The Pirate Bay as a Service Provider: Initial Interpretation of the E-Commerce Directive

In response to the proliferation of numerous types of internet related fraud and copyright infringement, the European Union (EU) passed the Directive on Electronic Commerce (ECD) in 2000. Meant to help combat the increasing accessibility and movement of copyrighted files, the ECD defined the types of files protected, provided liability expectations for service providers, and delineated certain safe harbors for providers not directly contributing to illegal copyright infringement. The interpretation of the ECD has brought to light potential issues concerning the liability of third party providers of websites which may be used for copyright infringement.

The Pirate Bay.org (TPB), an internet file sharing site based in Sweden, has become a poster child for the free-copyright movement and is currently challenging the breadth and coverage of the ECD. On April 17 2009, a Swedish District Court held the four masterminds behind the .torrent site ThePirateBay.org liable for damages in the amount of $1 million apiece and gave them each one year in prison for their complicity in copyright infringement on the site. The court made the threshold determination that TPB was a service provider, which put the site within the ECD. According to the court: “(a) service provider, under the terms of the Electronic Commerce Act, is a physical or legal entity which provides any of the services found in an information society.” These services must be provided (1) for remuneration, (2) supplied at a distance, (3) electronically, and (4) at the request of the end user.

TPB may be able to challenge the court’s holding on the remuneration, or payment, prong of the directive. The court concluded that TPB profited from the advertising revenue generated through the popularity of the site. However, a strong argument could be made that the directive was meant to cover only those providers that are paid directly by the end user for the transmission of information.

Potential confusion exists regarding the safe harbor provisions and under what circumstances they apply to these file sharing and search related sites. There are three safe harbor provisions for service providers within the ECD: (1) mere conduit, (2) caching, and (3) hosting. The mere conduit and caching exceptions are the most likely avenues for challenge by TPB on appeal. The mere conduit exception precludes liability when the provider: (a) does not initiate the transfer, (b) does not select the receiver of the transmission, and (c) does not select or modify the information contained in the transmission. In addition, transmission must be (i) automatic, (ii) intermediate, and (iii) transient, with storage taking no longer than is required to facilitate transmission.

The court held that this exception did not apply to TPB, concluding the site violated the storage provision. The court found that TPB was not moving information immediately and automatically, but was storing information longer than was needed to facilitate transmission. However, in reaching this conclusion, the court disregarded the fact that TPB does not store copyrighted files on its website. It indexes user created .torrent files which do nothing more than direct traffic. It is possible that a reviewing court could find this distinction to be valid, in which case the mere conduit provision would preclude liability.

The court also held that the caching exception did not to apply to TPB. The caching provision is meant to apply to those sites that operate for the sole purpose of making the transmission of a file more efficient. Like the mere conduit exception, the caching exception also requires non-modification, automatic movement of information, and temporary storage. However, the caching exception requires that upon gaining knowledge of illegal activity, the site must expeditiously take down the information. Like the mere conduit provision, if a court could distinguish the type of storage accomplished by TPB, it could be shielded from liability under the exception. Additionally, the extent take down provision’s reach is not entirely clear. Currently, the provision leaves open the critical questions: Must notification by a record company require take down? Within what time period should the take down occur? Should TPB wait for a court order?

With these types of questions lingering as to the interpretation of the ECD’s definitions and application, another substantial argument for TPB is that the case should be referred to the European Court of Justice (ECJ) for an advisory opinion on the wording of the directive. The ECJ has the right to hear any interpretation of European Community law which may interfere with domestic national law or that might be ambiguous. The Swedish court claimed that since “there is no ambiguity regarding how the text of the [Swedish copyright] law or the ECD itself should be interpreted, the District Court does not find it necessary to obtain a preliminary ruling from the European Court of Justice.”

In European Union Law, this is known as the “Acte Clair” doctrine: the court feels that even though there is no ECJ decision on point, the interpretation of the legislation is so patently clear that no referral is needed. The ECJ stated in CILFIT v. Ministry of Health that in order for the national court to reject referral, it must feel that the application of the directive is so obvious as to leave no room for any reasonable doubt. This is a very large burden for the court to bear, especially when there has been no ECJ interpretation of the ECD. This is not an issue of analogy, but one of first impression. The ECJ further stated in CILFIT that the national court must believe the matter equally obvious to other national courts. However, as shown above, the language of the ECD may not be as clear and unambiguous as the Swedish court declared. Additionally, TPB could argue that the gravity of this ruling, compounded by the multiple interpretations possible, should urge the referral of this case to the ECJ.

If the Swedish decision stands, the implications could potentially move beyond the immediate realm of .torrent sites. There is a potential for sites like Google, YouTube, and Yahoo to have liability under this directive. These sites all store links which can connect end users to copyrighted material. In fact, Google is currently defending itself in the German courts over this very issue in Peterson v. Google. One major question that remains to be determined is what level of oversight a website must maintain over the material that is posted on its site.

Article 15 of the ECD is a no obligation to monitor provision. Service providers within the ECD are not required to manage and monitor the files stored, shared, or transmitted through their website. The logic behind this requirement is apparent: TPB and Google have millions of files on their sites, and monitoring each and every one of them would be impossible. Therefore the line between the take-down provisions upon notification and the no duty to monitor provisions pose a potential conflict. This was not addressed during TPB case, and poses a possible avenue for challenge as well. How long after notification is the take-down required? If suit is filed before the take-down occurs, does taking down the .torrent file, which leads to the copyrighted file, at the initiation of litigation cure the infringement, or has the damage been done?

In cases of this magnitude a uniform standard is needed; the potential for multiple interpretations would leave any information provider uneasy about entering the European market, and the potential for inconsistency undermines the common market goals of the EU. Ideally, the Swedish Supreme Court will refer the case on appeal, and the ECJ will render a uniform interpretation of the ECD and determine the scope of its practical application.