Memorandum submitted by International
Federation of the Phonographic Industry
INTRODUCTION
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.
AUTHORISATION LIABILITY
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.
ISP RESPONSIBILITY
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.
CONCLUSION
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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