Advocate General gives guidance on copyright infringement on peer-to-peer networks

In the case of Mircom International Content Management v Telenet and others (C-597/19) Advocate General (AG) Szpunar has advised that companies deemed to be "copyright trolls" should not be entitled to the information (e.g. IP addresses) of users sharing copyright-protected content on peer-to-peer networks, in order to collect damages from them for infringement.

The opinion also provided clarity on a much-discussed topic: users who are sharing copyright-protected works on peer-to-peer networks, even if it is only snippets of the works, are carrying out acts of communication to the public.

The facts

Mircom is a Cyprus-based company that holds licences for the communication to the public of erotic films on peer-to-peer networks and internet file-sharing networks in Europe. Under the agreements with the producers of those films, Mircom is required to take legal action in its own name against perpetrators of copyright infringement on those networks, in order to obtain compensation, 50% of which it can keep for itself and 50% which it must pass on to the producers.

In June 2019, Mircom brought an action before the Belgian Companies Court against Belgian ISPs Telenet, Proximus and Scarlet Belgium, seeking to obtain identification data of users whose internet connections had been used to allegedly share films from the Mircom catalogue on a peer-to-peer network by means of the BitTorrent-protocol (this technology entails the segmentation of a file into many small parts or pieces, which can be downloaded by the user and reconstituted to form the original file).

The Belgian Companies Court was dubious about the merits of the case for a number of reasons. It was unsure whether the users themselves carry out a communication to the public when they share works on peer-to-peer networks. Secondly, should a company such as Mircom, which does not actually exploit the film producers' IP rights but merely claims damages for infringement (and which conduct matches the definition of a "copyright troll), be entitled to benefit from the protection provided for under EU law for the enforcement of IP rights? Thirdly, the court was concerned about the lawfulness of collecting the IP addresses of those internet users allegedly sharing protected works on peer-to-peer networks. The Belgian Companies Court therefore referred four questions to the CJEU:

1. 1. Can the downloading of a file via a peer-to-peer network and the simultaneous provision for uploading parts (“pieces”) (which may be very fragmentary as compared to the whole) (“seeding”) be regarded as a communication to the public? If so:
   2. Is there a de minimis threshold, above which the seeding would be considered a communication to the public?
   3. Is the user's knowledge relevant given that seeding can take place automatically?
2. Can the relevant contractual holder of the copyright (in this case Mircom) which does not exploit the rights but merely claims damages from alleged infringers (and therefore their business model depends on the existence of piracy rather than combatting it) benefit from the same rights as those conferred by the Enforcement Directive (2004/48) on authors or licensees who exploit copyright in the normal way. Can such a company be regarded as having suffered "prejudice" within the meaning of the Directive?
3. Are the circumstances above relevant when assessing the correct balance to be struck between, on the one hand, the enforcement of IP rights and on the other, the rights and freedoms safeguarded under the Charter of Fundamental Rights of the EU, such as respect for private life and protection of personal data?
4. Is the systematic registration and general further processing of the IP addresses of a 'swarm' of 'seeders' (by the licence holder or by a third party on his behalf) legitimate under the General Data Protection Regulation (2016/679) ("GDPR")?  

The AG opinion

Communication to the public on a peer-to-peer network

On a peer-to-peer network, each user that is downloading a shared file is simultaneously uploading the same file to the network in order to increase the overall downloading speed. During this process however, it is not the complete document that is shared, but only small pieces of it. The complete document is only assembled on the downloading computer ones all parts are downloaded.

According to the AG, sharing such small parts of a protected work constitutes a communication to the public. It is irrelevant whether a (full) transmission has actually taken place. The mere fact that transmission is possible is sufficient. By installing the necessary software (which requires special skill and knowledge) each user becomes aware that he is always sharing data when downloading it. Therefore, it can be assumed that the user has the required knowledge of him sharing copyright-protected content.

Legal rights of “copyright trolls”

With regard to the second question, the AG made it clear that "copyright trolls" should not enjoy the same rights as traditional licensees. A "copyright troll" is a company that targets alleged file sharers for cash settlements, instead of entering into legal actions. It is therefore not interested in protecting the normal exploitation of their licences but merely wants to obtain a financial advantage. This advantage is in most cases bigger than the actual damage since the proposed settlement sum is always the same. This constitutes an abuse of rights which is prohibited under EU law. However, it is up to the national court to decide on the facts whether Mircom, having acquired exploitation licences which it does not intend to execute, is in reality seeking to rely on those licences improperly in order to obtain a lump sum payment. Such conduct would therefore fall under the definition of an abuse of rights prohibited under EU law.

The impact on personal data

The AG considered the impact of the activities of a company such as Mircom on the processing of personal data. A fair balance must be struck between, on the one hand, the enforcement of intellectual property rights and, on the other, the rights and freedoms of users, such as, in this case, respect for private life and the protection of personal data. It had been argued that disclosure of the names of those sharing the films, given the explicit titles of those films, constituted a processing of data concerning a natural person's sex life or sexual orientation (Article 9 of the GDPR).

Article 8(1) of the Enforcement Directive allows for the request for information "in the context of proceedings concerning an infringement of intellectual property rights" and even though Mircom did not intend to bring legal proceedings (rather it was seeking to encourage a financial settlement), the AG was of the opinion that this provision was probably broad enough to encompass Mircom's activities.  His view therefore was that a referring court could not refuse Mircom's request for the IP addresses on the basis that it had not been made "in the context of proceedings concerning an infringement of intellectual property rights". However, Article 8(1) of the Enforcement Directive also stipulates that the request for information must be 'justified and proportionate', and in relation to that, the referring court should take into account the way Mircom operates. If the court decides that Mircom's activities are an abuse of rights, then its request for information should be held to be unjustified. Therefore, if Mircom was considered to be a "copyright troll", it would not be eligible to obtain the identification data.

Second, the recording of IP addresses whose internet connections have been used to share protected works constitutes the lawful processing of personal data under the GDPR. This is on condition that they are used to file a justified request for the disclosure of the names of the owners of the internet connections identified by the IP addresses.

Comments

This opinion, if followed by the CJEU, may mean that European courts in the future will have to look more closely at the business model of companies that seek the IP addresses of alleged copyright infringers and determine whether they are still within their roles as a licensee. Companies such as Mircom will have to ensure that their business model falls within the boundaries of the law, in order to benefit from its measures, procedures and remedies.

It is also an important opinion in that it provides guidance on the fundamental and problematic question of whether the users themselves of a peer-to-peer network carry out acts of communication to the public when they share protected works. The CJEU has already found in Stitching Brein v Ziggo (C-610/15) that the making available and management of an online sharing platform which allowed users to locate copyright works and share them on a peer-to-peer network constituted a communication to the public, but that decision did not address the users themselves. This opinion is certainly a sign of a strengthened position for copyright owners.

With special thanks to trainee, Fabia Breuer, for her contribution to this article.