UK: Digital Economy Act Subjected To Judicial Review As Government Consults Again

Last Updated: 22 November 2010
Article by Chris Watson, Susan Barty and Scott Fairbairn

The High Court has recently confirmed that BT and TalkTalk's application for a judicial review of the Digital Economy Act will proceed to a full hearing early next year. BT and TalkTalk are seeking a judicial review of the parts of the Act relating to obligations on Internet Service Providers to require them to take steps to reduce copyright infringement online, on the grounds that aspects of the Act are illegal. A further ground of challenge based on proportionality was admitted this week by the High Court.

Meanwhile the new Coalition Government has launched a new inquiry into the "Protection of Intellectual Property Rights Online", which will consider the implementation, practicality and likely effectiveness of the applicable measures contained in the Digital Economy Act.

The latest inquiry, which solicits submissions and so is akin to a consultation, may provide further justification for modifying the law next year should BT and TalkTalk's application for judicial review be successful in whole or in part.

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Background - The Digital Economy Act

The DEA was passed into law in April 2010 and includes controversial provisions to prevent and penalise various electronic means of copyright infringement, notably peer-to-peer (P2P) file-sharing.

The DEA sets out a number of measures to prevent online copyright infringement. The first of these are:

  • an obligation on Internet Service Providers (ISPs) to notify subscribers that their accounts have been associated with copyright infringement; and
  • an obligation on ISPs to compile and keep anonymised lists of those subscribers associated with copyright infringement; these may be provided to rights holders on request. Personal details will only be handed over on receipt of a court order.

Together these are known as the 'Initial Obligations'.

On 28 May 2010, Ofcom launched a public consultation including a draft code of practice (called "the Online Copyright Infringement Initial Obligations Code", or the "Code") governing how these Initial Obligations are intended to work in practice.

In Ofcom's consultation document, it proposed that the Initial Obligations Code should only apply to fixed (as opposed to mobile) ISPs, who provide an internet service to more than 400,000 subscribers. Currently there are seven fixed ISPs that meet this criterion: BT, O2, Orange, Post Office, Sky, TalkTalk Group and Virgin Media.

Following its consultation, Ofcom is due to publish its Initial Obligations Code, but as yet, no final form of that code has been forthcoming.

In addition to the Initial Obligations, the DEA also includes controversial further powers allowing the Secretary of State to require ISPs to impose 'technical measures' against subscribers identified as repeat infringers, which may include disconnection, and to enable the Secretary of State to draft new regulations to govern the Court's powers to grant injunctions against websites associated with copyright infringement.

Judicial Review

BT and TalkTalk's application for a judicial review of the Digital Economy Act ("DEA") cleared the first obstacle in its path last week when Mr Justice Wyn Williams decided to grant the request for the application to be heard in the High Court. The Government is reported to have argued, unsuccessfully, that the application was groundless. The application is expected to be heard early in 2011.

The review is expected to subject the DEA to considerable scrutiny on the basis that it is inconsistent with European law. In a recent twist, it has been reported that BT has successfully included an objection on the grounds that the obligations contained in the Act are disproportionate in any event.

The press have reported (for example see ISP Review) that the four grounds on which the DEA is being challenged are that:

  • The Government should have notified the European Commission under the Technical Standards Directive which they failed to do.
  • Provisions of the DEA are not compatible with the E-Commerce Directive which provides that ISPs cannot be held liable for data going though their networks.
  • The DEA requires ISPs to deal with data that is not specifically permitted under the Privacy and Electronic Communications Directive.
  • Measures contained in the DEA are disproportionate

While the approval of the application does not provide insight into whether BT and TalkTalk will ultimately be successful, it does signal that they will have their day in Court and that the Court will have to consider fully the arguments put before it.

The case should evaluate the force of such arguments (which are increasingly developing UK constitutional law) and the judiciary's willingness to challenge the legality of legislation passed by both Houses of Parliament. It is well established that proportionality is a fundamental tenet of European Law; nevertheless the extent to which the Courts are prepared to fetter the legislature's discretion deploying this principle, which necessarily involves an element of subjectivity, remains to be seen.

Not Another Consultation

In recent years the previous Government and its associated organisations have embarked upon a great number of consultations into the effectiveness of the current IP framework, its ability to enable rights holders to enforce their intellectual property rights in the digital world and proposals for reform. These include the Gowers Review, the Digital Britain market reviews, and consultations on legislative options to address Peer-to-Peer File-sharing. The culmination of all of this consultation was the Digital Economy Bill. It was criticised by many as being a strange hybrid of proposals cherry-picked from the final Digital Britain Report, and seen as having been rushed through Parliament prior to the last general election. Once passed, The Digital Economy Act was seen as worryingly lacking in detail, requiring the Government to consult on who should foot the bill and Ofcom to consult further on how its Initial Obligations should be implemented in practice.

On 10 November, The Culture, Media and Sport Parliamentary Committee issued a call for evidence on the Protection of Intellectual Property Rights Online

The Committee will consider the new framework for the protection of intellectual property rights online that is being established under the Digital Economy Act, and the extent to which it is a reasonable and sufficient response to the challenges facing creative industries and individuals in digital markets.

Issues the Committee will be considering include the implementation, practicality and likely effectiveness of the relevant measures contained in the DEA. In particular:

  • Whether the new framework has captured the right balance between supporting creative work online and the rights of subscribers and ISPs.
  • Whether the notification process is fair and proportionate.
  • The extent to which the associated costs might hinder the operation of the DEA.
  • At what point, if at all, consideration should be given to introducing the additional technical measures allowed for under the DEA.

More broadly, the Committee will be reviewing the scope for additional activity and new approaches to ensure that original work is appropriately rewarded in the online environment, including the issues raised by the Government's review of the intellectual property framework. In particular:

  • Intellectual Property and barriers to new internet-based business models, including information access, the costs of obtaining permissions from existing rights-holders, and "fair use."

The Committee is inviting written submission on the above to be received by Wednesday 5 January 2011.

Not Worth the Paper it's Written On?

After years of consultations in the run up to the DEA, to launch another consultation so soon after the DEA has been enacted and prior to its implementation suggests that the Government has serious concerns about the new legislative framework and may be planning a change in direction. The latest consultation may provide further justification for modifying the law next year should BT and TalkTalk's application for judicial review be successful in whole or in part.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 18/11/2010.

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