Media and entertainment - Information technology - European Union

R (on the application of (1) British Telecommunications Plc (2) Talktalk Telecom Group Plc) (Claimants) v Secretary of State for Business, Innovation and Skills (Defendant) and BPI (British Recorded Music Industry) Ltd and Nine Ors (Interested Parties) and (1) Open Rights Group (2) Article 19 and Consumer Focus (Interveners): QBD (Admin) (Mr Justice Parker): 20 April 2011

The claimant internet service providers (B) applied for judicial review of the online infringement of copyright provisions (the ‘contested provisions’) in the Digital Economy Act 2010.

They also challenged the draft Copyright (Initial Obligations) (Sharing of Costs) Order 2011, which proposed to make service providers liable for 25% of the costs incurred by Ofcom in carrying out functions under the contested provisions.

The 2010 act was designed to tackle unlawful file sharing.

Under the contested provisions, B were obliged to send warning letters to those subscribers identified as unlawfully sharing copyright material and to compile a list of such subscribers.

However, the industry code which brought those obligations into legal effect had not yet been introduced.

It was B's case that the contested provisions were incompatible with EU law. B submitted that the provisions: (1) constituted a technical regulation and/or rule on services within the meaning of Directive 98/34 and therefore should have been notified to the commission in draft; (2) were incompatible with articles 3(2), 12 and 15 of Directive 2000/31; (3) were incompatible with certain provisions of Directive 95/46 and Directive 2002/58; (4) were disproportionate in their impact on internet service providers, consumers, business subscribers and public intermediaries; (5) infringed Directive 2002/20.

Held: (1) Notification allowed the commission and other member states to propose amendments that might remove or reduce any restrictions which a rule on services might create on the free movement of services or the freedom of establishment (see paragraph 60 of the judgment).

However, the obligations were not yet legally enforceable against any individual and therefore did not have the ‘legal effect’ described in case law, Commission of the European Communities v Germany (C-317/92) (1994) ECR I-2039 ECJ, CIA Security International SA v Signalson SA (C194/94) (1996) All ER (EC) 557 ECJ and Sapod Audic v Eco-Emballages SA (C159/00) (2002) ECR I-5031 ECJ (5th Chamber) considered (paragraphs 64-78).

It was the code that in strict legal terms would constitute the technical regulation and it was its enactment that would give legal life to the initial obligations (paragraphs 84-85, 88).

(2) The provisions did not breach article 12 of Directive 2000/31 (paragraphs 99-108).

Nor did they require service providers to ‘monitor’ the information they transmitted, in breach of article 15(1) (paragraph 110).

Furthermore, the provisions did not fall ‘within the coordinated field’ for the purposes of article 3(2); article 3(3) and the Annex removed ‘copyright’ from the scope of article 3(1) and therefore the UK remained free to impose those provisions on internet service providers, established elsewhere in the EU, supplying the relevant services in the UK (paragraphs 119-131).

(3) Under article 8(2) of Directive 95/46, processing would be necessary for the ‘establishment, exercise or defence of legal claims’.

That was the precise purpose of the contested provisions: the copyright owner would be able to establish not only that there had been an infringement, but also who was responsible (paragraph 159).

The fact that a copyright owner might not decide to pursue legal proceedings did not mean that the action he took under the act was not for the purposes of establishing or exercising such a claim (paragraph 160).

Furthermore, if there was any doubt about the application of article 8(2)(e) to the relevant processing, the UK 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 (paragraph 162).

In relation to Directive 2002/58, the data processed was ‘traffic data’ for the purposes of article 2.

However, it was indisputable that the contested provisions were intended to promote the protection of the right to property, namely copyright, and therefore fell within the derogation under article 15(1), as interpreted by the European Court of Justice in Productores de Musica de Espana (Promusicae) v Telefonica de Espana SAU (C-275/06) (2008) All ER (EC) 809 ECJ (Grand Chamber), Productores considered (paragraphs 163-166).

(4) The contested provisions promoted the aim of judicial protection of copyright, and from the point of view of both copyright owner and subscriber, the act represented a more efficient, focused and fair system than the current arrangements (paragraphs 221, 228).

There were good reasons for the court to attach substantial weight to the balance struck by parliament (paragraphs 210-212, 218).

The fact that less than 40% of online copyright infringement was due to file sharing did not undermine the appropriateness of the contested provisions (paragraphs 230, 234).

Furthermore, it was premature to conclude that any potential ‘chilling effect’, arising where the subscriber was not necessarily the copyright infringer, was likely to be such that the social costs of such measures plainly exceeded the likely benefits.

Parliament had proceeded on the basis that existing procedures were inadequate and that legislative measures had to be specifically directed to, first, educating and, second, inhibiting unlawful copyright infringement at the level where it was occurring, namely through individuals.

There was nothing disproportionate in that position. It could not be concluded from the evidence that the scale of the likely costs that would arise from the contested provisions would render disproportionate legislation aimed at substantially strengthening the protection of copyright material against unlawful file sharing (paragraphs 240-241, 262).

(5) The contested provisions did not breach Directive 2002/20 (paragraphs 175-183).

However, the draft cost order breached article 12 of the directive: charges to recover ‘qualifying costs’ from internet service providers would ordinarily be regarded as ‘administrative charges’ and would, in principle, appear to be administrative charges under article 12 (paragraph 195).

Application granted in part.

Anthony White QC, Kieron Beal (instructed by in-house solicitors) for the claimants; James Eadie QC, Robert Palmer, Alan Bates (instructed by Treasury solicitor) for the defendant; Pushpinder Saini QC, James Strachan (instructed by Wiggin) for the interested parties.