Article 17 of the DSM Directive is valid: an early take on today’s Grand Chamber ruling

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As The IPKat reported earlier today, nearly 3 years after the Republic of Poland lodged its action (C-401/19) against the European Parliament and the Council requesting that the Court of Justice of the European Union (CJEU) annul Article 17 of the DSM Directive – in part or as a whole – due to an alleged conflict with the EU Charter of Fundamental Rights and its Article 11 (freedom of expression and information), this morning the Grand Chamber of the CJEU ruled that Article 17 is compatible with freedom of expression/information.

The full text of the judgment is now available here (so far only in French and Polish).

Last year, Advocate General (AG) Saugmandsgaard Øe advised the CJEU not to annul the provision finding that Article 17 would be compatible with the Charter insofar as sufficient safeguards, inherent to the provision itself, are complied with when online content sharing service providers (OCSSPs) fulfil their monitoring obligations under Article 17(4)(b)-(c) [IPKat here; the AG will discuss C-401/19 at an in-person event that will be held in Stockholm on 2 June: do sign up! A rapid response online event – free to attend – will be also held this afternoon].

Today’s ruling

Reviewing the French version of the ruling, these seem to be the key takeaways.

Preliminary remarks

First of all, the Court addressed the very admissibility of Poland’s action. Like the AG, it held that Article 17 is a new liability regime (“nouveau régime de responsabilité”: para 20), whose various parts form a unicum whole. As such, it would not be possible to annul Article 17 in part: it should be either annulled as whole or not at all. Incidentally, any annulment of Article 17 would not have an effect on the rest of the Directive.

This said, the regime introduced in Article 17 only applies to OCSSPs, as defined in the Directive itself, and requires them in principle to seek an authorization from relevant rightholders (who are under no obligation to grant such an authorization) to make available user-uploaded content that incorporates their protected material.

Turning to Article 17(4), the CJEU correctly characterized it for what it is: a specific liability regime (“régime de responsabilité spécifique”: para 34) that applies in the event that no authorization has been obtained despite the best efforts made by the OCSSP at hand.

The Court then noted that such a regime is clarified and supplemented by Article 17(5) and (10). Article 17(7) further specifies that the cooperation between OCSSPs and rightholders should not result in the prevention of the availability of lawful uploads, including those covered by exceptions and limitations.

Limitation to freedom of expression/information

Turning to the substance of Poland’s claim, the Court noted – as the AG had done – that Article 11 of the Charter corresponds to Article 10 of the European Convention on Human Rights, all this implying the need and opportunity to also consider the case law of the European Court of Human Rights (ECHR) on that provision.

Referring to the ECHR rulings in Cengiz v Turkey and Kharitonov v Russia [IPKat here], the CJEU stressed the importance of the internet to freedom of expression and information and noted how it had also emphasized it in its case law on the right of communication to the public, including – most recently – YouTube itself [IPKat here].

The Court admitted that Article 17(4)(b)-(c) imposes on OCSSP a monitoring obligation that requires them to employ automated content recognition (ACR) and filtering technologies which, as of today, do not seem to have alternatives (“outils de reconnaissance et de filtrage automatiques. En particulier, ni les institutions défenderesses ni les intervenants n’étaient en mesure, lors de l’audience devant la Cour, de désigner des alternatives possibles à de tels outils.”: para 54).

Such technologies clearly restrict freedom of expression/information (para 55) and it is the EU legislature that is responsible for that (para 56).

Whether such a limitation is justified

All this said, freedom of expression/information is not absolute: both ECHR and CJEU case law have consistently noted that its exercise can be restricted at certain conditions (see Article 52(1) of the Charter) and provided that the principle of proportionality (which is also a general principle of EU law) is respected.

In order to determine whether the compression of freedom of expression/information as undertaken by Article 17(4)(b)-(c) may be tolerated, the CJEU noted the necessity not to limit the analysis to Article 17(4), but also to

• take Article 17(7)-(10) into account given that they specify and complete the liability regime and 
• consider the legitimate objective underlying the adoption of Article 17 as a whole (para 69).

The Court stressed that, when more than one interpretation is possible, precedence should be given to that which does not call into question the validity of the provision at hand and is in accordance with primary law as a whole and, in particular, with the provisions of the Charter (para 70).

Ultimately, the Court held that:

• The limitation on freedom of expression carried out by Article 17 is provided for by law;
• Even though Article 17(4)(c) does not specify what measures OCSSPs are concretely to adopt to ensure the unavailability of specific content, this is not in itself contrary to freedom of expression/information and may be even necessary to respect OCSSPs’ freedom to conduct a business, in accordance with Article 16 of the Charter;
• The limitation to freedom of expression carried out by Article 17 does not remove the essential content of that freedom because of both the obligation of result contained in Article 17(7) and the wording of Article 17(9), third sub-paragraph concerning “legitimate uses”.

Agreeing with the AG and also considering the principles laid down in earlier case law, the Court concluded that Article 17(4)(b)-(c) cannot be complied with by taking measures that block lawful uploads. In this sense, it follows from Article 17(7) and (9), as well as recital 66 and 70, that it is not possible to use ACR technologies that do not sufficiently distinguish between lawful and unlawful content to block user uploads ex ante, including where relevant exceptions and limitations – which the Court referred to as ‘rights’ – are at issue.

In conclusion, the Court ruled that, in drafting Article 17, EU legislature provided appropriate safeguards to protect freedom of expression/information. As a result, Poland’s action should fail and Article 17 be upheld.

The judgment’s implications

Today’s ruling will have a vast impact, both with regard to the application of already existing national transpositions of the DSM Directive and the transposition thereof by the remaining Member States (MS). According to the latest update, there are still 11 MS which have adopted no measures to transpose the DSM Directive into their own laws. To this it should be added that some MS have so far only partially transposed the Directive.

General comment

Before delving into specific aspects of the ruling, it should be noted at the outset that today’s outcome is hardly surprising.

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This is so for a number of reasons: besides the AG Opinion, it was apparent as early as last year’s YouTube judgment that the CJEU did not think that Article 17 would be per se in contrast with the earlier regime as substantially shaped by the CJEU itself and having regard to the need to ensure a ‘high level of protection’ alongside a ‘fair balance’ of rights and interests.

All this is so despite that the Court cautiously noted that the YouTube referral had nothing to do with Article 17. As such, those who – all this time – have called upon the Court to invalidate the provision have done so disregarding the (longstanding) judicial history of the EU right of communication to the public, including the 'fair balance' mandate and the fundamental rights dimension.

As I noted in my comment to the YouTube judgment, by holding that platform operators other than ‘rogue’ ones (á la Pirate Bay) may be also directly liable for copyright infringement and, when that is the case, no hosting safe harbour is available, the CJEU proceeded along lines that lead in substance to a place that does not look too different from Article 17, at least in its most basic features.

This said, the CJEU also suggested (this would be however a decision for the referring court to make) that YouTube – based on the facts as presented by the referring court – should not be held directly liable for user uploads under Article 3 of the InfoSoc Directive. This, in substance, bars the way to anyone seeking to apply Article 17 retroactively and advance claims based on situations arisen before the entry into force of the national transpositions of that provision.

Such a conclusion is in line with the Opinion of AG Saugmandsgaard Øe in the same case [IPKat here]: while acknowledging that it is for EU legislature to create new balance between different rights and interests, the AG ruled out that Article 17 would have retroactive application (and, so, the argument that it would be a mere clarification of the law as it pre-existed the Directive).

Today, the CJEU confirmed that Article 17 is a new specific liability mechanism: the door paving to any retroactive claims has been definitely shut.

Here are some further key aspects of the ruling.

Ex ante/ex post blocking of content

The most important aspect of the judgment relates the question whether ex ante blocking of content is allowed.

In his Opinion, the AG considered that legitimate uses under Article 17(7) should be taken into account ex ante by OCSSPs. As such, the complaint and redress mechanism under Article 17(9) would constitute “an additional and final safeguard for situations where, despite the obligation in paragraph 7, those providers nevertheless block such legitimate content mistakenly.”

The CJEU agreed in principle … but did so with caution and having regard to available technologies.

The judgment, in fact, does not appear to remove the possibility of employing ACR technologies altogether (in its Guidance, also the European Commission conceded that there are cases in which they are unavoidable). Indeed, the Court found that only where such technologies do not distinguish adequately between unlawful and lawful uploads there is a freedom of expression problem.

Arguably, this part of the judgment is justified by the desire, on the side of the Court, not to crystallize the legal position on today’s available technologies and opt, instead, for a future-proof type of evaluation. This is not surprising: it is in line with what has happened in past copyright cases too, including Tom Kabinet [IPKat here] and the establishment of unlicensed second-hand digital marketplaces.

All this said, the judgment also gives clear guidelines for the national transpositions of Article 17. A national transposition that mandated ex ante blocking of content in each and every case (with only the possibility of that content being reinstated further to a complaint) would not be compatible with EU law. It follows that:

• Member States which have already transposed the Directive and provided for an ex ante blocking mechanism need to correct their national provisions right away; in any event, and even lacking legislative 'correction', national courts are required to interpret national law in a manner that complies with today’s ruling as this is very likely - also considering the characterization of users' position (see below) - a case of vertical direct effect.
• Member States which have yet to transpose the Directive need to provide for a legal mechanism that prohibits the undiscriminated blocking of content ex ante.

Users’ position

As regards users, the Court referred to uses allowed by exceptions and limitations as ‘rights’ of users, thus agreeing with the AG’s position.

The judgment does not provide any additional elaboration on this important point.

What does it mean – in practice – that users have rights? Are they entitled to, for example, claiming damages from OCSSPs (and rightholders too, given the cooperation mandated by Article 17(10)) that have unduly blocked their uploads? What if a Member State has failed to transpose or transpose correctly this part of the Directive - is this a case of vertical direct effect?

In conclusion

It may be still too early to form a full opinion of today’s judgment. What is certain is that it will be studied, analyzed, and invoked in all situations in which Article 17 and its national transpositions are at issue.

In addition, despite last week’s provisional agreement on the Digital Services Act, it is also anticipated that the judgment will have an impact in the eventual wording and fine-tuning of this important EU regulation and its provisions. This is so because today's CJEU ruling will be relevant to any situation in which the enforcement of legal rights, including IP rights, needs to be balanced with freedom of expression/information. After all, it is not accidental that, in its ruling, the CJEU also referred to defamation and data protection cases ...