Provider liability: First YouTube, now “uploaded” – next case before the CJEU

[Len]

Only two weeks ago, the Federal Court of Justice (BGH) referred various questions to the Court of Justice of the European Union (CJEU) concerning the liability of the video platform YouTube. There, the court’s queries focused on who is actually responsible for unlawfully uploaded content – just the uploader himself or the service provider as well? Last week, the German judges yet again sat over a case dealing with this issue. Once again they decided to initiate preliminary proceedings before the CJEU in Luxembourg (see the decision of 20 September 2018, file no.: I ZR 53/17 – uploaded).

One might ask why the second case also had to be referred to the CJEU with fairly similar questions being asked. The answer is quite simple: one platform is not the same as another and one service does not necessarily reflect the features of the next. Since case law builds on and develops on the basis of judges handing down more than one judgment on a certain subject, it is crucial that the CJEU examines the matter and explains its views on such an important issue (the liability of service providers) on the basis of differing factual situations. In this respect, it is fair to say that these two German cases differ widely.

It’s important to keep in mind that provider liability is currently also a major concern for the European legislator. In the course of the copyright reform pending in the legislative process, the Commission, Parliament and the Council are endeavoring to find a compromise as to the conditions under which providers could be held liable for uploaded content. Unsurprisingly, Article 13 of the current draft is one of the most controversial standards in the draft law.

Background

Instead of storing favorite holiday pictures, music or other files on their own private server, an increasing number of people use the services of host providers in order to store content in the cloud, i.e. on third-party servers. The advantages are obvious: no need for local space, online accessibility and easy sharing of content.

The defendant in the current proceedings before the BGH offers such type of cloud service. The service is called “uploaded“. It offers storage space for the uploading of all sorts of files. For each uploaded file, a download link is automatically created and made available to the person uploading. The service does not include the compilation of a table of contents in which the links or uploaded files could be looked up, nor does uploaded offer a search function. However, users may place their own links in so-called “link collections” on pages outside uploaded. So, in the end there is a frequently used option to navigate through uploaded links on this kind of database enabling users to choose from the stored content.

In general, the up- as well as the download of content is free. However, the free version of the service is limited in terms of storage volume and download speed. Users aiming for a higher download ratio and/or higher speed may register for a paid-for version. In addition, every user who uploads content receives a “download fee” from the service provider. For example 1,000 downloads are rewarded with € 40.00.

Although, the general terms and conditions of the service prohibit users from uploading unlawful content, we see a large number of copyrighted works having been uploaded without adequate authorisation by the rights holders. This content has been illegally shared with countless other users. To give you a better impression, the parties to the main proceedings disagree as to whether more than 90% (!) of all available content was uploaded illegally onto the uploaded platform. This figure alone shows how substantial the potential for abuse is in the specific case at issue.

Various publishers as well as film and music companies plus the German collecting society GEMA have taken legal action against the operator of uploaded. There are in total five court proceedings pending. The claims put forward relate to the unlawful act of making available to the public copyright-protected content within the meaning of Sec. 19a of the German Copyright Act [Urheberrechtsgesetz – UrhG]. The provision is based on Article 3(1) of the InfoSoc Directive 2001/29. uploaded is accused of being the perpetrator of a copyright infringement. The lawsuits are aimed at injunctive relief, disclosure of information and payment of damages.

In the appeal instances, uploaded was in all cases charged with indirect liability (under the concept of the so-called “Störerhaftung” which has been developed by German courts). Accordingly, uploaded was not seen as perpetrator or participant of copyright infringement. In consequence, the judges “only” granted injunctive relief (cf. Higher Regional Court of Munich, judgment of 2 March 2017, Case Ref.: 29 U 3735/16). The claims for disclosure of information and damages were denied

The Questions submitted

In the oral hearing, in which all five proceedings were handled jointly, the judges already made it clear that yet again a case would be referred up to the CJEU. In the end, the BGH submitted one of the five proceedings and suspended the remaining proceedings for the time being.

Contrary to the previous referral, when the BGH expressed its opinion that YouTube was not liable for an act of communicating to the public, the judges this time are actually considering a declaration of liability for such act in respect to uploaded’s service. The reason for this is the fact that there are indeed recognizable differences when comparing both services. Uploaded is based on a concept of hyperlinking, there is also a greater degree of structural anonymity of the user and uploaded’s remuneration scheme is a clear differentiator. Accordingly, the German court posed a number of questions pointing to those differences( see particular the bold print below).

1- First, the question
arises “whether the operator of a share hosting service, on which users communicate copyright-protected content to the public without the consent of the right holders, performs an act of communication to the public within the meaning of Article 3(1) of Directive 2001/29/EC if
 

the upload process takes place automatically and without prior viewing or control by the operator,

the operator points out in the terms of use that copyright infringing content may not be posted,

he earns revenue by operating the service,

the service is used for legal purposes, but the operator is aware that a considerable number of copyright infringing content (more than 9,500 works) are also available,

the operator does not offer a table of contents or a search function, but the unlimited download links provided by the operator are placed by third parties in link collections on the Internet, which contain information on the content of the files and make it possible to search for specific content,

he creates an incentive to upload copyrighted content that is otherwise only available to users for a fee by structuring the remuneration for downloads paid by him according to demand, and

the possibility of anonymously uploading files increases the likelihood that users will be held accountable for copyright infringements?”

2- In addition, the Federal Court of Justice wants to know “whether the assessment of the above question changes if copyright infringing offers are made available via the share hosting service in an amount of 90 to 96% of the total use.”

3- In essentially the same wording as the reference questions on YouTube, the BGH further asks whether – and if so, under what conditions – the liability privilege pursuant to Art. 14(1) of the E-Commerce Directive 2000/31 applies in favor of the share hosting service and what possibilities of liability exist pursuant to Art. 8 (3) of the InfoSoc Directive and Art. 11(1) and Art. 13 of the Enforcement Directive 2004/48.

Comment and Outlook

The BGH’s latest referral does not come as a complete surprise. The judges’ decision to address a further set of questions to the CJEU resonates. When it comes to the discussion whether or not certain hosting providers shall be held liable for illegal content being uploaded to their platforms, one has to look closely at the specifics. There is no “one fits all” approach as the individual services are simply too diverse.

For instance, service providers can make it harder or easier for users who primarily want to place unauthorized content on the Internet. The effort made by the provider is crucial in our view and only a completely “clean” service is utopian. Therefore, the legal assessment of responsibility must be linked to the structure chosen by the service provider and his measures taken to ensure an adequate level of legal conformity as regards the uploaded content.

What all stakeholders need most is guidance as to what is required in this context. Thus, we need clear court rulings dealing with different platform settings. We therefore welcome that the CJEU now has the opportunity to clarify its position. Against this background, combining the two cases referred up to the CJEU by the BGH would be beneficial. Thereby, a stringent continuation of The Pirate Bay case law could be ensured.