Digital Economy Act under challenge

02 November 2010

Graham Smith

Two internet service providers have launched a court challenge to the copyright enforcement provisions of the Digital Economy Act 2010, while OFCOM has now closed its consultation on the Initial Obligations Code.

In the May edition of our IT and E-commerce Bulletin we reported on the UK Digital Economy Act, which introduces a regime under which internet service providers are initially required to assist copyright owners in taking steps to deter online copyright infringement, including peer to peer file-sharing, by notifying subscribers whose connections are alleged to have been used for copyright infringement.  Subsequently a regime may be introduced under which ISPs are required to take technical measures, such as throttling, filtering or suspension, against some subscribers’ internet connections.

OFCOM has been consulting on its draft Initial Obligations Code, which would set out which ISPs are to be included in the notification regime, the steps that the ISPs are required to take, and other aspects such as subscriber appeals.  The consultation is now complete and 179 responses have been published.  The Department of Business Innovation and Skills has also published the Government’s response to the consultation on sharing of notification costs.  It intends that the costs of ISPs and the regulator will be split 75:25 between copyright owners and ISPs.

Simultaneously two ISPs, BT and TalkTalk, have started judicial review proceedings in the High Court for an order that the provisions of the Act governing online infringement of copyright be quashed, alternatively for declaratory relief.  The ISPs contend that the contested provisions are incompatible with EU law on four separate grounds:

1. They should have been notified in draft to the European Commission under the EU Technical Standards Directive (98/34/EC, as amended by 98/48 EC), but were not.  The provisions are accordingly unenforceable.  The Government has asserted that the contested provisions are mere enabling provisions, which do not need to be notified.  The ISPs argue that the provisions lay down substantive requirements.

2. They are incompatible with the EU Electronic Commerce Directive (2000/31/EC), in that they impose on mere conduits (a) liability for transmitted information, (b) general monitoring obligations and (c) obligations regarding the removal or disabling of access to information.

3. They require the processing by ISPs of traffic data for purposes that are not specifically permitted by Article 6(1) of the EU Privacy and Electronic Communications Directive, and are not necessary, appropriate and proportionate or otherwise saved by a derogation under Article 15.

4. They are disproportionate in their impact on ISPs, business and consumers and thus infringe:

  • the free movement of services provisions of the Treaty of the Functioning of the European Union;

  • Article 3(4) of the E-Commerce Directive;

  • Article 15(1) of the Privacy and Electronic Communications Directive; and

  • the UK Human Rights Act 1998 and various instruments of EU law, giving effect to Articles 8 and/or 10 of the European Convention of Human Rights relating to privacy and freedom of expression respectively.

The proportionality arguments in particular raise wide-ranging issues such as:

  • the risk that the contested provisions will catch and harm innocent internet users whose internet service has been used for illicit purposes by third parties;

  • chilling effects on internet use, resulting from the obligation placed on subscribers to take reasonable steps to ensure that their networks are not misused, and from technical measures if imposed.  The ISPs argue that this goes well beyond the objective of penalising unlawful file-sharers and point to the negative effect on organisations that use open wi-fi such as coffee shops, libraries and universities; and

  • the way in which the proportionality assessment was conducted by the Government.  The ISPs point to failure to take into account the strong likelihood of circumvention by unlawful file-sharers and its impact on the Government’s revenue estimates.  They also make numerous criticisms of the legislative impact assessment and of the Government’s analysis of the benefits of the contested provisions and the balance between costs and benefits of the measures in question.  The ISPs contend that the Government failed properly to take into account a number of material considerations and took into account irrelevant considerations.   

 Since the ISPs’ Statement of Facts and Grounds runs to 79 pages this summary can only give a flavour of the arguments.  The Government is understood to contest all the ISPs’ claims.

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