Liability of users in seeding on a P2P network, copyright "trolls" and the relationship with data protection

The CJEU has recently issued its decision in the case of Mircom International Content Management (M.I.C.M) Limited v Telenet and others (C-597/19), the latest case regarding the interpretation of rightsholders' exclusive right of communication to the public under Article 3 of the InfoSoc Directive (2001/29).

We set out details of the background to the case and a summary of the Advocate General's opinion in our blog in January 2021 (here: Advocate General gives guidance on copyright infringement on peer-to-peer networks | Fieldfisher).

Background to the case

Mircom is the assignee of the right to bring proceedings in relation to the infringement of copyright in various pornographic films. Mircom's sole role and business model as holder of these rights was to contact users unlawfully sharing these films using peer-to-peer (p2p) networks and claim a standard amount as a 'settlement' of the claim – 50% of which Mircom would keep and the other 50% would be passed to the producers of the films.

Mircom had collated various IP addresses of users who had been sharing the films illegally using p2p networks and brought proceedings to obtain the identity of these users from their ISP – Telenet.

The Belgium court referred various questions of interpretation to the CJEU, which held as follows.

Communication to the public

The first issue that the court considered was whether the acts of the user in this situation amounted to a communication to the public. In summary, they concluded that they could.

It is irrelevant that users of p2p networks transmit only parts of the files that are themselves unusable – the files can be reconstructed from these pieces. It was also not necessary to prove the user previously downloaded a certain number of pieces to meet any minimum threshold. All that was required for an 'act of communication' was that a work was made available to a public in a way that the public could access it from wherever and whenever they chose.

Where a user, in full knowledge of their conduct and the consequences it may have, gives access to a protected work, they are liable to have engaged in an act of communication under Article 3. If it is apparent, which it is for the referring court to determine, that the relevant network users have subscribed to the software and given their consent to the application after being informed of its characteristics, those users must be deemed to have this requisite knowledge. Therefore, it is irrelevant that the uploads are generated automatically by the software - the users are considered to have engaged in an act of communication.

The CJEU held that this would satisfy the requirement of a new public or new technical means because of the number of persons who used the network and the decisive role played by the user in downloading and uploading pieces of the files within the network in a way not taken into account by the rightsholder in authorising the initial communication.

Remedies available to a "copyright troll"

Next, the court addressed whether an entity that merely claims damages from infringers can benefit from the remedies under the Enforcement Directive.

The first component of this was whether the entity has legal standing. The referring court had held that Mircom was the contractual holder of the relevant right, which is a category entitled to legal standing. Therefore, this was satisfied. However, if the entity was not the holder of the rights and instead just authorised to use those rights (i.e. a licensee rather than an assignee), they would also need to demonstrate a direct interest in the defence of the rights.

Secondly, it was necessary that the entity suffered prejudice. The referring court had questioned the application of this criterion in circumstances where an entity does not intend to use the rights. The CJEU did not consider that the fact that an entity was an assignee rather than the author of the work should exclude them from the benefit of the usual remedies for infringement – an assignment cannot affect the nature of the rights and the available remedies. Therefore, essentially outsourcing enforcement should not mean they suffer less favourable treatment because this would undermine the attractive economic benefit of this route.

The final criteria was the admissibility of any request for information. This must be in the context of proceedings and the pre-litigation stage was sufficient. However, importantly the request must be "justified and proportionate". This may be the case where the entity is contracted specifically to enforce rights, but it is for the referring court to assess. Another consideration is that the aim of the Enforcement Directive is to require "structural action against the spread of counterfeiting on the market" rather than just "the fight against individual infringers". The measures can still be applied by Member States in situations that do not concern a commercial scale of infringement, but in this case the fact that the ISPs were in the process of providing services used in infringing activities on a commercial scale was relevant.

The final issue was whether Mircom had abused the remedies. There is a general obligation that the remedies are "fair and equitable". It is for the referring court to assess any abuse on the facts in front of it considering factors such as the operating methods, the manner of any amicable solutions and how disputes are ultimately resolved. There was some suggestion that such factors may be apparent in this case, although the CJEU did not have sufficient evidence.

Data protection

Finally, the court considered the relationship between enforcement of copyright and data protection. They reviewed the relevant parts of the GDPR and concluded that:

1. Obtaining personal information related to someone who has allegedly damaged property was a legitimate interest;

2. It is necessary to process the IP addresses in order to ascertain the details of this individual; and

3. It is for the referring court to balance the opposing rights and interests at issue.

Comment

Although the court provide various guidance and criteria, the application of this to Mircom has been left to the referring court.

On the facts, Mircom could face difficulties given the nature of its business model. However, much of the guidance does strengthen the position for rightsholders in enforcing their rights, particularly confirming that it is legitimate to assign and outsource the enforcement of rights. This is to be welcomed – given the high costs and resources involved in enforcing IPR, businesses should be encouraged to protect their rights in the most economical way possible.

The court also emphasised the difference between an action that is trying to counter the root cause of widespread infringement and one targeting an individual. Clearly, it is more beneficial in the long run for rightsholders (and their assignees or agents) to target the commercial businesses involved in piracy (the Pirate Bays of the world) and the court generally seems to take a much stronger pro-rightsholder position in such cases.

The discussions as to what constituted a copyright "troll" were also interesting in this case. Characterising an entity as a "troll" in the context of unregistered rights such as copyright feels slightly different to the context of registrations such as trade marks or domain names. For the latter, a troll often operates by registering or acquiring numerous rights with the intention of restricting legitimate businesses from trading unless they obtain the rights from the troll at a high cost. However, in the current case, "troll" is being used to refer to an organisation that has been authorised by the creators of a copyright work to exploit certain exclusive rights, a legitimate function and entitlement of the rightsholder. The troll label here seems to relate more to the manner of the business model rather than the ownership of the IPR i.e. the manner in which Mircom aggressively targets users and seeks to extort an excessive amount that far exceeds any legitimate damages. This can be seen as a warning to rightsholders to ensure they take a fair and equitable approach when it comes to enforcing their exclusive rights.

It is also important to remember that this case only concerned the right of communication to the public as it applies to sharing via a p2p network. Downloading from unlawful sources remains an illegal act of reproduction (see C-435/12) (ACI Adam)).