In what is seen by many as a landmark decision, the European Court of Justice (ECJ) in Luxembourg on Thursday ruled that an injunction obliging an internet service provider to install a filtering system to prevent peer-to-peer copyright violations on its network would violate European law.

The ruling resulted from the referral of a case from Belgium in which Belgian ISP Scarlet had been ordered to block all exchanges of files including repertoire of the collecting society SABAM. The Brussels Court of Appeals had sought a ruling from the Court of Justice before deciding on Scarlet’s appeal.

The ECJ ruling said the general monitoring necessary to prevent any future infringement of IP rights was explicitly prohibited in the EU E-Commerce Directive (Article 15.1). While IP protection was enshrined in the Charter on Fundamental Rights, it is not an absolute right. Instead, national authorities must “strike a fair balance between the protection of the intellectual property right enjoyed by copyright holders and that of the freedom to conduct a business enjoyed by operators such as ISP (…).”

Because of the limitless and costly nature of the filtering obligation, the injunction sought by SABAM was found by the ECJ to be violating provisions of the IP enforcement directive and also the fundamental right of Scarlet. Moreover, the contested filtering system, according to the court, also infringed fundamental rights of the ISP’s customers, “namely their right to protection of their personal data and their freedom to receive or impart information, which are rights safeguarded by Articles 8 and 11 of the Charter respectively.”

Christophe Depreter, CEO of SABAM, in a comment on the judgement said: “SABAM regrets the European Court of Justice’s decision on the fair balance of different fundamental rights. As was decided in the Promusicae judgment from the ECJ, we believe it is the national judge, who disposes of all the elements of the case – factual, technical as well as legal – that is best placed to decide on the fair balance of different fundamental rights. Furthermore, we regret the Court did not take into account the massive nature of the infringements on copyright works that are taking place over the Internet.“ SABAM had intended to initiate legal proceedings also against other ISPs unwilling to cooperate with the collecting society on preventing infringement, Depreter said.

“In SABAM’s point of view, due to the technical knowledge of the architecture of their network, it is the ISP that is best placed to determine how the illegal sharing of copyright works via P2P applications over their network can be stopped and to evaluate the different technologies that are on the market,” Depreter said. SABAM viewed it “that a legal obligation for the access providers to filter and block all works that are exchanged without authorization by way of P2P systems is the best measure to put an end to the massive counterfeiting that is taking place over the internet.“ The organisation will now analyse “whether alternative measure might be feasible,” he said.

A spokesperson of the European Commission said the ruling provided a clarification about “how to implement rules in cross border situations, particularly the ban which exists in the E-Commerce Directive on imposing a general obligation on filtering.”

The ruling was welcomed by the European Internet Service Providers Association, EuroISPA. “The ruling from the Court of Justice of the EU will have serious implications for content blocking systems imposed on ISPs in other Member States, especially where these are also maintained at the ISP’s expense,” EuroISPA wrote in a statement. Malcolm Hutty, president of EuroISPA told Intellectual Property Watch that the ECJ decision might put a question mark on the British Digital Economy Act’s provision that ISP would be forced to pay 25 percent of the cost of implementing any measures for filtering or blocking introduced.

“On the fundamental rights issue, Scarlet clearly places a limit of how far the State can go to co-opt ISPs to monitor traffic,” said Hutty. “The Scarlet case would have had the ISP examining the content of every communication, and any such system has been clearly ruled out.”

With regard to the many blocking schemes in place all over the EU that were based on the ISP examining the destination of every communication, Hutty said: “the court’s clear and sweeping ruling in Scarlet raises questions as to whether examining the destination is acceptable either. It doesn’t definitively rule it out yet, but it certainly raises that possibility for the future.”

The decision is here.