eBay Europe are under some legal duty or obligation to take all reasonable measures? Furthermore, what is the criterion or benchmark by which the court is to judge the reasonableness of the measures taken by eBay Europe? L’Oréal have put forward PriceMinister as a comparator, but in my judgment it is not a useful comparator even if one disregards the special steps it takes in relation to L’Oréal’s products because it operates according to a different business model and on a different scale. In any event, why should PriceMinister be taken as the benchmark and not some other competitor of eBay?
In my judgment the right answer is that, as a matter of domestic common law, eBay Europe are under no legal duty or obligation to prevent infringement of third parties’ registered trade marks. I qualify my answer in that way because eBay Europe may come under such a duty or obligation with regard to future infringements as a result of the operation of Article 11 of the Enforcement Directive (as to which see below), but that does not affect their liability for past infringements on the ground of joint tortfeasorship.
Turning to the second point made by counsel for eBay Europe, he submitted that eBay’s systems and policies contained no inbuilt bias or tendency in favour of infringing activities, but rather the reverse. It is worth considering this proposition in relation to each of the four types of infringement that are in issue in this case.
So far as counterfeits are concerned, I consider that the proposition is true. There is nothing in eBay’s systems and policies which favours or encourages the listing or sale of counterfeit goods. On the contrary, eBay Europe take active steps to prevent or at least minimise such activities. The fact that eBay could take further steps does not affect this.
With regard to testers and dramming products, I again consider that the proposition is true. eBay do not, so far as the evidence goes, take any specific steps to combat the sale of such items; but there is nothing in eBay’s systems and policies which favours or encourages the listing or sale of testers or dramming products. Again, the fact that eBay could take specific steps to combat the sale of such items does not affect this.
As to unboxed products, I again consider that the proposition is true. Again, there is nothing in eBay’s systems and policies which favours or encourages the listing or sale of unboxed products. In the case of sales to Germany, eBay Europe take active steps to prevent such products. I have to say that I consider it anomalous that eBay Europe apply a different policy in other Member States of the Community; but that does not amount to condoning, let alone encouraging, such activities in those countries.
L’Oréal’s strongest case is in relation to non-EEA goods. In this instance I do not consider that counsel for eBay Europe’s proposition is true. On the contrary, the evidence shows that eBay actively encourage the listing and sale of goods from outside the EEA to buyers in the United Kingdom and provide specific facilities to assist sellers to do this. Moreover, no steps are taken to discourage such infringements, let alone to try to prevent them. I have reflected long and hard on whether this is enough to make eBay Europe jointly liable for such infringements, even if not for the other types of infringements. In the end, and not without considerable hesitation, I have concluded that it is not. I shall explain why below.
Turning to the third point made by counsel for eBay Europe, in my judgment eBay Europe do facilitate the infringement of third parties’ trade marks, including L’Oréal’s Trade Marks, by sellers; they do know that that such infringements have occurred and are likely to continue to occur; and they profit from such infringements except where the rights owner makes a VeRO complaint in sufficient time. I would add that, while it is true that the Fourth to Tenth Defendants’ trading histories are different from one another, certain common patterns and themes do emerge from the narratives set out above. Nevertheless, I accept counsel’s submission that these factors are not enough to make eBay Europe liable as joint tortfeasors.
As I have already indicated, the issue of whether eBay Europe are liable as joint tortfeasors is at its most acute in relation to non-EEA goods. This is particularly so in the case of International Site Visibility: as discussed below, this facility provides a specific mechanism for foreign sellers to target UK buyers. Nevertheless, it cannot be said that the facility is one which inherently leads to infringement. It is capable of being used by sellers in a manner which does not infringe third party trade marks. Whether the use of International Site Visibility leads to infringement depends on the autonomous actions of the foreign sellers. Given that (i) eBay Europe is under no legal duty to prevent infringement and (ii) facilitation with knowledge and an intention to profit is not enough, I conclude that, even in these circumstances, eBay Europe are not liable as joint tortfeasors.
Are eBay Europe liable as primary infringers for the use of the Link Marks in relation to infringing goods?
L’Oréal’s claims concerning use of the Link Marks in sponsored links on third party search engines and on the Site raise slightly different issues and require separate consideration. It is nevertheless important to re-iterate that in both cases L’Oréal only claim that such use amounts to an infringement where and to the extent that the use relates to infringing goods.
Use in sponsored links
The complaint. In considering this allegation, it is first necessary to be clear as to what is being complained of. Sub-paragraph (1) of the Particulars under paragraph 34 to the Re-Amended Particulars of Claim particularises this claim as follows:
“The use of signs identical to the Link Marks on advertising links sponsored by eBay appearing on popular and well-known third party search websites. These link to products appearing on the Site from time to time which use such signs. Examples showing the use of such links are attached hereto as Annex 7.”
This pleading is somewhat vague as to precisely what act or acts are relied upon as constituting the allegedly infringing use. My reading of it, however, is that what is complained of is the appearance of the relevant sign as it appears in the sponsored link in the search result. Thus in the first example set out in paragraph 27 above, what is complained of is the appearance of the words “Shu Uemura” in the sponsored link. It can be seen that in this example the sign is used twice, once in the hyperlink at the top of the link and once in the text underneath. As I understand it, L’Oréal complain of both these uses. In the other three examples, the sign only appears in the hyperlink.
It should be noted that L’Oréal do not complain of any other uses of the relevant sign which may have occurred, for example when eBay Europe purchased the relevant keyword or when the user entered the search request or when that search request was processed internally by the third party search engine provider (in these examples, Google). The pleading is perhaps ambiguous as to whether L’Oréal complain of the use of the relevant sign on the page containing the search results to which the user is taken if he or she clicks on the sponsored link; but since this type of use is essentially the same as that which is the subject of L’Oréal’s next claim, the question is academic.
It is convenient to consider L’Oréal’s claim in respect of the sponsored links, and eBay Europe’s defences to it, under five headings. First, is there “use” of the signs in question by eBay Europe at all (i.e. is the first condition for liability under Article 5(1)(a) satisfied)? Secondly, if so, is such use “in relation to” the allegedly infringing goods (i.e. is the fifth condition satisfied)? Thirdly, if so, is such use “in the course of trade” (i.e. is the second condition satisfied)? Fourthly, if so, is such use in the United Kingdom? Fifthly, if so, is the use complained of an infringing act? There is no dispute that the signs in question are identical to the relevant Trade Marks or that the goods in question are identical to goods in respect of which the Trade Marks are registered. Nor is there any dispute that L’Oréal has not consented to the uses complained of.
Use? L’Oréal contend that the sponsored link constitutes an advertisement placed by eBay Europe falling within Article 5(3)(d) of the Trade Marks Directive, albeit that it is displayed to the user by Google in response to a search request made by the user employing the sign in question. L’Oréal argue that a sponsored link is entirely analogous to an advertisement placed by an advertiser in a newspaper or television broadcast or other medium. Accordingly, L’Oréal say that the sponsored link amounts to “use” of the signs complained of (which it is not disputed are identical to the relevant Link Marks) by eBay Europe (whether or not it constitutes use by the user and/or by Google) falling within Article 5(1)(a).
eBay Europe contend that display of the sponsored link did not involve “use” of the sign in question by eBay Europe. In support of this argument, counsel for eBay Europe relied upon Wilson v Yahoo! Ltd [2008] EWHC 361 (Ch), [2008] ETMR 33. In that case the claimant was the proprietor of a Community trade mark consisting of the words MR SPICY registered in Classes 29, 30 and 42. The defendants were subsidiaries of Yahoo! Inc and provided a search engine service. The claimant complained that, when a user entered “mr spicy” as a search request, the defendants’ search engine displayed sponsored links for Sainsbury’s Supermarkets Ltd and Pricegrabber.com. It is important to note that the Sainsbury’s sponsored link did not include the word “spicy” let alone the sign “mr spicy”, while the Pricegrabber sponsored link included the word “spicy” as a hyperlink but not the sign “mr spicy”. The defendants’ evidence was that Sainsbury’s and Pricegrabber had purchased the keyword “spicy” and that the detection of this keyword in the search request was what had triggered the sponsored links. The defendants expressly denied that Sainsbury’s or Pricegrabber (or anyone else) had purchased the keyword “mr spicy”, and there was no credible evidence to the contrary.
The claimant’s principal claim was that there had been an infringement pursuant to Article 9(1)(a) of the CTM Regulation, although he sought to introduce claims for infringement of Article 9(1)(b) and (c) by amendment. Morgan J granted summary judgment against the claimant, who was not legally represented. Morgan J’s principal reasons for dismissing the claim were that (i) the only use of MR SPICY was by the user and not the defendants; and (ii) even if one regarded the sponsored links as constituting a use by the defendants, such use was only of the word “spicy” which was neither identical to nor confusingly similar to MR SPICY.
In my judgment the present case is readily distinguishable from the Wilson case. First, the sponsored links here include signs which are admittedly identical to the relevant Trade Marks, whereas that was not the case in Wilson. Secondly, the defendants who are alleged to have made the infringing use here are the advertisers rather than the search engine provider, whereas in Wilson it was the other way around (indeed, it appears that the claimant in Wilson had originally sued Sainsbury’s, but discontinued that claim).
In my opinion the display of the sponsored links to users does constitute “use” of the signs in question by eBay Europe. In view of the current uncertainty over this and related questions discussed in my judgment in Interflora v M & S, however, I do not feel able to say that this is acte clair.
In relation to? L’Oréal contend that such use is use “in relation to” all goods listed on the Site under the relevant Trade Mark at the time when the sponsored link is displayed i.e. the listings which would be displayed if and when the user clicked on the hyperlink. Accordingly, where those listings include both infringing and non-infringing goods, L’Oréal contend that such use is in relation to both infringing and non-infringing goods; and is in an infringement in so far as it is in relation to infringing goods. On L’Oréal’s case it is immaterial whether use in relation to non-infringing goods escapes infringement because it does not fall within Article 5(1)(a) at all or because it is saved by Article 7(1).
Counsel for eBay Europe accepted that, when the user clicked through to the Site, there was use of the signs in question in relation to the particular listings of the particular sellers thrown up by the search. So far as such use was concerned, he submitted:
“This does not involve use of any L’Oreal trade marks ‘in relation to’ any particular goods offered for sale or supply by any of the eBay Defendants ‘in the course of trade.’ Moreover, to the extent that it involves use of any L’Oreal trade marks ‘in relation to’ any particular goods offered for sale or supply by any particular seller ‘in the course of trade’, the use cannot be stigmatised as infringing use except and unless it is directly hypothecated to infringing products.”
As I understood his argument, counsel for eBay Europe accepted that the use of the relevant sign in a particular listing by a particular seller was use “in relation to” the particular goods the subject of that listing, and thus an infringement by the seller (but only the seller) if those goods were infringing goods (subject to the third and fourth points discussed below); but he submitted that the use of the sign in displaying the search results by eBay Europe was not use “in relation to” infringing goods, and hence not an infringement by eBay Europe, because such use was not “directly hypothecated to” the infringing goods; and still less was use of the sign in the sponsored link use in relation to infringing goods because such use was even less “directly hypothecated to” the infringing goods.
Counsel for L’Oréal riposted that eBay Europe was in no better position than a retailer who placed an advertisement in a newspaper saying “Lancôme perfumes for sale at low prices in our shop now” at a time when the goods for sale in the shop included both infringing and non-infringing goods, and that the placing of such an advertisement would amount to an infringement.
In my view the problem with L’Oréal’s newspaper analogy is that whether or not an advertisement is an infringement must depend on whether it relates to identifiable goods which can be shown to be infringing. If it does not relate to identifiable goods which can be shown to be infringing, but merely to goods of a general class some, but not of all, of which turn out to be infringing upon further investigation, I find it difficult to see that the placing of the advertisement, or the making of any offer or exposure for sale thereby, is in itself an infringing act.
Even if I am right about that, however, that is not the end of the matter so far as L’Oréal’s second proposition is concerned. In the case of the sponsored links complained of, there is some degree of nexus between the use of the sign in the sponsored link and what I will assume for the moment are infringing goods in that clicking on the sponsored link leads the user directly to listings for goods by reference to the sign which include infringing goods. In the present state of the ECJ’s jurisprudence I consider it arguable that this is sufficient to constitute use “in relation to” infringing goods.
I would add that I agree with L’Oréal that it is immaterial to this question whether use in relation to genuine goods is outside the scope of Article 5(1)(a) of the Directive altogether or whether it is within the scope of Article 5(1)(a) of the Directive and saved from infringement by Article 7(1).
In the course of trade? L’Oréal contend that acts complained of were carried out “in the course of trade” since eBay Europe are plainly engaging in commercial activity with a view to economic advantage. Counsel for eBay Europe did not dispute this.
Since L’Oréal accept that the sponsored links only infringe in so far as they relate to infringing listings, however, it is also necessary to consider whether the sellers were acting in the course of trade. L’Oréal contend that they were. Counsel for eBay Europe did not dispute that, if there was use of the signs in question in the United Kingdom by virtue of the allegedly infringing listings, then the use was in the course of trade. Rather, he submitted that the requirement that use be in the course of trade had to be borne in mind when considering whether the use was in the United Kingdom.
In the United Kingdom? Since most of the Trade Marks are United Kingdom trade marks, it is necessary to consider whether the use complained of is use in the United Kingdom. (Although two of the Trade Marks are Community trade marks, L’Oréal’s complaint is that they have been infringed in the United Kingdom.) It is common ground that the mere fact that a website is accessible in the United Kingdom does not mean that an advertisement or offer for sale featuring a particular sign displayed on that website constitutes use of that sign in the United Kingdom. Such an advertisement or offer for sale only constitutes use in the United Kingdom if it is aimed or targeted at consumers in the United Kingdom: see Euromarket Designs Inc v Peters [2001] FSR 288 at [21]-[25] and 800-FLOWERS Trade Mark Application [2000] FSR 697 at 704-706 (affirmed [2001] EWCA Civ 721, [2002] FSR 191).
L’Oréal contend that the sponsored links are aimed or targeted at consumers in the United Kingdom since they are advertisements for the Site, which is a website specifically aimed or targeted at UK users. I did not understand counsel for eBay Europe to dispute this.
Again, however, it is also necessary to consider whether the allegedly infringing listings are aimed or targeted at UK consumers. L’Oréal contend that they are. Of the four situations in which non-UK sellers’ listings may appear on the Site listed in paragraph 61 above, counsel for eBay Europe did not dispute that the first did involve targeting UK consumers but contended that the second, third and fourth did not.
So far as International Site Visibility is concerned, in my judgment this clearly does involve targeting UK consumers since this upgrade is country-specific. In order for listings to be visible on the Site, the sellers must have selected visibility in the UK and paid the fee for visibility in the UK.
So far as listings revealed by European Union or worldwide searches are concerned, the position is more finely balanced. Such listings are in a sense aimed at the whole of the European Union or the world. Nevertheless, on balance I consider that they are sufficiently targeted at UK consumers because such listings will only be returned by the search if the seller has indicated that he or she is prepared to deliver to the United Kingdom among other countries. If a UK buyer purchases the item in question, then a contract of sale will be concluded which will probably be made in the United Kingdom. Whether that is so or not, the seller will (unless he or she defaults) post the item to the United Kingdom and will thereby import it into the United Kingdom.
In this connection, counsel for eBay Europe relied on the decision of the Hamburg District Court in Case 406 O9/07 L’Oréal SA v eBay International AG (20 April 2007). This was a claim by L’Oréal against eBay for unfair competition, not trade mark infringement. L’Oréal objected to listings by a seller identified as www.flaconetti.de which were (i) accessible on the German eBay site as a result of a search for L’Oréal’s brands with the worldwide option, (ii) priced in US dollars with a euro equivalent and (iii) did not include the seller’s name or information about the buyer’s right to cancel the purchase. Counsel for eBay Europe told me, although it does not appear from the face of the decision, that L’Oréal argued the display of these listings amounted to unfair competition because they did not comply with Council Directive 97/7/EC of 20 May 1997 on the protection of consumers in respect of distance contracts (“the Distance Selling Directive”, as to which see below). The same seller also published listings on the German eBay website priced in euros which did include the seller’s name and information about the right to cancel. The District Court rejected the claim on the ground that the US dollar listings were not intended for the German market.
I have to say that I do not find this decision of much assistance. As I have pointed out, it is based on unfair competition law. Even so, the test applied by the Hamburg court seems broadly consistent with that applied in this jurisdiction. The facts of the case, or at least the evidence, seem to have been different to those here. In particular, the evidence before me is that a worldwide search on the Site only produces listings for goods which the sellers have indicated that they are prepared to deliver to the UK, whereas there is no reference to that factor in the decision. Moreover, the Hamburg court relied on the fact that the listings quoted prices in euros, which is not a currency specific to Germany. By contrast, in the present case the prices are quoted in sterling.
Turning to the specific listings which are the subject of L’Oréal’s complaint as particularised by reference to Annex 7, as I have said above these fall into two categories.
The first category is where both price and postage are stated in sterling, in neither case in italics. All the listings in this category where thrown up by the search when the SHU UEMURA sponsored link was clicked. I infer that the sellers were either UK sellers or non-UK sellers who had registered on the Site. In my judgment these listings are clearly targeted at UK consumers.
The second category is where the price was stated in sterling, in italics, indicating that the price had been converted from a foreign currency. All the listings in this category were listings described as being “from eBay international sellers”. It is not clear from the evidence precisely how these listings came to be displayed, but it appears to have been due to some predecessor of the International Site Visibility feature since it is common ground that it was not due to a worldwide search. That being so, I consider that these listings are clearly targeted at UK consumers. It is immaterial that the sellers rely upon eBay to convert their prices into sterling rather than doing it themselves.
I would add that, even if the listings had appeared as a result of a worldwide search, I would still reach the same conclusion for the reasons given above.
Infringing use? As already noted, L’Oréal contend that the sponsored links infringe where they relate to listings for non-EEA goods. L’Oréal accept that the sponsored links do not infringe where they relate to goods placed on the market within the EEA by or with the consent of L’Oréal, except testers and dramming products and unboxed products, since in those circumstances the use is protected by Article 7(1).
Counsel for eBay Europe submitted that the fact that the listings indicated that the goods were located in a country outside the EEA did not, or at least did not necessarily, mean that there was an infringement. In this connection, he pointed out that there was an important distinction between L’Oréal’s claims regarding items (1)-(15) sold by the Fourth to Eighth Defendants and L’Oréal’s claims regarding the acts particularised by reference to Annex 7 of the Re-Amended Particulars of Claim, namely that in the former cases L’Oréal had arranged for trap purchases to be made, whereas in the latter cases L’Oréal had not. Counsel for eBay Europe submitted that the significance of this was that in the former cases the goods in question had in fact been sold and delivered to purchasers in the United Kingdom in factual circumstances which were the subject of evidence before the court; but in the latter cases there was no evidence as to what would have happened even supposing that UK buyers had successfully bid for the goods in question. From this starting point, Counsel for eBay Europe advanced four arguments which I will consider in turn.
First, counsel for eBay Europe submitted that there can be no liability for infringement in respect of any offering for sale or sale which does not necessarily entail putting the specific goods at issue on the market within the territorial limits of the protection conferred by the relevant registration. In support of this submission he relied on Class International at [51]-[61], Montex Holdings at [22]-[24] and [28]-[32] and the judgment of the Court of Appeal in Eli Lilly & Co v 8PM Chemists Ltd [2008] EWCA Civ 24, [2008] FSR 12, where Jacob LJ giving the judgment of the Court said at [46]:
“So, no placing on the market, no infringement. The touchstone is clear.'”
Counsel for L’Oréal distinguished Class International, Montex Holdings and Eli Lilly as being cases concerned with goods in transit under customs procedures other than release for free circulation and where there had been no advertisement, offer for sale or exposure for sale within the United Kingdom. He submitted that the present case was different because it involved the advertisement, offer for sale and exposure for sale within the United Kingdom by virtue of listings which targeted UK consumers of goods which had been placed on the market by L’Oréal outside the EEA.
Counsel for eBay Europe riposted that the reasoning in those cases suggested that, where one was concerned with an advertisement, offer for sale or exposure for sale on a website which at best was targeted at UK consumers in the sense described above, that was not enough to constitute infringement unless it was also possible to say that the advertisement, offer for sale or exposure for sale necessarily entailed putting the goods on the market in the United Kingdom. Accordingly, if the advertisement, offer for sale or exposure for sale could equally lead to a sale to a different market, that was not enough.
In my opinion L’Oréal is right on this point. I consider that eBay Europe’s argument confuses the use complained of (namely the advertisement etc constituted by the sponsored link) with the status of the goods (namely whether they fall within Article 7(1) or not). Nevertheless, I do not feel able to say that this is acte clair. Accordingly, I consider that guidance is required from the ECJ.
Secondly, counsel for eBay Europe relied on the fact that, unlike counterfeit goods, parallel imports are not subject to border control measures pursuant to Council Regulation 1383/2003/EC of 22 July 2003 concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights. Accordingly, he submitted, it would be wrong in principle to require eBay Europe to establish electronic border control measures of greater restrictiveness than L’Oréal could lawfully ask the customs authorities to apply.
Counsel for L’Oréal responded that the position under Council Regulation 1383/2003/EC was irrelevant. I agree. Although a trade mark owner cannot request border control measures in respect of parallel imports, it can invoke its ordinary legal remedies in respect of parallel imports.
Thirdly, counsel for eBay Europe submitted that the court could not exclude the possibility that L’Oréal had impliedly consented to the putting of the goods in question upon the market in the EEA. In this connection, he reminded me that the ECJ had held in its ruling in Zino Davidoff that “consent may be implied, where it follows from facts and circumstances prior to, simultaneous with or subsequent to the placing of the goods on the market outside the European Economic Area”. He also relied upon the absence of disclosure by L’Oréal of documents relating to their policies and procedures for the enforcement of their trade mark rights against parallel imports of genuine products, and submitted that the decision of the Court of Appeal in Honda Giken Kogyou Kabushiki Kaisha v KJM Superbikes Ltd [2007] EWCA Civ 313 showed that such disclosure would be necessary to resolve this issue.
Counsel for L’Oréal responded that L’Oréal had given proper disclosure and pointed out that eBay Europe had not applied for further disclosure. He distinguished Honda on the basis that in that case a positive case of consent had been pleaded by the defendants, whereas in the present no such case had been pleaded by eBay Europe. He also relied on the evidence of Mr Monteiro that L’Oréal had made many claims against parallel importers in the UK as confirming that L’Oréal did not consent to parallel imports from outside the EEA and took action against them when they considered it appropriate to do so.
In my judgment, there is no evidence that L’Oréal impliedly consented to the acts of the sellers in question (still less to the sale and delivery of the goods in question to the United Kingdom in the event that UK buyers bought the items).
Fourthly, counsel for eBay Europe submitted that the court could not exclude the possibility that the goods in question had been placed on the market in the EEA by L’Oréal even though the seller stated that they were located outside the EEA. In the first place, one only had the seller’s word for it that the goods were located where he or she said and so they could be located within the EEA. Even if that was true, the goods might have been exported from the EEA by someone.
Counsel for L’Oréal accepted that these were theoretical possibilities, but submitted that it was highly probable that the goods were located where the seller stated and had not been exported from the EEA, because a false statement of location would affect the postage cost and it would probably be uneconomic to sell back to the EEA goods exported from the EEA. I agree. Moreover, in the case of the listings in question it is probable, and I find, that the goods were located where the sellers stated and had been placed on the market outside the EEA.
Use on the Site
Again, it is convenient to consider L’Oréal’s claim in respect of use on the Site under the same five headings.
Use? Again there is an issue as to whether there is a “use” of the signs in question by eBay Europe. The nature of the alleged use is slightly different to that in the case of the sponsored links, however, in that it is more like a heading in classified advertising and less like an actual advertisement itself. Nevertheless, my conclusion is the same.
In relation to? Again, L’Oréal contend that such use is “in relation to” all goods listed on the Site under the relevant Trade Mark at the time the search is carried out, and hence in relation to both infringing and non-infringing use. Again, I consider that it is arguable that there is a sufficient nexus between the use and the infringing goods.
In the course of trade? The position is the same as in the case of the sponsored links.
In the United Kingdom? The position is much the same as in the case of the sponsored links. In the case of the specific listings which are the subject of L’Oréal’s complaint as particularised by reference to Annex 8, these all fall within the first of the two categories described above. Accordingly, I conclude that these listings are all targeted at UK consumers.
Infringing use? The position is the same as in the case of the sponsored links. Again, I consider that guidance is required as to whether, as eBay Europe contend, L’Oréal must show that the listings necessarily entail putting the items on the market in the United Kingdom.
Do eBay Europe have a defence under Article 14 of the E-Commerce Directive?
eBay Europe contend that in any event they have a defence under Article 14 of European Parliament and Council Directive 2000/31/EC of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (“the E-Commerce Directive”).
Key provisions of the E-Commerce Directive
The E-Commerce Directive contains no less than 65 recitals which explain its purpose and guide its interpretation. My attention was drawn to recitals (17), (25), (29), (42), (45), (46) and (47). Of these the most relevant are recitals (42), (45), (45), (46), (47) and (48), which read as follows:
“(42) The exemptions from liability established in this Directive cover only cases where the activity of the information society service provider is limited to the technical process of operating and giving access to a communication network over which information made available by third parties is transmitted or temporarily stored, for the sole purpose of making the transmission more efficient; this activity is of a mere technical, automatic and passive nature, which implies that the information society service provider has neither knowledge of nor control over the information which is transmitted or stored.
(45) The limitations of the liability of intermediary service providers established in this Directive do not affect the possibility of injunctions of different kinds; such injunctions can in particular consist of orders by courts or administrative authorities requiring the termination or prevention of any infringement, including the removal of illegal information or the disabling of access to it.
(46) In order to benefit from a limitation of liability, the provider of an information society service, consisting of the storage of information, upon obtaining actual knowledge or awareness of illegal activities has to act expeditiously to remove or to disable access to the information concerned; the removal or disabling of access has to be undertaken in the observance of the principle of freedom of expression and of procedures established for this purpose at national level; this Directive does not affect Member States’ possibility of establishing specific requirements which must be fulfilled expeditiously prior to the removal or disabling of information.
(47) Member States are prevented from imposing a monitoring obligation on service providers only with respect to obligations of a general nature; this does not concern monitoring obligations in a specific case and, in particular, does not affect orders by national authorities in accordance with national legislation.
(48) This Directive does not affect the possibility for Member States of requiring service providers, who host information provided by recipients of their service, to apply duties of care, which can reasonably be expected from them and which are specified by national law, in order to detect and prevent certain types of illegal activities”
Articles 13, 14 and 15 provide:
“Article 13
‘Caching’
1. Where an information society service is provided that consists of the transmission in a communication network of information provided by a recipient of the service, Member States shall ensure that the service provider is not liable for the automatic, intermediate and temporary storage of that information, performed for the sole purpose of making more efficient the information’s onward transmission to other recipients of the service upon their request, on condition that:
(a) the provider does not modify the information;
(b) the provider complies with conditions on access to the information;
(c) the provider complies with rules regarding the updating of the information, specified in a manner widely recognised and used by industry;
(d) the provider does not interfere with the lawful use of technology, widely recognised and used by industry, to obtain data on the use of the information; and
(e) the provider acts expeditiously to remove or disable access to the information it has stored upon obtaining actual knowledge of the fact that the information at the initial source of the transmission has been removed from the network, or access to it has been disabled, or that a court or an administrative authority has ordered such removal or disablement.
2. This Article shall not affect the possibility for a court or administrative authority, in accordance with Member States’ legal systems, of requiring the service provider to terminate or prevent an infringement.
Article 14
Hosting
1. Where an information society service is provided that consists of the storage of information provided by a recipient of the service, Member States shall ensure that the service provider is not liable for the information stored at the request of a recipient of the service, on condition that:
(a) the provider does not have actual knowledge of illegal activity or information and, as regards claims for damages, is not aware of facts or circumstances from which the illegal activity or information is apparent; or
(b) the provider, upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information.
2. Paragraph 1 shall not apply when the recipient of the service is acting under the authority or the control of the provider.
3. This Article shall not affect the possibility for a court or administrative authority, in accordance with Member States’ legal systems, of requiring the service provider to terminate or prevent an infringement, nor does it affect the possibility for Member States of establishing procedures governing the removal or disabling of access to information
Article 15
No general obligation to monitor
1. Member States shall not impose a general obligation on providers, when providing the services covered by Articles 12, 13 and 14, to monitor the information which they transmit or store, nor a general obligation actively to seek facts or circumstances indicating illegal activity.
2. Member States may establish obligations for information society service providers promptly to inform the competent public authorities of alleged illegal activities undertaken or information provided by recipients of their service or obligations to communicate to the competent authorities, at their request, information enabling the identification of recipients of their service with whom they have storage agreements”
The E-Commerce Directive was transposed into domestic law by the Electronic Commerce (EC Directive) Regulations 2002, SI 2002/2013. In particular, Article 14 of the E-Commerce Directive is implemented by regulation 19 of these Regulations. There is little difference between the wording of the two provisions, however, and it was not suggested by either side that they bore different meanings.
Discussion
Counsel for eBay Europe submitted that it is evident from a comparison of Articles 13 and 14 that Article 14 covers “storage of information” that was not merely “automatic, intermediate and temporary”. Otherwise, he argued that there is storage of data for the purposes of Article 14 when information is recorded in electronic form and there is no limit as to the nature or content of the information which is stored. Thus he argued that it included information recorded for access or retrieval in electronic form including access or retrieval by display on screen. He went on to submit that L’Oréal’s refusal to participate in the VeRO programme meant that eBay Europe could not have the knowledge or awareness required for loss of immunity. He also submitted that, if L’Oréal’s contentions in this case were upheld, it would be tantamount to imposing on eBay Europe a general obligation to monitor contrary to Article 15.
Counsel for L’Oréal submitted that recital (42) shows that Article 14(1) is limited to “the technical process of operating and giving access to a communication network…” and applies to activities “of a mere technical, automatic and passive nature”, where “the provider has neither knowledge of nor control over the information … stored”. Thus Article 14(1) applies to cases where the information society service provider has no control over the information to be stored. Accordingly, he argued, Article 14(1) cannot apply in the present case because the activities of eBay Europe go far beyond the mere passive storage of information provided by third parties. On the contrary, eBay Europe actively organised and participated in the processing and use of the information to effect the advertising, offering for sale, exposing for sale and sale of goods including infringing goods. Furthermore, the use of the Link Marks, particularly in sponsored links, went well beyond hosting on any view.
Counsel for L’Oréal also submitted that Article 14(2) makes it clear that the hosting defence does not apply where the recipient of the service (the provider of the information to be stored) is acting under the control of the provider of the information service. Here the recipient of the service is the seller, and the provider of the information society service is eBay Europe. Counsel argued that eBay have the power to control the information which is stored by sellers and purport to exercise that power. eBay Europe control whether the listings are displayed, and if so for how long, by means of filters and sanctions for breaches of their policies which include removal of listings.
Furthermore, counsel for L’Oréal submitted that eBay Europe were well aware of “facts or circumstances from which the illegal activity or information is apparent”. In this regard he relied on eBay Europe’s own knowledge of what was taking place on the Site, on the letter from L’Oréal to eBay Europe dated 22 May 2007 drawing attention to the problems and giving examples of infringements and on the evidence relating to the activities of the Ninth and Tenth Defendants. He disputed that requiring eBay Europe to take steps to stop, or least minimise, activities of the kind complained of amounted to imposing a general duty to monitor.
Finally, counsel for L’Oréal submitted in any event Article 14(3) made it clear that L’Oréal was entitled to an injunction even if Article 14(1) provided eBay Europe with a defence to a claim for financial remedies.
My attention was drawn to a selection of decisions of courts of other Member States, although I understand that there are others. In Case RG 06/02604 Hermès International v Feitz, a decision of the Tribunale de Grande Instance in Troyes dated 4 June 2008, it was held that eBay was not a mere host and therefore was not protected by the French implementation of Article 14 of the E-Commerce Directive. By contrast, in Case A/07/06032 Lancôme Parfums et Beauté & Cie v eBay International AG, a decision of the Brussels Commercial Court dated 31 July 2008, it was held that eBay was protected by the Belgian implementation of Article 14. Counsel for L’Oréal submitted, however, that the Belgian court had, rightly or wrongly, understood that Lancôme’s claim only related to the hosting activities carried out by eBay, and in particular storing listings, and thus the decision was distinguishable from the present case. He also told me that the decision was under appeal. More importantly, perhaps, I note that in the three Internet Auction judgments of the Bundesgerichtshof discussed below, the Bundesgerichtshof seems to have taken a fairly expansive view of the scope of Article 14(1); but since it held that the online service providers were not liable for trade mark infringement anyway, its statements about Article 14(1) would appear to be obiter dicta.
In any event, there are three references pending before the ECJ which include questions as to the proper interpretation of Article 14, namely the three Google references from the Cour de Cassation discussed in my judgment in Interflora v M & S.
Although I prefer the arguments of counsel for L’Oréal to those of counsel for eBay Europe, I do not think it can be said that the interpretation of Article 14 is acte clair. This is another matter upon which guidance from the ECJ is required.
Do L’Oréal have a remedy under Article 11 of the Enforcement Directive?
L’Oréal rely on Article 11 of the Enforcement Directive as entitling L’Oréal to an injunction against eBay Europe even if (contrary to their contentions) eBay Europe are not liable for trade mark infringement. L’Oréal contend that, having established a number of infringements by the Fourth to Tenth Defendants, Article 11 of the Enforcement Directive requires the court to grant an injunction against eBay Europe to prevent the same or similar infringements in the future. Furthermore, L’Oréal contend that a fairly broad view must be taken as to what constitutes a “similar” infringement. As I understand L’Oréal’s case, this would extend to an injunction in relation to testers and dramming products and unboxed products even though I have found that the acts of the Fourth to Eighth Defendants infringed upon a more general ground.
Relevant provisions of the Enforcement Directive
Article 11 provides:
“Injunctions
Member States shall ensure that, where a judicial decision is taken finding an infringement of an intellectual property right, the judicial authorities may issue against the infringer an injunction aimed at prohibiting the continuation of the infringement. Where provided for by national law, non-compliance with an injunction shall, where appropriate, be subject to a recurring penalty payment, with a view to ensuring compliance. Member States shall also ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right, without prejudice to Article 8(3) of Directive 2001/29/EC.”
Article 2(3) provides:
“This Directive shall not affect:
(a) the Community provisions governing the substantive law on intellectual property, Directive 95/46/EC, Directive 1999/93/EC or Directive 2000/31/EC, in general, and Articles 12 to 15 of Directive 2000/31/EC in particular”.
Domestic law
It is common ground that the United Kingdom has not taken any specific steps to implement the last sentence of Article 11, but instead has relied upon its pre-existing law as being in compliance with that provision. It is not entirely clear, however, that English law is fully compliant with that provision.
Section 37(1) of the Supreme Court Act 1981 (shortly to be re-named the Senior Courts Act) provides:
“The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to be just and convenient to do so.”
The ambit of the power conferred by section 37(1) has been considered by the House of Lords and the Privy Council in at least six cases in the last 30 years: The Siskina [1979] AC 210, South Carolina Insurance Co Ltd v Assurantie Maatschappij De Zeven Provincien NV [1987] AC 24, Pickering v Liverpool Daily Post [1991] 2 AC 370, Kirklees MBC v Wickes Building Supplies Ltd [1993] AC 227, Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 and Mercedes-Benz AG v Leiduck [1996] AC 284. In South Carolina a majority of the House and in Pickering a unanimous House held that (with the exception of injunctions to restrain proceedings overseas) the power was limited to two situations: (i) where one party to an action can show that the other party has invaded, or threatens to invade, a legal or equitable right of the former, for the enforcement of which the latter is amenable to the jurisdiction of the Court; and (ii) where one party to an action has behaved, or threatens to behave, in a manner which is unconscionable. Despite this, dicta in the Kirklees, Channel Tunnel and Mercedes-Benz cases suggest that the power may not be so confined.
More recently, in Broadmoor Special Hospital Authority v Robinson [2000] QB 775 Lord Woolf MR at [20], with whom Waller LJ agreed at [55], cited with approval the following passage from Spry, Equitable Remedies (5th ed, 1997) at 323:
“The powers of courts with equitable jurisdiction to grant injunctions are, subject to any relevant statutory restrictions, unlimited. Injunctions are granted only when to do so accords with equitable principles, but this restriction involves, not a defect of powers, but an adoption of doctrines and practices that change in their application from time to time. Unfortunately, there have sometimes been made observations by judges that tend to confuse questions of jurisdiction or of powers with questions of discretions or of practice. The preferable analysis involves a recognition of the great width of equitable powers, an historical appraisal of the categories of injunctions that have been established and an acceptance that pursuant to general equitable principles injunctions may issue in new categories when this course appears appropriate.”
The same passage appears in the current (7th, 2007) edition of Dr Spry’s book at 323. He deals with the same point more fully at pages 332-333 as follows (footnotes omitted):
“Where, as in most jurisdictions, superior courts now exercise the powers of the former Court of Chancery, whether or not they are also able to grant legal injunctions or are affected by special Judicature Act provisions, their powers of granting injunctions are unlimited, provided that they have jurisdiction over the defendant in the circumstances in question. These powers are however exercised in accordance with the principles set out here under.
First, an injunction may issue in the protection of any legal right whatever, save for an applicable statutory provision provides to the contrary. For these purposes the relevant legal right must ordinarily be a present right of the plaintiff, as opposed to a right that he merely expects or hopes to acquire in the future.
Secondly, an injunction may issue in the enforcement of any equitable right. Here on a strict analysis the right to the injunction itself represents pro tanto the equitable right in question. Hence in ascertaining whether an injunction may be obtained on this basis it is necessary to determine whether injunctions of the relevant kind were formally granted in the exclusive or concurrent jurisdiction of courts of equity, and if not, whether the principles underlying those jurisdictions should nonetheless now be treated as rendering the grant of the injunction appropriate.
Thirdly, an injunction may issue pursuant to its natural power to grant injunctions conferred in respect of a particular subject matter, such as family law or trade practises law.
Fourthly, an injunction may issue in the protection of a legal privilege or freedom. So an injunction may be obtained to prevent a person from harassing the plaintiff. Likewise even if, on the principles that have been set out here, an injunction is not otherwise obtainable to enjoying the bringing or continuation of proceedings in another court – whether in an inferior court, a court of special jurisdiction or a foreign court – it may nevertheless be obtained if the bringing or continuation of those proceedings would be unconscionable. Injunctions of these kinds may be granted whether or not inconsistent proceedings have been or will be commenced in the forum.
Fifthly, an injunction (such as a Mareva injunction or freezing order) may issue in other cases in which, on miscellaneous grounds, the conduct restraint would be unconscionable. It has been said in the House of Lords that this term includes conduct which is oppressive or vexatious or which interferes with the due process of the court. Here s. 37 of the Supreme Court Act 1981 and other such provisions merely confirm the width of the court’s inherent powers. “
Counsel for L’Oréal submitted that the basis for the grant of an injunction could be found in a somewhat obscure equitable principle known as the equitable protective jurisdiction. In Norwich Pharmacal Co v Customs & Excise Commissioners [1974] AC 133 Buckley LJ stated this as follows:
“If a man has in his possession or control goods the dissemination of which, whether in the way of trade or, possibly, merely by way of gifts (see Upmann v Forester, 24 Ch.D. 231) will infringe another’s patent or trade mark, he becomes, as soon as he is aware of this fact, subject to a duty, an equitable duty, not to allow those goods to pass out of his possession or control at any rate in circumstances in which the proprietor of the patent or mark might be injured by infringement ensuing. The man having the goods in his possession or control must not aid the infringement by letting the goods get into the hands of those who may use them or deal with them in a way which will invade the proprietor’s rights. Even though by doing so he might not himself infringe the patent or trade mark, he would be in dereliction of his duty to the proprietor. This duty is one which will, if necessary, be enforced in equity by way of injunction: see Upmann v Elkan, L.R. 12 Eq. 140, 7 Ch App 130.”
As counsel for eBay Europe pointed out, however, in Amstrad v BPI at 214-215 Slade LJ held that this principle had no application to a case where the dissemination of the goods in question would not of itself infringe the claimant’s rights. Similarly, I find it somewhat difficult to see how this principle can be extended to a case where the person against whom the injunction is sought does not have the allegedly infringing goods within his possession, custody or control.
Nevertheless, in the light of the general principles I have set out above, I consider that, if Article 11 requires that the grant of an injunction against an intermediary who is not an infringer, then that provides a sufficient reason for a court of equity to exercise its power to grant an injunction to protect an intellectual property which has been infringed. In saying this, I am not treating Article 11 as having direct effect; but as providing a principled basis for the exercise of an existing jurisdiction in a new way. The question then is whether, and if so to what extent, that is what Article 11 requires.
What does Article 11 require?
In this connection, my attention drawn was to a series of three decisions of the Bundesgerichtshof, Case I ZR 304/01 Internet Auction I (reported in English at [2006] ECC 9, [2005] ETMR 25 and [2005] IIC 573), Case I ZR 35/04 Internet Auction II (reported in English at [2007] ETMR 70) and Case I ZR 73/05 Internet Auction III (30 April 2008, but so far as I am aware not yet reported in English).
The first case concerned claims by Rolex SA and Manufacture des Montres Rolex SA against ricardo.de AG, another company which provides an online auction-style service, about the offering for sale of imitation ROLEX watches explicitly described as such by users of ricardo’s website. The Bundesgerichtshof held that, assuming they had used the signs in the course of trade, the sellers had infringed Rolex’s trade marks; but that ricardo had neither infringed the trade marks nor participated in infringement by the users. Accordingly, Rolex’s claim for damages was dismissed. Nevertheless, the Bundesgerichtshof held that Rolex had a claim to an injunction based on the German legal principle of Störerhaftung, which may be translated as “disturber” or “interferer” liability,… since ricardo had wilfully made an adequate causal contribution to the infringements. The Bundesgerichtshof held that Rolex would be entitled to an order requiring ricardo to take reasonable measures, such as filtering, to prevent further infringements, but that ricardo could not be required to take steps which would jeopardise its entire business model, nor would ricardo be liable for further infringements it was unable to detect by filtering. The Bundesgerichtshof was not able to reach a final conclusion as to whether Rolex were entitled to an injunction, however, since the Higher Regional Court had not made a finding as to whether the users had used the signs in the course of trade. Accordingly the case was remanded to the Higher Regional Court.
In reaching this conclusion, the Bundesgerichtshof held that a claim for an injunction on the ground of Störerhaftung was not precluded by sections 8 to 11 of the German Telecommunications Act which implemented the E-Commerce Directive. Furthermore, it held that the German legislation conformed in this respect with Article 14(3) of the E-Commerce Directive: see [2006] ECC 9 at [29]. As I understand it, the Bundesgerichtshof did not consider Article 11 of the Enforcement Directive in this decision since the Enforcement Directive was not yet in force.
The Bundesgerichtshof’s decision in Internet Auction I has been the subject of extra-judicial explanation by Prof. Dr. Joachim Bornkamm, the President of the First Civil Chamber and a party to the decision, in a paper entitled E-Commerce Directive vs. IP Rights Enforcement – Legal Balance Achieved given at a conference in Brussels on 6 March 2007 and subsequently published in English at [2007] GRUR Int 642. In his paper Judge Bornkamm explains the doctrine of Störerhaftung and its application to the present situation as follows (footnotes omitted):
“It is, however, consistent practice of German courts that whenever an absolute right, i.e. a right which is enforceable against everyone, is in question a third person who has neither committed an infringement in his own right nor has aided and abetted the infringement of a principal infringer can be asked to stop any interference (‘Störung’) he has caused in the past. Sec. 1004 of the German Civil Code grants such a right to (permanent) injunctive relief to the proprietor against anybody who was caused an interference with the property. German courts apply this provision to interferences as with any other absolute right, i.e. intellectual property. This liability of the ‘interferer’ (‘Störer’) is related to a rule of reason, which takes into account that even such a liability limited to injunctive relief involves a duty to take care. Nobody shall be held liable as an interferer (Störer) if it would be unreasonable to burden him with a duty to examine whether or not his behaviour could interfere with the (intellectual) property of a third person. For example, a carrier who transports counterfeit goods from A to B may be an important link in the chain of causation leading to the infringing sales of the goods in B. Still he could not be held liable as an interferer (Störer) because it will be unreasonable to burden him with a duty to examine the goods he has to carry in regard to possible trademark infringements.
Applying this doctrine to a host provider like RICARDO or eBay, that opens a platform for an internet auction, leads to the conclusion that there can be no ex ante examination of any infringing content of the vendors may want to put up for sale. If the host provider was expected to screen and control any contents before it is offered on the internet, this would clearly mean the end of such a business model. Taking into account the number of individual sales taking place on a platform of this kind, it can only be operated in a way that individual offers are put up the sale by the vendor without the assistance of the host provider. A duty to react in the case of infringement would, however, be reasonable once a clear infringement has been shown by the right holder. In this case the host provider should indeed be obliged to remove the infringing object from the platform and to install measures in order to prevent a repetition of such an infringement.”
Judge Bornkamm goes on to express the following conclusion:
“The solution found in the RICARDO judgment of the Bundesgerichtshof strikes a fair balance between intellectual property rights and the interests of host providers. On the one hand, it does not impose an unreasonable burden on the provider. On the other hand, it makes sure that the provider takes all reasonable steps to prevent further infringements of the same kind. It seems only fair that a provider, who would who would profit from the sales of counterfeit goods, does everything in his power to prevent such infringements. The balance struck by the German courts is in accordance with European law, but European law only allows such a balance without stipulating it. Hence there is room for further harmonisation, which would not only allow member states to strike such a balance but which would also would ask such a balance in order to give adequate protection to intellectual property rights.”
The second case concerned claims by Rolex against eBay about the offering for sale of imitation ROLEX watches, some of which were explicitly described as such, on the German eBay website. The Bundesgerichtshof essentially re-iterated its conclusions in the first case. It held that the sellers were liable for trade mark infringement, but eBay was not. Nevertheless, it held that Rolex were entitled to an injunction against eBay on the basis of Störerhaftung. In reaching this conclusion, it held that Article 11(3) of the Enforcement Directive not merely enabled, but also required recourse to this principle of national law in the case of intermediaries, even where the trade mark sued upon was a Community trade mark in respect of which questions of infringement were governed by the CTM Regulation: see [2007] ETMR 70 at [36]-[38]. It also held that such an injunction could be granted not only where there had already been an infringement, but also where there was an imminent threat of infringement: see [41]. The Bundesgerichtshof remanded the case back to the Higher Regional Court to consider whether an injunction was justified on the facts.
The third case was a further appeal in the Rolex v ricardo proceedings. When the case was remanded to the Higher Regional Court, it had found that the users had acted in the course of trade in eight out of nine cases and granted an injunction. On the further appeal, the Bundesgerichtshof held that the Higher Regional Court was not justified in concluding that the users had acted in the course of trade in all eight cases but only in two. It agreed with the Higher Regional Court that Rolex was entitled to an injunction both because of clear past infringements and because ricardo was aware of infringements from a press release issued by Rolex in 1999, but considered that the injunction went beyond what Rolex were entitled to and/or was insufficiently precise in certain respects. Accordingly it substituted a more limited form of injunction. I note with interest that the Bundesgerichtshof considered that the fact that the two sellers in question had 26 and 75 feedbacks respectively was sufficient to indicate, and enable ricardo to detect, that they were acting in the course of trade.
The doctrine of Störerhaftung and its application to online service providers have recently been discussed by Dr Alexander Bayer in a paper entitled Liability 2 – Does the Internet environment require new standards for secondary liability? An overview of the current situation in Germany published in Prinz zu Waldeck and Pyrmont et al (eds), Patents and Technological Progress in a Globalized World: Liber Americorum Joseph Strauss (Springer, 2009), pp. 365-377. Dr Bayer traces the development of the doctrine from its origins in three decisions of the Bundesgerichtshof in the 1950s. Notwithstanding the recent decisions of the Bundesgerichtshof in the cases discussed above, he expresses the view that:
“… its requirements and scope have not yet been determined. This is particularly true with respect to legal offences committed online, i.e. through services provided by Internet Service Providers…”
Counsel for eBay Europe submitted that Störerhaftung is a doctrine peculiar to German law which has no counterpart in English law. That I entirely accept, but for the reasons given above it does not follow that an English court has no power to grant an injunction against an intermediary if that is what Article 11 requires.
Counsel for eBay Europe also submitted that, while the Bundesgerichtshof may have been entitled to apply the doctrine of Störerhaftung in the way that it had, the Bundesgerichtshof had gone rather further than Article 11 required. He accepted that, once it was shown that a third party had infringed a trade mark, then the third sentence of Article 11 required that an injunction be available against an intermediary whose services had been used to commit that infringement. He submitted, however, that Article 11 merely required that an injunction be available against the intermediary to prevent the continuation of that specific act of infringement. Furthermore, he argued that, if Article 11 was interpreted as requiring the taking of the kind of steps contemplated by the Bundesgerichtshof, that was tantamount to imposing a general obligation to monitor contrary to Article 15 of the E-Commerce Directive and that Article 2(3) of the Enforcement Directive shows that that is not a permissible interpretation of Article 11.
I conclude that the scope of the obligation placed on Member States by the third sentence of Article 11, and in particular the scope of the injunction which it requires to be available against intermediaries, is unclear. This is another matter upon which the guidance of the ECJ is required.
Are the Distance Selling Regulations relevant to any of the foregoing issues, and if so how?
The Distance Selling Directive has been implemented in domestic law by the Consumer Protection (Distance Selling) Regulations 2000, SI 2000 No. 2334 (“the Distance Selling Regulations”).
In paragraph 40(16) of the Re-Amended Particulars of Claim, L’Oréal plead:
“The Distance Selling Regulations provide protection to consumers in relation to any consumer distance contract. ‘Buy It Now’ sales advertised on the Site are covered by the scope of the Distance Selling Regulations. Accordingly, under the Distance Selling Regulations, ‘Buy It Now’ offers on the Site should provide the consumer with information in respect of the identity of the supplier and the supplier’s address where the contract requires payment in advance. Relevant sellers on the Site do not provide such information, including the Fourth, Fifth, Sixth, Seventh and Eighth Defendants.”
L’Oréal rely upon this allegation in support of (i) their allegation of joint torfeasorship and (ii) their case that eBay Europe are not protected by the E-Commerce Directive. It is far from clear on the face of the pleading, however, what relevance this allegation has to either of those issues.
Selected provisions of the Distance Selling Regulations
The Distance Selling Regulations include the following provisions:
“Interpretation
3. (1) In these Regulations –
“breach” means contravention by a supplier of a prohibition in, or failure to comply with a requirement of, these Regulations;
“business” includes a trade or profession;
“consumer” means any natural person who, in contracts to which these Regulations apply, is acting for purposes which are outside his business;
…
“distance contract” means any contract concerning goods or services concluded between a supplier and a consumer under an organised distance sales or service provision scheme run by the supplier who, for the purpose of the contract, makes exclusive use of one or more means of distance communication up to and including the moment at which the contract is concluded;
…
“excepted contract” means a contract such as is mentioned in regulation 5(1);
“means of distance communication” means any means which, without the simultaneous physical presence of the supplier and the consumer, may be used for the conclusion of a contract between those parties; and an indicative list of such means is contained in Schedule 1;
…
“operator of a means of communication” means any public or private person whose business involves making one or more means of distance communication available to suppliers;
“period for performance” has the meaning given by regulation 19(2);
…
“supplier” means any person who, in contracts to which these Regulations apply, is acting in his commercial or professional capacity; and
…
Contracts to which these Regulations apply
4. These Regulations apply, subject to regulation 6, to distance contracts other than excepted contracts.
Excepted contracts
5.(1) The following are excepted contracts, namely any contract –
…
(f) concluded at an auction.
…
Information required prior to the conclusion of the contract
7.(1) Subject to paragraph (4), in good time prior to the conclusion of the contract the supplier shall –
(a) provide to the consumer the following information –
(i) the identity of the supplier and, where the contract requires payment in advance, the supplier’s address;
(ii) a description of the main characteristics of the goods or services;
(iii) the price of the goods or services including all taxes;
(iv) delivery costs where appropriate;
(v) the arrangements for payment, delivery or performance;
(vi) the existence of a right of cancellation except in the cases referred to in regulation 13;
(vii) the cost of using the means of distance communication where it is calculated other than at the basic rate;
(viii) the period for which the offer or the price remains valid; and
(ix) where appropriate, the minimum duration of the contract, in the case of contracts for the supply of goods or services to be performed permanently or recurrently;
(b) inform the consumer if he proposes, in the event of the goods or services ordered by the consumer being unavailable, to provide substitute goods or services (as the case may be) of equivalent quality and price; and
(c) inform the consumer that the cost of returning any such substitute goods to the supplier in the event of cancellation by the consumer would be met by the supplier.”
Under regulations 26-29, enforcement of the Distance Selling Regulations is a matter for enforcement authorities such as the Director General of Fair Trading, who can apply for an injunction. It is common ground that the Regulations do not create or confer any private right of action.
Application of the Distance Selling Regulations to eBay Europe
It is common ground that a Buy It Now transaction is a distance contract if the supplier (the seller) is acting in a commercial capacity. L’Oréal suggest that anyone other than a private seller on an occasional basis (e.g. selling an unwanted present) is acting in a commercial capacity. More particularly, L’Oréal contend that PowerSellers such as the Fourth-Eighth Defendants and operators of eBay Shops such as the Fourth-Sixth Defendants are acting in a commercial capacity. Counsel for eBay Europe did not concede this, but nor did he directly dispute it.
The help page on the Site entitled Legal Guidance for Business Sellers states that users should register as a business if they (i) sell items that they have bought to resell, (ii) make items themselves and sell them, intending to make a profit, (iii) are a Trading Assistant or (iv) buy items for their business. (The page entitled Registering as a Business suggests that users should also register as a business if they sell a large amount of goods on a regular basis or sell new items that they have not acquired for their own personal use.) It advises that the Distance Selling Regulations apply to Buy It Now listings, but not to auction-style listings. It advises that where the Distance Selling Regulations apply a seller has to refund an item if the buyer changes his or her mind within 7 days of the day on which the item was delivered (this requirement is imposed by regulation 10). So far I can see, it does not advise users about the requirements of regulation 7. This and other help pages do, however, advise business sellers of the need to comply with the Electronic Commerce (EC Directive) Regulations 2002 by providing full contact details.
The basis upon which eBay Europe advise users that the Distance Selling Regulations do not only apply to auction-style listings is regulation 5(1)(f) and advice published by the Office of Fair Trading that the Regulations “do not apply to … auctions, including internet auctions”. It appears, however, that the position may be different in Germany.
L’Oréal contend that many sellers on the Site act in a commercial capacity, but do not register as business sellers, and that many such sellers (and some sellers who do register as business sellers) do not comply with regulation 7 of the Distance Selling Regulations. L’Oréal also contend that eBay Europe participate in such breaches because it has sufficient information available to it, in particular from account histories and feedback records, to know that this is so.
Relevance?
Even if L’Oréal were right about this, I am not persuaded that it would be relevant to the issues arising in this case which are discussed above. In this regard, it is instructive that there was no mention of the Distance Selling Regulations in L’Oréal’s detailed skeleton argument for trial. Accordingly, I decline to make any findings as to whether sellers are contravening the Regulations or whether, if so, eBay Europe bear any legal liability for such breaches.
A reference to the ECJ?
In eBay Europe’s skeleton argument for trial counsel for eBay Europe pointed out that the issues in the present case touched upon matters that were already the subject of pending references before the ECJ. He identified eight references that were then thought to be pending, although it was later discovered that the ECJ had already dealt with one of these by reasoned order (Case C-62/08 UDV North America Inc v Brandtraders NV, 19 February 2009). Since the hearing, the ECJ has given judgment on a second reference (Copad). The other six references are all references concerning Google Adwords, or similar services, and at present they remain pending. Those six references are considered in some detail in my judgment in Interflora v M & S.
When I enquired whether eBay Europe was contending that this court should refer questions to the ECJ for a preliminary ruling, counsel replied that eBay Europe considered that a reference on the issues arising in these cases was long overdue. He adhered to that position in his closing submissions. Counsel for L’Oréal accepted in his closing submissions that the present case raised one issue of law which was not acte clair and upon which it would be appropriate for this court to seek guidance from the ECJ, namely the issue in relation to testers and dramming bottles; but he submitted that, apart from that issue, the legal issues in the present case were either issues of English law or were acte clair.
For the reasons given above I have concluded that this case raises a number of issues of Community law upon which the guidance of the ECJ is required. Since this court is not a court of last resort, I have a discretion as to whether to make a reference or to attempt to decide the issues myself. In my judgment, in the circumstances of the present case it is clearly better to make a reference myself, for the following reasons.
First, I consider that there are clearly some issues of law which are difficult and important even though others appear more straightforward. If I did not refer, I consider that it is highly likely that the Court of Appeal would do so on any appeal. Thus refusing to refer now would simply entail further delay and costs for the parties.
Secondly, as I have observed, this is one of a number of cases around Europe both between the same parties and between other parties raising the same or similar issues. Interflora v M & S is another one. The sooner the courts of Europe are able to arrive at common answers to these issues, the better. Accordingly, the ECJ should be asked to rule on these issues as soon as possible.
Conclusions
For the reasons given above, I conclude as follows:
i) The Fourth to Tenth Defendants have infringed the Trade Marks. In the case of the Fourth to Eighth Defendants the goods they sold were put on the market outside the EEA and L’Oréal did not consent to those goods being put on the market within the EEA. In the case of the Ninth and Tenth Defendants the goods they sold were counterfeits.
ii) Whether the sale by sellers on the Site of testers and dramming products and of unboxed products amounts to an infringement of the Trade Marks depends upon questions of interpretation of the Trade Marks Directive as to which the law is unclear (see paragraphs 319-326 and 331-342 above). Although these questions are academic so far as the acts committed by the Fourth to Tenth Defendants are concerned, they are potentially relevant to the question of what relief, if any, L’Oréal are entitled to. Accordingly, guidance from the ECJ is required on these points.
iii) eBay Europe are not jointly liable for the infringements committed by the Fourth to Tenth Defendants.
iv) Whether eBay Europe have infringed the Link Marks by use in sponsored links and on the Site in relation to infringing goods again depends upon a number of questions of interpretation of the Trade Marks Directive upon which guidance from the ECJ is required (see paragraphs 388-392, 393-398 and 413-418 above).
v) Whether eBay Europe have a defence under Article 14 of the E-Commerce Directive is another matter upon which guidance from the ECJ is needed (see paragraphs 436-443 above).
vi) As a matter of domestic law the court has power to grant an injunction against eBay Europe by virtue of the infringements committed by the Fourth to Tenth Defendants, but the scope of the relief which Article 11 requires national courts to grant in such circumstances is another matter upon which guidance from the ECJ is required (see paragraphs 455-465 above).
I shall hear further argument on the precise formulation of the questions to be referred to the ECJ. The parties should exchange proposed drafts of the questions in advance of that hearing. The parties should also consider the guidance given by Arden LJ in Horvath v Secretary of State for Environment [2007] EWCA Civ 620 at [80].
Note 1 In the translation in ETMR the word “perpetrator” is used and in the translation in IIC the word “accessory” is used, neither of which is accurate. [Back]
British Telecommunications Plc & v The Secretary of State for Business, Innovation and Skills
[2011] EWHC 1021 (Admin) Mr Justice Kenneth Parker :
Introduction
This is an application for judicial review in which it is claimed that the online infringement of copyright provisions (“the contested provisions”) of the Digital Economy Act 2010 (“the DEA 2010”) and the Copyright (Initial Obligations) (Sharing of Costs) Order 2011, currently laid before Parliament (“the draft Costs Order”) are incompatible with a number of provisions of EU law. Permission was granted by Wyn Williams J on 10 November 2010.
The First Claimant, British Telecommunications Plc (“BT”), is a public limited company incorporated under the laws of England and Wales. The Second Claimant, TalkTalk Telecom Group Plc (“TTG”), is also a public limited company incorporated in England. Each carries on business in the supply of telecommunications services and equipment to both businesses and residential customers. Both BT and TTG are also internet service providers (“ISPs”).
The Defendant (“the Secretary of State”) is the Government minister designated with responsibility for the Department for Business, Innovation and Skills (“DBIS”).
There are ten Interested Parties. These are organisations and associations concerned with the protection of copyright in works belonging to their members whom they represent. They also include unions whose members are employed in the creative industries, and their employers. There are also two interveners, Consumer Focus (“CF”) and Article 19. CF is the National Consumer Council in England and Wales, with statutory duties to represent the interests of consumers and to advise the Government and regulators on consumer matters. Article 19, the Global Campaign for Free Expression, a charity registered in the UK, is an international human rights organisation concerned with protecting and promoting the right to freedom of expression.
The Claimants advance five grounds of challenge in respect of the contested provisions. They contend that:
i) The provisions constitute a technical regulation and/or a rule on services within the meaning of the Technical Standards Directive (Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations, OJ [1998] L No 204, as amended by Directive 98/48/EC of the European Parliament and of the Council of 20 July 1998, OJ [1998] L No 217). The provisions, it is said, should have been notified to the EU Commission in draft, but were not. The provisions are accordingly unenforceable.
ii) They are incompatible with certain provisions of the Electronic Commerce Directive (“the E-Commerce Directive”) (Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market, OJ 2000 L No 178).
iii) They are incompatible with certain provisions of the Privacy and Electronic Communications Directive (“the PEC Directive”) (Directive 2002/58/EC of the European Parliament and of the Council concerning the processing of personal data and the protection of privacy in the electronic communications sector, OJ [2002] L No 201).
iv) They are disproportionate in their impact on ISPs, consumers, business subscribers and public intermediaries. The requirement for the legislation to be proportionate in its impact on ISPs, businesses and consumers is said to be derived from a number of sources, including Articles 7, 8, 11 and 52 of the Charter of Fundamental Rights and/or general principles of EU law, pursuant to Article 6 TEU and the Human Rights Act 1998 and Articles 8 and/or 10 of the European Convention on Human Rights.
v) They infringe the Authorisation Directive (Directive 2002/20/EC of the European Parliament and of the Council on the authorisation of electronic communications networks and services OJ [2002] L No 108, as amended by European Parliament and EC Council Directive 2009/140, OJ [2009] L 337).
The Claimants also seek to challenge the draft Costs Order on each of grounds 2 to 5 above (the Order having been notified in draft to the EU Commission, ground 1 was not applicable).
Factual Background
The framework within which ISPs operate
The Claimants operate within a framework of measures known as the “telecoms package”. This includes five European Directives which set out the major provisions governing the “telecoms package”. These were introduced by the EU to harmonise the cross-border provision of telecommunications services within the internal market.
The Office of Communications Act 2002 and the Communications Act 2003 (“CA 2003”) led to a major re-organisation of telecommunications markets in the United Kingdom, under the regulatory control of Ofcom. The regulation at both an EU and a national level has been designed to promote competition between telecommunications providers and protect consumer interests, while ensuring that a universal service is available for the majority of telecommunications services (access to landline telephony, mobile phone telephony and internet access).
The Claimants each provide an “information society service” (as defined in the E-Commerce Directive: see paragraph 96 below). For the relevant purposes of these proceedings, they do so as mere “conduit” ISPs. As such each ISP gives access to an electronic communications network to its own subscribers. A conduit is not allowed to interfere with traffic. In that capacity, it has neither knowledge of, nor control over, the information which is transmitted by subscribers. Its actions are merely “technical, automatic and passive”: see Joined Cases C-236/08 to C-238/08 Google France SARL v Louis Vuitton Malletier SA [2010] ECR 1-0000, ECJ, at [110], [113] and [114].
Background to the relevant legislation
(a) Memorandum of Understanding
Software developers have created file-sharing software enabling an internet user on one computer to access files and material stored on another user’s computer where the second user is also connected to the internet (peer-to-peer or “P2P” software). P2P services enable an internet user to search for files being offered by other users who are connected to the same and sometimes other P2P services, and to request and receive copies of these files on his or her computer, and make these files available for further distribution to other users of P2P services over the internet, transmitting exact copies of files from his or her computer to another user’s computer. Individuals who make available and communicate files using P2P services store these files in directories on their computers that they open to other internet users to view and access. In this way a copyright work such as a sound recording or film can be stored in the form of a digital file in the shared directory, and that file can be made publicly available to vast numbers of other P2P users who are able to search for the file and, on request, transfer copies of that file over the internet to others. At any time there may be hundreds of thousands of individuals accessing a P2P service, many of them doing so unlawfully by infringing copyright in the relevant work.
Music is a popular target of P2P file sharing. The arrival of MP3 software in the late 1990s enabled the conversion of digitally recorded (or remastered) music into highly compressed computer files. As a matter of history it appears that Napster Inc, in the United States, was the first to exploit the opportunities for music sharing opened up by P2P technology, but the early means that it employed exposed it to a successful claim for copyright infringement and led to its demise, without deterring more sophisticated successors. It should be stressed that P2P software may be used for legitimate purposes, such as sharing photographs between family and friends and transferring digital media files between a desk top and a lap top computer owned by the same individual or family.
In order to combat the increase in unlawful file-sharing, BT, TTG and other ISPs were encouraged by the Government to enter into a Memorandum of Understanding (“MOU”) with the BPI (British Recorded Music Industry) Limited (“BPI”) and other rights owners in July 2008. ISPs undertook to work together with other signatories in an experimental trial in which internet service customers were informed if their accounts were being used to share copyright material unlawfully and were advised how to address such infringements. The Claimants participated in such a trial for three months.
The MOU was intended to improve communication and cooperation between relevant industries to promote education of consumers. A combined Principle 2 and Principle 3 Working Group was set up under the MOU to report on commercial solutions to the problem of copyright infringement. The MOU three-month trial period expired in January 2009. BT also filed a response to the consultation process undertaken by the Secretary of State.
The ISPs which took part in the MOU were not obliged to inform rights holders of the fact that notification letters had been sent. The notifications sent to subscribers were primarily educative and further notifications to the same customer did not escalate in tone or make threats or warnings. The notifications also made it clear that they were being sent as part of a trial, not because of a statutory requirement on ISPs. BT informally raised concerns about the lawfulness of data processing and retention with the Information Commissioner’s Office at the time of the MOU. These legal concerns were shared by other ISPs.
Furthermore, the MOU Principle 5 Group (one of the inter-industry groups established under the MOU to explore the options for controlling unlawful P2P file-sharing) examined not only technical measures but also legal measures that might be adopted by rights holders, including legal action by rights holders against individuals. This Group’s work was not complete when in February 2009 the Government indicated that, in the light of the Digital Britain Interim Report, it was proposing to adopt a legislative solution to the problem.
(b) Digital Britain: The Interim Report
In January 2009, the Department for Culture, Media and Sport (“DCMS”) and the Department for Business, Enterprise and Regulatory Reform (“DBERR”), now known as the Department for Business, Innovation and Skills (“DBIS”), published a paper entitled Digital Britain: Interim Report (Cm 7548). The paper proposed the enactment of legislation which would require ISPs to notify alleged infringers of copyright that their conduct was unlawful (upon the provision of certain evidence by rights holders); and to collect “anonymised” information on repeat infringers which could be made available to rights holders upon production of a Court order.
(c) The Government White Paper
In June 2009, the Government published its White Paper on Digital Britain, entitled Digital Britain: Final Report (Cm 7650). This set out Government proposals designed to put the United Kingdom at the forefront of “the global move towards a digital knowledge economy.” The Government in particular set out to tackle unlawful P2P file sharing.
The White Paper followed the Interim Report. ISPs would be required to notify subscribers of infringements identified by copyright holders and to maintain “anonymised” lists of repeats offenders (the identity of whom could be made subject to a request for disclosure by the copyright holders by Court order). Obligations would be placed on ISPs to notify subscribers of their alleged unlawful conduct, and to collect information on repeat infringers.
The White Paper also raised the possibility of further legislative measures being adopted if the “initial obligations” did not produce the desired reduction in unlawful file-sharing. The envisaged measures included:
i) The blocking of access to websites, internet protocol (“IP”) addresses or to a uniform resource locator (or URL, which is the global address of individual web pages, documents and other resources on the worldwide web);
ii) Protocol blocking (preventing certain internet protocols from accessing the internet which can prevent certain internet services being used by a computer);
iii) Port blocking (preventing certain ports from accessing the internet, with the same aim as protocol blocking);
iv) Bandwidth capping (which reduces the speed at which files might be downloaded);
v) Volume capping (restricting the amount of data that may be downloaded over a period of time);
vi) Bandwidth shaping (limiting the speed of a subscriber’s access to selected protocols or services);
vii) Content identification and filtering.
On 25 August 2009, the Government issued a statement in the course of the consultation. The statement set out a significant change in the Government’s proposals in respect of technical obligations that might be imposed. The Secretary of State would be able to introduce technical obligations at any time, including the disconnection of a subscriber’s internet access. The statement also indicated that individual parties would be responsible for bearing their own costs of compliance with the initial obligations, save that the operating costs of sending notifications would be split 50:50 between ISPs and rights holders. Previously it had been intended that Ofcom should determine this matter in the Code. The Claimants responded to the consultation, and I believe that it is fair to say that, in principle, they supported a system of notifying subscribers of copyright infringement.
The passage of the Digital Economy Bill
The Government published its response to the consultation in November 2009. It announced that legislation to tackle online copyright infringement would be introduced in the Digital Economy Bill. The Government stated that the Bill would introduce two “straightforward obligations”, whose detailed practical implementation would be left to be developed in an industry approved Code (or in default by Ofcom). The costs proposals previously advanced were changed to a proposed “flat fee” system, by which rights owners paid an ISP a flat fee for processing each of its “copyright infringement reports” (“CIRs”).
On 16 November 2009, the Government published the Digital Economy Bill. It was introduced in the House of Lords on 19 November 2009.
Paragraph 34 of the Explanatory Notes accompanying the Digital Economy Bill stated that:
“The provision inserts new sections 124A to 124M in the Communications Act 2003 (“the 2003 Act”), which impose obligations on internet service providers (“ISPs”) to:
Notify their subscribers if the internet protocol (“IP”) addresses associated with them are reported by copyright owners as being used to infringe copyright; and
Keep track of the number of reports about each subscriber, and compile, on an anonymous basis, a list of some or all of those who are reported on. After obtaining a court order to obtain personal details, copyright owners will be able to take action against those included in the list.”
Paragraph 35 of the Notes explained that these obligations would be underpinned by a code approved by Ofcom or, if no industry code was put forward for approval, a code made by Ofcom. The Notes stated that the Code would “set out in detail how the obligations must be met.”
Furthermore, paragraph 36 observed that the structure of the Bill was such that if the initial obligations imposed did not achieve the objective of reducing unlawful file-sharing to a satisfactory extent, then additional “technical obligations” could be imposed on ISPs. These would require ISPs to limit internet access by certain subscribers, for example through bandwidth capping or shaping, or through temporary suspension in certain circumstances.
Paragraph 48 gave the following explanation of the content of the obligation found in Clause 5:
“ISPs will have to keep a record of the number of CIRs linked to each subscriber along with a record of which copyright owner sent the report. Under section 124B of the 2003 Act, inserted by clause 5, an ISP may be required to provide a copyright owner with relevant parts of those records on request (“copyright infringement lists”), but in an anonymised form so as to ensure compliance with data protection legislation.”
Paragraphs 51 and 52 of the Explanatory Notes stated that the obligations in the proposed Act would not take formal effect until a Code was published. The Code would deal with the “points of detail.” The Government’s stated intention (at paragraph 55) was for the obligations imposed by the Bill to fall on all ISPs except those who were demonstrated to have a very low level of online infringement.
The contents of the “initial obligations code” were addressed in Clause 8 of the Bill and paragraph 59 of the Explanatory Notes. A proposed section 124E of the CA 2003 would set out what the Code must contain in terms of a minimum set of obligations to be imposed on ISPs. The stated reason for setting the fuller details down in the Code was that the specific obligations and procedures would be detailed and were likely to have to be adapted over time.
The Government’s Impact Assessments
The Bill was the subject of a regulatory Impact Assessment issued in November 2009. It was updated in March 2010 following some amendments to the Bill during its passage through the House of Lords. The then Financial Secretary to the Treasury (Stephen Timms MP) said of the Impact Assessment:
“I have read the Impact Assessment and I am satisfied that (a) it represents a fair and reasonable view of the expected costs, benefits and impact of the policy, and (b) that the benefits justify the costs.”
The Impact Assessment set out estimated costs of compliance and anticipated benefits. The Secretary of State assumed that 70 per cent of infringers would stop downloading illegally following receipt of a notification letter from an ISP. The figures behind this assumption were derived from the Digital Entertainment Survey, conducted by representatives of the rights holders.
The DEA 2010 received Royal Assent on 8 April 2010. Pursuant to sections 47(1) and (2) DEA 2010, sections 124A and 124B of the CA 2003 came into force on 8 June 2010. Sections 124C to 124E, 124M and 124N came into force on 8 April 2010. The other relevant provisions came into force on 8 June 2010.
The Draft Costs Statutory Instrument
Section 15 DEA 2010 introduced a new section 124M of the CA 2003, empowering the Secretary of State by statutory instrument to make an Order addressing the question of costs-sharing or costs allocation arising from costs incurred in complying with the initial obligations or any technical obligation. The Secretary of State has exercised that power in drawing up the draft Costs Order. That measure was notified to the EU Commission pursuant to the Technical Standards Directive.
ISPs, rights holders and Ofcom were incurring costs in anticipation of meeting the obligations contained in the DEA 2010 and participating in discussions on the draft Initial Obligations Code. Ofcom also sent to BT a draft Notice under section 135 of the CA 2003 requesting the provision of information.
A consultation was conducted by the Secretary of State and Ofcom concerning the proposed allocation of the costs of implementation of the DEA 2010 between rights holders and ISPs.
The Government also conducted a specific impact assessment of the draft Costs Order. The Impact Assessment at page 7 stated:
“The intention of the Order is to specify the allocation of costs arising from the primary legislation in the Act which places obligations on ISPs when informed by copyright owners through copyright infringement reports to identify and inform subscribers of their illegal behaviour and to maintain record keeping systems.”
The Government also acknowledged that it had to notify the draft Costs Order governing “costs sharing” to the Commission as a draft technical regulation under the Technical Standards Directive. It was notified to the EU Commission on 22 September 2010. The Commission has responded to the notified measure, raising concerns about its compatibility with the Authorisation Directive.
The draft Costs Order was laid before Parliament on 21 January 2011. It is subject to the affirmative resolution procedure. The Costs Sharing Order 2011 is expected to enter into force in due course, subject to the correction of a drafting error identified by the House of Lords and House of Commons Joint Committee on Statutory Instruments.
The Prospect of Pan-European Action
The Commission on 22 December 2010 published a Report on the Application of Directive 2004/48/EC on the enforcement of intellectual property rights. The Report stated:
“The analysis of the implementation of the Directive in the Member States shows that the Directive lays a solid foundation for enforcing intellectual property right in the internal market, but that certain clarification may be needed to avoid any ambiguities and adapt the Directive to the new challenges posed in particular by today’s digital environment.”
The Commission considered that a number of areas deserved further attention, including the
“use of provisional and precautionary measures such as injunctions, [and] procedures to gather and preserve evidence (including the relationship between the right of information and the protection of privacy).”
The Commission indicated that it was beginning work on impact assessment and was encouraging responses to proposed measures.
Many of the ISPs operating in the UK are wholly or partly owned by ISPs established in other Member States. The question of unlawful file-sharing is an EU wide issue. In October 2009 the Commission commenced its own consultation about the consequences of “de-materialisation of online content.” The “Reflection Paper” issued by the Commission at the same time observed that “the nature of the challenges and problems presented by cross-border provision of creative content by the internet” suggested that “responses to most of these challenges will have to be joint European ones, instead of being the result of separate or even contradictory national initiatives.”
The Contested Provisions
The Initial Obligations Provisions
The first ground of challenge, in particular, turns, in my view, upon the legal effect of the contested provisions. It is, therefore, necessary to examine these provisions in some detail.
Sections 3-7 of the DEA 2010 insert sections 124A-124E into the CA 2003. Materially:
i) Section 124A(2) permits a copyright owner to make a copyright infringement report (“CIR”) to an ISP “if a code in force under section 124C or 124D (‘an initial obligations code’) allows the owner to do so.”
ii) Section 124A(4) creates an obligation on an ISP to notify the subscriber of such a report “if the initial obligations code requires the provider to do so.”
iii) An obligation on an ISP to provide a copyright owner with a copyright infringement list on its request arises under section 124B(1) “if … an initial obligations code requires the internet service provider to provide it.”
iv) Any such copyright infringement list will relate to each “relevant subscriber” – a term which is defined by reference to the threshold which will in due course be set by the initial obligations code: see section 124B(3).
Those obligations are referred to as the “initial obligations”: section 124C(1). Each of them is dependent for their content, as well as for their effect, on the making of an initial obligations code under sections 124C or 124D.
Section 124D requires an initial obligations code to be made by Ofcom within the period prescribed by the Secretary of State (currently by 31 March 2011), if such a code has not previously been made by others and approved by Ofcom under section 124C. But by either route the maker of the Code will design and set the particulars of the initial obligations. Thus:
i) Section 124C(3) to (5) provides as follows:
“(3) The provision that may be contained in a code and approved under this section includes provision that –
(a) specifies conditions that must be met for rights and obligations under the copyright infringement provisions or the code to apply in a particular case;
(b) requires copyright owners or internet service providers to provide any information or assistance that is reasonably required to determine whether a condition under paragraph (a) is met.
(4) The provision mentioned in subsection (3)(a) may, in particular, specify that a right or obligation does not apply in relation to a copyright owner unless the owner has made arrangements with an internet service provider regarding –
(a) the number of copyright infringement reports that the owner may make to the provider within a particular period; and
(b) payment in advance of a contribution towards meeting costs incurred by the provider.
(5) The provision mentioned in subsection (3)(a) may also, in particular, provide that –
(a) except as provided by the code, rights and obligations do not apply in relation to an internet service provider unless the number of copyright infringement reports the provider receives within a particular period reaches a threshold set in the code; and
(b) if the threshold is reached, rights or obligations apply with effect from the date when it is reached or from a later time.”
ii) Further, where a Code is made by Ofcom under section 124D, section 124D(2) provides that in addition to any of the things mentioned in section 124C(3)-(5), the Code may also make various provisions as to jurisdiction and enforcement of the initial obligations, as well as (under section 124D(5)(h)) “make other provision for the purpose of regulating the initial obligations”.
There are certain criteria that any initial obligations code must fulfil: section 123C(6) and 124D(6). They are set out in section 124E.
i) Section 124E(1)(a) requires the Code to include provision about the means of obtaining the standard of evidence that must be included in a CIR, and as to its required form. The DEA 2010 does not otherwise define the circumstances in which a copyright owner will be allowed to make a CIR. That is left open by sections 124C(3)-(5).
ii) Sections 124E(1)(b) and 124E(3)-(4) require the Code to make provision specifying the requirements as to the means by which the ISP identifies the subscriber who is the subject of a CIR, which of the reports the provider must notify the subscriber of, and requirements as to the form, contents and means of the notification; they also place an upper limit of 12 months on the period which may elapse between the date of receipt of a CIR and of its being taken into account for the purposes of the notification. The DEA 2010 does not otherwise define what any of those requirements should be, or otherwise prescribe the circumstances in which an ISP will be required to notify the subscriber of the report. It does not prevent Ofcom from setting a lower limit than 12 months on the period which may elapse between the date of receipt of a CIR and of its being taken into account.
iii) Section 124E does not prescribe the circumstances in which the ISP will be required to provide a copyright infringement list in accordance with section 124B(1)(b): that is left to be determined by the Code.
iv) Sections 124E(1)(c) and 124E(5)-(6) require the Code to set a threshold for determining who a “relevant subscriber” is, but that threshold may “be set by reference to any matter”; they also set an upper limit of 12 months on the age of CIRs to be taken into account, but again do not prevent the introduction of a lower limit.
The remaining provisions of section 124E operate in a similar way as regards the initial obligations:
i) Sections 124E(1)(d) and (e) require that the Code makes provision about how ISPs are to keep information about subscribers and limits the time for which they may keep that information. They do not specify what provision or for what period of time.
ii) Sections 124E(1)(f) and 124M require provision to be made about contributions towards meeting costs, but do not specify what that provision should be.
iii) Sections 124E(1)(g) and 124E(7)-(8) require provision to be made that Ofcom has the function of administering and enforcing the Code, and that there are “adequate arrangements” for it to obtain information and recover its costs for so doing. They do not specify what provision should be made by the Code.
iv) Sections 124E(1)(i), (j), (k) and (l) respectively provide that the Code must be objectively justifiable, non-discriminatory, proportionate and transparent.
The Technical Obligations Provisions
The DEA 2010 does not provide for any obligation for technical obligations to be brought into effect: see section 124H(1). If and when they are brought into effect, their precise content would be informed by the annual progress reports which Ofcom must produce under section 124F, as well as the product of any consultation with ISPs and others undertaken under section 124G(5)(a), and would take into account Ofcom’s assessment of whether or not any particular technical obligation should be imposed on ISPs.
The actual technical obligations to which ISPs might be subject are not provided for by the DEA 2010. The definition of a “technical measure” provided by section 124G(3) is indicative, not exhaustive: a variety of alternatives is set out, the last of which reads “limits the service to the subscriber in another way”. The “relevant subscribers” against whom technical measures may be required to be taken are in turn defined by criteria which are not yet set: see sections 124G(4) and 124B(3). Sections 124I-J do not prescribe the contents of the technical obligations. It is expressly provided by section 124I(3) that a code may do any of the things mentioned in section 124C(3)-(5) or sections 124D(5)(a)-(g), and may also make other provision for the purpose of regulating the technical obligations.
The Appeals Provisions
The obligations that the Code must contain in relation to subscriber appeals are set out in sections 124E(1)(h) and 124K(2)-(8) in respect of the initial obligations, and sections 124J(1)(b) and 124K(2)-(11) in respect of the technical obligations.
It should be noted, in particular, that:
i) The scope of the appeal provisions’ practical application is not yet fixed: no subscriber appeal can be made until (at the earliest) a subscriber has been notified by an ISP of a CIR under section 124A.
ii) Although there is a prescribed appeal mechanism in respect of any technical measures, such measures have not yet been proposed and adopted (see above).
iii) The appeal provisions depend upon the initial obligation provisions and the technical obligation provisions. The appeal provisions can have no legal effect until the relevant underlying provisions have been defined and brought into effect.
Section 124G(6) places an obligation on ISPs and copyright owners to give Ofcom any assistance that it reasonably requires for the purposes of complying with any direction made under section 124G. But those directions may only be given by Ofcom, and concern the preparatory steps which Ofcom might be required to take in advance of the introduction of a technical obligations code, such as the need to assess whether technical obligations should be imposed on ISPs, to prepare for those obligations, including by consulting ISPs and assessing the likely efficacy of a technical measure and to report to the Secretary of State.
Section 124L applies sections 94 to 96 of the CA 2003 in relation to a contravention of an initial obligation or a technical obligation, or a contravention of an obligation under section 124G(6), allowing Ofcom to impose a penalty on an ISP or copyright owner in respect of such contraventions. Those compliance provisions are dependent upon such obligations having come into effect as a result of the making of an initial obligations code or technical obligations code.
Section 17 of the DEA 2010 empowers the Secretary of State to make provision by regulations in respect of blocking injunctions. Section 17 does not prescribe the circumstances in which the regulations would allow an injunction to be applied for or granted by the court, beyond the reference to the court needing to be satisfied that there was a “substantial amount of material” being obtained in infringement of copyright from a particular location, in section 17(4).
The First Ground of Challenge: Breach of The Technical Standards Directive
The Relevant Provisions of the Amended Technical Standards Directive (TSD)
Article 1(2) defines “service” as
“Any Information Society service, that is to say, any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services.”
Article 1(5) TSD defines “rule on services” as a
“requirement of a general nature relating to the taking-up and pursuit of service activities within the meaning of point 2, in particular provisions concerning the service provider, the services and the recipient of services, excluding any rules which are not specifically aimed at the services defined in that point.”
For the purposes of that definition
“a rule shall be considered to be specifically aimed at Information Society Services where, having regard to its statement of reasons and its operative part, the specific aim and objective of all or some of its individual provisions is to regulate such services in an explicit and targeted manner.”
and
“a rule shall not be considered to be specifically aimed at Information Society Services if it affects such services only in an implicit or incidental manner.”
Article 1(11) TSD defines “technical regulations” as
“technical specifications and other requirements or rules on services, including the relevant administrative provisions, the observance of which is compulsory, de jure or de facto, in the case of marketing, provision of service, establishment of a service operator or use in a Member State or major part thereof…”
Article 1(12) TSD defines “draft technical regulation” as
“the text of technical specification or other requirement or of a rule on services, including administrative provisions, formulated with the aim of enacting it or of ultimately having it enacted as a technical regulation, the text being at a stage of preparation at which substantial amendments can still be made.”
Article 8(1) TSD requires Member States to communicate to the Commission “any draft technical regulation” along with a statement of the grounds which make the enactment of such a technical regulation necessary, where these have not already been made clear in the draft. It also provides that, where appropriate, Member States must also communicate
“the text of the basic legislative or regulatory provisions principally and directly concerned, should knowledge of such text be necessary to assess the implications of the draft technical regulation.”
Article 9(1) provides for a standstill period of three months from the date of receipt by the Commission of the notification of a draft rule on services.
By Article 9(2), that period may be extended to four months in the event that the Commission or another Member State delivers a detailed opinion, within the three month period, to the effect that the draft rule on services notified may create obstacles to the free movement of services or to the freedom of establishment of service operators within the internal market. The Member State concerned must then report to the Commission on the action it proposes to take on such detailed opinions. The Commission must then comment on that reaction.
Alternatively, by Article 9(4), that period may be extended to twelve months in the event that the Commission announces its finding that the draft technical regulation concerns a matter which is covered by a proposal for a directive, regulation or decision which has been presented to the Council.
The Purpose of the Notification Requirement
The main purposes of the notification requirement emerge from the terms of Article 9 itself: it is to allow the Commission and other Member States to propose any amendments which might remove or reduce any restrictions which a rule on services might create on the free movement of services or the freedom of establishment, and to serve the interests of transparency and legal certainty by ensuring that there is an opportunity for Member States to take into account the potential introduction of forthcoming EU legislation which covers some or all of the same ground that the national measure is designed to address. (See Case C-42/07 Liga Portuguesa de Futebol Profissional v Departamento de Jogos [2009] ECR 1-7633, by Advocate General Bot at [53] and [168]-[178]).
Those purposes are reinforced by the recitals to the original TSD 98/34/EC (which concerned only technical requirements related to products rather than services), which provided:
“(2) Whereas the internal market comprises an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured; whereas, therefore, the prohibition of quantitative restrictions on the movement of goods and of measures having equivalent effect is one of the basic principles of the community;
(3) Whereas in order to promote the smooth functioning of the internal market, as much transparency as possible should be ensured as regards national initiatives for the establishment of technical standards or regulations;
(4) Whereas barriers to trade resulting from technical regulations relating to products may be allowed only where they are necessary in order to meet essential requirements and have an objective in the public interest of which they constitute the main guarantee;
(5) Whereas it is essential for the Commission to have the necessary information at its disposal before the adoption of technical provisions; whereas, consequently, the Member States which are required to facilitate the achievement of its task pursuant to Article 5 of the Treaty must notify it of their projects in the field of technical regulations;
(6) Whereas all the Member States must also be informed of the technical regulations contemplated by any one Member State;
(7) Whereas the aim of the internal market is to create an environment that is conducive to the competitiveness of undertakings; whereas increased provision of information is one way of helping undertakings to make more of the advantages inherent in this market; whereas it is therefore necessary to enable economic operators to give their assessment of the impact of the national technical regulations proposed by other Member States, by providing for the regular publication of the titles of notified drafts and by means of the provisions relating to the confidentiality of such drafts;
(8) Whereas it is appropriate, in the interests of legal certainty, that Member States publicly announce that a national technical regulation has been adopted in accordance with the formalities laid down in this Directive;
(9) Whereas, as far as technical regulations for products are concerned, the measures designed to ensure the proper functioning or the continued development of the market include greater transparency of national intentions and a broadening of the criteria and conditions for assessing the potential effect of the proposed regulations on the market;
(10) Whereas it is therefore necessary to assess all the requirements laid down in respect of a product and to take account of developments in national practices for the regulation of products;
…
(13) Whereas the Commission and the Member States must also be allowed sufficient time in which to propose amendments to a contemplated measure, in order to remove or reduce any barriers which it might create to the free movement of goods;
(14) Whereas the Member State concerned must take account of these amendments when formulating the definitive text of the measure envisaged.”
Directive 98/48/EC, which amended the TSD to embrace rules on services, also provided in its recitals:
“(1) Whereas, in order to promote the smooth functioning of the internal market, as much transparency as possible should be ensured as regards the future national rules and regulations applying to Information Society services, by amending Directive 98/34/EC;
…
(8) Whereas, without coordination at Community level, this foreseeable regulatory activity at national level might give rise to restrictions on the free movement of services and the freedom of establishment, leading in turn to a refragmentation of the internal market, over-regulation and regulatory inconsistencies;
(9) Whereas, in order to ensure real and effective protection of the general-interest objectives involved in the development of the Information Society, there is a need for a coordinated approach at Community level when questions relating to activities with such highly transnational connotations as those of the new services are dealt with;
…
(12) Whereas it is therefore necessary to preserve the smooth functioning of the internal market and to avert the risks of refragmentation by providing for a procedure for the provision of information, the holding of consultations, and administrative cooperation in respect of new draft rules and regulations; whereas such a procedure will help, inter alia, to ensure that the Treaty, in particular Articles 52 and 59 thereof, is effectively applied and, where necessary, to detect any need to protect the general interest at Community level; whereas, moreover, the improved application of the Treaty made possible by such an information procedure will have the effect of reducing the need for Community rules to what is strictly necessary and proportional in the light of the internal market and the protection of general-interest objectives; whereas, lastly, such a procedure will enable businesses to exploit the advantages of the internal market more effectively;”
It is common ground that, if a technical regulation within Article 1(11) TSD is not duly notified, it is unenforceable at national level: see Case C-194/94 CIA Security International [1996] ECR I-2201, at [44] and [45].
The Relevant Case Law
In Case C-317/92 Commission v Federal Republic of Germany [1994] ECR-1-2039 the Court of Justice held that a legislative measure of the German Federal Minister of Health, requiring sterile medical instruments to be labelled with specific expiry dates, should have been notified under the TSD as it then stood and before relevant amendment. The Court stated at [25]:
“… The German regulation in question constitutes a new technical specification within the meaning of Article 1, cited above, since non-reusable sterile medical instruments may henceforth be marketed or used in Germany only if certain obligations are fulfilled the application of which was formerly confined to the labelling of medicinal products. The application, to given products, of a rule which previously only affected other products, constitutes, with regard to the former, a new regulation and must therefore be notified in accordance with the directive.”
The primary German legislation provided that the packaging of medical products had to show the expiry date by reference only to two stipulated days of the year; and it appears that the Federal Minister for Health was specifically empowered to extend, by regulation, this requirement to other medicinal products stricto sensu and also to other products that under German law were regarded as medicinal. The primary German legislation had been duly notified to the Commission. The German government, therefore, argued that such notification of the enabling provisions “covered” the specific regulation extending the contested requirement to products which were not medicines under Community Law. The Court rejected that argument at [26]:
“… that enabling measure, taken as such, does not require to be notified on the basis of Article 8 [of the TSD as it then stood] aforesaid since it does not constitute a new specification. The situation is different as regards the implementation of that measure, which does constitute a new specification which must be notified.”
It seems to me that the Court of Justice was not saying that the provisions generally of the primary German legislation did not in principle require notification. The Court was simply saying that the enabling provision, standing alone, was not notifiable because, unless and until the Federal Minister exercised his power to extend the scope of the contested requirement, the enabling provision imposed no relevant obligation or liability upon individuals or undertakings.
The second case is Case C-194/94 CIA Security International SA v Signalson SA and Securitel SPRL [1996] ECR I-2201, (“CIA”). Under Article 12 of Belgian legislation of April 1990:
“The alarm systems and networks … and their components may be marketed or in any event made available to users only after prior approval has been granted under a procedure to be laid down by royal decree.”
In May 1991 a decree was adopted on the basis of Article 12, which prohibited the marketing in Belgium of the relevant products if they had not been approved by a special committee, such approval to be given only if the products satisfied specified criteria. Neither Article 12 nor the decree was notified to the Commission in accordance with the TSD as it then stood. As regards the 1991 decree the Court of Justice had no hesitation in concluding that it was a technical regulation:
“… it contains detailed rules defining, in particular, the conditions concerning the quality tests and function tests which must be fulfilled in order for an alarm system or network to be approved and marketed in Belgium…” at [26].
However, there was a real contest between the parties as to whether Article 12 of the 1990 law was a technical regulation. It is common ground in the present claim that the Court’s resolution of that contest is central to the first ground of challenge, and I, therefore, set out in full the Court’s discussion of the issue:
“27. As regards Article 12 of the 1990 Law, it is to be recalled that it provides that the products in question may be marketed only after having been previously approved according to a procedure to be laid down by royal decree, which was laid down by the 1991 Decree.
28. According to the Commission and CIA Security, Article 12 of the 1990 Law constitutes a technical regulation within the meaning of the Directive 83/189 whilst Signalson, the United Kingdom and the Belgian Government, in their written observations, submit that this article is merely a framework law not comprising any technical regulation within the meaning of Directive 83/189.
29. A rule is classified as a technical regulation for the purposes of Directive 83/189 if it has legal effects of its own. If, under domestic law, the rule merely serves as a basis for enabling administrative regulations containing rules binding on interested parties to be adopted, so that by itself it has no legal effect for individuals, the rule does not constitute a technical regulation within the meaning of the directive (see the judgment in Case C-317/92 Commission v Germany [1994] ECR I-2039, paragraph 26). It should be recalled here that, according to the first subparagraph of Article 8(1) of Directive 83/189, the Member States must communicate, at the same time as the draft technical regulation, the enabling instrument on the basis of which it was adopted, should knowledge of such text be necessary to assess the implications of the draft technical regulation.
30. However, a rule must be classified as a technical regulation within the meaning of Directive 83/189 if, as the Belgian Government submitted at the hearing, it requires the undertakings concerned to apply for prior approval of their equipment, even if the administrative rules envisaged have not been adopted.
31. The reply to be given to the third and fourth questions must therefore be that a rule such as Article 4 of the 1990 Law does not constitute a technical regulation within the meaning of Directive 83/189 whereas provisions such as those contained in the 1991 Decree do constitute technical regulations and that classification of a rule such as Article 12 of the 1990 Law depends on the legal effects which it has under domestic law.”
Mr White QC, who appeared for the Claimants and made his submissions (both written and oral) with great force and admirable clarity, contended that in the passages cited above the Court of Justice was drawing a distinction between, on the one hand, mere enabling provisions (such as were considered in Commission v Germany: see paragraph 64 above) and a substantive legal requirement, such as that in Article 12 of the Belgian law. The latter would be a technical regulation. On that view, it did not matter whether the legal requirement, when enacted and/or brought into force, had binding effect, or whether the binding effect of the requirement was rather made contingent upon the incidence of some subsequent event (such as, for example, a commencement measure or another measure that might give greater content or substance to the requirement). Only an enabling measure of the kind found in Commission v Germany was ruled out as a technical regulation.
Mr Eadie QC, to whose lucid submissions I am also indebted, contended that this is an incorrect reading of CIA. I accept his submission on this point. In my judgment, the true test that emerges from the cited passages is whether the measure in question “by itself” has “legal effect for individuals”; and that, therefore, for a measure to have legal effect by itself it must be binding and be sufficiently precise and specific so as to be enforceable against an affected individual. In CIA the requirement in Article 12 of the Belgian law to apply for approval for the relevant product was unambiguous and self-contained. However, there was uncertainty, simply from a perusal of the text of the Belgian law, whether the requirement in Article 12 had legal effect, or whether the legal effect of Article 12 was contingent upon the subsequent enactment of implementing measures of a kind adopted in the 1991 decree. (In the latter event there might well of course have been transitional provisions to enable existing products to continue to be marketed pending a decision under the new controls). If the legal effect was made contingent, the measure was not a technical regulation. Although the Belgian Government submitted (apparently by way of concession) that the undertakings concerned were bound to apply for prior approval even before the adoption of the 1991 decree, the Court of Justice quite properly considered that the correct interpretation of Article 12 was a matter for the Belgian courts, not the executive, and so for that reason left the disposition of the issue arising under that Article to be decided by the national court. It seems to me plain that if, and only if, the Belgian court did in the event agree with the interpretation put forward by the Belgian government, namely, that the effect of the requirement under Article 12 was not contingent upon the enactment of the 1991 decree, the measure in question was a technical regulation.
In my view, this interpretation of CIA is reinforced by the observations of Advocate General Elmer at [45] of his Opinion:
“The Law and the 1991 Decree introduced a type approval procedure for alarm systems and networks. Article 12 of the Law laid down, as stated, the actual requirement of prior approval of alarm systems and networks. At the hearing the Belgian government explained that even without the 1991 Decree Article 12 of the Law would not be without legal effect. The provision is thus not merely an enabling provision (see the situation in Case C-317/92 Commission v Germany [1994] ECR I-203, para 26), but is on the contrary a significant substantive regulation. Article 8 of the directive can hardly, in my view, be interpreted to the effect that such a general requirement concerning prior approval should be exempted from the obligation to inform the Commission, inasmuch as it can stand alone. Irrespective of its general character, such a requirement concerns the product’s properties. Furthermore, its enforcement would per se create great uncertainty on the part of traders and thus give rise to not insignificant obstacles to trade. A provision such as that contained in Article 12 of the Law must therefore, in my view, be regarded per se as a technical regulation which must be notified.”
In other words, Article 12 of the Belgian law “standing alone” had legal effect and such effect represented a real impediment to cross border trade. That legal effect and real impediment was in no way contingent upon the enactment of the later decree.
In my view, if Mr White’s interpretation of CIA were correct, there would have been no point in the Court of Justice leaving the ultimate issue to be determined by the Belgian courts. It was plain from a simple perusal of the text of Article 12 of the Belgian law that that Article was not a mere enabling provision: it constituted, as the Advocate General in terms observed, a substantive requirement. If that was the relevant contrast, no further input was needed, either from the Belgian government or the Belgian courts. However, that was not the relevant contrast. It was necessary to determine whether the substantive requirement had legal effect even before the enactment of the 1991 decree, a question of interpretation of national law that only the national judge could properly answer.
The practical result of CIA was that, even if the Belgian government had furnished to the Commission a draft of the 1991 implementing decree, that by itself would not have saved Article 12 if, but only if, the requirement of that Article standing alone and in the absence of any implementing measure was legally enforceable against individuals.
The third authority is Sapod Audi v Eco–Emballages SA [2002] ECR I-5031, ECJ Case C-159/00. In that case a French law required that producers were required to “identify” certain packaging, and the relevant issue was whether an obligation to “identify” a product or its packaging was, for the purposes of the TSD as it then stood, a “specification … which lays down the characteristics required of a product” (emphasis added). Taken literally, an obligation to identify something (such as pointing out one’s luggage to a customs officer) is not coterminous with an obligation to mark something (such as putting a label on one’s luggage). On that linguistic footing, the French law did not literally fall within the definition (see judgment of the Court at [30]). However, such a literal interpretation of the French law bordered on the unreal in circumstances where in fact identification could be achieved only by marking. As Advocate General Jacobs observed at [36] of his Opinion:
“At the hearing it was accepted by all of those present that in order to comply [with the French law] producers must affix some form of distinguishing mark to the packaging in which they market household goods … [The French law] thus requires products to be identified, but does not insist on the use of a particular mark or symbol.”
The Court of Justice decided that, despite the common accord of those present at the oral hearing, the correct interpretation of national law was strictly for the national court [31], and then continued:
“32. Consequently, the Court must also consider the possibility that, in the light of all the factual and legal evidence before the national court, that court will reach the conclusion that the second paragraph of Article 4 of Decree No 92-377 must be interpreted as imposing on producers an obligation to mark or label the packaging, although not specifying what sign must be affixed.
33. In such an event, it would have to be held that that provision is in fact a technical specification within the meaning of Directive 83/189 and, consequently, that, since the obligation is imposed by decree in the case of marketing of packaged products throughout the national territory, that provision constitutes a technical regulation.
34. In that case, even though the detailed rules regarding the marking or the labelling remained to be defined, marking or labelling would, in itself, be compulsory, also for imported products (see, in particular, Case C-13/96 Bic Benelux [1997] ECR I-1753, paragraph 23). In addition, having regard to the aim of Directive 83/189, namely the protection of free movement of goods by means of preventive control (see, in particular, Case C-194/94 CIA Security International [1996] ECR I-2201, paragraphs 40 and 48), such a control, implemented in accordance with the procedure prescribed by that directive, would be both appropriate and possible.”
It seems to me that Sapod, for present purposes, therefore, does no more than emphasise that whether a particular measure is a technical regulation may depend upon the correct interpretation of national law: in CIA the national judge had to decide whether the measure, on its true meaning, had “legal effect”; in Sapod whether the measure in fact imposed a legal obligation to put some form of distinguishing mark on the physical product or packaging.
Claimants’ Submissions on the First Ground
Mr White submitted that the “initial obligations provisions”, in particular, (see paragraphs 39-43 above) were technical regulations within the meaning of Article 1(11) of the TSD, in accordance with the case law of the Court of Justice in respect of the TSD as it stood at the relevant time.
He contended, first, that the inherent nature of the initial obligations fell squarely within the description of “rule on services” in Article 1(5), such a rule being expressly made by Article 1(11) a technical regulation. That proposition is not disputed. Secondly, he said that the initial obligations cannot sensibly be regarded as mere enabling legislation of a kind considered at one point in Commission v Germany (see paragraph 64 above). That also was not contested. Thirdly, he argued that the initial obligations were of themselves sufficiently precise and specific so as to be enforceable against individuals, and, therefore, had the “legal effect” described by the Court of Justice in CIA. It was irrelevant that the initial obligations were not yet binding on ISPs (because no Code had yet been promulgated and brought into effect); and it was irrelevant that what he characterised as the “detail” of the initial obligations had not yet been developed by the anticipated Code. In any event, a Code was mandated by the DEA 2010 (see paragraphs 41 and 42 above) and, therefore, the ultimate binding effect of the initial obligations was a foregone conclusion.
He argued that the foregoing analysis rested upon the best interpretation of EU law, essentially for three reasons. First, it most effectively promoted the objectives of Article 9 TSD (see paragraphs 57-59 above) and legal certainty. The Commission and interested Member States would, at the earliest opportunity, be able to comment on the initial obligations from the perspective of Community law, and to propose amendments which they believed would better advance the aims, and reflect the principles, of that law. If, close to enactment, a draft Bill containing the initial obligations had been furnished to the Commission and Member States, the United Kingdom, through its appropriate institutions, could have sought, in the light of any proposals received from the Commission and/or Member States, to amend the Bill before enactment into the DEA. Economic operators, including ISPs, would also have learnt at an early stage what, if any, comments on the Bill had been made at the EU level, and what, if any, action the UK intended to take in the light of such comments.
Secondly, he argued that his interpretation was more in accord with Article 1(12) TSD. The initial obligations having been enacted and brought into force, the only “draft technical regulation” that could be notified under the TSD was a draft of the Code, because that was the only text that was still “at a stage of preparation at which substantial amendments can be made”. However, the Code would largely, if not wholly, reflect the primary provisions of the DEA, and, if substantial amendments needed to be made following the procedure in Article 9 TSD, those primary provisions, as well as provisions in the Code, would in all probability also need amendment, a scenario not contemplated by Article 1(12) TSD.
Thirdly, he argued that any other interpretation would create anomalies. For example, if an obligation had no “legal effect” simply because its effect was made contingent upon some later event, then the duty to notify could be put off so long as that event, such as a statutory commencement order, was not imminent. He also pointed to an alleged inconsistency in the Defendant’s position: why notify the draft Costs Order at this stage when, apparently on the Defendant’s case, the Order would have no “legal effect” until the Code had been promulgated and brought into force?
First Ground: Discussion
In my judgment, the fundamental difficulty with Mr White’s analysis is that, on their proper interpretation (which, as the Court of Justice has stressed on at least two occasions: see paragraphs 74 and 77 above, is a matter for the national court), the initial obligations enacted by the DEA and brought into force are not yet legally enforceable against any individual, including ISPs such as the Claimants; and, therefore, they do not have the “legal effect” described in the Court’s case law. They are not legally enforceable for two distinct, but related, reasons. First, the incidence of the initial obligations on ISPs is made expressly contingent upon the promulgation and enactment of the Code. Without the Code, the initial obligations simply beat the air in legal terms. Secondly, the initial obligations are not yet sufficiently particularised as to be enforceable: the actual content of the obligations is to be spelled out in the Code.
As to the first point, I have already set out the relevant provisions at some length and need not repeat them. I put forward by way of example Section 124A(2) which permits a copyright owner to make a CIR to the ISP “if a code in force under section 124C or 124D … allows the owner to do so”. In my view, the Parliamentary meaning could not be clearer: unless and until a code is in force the ISP is not liable to receive a copyright infringement report under the DEA and an ISP is not obliged to take any action in respect of any such report pursuant to the DEA. Copyright owners may send copyright infringement reports, but they have no consequences under the DEA unless and until a code is in force.
As to the second point, although section 124E sets out the criteria which the Code must fulfil, it is the code itself which will define the substantive content of the initial obligations. For example, the Code will specify the circumstances in which a copyright owner will be allowed to make a CIR, the means by which evidence must be obtained and the standard of proof which is required. The Code will also specify the circumstances in which an ISP will be required to provide a copyright infringement list to a copyright owner and determine the number of CIRs that must be made in respect of a subscriber before he becomes a “relevant subscriber”. Importantly, although sections 124E(1)(f)-(g), 124E(7)-(8) and 124M require provision to be made about contributions towards meeting costs, they do not specify what that provision should be. That is left to the Costs Order, which will take effect when the Code itself takes effect.
In my view, none of the points made by Mr White undermines this conclusion. It is contentious whether the Commission or other Member States would have been better placed to comment upon the initial obligations if the United Kingdom had adopted the course which he argues it was legally obliged to adopt. Mr Eadie argued strongly that, in the absence of a draft Code, the Commission and other Member States would have been left in the dark about significant parts of the content of the initial obligations, and either would not have been able to comment in a sufficiently informed and constructive manner, or would have been tempted to make assumptions that turned out to be unfounded: in short, a premature, pointless, time wasting and resource absorbing exercise. In my view, this particular debate cannot be satisfactorily resolved either way, and cannot, therefore, be decisive or significantly influential on the resolution of the relevant legal issue.
Nor do I apprehend any particular difficulty under Article 1(12) TSD with the foregoing interpretation. It is common ground that the Code is to be notified in draft, and the Code may, therefore, be substantially amended before enactment as Article 1(12) provides. It is the Code that in strict legal terms will constitute the technical regulation. However, it is plain that the DEA itself must be provided to the Commission and other Member States so that they can properly set the Code in its full legislative context. If the Code required such fundamental amendment that the provisions of the DEA itself required amendment, such amendment could be effected, if necessary, under the relevant provisions of the European Communities Act 1972. The essential point is that it is the enactment of the Code which gives legal life and real content to the initial obligations; and the text of the Code will be furnished under Article 1(12) at a time when substantial amendments to the Code can still be made before the Code is enacted and takes legal effect. The purpose of Article 1(12) is to prevent technical regulations from being enacted and being enforceable against individuals before the Commission and other Member States have had an opportunity to comment upon the proposed regulation. For the reasons stated, that purpose is not defeated or impeded in this case by notification of the code rather than a draft Bill containing the initial obligations: until the code is enacted and comes into effect there is simply no relevant legally enforceable obligation on individuals.
As to Mr White’s third point, each situation will have to be assessed on its own particular facts. It may well be that once enacted a measure could be a technical regulation if all that was lacking was a simple provision to bring the measure into force. In such a case, in contrast to the present one, it would be difficult to see how the commencement provision, having no substantial content, could be a technical regulation, and how the measure itself, having been enacted, was still “in draft” for the purposes of Article 1(12). In such circumstances the correct course would probably be to notify the measure before it was enacted, and so “in draft”, even if it was not intended to bring the measure immediately into force.
Mr White had one final point. In May 2010 Ofcom sent a draft notice to BT and other ISPs requiring the provision of information. The notice was headed “Digital Economy Act – Initial Obligations Code: [Draft] Notice requiring the provision of specified information under Section 135 of the Communications Act 2003”. The first two paragraphs of the notice read:
“This is a [draft] notice under Section 135 of the Communications Act 2003 (“the Act”) addressed to BT Group plc, whose registered company number is 4190816 and any subsidiary or holding company, or any subsidiary of that holding company, all as defined in section 1159 of the Companies Act 2006.
This notice requires you to provide the information set out below, in the manner and form specified, for the purposes of enabling Ofcom to carry out its functions in relation to the making of a code under section 124D of the Act to regulate the obligations of internet service providers under sections 124A and 124B of the Act.”
Mr White argued that the obligation to provide information arose under the DEA and that the existence of such an obligation showed that the initial obligations had taken “legal effect”. Mr Eadie submitted that the obligation to provide information did not arise under the DEA, the implication being that Ofcom had misunderstood its powers. I do not believe that either submission is correct, for the following reasons.
Section 135(1) of the DEA provides:
“135 Information required for purposes of chapter 1 functions
(1) Ofcom may require a person falling within subsection (2) to provide them with all such information as they consider necessary for the purpose of carrying out their functions under this Chapter.”
Section 124D obliges Ofcom, in circumstances which have now arisen, to make a code for the purposes of regulating the initial obligations. That obligation is a new regulatory function of Ofcom that arises only by virtue of the DEA, and that function falls squarely within the terms of section 135(1). Accordingly, as a result of the combined effect of section 124D and section 135(1), ISPs and others come under a new liability to provide information, if Ofcom requires, for the purposes of Ofcom’s new function. In my view, Ofcom was entirely correct to make the request (even if in draft) under section 135 and was not mistaken about its powers, as Mr Eadie’s argument implied. Furthermore, I cannot at present see why the new liability imposed on, among others, ISPs, would not itself be a “rule on services” and hence a technical regulation falling within the TSD. Neither party, given the confines of their respective cases, specifically addressed that issue. Nonetheless, the liability referred to is specific and limited: it is to provide information to assist Ofcom to draw up the initial obligations code. It does not in itself make the initial obligations legally enforceable against ISPs, and does not give relevant legal effect to those obligations. It would appear common ground that this new liability was not notified “in draft” under Article 9 TSD, and the inevitable consequence would seem to be that, in the absence of such notification, ISPs and others could not be legally required to provide information under section 135 specifically to assist Ofcom to discharge its new function under section 124D. Whether Ofcom has other compulsory powers that would enable such information to be obtained was not a matter explored before me.
Finally, on this ground, Mr White realistically acknowledged that if he could not show that the initial obligations were technical regulations then he had little chance of showing that the other contested provisions were such regulations. That must be correct. There is no present obligation to bring any technical obligations under the DEA into effect (see paragraphs 45 and 46 above). The appeals provisions are dependent upon the initial obligations coming into effect, as are the provisions allowing Ofcom to impose penalties on ISPs (see paragraphs 47-50 above). Similarly, section 17 does no more at this stage than enable the Secretary of State to make provision by regulations for blocking injunctions (see paragraph 51 above). None of these provisions, therefore, presently has relevant legal effect for individuals.
The Second Ground: Breach of the e-Commerce Directive (“ECD”)
It is alleged that the contested provisions infringe certain Articles of the ECD. Certain propositions are common ground.
The provision of ISP services (by way of access to the internet or an email communication service) constitute the provision of information society services under the ECD (see recitals (17) and (18) and Articles 2(a) and (b) of the ECD).
Under Article 3(2) of the ECD, Member States may not, for reasons falling within “the co-ordinated field”, restrict the freedom to provide information society services from another Member State. Article 1 sets out the objective and scope of the ECD. The objective is the free movement of, among other things, ISP services. Under Article 3(1) the services provided by an ISP established in a Member State are intended to be regulated by the Member State of establishment (the “country of origin” principle). The Explanatory Memorandum to the Commission’s Initial Proposal stated that Article 3(2):
“prohibits in principle all forms of restriction to the freedom to provide Information Society services, i.e. any actions on the part of a Member State liable to hamper or otherwise make the free provision of services less attractive. However, possible exemptions from the principle are provided for in Article 22(2) and (3) [later moved into Article 3 of the ECD].”
It is contended that the contested provisions of the DEA infringe, in particular, Articles 12, 15 and 3(2) of the ECD, and I shall consider each of these Articles in turn.
(1) Article 12
Article 12 ECD provides as follows:
“1. Where an information society service is provided that consists of the transmission in a communication network of information provided by a recipient of the service, or the provision of access to a communication network, Member States shall ensure that the service provider is not liable for the information transmitted, on condition that the provider:
(a) does not initiate the transmission;
(b) does not select the receiver of the transmission; and
(c) does not select or modify the information contained in the transmission.
2. The acts of transmission and of provision of access referred to in paragraph 1 include the automatic, intermediate and transient storage of the information transmitted in so far as this takes place for the sole purpose of carrying out the transmission in the communication network, and provided that the information is not stored for any period longer than is reasonably necessary for the transmission.
3. This Article shall not affect the possibility for a court or administrative authority, in accordance with Member States’ legal systems, of requiring the service provider to terminate or prevent an infringement.”
I was referred in some detail to the legislative history of Article 12 (and of Article 15 which is within the same general terrain), including the Press Release publishing details of the Commission’s proposal for what became the ECD, the Explanatory Memorandum to the proposal, and proceedings in the European Parliament. I need not rehearse that material, for the fundamental point that Mr White extracted from it was that, in the words of the European Commission, Article 12 “struck a careful balance between the different interests involved in order to stimulate cooperation between different parties thereby reducing the risk of illegal activity on-line”. The different interests involved plainly include at least the interest of the copyright owner, wishing to achieve maximum protection for the copyright product, and to secure the most effective remedies for copyright infringement; and the interest of the ISP, wishing to realise the most efficient transmission of information, with minimal responsibility for its actual content. The tension between these interests is obvious and palpable.
Mr White invited the Court to infer from the point that he had extracted from the legislative material that the immunity conferred on mere conduit ISPs by Article 12 (and by Article 15) was a very wide one, and that the precise language of these Articles could and should be stretched beyond its natural and ordinary meaning to achieve the assumed legislative purpose. However, I draw a different conclusion from the material. It seems to me that if the Community legislator, as in this instance, has chosen specific language to give effect to a careful balancing of competing interests, the judge must be especially cautious before departing from the plain meaning of the text. To depart from that meaning creates the obvious risk of promoting the interest of one economic sector to the detriment of the other interested sector, and hence of seriously upsetting the balance between competing interests that the legislator has carefully struck. It was for this very reason that the Commission rejected certain amendments to its legislative proposal that the European Parliament put forward which would have affected the balance struck by the text of Article 12.
It seems to me, particularly in the light of that legislative history, that liability “for the information transmitted” is a carefully delineated and limited concept. As regards copyright material, this language is broadly contemplating a scenario in which a person other than the ISP has unlawfully placed the material in the public domain or has unlawfully downloaded such material, and a question then arises whether the ISP, putatively a mere conduit for the transmission of the information, also incurs a legal liability in respect of the infringement. That liability could take the form of a fine (in criminal or regulatory proceedings) or damages or other compensation payable to the copyright owner, or some form of injunctive relief. The liability could be joint and several with the other person, or it could simply be a default liability if the other person could not be found, or was not worth pursuing, or was insolvent. This reflects an age old problem, where owners of intellectual property rights have sought effective remedies against those that they perceive to have facilitated the infringement of those rights, although at the time these other persons may well have had no knowledge that any specific infringement was taking place. In the United Kingdom liability under the Copyright, Designs and Patents Act 1988 turns on whether the intermediary has “authorised”, that is, “sanctioned, countenanced or approved” (Evans v Hulton [1924] 131 LT 534) the infringement. In the leading case, the supply of machines capable of use by buyers for copying copyright works was not an “authorisation” where the supplier had no control over the use of the machine, which was capable of legitimate use: CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] 1 AC 1013.
It also seems to me that this interpretation is perfectly consistent with Article 12(3). In the scenario just described it is conceivable that the copyright owner might in certain cases be able to draw the attention of the ISP to the fact of a present infringement, or to the likelihood of a specific infringement occurring in the future, and to invite the ISP to terminate or prevent such an infringement. In these circumstances, if the ISP was liable to terminate or prevent the present or future infringement, a real question could arise as to whether the ISP was being made liable “for the information transmitted”, or was rather simply coming under an obligation to use its technical facilities to terminate or prevent an infringement, in respect of the information transmitted, committed by another person. The “careful balance” struck by the Community legislator settles that issue, and removes all uncertainty, by allowing Member States to authorise the courts or competent administrative authority to order the ISP to terminate or prevent the infringement, so long as the ISP is not made liable (by way of fine or compensation) in respect of the infringement itself.
On this reading of Article 12 it would also appear that the jurisdiction of the High Court arising from Norwich Pharmacal v Customs and Excise Commissioners [1974] AC 133 (“Norwich Pharmacal”) (see now CPR 31.18) is entirely consistent with EU law. If the relevant conditions are satisfied, the Court may order an ISP, which has been no more than a mere conduit in the unlawful transmission of copyright material, to disclose the identity of the infringing subscriber to the copyright owner. Again the ISP is made liable under the terms of the court order, not in respect of the subscriber’s infringement of copyright, but to take steps that are intended to facilitate the copyright owner in asserting his rights against the infringing party. This is a liability that arises because of the nature of the information (copyright material) that the ISP has transmitted. On a broad interpretation of Article 12 it seems to me that Norwich Pharmacal orders would run the risk of violating that Article, as such orders place burdens on ISPs even if a Claimant copyright owner in such proceedings is ordinarily required to pay a blameless ISP’s expenses in providing the identity of an infringing subscriber (see CPR 31.18).
The reading is also consistent with the implementation of Article 12 in UK law. Regulation 17(1) of the Electronic Commerce (EC Directive) Regulations 2002 provides:
“Where an information society service is provided which consists of the transmission in a communication network of information provided by a recipient of the service or the provision of access to a communication network, the service provider (if he otherwise would) shall not be liable for damages or for any other pecuniary remedy or for any criminal sanction as a result of that transmission where the service provider—
(a) did not initiate the transmission;
(b) did not select the receiver of the transmission; and
(c) did not select or modify the information contained in the transmission.”
Mr White, in support of this ground of challenge, relied upon certain liabilities of ISPs under the DEA: for example, their potential exposure to financial penalties in the event of failure to comply with their obligations under section 124L; their liability to bear 25 per cent of Ofcom’s regulatory costs, and any appeal costs under section 124M and the Costs Order; and the fact that ISPs will incur expense in complying with the provisions of any Initial Obligations Code or Technical Obligations Code.
However, penalties may be imposed under section 124L only as a sanction for a breach of an initial obligation, for example, by a failure to notify a subscriber of a CIR, or to provide a copyright owner with a Copyright Infringement List (“CIL”), or for a breach of a technical obligation (a failure to take a technical measure against a relevant subscriber), or for a failure to give Ofcom any assistance that they reasonably require for the purposes of complying with any direction by the Secretary of State. These liabilities arise as a result of the specific scheme established by the DEA, of which the core obligations, so far as concern ISPs, are that ISPs are obliged to receive CIRs from copyright owners and to communicate such CIRs to their subscribers, and to compile CILs for onward transmission to copyright owners. These core obligations do not constitute any liability “for the information transmitted”, that is, in respect of the underlying infringement of copyright that has given rise to CIRs and CILs, as explained earlier. Without the underlying infringement, there would be no CIR or CIL: but the legal test is not whether a liability has arisen because there was an initial infringement of copyright; the liability must arise in respect of that underlying infringement, so that the liability is for the information transmitted. The liabilities or costs referred to by Mr White are wholly dependent upon the regulatory regime under the DEA and are essentially parasitic on the core obligations of the ISPs. In that sense they are one stage removed from the core obligations and do not, any more than those obligations, constitute any liability “for the information transmitted”. The same analysis applies to costs and/or compensation arising from subscriber appeals. The liability to pay such costs and/or compensation arises in essence from the failure of an ISP to discharge its core obligations under the DEA. Nor does any eventual requirement to take technical measures impose a liability “for the information transmitted”: such a requirement is an element in a regulatory procedure designed to put appropriate controls on those subscribers who, despite other measures, have persisted in copyright infringements.
Mr White frankly accepted that the foregoing obligations and costs could fall within Article 12 only if the crucial words of that Article meant “an economic or other burden falling on an ISP that would not have so fallen if there had not been a transmission of information in breach of copyright, etc.”, or other language to that effect. However, for the reasons already given, I am not able to extract such an extended meaning from the language of Article 12 without doing violence to that language and thereby upsetting the careful balance represented by the text. I should perhaps add that in this context Mr White laid stress on Article 12(3). He argued that what he called “primary” and “secondary” infringers would not benefit from the immunity conferred by Article 12(1), because such infringers, being necessarily closely involved with the infringement, could not be regarded as “mere conduits” under Article 12. Therefore the immunity must cover some class beyond primary and secondary infringers, and must in turn extend to the liabilities of ISPs under the DEA. However, in my judgment, the premise of that argument is very dubious. It seems to me that it is quite conceivable that under some systems of copyright law a transmitter, who was a mere conduit and who had in fact not perpetrated or “authorised” the copyright infringement, might be made liable, as a matter of policy, for the infringement as if he had so perpetrated or authorised it. The EU embraces many Member States and, in the absence of a provision such as Article 12, it seems to me very possible that one or more might choose a legislative solution to the tension between copyright owners and ISPs that more markedly advanced the interests of the creative industries. Article 12(1) would then serve a very valuable purpose of precluding the imposition of such extended liability on those who were mere conduits. In any event, even if Article 12 was aimed at persons other than primary and secondary infringers, in Mr White’s sense, that would still be a long way from showing that the immunity conferred by Article 12 was as extensive as that required for Mr White to succeed in this claim. Finally, in my view, as already explained, Article 12(3) is perfectly intelligible on a natural reading of Article 12(1).
(2) Breach of Article 15 ECD
Article 15 provides:
“1. Member States shall not impose a general obligation on providers, when providing the services covered by Articles 12, 13 and 14, to monitor the information which they transmit or store, nor a general obligation actively to seek facts or circumstances indicating illegal activity.
2. Member States may establish obligations for information society service providers promptly to inform the competent public authorities of alleged illegal activities undertaken or information provided by recipients of their service or obligations to communicate to the competent authorities, at their request, information enabling the identification of recipients of their service with whom they have storage agreements.”
Under the DEA a copyright owner will file a CIR with an ISP. The CIR must contain the name of the copyright owner who made the report; a description of the apparent infringement; and evidence of the apparent infringement that shows the subscriber’s IP address and the time at which the evidence was gathered. The ISP must then link the IP address with the details of a particular subscriber to whom the IP address was allocated at the material time. The ISP must notify the subscriber that it has received a CIR, informing the subscriber of the nature of the copyrighted work infringed and the time and date of the infringement. The ISP must maintain a database of individual subscribers linking the subscriber with CIRs received from copyright owners. Any CIL reported to a copyright owner will not specifically identify the subscriber, but the system can only be effective if the ISP maintains records linking CIRs to particular identified subscribers. Mr White submits that the DEA, therefore, requires ISPs to “monitor” the information which they transmit, in breach of Article 15(1) ECD.
The Commission’s Explanatory Memorandum (see paragraph 100 above) explained Article 15 as follows:
“This Article establishes that no general obligation should be imposed on providers to screen or to actively monitor third party content. This general rule does not affect the possibility of a court or law enforcement agency requesting a service provider to monitor, for instance, a specific site during a given period of time, in order to prevent or fighting (sic) specific illegal activity.”
That explanation is reflected in recital (47) to the ECD which states:
“Member states are prevented from imposing a monitoring obligation on service providers only with respect to obligations of a general nature; this does not concern monitoring obligations in a specific case and, in particular, does not affect orders by national authorities in accordance with national legislation.”
In case C-236/08 Google France v Louis Vuitton Advocate General Maduro observed in his Opinion:
“142. To my mind, the aim of [the ECD] is to create a free and open public domain on the internet. It seeks to do so by limiting the liability of those which transmit or store information, under its Articles 12 to 14, to instances where they were aware of an illegality.
143. Key to that aim is Article 15 of [the EC], which prevents Member States from imposing on information society service providers an obligation to monitor the information carried or hosted or actively to verify its legality. I construe Article 15 of that directive not merely as imposing a negative obligation on Member States, but as the very expression of the principle that service providers which seek to benefit from a liability exemption should remain neutral as regards the information they carry or host.”
In my judgment, there is nothing in this further material which would tend to suggest that “monitor” (or in French, “surveiller”) has other than its ordinary and natural meaning, that is, to inspect or examine some phenomenon. In the context of information society services, that means inspecting or examining the information that is being, or has been, transmitted, with a view to checking whether the information may lawfully be transmitted, or whether the transmission complies or complied with some other norm regulating the nature of information that may be transmitted. A “general” obligation refers to a systematic arrangement whereby the putative “monitor” is inspecting or examining information randomly, or by reference to particular classes of information or subscribers, and is not focusing on a specific instance that has for apparently good reason been brought to its attention.
The DEA does not require ISPs to monitor information in the above sense. The DEA may impose general obligations on ISPs, but these obligations cannot accurately be called “monitoring”. Nothing in the DEA requires ISPs to inspect or examine the information transmitted for any purpose, including the purpose mentioned earlier concerning the legality of the information transmitted. Copyright owners may well monitor information that is being transmitted, to check whether there is an apparent copyright infringement, but they are not ISPs and they are under no duty by virtue of the DEA to carry out any “monitoring”.
For present purposes, the role of the ISP under the DEA is essentially passive. It receives reports from those who have, in the relevant sense, “monitored” information that has been transmitted. It is the copyright owners who must show (according to substantive criteria and standards of evidence to be set out in the Code) that the information transmitted infringed the owners’ rights. The ISP has itself no general obligation to inspect or examine the information to see whether the transmission might infringe, or has infringed, the rights of any copyright owner. When the ISP sends a CIR to a subscriber, it is not “monitoring” any information. It is simply reporting to the subscriber that, according to information received from another person, the subscriber has infringed the rights of a copyright owner. Similarly, when the ISP sends a CIL to a copyright owner, it is not “monitoring” any information. It is simply reporting to the copyright owner that, according to information held by the ISP, a particular subscriber, identified through the IP address or addresses, has infringed the owner’s rights on a number of occasions (to be specified in the code). The fact that the ISP may by that stage know what kind of information the relevant subscriber is prone to download in breach of the copyright owner’s rights (it may, for example, be lawful pornography) does not, in my view, convert the ISP’s activity into one of “monitoring” that information. The knowledge acquired is no more than a by-product of the different non-monitoring role that I have set out above.
Mr White relied strongly on the Opinion dated 22 February 2010 of the European Data Protection Supervisor (“EDPS”) who, in describing “three strikes Internet disconnection policies” stated that they entailed “generalised monitoring of Internet users’ activities” (see paragraphs 16, 17 and also 21 and 22). In my view, this Opinion adds nothing. It is clear from the context that the EDPS was describing “monitoring” by copyright holders of internet usage with a view to discovering copyright infringement. He was not stating that ISPs under such arrangements were “monitoring” the information transmitted through their services; he was not offering a legal interpretation of Article 15 of the ECD (which would in any event appear to be outside his remit); and he was not saying that anything done by ISPs under the arrangements in question would constitute “monitoring” under that Article.
Mr White also argued that the DEA imposed on ISPs “a general obligation to seek facts or circumstances indicating illegal activity”, contrary to the second part of Article 15(1) ECD. However, it is the copyright owner who actively seeks such facts and circumstances and reports them to the ISP. The ISP itself has no such active role, either when it communicates a CIR to a subscriber or reports a CIL to a copyright owner: the CIR is already the work product of another person who has conducted an active investigation, and the CIL is simply a compilation of such reports in respect of a relevant subscriber. In the present context, the essential function of the ISP is not to investigate facts or circumstances, but to identify the wrongdoer. If a police officer observes a motor car passing through a red light, and asks an official at the vehicle licensing authority to disclose the name and address of the registered keeper (and presumed driver) of the car, that official, in responding, would not actively be “seeking facts or circumstances indicating illegal activity”. She would be doing no more than identifying, in response to a specific request, the person who, according to the investigation already completed by the police officer, had infringed the traffic code.
(3) Breach of Article 3 ECD
Mr Beal (who took responsibility for this part of the claim) submitted that the contested provisions infringed Article 3 ECD. Article 3 provides:
“1. Each Member State shall ensure that the information society services provided by a service provider established on its territory comply with the national provisions applicable in the Member State in question which fall within the coordinated field.
2. Member States may not, for reasons falling within the coordinated field, restrict the freedom to provide information society services from another Member State.
3. Paragraphs 1 and 2 shall not apply to the fields referred to in the Annex.
4. Member States may take measures to derogate from paragraph 2 in respect of a given information society service if the following conditions are fulfilled:
(a) the measures shall be:
(i) necessary for one of the following reasons:- public policy, in particular the prevention, investigation, detection and prosecution of criminal offences, including the protection of minors and the fight against any incitement to hatred on grounds of race, sex, religion or nationality, and violations of human dignity concerning individual persons, – the protection of public health, – public security, including the safeguarding of national security and defence,- the protection of consumers, including investors;
(ii) taken against a given information society service which prejudices the objectives referred to in point (i) or which presents a serious and grave risk of prejudice to those objectives;
(iii) proportionate to those objectives;
(b) before taking the measures in question and without prejudice to court proceedings, including preliminary proceedings and acts carried out in the framework of a criminal investigation, the Member State has:
– asked the Member State referred to in paragraph 1 to take measures and the latter did not take such measures, or they were inadequate,
– notified the Commission and the Member State referred to in paragraph 1 of its intention to take such measures.
5. Member States may, in the case of urgency, derogate from the conditions stipulated in paragraph 4(b). Where this is the case, the measures shall be notified in the shortest possible time to the Commission and to the Member State referred to in paragraph 1, indicating the reasons for which the Member State considers that there is urgency.
6. Without prejudice to the Member State’s possibility of proceeding with the measures in question, the Commission shall examine the compatibility of the notified measures with Community law in the shortest possible time; where it comes to the conclusion that the measure is incompatible with Community law, the Commission shall ask the Member State in question to refrain from taking any proposed measures or urgently to put an end to the measures in question.”
For reasons already explained, it is common ground that the contested provisions “restrict the freedom to provide information society services from another Member State”. It is plain that the DEA, if applied to undertakings in other Member States, would impose a significant economic burden on them, and would, following the well established case law of the Court of Justice, be a “restriction” on their ability to provide the relevant services from outside the UK.
However, the main issue in this context is whether the contested provisions in any event fall “within the coordinated field” under Article 3(2), or are taken out of that field by Article 3(3) and the annex to the ECD which disapplies Article 3(1) and 3(2) in relation to, among other things:
“Copyright, neighbouring rights, rights referred to in Directive 87/54/EEC and Directive 96/9/EC as well as industrial property rights.” (emphasis added)
The Commission’s Explanatory Memorandum (see paragraph 100 above) explains the reason for this particular form of derogation:
“The country of origin principle, as envisaged in this Directive, requires certain derogations in the specific cases cited in Annex 11 [as it then stood]. Indeed, certain specific areas cannot benefit from the country of origin principle because in these fields:
it is impossible to apply the principle of mutual recognition as set out in the case law of the Court of Justice concerning the principles of freedom of movement enshrined in the Treaty, or
it is an area where mutual recognition cannot be achieved and there is insufficient harmonisation to guarantee an equivalent level of protection between Member States,
there are provisions laid down by existing Directives which are clearly incompatible with Article 3 because they explicitly require supervision in the country of destination.”
Mr Eadie, therefore, submits that the matter could not be clearer. Article 3(3) and the Annex removes “copyright” from the scope of Article 3(1), for the good reason that it is a case falling within either the first or second indent cited above. The contested provisions concern copyright, and the UK, therefore, remains free to impose those provisions on ISPs established elsewhere in the EU and supplying the relevant services in the UK.
Mr Beal contends that the matter is not so straightforward. He points, in particular, to recital (5) of the ECD:
“It is important that the proposed directive on the harmonisation of certain aspects of copyright and related rights in the information society and this Directive come into force within a similar time scale with a view to establishing a clear framework of rules relevant to the issue of liability of intermediaries for copyright and relating rights infringements at Community level.”
He noted that Article 8 of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (“the Copyright Directive”) did deal with “sanctions and remedies”, and provided, in particular, in Article 8(3):
“Member states shall ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right.”
In short, and on the footing of these provisions, Mr Beal submitted that copyright has now been harmonised (by the Copyright Directive), the rationale for the derogation in Article 3(3) ECD, in so far as it relates to copyright, has fallen away, and Member States may take measures, falling within Article 3(1), relating to copyright, only if such measures are unequivocally and specifically authorised by the Copyright Directive. The contested provisions are not so authorised and they cannot, therefore, be invoked against ISPs established in other Member States.
In my view, the logical elegance of Mr Beal’s submission faces serious practical difficulties. First, the central premise is that, through the Copyright Directive, the law of copyright has now been entirely or at least sufficiently harmonised so that within the EU the exclusion found in the Annex to the ECD in relation to copyright has simply vanished, no longer buttressed by an extant rationale. But all references to the Copyright Directive, including its very title, speak of harmonising “certain aspects” of copyright law, indicating that complete harmonisation lies somewhere in the future. Whether or not the degree of harmonisation achieved at any point is sufficient to undermine the rationale for exclusion in the current text of the ECD for copyright would, in my view, require a fine exercise of legislative judgment, and is not a matter appropriate for judicial adjudication. I was referred to no authority that harmonisation in this field is complete (and my own researches simply confirm that the view of learned commentators is that it remains partial), or that harmonisation had advanced to such an extent that the rationale for the relevant exclusion could no longer be supported.
Furthermore, it seems to me that Mr Beal’s interpretation would create intolerable legal uncertainty in a system of law (namely EU law) where the principle of legal certainty has been accorded great weight. It must be remembered that the relevant exclusion remains in the legislative text of the ECD: the Community legislation did not remove that exclusion, either at the time that the Copyright Directive came into force (in May 2001), or at the time by which Member States had to implement the Copyright Directive (22 December 2001), or at any subsequent time. In my judgment, if the Community legislator had wished to abrogate the relevant exclusion, it would, in the interests of legal certainty, expressly have removed the exclusion by an appropriate amendment of the ECD, and would not have left the matter in the air, susceptible to competing and conflicting interpretation.
Finally, on Mr Beal’s approach, the relevant exclusion would have had a relatively short shelf-life: after 17 January 2002 (the implementation date for the ECD) Member States could have retained provisions on copyright that otherwise fell within Article 3(1), relying on the relevant exclusion. However, by 22 December 2002 (that is, less than a year later) such provisions could no longer be invoked against ISPs established in other Member States unless, following Mr Beal’s argument, the Copyright Directive expressly authorised them. Short shelf lives generally need prominent signposting. If such a result had been intended, an express provision in the Copyright Directive abolishing the relevant exclusion, with an appropriate explanatory recital, could have been expected, with the proverbial red hand pointing at it.
I accept Mr Beal’s submission only to this extent. After the date for implementing the Copyright Directive had been reached, Member States could no longer lawfully maintain provisions in national copyright law (broadly interpreted) that conflicted with the provisions of the Directive. However, the contested provisions do not so conflict. In particular, Article 8(3), cited above, does no more than impose an obligation on Member States to secure the minimum protection there referred to. It does not preclude a Member State from introducing additional measures that it believes are reasonably required to facilitate rightsholders in exercising effective remedies against persistent copyright infringers.
In any event, Mr Eadie submitted, the initial obligations do not yet have legal effect, and there is nothing in the DEA that would preclude the Code from disapplying the initial obligations in the case of ISPs established in other Member States. The Code is to be notified to the Commission and other Member States, and the Commission, in particular, could raise any concerns about the application of Article 3(1) ECD and the scope of the exemption for copyright. No doubt the Commission would wish to assure itself that the relevant provisions fairly fell within the province of copyright, that they did not conceal other restrictions unrelated to copyright, that they were reasonably proportionate to the aim of copyright protection, and that they did not discriminate against ISPs in other Member States. If, as Mr Beal submitted, Article 3(1) did prohibit the UK from applying the contested provisions to ISPs established in other Member States, the UK law in its final form would need to reflect that position, and no complaint could legitimately be made that the scope of the initial obligations had been limited so as to comply with EU law. The Secretary of State could extend Regulation 4(3) of the Electronic Commerce (EC Directive) Regulations for that purpose, if need be. I accept Mr Eadie’s submission on this point. Even if, contrary to my earlier finding, the exemption for copyright did not apply, and Article 3(1) would otherwise prohibit the application of the contested provisions to ISPs in other Member States, it cannot be determined at this stage, before the Code has been promulgated and brought into force, and before the initial obligations have achieved legal effect, that the contested provisions would inevitably infringe EU law.
The Third Ground: Breach of the Data Protection Directive (“DPD”) and of the Privacy and Electronic Communications Directive (“PECD”)
It is first necessary to set out the applicable provisions of the DPD and of the Data Protection Act 1998, which implements the DPD in the United Kingdom, and of the PECD.
The Data Protection Directive
Article 2(a) of the DPD defines “personal data” to mean
“any information relating to an identified or identifiable natural person (“data subject”); an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity.”
Article 2(b) of the DPD defines “processing of personal data” (“processing”) to mean
“any operation or set of operations which is performed upon personal data, whether or not by automatic means, such as collection, recording, organisation, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, blocking, erasure or destruction.”
Article 2(d) of the DPD defines “controller” as
“The natural or legal person, public authority, agency or any other body which alone or jointly with others determines the purposes and means of the processing of personal data; where the purposes and means of processing are determined by national or Community laws or regulations, the controller or the specific criteria for his nomination may be designated by national or Community law.”
Article 3(2) of the DPD provides that the Directive shall not apply to the processing of personal data by a natural person in the course of a purely personal or household activity.
Article 7 of the DPD directs Member States to provide that personal data may be processed only in certain specified circumstances, one of which, under Article 7(c), is where
“processing is necessary for compliance with a legal obligation to which the controller is subject.”
Another circumstance, under Article 7(e), is where
“processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller or in a third party to whom the data are disclosed,”
and Article 7(f) refers to
“processing that is necessary for the purposes of the legitimate interests pursued by the controller or by the third party or parties to whom the data are disclosed, except where such interests are overridden by the interests for fundamental rights and freedoms of the data subject which require protection under Article 1(1).”
Article 8(1) of the DPD erects a further hurdle in the case of special categories of data, in that it directs Member States to
“prohibit the processing of personal data revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, trade-union membership, and the processing of data concerning health or sex life.”
Article 8(2) provides a number of exceptions to that prohibition, which include at Article 8(2)(e) where
“the processing relates to data which are manifestly made public by the data subject or is necessary for the establishment, exercise or defence of legal claims.”
Article 8(4) allows Member States, “subject to the provision of suitable safeguards”, and “for reasons of substantial public interest”, to lay down exemptions in addition to those laid down in Article 8(2), and provided that such derogations are notified to the Commission in accordance with Article 8(6).
The Data Protection Act 1998
The DPD was implemented in the United Kingdom by the Data Protection Act 1998 (“DPA 1998”).
Section 1(1) DPA 1998 defines “personal data” to mean
“data which relate to a living individual who can be identified –
(1) from those data, or
(2) from those data and other information which is in the possession of, or is likely to come into the possession of, the data controller, …”
Definitions of “data subject” and “data processing” are also provided by section 1(1) DPA 1998; they do not materially differ from those in Article 2 of the DPD.
Section 1(4) DPA 1998 provides that
“Where personal data are processed only for purposes for which they are required by or under any enactment to be processed, the person on whom the obligation to process the data is imposed by or under that enactment is for the purposes of this Act the data controller.”
Section 2 DPA 1998 defines “sensitive personal data” to mean personal data consisting of
“information as to
(1) the racial or ethnic origin of the data subject,
(2) his political opinions,
(3) his religious beliefs or other beliefs of a similar nature,
(4) whether he is a member of a trade union… ,
(5) his physical or mental health or condition,
(6) his sexual life, …”
Section 4(4) provides that (subject to exemptions set out later in the Act)
“it shall be the duty of a data controller to comply with the data protection principles [set out in Schedule 1 of the Act] in relation to all personal data with respect to which he is the data controller.”
The first of those principles is that
“Personal data shall be processed fairly and lawfully and, in particular, shall not be processed unless –
(1) at least one of the conditions in Schedule 2 is met, and
(2) in the case of sensitive personal data, at least one of the conditions in Schedule 3 is also met.”
The conditions set out in Schedule 2 include at paragraph 3 that
“The processing is necessary for compliance with any legal obligation to which the data controller is subject, other than an obligation imposed by contract.”
The conditions set out in Schedule 2 also include at paragraph 5 that
“The processing is necessary –
(1) for the administration of justice,
(aa) for the exercise of any functions of either House of Parliament,
(2) for the exercise of any functions conferred on any person by or under any enactment,
(3) for the exercise of any functions of the Crown, a Minister of the Crown or a government department, or
(4) for the exercise of any other functions of a public nature exercised in the public interest by any person.”
The exemptions in respect of sensitive personal data have been implemented in domestic law in Schedule 3 of the DPA 1998. The relevant paragraphs of that Schedule for present purposes are:
“5. The information contained in the personal data has been made public as a result of steps deliberately taken by the data subject.
6. The processing
(a) is necessary for the purpose of, or in connection with, any legal proceedings (including prospective legal proceedings),
(b) is necessary for the purpose of obtaining legal advice; or
(c) is otherwise necessary for the purposes of establishing, exercising or defending legal rights.
10. The personal data are processed in circumstances specified in an order made by the Secretary of State for the purposes of this paragraph.”
An order under paragraph 10 has been made: it is the Data Protection (Processing of Sensitive Personal Data) Order 2000 (SI 2000/417) (“the 2000 Order”).
The Claimants’ Submissions on the Third Ground
It is common ground that sections 124A and 124B, taken with the initial obligations code, are likely to require ISPs to process “personal data” within the meaning of Articles 2(a) and (b) of the DPD. The ISP must link the IP address provided by the copyright owner with an individual subscriber’s name and address, and write to them and compile lists. However, it is also accepted that the ISP is under a legal obligation to notify the subscriber if a CIR is made, and to complete CILs, to the extent that the initial obligations code will provide, and that such operations will be expressly authorised by paragraphs 3 and/or 5 of Schedule 2 to the DPA 1998 in accordance with Article 7(c) and/or 7(e) of the DPD. The focus in this ground, therefore, was more on the position of copyright owners.
Mr White submitted that Article 2 DPD, read in conjunction with Recital (26), gives a definition of “personal data” which is intended to cover all information relating to an identified or identifiable person, either directly or indirectly. To determine whether a person is identifiable, account should be taken of all the means likely reasonably to be used either by the controller or by any other person to identify the said person. A Working Party was set up under Article 29 of the DPD. It is an independent European advisory body on data protection and privacy, and its tasks are set out in Article 30 DPD and Article 15 PECD. In its Opinion 4/2007 (01248/07/EN, WP 136), the Working Party concluded that dynamic IP addresses were personal data:
“Internet access providers and managers of local area networks can, using reasonable means, identify Internet users to whom they have attributed IP addresses as they normally systematically “log” in a file the date, time, duration and dynamic IP address given to the Internet user. The same can be said about Internet Service Providers that keep a logbook on the HTTP server. In these cases there is no doubt about the fact that one can talk about personal data in the sense of Article 2(a) of the [DPD] (page 16).”
A little further on the Working Party considered specifically the position of copyright owners:
“Especially in those cases where the processing of IP addresses is carried out with the purpose of identifying the users of the computer (for instance, by Copyright Holders in order to prosecute computer users for violation of intellectual property rights), the controller anticipates that the “means likely reasonably to be used” to identify the persons will be available e.g. through the courts appealed to (otherwise the collection of the information makes no sense), and therefore the information should be considered as personal data.” (Page 17)
Furthermore, the CIR will identify the nature of the digital material that has been unlawfully copied by a subscriber. The nature of this material may reveal special categories of personal data within Article 8 DPD, relating to racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership, or relating to health or sex life of an individual, as was recognised in the Opinion of the EDPS (see paragraph 117 above) at [32].
In the written outline submissions the Defendant took issue with these propositions. At the hearing, however, Mr Eadie showed a marked lack of enthusiasm for pursuing the matter. As to “personal data”, the main point advanced in writing was that the purpose of the CIRs/CILs was to identify the subscriber, and the subscriber may not have been the copyright infringer. (It is necessary only to think of internet cafés or wi-fi hotspots in libraries). However, as Mr White submitted, the data nonetheless relates to an identified or identifiable person because the subscriber, who can be identified through the dynamic IP address, is inevitably linked to the data (the particulars of the copyright infringement, including the dynamic IP address) as the person who, in a broad sense, has facilitated the infringement, even if he is not the infringer and could incur no legal liability for the infringement. The same point was made in respect of special data under Article 8, but the answer is the same: an identified or identifiable person (the subscriber) is inevitably linked, through the dynamic IP address, to material that might, for example, tend to show unusual sexual proclivities. It does not seem to me to be sufficient to show that the subscriber might not be the person who putatively has such proclivities, where the relevant link was to the subscriber’s internet access, and the inference would be that he was either a person who has permitted access to someone with such proclivities or has them himself. It was also argued that, even if the subscriber had downloaded such material, it would be unsafe to assume that the subscriber had the characteristics that the downloaded material tended to show. It is true that a particular subscriber might be downloading copyrighted pornographic images for the purposes of scholarly research into the efficacy (or lack thereof) of the Obscene Publications Act 1959, but in the real world the inference, whether or not accurate, would tend to be less favourable.
I shall, therefore, proceed on the basis that the relevant data which would be processed by copyright owners would be personal data and that some of it would be special data.
However, the important issue on this ground of challenge is whether the relevant processing of personal data is permissible.
The Defendant and the Interested Parties rely on Article 8(2)(e) (which relates strictly to special categories of data): the processing is necessary for “the establishment, exercise or defence of legal claims”. That would appear to be the precise purpose of the contested provisions of the DEA: the copyright owner will be able, through the procedures under the DEA, to establish not only that there has been an infringement of copyright but also who is responsible for the infringement.
Mr White argued that the provision applied only if the data controller was sure, at the beginning and throughout the relevant “processing”, that at the end of the processing a legal claim would be brought. However, in my view, the copyright owner might not in a particular case decide to pursue legal proceedings, but that does mean that the action that he took under the DEA was not for the purpose of establishing or exercising such a claim. Mr White’s interpretation would create intolerable legal uncertainty and something of a “Catch 22” situation. The data controller might not know at an early stage in processing the relevant data whether he intended at the end of the process to commence legal proceedings, and the processing could be rendered impermissible if in the event he did not commence such proceedings; and it might be only after the relevant data processing that he could sensibly decide whether it was appropriate to commence proceedings. The data controller might change his mind during the course of processing, and the legal position would be obscure.
Article 8(2)(e), as noted, does not in strict terms apply to processing under Article 7. However, it would be absurd if that particular basis did not apply generally, for it would otherwise mean that processing of data that fell short of special category data was permissible in more restricted circumstances than those applied to special category data. It seems to me that the only sensible interpretation is that the circumstances described in Article 8(2)(e) inevitably fall within Article 7(f) as “processing … necessary for the purposes of the legitimate interests pursued by the controller or by the third party or parties to whom the data are controlled” and necessarily observe the balance required by the proviso to that Article.
The final point made by Mr Eadie under this topic, which seemed to me also to have force, was that if there were any doubt about the application of Article 8(2)(e) to the relevant processing, the United Kingdom could, before the Code came into legal effect, lay down an exemption under Article 8(4), based upon a “substantial public interest”, namely, the better protection of the rights of copyright owners.
Mr White also submitted that the data processed was “traffic data” for the purposes of Article 2 PECD, namely, “data processed for the purpose of the conveyance of a communication on an electronic communications network or for the billing thereof”. The relevant processing did not comply with the criteria under Article 6 PECD, and the derogation under Article 15 did not apply.
Mr Eadie was content to proceed on the footing that the data was “traffic data” and that a derogation for processing was necessary under Article 15(1) which provides so far as is material:
“1. Member States may adopt legislative measures to restrict the scope of the rights and obligations provided for in Article 5, Article 6, Article 8(1), (2), (3) and (4), and Article 9 of this Directive when such restriction constitutes a necessary, appropriate and proportionate measure within a democratic society to safeguard national security (i.e. State security), defence, public security, and the prevention, investigation, detection and prosecution of criminal offences or of unauthorised use of the electronic communication system, as referred to in Article 13(1) of Directive 95/46/EC. To this end, Member States may, inter alia, adopt legislative measures providing for the retention of data for a limited period justified on the grounds laid down in this paragraph. All the measures referred to in this paragraph shall be in accordance with the general principles of Community law, including those referred to in Article 6(1) and (2) of the Treaty on European Union.
1a. Paragraph 1 shall not apply to data specifically required by Directive 2006/24/EC of the European Parliament and of the Council of 15 March 2006 on the retention of data generated or processed in connection with the provision of publicly available electronic communications services or of public communications networks to be retained for the purposes referred to in Article 1(1) of that Directive.”
The protection of property is not explicitly referred to in Article 15, but the scope of Article 15 was explored in Case C-275/06 Productores de Musica de España (Promusicae) v Telefonica de España SAU, where the Court of Justice stated at [52]:
“It is clear, however, that Article 15(1) of [PECD] ends the list of the above exceptions with an express reference to Article 13(1) of Directive 95/46. That provision also authorises the Member States to adopt legislative measures to restrict the obligation of confidentiality of personal data where that restriction is necessary inter alia for the protection of the rights and freedoms of others. If they do not specify the rights and freedoms concerned, those provisions of Article 15(1) of Directive 2002/58 must be interpreted as expressing the Community legislature’s intention not to exclude from their scope the protection of the right to property or situations in which authors seek to obtain that protection in civil proceedings.”
Mr White submitted that the Court was there holding that the derogation in Article 15(1) was restricted to the context of “protection in civil proceedings”, which would inevitably involve some “judicial oversight”. It is correct that the question asked by the national court related to a context of civil proceedings and that at [70] the Court of Justice answers the referring court’s question (see [41] of the judgment) by stating that the relevant directives “do not require the Member State to lay down … an obligation to communicate personal data in order to ensure effective protection of copyright in the context of civil proceedings”. However, the Court’s ruling, at [53] cited above, plainly goes beyond protection in the context of civil proceedings and includes “the protection of the right to property” within the scope of the “protection of the rights and freedoms of others” under Article 15(1). It is indisputable that the contested provisions are intended to promote the protection of the right to property, namely, copyright, and therefore, fall within Article 15(1) as interpreted by the Court.
Mr White at the hearing advanced a new point: some of the “traffic data” was “retained information” under Article 15(1)(a) PECD and, therefore, was not covered by the derogation at all. Mr Eadie showed the purposes of Directive 2006/24/EC (against the background of the London bombings of July 2005) and that the only sensible meaning of Article 15(1)(a) was that the derogation under Article 15 was not required in respect of that material. Mr White did not seek to reply to what would appear to be the obvious purposive interpretation, acknowledging that this belatedly raised point was misconceived.
Ground 4: Breach of the Authorisation Directive (“AD”)
This is an additional ground, for which permission has not yet been given. In the pleadings it has stood as the fifth ground, but it is convenient to deal with it before moving to the last ground of challenge, namely, proportionality.
Article 2(2) of the AD defines “general authorisation” as follows:
“‘general authorisation’ means a legal framework established by the Member State ensuring rights for the provision of electronic communications networks or services and laying down sector specific obligations that may apply to all or to specific types of electronic communications networks and services in accordance with this Directive.”
Some assistance in interpreting Article 2(2) is given by recital (18):
“The general authorisation should only contain conditions which are specific to the electronic communications sector. It should not be made subject to conditions which are applicable by virtue of other existing national law which is not specific to the electronic communications sector. Nevertheless, the national regulatory authorities may inform network operators and service providers about other legislation concerning their business, for instance through references on their websites.”
Recital (18) is reflected in Article 6(3) AD:
“The general authorisation shall only contain conditions which are specific for that sector and are set out in Part A of the Annex and shall not duplicate conditions which are applicable to undertakings by virtue of other national legislation.”
It is common ground that the general authorisation scheme for electronic communications networks and services is intended to allow any person who wishes to provide such networks and services to do so in accordance with the publicly available set of conditions. Such schemes replace what was commonly found in national systems of regulation, namely, individual licensing arrangements under which licence conditions could be imposed. The nature of such arrangements, and the conditions imposed by the authorities in Member States, could vary substantially and could create significant barriers to new entrants, particularly new entrants from other Member States. The General Conditions under the AD are conditions which are (i) imposed for the purpose of regulating and/or (ii) directed at regulating the manner in which, or means by which, electronic communications networks and services are to be provided. Article 4 AD specifies the minimum content of the rights enjoyed by an authorised person, including the right (a) to provide electronic communications networks and services; and (b) to have their application for the necessary rights to install facilities considered in accordance with Article 11 of the Framework Directive.
In the United Kingdom Ofcom, as the national regulatory authority, has drawn up “General Conditions of Entitlement” which have been formulated, decided upon and published in accordance with the AD and Part II of the CA 2003.
It is of some importance that Article 10 of the AD creates a specific regime for the enforcement of the conditions of the general authorisation. The regime provides for a range of proportionate penalties for proven breach of any condition, and in certain circumstances a person who has contravened the conditions is liable to be prohibited from providing electronic communications networks and services, and so effectively excluded from the general authorisation. Providers of the relevant networks and services are not of course exempted from having to comply with such of the Member State’s national law requirements as may be relevant to their activities (provided that those requirements accord with EU law), but Member States may not make the general authorisation itself subject to compliance with such requirements of national law. A Member State cannot suspend or terminate a person’s authorisation under the general authorisation for non-compliance with a requirement of national law which is not contained, and should not properly be contained, in the general authorisation. There is, therefore, an important difference between an obligation which has been specified as a condition contained in the general authorisation, and a requirement which has not been so specified and is outwith the general authorisation published by the Member State.
Mr White submitted, first, that the contested provisions fell within the terms of the definition in Article 2(2) AD. It did not matter that those provisions had not found their way into the actual arrangements made by Ofcom to implement the AD (see paragraph 41-42 and 173: the initial obligations code will not be imposed by Ofcom as part of the General Conditions of Entitlement). These provisions ought to have been included in the general authorisation. However, and secondly, if they had been so included, they would have had no legal force because they were not conditions of a kind that are permitted by the general authorisation, as specified in the annex to the AD.
In my view, the first proposition rests upon a false premise, namely, that, as a result of Article 2(2), any “sector specific obligation” must be contained in the conditions of the general authorisation. It is correct that nothing other than a sector specific obligation may be contained in the conditions of the general authorisation. It does not follow that each and every such obligation must be so contained, and there are good reasons why that should not be the case.
First, to insist that each and every sector specific obligation has to be included in the conditions of the general authorisation would create serious tension with the Framework Directive. The AD is subject to Article 1(3) of the Framework Directive, which provides that both the Framework Directive itself, and the “Specific Directives” which are to be read alongside it (including the AD: see Article 2(1)) are “without prejudice to measures taken at Community or national level, in compliance with Community law, to pursue general interest objectives, in particular relating to content regulation and audio-visual policy.”
Recital (6) to the Framework Directive states:
“Audio-visual policy and content regulations are undertaken in pursuit of general interest objectives, such as freedom of expression, media pluralism, impartiality, cultural and linguistic diversity, social inclusion, consumer protection and the protection of minors. The Commission communication “Principles and guidelines for the Community’s audio-visual policy in the digital age”, and the Council’s conclusions of 6 June 2000 welcoming this communication, set out the key actions to be taken by the Community to implement its audio-visual policy.”
The Commission communication to which recital (6) refers recognises copyright protection and the taking of measures against piracy as being a “central element” of the Commission’s audio-visual policy (Commission communication “Principles and guidelines for the Community’s audio-visual policy in the digital age” (COMM (1999 657 final) at point 3.3).
It is readily conceivable that certain national measures falling within the relevant “audio-visual policy and content regulation” might be directed at suppliers of telecommunication services and networks. The contested provisions are one type of such measures. In my view, it would then be distinctly odd that, on the one hand, Article 1(3) of the Framework Directive expressly excluded such measures from the scope of the relevant Directives, including the AD, but, on Mr White’s interpretation of Article 2(2) AD, such measures would have to be specifically included in the conditions of general authorisation under the AD, solely because they were sector specific obligations. In my judgment, this obvious tension, if not inconsistency, between the applicable provisions tells heavily against Mr White’s interpretation.
Secondly, the forced inclusion of provisions of the general law, such as the contested provisions, within the conditions of the general authorisation would have the most serious policy consequences. For example, any aspiring new entrant from another Member State which was contemplating the possibility of seeking to compete in the supply of telecommunications networks or services in the UK would face the prospect of adherence to, and compliance with, provisions of the general law such as the contested provisions as part of the price of entry. In the last resort failure to meet such a putative “condition” of the general authorisation would mean not simply incurring liability under the general law (such as financial penalties under the DEA) but also the forfeiture of the right to supply the relevant services in the UK and the potential loss or diminution in value, of a substantial capital investment in the UK. The potential deterrence to competition and inter-state trade would be obvious. Indeed, if the United Kingdom sought to include provisions of the general law such as the contested provisions within the conditions of the general authorisation, it is not hard to imagine that the Commission would object fiercely, not on the technical ground that the conditions did not fall within the Annex to the AD, but because the very attempt to include general measures of that nature, in this case relating to audio-visual policy and content, within the basic open ticket to carry on the relevant business in the UK, was wholly misconceived in principle. The response that the putative “condition” was properly inserted in the general authorisation because it was “sector specific” would, in my view, receive short shrift, and rightly so.
Thirdly, Mr White is somewhat hoist by his own petard if one compares his interpretation of Article 2(2) AD with the implications of his second ground of challenge. It should be recalled that if his interpretation of Article 3(1) ECD were correct, the Code bringing the initial obligations into legal effect would necessarily have to disapply them to ISPs established in other Member States. (The Defendant accepts that proposition). However, if his interpretation of Article 2(2) AD were correct, no such disapplication would succeed because, perforce, sector specific provisions of the general law, such as the contested provisions would have to be included in the general authorisation, but could not be so included because they did not fall within the subject matters of the Annex. The net result would be that general national measures designed to promote an important objective of public policy, otherwise assumed for the purposes of this argument to be lawful under EU law, could not, by virtue of Article 2(2) AD, be implemented in the UK, even if the implementation was only in respect of UK-established ISPs. It is difficult, if not impossible, to see what sensible policy, either at national or EU level, such an interpretation and result would promote.
In any event, I reject Mr White’s second proposition that the contested provisions, if they were contained in the general authorisation, would not be “restrictions in relation to the transmission of illegal content”. The initial obligations require ISPs to take steps to assist copyright owners in asserting their rights against those who unlawfully download copyright material from the internet, and to curtail such practices. Such a requirement, in my view, in the factual setting in which it arises, “relates” to the transmission of illegal content within paragraph 9 of the Annex to the AD. Mr White’s argument was that the putative restriction would not be “in accordance with the [ECD]”, as stipulated by paragraph 9. Mr White contended that “in accordance with” meant something like “mandated” or “specifically authorised” by the ECD. However, in this context, it seems to me that the reference is principally to section 4 of the ECD, which confers important immunities on ISPs, and that the intention of paragraph 9 is that any condition imposed “in relation to the transmission of illegal content” should not limit or undermine such immunities. For the reasons set out earlier, the contested provisions do not limit or undermine the relevant immunities conferred by the ECD, and they would not, therefore, be inconsistent with paragraph 9 even if, quod non, they formed part of the conditions of the general authorisation.
Ground 4: Breach of Article 12 AD
There is a second ground of attack under the AD, namely, that the Costs Order breaches Article 12 AD and the Annex at A2. That Article provides, so far as is material:
“1. Any administrative charges imposed on undertakings providing a service or a network under the general authorisation or to whom a right of use has been granted shall:
(a) in total, cover only the administrative costs which will be incurred in the management, control and enforcement of the general authorisation scheme and of rights of use and of specific obligations as referred to in Article 6(2), which may include costs for international cooperation, harmonisation and standardisation, market analysis, monitoring compliance and other market control, as well as regulatory work involving preparation and enforcement of secondary legislation and administrative decisions, such as decisions on access and interconnection; and
(b) be imposed upon the individual undertakings in an objective, transparent and proportionate manner which minimises additional administrative costs and attendant charges.
2. Where national regulatory authorities impose administrative charges, they shall publish a yearly overview of their administrative costs and of the total sum of the charges collected. In the light of the difference between the total sum of the charges and the administrative costs, appropriate adjustments shall be made.”
The Annex provides, so far as is material:
“The conditions listed in this Annex provide the maximum list of conditions which may be attached to general authorisations…
….
2. Administrative charges in accordance with Article 12 of the Directive.”
In broad terms, the Costs Order refers to three kinds of cost. First, “qualifying costs” are the costs incurred by Ofcom or the appeals body in carrying out functions under the copyright infringement provisions (as specified in section 124N DEA), including costs incurred by Ofcom under those provisions in appointing the appeals body or in establishing a body corporate to be the appeals body. Such costs would ordinarily be regarded as administrative costs, and any sums charged on ISPs in respect of such costs would ordinarily be regarded as “administrative charges”. ISPs will bear 25 per cent of such costs by way of payment of fees to Ofcom.
Secondly, “relevant costs” are costs which would be reasonably and efficiently incurred by a notional qualifying internet service provider in carrying out its obligations under the copyright infringement provisions. Under paragraph 1(1) of the Schedule to the Costs Order, such costs may (and most likely will) include the costs of, for example, receiving a CIR, matching the IP address to a subscriber on receipt of a CIR, generating and sending a notification of the CIR to the subscriber and compiling and providing CILs to copyright owners. These are the internal operating costs that ISPs will bear in discharging their obligations under the DEA. They are not part of Ofcom’s administrative costs. ISPs could be left to meet these costs for they are the ISPs’ own internal costs. However, the Costs Order provides a mechanism by which ISPs can recover part of the costs incurred from copyright owners. Using relevant cost information, Ofcom will design a model of a notional efficient ISP and calculate the total costs that such an ISP would incur in discharging its obligations under the DEA.
Using that model, Ofcom then calculates an amount that an ISP would have to charge a copyright owner for each CIR in order that the ISP would recover 75 per cent of its total costs of discharging its obligations under the DEA. That is then the amount that the copyright owner must pay (by way of “notification fee”) to the ISP in respect of each CIR. If this system operated correctly, ISPs would, therefore, recover from copyright owners 75 per cent of the costs incurred by ISPs in discharging their obligations. ISPs would be left to bear 25 per cent of their own operating costs in carrying out their functions under the DEA. Of course, a particular ISP may be more or less efficient than the notional ISP in the Ofcom model, and so recover more or less than 75 per cent of its costs. It is also perhaps conceivable that a particular ISP receives more or fewer CIRs than it expected to receive and, therefore, might receive a total amount greater or less than 75 per cent of actual costs (if some of the costs incorporated in the model included overhead costs which might then be over or under-absorbed depending on the real “output” of CIRs). But even the worst case scenario would leave the hopelessly inefficient ISP, which undershot its target number of CIRs by a mile, bearing 100 per cent of its own operating costs of discharging its functions under the DEA, that is, in no worse a position than if there were no mechanism to enable ISPs to recover any part of their own operating costs.
Third, the appeals body may set a “case fee” charged in respect of each subscriber appeal which it receives. The case fee must be based on the costs that the appeal body may incur in handling and determining a subscriber appeal, to the extent that such costs are not recovered by the fees payable to Ofcom in respect of the qualifying costs. The relevant ISP to the appeal will bear 25 per cent of the case fee in the appeal.
Mr White contended that the contested provisions, so far as they dealt with “qualifying costs”, “relevant costs” and “case fees”, were conditions of the general authorisation, or what should have been included within the general authorisation, and, therefore, were not permitted as such by the Annex to the AD. In particular, the provisions relating to “relevant costs” could not be a condition allowed by paragraph 2 of the Annex, since these costs were not charges falling within Article 12 AD.
For the reasons given earlier, I do not accept that the contested provisions, including the provisions in respect of “qualifying costs”, “relevant costs” and “case fees” are conditions of a general authorisation. The contested provisions are simply outwith the scope of the general authorisation, and it would be wrong in principle to include them.
However, the matter does not end there because Article 12, standing alone, prohibits in any event “administrative charges” which cover costs extending beyond those identified in that Article. The question, therefore, arises whether any of the cost provisions is prohibited on that ground.
In my view, “relevant costs” are in this context irrelevant. They are not “administrative charges” at all. ISPs do not pay “relevant costs”: they will incur such costs internally in order to discharge statutory obligations under the DEA. The Costs Order is simply a means by which ISPs can recover from copyright owners a (substantial) proportion of internal costs that ISPs have had to incur. The DEA could have left ISPs to bear such costs entirely and have provided no mechanism for recovering any part of such costs. However, Parliament provided that in fairness copyright owners should reimburse ISPs for a substantial part of the costs incurred by ISPs in discharging their obligations under the DEA.
Similarly, it does not seem to me that “case fees” can be regarded as “administrative charges” under Article 12 AD. The fees arise because a subscriber has brought a specific appeal, involving a relevant ISP and a relevant copyright owner. The fees are intended to do no more than ensure that the judicial vehicle for resolving disputes under the DEA is adequately funded.
However, charges imposed to recover “qualifying costs” would ordinarily be regarded as “administrative charges” and would, in principle, appear to be administrative charges under Article 12 AD.
Consistently with the case on the meaning and scope of Article 2(2) AD, the Defendant argues that the charges imposed to ensure the recovery of “qualifying costs” are not administrative charges, because ISPs do not pay them “under” the authorisation, that is, they do not pay them in their capacity as authorised persons. ISPs pay them because they are ISPs who are required by other national legislation to discharge certain statutory duties.
For the reasons already given, I agree that the contested provisions do not, and could not properly, form part of the conditions of the general authorisation. However, Article 12 does not in terms say that administrative charges are charges that ISPs pay only in their capacity as authorised persons, that is, in meeting the conditions set by the general authorisation. Article 12(1) appears simply to identify a class of person, namely, “an undertaking providing a service or a network under the general authorisation or to whom a right of use has been granted”. No charges of an administrative nature may then be imposed upon such persons, if such charges fall, and fall substantially, on persons of that description. Corporation tax, business rates, etc would not be caught because those charges, even if administrative, do not fall exclusively or substantially on persons within the protected description.
It appears to me that the interpretation put forward by the Defendant does not represent the natural meaning of the language of Article 12(1). That interpretation also seems to carry unsatisfactory policy consequences. A narrow reading would potentially allow Member States to impose charges on authorised persons, and only or substantially on authorised persons, and then to argue that such charges were imposed on them not “in their capacity as such”, that is, in meeting the conditions of the general authorisation, but because they were doing other things under national law. It does not require great imagination to see that the “other things” relied upon might be contrived, vague or dubious, and that the charges in such cases were more likely to be a disguised form of levy or tax exclusively or substantially charged on authorised persons, which was in truth being charged because telecommunication enterprises tend to be perceived as easy and worthy targets of such levies or taxes. Such a potential effect would run counter to the rationale of Article 12 – to prohibit such specific levies, charges or forced subsidies – as clearly articulated by the Court of Justice in the leading case of Case C – 296/06 Telecom Italia [2008] ECR 1-801.
The Defendant also argued that the charges were not administrative charges because ISPs could meet them, in whole or in part, out of the relevant costs recovered, by way of notification fees, from copyright owners. I confess that I had difficulty in understanding this argument. Notification fees are paid exclusively to meet 75 per cent of “relevant costs” incurred by ISPs. They are not paid to subsidise ISPs’ liability to Ofcom. It may be that, looked at as a whole, ISPs will not be out of pocket. However, that does not seem to me to be the right test. The competitive structure in a telecommunications market might be such that the (few) operators could readily pass on most if not all taxes or levies imposed on them, but that fact would not take such taxes or levies outside the prohibition. It may be that the recovery rate of the relevant costs could be lawfully adjusted to take account of the fact that only copyright owners could be charged qualifying costs, but that is not an issue that I have to decide in this claim.
It is common ground that if the charges in respect of “qualifying costs” amount to “administrative charges” within Article 12, they do not relate to any of the matters specified under Article 12, and must, therefore, be unlawful.
Ground 4: Discrimination
The Claimants also argue that the proposed exclusion of small-scale ISPs from the scope of the initial obligations is “discriminatory” under Article 6 of the AD (assuming that the AD applies at all to the contested provisions). However, it appears from the evidence that Ofcom proposed the initial qualifying threshold of 400,000 subscribers as a starting point because it represented a proportionate response. The six ISPs who have more than 400,000 subscribers together account for 93.4 per cent of the residential and SME business broadband market. There is a natural break point below the big six, in that the smallest of the big six is still twice the size of the next in line. In my view, it is reasonable and proportionate to concentrate on the larger ISPs in the first instance, and to identify any other individual ISPs where there are high levels of copyright infringement on a case by case basis. Any alleged “migration” of infringers to smaller ISPs is speculative at this stage and could be addressed if it began to present real problems.
As to the exclusion of mobile network operators (“MNOs”), the evidence shows that mobile networks are less conducive to online copyright infringement due to technical features such as speed and capacity constraints, traffic management policies, and pricing relative to fixed lines. Internet traffic carried by MNOs represents only a very small proportion (less than 5 per cent) of the overall file-sharing problem. It was therefore considered disproportionate to include MNOs at the present time and this appears to me to be a legitimate policy choice for the Defendant to make, having regard to proportionality. In any event, under the DEA Ofcom has a statutory obligation to monitor levels of online copyright infringement. Ofcom could be expected to alter the qualification criteria in the Code as necessary in future notification periods, to bring within the scope of the obligations in the Code any ISP, whether fixed or mobile, where the scale of infringement is such that inclusion in the Code was justified.
Ground 5: Proportionality
The Claimants submit that the contested provisions represent a disproportionate restriction on the free movement of services and/or the right to privacy and/or the right to free expression or to impart and receive information, and that the need for the measures to be proportionate flowed from, for example, Article 56 TFEU (formerly Article 49 EC) together with Article 61 TFEU (formerly Article 55 EC) and Article 52 TFEU (formerly Article 46 EU); Article 3(4) of the ECD (see paragraph 119 above); Article 15 of the PECD (see paragraph 164 above); Article 6(1) and 6(3) TEU, taken with Articles 7 and 8 of the Charter on Fundamental Rights; and Articles 8 and 10 of the ECHR; and Directive 2009/140/EC recital (4) where it is recognised that effective freedom of expression requires access to the internet.
The Defendant accepted in the detailed grounds that the contested provisions were likely to create a restriction on the free movement of services and/or freedom of establishment, so as to permit a proportionality review under EU law. Furthermore, there did not appear to be any dispute that the contested provisions in principle raised issues touching upon freedom of expression and privacy.
Mr Eadie made a preliminary point that a proportionality challenge was premature: the initial obligations had not yet been brought into effect, and their content was not yet sufficiently ascertained in the absence of the Code (see the first ground of challenge). Technical measures were not yet in contemplation and could be introduced only if the elaborate procedures had been followed under the DEA and the justifying criteria for such measures had been satisfied. There is considerable force in Mr Eadie’s point. However, it seems to me that enough is known at this stage of the fundamental regulatory structure of the DEA to permit a challenge based on proportionality, so long as one bears in mind that the final shape of the regulatory scheme is not yet established, and that the Claimants cannot simply make assumptions about the exact scheme that will be implemented in order to support its challenge, or about the effects of such final scheme.
There was also a preliminary contest between the parties as to the precise formulation of the test for proportionality in the present context, namely, whether, as the Defendant submitted, the Claimants had to discharge the heavier burden of showing that the contested measures were “manifestly disproportionate”. Each side deployed a welter of authority to support its position.
Lurking beneath this linguistic tussle was a broader issue of principle, namely, the extent to which the Court was entitled to re-assess for itself the balance that Parliament has struck in the DEA, and the extent to which the Court should accord deference, or allow an area of discretionary judgment, to the primary decision maker in the present context. Fortunately, the parties agreed that the resolution of this issue was the same whether the evaluation of proportionality was made under EU law or under the ECHR (see, in particular, R (Countryside Alliance and Others) v Attorney General [2007] UKHL 52, by Lord Brown, at [162]-[164]). In my view the relevant issue is well articulated in Beatson and Others, Human Rights: Judicial Protection in the United Kingdom, at paragraph 3-182, page 267, under the heading “Weight and Latitude”:
“The courts have struggled with the question of whether, and to what degree, they should defer to the assessment of the primary decision maker when determining whether their decision or conduct is compatible with a Convention right. The problem arises because, although the courts have been given the task of determining for themselves whether decisions of public authorities are compatible with Convention rights, such questions frequently involve difficult assessments and judgments that the courts are not as well-placed to make as the primary decision maker. By way of example, judgments about the scale of a particular social problem that Parliament or government decides to address is not a matter that the courts can easily assess. Likewise, predictions as to the likely effectiveness of measures taken by the political branches, and the potential effectiveness of alternatives, are also extremely difficult judgments for the judges to make. The primary decision maker will often be better placed to make such judgments. There is also a further concern. The courts are not accountable for making such assessments in the same way as politicians and public authorities are. It is therefore sometimes suggested that the courts lack democratic legitimacy to make such assessments and should defer to those who are accountable for making them.”
The authors go on to observe at paragraph 3-183 that
“it is because of these concerns that the case law of domestic courts under the HRA and devolution statutes has developed a concept of “deference”, or “respect” for judgments or assessments made by the primary decision maker. These concepts have been applied alongside, and interchangeably with, a host of other terms, such as “discretionary area of judgment”, “relative institutional competence”, “policy decisions”, “margin of discretion” and “degree of latitude”.” (Footnote references to authorities omitted)
At paragraph 3-184 the authors also suggest that there are principles that govern when it is appropriate for courts to place weight on the judgment of a primary decision maker, citing (at paragraph 3-189) Lord Steyn’s extra-judicial statement:
“… the Court must sometimes consider in the context of the particular case before it, where an issue of deference arguably arises, whether the context and circumstances of the case require the Court on a specific issue to the view of the legislature or the executive. It is not a matter of law: it is a matter of discretion to be exercised in the objective circumstances of the particular case.” (“Deference: A Tangled Story” [2005] P.L. 346 at 390)
In my judgment, there are good reasons in the present context for the Court to attach substantial weight to the balance struck by the primary decision maker, namely, Parliament. First, there is considerable support in the case law for the proposition that the Courts should afford particular deference to elected and accountable decision makers where the decision concerns subject matters that are regarded as within the particular province of the political branches. In Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; (2004) I AC 816 Lord Nicholls stated that the readiness of a court to depart from the views of the legislature depends upon the circumstances, “one of which is the subject matter of the legislation”. The more the legislation concerns matters of broad social policy, the less ready will be a court to intervene (see [70]). (See also Ghaidan v Godin-Mendoza [2004] UKHL 30; [2004] 2 AC 557 at [19], and Michalak v London Borough of Wandsworth [2002] EWCA Civ 27; [2003] I WLR 617, at [41]). In International Transport Roth Gmbh v SSHD [2002] EWCA Civ 158; [2003] QB 728 at [83] Laws LJ stated that
“greater deference will be due to the democratic powers where the subject matter in hand is peculiarly within their constitutional responsibility.”
In this case Parliament has addressed a major problem of social and economic policy, where important and conflicting interests are in play. On the one hand, there is evidence to suggest that the media industry, broadly interpreted, is sustaining substantial economic damage as a result of unlawful activity on the internet; and there is concern that such damage may significantly affect creativity and productivity in an economic area of national importance where, at least historically, the UK has tended to enjoy some comparative advantage in international markets. On the other hand, the business models of ISPs are constructed on the basis that they are essentially conduits for the flow of information, and the efficiency, cost effectiveness and competitiveness of their operations depend on the minimum regulatory interference with that flow of traffic, and on the minimum responsibility and burden in respect of the actual content of the material passing through the conduit. Similarly, subscribers of the ISPs and users of the internet appreciate that the technology is the most prodigious tool for the transmission and interchange of information and other material ever designed, and, in general, they would oppose restrictions on their ability to enjoy untrammeled access to such information and material. Information is also a public good, and interference with access to, and publication of, information may adversely affect general welfare. How these competing and conflicting interests should be accommodated and balanced appears to me to be a classic legislative task, and the court should be cautious indeed before striking down as disproportionate the specific balance that Parliament has legislated.
Secondly, Parliament struck the challenged balance after a lengthy process of consultation with all interested parties, which took account of the representations made by those parties, and after a voluntary, non-legislative scheme was tried out. That process is likely to have provided the decision maker with an insight and capacity that the court is unlikely to enjoy.
Thirdly, in a case of this nature, there are real limits on the process of adjudication. Although I was confronted with 11 files of evidence, I cannot be entirely confident that all relevant material was before me, nor can the sheer constraints of judicial review proceedings afford the time that would be necessary critically and rigorously to evaluate the volume of material that was submitted. For example, a number of expert economists were deployed on each side, putting forward with equal conviction and vigour their rival cases. Experience in the Restrictive Practices Court, now extinct, suggests that a thorough exploration and assessment of such evidence could be likely to take many days of detailed cross-examination. Furthermore, the issues in this judicial review, for the reasons already given, are classically of the kind that Professor Lon Fuller famously described as “polycentric” where it is hard enough for the legislature to seek to think through, and to weigh all the possible implications of a range of policy choices that are theoretically open, but is well nigh impossible for a judge. In R v Secretary of State for Health Ex p. Eastside Cheese [1999] CMLR 123, Lord Bingham accorded a margin of appreciation (under EU law) because the challenged decision called for:
“the evaluation of scientific evidence and advice as to public health risks, and which have serious implications both for the general public and for the manufacturers, processors and retailers of the suspect cheese.”
Here, the evaluation is not of scientific evidence but of competing economic arguments, when a similar margin of appreciation is justified.
Fourthly, and this seems to me to be a very important consideration, this is not a case where, on the one side, there is a human right, or a fundamental EU freedom, and on the other side the State is seeking to restrict or interfere with that right on grounds of general utility or welfare. The Court may then wish, notwithstanding other contextual factors, to examine the proportionality of the measure with considerable intensity, and to accord less weight to the balance struck by the legislature or executive. Mr Saini, who appeared on behalf of the Interested Parties, rightly stressed that the countervailing interests in this case are also recognised as fundamental rights. He referred, in particular, to Article 17.1 of the Charter of Fundamental Rights, to the observations of the Court of Justice in Promusicae at [62] and to ECHR Article 1 Protocol 1 for the proposition that copyright was an important right of property and that its enjoyment and exploitation was recognised as a fundamental right. The Claimants did not challenge that proposition.
Mr Saini drew what I consider is a very helpful analogy with Schmidberger v Republik Österreich, Court of Justice 12 June 2003, a case in which the government of Austria had closed the Brenner pass for a period (preventing road hauliers from using the pass) in order to allow a peaceful demonstration to take place. The case, therefore, raised
“the question of the need to reconcile the requirements of the protection of fundamental rights in the Community with those arising from a fundamental freedom enshrined in the Treaty and, more particularly, the question of the respective scope of freedom of expression and freedom of assembly, guaranteed by Articles 10 and 11 of the ECHR, and of the free movement of goods, where the former are relied upon as justification for a restriction of the other.” [77]
The Court held:
“79. Second, whilst the fundamental rights at issue in the main proceedings are expressly recognised by the ECHR and constitute the fundamental pillars of a democratic society, it nevertheless follows from the express wording of paragraph 2 of Articles 10 and 11 of the Convention that freedom of expression and freedom of assembly are also subject to certain limitations justified by objectives in the public interest, in so far as those derogations are in accordance with the law, motivated by one or more of the legitimate aims under those provisions and necessary in a democratic society, that is to say justified by a pressing social need and, in particular, proportionate to the legitimate aim pursued (see, to that effect, Case C-368/95 Familiapress [1997] ECR I-3689, paragraph 26, Case C-60/00 Carpenter [2002] ECR I-6279, paragraph 42, and Eur. Court HR, Steel and Others v. The United Kingdom judgment of 23 September 1998, Reports of Judgments and Decisions 1998-VII, § 101).
80. Thus, unlike other fundamental rights enshrined in that Convention, such as the right to life or the prohibition of torture and inhuman or degrading treatment or punishment, which admit of no restriction, neither the freedom of expression nor the freedom of assembly guaranteed by the ECHR appears to be absolute but must be viewed in relation to its social purpose. Consequently, the exercise of those rights may be restricted, provided that the restrictions in fact correspond to objectives of general interest and do not, taking account of the aim of the restrictions, constitute disproportionate and unacceptable interference, impairing the very substance of the rights guaranteed (see, to that effect, Case C-62/90 Commission v Germany [1992] ECR I-2575, paragraph 23, and Case C-404/92 P X v Commission [1994] ECR I-4737, paragraph 18).
81. In those circumstances, the interests involved must be weighed having regard to all the circumstances of the case in order to determine whether a fair balance was struck between those interests.
82. The competent authorities enjoy a wide margin of discretion in that regard. Nevertheless, it is necessary to determine whether the restrictions placed upon intra-Community trade are proportionate in the light of the legitimate objective pursued, namely, in the present case, the protection of fundamental rights.”
For the same reasons this Court must accord Parliament a wide margin of discretion in weighing the competing rights in this case.
I turn now to the six specific points upon which the Claimants rely on this ground of challenge.
First, it is contended that the DEA does not pursue a legitimate aim. It is accepted that the contested provisions do pursue the legitimate aim of the fundamental right to property, but Mr White submitted that the DEA was also enacted for the purpose of enhancing effective judicial protection, and that many of the provisions do not in fact advance that aim.
It is correct that the production and transmission of CIRs is an administrative or regulatory procedure that does not involve judicial supervision in the strict sense, although a subscriber may have a right of appeal in appropriate circumstances. However, persistent infringement will lead to a CIL; and that in turn will enable the copyright owner to apply to the Court to ascertain the identity of the infringer and, in appropriate cases, to bring legal proceedings for breach of copyright against the infringer. Considered as a whole, therefore, the contested provisions of the DEA do promote the aim of judicial protection of copyright, and I see no force in this criticism.
Secondly, in their grounds the Claimants alleged that there was no need for legislation to deal with the identified problem of large scale copyright infringement, and that less restrictive measures were adequate. Much of the Claimants’ original evidence filed in support of the claim was directed towards that allegation. That led to considerable evidence in response from the Defendant. It was explained that the Government’s preferred solution to the problem of unlawful P2P file sharing had been for ISPs and copyright owners to collaborate to produce their own voluntary codes of best practice to reduce its incidence. In the event, no such agreement was forthcoming, despite the encouragement given in the Government’s Creative Britain strategy document.
There were further efforts to reach a voluntary agreement through a MOU. Following consultation the Government favoured a “co-regulatory” response, in which a voluntary agreement reached by industry would be supervised by Ofcom. After further consideration on that proposal, it was found to be impractical. By the time of the publication of the Digital Britain Interim Report in January 2009, the MOU process had ceased, and legislation was inevitable.
By June 2009 the initial legislative proposals had been further developed, with a more central role for Ofcom, and the introduction of reserve powers for more interventionist technical measures, should the initial obligations prove insufficiently effective. Those proposals were fully consulted on, giving ISPs and others the opportunity to submit any evidence or comment in response to the proposals. ISPs’ responses concerning the initial obligations were generally neutral, but revealed concerns about the attribution of costs. BT’s own response to the initial obligations was broadly supportive and did not suggest that the initial obligations would be disproportionate.
The Government concluded that the initial obligations proposal remained the option that the Government would pursue through legislation, with a reserve power to introduce technical measures in the event that they should prove to be necessary and proportionate. Ofcom would be required to evaluate and make recommendations on what measures might be appropriate, effective and proportionate if and when it was deemed necessary to introduce an obligation on technical measures. The DEA, when enacted, offered the industry an opportunity to draft an Initial Obligations Code to be approved by Ofcom under Section 124C. No such industry agreed code has been forthcoming and, by default, Ofcom must act.
The Claimants’ argument under this heading has now narrowed to one point, namely, that Parliament enacted the contested provisions in the mistaken belief that the existing civil procedures did not allow copyright owners to target “repeat” offenders. Mr White referred, for example, to the Explanatory Notes to the Bill, and to the impact assessment, to show that Parliament must have been labouring under such a misapprehension. In fact Mr White was able to show a form of Norwich Pharmacal order, settled by BT, that was specifically designed to enable copyright owners to identify, and target, such repeat infringers.
It seems to me that the Claimants have here somewhat lost sight of what they need to show in order to succeed on the proportionality challenge, namely, that there was a clearly less intrusive but equally effective means of resolving the relevant problem. Currently, copyright owners, armed with evidence of infringement and IP addresses, must go to Court in order to ascertain precisely who has infringed and to what extent. Having obtained that information, the copyright owner may decide which infringers, if any, to pursue in legal proceedings. It is at that point that the infringer, if pursued, will be confronted with a legal claim, with the anxiety, uncertainty and expense that ensue.
Under the DEA, on the other hand, the copyright owner will routinely and systematically receive CILs that, in practically every case, will accurately identify the subscriber/infringer and the extent of copyright infringement. Without going near court, the copyright owner can decide which infringers, if any, to pursue in legal proceedings, in which the first step would then be to establish the identities of targeted infringers through Norwich Pharmacal orders. Furthermore, if substantive proceedings are then brought, the infringer can hardly be caught unawares, for ex hypothesi he or she will already have received prior warning(s) through receipt of the CIRs earlier sent on by the ISP. Indeed, many potential targets of legal action under current procedures may well have ceased infringing before they find themselves on a CIL at all, a much less stressful and costly outcome for them. Thus, from the point of view of both copyright owner and subscriber, the DEA represents a more efficient, focussed and fair system than the current arrangements. To the extent that CIRs received from ISPs dissuade subscribers from continuing to act unlawfully and so obviate the need for legal proceedings, there will also be cost savings for the administration of civil justice.
Whatever, therefore, may have been believed about the efficacy of Norwich Pharmacal orders in identifying repeat infringers, the fact remains that as an objective matter the contested provisions are not shown to be disproportionate.
The third point, which has two aspects, is an alleged lack of appropriateness of the contested provisions. Relying upon BPI data, Mr White was able to show that less than 40 per cent (in fact, about 37 per cent) of online copyright infringement was due to P2P file sharing, the form of infringement against which the measures in the DEA are targeted. However, that does not, in my view, tend to undermine the appropriateness of the contested provisions: P2P file sharing appears to account for the largest single element of online copyright infringement, and the percentage of the total, 37 per cent, is still very substantial. A very significant reduction in that form of infringement would make a valuable contribution to reducing the overall level of infringement.
The second aspect is that a determined infringer has in any event several means of avoiding detection, and that for that reason the contested measures will have little, if any, impact on reducing P2P file sharing.
It is not disputed that technical means of avoiding detection are available, for those knowledgeable and skilful enough to employ them. However, the central difficulty of this argument is that it rests upon assumptions about human behaviour. Experts can seek to establish a profile of those who engage in P2P file sharing, and their various reasons for doing so, and may then attempt to predict how these users may be likely to respond if confronted with the kind of regime that the DEA enacts. In theory, some may cease or substantially curtail their unlawful activities, substituting or not, for example, lawful downloading of music; others may simply seek other means to continue their unlawful activities, using whatever technical means are open. The final outcome is uncertain because it is notoriously difficult accurately to predict human behaviour. Professors Mansell and Steinmueller, expert economists engaged by the Claimants, say:
“The results of studies of intentions, behavioural range, deviant behaviour, the effects of deterrents, and cognitive perceptions of moral behaviour online, are ambiguous at best.” First Report, at paragraph 2.3. See also paragraph 2.12: “Overall, studies from several disciplines indicate that it is unclear what effects that various types of prosecution, threats of prosecution and other sanctions are likely to have.”
The DEA proceeds on the premise, first, that a significant number of infringers do not at the moment fully appreciate that what they are doing seriously infringes the legal and moral rights of others and that, although individual behaviour of this kind may seem trivial and excusable, the general effect may well be very damaging to the creative industries, a notorious example of what is sometimes called the tyranny of small decisions that have ruinous economic consequences. A central purpose of the contested measures is educational: through systematic CIRs the recipient will be better informed about the nature of his conduct and of the likely consequences for others, and he may be disposed to cease, or at least to modify, such conduct. He may be persuaded to do so, even if it is contrary to his immediate interests: the days when it was assumed that consumers act only out of the pursuit of economic self interest, and do not, quite rationally, respond to moral, altruistic or longer term considerations, are long gone. Furthermore, insofar as the contested provisions improve the efficiency and effectiveness of copyright protection (see above), the risks attached to persistent infringing are raised: even if the selfish, determined infringer were minded to seek to evade detection, he might not be sure that technical means existed or were being developed to thwart him, and he might fear that, if he was detected, the new arrangements would be more likely to expose him to painful enforcement measures. Although it is difficult to predict the effect of measures such as those contemplated by the DEA, there are reasons for believing that such measures may well have positive effect.
In these circumstances, and bearing in mind my role on this part of the case, I am not able to conclude that insofar as Parliament proceeded on the basis that the contested provisions would be likely to have a significant effect in reducing unlawful P2P file sharing, it proceeded on an obviously flawed assumption, so as to cast doubt upon the lawful proportionality of those provisions.
The fourth point is the alleged “chilling” effect of the contested provisions. Such an effect potentially arises because the subscriber is not necessarily the copyright infringer but it is the subscriber who will be the subject of any CIR or CIL. It is easy to understand that, for example, a library with a wi-fi hot spot or internet café would wish to avert the risk of receiving such reports, of being the possible target of legal proceedings and of having to show that it took reasonable steps to prevent any infringement (as required by the DEA). Some public intermediaries and businesses provide “open” wi-fi to their customers. Parents may also be worried about their children’s use of the home computer. The Claimants’ economic experts explain how those exposed to such liabilities, and who are understandably risk averse, may take prophylactic measures that in fact go significantly beyond what is necessary to protect them from legal liability and so unnecessarily curtail the rights and freedoms of others.
The Interveners strongly support this argument and express real concern about the potential for the DEA to stifle, without good cause, access to the internet.
The Interveners draw attention to the report “Internet Access 2010” of the Office of National Statistics that reveals that 73 per cent of households in the UK now have internet access and that 30.1 million adults used the internet every day or nearly every day in the 12 months under review. Some 17.4 million adults used the internet to watch television or listen to the radio, while 31 million people bought or ordered goods or services online. The rapid growth in demand for internet services is illustrated by the fact that since 2006 an extra 5 million households now have internet access. Some 90 per cent of individuals with internet access had used it to send/receive email, 54 per cent had used the internet for online banking, 39 per cent used it to seek health-related information, 35 per cent used it for the purpose of learning, and 26 per cent used the internet to look for a job, or to send a job application. Internet access is also part of official Government policy concerning “digital inclusion”, where increasing internet access in disadvantaged communities is seen as an important part of combating social and economic exclusion.
One particular concern of the Interveners was that a subscriber could find himself the subject of a CIR and/or on a CIL, even if he was not the infringer, unless he could show that he took “reasonable measures” to prevent it (see section 124K (6) DEA). Such a burden would tend to discourage subscribers from allowing others (for example, in the same household) from gaining access to the computer or the internet. However, the counter argument is that this is not an unreasonable burden to place on subscribers if it promotes more effective copyright protection. Furthermore, inclusion on a CIL is intended to identify the subscriber whose internet service has been used to infringe copyright; even if a subscriber has been properly included on a CIL (because he failed to take reasonable precautions), that is not sufficient to establish legal liability for infringement. The copyright owner, having established the subscriber’s identity following a CIL and a Norwich Pharmacal order, would have the burden of showing, in any subsequent civil action, that the subscriber had “authorised” the infringement (which is a relatively high test on current authority: see paragraph 102 above). In addition, under present arrangements, a subscriber is exposed to the risk of a copyright owner obtaining a Norwich Pharmacal order to establish his identity, even if the subscriber has not committed the infringement and even if he took reasonable steps to prevent the infringement. The current procedures are indiscriminate, costly and inefficient, and they include within their scope, unlike the putative CIL, the careful subscriber who has taken reasonable precautions. In so far as copyright owners pursue the procedures under the DEA (as is likely to be the case), the careful subscriber will be relieved of the anxiety and cost of involvement in applications for Norwich Pharmacal orders and in subsequent infringement proceedings.
A second concern of the Interveners was that certain public intermediaries might be classed as qualifying ISPs. However, it appears likely that the Code will apply only to ISPs with more than 400,000 subscribers, so that that concern should be met.
Returning to the more general point, I accept that the “chilling effect” is now a well documented phenomenon, and I acknowledge that the concerns of the Interveners are genuine and that there is in the present context a risk of some chilling effect. The difficulty again is to assess, at this stage, the likely magnitude of such an effect. I must bear in mind that the measures are not yet even operative, and no experience has been accumulated of their effects in practice. It is also expected that the Code will deal explicitly with the position of such subscribers as libraries and internet cafés so that the regulation works fairly and reasonably. Furthermore, the regulatory regime can seek to respond to particular difficulties that have arisen of the kind foreshadowed by the Interveners’ evidence and submission. Although, therefore, I do not dismiss this point as insubstantial, it seems to me premature to conclude that any chilling effect that might arise as a result of the contested measures is likely to be such that the social costs of such measures so plainly exceeds the likely benefits (in terms of enhanced copyright protection) that they are disproportionate.
The fifth point is drawn from Directive 2004/48/EC of 28 April 2004 on the enforcement of intellectual property rights, OJ [2004] L No 157 (“the IPRE Directive”) and the opinion of the EDPS. Mr White seeks to extract from these documents that the only proportionate way to proceed is by stages; namely, first to see whether existing judicial procedures are satisfactory; then to target large, commercial scale infringers, and finally, if all else fails, to introduce something like the DEA. I agree that this may be one way of proceeding, but the relevant question is whether it is the only lawful and proportionate way of proceeding. Parliament has proceeded on the basis that existing procedures are inadequate and that legislative measures must be specifically directed to, first, educating and, second, inhibiting unlawful copyright infringement at the level where it is occurring, namely, through a huge number of individual decisions. For the reasons already given, I find nothing disproportionate in that position.
The sixth point relates to the impact assessment that was made by the Government to show the likely benefits and costs that could be expected to flow from the proposed legislation. A very substantial part of the expert economic evidence was directed at this impact assessment. The Claimants produced no less than four expert reports, running to 220 pages; the Interested Parties were content, modestly by comparison, with one expert who confined himself to 28 pages (unless the evidence of Professor Geoffron is also treated as expert evidence): in total almost 250 pages. I was concerned about this volume of material, adding to the eleven files of other evidential material, not to mention the five bulky files of authorities. Perhaps I might be permitted to make some general observations about this expert evidence, in the hope (perhaps forlorn) that judges in the Administrative Court might not in future be confronted to the same extent with expert evidence in this kind of judicial review.
In my view, it is essential not to lose sight of what ultimately a claimant needs to show, namely, that the impugned legislative measure is not proportionate, in other words, that the legislator unlawfully failed to balance the relevant interests at stake, bearing in mind that, for the reasons already given, the court in this type of case, involving economic interests and/or the weighing of competing rights, is very likely to accord the legislator a wide area of discretionary judgment.
The impact assessment cannot be dismissed as irrelevant to the proportionality assessment. In Sinclair Collis Limited v Secretary of State for Health [2010] EWHC 3112 (Admin), an attack was made on an impact assessment that supported a legislative ban on the sale of tobacco from automatic vending machines. Sir Anthony May, President of the Queen’s Bench Division, in rejecting the argument that the impact assessment was irrelevant, added:
“On the other hand, I do understand an argument that a decision to legislate may be proportionate even though cost/benefit analysis produces a negative money balance; or a variant of that, that a decision to legislate may be proportionate provided that the legislator identifies and takes account of the important detriments and their broad measure. This would be so perhaps where any money calculation is necessarily imprecise.” [58], emphasis added
I would, with very great respect, only venture to add to the President’s statement that, depending on the context, the legislator should also identify and take account of the important benefits and their broad measure, and possibly the broad measure of alternative arrangements that might achieve the desired legislative objective. I would suggest that this would be the correct approach also in a case where it is inherently difficult to predict precisely what might occur and the quantification of benefits and costs necessarily turns on rational assumptions made by the legislator.
It will not, therefore, be sufficient to show, through expert economic evidence, that there are arguable errors in the impact assessment. Drawing on three decades’ experience in competition cases, I would say that it would be surprising if a skilled economist, who not infrequently comes close to donning the robe of a further advocate in these cases, was unable to put forward a case that such errors had been made. It is, therefore, important for parties to appreciate the limitations of such evidence and not to lose sight of what is required to mount a successful challenge to the proportionality of primary legislation.
With these general observations in mind, I now turn to the specific criticisms of the impact assessment. At the hearing Mr White, to his great credit, chose to focus on four main points.
First, a dominant theme of the Claimants’ expert economic evidence was that the impact assessment missed a whole dimension of social welfare. It was argued that the assessment should have sought to evaluate “the welfare impact of improved incentives for the creation of audio-visual content and the welfare costs of limiting access to content through file sharing” (see paragraph 70 of the Report of Dr Koboldt). On this view it was insufficient to evaluate the increased revenues, if any, that would accrue to rights holders by reason of the enhanced protection of copyright as a result of the contested provisions. It was also necessary to assess, in quantitative terms, the extent to which the prospect of such increased revenues would lead to the production of a greater quantity of audio-visual content than would otherwise be produced. It was also necessary to set off against that marginal increase in the quantity of audio-visual content made available to consumers the welfare loss of those consumers who, no longer enjoying the copyright material free of charge, but illegally, would be “priced out” of paying for it and would so be deprived of it, or enjoy it to a lesser degree.
The problem with this argument, it seems to me, is that Parliament, through current copyright legislation, has already struck a balance between, on the one hand, the aim of providing incentives to actual and potential creators of audio-visual material, and, on the other, the potential welfare loss to those consumers who would, in the absence of copyright protection, enjoy such material either free of charge or at substantially reduced prices but who, as a result of copyright restrictions, are either deprived of the material or are required to pay higher prices for it. Existing copyright legislation may strike that balance in a way that is controversial or open to criticism. However, in my view, Parliament, when considering measures such as the contested provisions, which could be expected to enhance copyright protection, is entitled to proceed on the basis that existing copyright law does strike a fair balance between the interests referred to. In the context of such measures, Parliament does not have to re-calculate that balance. Indeed, there would seem to be serious practical and political difficulties with any such re-calculation. How precisely would the marginal increase in putative productivity arising from enhanced protection resulting from proposed measures be reliably calculated? What would be the political response if Government were seen to be counting as a genuine “welfare loss” the fact that some of those behaving unlawfully would, as a result of the proposals, no longer enjoy the fruits of their unlawful behaviour? Copyright owners would no doubt say, with some justification, that such an approach was inconsistent with existing copyright legislation, and implied that some other legislation might more efficiently promote the objectives of copyright law.
I do not conclude that the approach advocated by the Claimants’ experts (which the Interested Parties’ expert, Professor Liebowitz, contested) was not one that could not in any circumstances lawfully have been employed. However, in my judgment, there were good reasons why the impact assessment did not follow that approach and therefore did not take into account the particular balance of social welfare that such an approach would have entailed. It is perhaps also worth noting that in any event such an approach would be exclusively economic, based on the concept that copyright is no more than a response to market failure; without it, the expression of ideas and information, creativity and innovation would be available to all, without reward for those who invented in the creation and dissemination of the works produced. However, it appears that copyright, even in the Anglo-American world, now also protects the creative individual’s personality or “moral rights”, leading, for example, to a longer term of protection than a strict economic analysis might be able to justify for the fulfillment of the economic goal. That element of personality right, and its enhanced protection through the contested provisions, could not be captured in a purely economic model of social welfare.
The second criticism is that the impact assessment assumed an annual figure of “displaced” sales in the music industry of about £400 million due to unlawful P2P file sharing, whereas that figure includes all displaced sales whether by P2P file sharing or other unlawful methods. Likewise, the contested provisions are targeted at unlawful P2P file sharing, and, in calculating the extent to which the contested provisions would improve sales, it must be remembered that P2P is not the only means of gaining access to copyright music material. However, on a proportionality challenge the key issue is not whether the numbers in the impact assessment were correct, but whether there was evidence tending to show that unlawful P2P file sharing was substantially displacing lawful sales of music (and other audio-visual content) that would otherwise have been made.
According to the evidence filed in this claim of Rachel Clark, Deputy Director for Communications and Content Industries within the Information Economy Directorate at BIS, there was such evidence before the Government and Parliament. She said this:
“10. The content industries argue strongly that unlawful file sharing has had a damaging effect on sales in recent years, which significantly outweighs any of the spillover effects. There is a lack of consensus in the literature from academic and industry sources about what sort and how great an effect file sharing has on the creative industries, and whether there are other reasons to explain declining sales in recent years. That said, most studies agree that unlawful file sharing does play a role in the decline of sales. Estimates for the scale of the sales displacement effect – i.e. revenue lost by industry because the content was accessed for free, through file sharing – tend to be in the range of between zero and 20%.
Studies on the effect of unlawful P2P downloading on industry revenues Sales displacement effect (as % of total revenues Industry Country Method
Oberholzer-Gee & Strumpf (2007), Journal of Political Economy 0% Music US Actual downloads data
IPSOS (2007) 2% Film and television UK Survey data
Zentner (2008), Journal of Law and Economics 8% Music 7 European countries, including the UK Survey data
Rob & Waldfogel (2006), Journal of Law and Economics 9% Music US Survey data
Hennig-Thurau, Henning & Sattler (2007), Journal of Marketing 9% Film Germany Downloads proxies data
Jupiter Research (2007) 17% Music UK Survey data
Peltz & Waelbroeck (2004), mimeo 20% Music 16 countries, including the UK Downloads proxies data
…
12. Unlawful P2P file sharing is of concern in its own right because it is unlawful. It also creates a problem of industry revenue loss creating a disincentive to invest in artists and content production as investors cannot fully appropriate the returns on their investment. That this may already be happening may be suggested by findings from the IFPI Digital Music Report 2010, which reported that the number of local repertoire releases in France dropped from 271 in the first half of 2003 to 107 in the same period of 2009. New signings of French artists also fell by 60% from 91 in the first half of 2002 to 35 in the same period in 2009. Reticence in investing in the creative industries in the future would be damaging to the economy and therefore is a significant cause for concern to the Government.
13. The figures most often quoted to illustrate the impact of file sharing on sales are for the film and music industries. The greatest amount of research into the effects of file sharing has been for the music industry, not least because it was the first industry to feel the effects of such online behaviours and, in terms of overall numbers, it represents the biggest area of P2P activity. IPSOS estimates a sales displacement effect of £185 million for the film and television industry in 2009. Jupiter Research estimated a sales displacement effect of £180 million for the music industry in 2008. We have not been able to assess fully the reliability of the methodology used in calculating these figures – not least because there is not a wide selection of work from which to draw comparative information and against which to benchmark the industry figures. However, we understand that the methodology used to generate those figures did acknowledge and take account of the fact that there would not be a direct transfer from unlawful downloads to legitimate purchases i.e. there would be some people who, if stopped from unlawfully downloading, would simply choose not to consume the content, rather than purchasing it legally, or who would have consumed it lawfully but in a way that would not have generated marginal revenue. Therefore, we are sufficiently persuaded that these figures are an appropriate contribution to the evidence base for the provisions of the DEA.
14. At all times during the DEA process and through the consultation periods before that, BIS has been scrupulous in making clear that the Government’s estimates of the loss to unlawful file sharing and potential benefits of the DEA obligations have been based on figures provided by the creative industries. The Government was not in a position either to conduct its own research – which would in any case have relied upon the cooperation of rights holders in providing information or to audit industry repots which were regarded as confidential. There has been a limited amount of research in this area, therefore the evaluation of data sources in existence is challenging because of the absence of comparative data.
15. BIS also consistently sought additional evidence through consultations on the extent of the impact of unlawful file share. Although the Claimants critique the Government’s use of industry figures in the assessment of costs and benefits of the provisions, it should be noted that ISPs have consistently declined to make available an alternative estimate for the cost of unlawful file sharing. However, those ISPs with significant content interests have not demurred at the estimates provided in their responses to Government consultations.”
In my view, this is a complete answer to the second point, so far as a proportionality challenge is concerned. It is also consistent with the evidence of one of the Claimants’ expert economists, Dr Koboldt who says:
“125. In summary, whilst I would share both Professor Liebowitz’s view that the majority of studies find that file sharing has a negative impact on the sales of recorded music and his reservations about some of the studies that find no (or a positive) impact, I would strongly object to his interpretation of the extant literature as providing strong support for the claim that file sharing is responsible for the entire decline in sales. I can see little support for the consensus view portrayed by Professor Liebowitz, and would rather take the position that Professor Leibowitz adopted in 2008 when he noted that “most recent research … has found that the impact of file sharing is negative although the methodology used in these papers generally makes it difficult to determine clear estimates of the position of the recent decline in sound recording sales that might be caused by file-sharing”.”
The third point of criticism is that the impact assessment, in quantifying benefit, assumed that 70 per cent of infringers would stop file sharing once and for all upon receiving a single notification from their ISP. This figure was based on the Digital Entertainment Survey 2008. That Survey asked respondents who admitted to unlawful file sharing whether they would stop if they received a communication from their ISP. In 2008 70 per cent of respondents agreed that a communication would be effective to stop them file sharing. In 2009 the figure was down to 33 per cent. The Survey said that the drop appeared to be explained by the fact that respondents in 2009 were asked to consider the possibility of a communication containing no specific threat. The figure of 70 per cent could be explained only on the basis that in 2008 respondents believed that the communication was a prelude to further action.
Dr Koboldt was extremely critical of the 70 per cent figure. He said that
“even without knowledge of the subsequent edition of the Digital Entertainment Survey, the claim that 70 per cent of those who engage in illegal downloading would stop completely and forever as a result of receiving a notification from their ISP is straining credulity. I would like to think that such an assumption – which is crucial for the entire analysis – should have been considered very carefully, and should have been subject to some sense checks.” (paragraph 152)
Again, in the context of a proportionality challenge, the relevant issue is not whether the figure of 70 per cent in the impact assessment was robust, but whether Parliament was entitled to proceed on the basis that a carefully worded letter from the subscriber’s ISP, drawing the subscriber’s attention to the fact that the unlawful file sharing had been detected, and that persistent infringement could lead to unpleasant legal sanctions, would have a strong and immediate impact on unlawful P2P file sharing. Of course, for the reasons already given, it is difficult to predict human behaviour and the likely response to CIRs under the contested provisions. However, I see nothing unreasonable or lacking in common sense if Parliament proceeded on the basis that I have mentioned.
The fourth point of criticism is that the impact assessment translates a 70 per cent reduction in the number of file sharing infringers into a 55 per cent reduction in infringement. Some such calculation needed to be made, for one infringer may be responsible for a greater level of unlawful P2P file sharing than another. The impact assessment was in one sense conservative for it did not assume that the 70 per cent of infringers who would be deterred by a CIR accounted for 70 per cent of infringing activity: those who would be deterred on average accounted for a lesser degree of such activity. Professor Liebowitz, for the Interested Parties, thought that the relationship between infringer and infringement was not unreasonable. Dr Koboldt was not convinced:
“There is some plausibility to the underlying logic – those who download the most are more reluctant to stop or, conversely, those who stop are likely to download less than the average but there is at the same time some uncertainty about the magnitude of this effect, not least because the Impact Assessment fails to distinguish between different forms of infringement and not consider the different ways in which P2P file sharers might respond to particular enforcement measures. For example, there is nothing in the Impact Assessment that would suggest that attention has been paid to the options available for file sharers to avoid detection by using public wi-fi networks, e.g. in libraries or coffee shops (which appear to have been completely ignored in the Impact Assessment) or to download from non-P2P sources (e.g. cyberlockers), even though non-P2P file sharing had been registered as a problem by the industry.” (paragraph 146)
It is notable that Dr Koboldt wisely does not offer his own estimate of the extent to which the level of infringement could be expected to be curtailed if the 70 per cent assumption was sound, or point to any reliable industry or academic research on such a calculation. That is not surprising for it would appear difficult, first, to draw up comparative “profiles” of different classes of infringers and, secondly, to draw reliable inferences about how each different class would be likely to respond to a notification such as a CIR. Again, the relevant question is not whether the figure of 55 per cent is accurate. The background to the enactment of the DEA shows that there was an awareness of the difference between numbers of infringers and volume of infringement, and that it could not simply be assumed that curtailing a certain number of infringers would necessarily reduce infringement by a corresponding amount. The impact assessment assumed that the reduction in infringement would be less than the reduction in infringers. Nonetheless, even allowing for that lack of symmetry, Parliament proceeded on the basis that as a result of the contested measures both the number of infringers and the volume of infringement would be substantially reduced, to the very considerable benefit of copyright owners. That, in my view, was a rational and justifiable assumption and sufficient for the purpose of lawful assessment of proportionality.
The Claimants also took issue with the alleged failure of the impact assessment to take account of certain costs that were omitted. For example, the Claimants contend that the contested provisions will lead subscribers to upgrade home and business networks, and that the cost of doing so is not included. However, it is difficult to assess the extent to which the initial obligations code will in practice lead to upgrading, and so occasion additional costs. Furthermore, unsecure networks are exposed to risks at present, including the risk of action resulting from unlawful activity, and any upgrading would produce countervailing benefits, again very difficult to quantify. As to, for example, open wi-fi networks, the Code will need to take account of such needs and ensure that the impact on them is fair and proportionate. The incidence of “distress” to those who might receive CIRs in error, or of distress to those whose unlawful use of the internet has been brought to the attention of the subscriber (even if a legitimate source of grievance), is again difficult to predict and to measure quantitatively.
At the hearing Mr White focussed in particular on the costs of the appeal process which were not included in the impact assessment. It would have been difficult at the time of the impact assessment to quantify those costs, and, according to the Defendant’s evidence, work is continuing on establishing the final costs of the appeal process. Ofcom will be consulting on the tariff in connection with the Costs Order, which allocates the costs of appeal between the ISP and the copyright owner. Again, according to the Defendant’s evidence, it is not expected that the appeals process would be unduly complex or expensive. Mr White also criticised the failure to take account of, and to quantify, the costs that copyright holders would incur in bringing actions against infringers. However, he accepted that such an analysis would have to be carried out on a marginal basis. Again, it seems to me very difficult to seek to assess in any impact assessment how many more infringement actions would ultimately be brought under the contested provisions than would be pursued under present arrangements, and to quantify the marginal net economic cost of such actions, bearing in mind, first, that a principal aim of the measures is educational (so obviating legal action) and, secondly, legal action under the contested provisions can reasonably be expected to be more efficient and effective.
Dr Koboldt in his report also stated that the impact assessment should have been subject to “sensitivity analysis”, that is, a range of possibilities should have been quantified to show how an estimate of net benefit (or loss) would vary with a change in certain assumptions. That is certainly something that could have been done. However, as explained at earlier points in this discussion, the Government did expressly recognise that a range of outcomes was possible (for example, in respect of the key variable, the extent of “displaced revenues”). The reader of the impact assessment would appreciate that the quantification of benefits and costs would be different on a different set of assumptions. Even if the impact assessment had sought to attach numerical values to a range of outcomes, it is not immediately obvious that any informed person trying to interpret the impact assessment would be greatly assisted by such further quantification, and, in my view, the omission of such further quantification does not undermine the proportionality of the contested measures.
In summary, it may be the case that certain further costs could have been included in the impact assessment. However, as stated, some of the alleged costs were very difficult to quantify and would have involved little more than guesswork, and some involved questionable items. Looking at the matter in the round, I cannot conclude from the evidence as a whole that the scale of the likely costs that would arise from the contested provisions, bearing in mind that technical measures are not in immediate contemplation, would render disproportionate legislation aimed at substantially strengthening the protection of copyright material against unlawful P2P file sharing.
For these reasons, I reject the proportionality challenge.
I raised with the parties the possibility of a reference to the European Court of Justice. Mr Eadie strongly opposed such a reference; Mr White argued that a reference would be appropriate. I have come to the conclusion that the questions of European Union law raised by this judicial review admit of clear answers, and I do not believe that any useful purpose would be served by my making a reference.
In the event, the Claimants succeed only in respect of the claim relating to Article 12 AD (“administrative charges”). They are entitled to appropriate relief on that claim. Formally, I grant permission in respect of the new ground under the AD (ground 5 of the amended claim), but, save for the claim referred to, I dismiss all other claims in this judicial review.
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URL: http://www.bailii.org/ew/cases/EWHC/Admin/2011/1021.html
Totalise Plc v Motley Fool Ltd & Anor
[2001] EWCA Civ 1897 [2002] EMLR 20, [2001] EWCA Civ 1897, [2002] 1 WLR 1233, [2002] FSR 50, [2003] 2 All ER 872, [2002] Masons CLR 3, [2002] CP Rep 22, [2002] WLR 1233
Lord Justice Aldous:
This is the judgment of the Court in an appeal brought by the second defendant, Interactive Investor Ltd, with permission of this Court against that part of the order of Owen J of 23rd February 2001 ([2001] 1 P & T 764) which ordered them to pay costs of £4,817.
Interactive were an operating subsidiary of a company listed on the London Stock Exchange. Since the hearing before the judge, they have become part of an Australian Group and have changed their name to Ample Interactive Investor Ltd. Their principal business is the provision of financial information to individual investors through their website. One service they offer consists of a series of “discussion boards” relating to particular companies on which users of the website can post information and opinions likely to be of interest to other investors. Before a user can make a posting on Interactive’s discussion boards, the user must register and enter into a contract containing Interactive’s standard terms. These proceedings arise out of use of that service. Another service is the provision of a portfolio tracker system through which individuals can track their investments without professional help.
On 31st January 2001 Interactive were sent a letter by solicitors acting on behalf of the claimants Totalise Plc. That letter complained about the content of a number of postings on Interactive’s website by a person using the nickname “Zeddust”. The letter alleged that the postings contained defamatory statements and that both individually and, when taken together, were maliciously designed to call into question the competency and integrity of Totalise’s management team, the solvency of Totalise and generally to cause as much damage to Totalise’s reputation as possible. The letter went on to inform Interactive that the solicitors had written to the first defendants, The Motley Fool Limited, to complain about similar postings made by Zeddust. The letter requested confirmation that the postings would be removed, that Zeddust’s posting rights be immediately withdrawn and that the identity and registration details of Zeddust be disclosed.
Interactive replied by letter dated 1st February 2001. The letter stated that the postings would be removed and that the account of Zeddust had been suspended on 31st January 2001. As to the request for details of Zeddust, the letter said:
“We also note your request for contact details of the author ‘Zeddust’, and advise that Interactive Investor is not able to provide this data to you. The Data Protection Act 1998 and our Terms and Conditions and Privacy Policy do not allow Interactive Investor from disclosing personal details about any account to a third party in these circumstances.”
On the same day solicitors acting for Totalise wrote stating that they had instructed both leading and junior counsel to advise on and conduct a “Norwich Pharmacal” application to obtain disclosure of the identity of Zeddust.
On 5th February 2001, Totalise issued a claim form naming Motley Fool Limited as first defendants and Interactive as the second. The claim was for disclosure and production in a witness statement of the full name and address of Zeddust and all documents which were or had been in the possession, custody or power of the defendants relating to the identity of Zeddust. That application was what can be referred to as a Norwich Pharmacal application having regard to the decision of the House of Lords in Norwich Pharmacal Co v Customs & Excise Commissioners [1974] AC 133.
Those proceedings came before Owen J on 15th February 2001. At the hearing in chambers Interactive was not represented by counsel, but Mr Kiddell of Stephenson Harwood appeared on their behalf. He made no submissions as to whether the order should be made as Interactive’s attitude was purely neutral. The solicitor acting for the first defendant did submit that the order sought should not be made and advanced supporting arguments.
The judge, in his judgment of 19th February 2001, concluded that he had jurisdiction to make the order requested. He went on to hold that there was no reason under the Data Protection Act 1998 for the defendants to withhold the information sought. He also rejected a submission, made on behalf of the first defendant, that the order would be contrary to section 10 of the Contempt of Court Act 1981. He then considered whether, in the exercise of his discretion, he should grant the relief and concluded:
“I have no hesitation in finding that the balance weighs heavily in favour of granting the relief sought. To find otherwise would be to give the clearest indication to those who wish to defame that they can do so with impunity behind the screen of anonymity made possible by the use of websites on the internet. It follows that I propose to make an order against both defendants in the terms sought by the complainant.”
After judgment, counsel for the claimants sought an order that the defendants should pay his client’s costs. After hearing submissions, the judge concluded that he should make such an order. He said:
“In my judgment the situation that arises in such cases is very different from what could be described as the classic Norwich Pharmacal situation. I consider that there is considerable force in Mr Moloney’s argument that those who operate websites containing discussion boards do so at their own risk. If it transpires that those boards are used for defamatory purposes by individuals hiding behind the cloak of anonymity then in justice a claimant seeking to establish the identity of the individuals making such defamatory contents ought to be entitled to their costs.
I have come to the conclusion that it was perfectly plain from the outset that the postings on both websites were highly defamatory and that, accordingly, the claimants were the victimsof a sustained campaign amounting to an actionable tort. There was no other way in which the claimants could have proceeded, save by requiring identification of Zeddust from both defendants.
I accept that the defendants had to carry out the balancing exercise, but in my judgment there was only one answer to that balancing exercise, namely that they should have complied with the requests made by the claimant. In those circumstances, I order the defendants to pay the claimant’s costs of this application/action.”
The judge then summarily assessed the costs to be paid by Interactive at £4,817.
Mr Higham QC who appeared on behalf of Interactive submitted that the judge had exercised his discretion upon wrong principles. He submitted that the actions of his client were perfectly proper. The Data Protection Act 1998 was difficult to construe and arguably prevented disclosure without a court order. Whilst the Act might not prevent disclosure of Zeddust’s name, it strongly indicated that personal data should not be disclosed to third parties without the consent of the data subject, save in exceptional circumstances. Further, the judge had failed to place any weight on the fact that Interactive was contractually obliged not to reveal the identity of its users. That was a particularly relevant factor, having regard to Interactive’s published privacy policy. To support that submission he referred us to the terms and conditions upon which Interactive contracted with Zeddust which prevented Interactive from passing on Zeddust’s information to any other person except in circumstances which do not apply in this case, and also to the published privacy policy which precluded Interactive giving the information required.
Mr Higham also submitted that the judge had failed to distinguish between the attitude of Interactive and that of the first defendant. The first defendant had opposed the grant of the order, whereas Interactive had not. It had left to the judge the question of whether an order should be made which overruled their obligation of confidence and exposed Zeddust to litigation.
Mr Higham went on to point out that in the present case Interactive were under an obligation of confidence, whereas that was not the position in the Norwich Pharmacal case. It followed that the Court should be more inclined to make the applicant pay costs than in the Norwich Pharmacal case where the applicant had to pay the costs of the Customs & Excise Commissioners. He directed our attention to these passages in the speeches of Lord Reid and Lord Cross which he submitted indicated the correct approach that the judge should have adopted. At page 176 Lord Reid said:
“But there may be other cases where there is much more doubt. The validity of the patent may be doubtful and there could well be other doubts. If the respondents have any doubts in any future case about the propriety of making disclosures they are well entitled to require the matter to be submitted to the court at expense of the person seeking the disclosure. The court will then only order discovery if satisfied that there is no substantial chance of injustice being done.”
At page 199 Lord Cross said:
“Secondly, although in any case which was on all fours with this case or any subsequent case which may be decided, the commissioners or any other person who was asked for a name would no doubt give it without putting the applicant to the expense of obtaining an order of the court; in any case in which there was the least doubt as to whether disclosure should be made the person to whom the request was made would be fully justified in saying that he would only make it under an order of the court. Then the court would have the right to decide whether in all the circumstances it was right to make an order. In so deciding it would no doubt consider such matters as the strength of the applicant’s case against the unknown alleged wrongdoer, the relation subsisting between the alleged wrongdoer and the respondent, whether the information could be obtained from another source, and whether the giving of the information would put the respondent to trouble which would not be compensated by the payment of all expenses by the applicant. The full costs of the respondent of the application and any expense incurred in providing the information would have to be borne by the applicant.”
The principle expressed in those speeches was, Mr Higham submitted, consistent with Part 48.1 CPR which is concerned with pre-action disclosure. There the general rule is stated as “the Court will award the person against whom the order is sought his costs – (a) of the application; and (b) of complying with the order made on the application.” However the court is given a discretion to make a different order “having regard to all the circumstances” which are stated to include the extent to which it was reasonable to oppose the application and whether the parties had complied with relevant pre-action protocols.
Mr Higham submitted that a party should be paid the costs in circumstances (a) where the party had a genuine doubt that the person seeking disclosure was entitled to it; (b) where the party was under a legal obligation not to reveal the identity of the third party, or where the legal position was not clear, or the respondent was in any reasonable doubt as to his obligations; (c) where there was a risk that proceedings could be brought against the party if the disclosure was voluntarily given; (d) where the party would suffer damage if he was seen to be providing the disclosure voluntarily or otherwise had a legitimate interest in not being seen providing the disclosure voluntarily; or (e) the disclosure could infringe a legitimate interest of somebody else.
Mr Higham submitted that all those conditions were satisfied in this case. He submitted that the contract between Interactive and Zeddust was clear in that it prohibited disclosure of the information sought. Second the information sought was personal data, the disclosure of which was governed by the Data Protection Act 1998. To a person in Interactive’s position it was not at all obvious, absent a ruling from the court, that any of the conditions apply. There was, he submitted, a material risk that if Interactive had made a disclosure without an order of the Court, proceedings might have been brought against them. Third there was the issue of privacy. Internet users are acutely aware of the potential of the internet to invade privacy and thus respectable website operators invariably take great care to ensure their users are comfortable that their privacy is being respected. That was the position in this case. Fourth, Interactive were not in a position to judge whether Zeddust had a legitimate interest which should be protected, in particular whether disclosure would infringe on Zeddust’s right of freedom of expression. Further this was a case in which the order for costs was particularly unfair as Interactive had not sought to influence the court, and the court had to exercise a discretion when deciding to overrule the obligations of confidence imposed by the contract between Zeddust and Interactive.
Mr Higham submitted that Interactive were caught in a conflict not of their making. If they simply handed over the information, then they could be liable for proceedings for breach of contract and perhaps under the Data Protection Act. It was wrong to penalise them in costs for leaving the decision to the Court, particularly as Totalise would be expected to recover their costs from Zeddust as part of the costs of the action that they intended to take. By awarding costs to Totalise, the court had ensured that the proper person, Zeddust, could in practice avoid paying those costs. That he submitted, was contrary to justice.
Mr Patrick Moloney QC, who appeared on behalf of Totalise, reminded us that this was an appeal on costs alone. He drew to our attention Part 44.3 CPR which provides that as a general rule the “unsuccessful party” should pay the costs of the “successful” party. Important as that principle is, it cannot apply to Norwich Pharmacal applications. That was made clear by Lord Reid and Lord Cross. Such applications are not really inter partes disputes to which Part 44.3 is specifically directed. Interactive did not resist the Court making the order and therefore cannot properly be called an “unsuccessful party”. A closer analogy is with applications for pre-action discovery to which Part 48.1 applies.
Mr Moloney submitted that the judge was not wrong in the way he exercised his discretion and therefore it was not appropriate for this Court to interfere (see Tanfern Ltd v Cameron-MacDonald [2000] WLR 1311 at 1317). The basis of that submission is correct. But we believe that the judge failed to take into account relevant matters which may have been the result of a failure to bring the relevant matters to his attention. That being so, the Court must look again at what should be the correct order. It is sufficient at this stage of the judgment to draw attention to the failure by the judge to consider the attitude of Interactive separately from that of the first defendant; the failure to consider the effect upon Interactive of voluntarily disclosing confidential details and the fact that Totalise could recover the costs from Zeddust if they were to bring a successful action for libel.
Mr Moloney submitted that the judge was entitled to distinguish the Norwich Pharmacal case as there was a clear difference between the position of Customs & Excise, which is a public body, and the provider of a website. That the judge had in mind. We accept that what was said in the Norwich Pharmacal case was directed to the facts of that case and therefore cannot be blindly applied in all Norwich Pharmacal applications. However the statements reflect the difference between such applications and normal inter partes proceedings.
Mr Moloney also drew attention to what he said was the basic merit of the order which the judge had made. If defendants to an application for discovery, pursuant to the Norwich Pharmacal procedure, could sit back and do nothing and expect their costs to be paid, then the time of the courts would be taken up with wholly formal and unnecessary disclosure applications to the prejudice of other court users. Further, a deterrent of double-cost liability would be incurred by the victim of anonymous web libels who would have to bear that burden before coming to grips with the libeller himself. That would encourage people to use the web as a vehicle for anonymous scurrilous allegations. Thus the judge was right to make an order which would discourage such events. A website provider should, when requested to give disclosure, take legal advice (if necessary, first seek the claimant’s undertaking to cover its costs) and then provide the information requested unless there was a reasonable prospect that a court would not make the order. There was, he submitted, no reasonable prospect in this case that the order would not be made and therefore the order made was correct.
We accept that the court has a discretion as to the order for costs when deciding a Norwich Pharmacal application, but such applications are not truly ordinary adversarial proceedings as the defendant, whether it be a web provider, Customs & Excise, a telephone company or a bank does not normally resist the order being made. Such defendants have become mixed up in tortious acts and are only concerned that duties and rights, such as duties of confidence and legitimate interests of privacy, are considered by the court. It is for the applicant to satisfy the Court that the order should be made, not for the defendant to take a view which could be wrong. We believe that that is emphasised by an analysis of the parties’ submissions on the effect of the Data Protection Act 1998.
There was no dispute that the information requested by Totalise was covered by the 1998 Act. It was their submission that disclosure was appropriate having regard to section 35 and schedule 2. Section 35 exempts disclosure which is otherwise necessary for the purposes of establishing, exercising or defending legal rights. The effect of paragraph 5(a) of Schedule 2 is to allow disclosure for the administration of justice. However paragraph 6 states:
“6.- (1) The processing is necessary for the purposes of legitimate interests pursued by the data controller or by the third party or parties to whom the data are disclosed, except where the processing is unwarranted in any particular case by reason of prejudice to the rights and freedoms or legitimate interests of the data subject.
(2) The Secretary of State may by order specify particular circumstances in which this condition is, or is not, to be taken to satisfied.”
It is not necessary to construe section 35 or paragraphs 5 and 6 of Schedule 2, but it is manifest from paragraph 6 of Schedule 2 that no order is to be made for disclosure of a data subject’s identity, whether under the Norwich Pharmacal doctrine or otherwise, unless the court has first considered whether the disclosure is warranted having regard to the rights and freedoms or the legitimate interests of the data subject. By virtue of s.10 of the Contempt of Court Act 1981, if applicable, the court must also be satisfied that disclosure is necessary in the interests of justice.
In a case such as the present, and particularly since the coming into force on 2 October 2000 of the Human Rights Act 1998, the court must be careful not to make an order which unjustifiably invades the right of an individual to respect for his private life, especially when that individual is in the nature of things not before the court: see the Human Rights Act 1998, s.6, and the European Convention on Human Rights, Arts. 10 and (arguably at least) 6(1). There is nothing in Art. 10 which supports Mr Moloney’s contention that it protects the named but not the anonymous, and there are many situations in which – again contrary to Mr Moloney’s contention – the protection of a person’s identity from disclosure may be legitimate.
It is difficult to see how the court can carry out this task if what it is refereeing is a contest between two parties, neither of whom is the person most concerned, the data subject; one of whom is the data subject’s prospective antagonist; and the other of whom knows the data subject’s identity, has undertaken to keep it confidential so far as the law permits, and would like to get out of the cross-fire as rapidly and as cheaply as possible. However the website operator can, where appropriate, tell the user what is going on and to offer to pass on in writing to the claimant and the court any worthwhile reason the user wants to put forward for not having his or her identity disclosed. Further, the Court could require that to be done before making an order. Doing so will enable the court to do what is required of it with slightly more confidence that it is respecting the law laid down in more than one statute by Parliament and doing no injustice to a third party, in particular not violating his convention rights.
Mr Moloney has suggested that the issue need never come before a court: an intermediate party asked to disclose someone’s identity can perfectly well act on their lawyers’ advice as to what the likely outcome in court would be, and can look to the claimant for the cost of obtaining the advice. We doubt this. There are many factors which may be material to enforced disclosure beyond the deceptively simple fact advanced by Mr Moloney that defamation is a tort of strict liability. It is perfectly possible, for example, that a judge would refuse disclosure of the identity of a data subject whose attacks, though legally defamatory, were visibly the product of a deranged mind or were so obviously designed merely to insult as not to carry a realistic risk of doing the claimant quantifiable harm.
We also believe that it is legitimate for a party, such as Interactive, who reasonably agrees to keep information confidential and private to refuse to voluntarily hand over such information. That we believe was applicable to this case. Despite the submissions of Mr Moloney as to the effect of clause 12 of Interactive’s Terms and Conditions, we are not convinced that Interactive were free to hand over the material without coming to a view on the merits. That was not their task. The position could have been different, if they were in some way implicated or involved in the wrongful act.
We believe that Mr Higham is right. Norwich Pharmacal applications are not ordinary adversarial proceedings, where the general rule is that the unsuccessful party pays the costs of the successful party. They are akin to proceedings for pre-action disclosure where costs are governed by Part 48.3 CPR. That rule, we believe, reflects the just outcome and is consistent with the views of Lord Reid and Lord Cross in the Norwich Pharmacal case. In general, the costs incurred should be recovered from the wrongdoer rather than from an innocent party. That should be the result, even if such a party writes a letter to the applicant asking him to draw to the court’s attention to matters which might influence a court to refuse the application. Of course such a letter would need to be drawn to the attention of the court. Each case will depend on its facts and in some cases it may be appropriate for the party from whom disclosure is sought to appear in court to assist. In such a case he should not be prejudiced by being ordered to pay costs.
The Court when considering its order as to costs, after a successful Norwich Pharmacal application should consider all the circumstances. In a normal case the applicant should be ordered to pay the costs of the party making the disclosure including the costs of making the disclosure. There may be cases where the circumstances require a different order, but we do not believe they include cases where:
(a) the party required to make the disclosure had a genuine doubt that the person seeking the disclosure was entitled to it;
(b) the party was under an appropriate legal obligation not to reveal the information, or where the legal position was not clear, or the party had a reasonable doubt as to the obligations; or
(c) the party could be subject to proceedings if disclosure was voluntary; or
(d) the party would or might suffer damage by voluntarily giving the disclosure; or
(e) the disclosure would or might infringe a legitimate interest of another.
That does not mean that a party who supports or is implicated in a crime or tort or seeks to obstruct justice being done should believe that the Court will do other than require that party to bear its costs and, if appropriate, pay the other party’s costs.
For the reasons given, we believe that the judge came to the wrong conclusion on costs. Interactive should have recovered their costs. We therefore would allow the appeal.
Order: Appeal allowed; respondents to pay the appellant’s costs here and below to be summarily assessed – below at £2,339.50 and in this court at £17,300; the costs already paid to be repaid within 28 days; summary costs to be paid within 28 days; permission to appeal to the House of Lords refused.
(Order not part of approved judgment)
Sheffield Wednesday Football Club Ltd & Ors v Hargreaves
[2007] EWHC 2375
Parkes QC :
This is a part 8 claim brought by eight Claimants, the first of which is Sheffield Wednesday Football Club Ltd. The second is Dave Allen, the chairman of Sheffield Wednesday PLC, a company which owns 100% of the shares in the first Claimant. He and the third to seventh Claimants are directors of the first Claimant and (except for the fourth Claimant) they are also directors of Sheffield Wednesday PLC. The eighth Claimant is the chief executive of Sheffield Wednesday Football Club Ltd.
The Claimants seek Norwich Pharmacal relief against the defendant Neil Hargreaves, who owns and operates a web site, www.owlstalk.co.uk, on which fans of Sheffield Wednesday football club can post messages on matters relating to their club.
It is the Claimants’ case that the Defendant has permitted some users to pursue a sustained campaign of vilification against the Claimants, in the course of which users have posted false and defamatory messages on the website. They say therefore that the Defendant has facilitated and become mixed up in the wrongdoing of these users.
Because, ultimately, the position of the Defendant is that he does not oppose the making of what he calls a “proper” Norwich Pharmacal order, I need not refer at any great length to the facts relied on by the Claimants, which are not substantially in dispute. Mr Hargreaves’ website appears to be freely accessible to anyone with access to the internet. Once users have registered as members by providing an e-mail address and password, they are required to provide the user name, invariably a pseudonym, by which they identify themselves when they make a posting. When a member registers for the website he agrees that he will not use the bulletin board to post any material which is inter alia knowingly false and/or defamatory. Members are warned that the operators of the website have the ability to remove objectionable messages and that they will make every effort to do so within a reasonable time frame if they determine that removal is necessary.
The Claimants wish to bring libel proceedings against the individuals who posted certain messages concerning one or more of the Claimants on the website between 24th July and 3rd August 2007. Mr Dominic Bray of the Claimants’ solicitors sets out in his witness statement the allegedly defamatory passages in some 14 messages. A 15th message, posted by a member with the username “Shezza”, is no longer in point because it refers only to the ninth Claimant who is no longer a party to the action. In addition the Claimants no longer seek relief in respect of the postings by the member with the username “Gamrie Owl”. That leaves 11 members whose identities are sought, in relation to some 14 postings.
Mr Aidan Eardley, who represented the Claimants, took me through the postings which concern his clients. They are as follows:
(i) The first posting was made by a user called “Halfpint” on 24th July 2007, and was to this effect:
“I would like to know what these loans plus the added interest amounts (sic) to at present. How easy it was for Allen to call us Wednesdayites SCUM and put the blame on us when what it seems like that (sic) scuppered the Gregg buy out was the greedy demands of 3 directors.”
Mr Eardley explained that the reference to “Allen” is a reference to the second Claimant, and that the reference to three directors will have been understood as a reference to the second, third and fourth Claimants, all of whom are known to have substantial shareholdings in the club. The suggestion was, he said, that the three directors greedily sought too much for themselves and thereby wrecked the proposed buyout, and that Mr Allen wrongly blamed the fans when in fact the fault lay with him and his two shareholding colleagues.
(ii) The second posting was made on July 26 by a user called “DJ Mortimer”. It referred to the previous posting, which described the amounts spent by the club between January and June 2007 and observed that promoted sides spent on average 8 times more than Sheffield Wednesday did. The posting reads as follows:
“Is this more evidence that Dave Allen is nothing more than a skinflint? Even the agents can’t get anything worthwhile out of him”.
Mr Eardley explained that the previous posting was reporting on how much various clubs spend on agents. The meaning of this posting, he submitted, was that the second Claimant is someone who is mean with the club’s money and does not spend what is necessary to allow it to compete.
(iii) The third posting was by the same user, “DJ Mortimer”, one hour and 17 minutes later. After giving the reference to a piece of news on the BBC website, the posting read as follows:
“If this is confirmed by someone from outside the SWFC boardroom I’ll happily accept it. Kaven Walker is not my idea of a model witness. Ask Nathan Tyson what he thinks of SWFC’s trustworthiness”.
Kaven Walker is the eighth Claimant. Mr Eardley submitted that the allegation here was that none of the Claimants could be trusted to make honest statements.
(iv) The next posting was by a user who called himself “xdanielx”. It read:
“Why bother? We won’t sign anyone. We will create some new BBC stories that won’t go anywhere. Whenever we are linked with signing anyone remotely good/expensive we just create paper talk for a few days then repeat numerous times until getting someone in on a loan”.
This, Mr Eardley explained, meant that the club was not prepared to spend money on players, and that it would dishonestly foster speculation about buying players without any intention of doing so.
(v) The fifth posting complained of by the Claimants was by a user called “Ian”. The relevant part of it read:
“So Allen’s decided to f*ck off, but because that would please too many he’s going to be spiteful and make sure he doesn’t leave anything behind. So Brunt’s going to be sold, the Bougherra money is staying where it is, Whelan may be next, there’s no chance of getting anyone in. He’s going to make sure we have a sh*t start to the season, get out whatever money he can, and then go.”
This meant, according to Mr Eardley, that the Second Claimant would leave the club and destroy it vindictively when he left, putting his own personal interests before the interests of the club.
(vi) The next posting was by a user called “Auckland Owl”. It read, so far as relevant:
“If I were Brian Laws I’d walk away from it before the season starts. I wonder how long it took, after getting the job, before he thought to himself “What the absolute fook (sic) have I let myself in for?” The club’s best players being given away, endless broken promises and the chairman with the most acute Napoleon complex *allegedly* that I’ve personally ever seen.”
Mr Eardley submitted that this meant that the second Claimant was guilty of mismanagement by getting rid of players, making promises and breaking them, and being an egotist driven by an inferiority complex about his height.
(vii) Next was a posting by a user called “Foot 04”. He wrote:
“When will there be some good news? All this transfer rumour is just pathetic. We all know this is made to take some pressure off “u know who” after the stupid comments he made.”
This meant, Mr Eardley explained, that the second Claimant was knowingly putting out false rumours. The reference to “you know who” would have been understood by readers of the site to point to the second Claimant who gave a press conference at which he was critical of fans. The transfer rumour would have been understood to be a false rumour designed to take the pressure off the second Claimant.
(viii) The eighth posting was by a user called “Southy”. He listed the main reasons for his regret at buying a new season ticket and the third reason was this: “increased ticket prices, where the fook (sic) has this money gone (ohh BTW I saw Dave Allen getting measured up for a new suit the other day, he specifically requested bigger pockets)”.
This, Mr Eardley submitted, was a serious message conveyed in a light-hearted way. The ticket prices had increased and there was nothing to show for it, therefore the second Claimant had pocketed the proceeds. In his submission the words were capable of meaning that the directors had squandered the club’s money and the second Claimant had pocketed it.
(ix) Next came a posting by a user called Vaughan. In context, I understand, it referred to the possible acquisition by the club of a Southampton player called Rasiak. It read: “Because we never had any intention of buying him, and you could hear the collective puckering of sphincters in the Wednesday board room from when Southampton said okay, let’s talk? We then offer a ridiculous wage to ensure Rasiak would never be interested.”
The meaning put on this was that the Claimants had been pursuing negotiations on the false basis that they would buy a player without having any intention of doing so. Then, when Southampton seemed interested, they deliberately scuppered the deal by offering a ridiculous wage which the player would never accept. They were thereby damaging the reputation of the club as a serious negotiator, and acting in a manner which was damaging to the club’s best interests.
(x) The 10th posting was by the user called “paulrs”. This was his contribution, which was headed “Absolute sheer incompetence, Kaven Walker”:
“I still can’t believe the way the Brunt situation has been handled by the numpties at our club. Basically they are saying that Brunt will be on his way out of the club next summer for a tribunal-set fee, but might decide to stay if we get promoted to the Premiership (please understand that KW is talking like promotion is a strong possibility!!!!). Consider Brunt is, conservatively, worth £4m in the current market. Next summer, when out of contract, any tribunal fee is unlikely to be any higher than £1.5m. So in effect, the club is gambling at least £2.5m in Brunt’s value on us getting promoted to the Premiership this season. So WHY, last January and again during this summer, have they steadfastly refused to gamble on reaching the Premiership by putting that same £2.5m into a transfer kitty for the manager? If someone can come on here and explain why this is anything other than crass incompetence I’d like to hear it.”
This, Mr Eardley explained, was an allegation of incompetence by the Claimants. Even if on the face of it the user’s contribution was comment, he explained that the underlying factual basis of it was untrue and disputed by the Claimants.
(xi) The 11th posting was by the same user, “paulrs”. This time, he said:
“Whatever happens, we’ll get but a small fraction of what he’s worth. Right, well bowing to everyone’s greater knowledge of tribunal fees that makes it even worse. Seems we’re gambling away £3-3.5m in potential revenue on the premise that we’ll go up this season. Another day, another blunder. I doubt even Leeds were in such a mess this time last summer, and look what happened to them.”
This, Mr Eardley explained, was a repetition of the 10th posting, and amounted to an allegation of crass incompetence. He added that Leeds football club went into administration, and that the posting had to be understood in that context.
(xii) The next posting complained of was by a user called “danksy”. His contribution was as follows: “This club is a disgrace at the moment, off the pitch not on it. It all started last January when we sold one of our best talents for a long time (Bougherra) and didn’t replace him. Then in the summer release our joint op (sic) scorer, because we couldn’t afford an extra couple of grand a week. He also doesn’t look like he is going to be replaced and every striker we are linked with either doesn’t want to come or we can’t afford the transfer fee or wages. Now it looks like Brunt and Whelen with leave (sic) now or next summer n (sic) because the board won’t give them the improved contracts that they rightfully deserve. 4 players have joined this season, all on free’s (sic) and none of them, except Watson are good enough at this level. SWFC is a massive club but we aren’t going to achieve anything with these “cretins” that are the board running the club.”
Mr Eardley argued that the meaning of this posting was that the directors managed the club incompetently and refused to give the best players the contracts they deserved. He explained that because the Defendant’s bulletin board had in effect become a forum for defamatory abuse, his clients were particularly sensitive about it.
(xiii) The 13th posting was again by “halfpint”. It read as follows: “The club is ours. Allen is very much a minority shareholder. What HE wants and what is best for the CLUB are two different things, and while people like you support him without good reason he is laughing his bollocks off. Support t he club, not Allen’s bank account. Exactly the point and well said. With Allen it is all about me – myself and I & profit. He disgusts me.”
The meaning put on this by the Claimants was that the second Claimant was involved in the club for his own interests and not in the interests of the club or the players.
(xiv) The final posting which concerns the Claimants was by a user called “cbr bob”. His contributions followed a posting by the user known as Gamrie Owl, which referred to a trip abroad made by “the Chuckle Brothers” to watch players with a view to making a signing. I gather that the “Chuckle Brothers” was a reference, which would have been understood by users of the website, to the eighth Claimant, and to Mr Laws, the manager of the club, who was originally (but is no longer) the ninth Claimant. In response to that posting, “cbrbob” replied “they blew all the money on hookers”. Another user then interjected “it’s not a hooker we need, it’s a striker”, to which “cbrbob” responded “they wouldn’t know the difference”.
The Claimants are not, it appears, concerned about the suggestion that they spent the club’s money on prostitutes, which I presume they accept might have been unlikely to be taken seriously, but with the suggestion that the eighth Claimant would not have known the difference between a hooker in rugby and a striker in football, which would have been understood to mean that the eighth Claimant, though he was the chief executive of the football club, would not have been capable of spotting a competent player.
It is the unchallenged evidence of Mr Bray that the Claimants are unaware of the true identities of the individuals who have posted the allegedly defamatory material, and that they have no means of discovering their identities other than by obtaining the information from the defendant.
The position of the Defendant, represented by Miss Caroline Addy, is that there is no live issue between the parties as to the content or propriety of the order now sought. The Defendant does not oppose the order sought: nor does he consent to it, as he regards it as inappropriate for him to do so. He leaves it to the court to decide whether and on what terms to grant relief. Miss Addy describes that as being a necessary and proper stance for him to take having regard to the reasonable expectation of site users that their personal details will not be divulged save when required by law or an order of the court.
However, I must satisfy myself that the order sought is indeed a proper order to make. The proposed order will, if granted, disclose to the Claimants the identities, or at least the e-mail addresses, of users of the Defendant’s website who must have expected, given their use of anonymous pseudonyms, that their privacy would be respected. As the Court of Appeal observed in Totalise PLC v The Motley Fool Ltd [2002] EWCA Civ 365, [2002] 1 WLR 2450 at paragraph 25, in a case where the proposed order will result in the identification of website users who expected their identities to be kept hidden, the court must be careful not to make an order which unjustifiably invades the right of an individual to respect for his private life, especially when that individual is in the nature of things not before the court. Equally, it is clear that no order should be made for the disclosure of the identity of a data subject, whether under the Norwich Pharmacal doctrine or otherwise, unless the court has first considered whether the disclosure is warranted having regard to the rights and freedoms or the legitimate interests of the data subject (see paragraph 6 of schedule 2 of the Data Protection Act 1998). As the Court of Appeal pointed out (at paragraph 26 of the judgment) it is difficult for the court to carry out this task if it is refereeing a contest between two parties neither of whom is the person most concerned, that is to say the data subject. This is not a case, as I understand it, where the website operator has informed the relevant website users of what is going on or offered to pass to the court any particular reason why the users should not want their identities revealed. It did not seem to me that this was a case where I should require that the website users be contacted before making an order.
The jurisdiction to make such an order was first established by the case of Norwich Pharmacal v Customs & Excise Commissioners [1974] AC 133. Lord Reid described the principle as follows (p175): “….if through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrongdoing, he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him information and disclosing the identity of the wrongdoers. I do not think that it matters whether he became so mixed up by voluntary action on his part or because it was his duty to do what he did. It may be that if this causes him expense the person seeking the information ought to reimburse him. But justice requires that he should co-operate in righting the wrong if he unwittingly facilitated its perpetration”.
In Mitsui Ltd v Nexen Petroleum UK Ltd [2005] EWHC 625 (Ch) at [21], Mr Justice Lightman set out the three conditions which must be satisfied for the court to exercise the power to order Norwich Pharmacal relief. He stated them as follows:
i) A wrong must have been carried out or arguably carried out by an ultimate wrongdoer;
ii) there must be the need for an order to enable action to be brought against the ultimate wrongdoer; and
iii) the person against whom the order is sought must (a) be mixed up in the wrongdoing so as to have facilitated it; and (b) be able or likely to be able to provide the information necessary to enable the ultimate wrongdoer to be sued.
It is clear that even if these conditions are satisfied, the court retains a discretion whether or not to make the order. In Totalise PLC v The Motley Fool Ltd [2001] EMLR 750, Owen J at [27] identified the following matters as relevant to the exercise of the discretion: the strength of the Claimant’s prima facie case against the wrongdoer, the gravity of the defamatory allegations, whether the wrongdoer was waging a concerted campaign against the Claimant, the size and extent of the potential readership, the fact that the wrongdoer was hiding behind the anonymity which the website allowed, whether the Claimant had any other practical means of identifying the wrongdoer, and whether the Defendant had a policy of confidentiality for users of the website. The case went to the Court of Appeal on the question of costs alone, but I note that the court envisaged at [27] that a judge might refuse disclosure of the identity of an alleged wrongdoer whose attacks, though legally defamatory, were so obviously designed merely to insult as not to carry a realistic risk of doing the claimant quantifiable harm. In other words, it is relevant to the exercise of the discretion to consider whether the words complained of were, even if strictly defamatory, more than a trivial attack which would not be taken seriously.
As to the threshold requirements which must be satisfied before the Norwich Pharmacal jurisdiction can be exercised, Mr Eardley submitted that all the postings were arguably defamatory, so that wrongs had arguably been committed; that the Claimants had no other way of finding out who the authors of the words were; and that the Defendant plainly facilitated the alleged wrongdoing by giving users the means to address other users, and has access at least to the users’ email addresses, and possibly to their postal addresses as well. Even if he has access to email addresses alone, that would be sufficient for the Claimants, who could then make a further application or applications against the users’ internet service providers.
If condition (1) is satisfied, I accept Mr Eardley’s submissions as to conditions (2) or (3). Plainly, there is a need for an order to enable action to be brought against the ultimate wrongdoer, if wrongdoing there has been, because there is no other possible means by which the Claimants could identify them. Equally, there is no doubt that the Defendant facilitated any wrongdoing, because he provided the means for the users to post their messages. Moreover, he is likely to be able to provide the information necessary to enable any wrongdoers to be sued.
I have not found condition (1) as easy as Mr Eardley suggested that I should find it, because I do not accept his categorisation of all the postings as containing ‘very serious defamatory allegations’. In some cases, they are far from serious. However, I accept his submission that the threshold test is that the words complained of should be arguably defamatory of the Claimants, and this I have concluded that they are. In addition, I think that they must be at least arguably false, because there is no wrong done by the publication of words which are defamatory and true; but their falsity is deposed to by Mr Bray. So I find that the threshold tests are met.
As far as discretion is concerned, Mr Eardley submitted that there was a strong prima facie case against all the relevant users, although he accepted it was stronger in some cases than in others. He described the allegations as being very serious, although he accepted that there was a range of seriousness. He relied on the persistence of the campaign against the Claimants, and referred to other postings in the bundle. Some offenders were repeat offenders: “halfpint” and “paulrs” fell into this category. He claimed that the users had breached the rules of the website, and referred me to the Owlstalk registration form, which requires the prospective user’s agreement not to use the bulletin board to post any material which was (among other descriptions) knowingly false and/or defamatory, inaccurate or abusive. Moreover, users were told that they could not post defamatory material, and knew that if they did so they risked being barred from the site. This, Mr Eardley argued, was a relevant consideration on the question of proportionality and the degree of interference which an order would make with their rights of privacy and freedom of expression.
It seems to me that some of the postings which concern the Claimants border on the trivial, and I do not think that it would be right to make an order for the disclosure of the identities of users who have posted messages which are barely defamatory or little more than abusive or likely to be understood as jokes. That, it seems to me, would be disproportionate and unjustifiably intrusive. The postings which in my judgment fall into this category are those numbered 4 (“xdanielx”), which is only capable of being argued to be defamatory by devising a frankly implausible meaning, 7 (“Foot04”), which is barely if at all defamatory of the Second Claimant, 8 (“southy”) and 14 (“cbrbob”), both which in my view are plainly intended as jokes and would have been unlikely to be taken seriously, let alone understood in the senses for which Mr Eardley argued, and 10 and 11 (“paulrs”) which I regard as no more than saloon-bar moanings about the way in which the club is managed, rather than a serious indictment of grave mismanagement. In my view the same is true of 6 (“Auckland Owl”) and 12 (“danksy”), which add to the mix a smidgeon of personal abuse of a kind which I would have thought most unlikely to be taken seriously. I take a similar view of the posting numbered 2 (“DJ Mortimer”), which is no more than mildly abusive and is fairly plainly comment.
The postings which I regard as more serious are those which may reasonably be understood to allege greed, selfishness, untrustworthiness and dishonest behaviour on the part of the Claimants. In the case of those postings, the Claimants’ entitlement to take action to protect their right to reputation outweighs, in my judgment, the right of the authors to maintain their anonymity and their right to express themselves freely, and I take into account in this context the restrictions on the use of defamatory language which the rules of the Defendant’s bulletin board impose, restrictions which in the case of these postings appear to have been breached. I take into account also that the Defendant does not appear to have had any policy of confidentiality for the benefit of his users.
The postings which I regard as falling within this category are those by “halfpint” (1, which arguably accuses the Second Claimant and two other directors having allowed their personal greed to come in the way of the interests of the club; and 13, which may suggest that the Second Claimant is concerned only with his own profit, and not with the interests of the club); “Ian” (5, which may be argued to suggest that the Second Claimant plans to damage the club by taking as much out of it as he can and then leave it in the lurch); and “Vaughan” (9, which arguably suggests that the directors have shown bad faith in negotiations for new players and damaged the club’s reputation in consequence). I had some doubt about the second posting by “DJ Mortimer” (3), which may well suggest that the Eighth Claimant (and probably the directors) is not to be trusted to tell the truth, but in the end I reached the conclusion that it is sufficiently serious to merit inclusion.
I therefore make the order sought, but only in respect of the users responsible for the postings referred to in paragraph 19 above.
It has been agreed that the Claimants will pay the Defendant’s reasonable costs of the application and of compliance with this order, so I make that order also.
Having informed the parties that although I would hand down a written judgment, I intended to make an order in respect of some at least of the postings complained of by the Claimants, I went on to hear argument on the summary assessment of the Defendant’s costs.
The Defendant has put in a Statement of Costs. The grand total is the remarkable sum of £22,926.89.
Miss Addy correctly explained that the Defendant was originally faced with a letter before action from the Claimants dated 2nd August 2007 which demanded substantive remedies, including damages and indemnity costs (on the footing that the Defendant was the publisher of the postings complained of) as well as making wide-ranging requests for extensive Norwich Pharmacal relief by way of identification of 27 users of the bulletin board and for pre-action disclosure of all postings by those users over the past 12 months. Moreover, the Claimants were not properly identified, and the schedule of 19 postings complained of did not spell out the defamatory meanings which were put on the words. Nor, as far as I can see, did the schedule include postings by all the users whose identity was sought. That letter was followed by a letter of 7th August demanding Norwich Pharmacal relief against a further four users and complaining of seven defamatory postings by those users. Ms Addy submitted that the Defendant’s solicitors had to expend a considerable amount of effort to find out who the prospective Claimants were and what exactly was complained of, since it was important for them to be able to assess the true force of the complaint before being in a position to decide whether or not to accede to the demand for Norwich Pharmacal relief. That is a reasonable point. She pointed out that partly as a result of her solicitors’ efforts the Claimants’ demands were very considerably toned down as the correspondence continued. For example, the proposed ninth Claimant, Mr Brian Laws, dropped out, and on the final application the Claimants sought relief in respect of only 11 users and 14 postings. Ms Addy urged me not to take what she called a reductionist approach to the correspondence: there was a substantial overlap between the substantive claim and the Norwich Pharmacal claim, such that the costs incurred were relevant to both issues.
Mr Eardley described the global costs claimed as grossly disproportionate for an application on which the Defendant should have taken a neutral stance. Taking a step back in accordance with the guidance in Home Office v Lownds [2002] EWCA Civ 365, [2002] 1 WLR 2450, it does seem to me that Mr Eardley is correct. The overall costs claimed are plainly disproportionate, given in particular the nature of this application and its essentially non-adversarial character. That being so, I must be satisfied that the work done in relation to each item claimed was necessary and, if necessary, that the cost of it was reasonable.
Mr Eardley submitted also that it was necessary to disentangle the substantive claim from the Norwich Pharmacal claim, and that as far as the latter was concerned there was a limit to what it was reasonable for a respondent to do, once it was conceded (as the Defendant did concede by letter dated 9th August 2007) that he would not oppose a proper application subject to payment of his reasonable costs of compliance. He suggested that the proper course for a Norwich Pharmacal respondent is to set out any concerns about the relief sought in a letter and ask that it be placed before the court, and that after the relief has been conceded in principle, there is a heavy burden on the Defendant to justify any further expenditure. He conceded that the scope of the relief sought had been reduced, although he pointed out that the Defendant raised the issue of scope only once: the application notice sought more limited relief not because of the Defendant’s efforts but because the claim was reviewed before issue. However, he accepted that the Defendant had raised the question of Mr Laws, and the appropriateness of one posting, after the issue of the application notice, and that the claim had to that extent been narrowed in consequence.
He pointed out that the witness statement of Miss Harris was served on the Friday before the application was heard, at a point when there was almost nothing in dispute (and of which it might fairly be said that it amounts to nothing more than a commentary on the correspondence which would in any event have been before the court); and he questioned the claim for ‘Other work, not covered above’, totalling £2215.75 (of which Ms Addy was only able to say, not having anyone from whom to take instructions, that it included issuing press releases, which on any view cannot have been necessary to deal with this application). There is force in all those points, and in his submissions that it cannot have been necessary to spend 18.95 hours of work on the documents in the case, still less when 17 of those hours were partner’s time, nor to spend over 28 hours on correspondence with the Claimants’ solicitors, 21.5 hours of which was partner’s time. Much of that time was undoubtedly spent on preparation by Mr Lewis of the ‘defence’ to the substantive claims to which I refer at paragraph 29 below. Mr Eardley also submitted that while he did not criticise the claim for Ms Addy’s work before the hearing, it was not necessary for a senior specialist junior to appear to argue a summary assessment of costs. I am inclined to agree, but it is questionable whether bringing in another junior who knew nothing of the case and bringing him or her up to speed would in fact have saved more than a very small amount.
Mr Eardley also pointed out (this was not contested by Ms Addy) that the recommended grade A rate for inner Manchester, where the Defendant’s solicitors practise, is £195 per hour (by contrast with the £275 claimed) and for a grade C solicitor it is £145 (by contrast with £190 claimed).
In my judgment it is difficult, although necessary, to disentangle the substantive from the Norwich Pharmacal claim. It is difficult because the two claims were coupled by the Claimants in correspondence, in terms which inevitably gave a sharply adversarial edge to the Claimants’ demands, which in turn led the Defendants, not unreasonably at first, to adopt a more aggressive response than might otherwise have been the case. There is some justice in Ms Addy’s criticism that the scope and nature of the claim was not explained as clearly as it might have been, and that it required some critical examination. However, much of the correspondence was in reality devoted to the substantive claim, and it seems to me that this applies in particular to the Defendant’s highly elaborate response dated 21st August 2007 to the postings complained of. Prepared by Mark Lewis, a partner in the firm of George Davies, it amounts in effect to a defence, taking issue with the Claimants on meaning and publication and asserting substantive defences. It seems likely that a large amount of the 38.5 hours of partner’s time claimed in the statement of costs for attendances on opponents and work done on documents (totalling £10587.50) is to be attributed to this document, and even if that is not the case, I think that Mr Eardley is right to submit that the Norwich Pharmacal application (as opposed to the substantive claim) did not merit anything like the degree of partner involvement as is claimed for here. That level of partner involvement was simply not necessary to deal with an application like this, although it may well have been necessary as a response to the substantive claim.
Doing my best to disentangle the work done on the substantive claim from that necessary and reasonably incurred for the Norwich Pharmacal application, taking into account the fact that the application was conceded in principle as early as 9th August 2007, and reducing the rates claimed to the recommended inner Manchester rates, in my judgment the right figure to allow for the Defendant’s costs is £9000 before VAT, and that is the figure which I assess as recoverable. I will explain that figure by reference to each head of the Statement of Costs:
(i) Attendances on client: these must in part have related to the substantive claim, and the partner rate claimed is substantially in excess of the recommended rate. I allow £300.
(ii) Attendances on opponents: I discount all but two hours of partner’s time, as being unnecessary for this application. Had the partner not done the work, it would have been done by a grade C solicitor, but at £145 per hour. But it seems to me that much of this work plainly related to the substantive claim. I allow £2250.
(iii) Attendances on others: there was a need to contact Mr Laws, the proposed ninth Claimant, and also the eighth Claimant, who (there was some reason to suppose) might have been unwilling to be a party. But again, this relates in part to the substantive claim. I allow £350.
(iv) Other work not covered above: all that I know about this is that it related in part to press releases. I could not be satisfied that any of this work was necessary for the purposes of this application.
(v) Work done on documents: I discount all but one hour of partner’s time. Much of this work must have involved the ‘defence’ which Mr Lewis produced, which can only be regarded as a response to the substantive claim. If that work is not included under this heading, then it is included under the heading of attendance on opponents. I will allow £2500.
(vi) I allow Ms Addy’s fees at £3600.
(vii) On that basis, the total which I allow is £9000 before VAT.
Godfrey v. Demon Internet Limited
[1999] EWHC QB 244 [1999] Masons CLR 267, [2000] 3 WLR 1020, [1999] EWHC QB 244, [2001] QB 201, [1999] ITCLR 282, [1999] EMLR 542, [1999] 4 All ER 342Mr Justice Morland:
JUDGMENT.
According to Counsel this is the first defamation action involving the Internet to come up for judicial decision within this jurisdiction. However I had number of American cases cited before me. The United States was in forefront of the early development of the Internet. Care has to be taken before American cases are applied in English defamation cases. The impact of the First Amendment has resulted in a substantial divergence of approach between American and English defamation law. For example in innocent dissemination cases in English law the Defendant publisher has to establish his innocence whereas in American law the Plaintiff who has been libelled has to prove that the publisher was not innocent. Nevertheless the American decisions are educative and instructive as to the workings of the Internet and the problems which arise when defamatory material finds its way onto the Internet.
The Plaintiff by his summons (pages 40 and 41 of the Court Bundle) seeks to strike-out parts of the Defence as disclosing no sustainable defence. In short the Defendants’ contention is that they were not at common-law the publishers of the Internet posting defamatory of the Plaintiff and that even if they were there is material upon which they can avail themselves of the defence provided by Section 1 of the Defamation Act 1996, “a modern equivalent of the common law defence of innocent dissemination” (See per Lord Mackay L.C. Hansard. 2nd April 1996. Col 214 Defamation Bill (H.L.)).
THE FACTUAL BACKGROUND
The Plaintiff is a lecturer in physics, mathematics and computer science resident in England.
The Defendant is an Internet Service Provider (I.S.P.) carrying on a business in England and Wales.
The Internet is a world wide computer network. Three facilities (amongst others) are provided via the Internet: email, the World Wide Web and Usenet. This case is primarily concerned with Usenet.
Email is normally electronic mailing of a message from one sender to one recipient. The sender makes a connection to his own local ISP to whom he transmits his Email message. The sender’s ISP transmits the message via the Internet to the recipient’s ISP. At the recipient’s request his local ISP sends the message to the recipient.
The World Wide Web provides a facility for one to many publication. “Web Pages” are held at a particular site (usually operated by an ISP) in such a way that they can be accessed by Internet users world wide. The creator of Web pages sends them to his local ISP who stores them. An Internet user can access and download copies of the pages by connecting to his own local ISP and requesting transmission of those pages via the Internet.
Usenet is one to many publication from author to readers round the world. An article (known as a posting) is submitted by its author to the Usenet news-server based at his own local ISP (the originating ISP) who disseminates via the Internet the posting. Ultimately it is distributed and stored on the news-servers of every (or nearly every) ISP in the world that offers Usenet facilities to its customers. Internet users world wide can read and download the posting by connecting to their local ISP’s news-servers.
“Usenet News” is the name given to the system by which postings are sent by Internet users to forums know as “Newsgroups”. A posting is readable anywhere in the world by an Internet user whose own ISP offer access to the Newsgroup in question. Newsgroups are organised into broad subject areas known as “Hierarchies”. One such hierarchy is the “SOC” hierarchy which contains Newsgroups in which social issues are discussed for example the Newsgroups “soc.culture.thai” and “soc.culture.british”.
Postings on Newsgroups can be read by the customers of a particular ISP by accessing that ISP’s “news server”. In reading a Usenet posting an Internet user requests the posting from the ISP’s news server and a copy of the posting is then transmitted by the news server to the user’s computer where it can be held in the user’s computer for as long as he wishes. A posting may originate from anywhere in the world entering the Internet through the author’s own ISP and follow a “path” through a succession of news servers before eventually reaching a particular reader.
The Defendant ISP carries the Newsgroup “soc culture thai” and stores postings within that hierarchy for about a fortnight during which time the posting is available to be read by its customers.
On the 13th January 1997 someone unknown made a posting in the U.S.A. in the Newsgroup “soc.culture.thai”. The posting followed a path from its originating American ISP to the Defendants’ news server in England. This posting was squalid, obscene and defamatory of the Plaintiff. It is set out in Tab 1 page 1 of the Court Bundle. It purports to come from the Plaintiff although “Lawrence” is misspelt with a “W”. It invites replies by giving the Plaintiff’s Email address. It was a forgery.
On the 17th January 1997 the Plaintiff sent a letter by “fax” to Mr Stanford, the Defendant’s Managing Director, informing him that the posting was a forgery, and that he was not responsible for it and requesting that the Defendants remove the posting from its Usenet news server.
Although denying that Mr Stanford personally received the fax, the Defendants admit its receipt and that the posting was not removed as requested but remained available on its news-server until its expiry on about the 27th January 1997. There is no dispute that the Defendants could have obliterated the posting from its news-server after receiving the Plaintiff’s request.
As is clear from the prayer for relief in the Statement of Claim the Plaintiff only claims damages for libel in respect of the posting after the 17th January 1997 when the Defendants had knowledge it was defamatory.
THE LAW.
The governing statute is the Defamation Act 1996. Section 1 is headed “Responsibility for Publication”.
The relevant words are as follows:-
“1(1) In defamation proceedings a person has a defence if he shows that-
(a) he was not the author, editor or publisher of the statement complained of,
(b) he took reasonable care in relation to its publication, and
(c) he did not know, and had no reason to believe, that what he did caused or contributed to the publication of a defamatory statement.”
It should be noted that for the defence to succeed (a) and (b) and (c) have to be established by the Defendant.
“1(2) For this purpose…….”publisher” have the following meanings, which are further explained in sub-section (3)
“………”publisher” means a commercial publisher, that is, a person whose business is issuing material to the public, or a section of the public, who issues material containing the statement in the course of that business.”
“1(3) A person shall not be considered the author, editor or publisher of a statement if he is only involved-
(a) in printing, producing, distributing or selling printed material containing the statement;
(c) in processing, making copies of, distributing or selling any electronic medium in or on which the statement is recorded, or in operating or providing any equipment, system or service by means of which the statement is retrieved, copied, distributed or made available in electronic form;
(e) as the operator of or provider of access to a communications system by means of which the statement is transmitted, or made available, by a person over whom he has no effective control.
In a case not within paragraphs (a) to (e) the court may have regard to those provisions by way of analogy in deciding whether a person is to be considered the author, editor or publisher of a statement.”
“1(5) In determining for the purposes of this section whether a person took reasonable care, or had reason to believe that what he did caused or contributed to the publication of a defamatory statement, regard shall be had to-
(a) the extent of his responsibility for the content of the statement or the decision to publish it,
(b) the nature or circumstances of the publication, and
(c) the previous conduct or character of the author, editor or publisher.”
In my judgment the Defendants were clearly not the publisher of the posting defamatory of the Plaintiff within the meaning of Section 1(2) and 1(3) and incontrovertibly can avail themselves of Section 1(1)(a).
However the difficulty facing the Defendants is Section 1(1)(b) and 1(1)(c). After the 17th January 1997 after receipt of the Plaintiff’s fax the Defendants knew of the defamatory posting but chose not to remove it from their Usenet news servers. In my judgment this places the Defendants in an insuperable difficulty so that they cannot avail themselves of the defence provided by Section 1.
I am fortified in this conclusion by the contents of the Consultation Document issued by the Lord Chancellor’s Department in July 1995 and the words of Lord Mackay L.C. during debate on the Defamation Bill on the 2nd April 1996 (see Hansard Col. 214).
In the Consultation Document it is said:-
“2.4 The defence of innocent dissemination has never provided an absolute immunity for distributors, however mechanical their contribution. It does not protect those who knew that the material they were handling was defamatory, or who ought to have known of its nature. Those safeguards are preserved, so that the defence is not available to a defendant who knew that his act involved or contributed to publication defamatory of the plaintiff. It is available only if, having taken all reasonable care, the defendant had no reason to suspect that his act had that effect. Sub-sections (5) and (6) describe factors which will be taken into account in determining whether the defendant took all reasonable care.
2.5 Although it has been suggested that the defence should always apply unless the plaintiff is able to show that the defendant did indeed have the disqualifying knowledge or cause for suspicion, only the defendant knows exactly what care he has taken. Accordingly, as in most defences, it is for the defendant to show that the defence applies to him.”
Lord Mackay L.C. said in moving rejection of an amendment of Lord Lester of Herne Hill:-
“Clause 1 is intended to provide a defence for those who have unwittingly provided a conduit which has enabled another person to publish defamatory material. It is intended to provide a modern equivalent of the common law defence of innocent dissemination, recognising that there may be circumstances in which the unwitting contributor to the process of publication may have had no idea of the defamatory nature of the material he has handled or processed.”
“The amendment proposed by the noble Lord would, in effect, create an entirely new defence. It would give a defence to a person who was indeed aware, or on notice that he was contributing to a defamatory publication, but nevertheless chose to do so.”……….
“It is imperative that we do not lose sight of the effect on plaintiffs of giving a defence to those who have in fact been instrumental in bringing material which has defamed the plaintiff to its audience”. ………
“But in my submission it would not be right to deprive a plaintiff of his cause of action against a defendant who was aware that he might be wronging the plaintiff and misjudged the plaintiff’s chances of succeeding in a defamation action”
Mr Barca, for the Defendants, submitted that at Common Law the Defendants did not publish the defamatory posting and there was no publication.
Section 17 of the 1996 Act reads:-
“Publication” and “publish”, in relation to a statement, have the meaning they have for the purposes of the law of defamation generally, but “publisher” is specially defined for the purposes of section 1.”
At Common Law liability for the publication of defamatory material was strict. There was still publication even if the publisher was ignorant of the defamatory material within the document. Once publication was established the publisher was guilty of publishing the libel unless he could establish, and the onus was upon him, that he was an innocent disseminator.
An early example of the application of this principle is Day .v. Bream (1837) 2 Moody and Robinson 54.
The facts were:-
“The libel complained of was a printed handbill, containing imputations on the plaintiff clearly libellous. The plaintiff lived at Marlborough; the defendant was the porter of the coach-office at that place, and it was his business to carry out and deliver the parcels that came by the different coaches to the office. For the plaintiff it was shewn that the defendant had delivered on the same day papers parcels, tied up, and containing a large quantity of the handbills in question, to two or three inhabitants of the place, to whom the parcels were directed”
Patteson J., a great master of Common Law,
“in summing up, left it to the jury to say whether the defendant delivered the parcels in the course of his business without any knowledge of their contents; if so, find for him, observing, that prima facie he was answerable, inasmuch as he had in fact delivered and put into publication the libel complained of, and was therefore called upon to shew his ignorance of the contents.”
In Pullman .v. Hill & Co [1891] 1.Q.B. 524 Lord Esher M.R. said at page 527:-
“The first question is, assuming the letter to contain defamatory matter, there has been a publication of it. What is the meaning of “publication”? The making known the defamatory matter after it has been written to some person other than the person of whom it is written”
“If the writer of a letter shews it to his own clerk in order that the clerk may copy it for him, is that a publication of the letter? Certainly it is shewing it to a third person; the writer cannot say to the person to whom the letter is addressed, “I have shewn it to you and to no one else”. I cannot, therefore, feel any doubt that, if the writer of a letter shews it to any person other than the person to whom it is written, he publishes it. If he wishes not to publish it, he must, so far as he possibly can, keep it to himself, or he must send it himself straight to the person to whom it is written. There was therefore, in this case a publication to the type-writer”
The principle in Day .v. Bream was applied by the Court of Appeal in Emmens .v. Pottle (1885) 16 QBD 354 where Lord Esher M.R. said at page 357
“But the defendants did not compose the libel on the plaintiff, they did not write it or print it; they only disseminated that which contained the libel. The question is whether, as such disseminators, they published the libel? If they had known what was in the paper, whether they were paid for circulating it or not, they would have published the libel, and would have been liable for so doing. That, I think, cannot be doubted. But here, upon the findings of the jury, we must take it that the defendants did not know that the paper contained a libel.”
In the Golf Club notice board case Byrne .v. Deane [1937] 1K.B. 818 Greene L.J. said at page 837:-
“Now on the substantial question of publication, publication, of course, is a question of fact, and it must depend on the circumstances in each case whether or not publication has taken place. It is said that as a general proposition where the act of the person alleged to have published a libel has not been any positive act, but has merely been the refraining from doing some act, he cannot be guilty of publication. I am quite unable to accept any such general proposition. It may very well be that in some circumstances a person, by refraining from removing or obliterating the defamatory matter, is not committing any publication at all. In other circumstances he may be doing so. The test it appears to me is this: having regard to all the facts of the case is the proper inference that by not removing the defamatory matter the defendant really made himself responsible for its continued presence in the place where it had been put?”
In my judgment the Defendants, whenever they transmit and whenever there is transmitted from the storage of their news server a defamatory posting, publish that posting to any subscriber to their ISP who accesses the newsgroup containing that posting. Thus everytime one of the Defendants’ customers accesses “soc culture thai” and sees that posting defamatory of the Plaintiff there is a publication to that customer.
The situation is analogous to that of the bookseller who sells a book defamatory of the Plaintiff (see Weldon .v. “The Times” Book Co. Ltd (1911) 28 T.L.R. 143 the case about the books on Gounod), to that of the circulating library who provided books to subscribers (see Vizetelly .v. Mudie’s Select Library [1900] 2 Q.B. 170, the case about the book on Stanley’s search for Emir Pasha in Africa) (see in particular the judgment of Romer L.J. pages 178-181) and to that of distributors (see Bottomley .v. F.W. Woolworth [1932] 48 T.L.R.530, the case about “The detective story magazine” containing the article “Swindlers and Scoundrels. Horatio Bottomley, Editor and Embezzler.”) and (See Sun Life Assurance .v. W.H. Smith (1934) 150 L.T. 211, the case about newspaper posters announcing “More grave Sun Life of Canada Disclosures”).
I do not accept Mr Barca’s argument that the Defendants were merely owners of an electronic device through which postings were transmitted. The Defendants chose to store “soc.culture.thai” postings within their computers. Such postings could be accessed on that newsgroup. The Defendants could obliterate and indeed did so about a fortnight after receipt.
THE AMERICAN AUTHORITIES
In deference to the researches of Mr Barca I refer to them but only shortly because I found them of only marginal assistance because of the different approach to defamation across the Atlantic.
Mr Barca prayed in aid Anderson .v. New York Telephone Co. [1974] 35 N.Y. 2d 746 where the New York Court of Appeals held there was no publication by the telephone company in the following circumstances. The Plaintiff was a Bishop. One Jackson broadcast on radio urging his listeners to ring two telephone numbers
“A person calling these numbers would hear accusations against plaintiff involving him in all sorts of scurrilous activities not the least of which was illegitimately fathering children by women and girls in the church.
Jackson’s telephones were attached to equipment leased to Jackson by the defendant. This equipment contained the recorded messages which would automatically play upon activation of the telephone by a caller”
Gabrielli J. said
“The telephone company’s role is merely passive and no different from any company which leases equipment to another for the latter’s use”
“In order to be deemed to have published a libel a defendant must have had a direct hand in disseminating the material whether authored by another or not”
“It could not be said, for example, that International Business Machines, Inc, even if it had notice, would be liable were one of its leased typewriters used to publish a libel. Neither would it be said that the Xerox Corporation, even if it had notice, could be held responsible were one of its leased photocopy machines used to multiply a libel many times”
In my Judgment Anderson does not assist the Defendants who in the present case did not play a merely passive role. They chose to receive the “soc.culture.thai” postings to store them, to make them available to accessors and to obliterate them.
Mr Barca referred me to Cubby .v. CompuServe 776 F.Supp. 135 (S.D.N.Y. 1991) which illustrates clearly the difference in approach between New York and England.
The headnote reads:-
“Action was brought against computer service company for its alleged libel, business disparagement, and unfair competition. On company’s motion for summary judgment, the District Court, Leisure, J., held that: (1) computer service company that provided its subscribers with access to electronic library of news publications put together by independent third party and loaded onto company’s computer banks was mere “distributor” of information, which could not be held liable for defamatory statements made in news publications absent showing that it knew or had reason to know of defamation.”
Leisure D.J. said:-
“CompuServe develops and provides computer-related products and services, including CompuServe Information Service (“CIS”), an on-line general information service or “electronic library” that subscribers may access from a personal computer or terminal. Subscribers to CIS pay a membership fee and on-line time usage fees, in return for which they have access to the thousands of information sources available on CIS. Subscribers may also obtain access to over 150 special interest “forums” which are comprised of electronic bulletin boards, interactive on-line conferences, and topical databases.
One forum available is the Journalism Forum, which focuses on the journalism industry. Cameron Communications, Inc. (“CCI”), which is independent of CompuServe, has contracted to “manage, review, create, delete, edit and otherwise control the contents” of the Journalism Forum “in accordance with editorial and technical standards and conventions of style as established by CompuServe”
“New York courts have long held that vendors and distributors of defamatory publications are not liable if they neither know nor have reason to know of the defamation”
“The requirement that a distributor must have knowledge of the contents of a publication before liability can be imposed for distributing that publication is deeply rooted in the First Amendment, made applicable to the states through the Fourteenth Amendment”
“CompuServe’s CIS product is in essence an electronic, for profit library that carries a vast number of publications and collects usage and membership fees from its subscribers in return for access to the publications. CompuServe and companies like it are at the forefront of the information industry revolution. High technology has markedly increased the speed with which information is gathered and processed: it is now possible for an individual with a personal computer, modem, and telephone line to have instantaneous access to thousands of news publications from across the world. While CompuServe may decline to carry a given publication altogether, in reality, once it does decide to carry a publication, it will have little or no editorial control over that publication’s contents. This is especially so when CompuServe carries the publication as part of a forum that is managed by a company unrelated to CompuServe”
“CompuServe has no more editorial control over such a publication than does a public library, book store, or newstand, and it would be no more feasible for CompuServe to examine every publication it carries for potentially defamatory statements than it would be for any other distributor to do so. “First Amendment guarantees have long been recognised as protecting distributors or publications….Obviously, the national distributor of hundreds of periodicals has no duty to monitor each issue of every periodical it distributes. Such a rule would be an impermissible burden on the First Amendment””
“Technology is rapidly transforming the information industry. A computerised database is the functional equivalent of a more traditional news vendor, and the inconsistent application of a lower standard of liability to an electronic news distributor such as CompuServe than that which is applied to a public library, book store, or newstand would impose an undue burden on the free flow of information. Given the relevant First Amendment considerations, the appropriate standard of liability to be applied to CompuServe is whether it knew or had reason to know of the allegedly defamatory Rumorville statements”
Cubby was followed in Stratton Oakmont .v. Progidy [1995] N.Y. Misc. Lexis 229;23 Media L. Rep 1794, where Ain.J. said:-
“A computerised database is the functional equivalent of a more traditional news vendor, and the inconsistent application of a lower standard of liability to an electronic news distributor such as CompuServe than that which is applied to a public library, book store, or newstand would impose an undue burden [*10] on the free flow of information.”
“That such control is not complete and is enforced both as early as the notes arrive and as late as a complaint is made, does not minimise or eviscerate the simple fact that PRODIGY has uniquely arrogated to itself the role of determining what is proper for its members to post and read on its bulletin boards. Based on the foregoing, this Court is compelled to conclude that for the purposes of plaintiffs’ claims in this action, PRODIGY is a publisher rather than a [*11] distributor”
“Let it be clear that this Court is in full agreement with Cubby and Auvil. Computer bulletin boards should generally be regarded in the same context as book-stores, libraries and network affiliates”
“It is Prodigy’s own policies, technology and staffing decisions which have altered the scenario and mandated the finding that it is a publisher”
Zeran .v. America Online [1997] 129 F3d 327 illustrates how far the United States by statute has sought to protect Internet providers. Wilkinson C.J. said:-
“Section 230 creates a federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service. Specifically, Section 230 precludes courts from entertaining claims that would place a computer service provider in a publisher’s role. Thus, lawsuits seeking to hold a service providers liable for its exercise of a publisher’s traditional editorial functions — such as deciding whether to publish, withdraw, postpone or alter content — are barred”
“None of this means, of course, that the original culpable party who posts defamatory messages would escape accountability. While Congress acted to keep government regulation of the Internet to a minimum, it also found it to be the policy of the United States “to ensure vigorous enforcement of Federal criminal laws to deter and punish trafficking in obscenity, stalking, and harassment by means of computer”. Congress made a policy choice, however, not to deter harmful on-line speech through the separate route of imposing tort liability on companies that serve as intermediaries for other parties’ potentially injurious messages”
In my judgment the English 1996 Act did not adopt this approach or have this purpose.
Lunney .v. Progidy Services [1998] WL 999836 (NYAD 2 Dept) has factual similarity to the present case.
Bracken J.P. stated the facts:-
“Some infantile practical joker with access to a computer sent an offensive electronic message (hereinafter email) to a Boy Scout leader, infusing the text of the message with threats more likely to perplex than actually to intimidate an adult recipient. The intended victim of this prank appears to be less the Boy Scout leader himself than the plaintiff, Alex G. Lunney, who was then a 15 year old prospective Eagle Scout, and whose name appeared as the signatory and author of the e-mail message in question. The charade was, as they say, crude but effective, in that the plaintiff was initially suspected of having sent the threatening piece of electronic correspondence”
In his amended complaint, the plaintiff expanded his factual allegations in order to encompass two “bulletin board” messages posted with the help of Prodigy’s service.”
Bracken J.P. said
“We conclude that Prodigy cannot be held legally responsible for it, nor for the allegedly defamatory bulletin board postings, because (1) Prodigy did not publish the statement, and (2) even if Prodigy could be considered a publisher of the statement, a qualified privilege protects it from any liability given the absence of proof that Prodigy knew such a statement would be false”
“our application of the common-law qualified privilege recognised in Anderson also renders the outcome in this case in complete harmony with current Federal statutory law contained in the Communications Decency Act (47 USC Section 230 et seq”)
In my judgement at English Common Law Progidy would clearly have been the publisher of the practical joker’s message and therefore Lunney does not assist the Defendants.
CONCLUSION
In my judgment the defamatory posting was published by the Defendants and, as from the 17th January 1997 they knew of the defamatory content of the posting, they cannot avail themselves of the protection provided by Section 1 of the Defamation Act 1996 and their defence under Section 1 is in law hopeless. Therefore the Plaintiff’s summons to strike-out succeeds.
With regard to the Defendants’ application to amend the Defence I make no definitive ruling but indicate that it is likely to succeed.
It may also be helpful to suggest that on the basis of the proposed Amended Defence any award of damages to the Plaintiff is likely to be very small.
© 1999 Crown Copyright
Bunt v Tilley & Ors
[2006] EWHC 407 [2006] EMLR 18, [2006] EWHC 407 (QB), [2006] 3 All ER 336, [2007] WLR 1243, [2007] 1 WLR 1243, [2006] EMLR 523The Hon. Mr Justice Eady :
Mr John Bunt, the Claimant, seeks remedies in these proceedings against six defendants. The first three are individuals, Mr David Tilley, Mr Paul Hancox, and Mr Christopher Stevens. They take no part in the applications now before me. The Claimant complains of statements hosted on websites, the responsibility for which he attributes to one or other of the first three Defendants. What is controversial, however, is that he also seeks remedies against their respective internet service providers (“ISPs”). The fourth to sixth Defendants are, respectively, the ISPs of the first to third Defendants.
The ISP Defendants all now apply, on grounds which overlap to a large extent, for orders that the claims against them be struck out or dismissed on a summary basis. The fourth Defendant (“AOL”) and the sixth Defendant (“BT”) apply both under CPR 3.4(2) and CPR 24.2. The fifth Defendant (“Tiscali”) has confined itself to reliance on CPR 3.4(2).
The matter came before Gray Jon 2 December 2005, when the Claimant was given an opportunity to identify the nature of his claim more clearly. The case was accordingly reformulated in amended particulars of claim dated 8 December 2005.
It is notable that the Claimant takes the stance that the words complained of in this litigation form only a small part of the totality of defamatory allegations< published about him through the internet. He regards it as an on-going problem. He claims that ” … it is a precursor to a pandemic scale infection that is already widespread and festering just below the surface”. Nevertheless, he has to recognise that there is no mechanism in this kind of litigation for proceeding on the basis of “sample” publications. If a claimant wishes to sue over defamatory allegations, and to recover compensation and other remedies in respect of them, they must be set out clearly in the particulars of claim.
It is important in the context of the present applications that it is not pleaded that any of the three corporate Defendants has at any stage “hosted” any website relevant to these claims. The basis upon which the Claimant seeks to establish his causes of action is that the individual Defendants published the offending words “via the services provided” by their ISPs. The claim therefore raises points of general significance as to the basis upon which a provider of such services could,” if at all, be liable in respect of material which is simply communicated via the services which they provide.
The Claimant submits as follows:
“This is not some tuppeny ha’penny storm in a teacup, this is a truly vast case, the like of which English Defamation Law has never before seen, because of both the scope and nature, as well as the medium. It positively screams out for a Trial, and one way or another it will have one.”
It is necessary to consider the evidence relied on by the parties dealing with the role of ISPs in general and, more specifically, the interrelationship between the two sets of Defendants in these proceedings. Evidence is admissible for the purposes of an application for summary judgment under CPR Part 24, although in the context of CPR Part 3 the court is concerned with the pleaded case which is the subject of challenge. Thus, the primary question on such an application would ‘be whether or not any facts pleaded are capable of giving rise to liability on the part of an ISP for publication of material via its services. It is not, for example, pleaded against any of the corporate Defendants that it authorised any relevant publication or was vicariously responsible for it. Neither the pleaded case nor the evidence discloses any role on the part of these Defendants other than that of affording connection to the internet. On this basis, it is argued on behalf of all the corporate Defendants that the necessary ingredients for publication are missing.
The high point of the Claimant’s case in this respect is to rely upon the fact that the corporate Defendants have provided a route as intermediaries, whereby third parties have access to the internet and have been able to pass an electronic communication from one computer to another resulting in a posting to the Usenet message board. The Usenet service is hosted by others, who are not parties to these proceedings, such as Google. It is not accepted that the relevant postings necessarily took place via the relevant ISP services, but that would be a matter for the Claimant to establish at trial. For the moment, that assumption should be made in his favour.
When considering the internet, it is so often necessary to resort to analogies which, in the nature of things, are unlikely to be complete. That is because the internet is a new phenomenon. Nevertheless, an analogy has been drawn in this case with the postal services. That is to say, ISPs do not participate in the process of publication as such, but merely act as facilitators in a similar way to the postal services. They provide a means of transmitting communications without in any way participating in that process.
My attention was drawn to certain passages in Dr Matthew Collins’ work The Law of Defamation and the Internet (2nd edn, 2005) at paras. 15.38 and 15.43:
“There is … a line of authority arising out of intellectual property cases in the United Kingdom to the effect that persons who procure the commission of torts are liable jointly and severally with the principal tortfeasor, while persons who merely facilitate the commission of such torts are not exposed to liability. It is possible that this line of authority might apply to defamation law. If so, telephone carriers might be mere facilitators of defamatory telephone calls, and so not capable of being held liable as publishers.
…
There is … an argument that telephone carriers are mere ‘facilitators’ of telephone calls and therefore cannot be responsible for the publication of defamatory telephone calls. If that viewis correct, and there is a distinction between ‘publishers’ and ‘mere facilitators’, then there is a strong argument that mere conduit Internet intermediaries are mere facilitators of Internet publications passing through their computer systems, and therefore not responsible for publishing them” .
The line of authority to which Dr Collins was referring was exemplified in such cases as CBS Songs Ltd v Amstrad Consumer Electronics plc [1988] 1 AC 1013, 1058 (breach of copyright); PLG Research Limited and Ardon International Ltd [1993] FSR 197, 238-9 (infringement of patent); MCA Records Inc v Charly Records Ltd [2002] EMLR 1 (infringement of copyright and trademark); Douglas v Hello! Ltd [2003] EMLR 29 at [70] (breach of confidence: liability as a joint tortfeasor will only be imposed where the claimant proves ‘concerted action to a common end’). There is no instance so far in which that line of authority has been extended into the field of defamation although, as Dr Collins points out, in MCA Records Inc v Charly Records Ltd Chadwick LJ observed (at p27) that the line of authority applied “at feast in the field of intellectual property” (emphasis added).
It is now necessary to consider the decision of Morland J in Godfrey v Demon Internet Ltd [2001] QB 201, upon which the Claimant relies. In that case, the Defendant was an ISP, which had received and stored a defamatory article on its news server which had been posted by an unknown person via another ISP. Mr Godfrey informed Demon of the defamatory nature of the article and requested its removal from their news server. It remained available, however, until its automatic expiry. In his statement of claim Mr Godfrey made it clear that he was confining his claim for damages to the period after January 1997, when the Defendant had knowledge that the posting was defamatory. The Defendant relied upon s.1(1) of the Defamation Act 1996, arguing that it was not the publisher of the statement in question; that it had taken reasonable care; and that it did not know, and had no reason to believe, that it had caused or contributed to the publication of a defamatory statement. Mr Godfrey applied to strike out that part of the defence as unsustainable.
Morland J granted the application, holding on the particular facts that the Defendant was not merely a passive owner of an electronic device through which postings were transmitted. It had actively chosen to receive and store the news group exchanges containing the posting, and it could be accessed by its subscribers. It was within its power to obliterate the posting, as indeed later happened. Once the Defendant knew of the defamatory content and took the decision not to remove it from its news server, it was no longer able to satisfy the requirements of s.1 (1 )(b) that reasonable care had been taken, or of s.l (1)( c) that it did not know, and it had no reason to believe, that what it did caused or contributed to the publication. The learned Judge considered a number of authorities and at p208H-209A concluded:
“In my judgment the defendants, whenever they transmit and whenever there is transmitted from the storage of their news server a defamatory posting, publish that posting to any subscriber to their ISP who accesses the newsgroup containing that posting. Thus every time one of the defendants’ customers accesses soc.culture.thai and sees that posting defamatory of the plaintiff there is a publication to that customer”.
Reference was also made to certain cases from the United States, namely Anderson v New York Telephone Co (1974) 35 NY 2d 746 (“the telephone company’s role is merely passive … “); Cubby Inc v CompuServe Inc (1991) 776 FS Supp 135 (“The computer service company was a mere ‘distributor’ which could not be held liable ‘absent showing that it knew or had reason to know of defamation”‘); Stratton Oakmont Inc v Prodigy Services Co (1995) 23 Media L Rep 1794 (“Prodigy has uniquely arrogated to itself the role of determining what is proper for its members to post and read on its bulletin boards … Prodigy is a publisher rather than a distributor … “); Zeran v America Online Inc (1997) 129 F 3d 327 (concerned with a statutory federal immunity); and Lunney vProdigy Services Co (1998) 250 AD 2d 230. This latter case was perhaps closest in its background circumstances to the facts of Godfrey v Demon Internet. “Some infantile practical joker” sent an e-mail to a boy scout leader, which falsely gave the impression that it came from Alex G Lunney, “a prospective eagle scout”. He complained of that as well as two bulletin board messages posted with the help of Prodigy’s service.
Morland J made clear, however, that he found these of little assistance because of the fundamental differences in the approach to the law of defamation between the courts of England and those of the United States. What was left open for later consideration was how a court in England should approach a situation where, by contrast with the factual situation in Mr Godfrey’s case, an ISP had truly fulfilled no more than a passive role as owner of an electronic device through which defamatory postings were transmitted.
Publication is a question of fact, and it must depend on the circumstances of each case whether or not publication has taken place: see e.g. Byrne v Deane [1937] 1 KB 818, 837-838,per Greene LJ. The analogies that were held to be inappropriate in Godfrey v Demon Internet might yet be upheld where the facts do not disclose onward transmission with knowledge of the defamatory content. As Dr Collins observes, op. cit., at para 15.43:
“Mere conduit intermediaries who carry particular Internet communications from one computer to another … are analogous to postal services and telephone carriers in the sense that they facilitate communications, without playing any part in the creation or preparation of their content, and almost always without actual knowledge of the content”.
Such an approach would tend to suggest that at common law such intermediaries should not be regarded as responsible for publication. Indeed, that is consistent with the approach in Lunney where the New York Court of Appeals drew an analogy between an ISP and a telephone company “which one neither wants nor expects to superintend the content of his subscriber’s conversations”.
It is necessary, on the other hand, to bear in mind that Morland J in Godfrey, while acknowledging the factual similarity to the circumstances in the Lunney case, nonetheless took the view that it represented an approach to the law which was not consistent with English authority. It was held that Prodigy was not responsible in law for the e-mail or the defamatory bulletin board postings, one of the reasons being that “Prodigy did not publish the statement”. Morland J was of opinion that “at English common law Prodigy would clearly have been the publisher” of the message: see p212G.
Dr Collins tentatively concludes:
“In view of Morland J’s obiter dictum in Godfrey v Demon Internet Ltd and the authorities concerning postal services and telephone carriers discussed above, mere conduit Internet intermediaries are nonetheless probably publishers of the material which passes though their computer systems. Their liability in defamation law will depend on whether they can rely on a defence, the most important of which are the defences for intermediaries … “.
In this context, he had in mind the provisions of s.l of the Defamation Act 1996, the Electronic Commerce (EC Directive) Regulations 2002, the common law defence of innocent dissemination, and statutory defences applying in Australia.
Despite this cautious approach, I was invited by counsel in the present case to conclude that the corporate Defendants should not be regarded as responsible according to common law principles for the publication of the relevant postings, the factual situation before me being significantly different from that confronting Morland J.
My attention was also drawn to certain remarks made in the Court of Appeal in Totalise plc v The Motley Fool [2002] EMLR 358 at [28]-[29]. The appeal related only to questions of costs, and the issues which I have been outlining above were not specifically addressed. The case can only therefore be regarded as a “straw in the wind”. It is, nevertheless, of some interest that the ISP in that case was not penalised in costs (having adopted the policy that it would not reveal the name and address of one of its customers without a court order) since it was “an innocent party”. It was recognised that the position might have been different” … if they were in some way implicated or involved in the wrongful act”.
I prefer to avoid phrases with a moral connotation such as “innocent party” or “wrongful act”. The position may be complicated by arguments about whether or not the communication would be protected by qualified privilege or (say) fair comment. F or example, one of the reasons why Prodigy succeeded in the Lunney case was that ” … even if Prodigy could be considered a publisher of the statement, a qualified privilege protects it from any liability given the absence of proof that Prodigy knew such a statement could be false”. In such circumstances, it would be naturally inappropriate to use the phrase “wrongful act”. Language of this kind simply obscures the main issue.
In determining responsibility for publication in the context of the law of defamation, it seems to me to be important to focus on what the person did, or failed to do, in the chain of communication. It is clear that the state of a defendant’s knowledge can be an important factor. If a person knowingly permits another to communicate information which is defamatory, when there would be an opportunity to prevent the publication, there would seem to be no reason in principle why liability should not accrue. So too, if the true position were that the applicants had been (in the Claimant’s words) responsible for “corporate sponsorship and approval of their illegal activities”.
I have little doubt, however, that to impose legal responsibility upon anyone under the common law for the publication of words it is essential to demonstrate a degree of awareness or at least an assumption of general responsibility, such as has long been recognised in the context of editorial responsibility. As Lord Morris commented in McLeod v St. Aubyn [1899] AC 549,562:
“A printer and publisher intends to publish, and so intending cannot plead as a justification that he did not know the contents. The appellant in this case never intended to publish.”
In that case the relevant publication consisted in handing over an unread copy of a newspaper for return the following day. It was held that there was no sufficient degree of awareness or intention to impose legal responsibility for that “publication”.
Of course, to be liable for a defamatory publication it is not always necessary to be aware of the defamatory content, still less of its legal significance. Editors and publishers are often fixed with responsibility notwithstanding such lack of knowledge. On the other hand, for a person to be held responsible there must be knowing involvement in the process of publication of the relevant words. It is not enough that a person merely plays a passive instrumental role in the process. (See also in this context Emmens v Pottle (1885) 16 QBD 354,357, Lord Esher MR.)
It is necessary in these circumstances for me to turn to the evidence in the present case in order to see whether the position is sufficiently clear for a determination to be made at the pre-trial stage. It seems that it is a question of whether or not the facts are uncontroversial or unchallenged. A submission was made to me that public policy requires that an ISP who merely facilitates internet publications should not be held responsible as a “publisher”, and that it would be desirable for ISPs to be protected in the same way that statutory immunity has been provided for, in respect of all proceedings in tort, by the Postal Services Act 2000. I am concerned here not with questions of public policy so much as whether or not any of the relevant Defendants in this case could be said to have been liable for publication in accordance with established common law principles. Nonetheless, in seeking to determine that question, r should have regard to the European Convention on Human Rights and Fundamental Freedoms and relevant Strasbourg jurisprudence, especially that relating to Articles 8 and 10.
One of the factors I have to consider is whether knowledge has been notified to any of the corporate Defendants in such a way as to render the ISP in question responsible for publication from that moment onwards (even assuming “innocence” up to that point). This is a question which I shall have to consider in the context of some of the other defences raised, but it is plainly relevant also to this threshold argument on common law publication.
Distinct issues arise in the context of notification with regard to each of the corporate Defendants. So far as AOL is concerned, the Claimant relies upon notice having been given on 13 February 2005. I was told by Mr Philip Whall in his witness statement of 9 January 2006 that AOL had no record of receiving any notification: it was only made aware of the Claimant’s case in this respect on receipt of the amended particulars of claim. In that document reference was made to two e-mails, dated respectively 13 and 15 February 2005. The first purported to be from Dave Null, which apparently is a name used by the Claimant for internet purposes. It was headed “AOL customer details disclosure request” and continued:
“Hi Guys,
One of your (UK) customers has committed an act of libel against my business on our business forums, the url in question is http://www.surfbaud.co.uk/forum/index.php right at the forum page, and he started a thread entitled “Be warned about these cheap Batteries! Load of Crap!”
… Chances are the culprit is the scourge of uk.local newsgroups a Mr David Tilley, last known address 6 Lime Road, Tiverton, Devon, EX16 6JA.
I am emailing you in this instance in order to ask what procedures you need completed by myself before you are able to divulge this individual’s name and address to me, so that i can institute legal proceedings against them for libel under UK law as a matter of urgency”.
The later e-mail simply said:
“Hi Guys, over 24 hours passed and zero response from yourselves so escalating it somewhat, please don’t leave me with no option but to hardcopy this request and courier it to UK Board Members …
cheers
John Bunt”
It thus appears that Mr Tilley, the first Defendant, may have posted some unwanted statements on the Claimant’s own website; it was thus within his power to remove them if he wished to do so. All he was requesting was the identity of the person who had made those comments. It is not admitted that this was ever received by AOL but, even if it was, there was nothing to indicate that thereafter AOL sanctioned any publication with knowledge.
The Claimant did not ask AOL to remove the posting or suggest in either of the emails that he believed AOL was responsible for the posting.
A further point is taken by Ms Phillips on AOL’s behalf, to the effect that the words were not on their face defamatory. At most, they could be interpreted as disparaging the product.
In so far as the Claimant seeks support in Godfrey, there are plainly significant distinctions. Morland J deprived the ISP in that case from protection under s.l of the 1996 Act because it had continued publication of the same defamatory statements after Mr Godfrey’s letter had been received, asking for them to be removed from the Usenet news server. Here, by contrast, the Claimant is relying upon separate postings. In these there is no reference to batteries, but rather to suggestions of fraud and “kiddie porn”. There are no pleaded facts to suggest any knowing participation by AOL in the publication of these words.
Ms Phillips accordingly submits that an ISP should not become liable as a publisher (especially for postings on a site which it does not host) simply because it has been previously told of wholly unrelated allegedly defamatory statements, not necessarily even by the same author. That is a powerful argument which is relevant, as I have said, both to the fundamental issue of publication at common law and to statutory defences which I shall have to consider later.
I turn to the position of Tiscali, the fifth Defendant. In paragraph 18 of its defence, which is verified by a statement of truth, it is pleaded that the fifth Defendant only became aware of the complaint when it was served with the claim form on 12 August 2005. On that day, it suspended the internet access of the second Defendant pending investigation and resolution of the complaint. There is thus nothing to suggest knowing participation on the part of Tiscali either.
So far as BT is concerned, it is submitted that it did not know, and had no reason to believe, that it did anything to cause or contribute to the publication of a defamatory statement. This was addressed in evidence by Ms Catherine Lloyd, an in house solicitor. It is submitted, however, that the issue can be determined without the necessity of a trial of any contested factual issues. It is only necessary to look at the Claimant’s case.
Mr Bunt relies upon an e-mail dated I May 2005, giving notice to BT of the publications of which he complains. The notice referred to a posting earlier that day which allegedly libelled his business by disparaging his products. That posting, however, does not correspond to any of the postings subsequently complained of in his claim against BT. These were posted respectively at 7.48 am on I May, 2.38 pm on I July and 9.00 am on 5 July 2005. So much emerges clearly from paragraph 5 of his amended particulars of claim. By contrast, the posting referred to in his e-mail of I May was timed at 1.06 am that day. Moreover, the subject-matter of the postings actually complained of in these proceedings differs from that referred to in his 1 May complaint. The Claimant describes BT’s case in this respect as “insane and beyond belief’, but he has not addressed these important points. He takes the view that the issue is concluded by the notification of I May and a court order made in August 2005 that BT identify its customer.
There is thus no sustainable case on the Claimant’s part to support the proposition that BT knowingly authorised, sanctioned or participated in any of the relevant publications. Despite written requests, it was only upon receipt of the amended particulars of claim that BT was made aware of the postings actually complained of.
In all the circumstances I am quite prepared to hold that there is no realistic prospect of the Claimant being able to establish that any of the corporate Defendants, in any meaningful sense, knowingly participated in the relevant publications. His own pleaded case is defective in this respect in any event. More generally, I am also prepared to hold as a matter of law that an ISP which performs no more than a passive role in facilitating postings on the internet cannot be deemed to be a publisher at common law. I would not accept the Claimant’s proposition that this issue “can only be settled by a trial”, since it is a question of law which can be determined without resolving contested issues of fact.
I would not, in the absence of any binding authority, attribute liability at common law to a telephone company or other passive medium of communication, such as an ISP. It is not analogous to someone in the position of a distributor, who might at common law need to prove the absence of negligence: see Gatley on Libel and Slander (10th edn) at para. 6-18. There a defence is needed because the person is regarded as having “published”. By contrast, persons who truly fulfil no more than the role of a passive medium for communication cannot be characterised as publishers: thus they do not need a defence.
For the sake of completeness, it is now necessary to address the alternative arguments raised by the applicants. I turn first to the Electronic Commerce (EC Directive) Regulations 2002, which came into force in August of that year. They define the circumstances in which internet intermediaries should be held accountable for material which is hosted, cached, or carried by them but which they did not create. The protection which these regulations afford is not confined to the publication of defamatory material. They embrace other illegal material, such as child pornography or the infringement of intellectual property rights.
The Claimant asserts that these Defendants are not intermediary service providers.
“Simple logic dictates that to be an INTERMEDIARY service provider one must be a service provider who is BOTH customer of an upstream service provider and supplier to a downstream service provider”. Yet it is not a question of logic but of definition. No such restrictive definition appears in the regulations. Nor would it accord with the declared policy underlying them.
The effect of the regulations is to implement within this jurisdiction the Directive on Electronic Commerce, issued on 8 June 2000: Directive2000/311EC of the European Parliament and Council. It was made clear in the recitals that one of the objectives was to remove “existing and emerging disparities in Member States’ legislation and case law concerning liability of service providers acting as intermediaries”, because it was necessary to avoid their preventing the smooth functioning of the internal market – in particular by impairing the development of cross-border services and producing distortions of competition: see Recital 40. There is recognition that service providers may be obliged on occasion to act in order to prevent or stop unlawful activities. It was plainly thought desirable that the position should be made as clear as possible.
The relevant provisions apply to “information society services”. That is an important consideration in the present case, because the Claimant contends that these corporate Defendants are not able to avail themselves of such protection. I must therefore have regard to the definition in Regulation 2(1) which incorporates Article 2(a) of the Directive. This, in turn, incorporates the definition in Directive 98/34/EC. An “information society service” connotes:
“any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services”.
It is observed by Dr Collins, op cit, at para. 17.03 that:
“Commercial Internet intermediaries, such as ISPs, bulletin board operators, and web hosting services will usually satisfy this definition”.
It is certainly the case of these applicants that they each satisfy those requirements.
The matter is considered in Gatley on Libel and Slander (1oth edn.) at para. 6.27. Reference is there made to Recital 42 of the Directive, which provides that exemptions from liability established in the Directive cover only cases where the activity of the information society service provider is limited to the technical process of operating and giving access to a communication network over which information made available by third parties is transmitted or temporarily stored, for the sole purpose of making the transmission more efficient. That activity is said to be of a mere technical, automatic and passive nature, which implies that the information society service provider has neither knowledge of, nor control over, information which is transmitted or stored.
The learned editors summarise the position as follows:
“Many internet service providers charge no fee to users and derive their revenue from advertising or commission on telephone charges but the remuneration presumably does not have to be provided by the user so the vast majority will be covered, though a business organisation operating an internal network would not”.
Other instances of suppliers of internet access which might fall outside the definition are suggested by Dr Collins (at para. 17.03). He gives examples such as public libraries, universities, and schools where access would not be provided for remuneration, or at a distance, or both. In Gatley, however, it is submitted that, in the case of a university or fee paying school, it would be arguable that this service was provided for remuneration (through fees), even though there would not necessarily be a separately identifiable charge for the service.
At all events, it is clear to me from the evidence that these Defendants do indeed fall within the relevant definition. Of course that is challenged by the Claimant, but the facts which lead to that conclusion are themselves uncontroversial. I am thus unable to accept his submission that” … the Directive in questioJ1. most certainly does NOT apply to the business relationship that exists between the three corporate Defendants and the three individual Defendants”. I need to turn next to Regulations 17 and 18, upon which AOL and Tiscali both place reliance.
Regulation 17(1), which is concerned with the concept of “mere conduits” provides as follows:
“(1) Where an information society service is provided which consists of the transmission in a communication network of information provided by a recipient of the service or the provision of access to a communication network, the service provider (if he otherwise would) shall not be liable for damages or for any other pecuniary remedy or for any criminal sanction as a result of that transmission where the service provider –
(a) did not initiate the transmission;
(b) did not select the receiver of the transmission; and
(c) did not select or modify the information contained III the transmission” .
It is further provided by Regulation 17(2) that acts of transmission and of provision of access, for the purposes of Regulation 17(1), would include the automatic, intermediate and transient storage of the information transmitted where it takes place for the sole purpose of carrying out the transmission in the communication network, and provided that the information is not stored for any period longer than is reasonably necessary for the transmission. That again is a point raised by Mr Bunt in the present proceedings. He submits that the material, or some of it, is cached for too long a period for it to be characterised as “reasonably necessary”. It is appropriate for this to be judged in the light of the automatic system put in place and the objective it is intended to achieve. The evidence is set out in some detail below.
Regulation 18 is concerned with caching:
“Where an information society service is provided which consists of the transmission in a communication network of information provided by a recipient of the service, the service provider (if he otherwise would) shall not be liable for damages or for any other pecuniary remedy or for any criminal sanction as result of that transmission where –
(a) the information is the subject of automatic, intermediate and temporary storage where that storage is for the sole purpose of making more efficient onward transmission of the information to other recipients of the service upon their request, and
(b) the service provider –
(i) does not modify the information;
(ii) complies with conditions of access to the information;
(iii) complies with any rules regarding the updating of the information, specified in a manner widely recognised and used by industry;
(iv) does not interfere with the lawful use of technology, widely recognised and used by industry, to obtain data on the use of the information; and
(v) acts expeditiously to remove or to disable access to the information he has stored upon obtaining actual knowledge of the fact that the information at the initial source of the transmission has been removed from the network, or access to it has been disabled, or that a court or an administrative authority has ordered such removal or disablement”
The commentary in Gatley at para. 6.28 is helpful:
“The protection is therefore aimed at transient messages, such as email or at more permanent material which simply passes through the defendant’s system for purposes of access and not at material which is stored by the defendant for significant periods. The knowledge of the defendant is irrelevant, so he is not liable (in contrast to s.l of the Defamation Act 1996) for failing to take steps to prevent access to another site which he is aware carries defamatory material. However, the provision does not confer immunity against the grant of an injunction” .
The learned editors mention (in footnote 21) a possible qualification with regard to web-based e-mail, which is normally stored on the provider’s server until deleted by the customer. This qualification has been developed further by Dr Collins, op cit, at para. 17.08:
“The position is likely to be different for intermediaries who operate web-based e-mail services, such as MSN Hotmail. Such services store e-mail messages sent to their subscribers on their servers on a more permanent basis, so that the messages can be viewed by subscribers from any computer, located anywhere in the world. Rather than being deleted automatically from the intermediary’s server upon initial transmission to a subscriber, e-mail messages on web-based e-mail services are usually deleted from the intermediary’s server only at the request of the subscriber. As messages sent to web-based email services are not stored only on an ‘intermediate’ or ‘transient’ basis, and are frequently stored for a period longer than is reasonably necessary for their transmission, regulation 17 is unlikely to apply. Intermediaries operating these services are probably ‘hosts’, rather than ‘mere conduits’, of messages received by subscribers”.
Dr Collins also addresses (at para. 17.09) the matter of bulletin board postings and web pages, and concludes that Regulation 17 will usually apply to internet intermediaries who operate computer systems through which particular bulletin board postings and web pages happen to pass en route from one computer to another. This is subject to the proviso that the intermediary does not store the constituent IP datagrams for any period longer than is reasonably necessary for the transmission. Dr Collins suggests that, in order to attract the protection of Regulation 17, an intermediary would need to configure its computer system to delete any copies of the relevant datagrams immediately after receiving an acknowledgment that they have been received by the intended recipient. Should the datagrams be stored for a longer period, the intermediary would be likely to be deemed to have “cached” or “hosted” them.
The purpose of Regulation 18 is to protect internet intermediaries in respect of material for which they are not the primary host but which they store temporarily on their computer systems for the purpose of enabling the efficient availability of internet material. Many ISPs and other intermediaries regularly cache, or temporarily store, commonly accessed web pages on their computer systems, so that those pages will be more quickly accessible to their subscribers. This is described by the learned editors of Gatley (at para. 6.29) as a “sort of half way house between mere transmission and ‘hosting”‘.
The process was explained in evidence before me by Mr Nigel Hearth the Director of Technical Operations for AOL. In his witness statement of 10 February 2006 the matter is described as follows:
“4. When explaining in this statement how the practice of caching works I refer particularly to the practices of AOL in this area, although the practice of caching, and the way this is done (as explained below), is in effect ubiquitous amongst internet service providers.
5. The ability to view web pages quickly is an attractive attribute for users of the internet. The enormous volume of requests for web pages generated by internet users has led to the development of technical solutions by network providers and internet service providers to enable more efficient transmission of that information across the internet.
6. Caching is one such solution. It is a technical process which enables internet providers, such as AOL, to speed up the delivery of web pages to internet users by making a temporary copy of a web page that is requested by a user. When a subsequent request is made for the same page, the user can be provided with that content from the local ‘cached’ copy made by the internet service provider, rather than having to go back to the original web site which is the source of that page. This process enables the more efficient onward transmission of web pages to internet users.
7. A web cache (including AOL’s) is not a copy of the internet – that is neither the purpose of a web cache, nor would it be commercially or technically feasible. In order for web caches not to have to expand in memory size indefinitely the actual content in a web cache is designed to be overwritten in accordance with automatic defined rules ensuring that (i) cached content is up to date and (ii) cached content which is not being searched for (or has been removed or altered) is overwritten.
8. For ease of reference, I shall use a specific example, that of the pages of Google Groups, located at http://groups.google .co.uk/group/uk.loca1.l0ndon (“Google Groups London”).
9. Google Groups London is provided by Google and the content forming that page is hosted by Google i.e. that content sits on computers controlled by Google. A popular site such as google.co.uk may easily have more than several hundred thousand visitors per day. When a person using an AOL Member Account connected to the internet via the AOL UK Propriety Service (an “AOL User”) navigates to Google Groups London, a request is sent form that user’s personal computer, via AOL, to the Google computer hosting Google Groups London. The requested page is then sent back to the AOL User, via their AOL connection.
10. When Google computers receive high volumes of requests within short time periods, delivery of the relevant Google Groups London page may be affected and a queue may form for the relevant Google computers to become free to respond to an individual’s request. The Google computers may simply become too busy.
11. To help alleviate this problem, AOL in common with all major internet service providers, uses a so-called ‘web cache’ to make the onward transmission of information of content such as Google Groups London more efficient to users of AOL when they request such information.
12. AOL’s web cache consists of a computer system which sits between (in this case) Google’s computers, on which the Google Groups London page is stored, and the home computers of individuals wishing to view Google Groups London.
13. The AOL web cache in effect watches requests for web pages made by individuals and then saves copies of the responses from Google’s computers. If there is a subsequent request for the Google Groups London page from an AOL User then that request is fulfilled by delivery of the Google Groups London page from the AOL web cache, rather than via the original location on Google computers.
13.1 As the request for the Google Groups London page is delivered from the AOL web cache, rather than the Google servers, it takes less time for AOL to retrieve the images and text on the Google Groups London page and display it to the AOL User wishing to view it.
13.2 The mechanism of storage by the AOL web cache is completely automatic. Providers of web sites set automated ‘rules’ or conditions specifying; (I) whether a page may be cached; (2) if it may be cached, at what time that cached material should expire; and (3) whether the cache computers should revalidate with the original source web site as to whether a page sitting on AOL’s web cache has been updated or deleted. These rules are embedded in instructions which exist ‘behind’ web pages and the rules are applied by, and are readable by, web browser software in accordance with industry standards. This ensures that users of the internet reach the most up to date versions of web pages available. By way of example, for frequently updated pages like the BBC’s news home page (located at http://news.bbc.co.uk), the instructions behind that particular page will dictate that the page should not be cached. Each time that page is requested, those instructions state that it should be retrieved from the original source, not from a cached copy.
13.3 By contrast, the messages hosted by Google Groups London contain instructions that allow caching but require that a web cache should revalidate the content with the original source for each subsequent request. So, if a particular message is cached, before the cache displays that content to a subsequent user requesting that page, the cache will check with Google as to whether that page has subsequently been removed or deleted.
13.4 This entire process is entirely automatic and the only reason for it is to make the transmission of web pages more efficient. AOL does not modify the information contained on web pages in any way. AOL complies with any conditions embedded in such pages regarding access to the information (for example by preventing the caching of pages which contain instructions for them not to be cached) and does not interfere in any way with the lawful use of technology widely used by the industry to obtain data on the use of information (for example tracking how many times a source page has been accessed).
13.5 The storage of such material on AOL’s web cache is temporary – permanent storage would be inherently contradictory to the purpose and aim of the AOL web cache, which is to enable more efficient transmission of information to internet users.
13.6 It is core to the function of AOL’s web caches and similar caches used by other internet service providers that they do not modify the content of the information they transmit.
13.7 The material will appear in AOL’s web cache once the AOL user has requested it if the instructions in the source page permit this. AOL’s web cache can only hold a limited amount of information. It will subsequently be overwritten when either:
(a) no AOL users request the Google Groups London page within a specified period (AOL sets this period at 7 days). Thereafter the Google Groups London page will be labelled by AOL’s web cache as ready for deletion from the cache (such pages are described as (‘Expired’)), and will be overwritten, as newer requests for other web pages trigger the storage of those pages in AOL’s web cache – this mechanism effectively ‘recycles’ AOL’s web cache memory by overwriting; or
(b) the source material is altered after it is stored in the cache to use my example, if Google altered the content on the Google Groups London page, or removed it entirely, then that content would be labelled for deletion as soon as another AOL User requested that page. Prior to displaying that page to the AOL User, the AOL cache would revalidate the page with Google (in accordance with the automatic rules), find that the source page had changed or been removed and therefore label the Google Groups London page in the AOL web cache as Expired, leading to the overwriting of that page in the manner described above.
(c) Where access t6 the pages has been disabled or where a court or an administrative authority has ordered the source to remove or disable the content, and they had done so. Those pages stored in AOL caches would not be further displayed to an end user and would eventually be overwritten as the web cache stored other ‘fresh’ web pages.”
There is no expert challenge to that evidence, and I have no reason to doubt that it represents the true position. How then does the Claimant propose to overcome the protection claimed by the fourth and fifth Defendants under these regulations? As I have said, he relies on “simple logic”. He does not rely on any expert report. I turn therefore to his case as clarified in the light of the order of Gray J.
It is necessary to consider paragraph 19 of the amended particulars of claim which advances a proposition to the effect that there is an obligation to “gatekeep” its conduit. The nub of this submission appears to be contained in sub-paragraphs (i) and (j):
“An ISP providing a leased line connection to a customer has an extremely good argument under both the Defamation Act 1996 and also the Electronic Commerce Directive 2002 that it is no more than a ‘conduit’, that it has no knowledge or control over what passes through that ‘conduit’, and that the entire responsibility for what does pass through that ‘conduit’ rests with the customer who has purchased it, as it is the customer and not the ISP who acts as a ‘gatekeeper’ for that ‘conduit’ .
An ISP providing a standard domestic consumer or SOHO Internet access package to a customer has no possible hope of successfully arguing that it is a mere ‘conduit’ and therefore immune from that Law, as all content originates from within their own network, instead of merely passing through it in ‘Via’ fashion from one network to another.
In these circumstances not only is the ISP most definitely acting as sole ‘gatekeeper’ between the source of the defamatory material and the Internet, they also provide a bundle of other services … each of which clearly falls foul of the other provisions of the Electronic Commerce Directive 2002 which, for example, only allows the minimum level of cacheing technically necessary for the underlying technology of message transmission to function”.
The notion of a “gatekeeper” appears to derive from the Claimant himself; it IS nowhere to be found in the regulations.
Furthermore, I can see no realistic prospect of such an argument succeeding because it flies in the face of the fundamental policy underlying the regulations.
As is already clear, the regulations would not preclude the grant of an injunction in a proper case. It is concerned to restrict financial and penal sanctions. It is provided in Regulation 20(b) that nothing should affect the rights of a party to apply for relief to prevent or stop infringement of any rights. It is not accurate to describe this, as the Claimant does, as “guaranteeing” his right to apply for relief and his “right to a trial”. Here it is inconceivable that an injunction would be granted against Tiscali, if only for the reason that it has terminated its relationship with the second Defendant. In any event, looking at the matter more broadly, it is clear to me that the injunctive relief sought by the Claimant is wholly disproportionate to any conceivable legitimate advantage. He seems to be applying for an order preventing any supply of services to the relevant Defendant. That would be Draconian and pointless, since the individual Defendants would be able to obtain such services with great ease elsewhere.
It is argued by Ms Phillips on behalf of AOL that, even if the claim for an injunction were formulated along conventional lines to prevent the publication of the same or similar words defamatory of the Claimant, this would be unworkable and disproportionate. She points out that AOL does not host any material about which the Claimant complains: nor would it have the ability or power to amend or modify any Usenet content. That was confirmed in evidence by Mr Philip Whall, General Counsel to the fourth Defendant. (Although he has been described several times by the Claimant as “mendacious”, the bare assertion is not enough to give rise to the need for a trial.) The grant of such an injunction would be pointless in respect of a defendant who has no way of ensuring compliance with its terms.
I now turn to consider a further set of provisions upon which the Defendants place reliance. Parliament enacted a rather different form of protection in s.l of the Defamation Act 1996. Dr Collins considers the relationship between Regulation 17 and the s.l defence: op. cit., para. 17.10. He points out that there may be circumstances in which the application of the s.l defence and of Regulation 17 would lead to inconsistent outcomes. He also considers the relationship between Regulation 18 and the s.l defence at para. 17.19. As he points out, there could well be occasions when an ISP would be protected under Regulation 18 from liability for damages following transmission of a page which had been temporarily stored for the purpose of more efficient access – and yet fail in respect of a s.l defence if publication was made of the offending web page to subscribers after its existence had been brought to its attention.
The starting point is to consider the terms of s.l itself:
“(1) In defamation proceedings a person has a defence if he shows that –
(a) he was not the author, editor or publisher of the statement complained of,
(b) he took reasonable care in relation to its publication, and
(c) he did not know, and had no reason to believe, that what he did caused or contributed to the publication of a defamatory statement.
(2) For this purpose ‘author’, ‘editor’ and ‘publisher’ have the following meanings, which are further explained in subsection (3)-
‘author’ means the originator of the statement, but does not include a person who did not intend that his statement be published at all;
‘editor’ means a person having editorial or equivalent responsibility for the content of the statement or the decision to publish it; and
‘publisher’ means a commercial publisher, that is, a person whose business is issuing material to the public, or a section of the public, who issues material containing the statement in the course of that business.
(3) A person shall not be considered the author, editor or publisher of a statement if he is only involved –
(a) in printing, producing, distributing or selling printed material containing the statement;
(b) in processing, making copies of, distributing, exhibiting or selling a film or sound recording (as defined in Part I of the Copyright, Designs and Patents Act 1988) containing the statement;
(c) in processing, making copies of, distributing or selling any electronic medium in or on which the statement is recorded, or in operating or providing any equipment, system or service by means of which the statement is retrieved, copied, distributed or made available in electronic form;
(d) as the broadcaster of a live programme containing the statement in circumstances in which he has no effective control over the maker of the statement;
(e) as the operator of or provider of access to a communications system by means of which the statement is transmitted, or made available, by a person over whom he has no effective control.
In a case not within paragraphs (a) to (e) the court may have regard to those provisions by way of analogy in deciding whether a person is to be considered the author, editor or publisher of a statement.
…”
In the amended particulars of claim, the Claimant suggests that AOL has fallen foul of s.1(l)(c) by virtue of the notification in February 2005, to which I have already referred in the context of whether AOL would be liable as a publisher at common law in any event.
I addressed the submissions of Ms Phillips at that stage, and they seem to me to be equally valid in the present context. The e-mail did not effectively put AOL on notice, and its staff were given no reason to believe that they were causing or contributing to the publication of the postings complained of. Thus, s.1 would provide a complete defence to any claim in respect of those postings, whether for damages or an injunction. It is perhaps worth having in mind what was said by the Court of Appeal as to the hurdle to be surmounted in establishing “reason to believe” in a different context, albeit in the same statute, in Milne v Express Newspapers Ltd [2005] 1 WLR 772.
Ms Jethani for BT makes similar points in reliance upon s.l. She submits further that BT should not be regarded as a “publisher” by reason of s.1 (3)( c) and/or (e).
Moreover, she also argues that BT took “reasonable care”, having regard to the evidence from her witness relating to their contractual terms binding those who avail themselves of the BT Click (a pay-as-you-go internet service) and for the BT Broadband service. Clause 6.1 of the terms and conditions relating to the BT Click service provides that the customer must take all reasonable precautions to ensure that no one uses the service” … to send, knowingly receive, upload, download or use any material which is … defamatory … or in breach of … any other rights”.
Clause 20 of the Broadband terms and conditions, similarly, provides that a customer should take reasonable steps to make sure that nobody uses the service ••… (b) to send, receive, upload download, or use any material which is … defamatory”.
By reason of s.l(5) of the statute, it is necessary, in determining whether persons took reasonable care, or had reason to believe that what they did caused or contributed to the publication of a defamatory statement, to have regard to certain specific matters. These include the extent of the person’s responsibility for the content of the statement or the decision to publish it, the nature or circumstances of the publication, and the previous conduct or character of the author, editor or publisher.
There is nothing about these factors which would, in my judgment, in any way undermine the ability of either AOL or BT to rely upon the provisions of s.l.
Ms Jethani anticipated a further argument from the Claimant to the effect that the email of 1 May 2005 provided BT with “reason to believe” that further postings would be made by the same person using its services and, moreover, that it should have 4tken reasonable care to monitor the newsgroup for defamatory postings about the Claimant. There is, however, no evidence that BT was informed of where on its servers the posting was located, of which news group it was posted upon, or of the email address of the person responsible. It would be wholly impractical for BT to monitor its servers for defamatory content about the Claimant in any event.
It was made clear in the evidence served on behalf of BT that, although Regulations 17 and 18 had originally been relied upon, this was no longer being pursued. It is accepted that BT hosts Usenet newsgroups on its servers and that newsgroup postings are stored for a period of time, usually amounting to a few weeks, to enable BT’s users to access them. BT does not operate the newsgroups, but it has the ability to remove postings from its news group server, although they may still be viewed via other servers. In these circumstances it is necessary to consider the terms of Regulations 19 and 22.
In so far as it is relevant, the terms of Regulation 19 are as follows:
“Where an information society service is provided which consists of the storage of information provided by a recipient of the service, the service provider (if he otherwise would) shall not be liable for damages or for any other pecuniary remedy or for any criminal sanction as a result of that storage where –
(a) the service provider –
(i) does not have actual knowledge of unlawful activity or information and, where a claim for damages is made, is not aware of facts or circumstances from which it would have been apparent to the service provider that the activity or information was unlawful; or
(ii) upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information, and
(b) the recipient of the service was not acting under the authority or the control of the service provider.”
The terms of Regulation 22 are, so far as relevant, as follows:
“In determining whether a service provider has actual knowledge for the purposes of regulations 18(b )(v) and 19(a)(i), a court shall take into account all matters which appear to it in the particular circumstances to be relevant and, among other things, shall have regard to –
(a) whether a service provider has received a notice through a means of contact made available in accordance with regulation 6(1)( c), and
(b) the extent to which any notice includes –
(i) the full name and address of the sender of the notice;
(ii) details of the location of the information in question; and
(iii) details of the unlawful nature of the activity or information in question”.
Attention was also drawn in this context to the terms of Regulation 6(1)(c):
(1) “A person providing an information society service shall make available to the recipient of the service and any relevant enforcement authority, in a form and manner which is easily, directly and permanently accessible, the following information-
…
( c) the details of the service provider, including his electronic mail address, which make it possible to contact him rapidly and communicate with him in a direct and effective manner;
…”
In the light of these provisions it is submitted by Ms Jethani that the requirements of Regulation 6(1)( c) are satisfied, since the Claimant was able to send an e-mail to BT on 1 May 2005. Also, his purported notice would fail to satisfy the factors identified in Regulation 22(1)(b)(ii) and (iii) for the reasons considered above. None of that information was included. As I have already observed, in order to be able to characterise something as “unlawful” a person would need to know something of the strength or weakness of available defences.
It is thus submitted that BT is not liable for hosting the publications in the light of the provisions of Regulation 19, and there is nothing to suggest that the Claimant would have any prospect of proving otherwise.
Against BT there is also set out, in paras. 20 to 22 of the amended particulars, a claim based upon harassment. It is suggested that there were harassing publications for which the third Defendant was responsible and that BT are responsible as “accessories”. Having regard, however, to the provisions of the Protection from Harassment Act 1997, it is clear that BT has not ‘pursued any “course of conduct” within the meaning of s.l (1); nor could it be said that there is anything in the pleading to support the proposition that BT is liable in law for creating any of the publications relied upon as harassment. Nor yet could it be argued that BT ought to know that any course of conduct amounted to harassment, since the matter has to be assessed according to the information in the relevant defendant’s possession at the time and judged objectively: s.1 (2).
The Claimant argues that it is inevitable that BT will be found to be a publisher at common law and therefore “is most certainly by definition the harasser”. As I have already explained, however, I do not accept his premise.
It is necessary to bear in mind in this context, as 1 have said, that the provisions of Regulation 19 would prevent any claim for damages, whether in respect of harassment or any other wrongful act.
In conclusion, I am quite satisfied that the claims against these applicants should be struck out in accordance with CPR Part 3, and indeed that there would be no realistic prospect of success on any of the causes of action. Thus the criteria under CPR Part 24 would also be fulfilled.
All counsel have additionally relied upon the argument that the litigation constitutes an abuse of process in accordance with the principles expounded recently by the Court of Appeal in Jameel (Yousef) v Dow Jones and Co Inc [2005] QB 946 at [56][58]. It is unnecessary to consider these arguments in any detail in the light of my earlier conclusions. They are nonetheless consistent with the public policy considerations highlighted in that case. Moreover, the language used in such cases as Schellenberg v BBC [2000] EMLR 296, Wallis v Valentine [2003] EMLR 175 and in Jameel itself would be equally applicable. It is fair to say that there is here “no realistic prospect of a trial yielding any tangible or legitimate advantage such as to outweigh the disadvantages for the parties in terms of expense, and the wider public in terms of court resources”.
The Claimant is not deprived of access to justice. His remedies lie against the first to third Defendants (if he can establish the necessary ingredients in respect of each). They may not be persons of substance, such as to make it worthwhile pursuing them. Even if that is right, it is clearly not a sufficient reason for bringing in the present applicants. I therefore accede to the submissions of the applicants and will grant orders accordingly.