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ISPs Beware: Current Liability Regime for On-line Illegal File Sharing Called Into Question

July 2008

The on-going debate between the entertainment industries and Internet Service Providers (“ISPs”) centring round the extent to which ISPs should be liable for illegal activities occurring over their networks has recently intensified following the release of a strategy paper entitled “Creative Britain: New Talents for the New Economy” [1] (the “Strategy Paper”) by the Department of Culture, Media and Sport. The Government is encouraging stakeholders to come to a `voluntary’ agreement on a workable plan to take action against illegal file sharing. The Strategy Paper sets out a timescale within which content owners and ISPs must have reached an agreement, failing which the Government has made it clear that it “will not hesitate to legislate in this area if required”.[2]

Illegal downloads – why is there such a concern?

Rights holders have long argued that ISPs should bear some level of responsibility for putting in place technical and operational measures to prevent their subscribers from illegally downloading files from the Internet and from infringing those rights holders’ copyright.

To put the gravity of their concerns into perspective, figures available for 2006 indicate that 20 billion music files were illegally downloaded worldwide that year and the music industry estimates that for every single legally downloaded, there are 20 singles illegally downloaded.[3] The British music industry argues that it is due to this downloading, as well as other factors, that it is experiencing a dramatic decline in revenue. Whilst it is difficult to quantify how much revenue the British market is losing, experts estimate that it is somewhere in the region of £460 million.[4] In the UK, the creative industries have grown twice as fast as the rest of the economy in recent years and they now account for over 7 per cent of the UK’s GDP. Interestingly, the OECD found that the creative industries accounted for a greater share of GDP in the UK than it did in Canada, the USA, Australia or France.[5]

Little wonder then that the British Government considers that the spread of online piracy could severely undermine the commercial viability of the entertainment industries and dilute the value of copyright law. It is keen to protect the film and music industries and to work hard to maintain the favourable market and economic conditions necessary to stimulate innovation.[6]

The Government takes action

The Government’s Strategy Paper encourages ISPs and rights holders to ‘voluntarily’ reach agreement on some form of anti piracy system by April 2009. Whilst the Government is hopeful that the parties will be able to reach such an agreement, it recognises that there is a possibility that the parties may fail to do so. Consequently, it is spending 2008 consulting on regulatory arrangements that it could swiftly implement as legislation in April 2009 if no agreement is forthcoming.[7] As the Strategy Paper provides little guidance on the possible measures and systems that ISPs and rights holders could adopt in order to curb illegal file sharing, the Government will, presumably, be relying on both parties to agree a reasonable and adequate anti-piracy system which meets the Government’s objectives set out in the Strategy Paper.

Introducing an anti piracy regime is just one way in which the Government plans to make the UK a powerhouse in the creative industries. The Strategy Paper sets out twenty-six commitments to ensure that the UK’s creative industries are better supported and protected, including commitments to boost penalties for copyright infringement[8], fund expert police training to deal with intellectual property crimes, launch various educational and enforcement campaigns[9], and promote a better understanding of the value and importance of intellectual property.[10]

Plans announced in France to provide the blueprint for the UK?

In publishing its Strategy Paper, UK politicians have followed the lead of the French Government which is looking to implement legislation that requires ISPs to monitor their networks for illegal traffic. A Memorandum of Understanding has been signed by key stakeholders including music producers, audiovisual producers, ISPs and public authorities who each pledge to contribute towards fighting online piracy. The plan, which was unveiled by President Sarkozy in November last year, provides for the creation of an independent government body which will operate firstly a system of warnings against an illegal file sharer, followed by the suspension, and then finally termination, of Internet subscriptions used for illegal file sharing - in essence, a “three-strikes-and-you-are-out” policy against persistent/repeat offenders. The independent government body will enforce this system using information provided by ISPs on subscribers who seemingly transfer a high volume of files over the Internet.[11]

Lord Treisman, who was initially responsible for championing the Strategy Paper, has revealed that the UK Government has been working with the French Government on the legislation that they propose introducing shortly. He believes that both the French and the British Governments will continue to work alongside each other with a view to sharing evidence and analyses. He has, however, commented that the UK Government may not necessarily adopt exactly the same anti-piracy model as that of the French.[12]

What are the potential difficulties with the British Government’s attempt to turn ISPs into the policemen of the Internet?

A. Contrary to the philosophy of the Internet

The essence of the Government’s strategy, which could force ISPs to monitor the activities of its subscribers, seems to erode the very philosophy of the Internet, namely, the ubiquitous availability and movement of information. The effect of introducing this strategy could result in ISPs limiting lawful content passing over their networks for fear of breaching any legislation introduced by the Government.

B. Contrary to current legislation

As the law currently stands, ISPs bear no liability for illegal file sharing as the content is not actually hosted on their servers, it is merely transmitted across their networks. As a result and for the purposes of the E-Commerce (EC Directive) Regulations 2002[13], ISPs are considered to be “mere conduits” of information and, as such, escape liability for damages or criminal or civil action, provided that they do not become involved in initiating a transmission, selecting the recipient of a transmission or modifying the information contained in the transmission.
In addition, under the Regulation of Investigatory Powers Act, the UK’s ISPs are not permitted to inspect the contents of the packets of information being transmitted across the Internet without proper authority and only when such action is necessary and proportionate in the context of the issue being investigated. These powers are primarily used by the police to intercept and copy email and other traffic in terrorism investigations. It is doubtful, therefore, whether snooping on subscribers’ internet traffic to protect the commercial interests of the entertainment industries would be allowed under, or fall within the ambit of, the current legislation.
If the Government is forced to adopt new legislation in April 2009 in the absence of any voluntary agreement, it will not only need to amend a plethora of current UK and Community legislation but its plans could also fall foul of fundamental human rights laws that entitle people to a certain degree of privacy in their communications.

C. Technical difficulties

Technical experts consider that the proposals will be very difficult to implement and enforce. The UK’s Internet Service Providers’ Association claims that ISPs cannot monitor or record the type of information passing over their network due to the sheer volume of traffic. It is, therefore, questionable how effective any measures introduced will be.
One proposal is for subscribers with high data usage to be highlighted by ISPs as potential file sharers. However, from a technical perspective, it might be difficult to distinguish between those individuals involved in illicit activities and those legitimate users of the Internet who, for example, consume high volumes of bandwidth as a result of downloading broadband TV content from services such as the BBC’s iPlayer.
Illegal file sharers are likely to develop more sophisticated ways of distributing and sharing copyrighted material to escape being caught, for example, through using unsecured Wi-Fi hotspots or encrypting emails passing over ISPs’ networks to prevent them from monitoring their content.

D. Collapse of smaller ISPs

ISPs could be forced to spend millions of pounds developing technology and installing new equipment to implement any technical measures agreed between ISPs and rights holders or required by legislation. In the absence of any form of financial support from either the music and film industries or the Government, it is possible that many of the UK’s smaller ISPs will go insolvent in complying with such requirements.

Conclusion

Although most stakeholders consider that, to a greater or lesser extent, ISPs should be responsible for discouraging illegal activities carried on over the Internet, arguably the cost and responsibility of actually investing in, developing and implementing technical measures which seek to fight online piracy should not be borne solely by the ISPs themselves. Instead, the cost and responsibility of doing so should be shared across the industry as whole, particularly as ISPs, in their (current) role as intermediaries, have no control over the content of the material that third parties pass over their networks.

It would be sensible for the Government to better understand from a technical perspective, how workable and effective any proposed solutions to fight on-line piracy are before introducing any legislation. In particular, the Government could oversee a cost-benefit analysis comprising an assessment of how much it would cost ISPs to develop and implement effective technical measures to curb illegal file sharing, for comparison with the predicted benefit of enhanced revenues for the rights holders themselves.

The British Government at least has the benefit of being able to draw upon the experience of the French prior to deciding how to implement any legislation of its own.

April 2009 could be an important milestone for both the UK’s entertainment sector and ISPs.

Useful URL: www.culture.gov.uk/reference_library/publications/3572.aspx

Rebecca Anderson

[1]The Strategy Paper was released by the Department for Culture, Media and Sport on 22 February 2008

[2]Commitment 15 of the Strategy Paper, page 51

[3]Figures taken from the Irish Times, Ireland.com article “Eircom taken to Court over illegal music downloads”, dated 10 March 2008

[4]Strategy Paper, Page 51, Paragraph 5.11. Figures taken from independent research carried out for the British Video Association: IPSOS Piracy Study 2006

[5]Joint Press release 017/08, DCMS/BERR/DIUS, 22 February 2008

[6]Strategy Paper, Forward, page 4

[7]The 2006 Gowers Report on Intellectual Property in the UK first recommended that some form of Government regulation should be drafted if ISPs and content owners are not able to voluntarily agree on a system to curtail illicit downloads (Recommendation 39 of the Gowers Report on Intellectual Property 2006, page 103)

[8]The fine that magistrates can currently impose on “pirates” is currently limited to £5,000

[9]“Fake Free London” is one such campaign which hopes to make London free from counterfeit products by the time of the 2012 Olympic Games. The UK Intellectual Property Office will be piloting a project across key authorities, including all Olympic Boroughs. Findings from the pilot could provide a model for a much wider roll-out across London and in other cities

[10]Including, by pumping plenty of money into special schools focusing on arts and music, developing five new “centres of excellence” in various arts; making sure there are at least 5,000 apprentice positions in the creative industries by 2013; and ensuring that all children will get access to 5 hours of “culture” (i.e. art, music, theatre, dance lessons) a week

[11]It appears that the approach adopted by the French Government in relation to assigning liability to intermediaries has been extended by the French Courts to online auctioneers. For example, Hermes and LVMH have both, within the past month or so, successfully brought actions against eBay in France for permitting counterfeit products to be sold on its Internet auction site. eBay was fined €20,000 and €40,000, respectively, by the French Courts. The verdict in these cases is likely to result in a flood of similar cases being brought against eBay and similar online auction sites by other manufacturers in the luxury goods market and could seriously threaten their business models

[12]“Government piles file sharing pressure on UK ISPs”, an article from the Register.com, dated 8 January 2008 by Chris Williams

[13]Sections 17-19 of the E-Commerce (EC Directive) Regulations 2002