Balancing The Scales — The Emerging European Approach To Tackling IP Issues In The Online World

Due to the influence of the internet, the last two decades have dramatically reshaped how business is conducted and how content is produced, distributed, and consumed. This has led to some unique challenges for Intellectual Property ("IP") rights holders in their efforts to enforce their rights online. Consumer demand for instant, and often free, accessibility to digital content has never been greater, and there are increasing calls in the EU for all barriers to online content to be broken down.

The stakeholders in this rapidly evolving environment—from content generators and distributors to internet intermediaries and retail businesses—are varied, in terms of size as well as interests. Understanding the way European courts and institutions have been trying to balance these competing interests, and how the UK's decision to leave the EU will impact upon that, is therefore essential to all such stakeholders.

This Jones Day White Paper reviews a number of important ways in which intellectual property law and policy in Europe is being reshaped by the rapidly evolving online environment. It also considers the extent to which these developments manage to strike a fair balance between the rights of rights holders, internet users and intermediaries.

The Rise of Online Media and Commerce

It is estimated that there are now 3.5 billion people using the internet worldwide, and this number continues to rise rapidly. In the EU, the internet is now the most important channel for content distribution and consumption and the dominant platform for purchasing goods and services. Social media has also transformed traditional distribution portals and in many cases is now the primary means through which digital content is accessed and disseminated.

These developments have had a profound impact on intellectual property law and policy. In particular, three key trends stand out:

The rise of social media and peer-to-peer ("P2P") sharing means that rights holders have far less control over the dissemination of digital content. This can become problematic where content is made available to others without the appropriate consent of rights holders. The limitless nature of the internet makes it difficult to maintain traditional content distribution models along geographical boundaries, which rely on the territorial nature of existing copyright laws. This difficulty is particularly acute in Europe where EU institutions and policy makers are trying to create a "digital single market". The internet relies on a vast number of intermediaries that facilitate online commerce and the distribution of digital content. Although these intermediaries are often in a unique position to curb infringing conduct (for instance, by shutting off access), the extent to which it is fair, practical and, indeed, legal to require them to monitor generally and police the conduct of their users is debatable. Each of these three trends highlights the delicate balancing act of protecting the interests of rights holders without unduly compromising the freedom of the internet or stifling new and emerging business models.

Figure 1. Share of internet users who bought or ordered goods or services over the internet for private use by age groups in EU-28.

Linking, Framing and Rights Holder Consent

Traditionally, copyright owners have been able to control access to their works by actively managing the distribution channels for their content. Online distribution, however, is more difficult to control, as users are able to share content by readily hyperlinking and framing content from a multitude of sources. Such practices are particularly widespread on social media where users regularly post links to creative content from their social media profiles. Content is also shared through various P2P networks such as file-sharing websites and BitTorrent.

The ability to link and frame content online has raised a number of questions over its lawfulness, and has led to key reevaluation of some fundamental concepts of copyright law in an online context. The issue centres on the interpretation of article 3(1) of the Information Society Directive 2001/29/EC ("InfoSoc Directive"), which stipulates that:

"Member States shall provide authors with the exclusive right to authorise or prohibit any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access them from a place and at a time individually chosen by them."

Over the last few years, the Court of Justice of the European Union ("CJEU") has grappled with this issue in a number of judgments. The case law has distinguished between three scenarios: (i) where content is freely available and is published with the copyright owner's consent, (ii) where content is freely available but is published without the copyright owner's consent, and (iii) where content is made available by the rights holder only to a restricted audience.

Freely available material published with the copyright owner's consent. The leading case in which the CJEU considered whether links to freely available material published with the copyright owner's consent constitute communications to the public—and therefore can amount to copyright infringement under article 3(1) of the InfoSoc Directive—is Svensson, C-466/12. The case was brought by Swedish newspaper journalists against a media monitoring organisation whose website posted unauthorised links to the journalists' articles. Those articles were already freely available to internet users on the newspapers' own websites. The journalists argued that the unauthorised provision of links to their articles by the media monitoring organisation constituted a communication to the public.

The CJEU held in that case that the concept of "communication to the public" includes two cumulative criteria, namely an "act of communication" of a work, and the communication of that work to a "public". The court held that the hyperlinks in question were "acts of communication", but did not constitute communication of the work to a "public". The court reached the latter view based on the principle, first formulated in the earlier case of SGAE, C-306/05, that links could only fall within the scope of article 3(1) of the InfoSoc Directive to the extent that they constituted acts of communication to a "new public" i.e., "a public not taken into account by the copyright holders when they authorised the initial communication to the public". As a result, the CJEU held that a link to freely available material published with the copyright owner's consent did not constitute copyright infringement because the initial communication targeted all potential internet users.

In the case of BestWater, C-348/13, the CJEU confirmed that this approach applied equally to framing or embedding of content published with the copyright owner's consent that is freely available online (for instance, framing or embedding of a YouTube video on a website). In such a situation, the insertion of the...