Copyright trolls: Advocate general’s conclusions

The problem of works protected by copyrights and similar rights being exchanged on peer-to-peer networks (“P2P”) without the authorization of the rights holders is nothing new.

It will come as no surprise that this phenomenon has led to several disputes in Spain and the EU, leading the Court of Justice of the European Union (“CJEU”) to state its position on this, answering the various questions referred to it by Member States for preliminary rulings.

The CJEU must now clarify: (i) whether copyrights and similar rights are infringed when works are exchanged on P2P networks by network users; and (ii) different aspects of the situation and actions of the party that has obtained the relevant licenses on a protected work or subject-matter but does not exploit those rights, while claiming damages from alleged infringers on a “professionalized” basis. These claims are not normally heard before the courts and end in a settlement agreement, which involves the alleged infringer paying a sum of money. Thus, only a small fraction of infringers need to pay up for the companies in question to make a profit — sometimes higher than the profits derived from exploiting the work — and sustain their business model.

Academic opinion commonly refers to these companies as “copyright trolls,” as their main activity and business model depend on the very existence of piracy — which, therefore, they do not seek to eradicate — and on the abusive use of the protection granted by copyrights. For this model to work, they must be able to identify the IP addresses and names of the users: this is where the processes and procedures set out in Directive 2004/48 on the enforcement of intellectual property rights (the “Directive”) are particularly relevant.

The Polish Advocate General Maciej Szpunar (the “AG”) answered these points in his Conclusions in case c–597/19, which we discuss below.

The facts surrounding the dispute are described below. Mircom International Content Management & Consulting (“Mircom”) is a specialist company that, through the various agreements it has entered into with erotic movie producers, holds the intellectual property rights required to disseminate these movies to the public on P2P networks in Europe. As licensee on these networks, it is tasked with pursuing infringements of its rights to obtain compensation for those infringements, which it will subsequently share with the producers. In 2019, it filed a claim against Telenet BVBA (“Telenet”), an internet access provider in Belgium, requesting the identification data of its customers who use P2P networks and have accessed the disputed movies, to which Telenet objected.

In this context, the referring court has doubts regarding the actions of P2P network users and, specifically, whether they are performing acts of public communication of the works that they exchange on these networks on an automated basis. Furthermore, it doubts the standing of a company such as Mircom, whose activity and business model easily fit within the concept of copyright troll, to exercise the intellectual property rights it is tasked with defending and benefit from the resources and procedures in the Directive.

Copyright infringement by P2P network users

With regard to the first question, the AG starts by recalling how P2P networks based on BitTorrent protocol technology work. They do what is known as “seeding”, that is, the user who downloads a file also simultaneously uploads it in different parts or pieces (fragmentary as compared to the whole) and makes it accessible to other computers with the same program.

The AG also analyzes the three possible situations of P2P network users uploading content: (i) seeders, or users who download a complete file and share it with interested persons who have the same program; (ii) peers, or users who are downloading a file but do not yet have it in its entirety and who, in doing so, upload parts of the file to other users; and (iii) leechers, or users who download the files without uploading them, either during the download or subsequently. According to the AG, the intellectual property rights of the owners of the exchanged works are infringed in all three cases: reproduction and making available in case of seeders and peers, and reproduction in case of leechers.

The AG reaffirms the CJEU’s interpretation that making available does not require the effective transfer of the work and that it is sufficient for the work to be made available to a public such that they can access it from the place and at the time of their choice. In other words, it is sufficient for that transfer to be possible. The amount of data uploaded and whether the individual parts exchanged are unusable and have to be reassembled is irrelevant, as there is no de minimis threshold for ‘making available’.

With regard to the presence of subjective factors, such as the subject acting in “full knowledge of the consequences of their conduct” or being aware of the unlawfulness of the works they are accessing, although it jeopardizes users’ “innocence” insofar as they are aware that participating in a P2P network also entails uploading content, the AG believes that, in this case, the knowledge of the facts is not relevant to determining an act of making available. The unavoidable role of the user in giving the public access to the work, or the fact that it is aimed at a new public is also irrelevant. This is because P2P network users engage in an initial and not a “secondary” communication.

The AG therefore states that the action of a P2P network user in offering the possibility of downloading parts of the files containing protected works makes that work available to the public even before the user in question has downloaded the file in its entirety, and the user’s knowledge of the facts is not a decisive element.

Different aspects of copyright trolls

The second question referred for a preliminary ruling asks whether Mircom, as licensee of the rights on the movies, can benefit from the measures, procedures and resources envisaged in the Directive — for the purposes of this case, obtaining information to identify the infringers — given that, although it has acquired rights on these works and this subject-matter, it does not exploit or intend to exploit the acquired licenses (as recognized by Mircom itself at the hearing). Instead, it limits itself to filing claims to obtain the names and addresses of the infringers to then offer a settlement agreement involving the payment of a sum. In the case of erotic movies, a higher number of users will pay due to the shame associated with the conduct, even though, in many cases, they themselves have not committed the infringement in question.

Mircom’s actions easily fit within the concept of copyright trolling that, the AG recalls, is in any case not envisaged in EU law, or illegal in itself.

In this context, the AG invokes the general principle of EU law prohibiting abuse of rights, concluding that, by acquiring exploitation licenses that it has no intention of executing, Mircom’s real aim is to invoke them abusively to acquire the status of licensee, which allows it to take the relevant legal steps to obtain the names and addresses of the infringers of the works in question to threaten them with legal action and receive a lump sum in the form of an amicable settlement.

Mircom thus departs from the EU legislator’s objective (i.e. offering licensees an instrument to protect the normal exploitation of their licenses) by aiming to obtain financial advantage from repressing intellectual property infringements, which, in the AG’s opinion, would fall under the definition of an abuse of rights prohibited under EU law. In any case, this assessment is up to the national court. If it is determined, the information request must be denied.

In its third question, the referring court asks to what extent Mircom’s business model and activity must be taken into account when weighing up the correct balance that must be struck between enforcing intellectual property and users’ right to a private life and personal data protection.

The AG believes that, although morally dubious, Mircom’s activity is not illegal and is related to infringements of copyrights and similar rights. According to the AG, however, this request must be justified and proportionate. The AG gives some elements (including: “the fact that these are merely alleged infringements”; “the massive scale of the request for information”; “the nature of the films in question”; “the fact that Mircom assesses the compensation due at a flat rate of EUR 500 per person without taking account of the specific circumstances of each case”) that could be sufficient to determine the abusive nature of Mircom’s information request which, far from seeking compensation for harm, is more like a “ransom”, in the AG’s words.

In any case, this assessment is up to the national court. If it is determined that the information request is unjustified or abusive, it must be denied.

Conclusions

The AG is aligned with the position of some courts on so-called patent trolls — those who use inventions to obtain compensation from infringers or go to court —, which have rejected their standing to file claims for cessation on the grounds that they are abusive.

On this point, it should be questioned to what extent it is appropriate to criminalize going after intellectual property infringements — even if it is through entities whose business model may be morally questionable —, particularly in an environment in which, given the decentralized nature of P2P networks, controlling this phenomenon is particularly difficult, which places rights holders in an unprecedented vulnerable position.

The future of the copyright trolls’ business model will largely depend on the CJEU’s and the referring national court’s response to these questions. Be that as it may, if rights holders and entities such as Mircom want to carry on this scheme, nothing would prevent them going down the road of representation, acting for and on behalf of rights holders (giving standing to exercise claims under the Directive).

Author: Marta Zaballos