With the commercial internet now in its early twenties, stakeholders are finding themselves at a crossroads, unsure whether to allow business as usual or embrace a more regulated regime. Intellectual property, with its penchant for protection, is one of those areas where the tug-of-war is most evident, and seemingly caught in the middle are internet intermediaries. [updated]

“I believe the role of internet intermediaries is the main challenge for copyright in the digital environment,” Victor Vazquez Lopez of the World Intellectual Property Organization (WIPO) told Intellectual Property Watch recently. Vazquez Lopez is a senior legal counsellor at the UN agency’s Digital Future Project which tackles issues related to copyright in the digital environment.

In a move that reflects the recent changes on the internet, WIPO is now defining internet intermediaries as the ones that host, locate and search for content and facilitate the distribution of that content on the internet.

To cover social media, user-generated content websites, free hosting services and online streaming websites, the definition for an online third-party provider has come a long way – in both number and variety of services offered – from what was commonly referred to as an internet service provider (ISP). ISP is a term used mainly to describe a provider of internet access.

WIPO has begun to look into internet intermediary issues with greater focus.

“Their increasing influence in recent years, as well as their evolving role, has led to a debate regarding their liability in relation to online copyright infringement. This controversy is a direct result of the Internet’s phenomenal development,” the UN agency said on its web page on internet intermediaries and creative content.

“I believe there is an increasing need for balanced and rigorous research on the issue and for balanced and comprehensive discussions involving stakeholders and governments from all regions and viewpoints,” Vazquez Lopez said.

He added that there is an increasing demand from WIPO stakeholders to know the various developments taking place in different countries concerning the issue.

“WIPO as a multilateral, neutral body can facilitate research and discussions in an objective and neutral manner,” Vazquez Lopez said.

This year saw what is said to be the biggest criminal case brought by the United States involving an intermediary, Megaupload.com. The individuals behind the website have been charged with engaging in a racketeering conspiracy, conspiring to commit copyright infringement, conspiring to commit money laundering, and two substantive counts of criminal copyright infringement.

The link to the press release from the US Federal Bureau of Investigation is here.

The Megaupload case is the latest in which courts have found that an intermediary was doing more than it was supposed to and made substantial money as a result of offering a service that was mostly geared to facilitate the distribution of infringing materials online.

Other notable cases against intermediaries in the US before Megaupload involved the peer-to-peer sharing service Napster and music file-sharing platforms Aimster and Grokster.

For intermediaries whose businesses do not depend mostly on the distribution of infringing materials online, providers are strong on their position that they should not be held liable for acts of abuse that are made by their users.

At the first United Nations panel meeting on freedom of expression on the internet on 29 February (IPW, United Nations, 29 February 2012), William Echikson, Google head of free expression policy for Europe, Middle East and Africa, likened the role of the search giant to a postman, who is never held responsible for the content of a letter.

Describing the internet as not a “Wild West,” he said that intermediaries have responsibility, but this should be limited to the “minimum necessary” which refers to the notice-and-take-down rule. The rule limits the liability of intermediaries provided they take down the materials that are reported to be violating intellectual property laws.

[corrected] To date, only a few countries such as the United States and the European Union (EU) member states have set in place safeguards [which the US calls a safe harbor] for online third-party providers. The US Digital Millennium Copyright Act of 1998 (Section 512) protects providers from liability if they quickly remove or disable access to the material of a user that is allegedly infringing, commonly referred to as the notice-and-take down rule. The 2000 Electronic Commerce Directive of the EU also sets exemptions of the liability of intermediaries and gives member states an option to adopt similar safeguards such as the notice-and-takedown.

Section 512 of DMCA reads:

(c) Information Residing on Systems or Networks At Direction of Users. -
(1) In general. – A service provider shall not be liable for monetary relief, or, except as provided in subsection
(j), for injunctive or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider, if the service provider -
(A)
(i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing;
(ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or
(iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material;
(B) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and
(C) upon notification of claimed infringement as described in paragraph (3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.

Section 12 (e) of the E-Commerce Directive reads:

(e) the provider acts expeditiously to remove or to disable access to the information it has stored upon obtaining actual knowledge of the fact that the information at the initial source of the transmission has been removed from the network, or access to it has been disabled, or that a court or an administrative authority has ordered such removal or disablement.

Art. 14.3 of the E-Commerce Directive provides:

This Article shall not affect the possibility for a court or administrative authority, in accordance with Member States’ legal systems, of requiring the service provider to terminate or prevent an infringement, nor does it affect the possibility for Member States of establishing procedures governing the removal or disabling of access to information.

Recent developments in intellectual property laws point to a likelihood that the status quo where intermediaries are not generally held liable for claims and acts of abuse, including the deployment of new measures such as filtering, will not change any time soon.

In a decision dated 16 February, the European Court of Justice ruled that an online social network platform cannot be obliged to install a filter on its network to prevent users from committing acts of copyright infringement. Filtering that is seen as a way of monitoring online activities of users is prohibited by the EU E-Commerce Directive.

This case, which was forwarded to the EU High Court for preliminary ruling, involved the Belgian collecting society SABAM and the online social networking platform Netlog.

The link to the SABAM decision is here.

The EU High Court said that allowing the installation of a filtering system is a “disrespect” to the “requirement that a fair balance be struck between the right to intellectual property, the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information.”

For Markus Kummer, vice-president for public policy at the Internet Society (ISOC), internet intermediaries should not be turned into “de facto law enforcement agents.” ISOC is an international organisation that promotes internet open access.

“They should not be made responsible for content and should not be required to determine when conduct is illegal,” he said. “Law enforcement is the prerogative of governments and the rule of law and due process are important principles that should be adhered to.”

In the US, rights holders such as the music and film industries signed an agreement last summer with ISPs and cable companies for closer cooperation in monitoring BitTorrent and other peer-to-peer networks for copyright infringement. Under the agreement, ISPs will send copyright alerts if potentially infringing content is detected. The agreement is available here [pdf].

And the controversial Anti-Counterfeiting Trade Agreement (ACTA), the multinational treaty that seeks to establish international standards for IP rights enforcement, also has touched on internet intermediary liability. [corrected]

Signatories to the treaty are Australia, Canada, the EU and 22 of its 27 member states, Japan, Morocco, New Zealand, Singapore, South Korea and the US. No signatory, however, has yet ratified the treaty.

Maricel Estavillo, an intern at Intellectual Property Watch, is an LL.M. in Intellectual Property and Competition Law Candidate at the Munich Intellectual Property Law Center (MIPLC). A former business journalist in Manila, Philippines, she is currently working on research on copyright in digital media for her Master’s thesis.