By Richard Taylor, DLA Piper, Yorkshire


Illegal file-sharing and internet service providers

Change is coming to the way that internet service providers (ISPs) deal with illegal file-sharing on their networks. The changes may at last curtail the illegal copying of music, films and software which is endemic to the internet.



Illegal file-sharing involves the copying of copyright content without the consent of the copyright owner: most commonly music, but films and software are popular subjects of illegal copying too. A raft of provisions makes the practice illegal. Section 16(1) of the Copyright, Designs and Patents Act 1988 (CDPA) gives copyright owners the exclusive right to copy or authorise the copying of a copyright work. Section 20 gives copyright holders the exclusive right to communicate the copyright work to the public. Under the Copyright, etc. and Trade Marks (Offences and Enforcement) Act 2002, making or dealing in infringing articles is punishable by unlimited fines and up to ten years' imprisonment.



ISPs are not themselves copying anything, of course, and so do not fall foul of these rules. Furthermore, ISPs have limited liability for the traffic which passes through their networks, by virtue of sections 17-19 of the Electronic Commerce (EC Directive) Regulations 2002.



Moreover, ISPs argue that they are merely conduits for the information that passes through their hands. The Internet Service Providers Association (ISPA) has said that ISPs are no more able to inspect and filter every packet of data passing across their network than the Post Office is able to open every envelope it carries. The ISPA has also defended ISPs by reference to data protection legislation, which it says prevents its members from reviewing the content of the data sent.



The furious response from the entertainment industry is typified by a recent speech by Paul McGuinness, manager of rock band U2. He claimed that governments have created a 'thieves charter' by allowing ISPs to disclaim responsibility for what passes along their networks: 'If you were a magazine advertising stolen cars, handling the money for stolen cars and seeing to the delivery of stolen cars, the police would soon be at your door. That's no different to an ISP.'



The 'mere conduit' argument from ISPs is more or less the argument that used to be deployed by websites that facilitated peer-to-peer file-sharing.



In most jurisdictions around the world, courts have held that the sale of tape-to-tape recording machines is not illegal, even though they can be used to infringe copyright. In 1984, Sony tried to prevent Betamax from selling home video recording equipment. The US Federal Circuit refused an injunction against Betamax on the grounds that the machines were capable of substantial use which was legal.



In the UK, music company CBS tried to stop Alan Sugar's Amstrad selling tape-to-tape recording equipment (CBS Songs Limited v Amstrad Consumer Electronics Plc [1988] WL 624207). The House of Lords came to a similar conclusion to the US Circuit. Since the machines were capable of being used lawfully or unlawfully, and there was no incitement by Amstrad to use the machines for illegal copying, it would not grant an injunction against them.



These judgments gave some hope to websites that facilitated file-sharing. After all, they were doing no more than providing a mechanism for copying, just like a tape-to-tape recorder. This mechanism could be used both illegally and legally.



In 2001, a consortium of record companies in the US tested this defence with an action against the music-swapping website Napster. The US Supreme Court distinguished Sony v Betamax on the grounds of Napster's actual, specific knowledge of infringement over its site, and shut Napster down (it was later reborn as a legitimate music download site).



File-sharing websites were not defeated yet. The Supreme Court decision was based in part on the central server that Napster used in its file-sharing system, which gave Napster some control over what its users were sharing. The next generation of file-sharing websites therefore did not use a central server and instead merely distributed software which would allow file-sharing to take place, thereby manoeuvring themselves ever closer to the favourable tape-to-tape decisions of the 1980s. Again, the courts would not wear it.



In MGM v Grokster (2005), the US Supreme Court distinguished Sony v Betamax for a second time. It held that in 1984 no evidence had been adduced against Betamax of stated or indicated intent to promote infringing copying, whereas Grokster had induced the infringements perpetrated by the users. Again, the site was shut down.



Despite these successes, the entertainment industry has looked like King Canute as it has tried to hold back the tide of illegal file-sharing. The International Federation of the Phonographic Industry estimates that 20 billion songs were illegally downloaded in 2005 alone. Up to 80% of music downloads are not paid for, while downloading music and films from the internet has become the most common offence among 10-25 year-olds in the UK.





Upsurge in digital music

The statistics also show the vast potential of legal digital music, which is increasing in popularity exponentially. In 2007, 77.6 million tracks were purchased online in the UK - a 47% increase on the figure for 2006. More than 90% of all UK single sales are now digital, and more than 200,000 different titles are sold each week.



So it is no wonder that the entertainment industry has turned its guns on ISPs. In 2006, the Gowers Review of Intellectual Property (see [2007] Gazette, 18 January, 27) recommended that ISPs and content owners should jointly develop a best common practice to control illegal file-sharing.



No agreement has been forthcoming. Last month, intellectual property minister Lord Triesman told ISPs that they were drinking in the last-chance saloon. He said ISPs had until the summer to come up with a voluntary scheme, or the government would legislate.



The temperature was raised further in February with a government Green Paper, The World's Creative Hub, which proposes a 'three-strikes rule', similar to that being implemented in the US and France. Internet users suspected of illegal file-sharing will receive a warning email for the first offence, a suspension for the second, and termination of their contract if caught a third time.



Against this government sabre-rattling, ISPs are desperately trying to head off statutory regulation by reaching agreement with the entertainment industry, which wants rather more than the government has proposed. It wants a register of customers who have been found engaged in illegal activity and to be provided with customer details. Sticking points in negotiations include the question of who would arbitrate disputed allegations and how many enforcements the ISPs would be expected to make.



But the government too must prefer self-regulation to legislation, with its inevitable accusations of censorship and interference with users' rights. The 'last-chance saloon' threat has of course been made before, in 1991, by the then National Heritage Secretary David Mellor, to curb excessive invasions of privacy by the press. The threat led to press self-regulation in the form of the Press Complaints Commission - and the government backed off.



The 'three-strikes' proposal can therefore be taken to be the minimum that the government expects.



In the six months that Lord Triesman has given ISPs and the entertainment industry to reach an agreement, the challenge for ISPs will be to tempt the entertainment industry into voluntary agreement by offering more than this - but not too much more.