On 16 March 2016, the Advocate General (AG) delivered an Opinion, in McFadden v Sony Music Entertainment Germany GmbH Case-484/14, that a business offering free WiFi access to the public cannot be held liable for copyright infringement committed by a user of that WiFI. The decision confirms the applicability of the E-Commerce Directive, and the “mere conduit” defence, to free WiFi providers.
Mr McFadden operates a business selling and renting lighting and sound systems in Munich, and offers free WiFi to the public. In 2010, a musical work was unlawfully offered for downloading via that Internet connection. The Munich Regional German Court took the view that Mr McFadden was not directly liable for the copyright infringement, but may be indirectly liable on the ground that his WiFi network had not been made secure through use of a password.
The CJEU referral
The Munich Regional Court asked the European Court of Justice (CJEU) whether the E-Commerce Directive 2000/31/EC (the Directive), and in particular the mere conduit defence therein, applies to persons such as Mr McFadden who offers free WiFi as an adjunct to his principal economic activities. It further asked whether that defence shields persons from injunctions in respect of unlawful acts by third parties.
The E-Commerce Directive
The Directive limits liability of intermediate service providers for transmitting, caching or hosting unlawful third party content (for example, copyright infringement, defamation, trademark infringement etc.). The “mere conduit” defence, relied on by Mr McFadden, arises where three cumulative conditions are met: (i) the provider of the mere conduit service did not initiate the transmission; (ii) the provider did not select the recipient of the transmission; and (iii) the provider did not select or modify the information contained in the transmission. The Munich Regional German Court believed these conditions had been satisfied in the present case, but was uncertain as to whether Mr McFadden was a “service provider” providing an “information society service” (defined as services “normally provided for remuneration”) within the meaning of the Directive.
In a preliminary ruling, AG Szpunar opined that Articles 2(a) and (b) of the Directive, which, respectively, define "information society services" and "service provider", applied to Mr McFadden. The AG found that the WiFi was provided in the course of Mr McFadden’s business and was therefore provided in an economic context. It did not matter that Mr McFadden was not remunerated for the service or that it was ancillary to his principal economic activity. The free WiFi was a form of marketing designed to attract customers and was therefore of an economic nature.
The AG further found that the "mere conduit" defence in Article 12(1) applied to Mr McFadden, and that that defence precludes the making of orders against intermediary service providers not only for the payment of damages, but also for the payment of the costs of giving formal notice or other costs relating to an infringement of copyright committed by a third party.
However, the AG opined that, pursuant to Article 12(3), an injunction could be granted against Mr Mcfadden aimed at preventing further infringement, non-compliance with which would punishable by a fine. The AG stated that when issuing such an injunction, national courts must ensure it is:
(i) Effective, proportionate and dissuasive;
(ii) Aimed at bringing a specific infringement to an end or preventing a specific infringement and does not entail a general obligation to monitor, and
(iii) Achieves a fair balance between the applicable fundamental rights, in particular, freedom of expression and information, and the freedom to conduct business, as well as the right to the protection of intellectual property under the Charter of Fundament Rights.
An injunction could not be granted requiring Mr McFadden to terminate an Internet connection, or password-protect the Internet connection, or monitor all communications transmitted through it in order to ascertain whether the copyright-protected work in question is unlawfully transmitted again.
The Opinion will be welcomed by businesses offering free WiFi services as it confirms the availability of the “mere conduit” defence to limit their liability in respect of any third party infringement. At the same time, it will be a disappointment to music and record companies who will not be able to transfer liability of third party infringement to free WiFi providers. They will, however, be able to enforce an injunction against free WiFi providers in the event of third party infringement. Opinions of the AG are not legally binding, but are usually followed by the CJEU. The Judges of the CJEU are now beginning their deliberations in this case, and judgment will be given shortly.
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