Germany: Time To Hit Pause: Copyright Infringement On User Generated Platforms – When Is The Platform Provider Liable For Damages?

Last Updated: 28 January 2019
Article by Kristina Ehle and Stephan Kress

Content uploaded on to the Internet by users (e.g., music, videos, literature, photos, streaming of live events such as gaming and concerts – so-called "user-generated content") has spawned a series of legal cases in Europe. In 2019, decisions of the European Court of Justice (CJEU) are expected to clarify one of the key open issues in EU copyright law: the extent to which online platforms such as YouTube can be liable for copyright infringement caused by user-generated content. The CJEU decisions are eagerly awaited by both media and copyright owners and by online platform operators – and will mark yet another stage in the on-going battle of the creative industries against copyright infringements in the online world.

SUMMARY

In September 2018, the German Federal Court of Justice (Bundesgerichtshof, BGH) suspended proceedings in a widely-publicized case concerning YouTube's liability for copyright infringing user-uploaded content and referred a series of questions regarding the interpretation of several EU copyright provisions to the CJEU for a preliminary ruling. A few days later, the BGH also suspended proceedings in five other high-profile cases concerning the liability of the file hosting service uploaded.net for user files containing copyright infringing content and submitted the same questions again to the CJEU.

Previous rulings by the CJEU have addressed both the application of the safe harbor principle set out in the EU E-Commerce Directive1 that shields hosting providers from liability for hosted unlawful third-party content2 of which they have no actual knowledge and, separately, the extent of infringement of copyright by hosting of, or linking to, copyright infringing third-party content under the EU Copyright Directive3,4. But it is still unclear under which conditions the providers of the various online platforms that store and make available user-generated content, can rely on the safe harbor privilege applying to hosting providers to avoid liability, or whether they must not only take down the infringing content when they obtain knowledge of such content but also compensate the rightsholders of such content for damages for copyright infringement.

The questions that the BGH submitted to the CJEU aim to clarify these uncertainties by bringing together the different requirements established by the previous CJEU rulings for (i) affirming a direct copyright infringement by the online platform providers under the EU Copyright Directive and (ii) denying the application of the safe harbor privilege as well as the legal consequences of such a denial (such as the extent of liability for damages). The CJEU will have to consider the differences between the YouTube and uploaded.net business models. The CJEU will hopefully provide much clearer guidelines on key issues such as:

  • to what extent can providers of online services engage with the user content hosted by them;
  • which activities will trigger a liability for copyright infringement irrespective of actual knowledge of a specific infringement;
  • whether they must actively monitor the content uploaded by users for copyright infringements (e.g., by using state-of-the-art efficient filter technologies) to avoid damage claims by rightsholders.

In addition, we expect these cases to have an effect on the interpretation of the new Art. 13 of the revision of the EU Copyright Directive that will likely be adopted by the EU legislative institutions in the second quarter of 2019. The current trilogue negotiations among the EU institutions indicate that, under such new Art.13, providers of online content sharing services will be directly liable for copyright infringements by content uploaded to the platform by their users and will not be granted safe harbor under the EU E-Commerce Directive.5 The providers would then have to ensure that content for which the providers have not obtained a license from the respective rightsholders for use on their platforms cannot be displayed on their platform. This means that the providers would have to monitor all content files when uploaded to their platform, making filter technology mandatory for the majority of the platforms (see our previous MoFo Tech Blog on the draft amendment to the EU Copyright Directive).

BACKGROUND

YouTube: The plaintiff Frank Peterson, a German music producer, has an exclusive artist contract with the singer Sarah Brightman, under which he holds various exclusive rights under copyright to her recordings. Several videos were uploaded to YouTube by unknown users containing works of her newly released studio album "A Winter Symphony" as well as recordings of her concert tour "Symphony Tour". On Peterson's demand, YouTube blocked some of the videos which then were re-published on YouTube by users a few days later. As a result, Peterson sued YouTube seeking injunctive relief and claiming disclosure of user information as well as compensation of damages resulting from the copyright infringement. The Hanseatic Higher Regional Court (court of appeal) granted injunctive relief obliging YouTube to take down and to prevent the re-publication of the videos on its platform and requested YouTube to provide Peterson with information on the users who had uploaded the videos under pseudonyms. The damages claim, however, was dismissed. In line with previous decisions of this and other German courts of appeal on YouTube, the court decided that YouTube is not directly liable for copyright infringement because YouTube neither committed the copyright infringements by uploading or appropriating the videos nor was aware of any specific infringements that it had not blocked after the plaintiff notified YouTube of such infringements of his rights.

"uploaded": "uploaded" provides an online cloud service offering users free storage for all kind of files regardless of their content. Upon uploading, the user is supplied with a unique download link for each uploaded file. Different from the circumstances in the The Pirate Bay case, "uploaded" provides neither an index of, nor a search function for, the uploaded user files. However, it permits its users to share their download links for their files on third-party websites that offer categorized link collections including information about the content stored under these links so that other users can access the uploaded files on the "uploaded" system. The service is offered at no charge with a limited download capacity/speed and as a paid version for registered users without such limitations. In addition, "uploaded" incentivizes downloads of files by third-party users by paying the users who upload files a fee of up to €40 per 1,000 downloads. The majority of the files hosted on the defendant's system (up to 90%, the exact number is under dispute between the parties) are subject to third-party copyrights and were uploaded by users without the rightsholders' consent. Rightsholders notified "uploaded" many times of infringing files available on its systems (notices for more than 9,500 works subject to copyright infringement were submitted). The plaintiffs, several publishers, the German mechanical and performance rights organization GEMA, and a German film company argued that "uploaded" is responsible for the infringement of their copyrights in several content files uploaded by users. They seek injunctive relief and claim disclosure of user information as well as compensation of damages from "uploaded". The Higher Regional Court of Munich (court of appeal) granted injunctive relief obliging "uploaded" to take down and to prevent the re-publication of the files in question but dismissed all claims for damage compensation and disclosure of user information. The court argued that, pursuant to the applicable German liability principles, the defendant did not directly infringe the plaintiffs' copyrights and is only liable for secondary copyright infringement.

REQUESTS BY BGH FOR PRELIMINARY RULINGS

In both cases, the plaintiffs filed appeals against these judgments with the BGH. The BGH decided that these cases require guidance on the interpretation of EU law provisions by the CJEU, suspended the proceedings and referred the following questions to the CJEU:

1. Do the Providers commit an act of "communication to the public" under the Copyright Directive?

The BGH asks the CJEU whether the provider of an online video platform such as YouTube on the one hand and the provider of a file hosting service such as "uploaded" on the other hand (each of these two hereinafter referred as a "Provider" and jointly the "Providers"), commit an act of "communication to the public" under Art. 3(1) Copyright Directive.

Does the Provider play a "central role" in making the content available to the public?

Art. 3(1) provides that authors of a work shall be granted "the exclusive right to authorize or prohibit any communication to the public of their works, ... including the making available to the public of their works in such a way that members of the public may access them from a place and at a time individually chosen by them." Consequently, any "communication to the public" of a work without the rightsholder's consent constitutes a copyright infringement.

The Recent CJEU Rulings: In its recent rulings (see above), the CJEU emphasized that an individual assessment on a case-by-case basis is required taking into account several complementary criteria, which are interdependent, to determine whether the platform provider commits an "act of communication to the public". Firstly, the indispensable role of the user who uploaded and made available the infringing content, and thereby directly communicated the content to the public without the rightsholder's consent, must be taken into account. According to the CJEU, a provider's activities relating to third-party content are considered to constitute an "act of communication" when the provider acts in full knowledge of the consequences of its action to give its users access to the copyrighted work without the rightsholder's consent (the CJEU calls this the "deliberate nature of the intervention"). These criteria are met if the intervening provider plays a "central/essential role" in making the user content available to the public and acts deliberately. Important indications for such a central role and deliberate activity of a file sharing service are, inter alia, comprehensive classification, indexing and presentation of the hosted files, provision of a search function, deletion of obsolete or faulty files, the intention to generate profit with the user content and the awareness that the platform provides access to a very large number of files infringing third-party copyrights.

Key specifics of the two cases: It is worth looking at the specifics of the two cases that the BGH presented to the CJEU. The two cases have some similarities: The users of both services make copyright protected content available to the public without the respective rightsholders' consent; both YouTube and "uploaded" generate revenues with their platforms; the content upload process is fully automated without any involvement or control by the provider prior to publishing the user uploaded content on the platform; the terms of use for both services prohibit their users from uploading and using the service for content that would infringe third-party rights, including copyrights. However, the BGH also outlines some significant differences:

  • YouTube: The BGH expressly states that, in its opinion, YouTube does not play a "central role" as required by the CJEU in its recent rulings for an "act of communication to the public" provided that YouTube does not have actual knowledge of the specific infringing user content or, upon obtaining such knowledge, YouTube removes or blocks the infringing user content without undue delay. Though YouTube processes and presents search results in the form of rankings and contextual categories and recommends videos to its registered users derived from the videos they previously watched, such search and recommendation functions are completely automated as is the monetization of the videos by advertising. Moreover, YouTube has taken technical measures to prevent and cease the availability of infringing user content on its platform. It informs its users during the automated upload process that the upload of content infringing third-party rights is prohibited by the terms of use, has several options (including a notification button on the platform) for users to notify about unlawful videos and provides rightsholders with automated tools on the platform to identify, block, or claim user uploaded content infringing their rights (so-called content id system).
  • "uploaded": With regard to "uploaded", the BGH points out that the Provider is aware that a considerable number of copyright infringing files are available for download from its servers and that its remuneration model (based on popularity of the files) creates an incentive to upload copyright protected content. While "uploaded" neither provides an index of, nor a search function for, the uploaded user files, other users can access the files via the above-mentioned link collections hosted on third-party websites. The BGH also emphasizes that the option to upload files anonymously increases the likelihood that users upload content infringing third-party rights. In this context, the court also asked the CJEU whether the fact that content files infringing third-party copyrights account for 90 - 96% of the overall use of the service (i.e., irrespective of the total number of files stored) is relevant for the assessment of the first question. In our opinion, the previous rulings of the CJEU on The Pirate Bay and Filmspeler cases indicate that a provider may be assumed to act deliberately in full knowledge of the consequences of its action if its platform is primarily used for publishing infringing content and the provider was aware of this fact (e.g., from the large number of notices from affected rightsholders or user blogs and forums).

2. Are the Providers eligible for the safe harbor privilege under the E-Commerce Directive?

If the CJEU were to decide that the Providers did not commit an act of "communication to the public", the BGH asks whether these services are eligible for the safe harbor privilege under Art. 14 (1) E-Commerce Directive.

Does the Provider play an "active role" in processing the third-party content?

Art.14 (1) states that an online service that "consists of the storage of information provided by a recipient of the service" shall not be "liable for the information stored at the request of the recipient of the service, on condition that: (a) the provider does not have actual knowledge of illegal activity or information and, as regards claims for damages, is not aware of facts or circumstances from which the illegal activity or information is apparent; or (b) the provider, upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information."

According to rulings by the CJEU, this liability privilege is limited to host providers that play a neutral role by technically and automatically processing the user's content on their platforms. It does not privilege a provider that plays an "active role of such a kind as to give it knowledge of, or control over" the content or the data relating to the content, e.g. by providing assistance to the user's offers, such as optimizing or promoting the user's specific content (see eBay./.L'Oreal). The BGH does not indicate whether it believes that YouTube or "uploaded" play such an active role.

Is knowledge of the specific infringing user content required?

If the CJEU were to find that a platform provider plays a neutral role in processing the user content, the BGH asks whether the actual knowledge of the infringing user content and the awareness of the facts or circumstances from which the infringing user content becomes apparent must relate to the specific content/infringement in question (e.g., to specific music videos or specific files). In the opinion of the BGH, a mere general awareness of the provider that users published any unlawful content on its platform without knowledge of the specific unlawful item does not suffice for excluding the liability privilege. We also believe that previous rulings of the CJEU indicate that the CJEU takes the same position (see eBay./.L'Oreal, para. 120 -124, where the CJEU refers to "the offers for sale in question", for which the provider must have obtained information "on the basis of which a diligent economic operator should have realized that such offers were unlawful").

These questions are very important for clarifying the remaining substantial uncertainties as how the safe harbor privilege relates to Art. 3(1) Copyright Directive. Are the criteria for affirming a "central role" of the provider and "acting in full knowledge of the consequences of its action" under Art. 3(1) the same criteria as for affirming an "active role" and "actual knowledge of the illegal information" of a provider under Art. 14(1) E-Commerce Directive?

3. Must the rightsholder notify the Provider of the infringement of its copyright in its work(s) before it can obtain a cease and desist court order?

If the CJEU considers a platform provider to be a neutral host provider eligible for the safe harbor privilege, the BGH asks whether Art. 8(3) Copyright Directive requires a rightsholder to first notify the Provider of an infringement of the rightsholder's copyright by a specific user content before the rightsholder is entitled to obtain a court order against the Provider to take down such infringing user content.

Art. 8(3) The Copyright Directive sets forth that rightsholders shall be "in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right." While the provision does not expressly require the provider being notified of a specific infringement, the BGH states that, in its opinion, the national laws and courts of the EU Member States may provide for such a notification requirement (as it is the case under German law). In addition, the BGH deems such a notification requirement necessary to avoid a conflict with the Art. 15(1) E-Commerce Directive that prohibits the EU Member States from imposing a general obligation on host providers to monitor third-party content hosted on its platform.

4. Are the Providers liable for damages caused by the infringement when they did not commit an act of communication to the public without the rightsholder's consent but are not eligible for the safe harbor privilege?

If the CJEU considers a platform provider (i) to have not communicated the copyright protected work to the public without the rightsholder's consent under Art. 3(1) Copyright Directive but (ii) to be excluded from the safe harbor privilege under Art. 14(1) E-Commerce Directive because the Provider played an active role in processing the infringing user content, the BGH asks the CJEU whether

  • the Provider may be considered to be an "infringer" of intellectual property rights under Art. 11 and Art. 13 of the Enforcement Directive, and
  • if the Provider qualified as infringer under these provisions, are the requirements of Art. 13 met when, under German law, any such Provider is only obliged to compensate damages under the condition that the Provider acted with wilful intent (Vorsatz) with regard to both, (i) the act committed by the user who uploaded the infringing content on the Provider's platform and (ii) the Provider's act of supporting such infringing act by the user.

Rightsholders' claims against infringers and intermediaries: Art.11 requires the EU Member States to ensure that "the judicial authorities may issue against the infringer" of an intellectual property right "an injunction aimed at prohibiting the continuation of the infringement..." and "that rightsholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe an intellectual property right ...." Art.13 requires the EU Member States to "ensure that the competent judicial authorities... order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the right holder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement."

While a provider that commits an "act of communication to the public" without the rightsholder's consent under Art.3(1) Copyright Directive qualifies as infringer under these provisions and has to face not only cease and desist orders but also damages claims under national laws, a provider that is eligible for the safe harbor privilege under Art. 14(1) E-Commerce Directive is considered to be an intermediary that is not liable for damages provided that it does not have actual knowledge of the infringing user content and is not aware of facts from which the infringement is apparent. In the opinion of the BGH, if a provider does not commit an act of communication of a work to the public without the rightsholder's consent but supports such an act committed by the user by playing an active role in the processing of the user uploaded content on its platform, the provider should, in this role as supporter, be deemed an infringer under these provisions.

The second part of this question addresses a specific aspect of German liability law. Art. 13 Enforcement Directive sets forth that the infringer who acted knowingly, or with reasonable grounds to know that such act gives rise to the copyright infringement has to compensate the rightsholder for the damages resulting from such infringement. German liability law differentiates between the liability of (i) the perpetrator (Täter) or jointly acting perpetrators who commit the infringing act and (ii) participants (Teilnehmer) who incite or support the perpetrator in committing the infringing act; both, (i) and (ii), are directly liable for the infringement of the intellectual property right in question. Under German liability law, the user(s) who uploaded the infringing content would be directly liable for damages as perpetrator while a provider who is not considered to have committed an act of communication to the public could only be held directly liable for damages as a participant who supported or incited the user's unlawful act. As a participant the provider would only be liable for damages if it acted with willful intent (dolus eventualis suffices) with regard to both, (i) the specific infringing activity of the user and (ii) its own supporting activities. If the CJEU considered these German law rules compatible with Art. 13, platforms such as YouTube would likely not be considered by German courts to have acted with willful intent, provided that the platform is not aware of the specific infringing user content, and would not be liable for damages, even if they were considered to be excluded from the safe harbor privilege under Art.14(1) E-Commerce Directive.

POTENTIAL IMPACT OF THE CJEU RULINGS

The decisions by the CJEU will be eagerly awaited and may mark yet another cornerstone in the ongoing battle of the creative industry against copyright infringements in the online world. Last year, the Commercial Court of Vienna (Puls4/YouTube, HG Wien, June 4, 2018, 11 Cg 65/14t) ruled in a similar case that YouTube, as a participant that supported or incited the copyright infringing act of the user, is directly liable for such infringement (see our previous Client Alert). The Austrian court denied YouTube the safe harbor protection under Art. 14 (1) E-Commerce Directive, because it considered Youtube to play an active role in processing the videos on the platform. However, the plaintiff only pursued the take-down and stay-down of the infringing videos from the platform, and the court did not have to decide whether YouTube – as participant - is liable for damages resulting from the copyright infringement. All these court cases in various EU Member States show the necessity for additional guidance by the CJEU on the relationship of the relevant provisions of the Copyright Directive, the E-Commerce Directive and the Enforcement Directive as well as for an EU-wide uniform interpretation of these provisions so that all companies creating or using copyright protected works online have a reliable legal basis for their respective business models.

In addition, the rulings by the CJEU on these questions will be relevant in the context of the ongoing amendment of the current EU Copyright Directive. The highly controversial new Art. 13 of the draft proposal by the European Parliament, which is currently being negotiated in the trilogue meetings of the EU Parliament, the EU Council and the EU Commission, explicitly determines that processing and displaying of user uploaded content by online content sharing service providers such as YouTube are deemed to be a "direct act of communication/making available to the public" under Art.3(1) of the EU Copyright Directive (see our previous MoFo Tech Blog) to qualify these providers as copyright infringers if they do not have a license agreement with the rightsholders authorizing the use of their copyrighted works on the platform and denies them the safe harbor protection under the EU E-Commerce Directive. However, the final outcome of the legislative process is still uncertain (with massive lobbying from the entertainment and the digital industries taking place); we expect the three EU institutions will finally vote on the amendment to the EU Copyright Directive in the second quarter of this year. The CJEU's responses to the BGH's questions will have an effect on the interpretation of this new Art.13 of the amendment to the EU Copyright Directive and on the providers' liability for damages of the rightsholders resulting from copyright infringements.

Footnotes

[1] Directive 2000/31/EC

[2] See C-324/09 eBay/L'Oreal; C-360/10Netlog/SABAM; and C-70/10 Scarlet/SABAM.

[3] Directive 2001/29/EC

[4] See C-160/15GS Media/Sanoma; C-527/15Filmspeler; and C-610/15The Pirate Bay.

[5] See draft version dated December 14, 2018 available at here.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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