Scarlet Extended SA – CJEU Judgment (Belgium, 2011)

The Belgian Association of Authors, Composers and Publishers ('SABAM') is a collective management organisation with the goal of collecting, distributing, administrating and managing all authors' rights in Belgium and abroad. Scarlet is an Internet Service Provider ('ISP') which provides its customers with access to the internet without offering other services such as downloading or file sharing. In 2004, SABAM concluded that copyrighted works in its catalogue were being downloaded by Scarlet internet users through 'peer-to-peer networks' without authorisation or paying the royalties owed to artists. It brought proceedings against the ISP to court, claiming the company was best placed to bring measures to stop these copyright infringements. First, it sought a declaration that copyright infringements had occurred through the use of Scarlet services. Second, it sought an order requiring Scarlet to prevent these by blocking such delivery of files containing copyrighted works using peer-to-peer software. Thirdly, it requested that the ISP provide the organisation with details of the measures that it would apply to comply with the judgment. In a first judgment in 2004, the First Instance Court of Brussels held that copyright had been infringed. It nonetheless could not determine if the measures proposed by SABAM were technically feasible and appointed an expert to assess this. The appointed expert concluded that whilst there were some significant obstacles, this was feasible. In a second judgment in 2007, the court ordered the ISP to bring an end to the copyright infringements by installing a filtering and blocking system. Scarlet appealed, claiming such a system would effectively require the general surveillance of all communications passing through its system, a breach of Article 15 Directive 2000/31. Further, the company "considered that the installation of a filtering system would be in breach of the provisions of European Union law on the protection of personal data and the secrecy of communications, since such filtering involves the processing of IP addresses, which are personal data". The Court of Appeal of Brussels held that before it could make a decision on this case, it had to verify the obligations that could be imposed on Scarlet were in compliance with EU law, and referred the following two questions: # Do Directives 2001/29 and  2004/48, in conjunction with Directives 95/46, 2000/31 and 2002/58, construed in particular in the light of Articles 8 and 10 of the European Convention on the Protection of Human Rights and Fundamental Freedoms, permit Member States to authorise a national court, before which substantive proceedings have been brought and on the basis merely of a statutory provision stating that: “They [the national courts] may also issue an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right”, to order an [ISP] to install, for all its customers, in abstracto and as a preventive measure, exclusively at the cost of that ISP and for an unlimited period, a system for filtering all electronic communications, both incoming and outgoing, passing via its services, in particular those involving the use of peer-to-peer software, in order to identify on its network the movement of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold rights, and subsequently to block the transfer of such files, either at the point at which they are requested or at which they are sent? # If the answer to the [first] question … is in the affirmative, do those directives require a national court, called upon to give a ruling on an application for an injunction against an intermediary whose services are used by a third party to infringe a copyright, to apply the principle of proportionality when deciding on the effectiveness and dissuasive effect of the measure sought? The CJEU considered whether national courts could require ISPs to install such a filtering system. First, it listed the rights of intellectual property holders against intermediaries, such as ISPs, whose services are used by third parties to infringe their rights. It stated courts are entitled to take measures to bring an end to infringements and prevent future ones. It then nonetheless found those measures to be limited by Directives 2001/29 and 2004/48, and that they therefore have to comply with "Article 15(1) Directive 2000/31, which prohibits national authorities from adopting measures which would require an ISP to carry out general monitoring of the information that it transmits on its network". Then, it held that since courts cannot impose measures on ISPs requiring them to carry out such general monitoring, it needed to examine whether the system demanded by SABAM would comply with EU law. It analysed what the implementation of such a filtering system would require, and found that it would Scarlet would have to actively observe all electronic communications conducted on its networks. This would encompass all information to be transmitted and all customers. As such, the injunction against Scarlet would breach Article 15(1) of Directive 2000/31. Further, the court noted that "national authorities and courts must (...) strike a fair balance between the protection of the IP right enjoyed by copyright holders and that of the freedom to conduct a business enjoyed by operators such as ISPs pursuant to Article 16 of the Charter". It held that the injunction would infringe this right because it would have to install such a system at its own expense, which is also a breach of "Article 3(1) Directive 2004/48, which requires that measures to ensure the respect of IP rights should not be unnecessarily complicated or costly". Finally, it held that "the contested filtering system may also infringe the fundamental rights of that ISP’s customers, namely their right to protection of their personal data and their freedom to receive or impart information, which are rights safeguarded by Articles 8 and 11 of the Charter respectively" because their IP addresses would be collected, which allows users to be precisely identified. Thus, the CJEU held that national courts may not order ISPs to preventively, indefinitely and at their own expense install a filtering and blocking system applicable to all electronic communication between customers, because this type of system breaches ISPs’ right to conduct business as well as violates individuals' right to privacy, freedom of communication and freedom of information.