Can ISPs be held liable if their subscribers are pirates?

In a recent finding in the United States, a federal jury in the matter of BMG Rights Management (US) LLC v. Cox Communications, Inc., held Internet service provider (“ISP”), Cox Communications, liable for willful contributory copyright infringement resulting from the illegal downloading and sharing of music files by its subscribers.

The plaintiffs, BMG Rights Management (US), LLC (BMG) and Round Hill Music LP own and/or are responsible for the copyright in various musical works, and instituted proceedings against Cox for, inter alia, contributory copyright infringement, on the basis that it had not taken any active steps in preventing the illegal downloading and sharing of these musical works by its subscribers.

In short, the plaintiffs argued that Cox had taken a soft hand in dealing with copyright infringers and had, in fact, “turned a blind eye” to their conduct.

Cox argued that it should not be held liable for copyright infringement by its subscribers given that it was a mere conduit, or intermediary, and had not infringed the relevant copyright itself.

Cox had an “Acceptable Use Policy” in place, which prohibited copyright infringement, and which, had it implemented the policy against its subscribers, might have negated any liability on its part.

However, evidence was placed before the court to show that it had delayed the termination of infringers’ accounts, or terminated and then reinstated them, apparently to retain revenue for subscriptions.

It eventually also started blocking infringement notices sent to the infringers on behalf of the plaintiffs because it had reservations about the contents of those notices.

Cox was therefore found to have implemented its Acceptable Use Policy in an unreasonable manner and not only knew of its subscribers’ infringement but, though its conduct, contributed to it.

Cox was therefore found liable for contributory copyright infringement and ordered to pay damages of US$25 million. Cox has filed a notice of intention to appeal this decision.

How might South African courts have approached this issue?

The Legislature has, fortunately, provided some clarity by way of chapter XI of the Electronic Communications and Transactions Act (“ECTA”), which aims to exempt ISPs from liability for unlawful conduct in certain circumstances.

Cox, of course, tried to rely on similar legislative provisions but the court in the United States was not prepared to find that these provided it with a defence.

Section 73 of ECTA specifically recognises an ISP functioning as a “mere conduit” (one of the defences also claimed by Cox), which is an ISP “providing access to or for operating facilities for information systems or transmitting, routing or storage of data messages via an information system under its control”.

ECTA provides that such a service provider will not be liable where it did not initiate the transmission in question, did not select the addressee, performed its functions in an automatic and technical manner and did not modify the data contained in the transmission.

It is, however, specifically provided that a court may order the ISP “to terminate or prevent unlawful activity in terms of any other law”.

In terms of South African common law, in order to be found liable for “aiding and abetting” copyright infringement by a third party, or contributory infringement, it is necessary to satisfy the court that the alleged contributory infringer had knowledge, or reason to believe, that the act it was aiding and abetting was unlawful.

It is arguable that ISPs would be well-aware that the illegal downloading and sharing of musical works by their users amounts to copyright infringement, or should, at least, have reason to believe this is the case.

If copyright owners were to send a notice to an ISP, informing it of their rights and asking it to cease allowing its subscribers to perform certain downloads, this would likely be found to impart guilty knowledge, and would do away with any uncertainty in this regard.

Section 23(1) of the Copyright Act provides that any person who does “or causes” any other person to do a restricted act without the copyright owner’s authority directly infringes the relevant copyright.

In certain circumstances, and depending on the particular facts of a case, an ISP could arguably be said to be “causing” an infringer’s conduct by facilitating it.

In addition, the copying of the works in question, on and via the ISP’s systems, might constitute unauthorised reproductions of the works and therefore copyright infringement.

Of course, whether the ISP is directly liable, will depend greatly on the facts of each particular case, the technical role played and conduct of the ISP, and the conduct of the infringing user, but it is not inconceivable that the reproduction of works via an ISP’s systems may, in fact, amount to direct copyright infringement.

As the world is moving increasingly into the virtual realm, it seems it is only a matter of time before this issue will land up before our courts.

Until then, whether or not a copyright owner might hold an ISP directly liable for copyright infringement, and ensuing damages, in South Africa is not entirely clear.

ISPs would therefore be well-advised to have “Acceptable Use” policies in place, and to implement those policies effectively to avoid facilitating copyright infringement online and potentially attracting any liability.

Takedown and infringement notices should also be acted upon expeditiously. As we have seen in the matter of Cox Communications in the United States, failing to do so may result in a very costly rebuke by the courts.

Nicole Smalberger is a Senior Associate at Adams & Adams.

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Can ISPs be held liable if their subscribers are pirates?