Online Intellectual Property Infringement and Digital Media
Over the last few years advances in the services available through the internet and in digital media have made it easier and easier to make unauthorised copies of works and to distribute or share copies. The music industry's struggles over the last few years to stop websites from offering peer-to-peer sharing of music content have been well documented in the press. The Napster litigation in the US all seems a long time ago. But that dispute back in 2003 has led to the rise of authorised music downloading, largely from Apple's iTunes, that has changed the way many consumers buy music. Now not only can music be shared and downloaded, but movie clips and live broadcasts can be distributed or streamed. There are also numerous services through which content in various forms created or submitted by the user (user generated content) can be shared, for example, video clips (such as on YouTube), personal profiles (such as on MySpace.com) or photographs (such as www.flikr.com).
The way in which works are advertised and sold has also been revolutionised by the internet. Brand names can be used as metatags and keywords to attract consumers to websites that have nothing to do with the owners of those brands. Auction sites such as eBay have created new ways for counterfeit copies to be advertised and sold.
1. Copyright Infringement
What is Copyright?
Any discussion about the misuse of digital content from a legal perspective has to start with an understanding of copyright. Copyright in the UK arises automatically on the creation of a copyright work under the Copyright, Designs and Patents Act 1988 (CDPA). Copyright protects:
Copyright protects the skill and labour expended in making the work by giving the copyright owner the exclusive right to do certain things with the work and, therefore, the right to prevent anyone else from doing those things for the period of 70 years after the author's death (or 50 years from creation of a computer program and 50 years from death for a musical work). This includes:
Infringement by communicating the work to the public was introduced by the Copyright and Related Rights Regulations 2003 to provide a more straightforward way of establishing infringement where a copyright work was made available via the internet. By that time the then existing definitions of broadcasts and cable programmes were completely out of date. Communicating the work includes making available to the public â€œby electronic transmission in such a way that members of the public may access it from a place and at a time individually chosen by them.
The test of what is and what isn't copyright infringement is whether a substantial part has been copied. There is no hard and fast rule as to what a substantial part might be. It is measured qualitatively rather than by quantity, so copying a relatively small part of a song, or a book may be an infringement. If it is worth copying it is probably protected.
Exceptions to Infringement
There are limited circumstances in which copyright material may be reproduced without first obtaining the copyright owner's consent. These relate to specific activities and include:
There is no exception for the private copying of digital recordings, such as copying all your CDs onto your iPod. In its final report to the Treasury, the Gowers review of intellectual property rights in the UK recommended the introduction of a new private copying exception to legitimise "format shifting" of this kind. Following on from the Gowers review recommendations, in January of this year the UKIPO published a consultation paper on proposed changes to the copyright exceptions including the proposed exception to allow consumers to make a copy of a work which they legally own so that it can be accessible in another format on a device in their possession. However, rights-holders have been lobbying to get any exemption accompanied by a levy on hardware and blank media, as it is in other jurisdictions.
Under Article 5(2)(b) of the Copyright Directive fair compensation must be paid to the rights owner for private copying-exceptions. The UKIPO's opinion is that the proposed exception is very narrow in scope and it does not support the imposition of copyright levies as exists in all but three EU countries. The Gowers review said that the exemption should be taken into account in setting the initial sale price. Higher prices for CDs and DVDs will be unpopular with consumers, but then higher prices for iPods would be too.
In UEFA & ors v Briscomb & ors  EWHC 1268, the High Court considered whether the unauthorised online streaming of live sporting events could infringe copyright.
The Union of European Football Associations (UEFA) owns copyright in the live broadcasts of football matches in the European Champions League. The defendants operated a website www.sportingstreams.com that distributed the broadcasts over the internet for their subscribers' viewing. The broadcasts were digitally captured and processed into signals that could be sent in "packets" over the internet. Each part of the broadcasts was copied during processing and again on the computer of each of the subscribers who received the stream.
The court gave summary judgment for UEFA, holding that the Sportstreams.com had infringed copyright in the broadcasts by communicating the broadcasts or authorising their communication to the public and also copying them (or authorising others to make copies).
The US courts have also considered claims whether online streaming infringes copyright. A federal court in the District of New Jersey considered this issue in a case brought by Disney against Video Pipeline (Video Pipeline v Buena Vista Home Entertainment 342 F. 3d 191 (3rd. Cir. 2003). In that case, Disney sued Video Pipeline for streaming clips of Disney movies over the internet. Video Pipeline relied on the "first sale doctrine" and claimed that it was not liable for copyright infringement. Under this US copyright law doctrine, a consumer is not usually liable for infringement when he lawfully buys a copyright work and later transfers or distributes it to another (for example, reselling books or CDs). Video Pipeline argued that Disney had placed its videos into the stream of US commerce and therefore exhausted its exclusive distribution rights under the US Copyright Act.
The court found for Disney on the basis that Video Pipeline was not reselling as it did not purchase copies of all of the Disney clips and then distribute them (there were not enough licences purchased every time a consumer clicked on the online streaming of a Disney clip on Video Pipeline's website). It appears from the brief judgment that if Video Pipeline had purchased enough licences to cover every time a customer streamed a video clip, it would probably not have been liable for copyright infringement. However, purchasing one copy of a Disney copyrighted movie followed by streaming potentially unlimited numbers of that movie certainly does not fall within the first sale doctrine.
2. Liability of Intermediaries
Owners of intellectual property would like to see ISPs and other intermediaries having more responsibility for infringements committed by users of their sites. Legislation has been introduced both in the US and in Europe about how rights owners can deal with infringement on the internet and who can be liable.
Communications Decency Act
ISPs are generally immune from liability for copyright infringement, as under the Act an ISP is not "publishing" the infringing content on the website.
Digital Millennium Copyright Act
The Act sets out rules for take-down notices and how internet service providers are required to respond to copyright owners requests to remove material.
In Europe the liability of intermediaries for online infringement is governed by E-Commerce Directive which was implemented in the UK by the Electronic Commerce (EC Directive) Regulations 2002 (SI 2002/2013) (E-Commerce Regulations). This introduced exemptions to liability for Internet Service Providers (ISPs) when undertaking different activities:
User Generated Content Websites
Social networking sites such as MySpace, Facebook and Bebo allow people easily and simply to create their own online page or profile and to construct and display an online network of contacts, often called "friends". In addition to profile information, users can design the appearance of their page, and add content such as photos, video clips and music files. Nearly all sites allow users to post photos, video and often music on their profiles and share them with others. Musicians are using their profiles to distribute music through MySpace. You Tube encourages internet users to upload video clips they produce onto websites where they can be viewed downloaded, linked to and embedded in other web-based content.
Established applications and functions have also found their way onto social networking sites. It is now possible to make voice calls through certain sites using Skype, while Bebo has led the way in incorporating video drama with its KateModern series. This is a hosted interactive video drama where fans are able to use the tools on Bebo to influence the storyline and fully interact with the series. The production is funded via fully integrated product placement.
The risk for user generated content providers is when users include in their video clips or music files material that is owned by third parties. By storing uploaded user generated content on servers and making further technical copies during transmission a social networking site will be copying the material for the purposes of copyright infringement. They could also be infringing by communicating the material to the public. Although, it is as yet untested in the UK courts, it is likely that communicating material to the public is broad enough to include simply providing a link to user generated content that contains infringing materials.
Additionally, IPR owners may bring an action against a user generated content provider for "authorising" copyright infringement, by providing its users with the means of uploading infringing content and allowing other users to stream and/or download that content.
The leading UK case CBS Songs Ltd v Amstrad Consumer Electronics plc  AC 1013.provides that a party does not authorise infringement if it does not "sanction, approve or countenance" the infringement of copyright and the technology can be used for legitimate purposes. This relatively narrow definition of authorising offers user generated content providers in the UK some comfort against being found to have authorised infringement.
User generated content providers are likely to argue that they should be protected from all the forms of liability as providers of hosting services under the hosting defence in the E-Commerce Directive. However to benefit from this provision they must have an effective "notice and take-down" policy in place to take action when they are informed by IPR holders of infringing content posted to their sites. For example, the concerning clips from football matches that have been uploaded to YouTube's servers.
Any changes made to the E-Commerce Directive may have a significant impact on the responsibility user generated content providers and IPR owners will argue that they should be required to put in place automated processes to remove infringing conduct. Until these issues are resolved, many broadcasters are entering into commercial agreements with user generated content providers (for example, the BBC has an agreement with YouTube to provide official material on their site and Bebo has also signed a deal with the BBC and Channel 4, among others, to provide some of their broadcast content to Bebo users).
In the US user generated content providers are also at risk of being held directly liable for the breach of the copyright owners' exclusive rights. However, under the Digital Millenium Copyright Act there is an exemption for website owners who remove infringing material within a safe harbour period after the copyright owner notifies them of the alleged infringement . To come within this safe harbour period, the website owner need only establish that it did not know about the infringing material being posted on its website at the time. YouTube, for example, would argue that it cannot monitor every video clip that individual users upload to its website.
A user generated content provider may also be indirectly liable in contributory infringement for its users' infringement under the negligence or reckless disregard standard if it has a consistent flow of infringing clips. Media companies may argue that, as there is so much infringing material on the website, the owner has had more than sufficient notice, and there is a history, of individual users' continued infringing behaviour. Therefore, its failure to address this issue constitutes contributory infringement.
There has been the rapid rise of virtual worlds in the last couple of years. These are online communities where users assume new personalities ("avatars") and inhabit the particular world. Many started as online games in which a limitless number of users can take part known as "massive multiplayer online games". The best-known of these environments is Second Life, developed by Linden Labs. Residents can explore, meet other Residents, socialise, participate in individual and group activities, and create and trade items (virtual property) and services from one another. Second Life's virtual currency is the Linden Dollar (Linden, or L$) and is exchangeable for real world currencies in a resident to resident marketplace facilitated by Linden Labs.
Many new copyright works are being created by inhabitants of these worlds and interesting issues are arising as to whether the inhabitant or the operator of the virtual world owns these works. There is also use of third party copyright works. Where content protected by copyright is used in a virtual world without the consent of the copyright owner, it is difficult to determine where the infringement has taken place and which system of law applies.
In Second Life, there are terms of service, the legal agreement by which every Second Life user agrees to abide in using the site. The terms of service provide that use of Second Life is governed by California law and that disputes between Linden Lab and its users must be settled by arbitration in California. Linden Lab's terms of service include provisions that grant Second Life users the IP rights to the works they create in-world. With individual ownership of users' works comes the right to exploit them, resulting in Second Life's US$35 million (about EUR24.5 million) per month economy. There have been disputes over unauthorised copying of in-world assets and Linden Lab modified the software code that runs Second Life to give users a full suite of digital rights management options including the ability to prevent their assets from being copied by others for any reason.
Online Auction Sites
The online auction business model is one in which participants bid for products and services over the Internet. eBay, the world's largest online auction site, acts as a marketplace and merely facilitates the process of listing and displaying goods, bidding on items, and paying for them.
Cases have been brought in the US and the EU alleging that online auction sites have facilitated the infringement of companies' trade marks. No UK case has been brought on this issue. However, it is possible to argue that a site should be liable for trade mark infringement if it can be shown that auction sites are using registered trade marks in the course of trade and this use is not in accordance with honest practices in industrial or commercial matters.
An auction site operator could also be liable as a joint tortfeasor with the user selling infringing products. This requires proof that the operator induced or shared a common design with the user In the proceedings which Rolex brought against eBay, the German Federal Supreme Court held that eBay could be liable as an accessory and, when informed of specific infringements, must take all technically feasible steps as are reasonable to ensure that in the future such counterfeits are not offered for sale on its online auction site. It is possible to argue that as auction sites actively promote and make a profit from each sale of infringing products on their sites they share a common design with those sellers.
Online auction sites may in certain circumstances be able to rely on the "hosting defence" under the E-Commerce Directive against these claims, subject to being put on notice of specific infringements by brand owners.
In the US rights owners have brought claims for contributory trade mark infringement against auction sites. Tiffany has brought legal proceedings against eBay claiming that eBay is responsible for contributory infringement as it facilitated and participated in the counterfeiting, infringement and false advertising of Tiffany's trade marks. Under US law a landlord is responsible for any harm that comes to a party on the landlord's premises if the harm was a result of the landlord's wilful or gross negligence. The important issue in the Tiffany case is whether this landlord liability can be pursued in the virtual world. eBay argues that auction sites should not be held liable. They are merely intermediaries in online transactions and it is not practical for them to validate every item sold. It claims that it already goes beyond what is legally required.
Internet Service Providers
At present there is no obligation on ISPs actively to monitor content posted by their users and the E-Commerce Directive specifically states that they have no obligation to do so.
However, as a result of provision introduced into the CDPA (section 97A) by the Copyright Directive the High Court can grant an injunction against a service provider that has "actual knowledge" of somebody using their service to infringe copyright. The British Phonographic Association has relied on this provision in requesting that ISPs cancel a user's subscription when they have operated file sharing networks and so infringed BPA members' rights.
A decision last year in the Belgium Courts provided the first ruling in an EU state that an ISP must block the traffic of material infringing copyright when the technical facilities to do so are available. This is the first time that a Court has viewed ISPs as having responsibility for the content of the information their customers are transmitting. The Belgium Court did not say that an ISP had to monitor its service for illegal activity. The decision was made on the basis that there was a technical measure available to the ISP that could be introduced to stop the use of file sharing software and so prevent the copying.
There have been very few decisions on ISP liability in the English Courts. In about the only case there has been, John Bunt v (1) David Tilley (2) Paul Hancox (3) Christopher Stevens (4) AOL UK Limited (5) Tiscali UK Limited (6) British Telecommunications Plc , the ISP defendants successfully applied to have the claims against them struck out as having no realistic prospect of success and dismissed on a summary basis on the grounds that they disclosed no cause of action.
Later this year France is introducing the trial of a system that will force ISPs to block infringing material.
The UK Government has said that it will introduce legislation forcing ISPs to cooperate in disconnecting illegal file-sharers in 2009 if ISPs cannot come to an agreement with the music and film industries before then. The Government would prefer a voluntary solution to be found between content owners and ISPs. The British Phonographic Industry are trying to negotiate a procedure with ISPs where ISPs would be required to warn their customers that their account is being used for illegal file sharing and, if the warning is ignored, the ISP would disable the account under its terms and conditions.
The European Commission is currently undertaking its second review of the E-Commerce Directive and its conclusions are expected to be published in mid-2008. This is likely to have a substantial effect on the liability of intermediaries and the responsibility to monitor infringing content and prevent it being loaded onto their sites. Rights holders would like a requirement for providers to put in place automated processes designed to detect and remove infringing content automatically and requirements that they contact the relevant IPR holder to decide whether the content will be allowed to remain on the site as it is or under licensed terms.
ISPs and user generated content providers can be expected to object to any change to their legal obligations on the basis that such technical solutions have so far proven to be largely ineffective and that, in implementing such solutions, they may lose the "hosting defence".
If you would like further advice about any of the issues considered above please contact Paul Northwood on 01869 331753, or email him at email@example.com .
This article is not intended to be, and should not be taken as being, legal advice. The law often changes and it varies from jurisdiction to jurisdiction; the information in this article is generic in nature and specific legal advice should be taken before acting on any of it.