After the encouraging opinion of Advocate General Cruz Villalón in the Scarlet vs SABAM case delivered in April 2011, the Court of Justice of the European Union (CJEU) gave its final judgment on 24 November. One can say that the judgment is crucial for the Internet economy in general and for Internet Service Providers (ISPs) in particular, in two important ways. First, it clarifies and strengthens the ‘no general obligation to monitor’ provision enshrined in the e-Commerce Directive and, second, it makes clear that filtering measures raise concerns under a couple of fundamental rights, which have to be reconciled as much as possible. But let’s first turn to the facts of the case.

The judgment is the outcome of a reference for a preliminary ruling in a long lasting legal dispute between SABAM, a Belgian artists and authors’ rights group, and Scarlet, a Belgian ISP. In essence, SABAM sought a declaration that the copyright in musical works belonging to its repertoire was violated because of unauthorized online sharing enabled by Scarlet’s services. In a second step, SABAM sought an order requiring Scarlet to bring the alleged infringement to an end through filtering and blocking techniques. By a first judgment in 2004, the national court established that copyright infringements took place. In a second judgment in 2007, Scarlet was ordered to install a system that blocks users from sending or receiving copyrighted music. Scarlet appealed this ruling to the Court of Appeal in Brussels which referred the case to the CJEU.

In a first step the CJEU made clear that the Belgian court’s injunction de facto requires Scarlet to actively monitor its customers’ data for the purpose of preventing IPR infringements. Filtering mechanisms can only be effective if data is monitored in advance on a broad scale. It is precisely this fact that the Court considers to contradict the e-Commerce Directive since Article 15 clearly exempts ISPs from a general obligation to monitor the information that runs through their systems.

In a second step the CJEU laid down how a general filtering system as envisaged by SABAM would violate the ISP’s as well as its customers’ fundamental rights. Even though it is true that the protection of the right to intellectual property is also stipulated in the Charter of Fundamental Rights, it cannot be regarded as an absolute right that is inviolable. Given that the Belgian court’s injunction would require Scarlet to install a costly, unlimited, and permanent filtering system at its own expense, it results in the infringement of the ISP’s freedom to conducts its business.

From the perspective of the ISP’s customers, the CJEU had no difficulty in highlighting a couple of violations of fundamental rights. First, the filtering system is liable to infringe customers’ personal data because it would involve a systematic analysis of all content and the collection of users’ IP addresses. The collection of these IP addresses, which constitute personal data, would be used to identify those involved in sending unlawful content on the network. Second, the Court stressed potential violations of the freedom of information since the filtering system carries the risk of not being able to properly distinguish between unlawful and lawful content. This could block totally lawful communications.

These considerations brought the Court to the conclusion that the filtering system is far from striking a right balance between the various fundamental rights at stake. It is simply inadequate and disproportionate for the purpose envisaged. In addition, it violates a key provision of the e-Commerce Directive that seeks to bring more legal clarity to ISPs. The Court rightly showed overly broad filtering mechanisms the red card. IPR protection online is a worthwhile goal, but the means to achieve it cannot limit the ability to do legitimate business and give blind preference to one fundamental right while severely encroaching upon others. The Commission is set to evaluate the application of the e-Commerce Directive in December. No matter what it will propose, the CJEU’s judgment should be an important point of reference.

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