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The Cookie Jar

Stuck in the middle: Liability in the TMT sector for online IP infringements

Since the dawn of the internet age, holders of IP rights have battled with unscrupulous third parties wishing to use the opportunities afforded by the internet to infringe those rights. There are now countless websites dedicated to the provision of pirate music and films, and many more which specialise in the supply of counterfeit goods. 

Online infringement of IP rights is now an industry worth billions of Euros across the E.U.

The main problem which rights holders face when confronting online infringement is: who to pursue? The websites which supply counterfeit goods and pirate films and music tend to be located outside the jurisdiction, even if they can be validly identified, and going after end users tends to be inefficient (and not particularly good for public relations). Therefore, rights holders are left with one key target, the intermediaries who are part of the process that allows infringing acts to take place. The rationale is that you cannot stop infringing websites from popping up again, so instead you block the public’s access to them.

The intermediaries are predominantly in the TMT sector: predominantly ISPs providing broadband internet but also other internet players such as search engines, payment providers and advertising service providers.

Stakeholders on all sides of the debate tend to agree that IP rights holders, ISPs and other intermediaries will need to find a way to work together, with the legal system, to balance the rights of themselves and internet users. What shape that co-operation might take is still unclear.

One suggested approach which has gained some traction recently is to ‘follow the money’. This approach suggests that the best way to stop online infringement is to prevent it from being profitable. This requires the participation of payment and advertising service providers, because it is these two sources of revenue which tend to make pirate material and counterfeit goods profitable for infringers.

Another idea is imposing Know Your Customer (“KYC”) obligations on intermediaries. However it is not entirely clear who these obligations would bite on, nor what exactly the intermediaries would need to know about whom. If KYC were to require, for example, a payment provider to know exactly which film its customers were purchasing on any given occasion, then this is likely to be impossible to implement and to represent a significant restriction on intermediaries to conduct their business. In a counterfeiting context, would advertisers be expected to confirm the authenticity of every good sold on the websites where their adverts appear?

There are already moves within the industry to take pre-emptive steps to assist rights holders, although these still do not tend to go far enough for bodies representing rights holders. For example, Google announced in October 2014 that it would take further steps to alter its search results to downgrade the prominence of websites which are known to host pirate films and music.

The battle ground, as always, is who will bear the economic burden of this fight. The status quo remains that ISPs are not required to pre-emptively filter or monitor content. Instead, rights holders are required to identify infringing activity and inform the ISPs, who are then required to carry out the blocking measures. This will inevitably become more costly as the number of blocking requests multiplies. It might be that it would be cheaper for ISPs to pre-emptively monitor and/or filter, but this comes with its own risks, and goes against the foundations of the EU’s approach to intermediary liability.  

A further economic burden for the TMT sector may be on the horizon in the form of KYC. The extent of that burden will, of course, depend on the exact nature of the KYC obligations introduced, and who falls within the definition of a customer.

The growth of relationships between rights holders and online intermediaries can only assist in the fight against online infringement, and steps to form long-term collaborative partnerships between the two industries should be encouraged. 

Whatever the future holds, it is clear that intermediaries (the definition of which is likely to broaden) will play an incredibly significant role in the continuing fight against online infringement.

This article first appeared in the November 2014 issue of E-Commerce Law & Policy.