For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.

Tuesday, 3 April 2012

£700 demand letters: no Golden Egg for Golden Eye

Golden Eye ointment: perfect
relief for those whose eyesight
is adversely affected by too
much porn?
It has been observed that Chancery mends no men's bargains and that it is not the duty of the court to rewrite documents -- but that's not to say that the courts won't give some assistance to claimants who are a little over-ambitious when it comes to writing letters to alleged copyright infringers.  This can be seen from last week's decision of Mr Justice Arnold (Chancery Division, England and Wales) in Golden Eye (International) Ltd and others v Telefonica UK Ltd, Consumer Focus intervening [2012] EWHC 723 (Ch), a decision that was written up so quickly by Eleonora Rosati for the 1709 Blog that the IPKat's good intentions to get down to writing about the same decision were temporarily swept away. But now, after some further thought, the Kat has, he hopes, finally got to grips with this lengthy and important decision.

Golden Eye and its fellow claimants were the owners of the copyright in a number of pornographic films which, they suspected, had been the subject of unauthorised peer-to-peer file-sharing by some 9,124 users of Telefonika's 02 internet services which infringed the copyright in those films.  In these proceedings Golden Eye and friends applied for an order that Telefonika -- which was not being sued for copyright infringement itself -- divulge information concerning the identity of the allegedly infringing users, so that proceedings might be brought against them [note for non-UK readers and first-timers on this weblog: this order is usually referred to as a Norwich Pharmacal order, named from the case in which this request was first granted.  Merpel wonder how many readers, without resorting to their favourite search engine, can recall its official legal name].
The other claimants were divided into two categories: Ben Dover Productions and the rest. Ben Dover had entered into a licensing agreement with Golden Eye under which that company had the exclusive right to exploit its copyright for a period of years; the other claimants empowered Golden Eye to act for them in relation to any alleged copyright infringement arising from peer-to-peer copying. To enforce its copyright and the rights of its licensors, Golden Eye planned to write to the customers -- once it knew who they were -- and to threaten to sue them if they didn't pay up the handsome sum of £700 by way of compensation. The letter spelled out that its recipients were responsible for any infringement that took place via their internet connection even if it was committed by someone else. Golden Eye must have seen this as a Golden Egg, since the company stood to collect between 25% and 37.5% of the money it collected for the other claimants. Telefonika was happy to consent to the making of a Norwich Pharmacal order, but the court was worried that internet users whose details would be released might not have a practical means of opposing the order.  Accordingly, Consumer Focus was appointed in order to represent their interests.

In the ensuing proceedings the court had to consider (i) the duty of disclosure in the Norwich Pharmacal regime; (ii) whether the agreements between Golden Eye and the other claimants were champertous [says Merpel, champerty occurs where a third party involves itself in litigation and gets a cut of the winnings -- an attractive business model?]; (iii) the legitimacy of the proposed "speculative invoicing" of internet users at £700 a time and (iv) how to balance the rights of copyright owners and consumers.

In another strong judgment that helpfully lays down basic principles for subsequent litigation on the same topic, Mr Justice Arnold granted the relief sought, subject to a number of reservations, and held as follows:
  • Anyone who applies for Norwich Pharmacal relief is assumed to have complied with a duty of frank disclosure. Whether this is actually the case is a matter that can be raised if an application is made to set the order aside.  Accordingly, if a revenue-sharing arrangement was planned in the wake of the order, the applicant would have to disclose it so that its reasonableness could be assessed. 
  • Failure to adduce evidence in response to questions posed by Consumer Focus was not of itself a ground for refusing to make the order sought, but it was a factor that had to be taken into account.
  • The deals struck betweeen Golden Eye and the other claimants were not technically champertous because they were not agreements to conduct litigation; they were commercial arrangements which did not imperil the ability of the court to control either the circumstances in which an order would be granted or the subsequent use of the information.
  • Since it was at least arguable that peer-to-peer file sharing had taken place and that the claimants' copyright had been infringed, did the Golden Eye £700 demand letter seek redress -- or was it designed to generate revenue away from judicial scrutiny?  On the evidence, Golden Eye and Ben Dover Productions had demonstrated a genuine commercial desire to obtain compensation for infringement of their copyrights; they were therefore entitled to the order sought.
  • Media CAT v Adams [2011] EWPCC 6 demonstrated that a court, when asked to grant Norwich Pharmacal relief, had carefully to consider the terms of the draft letter of claim and its impact upon ordinary consumers who may be innocent, who may not have access to specialised legal advice and who may be embarrassed or distressed at the allegations. The Golden Eye draft failed this test.  It made a reference to the code of practice for pre-action conduct in intellectual property disputes was which inappropriate for ordinary consumers; it failed to state clearly that the merits of the infringement allegations had not yet been considered by the court; it said the recipient was liable for the infringement without clearly stating that that person might not be responsible for the infringing acts (the infringement might have been perpetrated by a visitor or a hacker, or the internet subscriber might be a publicly accessible site); it listed the dire consequences if it sued for copyright infringement and won, but didn't mention the claimant's fate if it lost; it made the unsupported suggestion that there might be other intellectual property infringements; it required a response within 14 days, which was unreasonable; its threat to slow down or terminate the recipient's internet connection was unjustified.
  • Golden Eye proposed to give an undertaking not to disclose recipients' names to the public without their consent until they became defendants to proceedings. In theory this was intended to protect them, but it could cause unnecessary distress since it could be read as an implicit threat of publicity once proceedings were commenced.
  • The £700 demand was unsupportable for many reasons, including the facts that (i) an unknown percentage of its recipients would be non-infringers and (ii) the scale of any infringement was unknown. That sum was chosen to maximise the revenue obtained from the letters and was not a realistic estimate of recoverable damages. The proper course was to require internet users who admit infringing to disclose information about the extent to which they did so, then negotiate a settlement on a case-by-case basis.
The IPKat is mildly amused by the fact that, if you write an over-the-top letter to an alleged infringer of a patent, trade mark or design, you might find yourself facing an action for making groundless threats of litigation and being ordered to pay damages; in contrast, if you write an over-the-top letter to an alleged infringer of copyright, you might just find the court coming to your aid to make sure that the threats are better focused. He's also pleased to see a High Court judge who is prepared to cite the reasoning of an inferior court where it strengthens the content of his judgment to do so.

Merpel says, there's a fascinating coda at paragraphs 148 to 151 of the judgment, under the heading "An issue not raised". It goes like this:
"In Case C-461/10 Bonnier Audio AB v Perfect Communication Sweden AB the Högsta domstolen in Sweden referred the following questions to the CJEU for a preliminary ruling:
"1. Does Directive 2006/24 ... on the retention of data generated or processed in connection with the provision of publicly available electronic communications services or of public communications networks and amending Directive 2002/58/EC (the Data Storage Directive), and in particular Articles 3, 4, 5 and 11 thereof, preclude the application of a national provision which is based on Article 8 of Directive 2004/48 ... on the enforcement of intellectual property rights [the Enforcement Directive] and which permits an internet service provider in civil proceedings, in order to identify a particular subscriber, to be ordered to give a copyright holder or its representative information on the subscriber to whom the internet service provider provided a specific IP address, which address, it is claimed, was used in the infringement? The question is based on the assumption that the applicant has adduced evidence of the infringement of a particular copyright and that the measure is proportionate.
2. Is the answer to Question 1 affected by the fact that the Member State has not implemented the Data Storage Directive despite the fact that the period prescribed for implementation has expired?"
On 17 November 2011 the Opinion of Advocate General Jääskinen was published in eight languages, none of them English [though there's a good note on the Opinion by Richard Sciaudone, here]. The Advocate General advised the CJEU to answer the first question as follows in the French version:
"La directive 2006/24 ... modifiant la directive 2002/58/CE, ne s'applique pas au traitement des données à caractère personnel à d'autres fins que celles visées à l'article 1er, paragraphe 1, de cette directive. Par conséquent, ladite directive ne s'oppose pas à l'application d'une disposition nationale au titre de laquelle, dans le cadre d'une procédure civile, aux fins d'identifier un abonné déterminé, le juge enjoint à un fournisseur d'accès à Internet de divulguer au titulaire de droits d'auteur, ou à son ayant droit, des informations relatives à l'identité de l'abonné à qui ledit opérateur a attribué une adresse IP qui aurait servi à l'atteinte audit droit. Toutefois, ces informations doivent avoir été conservées pour pouvoir être divulguées et utilisées à cette fin conformément à des dispositions législatives nationales détaillées, qui ont été adoptées dans le respect du droit de l'Union en matière de protection des données à caractère personnel."
That being so, there was no need to answer the second question.
Google Translate renders this answer as follows:
"Directive 2006/24 ... and amending Directive 2002/58/EC does not apply to the processing of personal data for purposes other than those referred to in Article 1, paragraph 1 of this Directive. Therefore, the directive does not preclude the application of a national provision under which, in the context of civil proceedings, in order to identify a specific subscriber, the judge ordered a provider access to the Internet to disclose to the holder of copyright, or his successor in title, information concerning the identity of the subscriber to whom the trader has allocated an IP address that would have been used to achieve that right. However, this information must be retained in order to be disclosed and used for this purpose in accordance with detailed national legislation, which were adopted in compliance with EU law on the protection of personal data."
At the time of writing this judgment, the judgment of the Court is still awaited. No argument was raised before me that to the effect that the answer suggested by the Advocate General was wrong. Nor was it suggested that the present claim be stayed, or judgment postponed, until after the Court's judgment".
Is this the first occasion that Google Translate has been credited in an English intellectual property trial court, she wonders.

5 comments:

Anonymous said...

I thought HHJ Birss finished off Golden Eye in this case http://www.bailii.org/ew/cases/EWPCC/2011/27.html

What happened? They shouldn't be coming back again surely.

Andy J said...

Jeremy, I'm glad you raised the point about the absence of a groundless threats provision in the CDPA, when it exists in the RDA 1949, PA 1977 and TMA 1994. This really ought to be corrected when/if someone gets around to thoroughly overhauling/replacing the CDPA, as Hargreaves suggested.

Jeremy said...

Anonymous -- you thought HHJ Birss finished off Golden Eye in http://www.bailii.org/ew/cases/EWPCC/2011/27.html, but he didn't. Golden Eye has learned from its earlier experience, but is still sailing very close to the wind!

Kingsley E said...

Andy J - Yes it should be looked into. The IPKat also reported here http://ipkitten.blogspot.co.uk/2011/12/friday-fantasies.html that the Law Commission is considering dropping the unjustified threat provision altogether with my comment that they should even consider (next time round) extending it to copyright due to cases like these and we've seen a few of them in recent times and I suspect more will now flow.

What worries me in particular is that the claimants in these kind of cases rarely instruct IP lawyers to begin with, they do it themselves (as Jeremy said from experience, using perhaps recycled materials) and we know what happens as a result.

Let's hope as Jeremy said that it's sailing very close to the wind! :D

Francis Davey said...

Does a "Norwich Pharmacal" order have any other "official name"? I didn't think it was renamed in the way that (say) the Anton Piller order became a "Search Order".

If so, do reveal all.

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