Select Committee on Culture, Media and Sport Written Evidence

Memorandum submitted by International Federation of the Phonographic Industry


  IFPI represents the recording industry worldwide. We have more than 1,400 members, including major recording companies and all sizes of independents. We submit this paper to the Culture, Media and Sport Select Committee to bring to the Committee's attention two legal issues that are currently standing in the way of the industry's ability to address online piracy in the UK.

  If the record industry is to realise the goal of developing a legitimate market that can capture more of the value currently lost to unauthorised uses on the Internet, the existing legal framework needs adjustment in two respects: (1) clarification of authorisation liability to ensure appropriate coverage of unauthorised P2P services and others who induce and facilitate mass infringement; and (2) ensuring better cooperation from ISPs in controlling the online infringement that they enable and from which they profit. We discuss both below.


  Over the past 15 months, a positive trend has emerged around the world: a growing number of courts in various countries have held that it is not acceptable to deliberately build a business model on the uncompensated use of others' intellectual property. Applying differing legal theories, these courts have all ruled that unauthorised P2P services can be held liable for the mass infringement taking place through their networks, despite their efforts to disclaim responsibility and turn a blind eye. Relevant factors have included the failure of the provider of the service to make any effort to prevent infringement (eg, through the use of available filtering technology), statements made or steps taken to encourage or promote infringement; and revenue to the provider, whether direct or indirect, as a result of the infringement.

  Since these court decisions, parallel legislative solutions have also begun to emerge. France has adopted legislation making it illegal to knowingly disseminate software manifestly intended to enable infringement, Taiwan is considering a similar approach, and discussions along these lines have been held in various other countries.

  The practical results of this greater legal clarity have been encouraging. P2P services (both those that were defendants in the lawsuits and those that wish to avoid suit) have demonstrated a marked new willingness to "go legit." They have entered into licensing negotiations with right holders, including not only payment of royalties, but also terms and conditions that require them to utilize reasonable filtering technology. We are now beginning to see the first steps of a legal market for P2P technology.

  We need to ensure the same clarity in the UK. If it is not possible to hold unscrupulous service providers responsible for their role as the deliberate enablers of mass infringement, the only option is to continue to rely only on lawsuits against individual users of the services. This is considerably less effective, and does not lead to the level playing field that enables the development of legitimate P2P services.

  Unfortunately, at this time, the effectiveness of the existing legal tools in the UK is unclear. While we believe that unauthorised P2P services, and others who induce the users of the services they provide to engage in mass infringement, should be considered liable for authorising infringement under current law, the outcome of a case remains uncertain. It is difficult to predict what would be a court's interpretation of authorisation liability under the precedent set by the House of Lords in CBS Songs v Amstrad (1988).

  In our view, what is needed is a prompt legislative solution. The legitimate market can only move forward if there is clarity in the law, and waiting for conclusive judicial interpretation could take many years. The key elements of any such legislation should be to make it illegal to supply a service that enables infringement with the intent that it be used for that purpose. The specific factors of failure to make reasonable efforts to prevent infringement, affirmative statements or steps to encourage infringement, and the making of a profit from the infringement, could all be relevant to show the requisite intent.


  ISPs play a very significant role in the chain of content distribution from creators through to consumers—and they need to take appropriate responsibility in protecting that content.

  ISPs are the internet's "gatekeepers"—they are uniquely placed to control the availability of infringing content online, and they have a direct relationship with the consumers gaining access to it. Moreover, they have a financial stake in the volume of music that passes through their systems.

  Today, however, most ISPs are standing back and washing their hands of any role in seeking to control P2P infringement. In various jurisdictions and contexts, they have refused to cooperate actively with right holders in dealing with unauthorised distribution of content over P2P networks.

  Why do they take this position? The bottom line is that ISPs have little incentive to assist right holders due to existing "safe harbours" under national laws implementing the E-Commerce Directive. When they are transmitting content between users' computers—as opposed to hosting it or caching it—they are not subject to any legal obligation in the EU as a condition of their immunity from damages. Nor, to date, have they felt significant pressure from public authorities to do more than what is legally required. The one exception to this has been where they have been offered a quid pro quo in a business deal providing access to specific content (eg, the recent Disney/Verizon deal).

  But the circumstances have changed in significant respects since the E-Commerce Directive was adopted, distorting the policy balance struck at that time. P2P technology, which was not part of the landscape in 2000, has become the predominant source of online infringement. ISPs are now reaping profits specifically from broadband traffic driven largely by illegal music swapping. Furthermore, advances in technology mean that it is now viable for ISPs to utilize automated tools to assist in preventing infringement without undue burden or the need to monitor the content of messages.

  As a result, the current situation is anomalous and unfair. ISPs are part of the distribution chain for online music; they are profiting from it; they are capable of taking steps to assist in controlling infringement; and yet they disclaim responsibility.

  The requests of right holders are simple: We want cooperation from ISPs in the P2P space, in the form of effective steps that they and only they can take. In particular, we ask that they terminate the accounts of subscribers who abuse the network to engage in serious copyright infringement—as they reserve the right to do in their standard terms of service. Second, we ask that they provide us with the information necessary to identify their subscribers who are infringing, so that we can enforce our rights, for example through civil actions against major uploaders of copyrighted music. And third, we ask that they come to the table as willing participants in the value chain, ready to work with us on creative solutions to the existing P2P problem.

  All of these things could be done voluntarily, but so far we have not had positive responses. The various Codes of Conduct and Charters that have been discussed in different Member States and at EU level have not had meaningful results. The ISPs have consistently refused to agree to take effective action, with little explanation. When right holders have sought subscriber information, ISPs have often resisted, requiring lengthy litigation. And requests for termination of infringers' accounts have led to court battles seeking to vindicate our rights to injunctions under Article 8(3) of the Copyright Directive.

  Something must change. We are looking for pressure from governments in order to achieve greater cooperation from the ISP community. If voluntary steps are not forthcoming, however, it will be necessary to look for legislative solutions. Ultimately the vehicle would need to take into account the European-level legal framework, and may involve a reconsideration of the scope and definition of the ISP safe harbours in light of today's realities.


  IFPI seeks assistance from the UK government in the fight against online piracy in two respects:

    (i)  legislative clarification of the liability of unauthorised P2P services and others who encourage or induce mass infringement, and

    (ii)  obtaining better cooperation from ISPs in controlling infringement and achieving a thriving legitimate online marketplace.

30 October 2006

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