On 28th July 2016, the Irish Court of Appeal, in Sony Music Entertainment (Ireland) Ltd. & Ors v UPC Communications Ireland Ltd.  IECA 231, confirmed that national courts have jurisdiction to grant graduated response system (GRS) injunctions against innocent intermediaries, such as ISPs, in response to alleged copyright infringement. This is the first GRS order of its kind made anywhere in the EU.
The Court held that Article 8(3) of the Information Society Directive (2001/29/EC) (the 2001 Directive), implemented in Ireland by section 40(5A) of the Copyright and Related Rights Act 2000, provided the jurisdiction to grant such orders. Article 8(3) requires Member States to 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.
The Court of Appeal upheld the High Court’s ruling of 27 March 2015. As discussed in a previous blog, the High Court made an order requiring UPC qua ISP to implement a form of GPS, for the benefit of three music companies, Sony Music, Warner Music and Universal Music, in response to alleged copyright infringement. The term GRS refers to types of steps which an ISP may be required to take against copyright infringers, ranging from warning letters to orders blocking access to particular websites.
The GRS order made by the High Court was a detailed one, requiring UPC to send each relevant subscriber a "cease and desist" letter upon receipt of notification of the first and second copyright infringement notifications it receives from rightholders. On receipt of the third copyright infringement notice, UPC is then required to send the relevant rightholders a notification that the particular subscriber has been the subject of three such notifications. The rightholders are then entitled to apply to the court for an order terminating the subscriber’s internet broadband service. The Order provided for a monthly limit of 2,500 notifications of this kind. It further required the rightholders are required to pay 20% of any capital expenditure incurred by UPC with a cap of €940,000. The curial part of the High Court judgment is appended to the Court of Appeal judgment for ease for reference.
UPC argued that the High Court had no jurisdiction to make a GRS injunction of this kind against a non-infringing ISP. It submitted that the order made is more appropriate to that of a specialist regulator vested with appropriate expertise and which is best placed to make policy decisions of this kind. It also contended that the High Court judge ought to have sought guidance from the Court of Justice of the EU (CJEU) on the interaction between the various EU directives invoked before determining the application.
The Court of Appeal dismissed the appeal, finding that the GRS order was one which the High Court had jurisdiction to make. Judge Hogan (Finlay Geoghegan J., Hogan J., Faherty J. concurring) held that the EU legislator had elected to vest a jurisdiction to grant an injunction against non-infringing parties in the national courts of the Member States by enacting Article 8(3) of the 2001 Directive. He stated that "although this type of injunction represents a novel innovation in our system of civil procedure it is nonetheless not for this Court to look behind that legislative policy choice. Once, therefore, the legal rubicon of vesting the High Court with a jurisdiction to grant an injunction against a non-infringing ISP has been crossed by the enactment of s. 40(5A) of the 2000 Act, then what follows is really all merely a matter of degree" as to the extent such an injunction can be.
Was the Order unnecessarily complex or costly?
Judge Hogan acknowledged that there are some in-built limitations to the scope of any such injunction against ISPs. In particular, Article 15(1) of the Electronic Commerce Directive (2000/31/EC) (the 2000 Directive) provides that Member States “shall not impose a general obligation” on ISPs to monitor the information which they transmit or store, nor a general obligation “actively to seek facts or circumstances indicating illegal activity". In addition, Judge Hogan noted that Article 3(1) of the 2004 Directive requires that Member States shall provide for “fair and equitable” measures to give effect to intellectual property rules and shall not be “unnecessarily complicated or costly” or “entail unreasonable time-limits or unwarranted delays.” However, Article 3(2) provides that those measures shall also "be effective, proportionate and dissuasive".
Judge Hogan concluded that it could not be said that the order in this case was "unnecessarily complex" given that no other technical solution was realistically possible. He further held that the sums in question (€800,000-€940,000) to set up a detection system to identify infringing subscribers were significant, but not "unnecessarily costly". He said the cost needed to be measured against the gross turnover of UPC of approximately €340m in 2013 and its gross profit of €238m, along with the fact that the copyright holders had suffered an alarming drop in income over this period, 50% of which could be attributed to the spiralling problem of anonymous internet infringements.
Was a CJEU reference necessary?
Judge Hogan held that no CJEU reference was required as the question as to whether the GRS order proposed was compatible with Article 8(3) of the 2001 Directive had already been determined by the CJEU in the cases of L’Oréal SA, Scarlet Extended and UPC Kabel Wien.
The decision in L’Oréal SA illustrates how an ISP can be ordered to take steps against a commercial customer who is using its services for infringement purposes. Judge Hogan noted however that different considerations apply in the case of non-business customers, not least because of privacy and data protection considerations, so that that decision could not, on its own, at least, be regarded as dispositive.
The matter was considered again by the CJEU in Scarlet Extended, but on that occasion the CJEU held that the various directives must be interpreted as precluding an injunction addressed to an ISP which ordered it to introduce a system for filtering all electronic communications passing by its services as a preventative measure. The CJEU held that such an injunction would have obliged the ISP to actively monitor all the data relating to each of its customers in order to prevent any future infringement of intellectual property rights, thus requiring general monitoring expressly prohibited by Article 15(1) of the 2000 Directive. In addition, it would require that provider to install a complicated costly permanent computer system at its own expense which would be contrary to the conditions laid down in Article 3(1) of the 2004 Directive. The Court reasoned that such an injunction would not meet the requirement that a fair balance be struck between the protection of the intellectual property rights enjoyed by copyright holders and the freedom to conduct business enjoyed by operators such as internet service providers.
Further in Kabel Wien, the Austrian court asked the CJEU whether an order sought by two film companies requiring UPC Wien qua ISP to block access to a particular website, which was offering either the downloading or the “streaming” of films to which they held the copyright, was compatible with Article 8(3) of the 2001 Directive. The CJEU answered this question in the affirmative, saying that such an injunction was not incompatible with EU law provided that it was necessary and proportionate and it respected the rights of the internet users.
Accordingly, Judge Hogan concluded that Article 8(3) of the 2001 Directive requires Member States to provide their judicial systems with the authority to grant injunctions of this kind, subject only to certain safeguards (such as the prohibition against general monitoring of users contained in Article 15(1) of the Electronic Commerce Directive).
This is an important decision so far as the effective protection of copyright against online infringement is concerned. It will be welcomed by rightholders as it confirms the jurisdiction of the courts under EU, and national law, to grant GRS injunctions against non-infringing ISPs, and clarifies the steps which the courts might require ISPs to adopt in regard to online copyright infringement. It will, however, lead to significant capital and operating expenditure on the part of ISPs.