Hargreaves, Digital Copyright Exchange & Intermediaries - is there a link?

Dear reader

Viable business models, a balanced legal framework and 21st century machine-powered licensing solutions,these are the building blocks of digital business.

In my last post, I mentioned the recently published Government's Response to the Hargreaves Review. In this post, I want to look at two issues: the proposed Digital Copyright Exchange and the position of intermediaries - there is a link.

1. Digital Copyright Exchange (DCE)

In his Review, Professor Hargreaves was  - I think deliberately - not prescriptive about whether the DCE was an online directory for licensed content or a digital content stock exchange where rights could be bought and sold or both. The Government clearly sees as the DCE as a revenue generator for UK plc amidst a sea of no or slow growth industries, citing the Hargreaves Review's prediction that the DCE could add up to to £2.2billion annually to the UK economy by 2020.

It's clear from the Government's Response that the DCE should be a digital stock exchange, serving as a "..genuine marketplace independent of sellers and purchasers, for example on the model of independent traders using amazon.co.uk to sell goods, rather than simply being an aggregated rights database."

2. Intermediary Liability

Whatever form the DCE takes,  digital middlemen are a vital link in the digital business chain, whether as providers of online marketplaces, content hosts and aggregators, search engines, ISP's - the list goes on and continues to get longer and more complex. The message for intermediaries is clear: there are circumstances in which they will be in the firing line of rights owners. There are two factors which increase the intermediaries' risk - knowledge and active encouragement.

The recent European Court of Justice (ECJ) decision in L'Oreal v.eBay was a referral from the High Court in England before which the case is now pending. The ECJ looked at intermediary liability from two angles. The first was the circumstances in which the intermediary, in this case eBay, could find itself legally liable to a rights owner (L'Oreal's trade mark rights) where one its users was infringing the trade mark. The other was the circumstance in which, even if eBay has no liability, the rights owner can nonetheless get an injunction against the interemediary to compel it to remove the infringing content.

On the first issue, the ECJ gave both comfort and alarm to intermediaries like eBay. The Court said that the operator of an online marketplace is not infringing a brand owner's trade mark (e.g. 'L'Oreal') when goods bearing the trade mark are offered for sale on its online site. However, the ECJ also decided that an online marketplace operator can be prevented from advertising based on offering key words which include the brand owner's trade mark.  Furthermore, knowledge of infringing activities can result in the online operator's loss of immunity e.g. where "the operator plays such as role when it provides assistance which entails, in particular, optimising the presentation of the offers for sale in question or promoting them." The Court is referring here to the purchase of keywords e.g. Google AdWords corresponding to the name of L'Oreal trade marks.

On the second issue, the ECJ in the L'Oreal decision made it clear that even where the online operator has no primary liability, it can be ordered to take measures to bring existing infringements to an end and to prevent their recurrence.The same issue was looked by the UK High Court in the case of Twentieth Century Fox Film & Others v BT plc in the context of copyright infringing content on the Newzbin website. I will look at the implications of that case in my next posts.

Have a good week.

Laurie Kaye

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