May 17 2008
Of the 26 "commitments" set out in the Government's 22 February strategy paper "Creative Britain: New Talents for the New Economy", perhaps the most significant for the music industry was commitment 15: “We will consult on legislation that would require internet service providers and rights holders to co-operate in taking action on illegal file sharing - with a view to implementing legislation by April 2009”.
Of the 26 "commitments" set out in the Government's 22 February strategy paper "Creative Britain: New Talents for the New Economy", perhaps the most significant for the music industry was commitment 15: “We will consult on legislation that would require internet service providers and rights holders to co-operate in taking action on illegal file sharing - with a view to implementing legislation by April 2009”.
Although not a green paper (the usual precursor to legislation) but a strategy paper, published jointly by the Department for Culture, Media and Sport (DCMS) and the Department for Business, Enterprise and Regulatory Reform (BERR), the publication seemed to suggest a shift in policy. While the Government continues to support the finding of the Gowers Review that it is preferable for internet service providers (ISPs) and content owners to find a commercial solution to tackle internet piracy, the paper made clear that the Government is now prepared to legislate if no such solution develops. ISPs and rights owners, therefore, are under more pressure than ever to reach an understanding.
This change in tack by the Government adds to the ever-present commercial pressure. Despite growth in the legal download market, concerted campaigns to educate users against piracy and numerous successful claims against infringing websites, services and individual downloaders, illegal file-sharing remains a huge problem for content owners. With none of these approaches managing to eradicate the problem, the Government clearly believes collaborative action alongside ISPs, as the gatekeepers of the net, may prove more fruitful.
A global issue
The UK is not alone in suggesting a change in approach may be necessary and many countries are now moving towards increased responsibility for ISPs. Notable examples include:
Belgium: In June 2007, the Brussels Court of First Instance ruled that Scarlet (a Belgian ISP) was under an obligation not only to block the accounts of offending users but also to implement a mechanism to filter out infringing content
Germany: A regional court held that the website Rapidshare was under an obligation to monitor the copyright status of all musical works made available on its site.
Sweden: The Government is currently considering amending legislation to enable ISPs to be ordered to terminate accounts if used for piracy.
Denmark: In February 2006, the Danish Supreme Court ruled that ISPs could be forced to disconnect customers using their services to carry out copyright infringement.
Ireland: In March, the major labels launched proceedings against Eircom, Ireland’s largest ISP, claiming that it should install filter technology to prevent illegal sharing or downloading of music.
Japan: In March, Japanese ISPs agreed to set up a warning and disconnection system to control users of WinNY, a popular peer to peer program.
France: In November 2007, French President Nicolas Sarkozy boasted of a pioneering entente between French ISPs and content owners based on a system of warnings leading to disconnection of persistently infringing users.
"Three strikes" legislation?
The DCMS/BERR paper, however, does not state a preferred approach for the UK. The question remains, therefore, what kind of voluntary solution the Government favours and what form of legislation it might introduce in the event that no such solution materialises. The French approach has attracted particular attention and has fuelled media speculation that the UK Government intends to adopt a similar approach based on a "three strikes and you're out" model, in which persistent infringers will receive a series of warnings before being disconnected by their ISP. Certainly increased responsibility for ISPs seems likely.
The Government's legislative freedom is, however, slightly restricted as it must continue to comply with European Law. In particular, the 'E-Commerce' Directive 2000/31/EC stipulates that ISPs cannot be forced to monitor the use of their networks and protects them from damages or criminal sanctions in relation to the actions of their users, as long as they are unaware of those actions (the often claimed "mere conduit" defence). The UK Government, however, would remain free to legislate to allow rights holders to apply for injunctions against ISPs that fail to cooperate with any proposed "three strikes" system.
Revision at the European level might be preferable for both ISPs and rights holders; at least this would create a consistent pan-European approach. Unfortunately, in April, the European Parliament imposed an amendment to a report on creative industries to make clear that the European Parliament believed that disconnecting users from the internet would violate their human rights. However, it should be noted that the European Parliament does not have the power to introduce European legislation. The European Parliament was well aware that this vote had no legal effect and was therefore free to make this amendment without fear of any direct practical or economic consequences.
A voluntary solution?
In any case, there is still time to find a voluntary solution and avoid the threat of Government legislation. Shortly after the DCMS/BERR paper was published, Virgin Media revealed that it was working on a pilot project with the BPI which would involve collaboration to curb infringement with the threat of disconnection. But finding an approach that is uniformly acceptable across both industries has proved difficult. A month prior to publication of the DCMS/BERR paper, the ISPs' trade association the ISPA nominated the BPI as its "Villain of the Year", alleging the recording industry had failed to "engage in constructive dialogue with the internet industry when dealing with file-sharing". Subsequently, the ISPA called on the record industry to agree to compensate ISPs for the cost of litigation brought against ISPs by users wrongly pursued for illegal sharing of music. A week before the paper, negotiations between the BPI and Tiscali, the UK's fourth largest broadband provider, broke down over Tiscali's proposal that the record industry should cover the cost of pursuing infringers. And more recently, the Carphone Warehouse issued a statement in strong defiance of any "three-strikes"-style approach, in language echoing the "mere conduit" defence: "Our position is very clear, we are the conduit that gives users access to the Internet, we do not control the Internet nor do we control what our users do on the Internet".
This point of principle is not the only reason for ISPs' apparent reluctance to accept responsibility for their customers' infringement. In a saturated and highly competitive market, the ISPs are unlikely to favour proposals involving increased administrative costs and possible loss of customers (through disconnections) and therefore decreased subscription and/or advertising revenue. It may be that the ISPs are also concerned that voluntarily adopting a "three strikes" system will encourage customers to switch to competitors.
However, despite the reluctance of ISPs to accept the change, it seems the tide is slowly turning in favour of content owners. It seems that ISPs will need to decide quickly whether a voluntary, negotiated solution is preferable to an imposed legislative one. Some might well prefer to wait it out, so that they can tell their customers that they have no choice. However, in any event, with the suggested deadline for legislation set to expire within a year, this may be the only choice left to them. The days of ISPs escaping any responsibility for their customers' infringement appear to be drawing to a close.
David Carter and Nick Eziefula are Associates in the Music Group at Olswang.
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