Sharing music is bad for your wealth - BPI to sue "major filesharers"

Introduction

The British record companies trade association, the BPI (British Phonographic Industry), has announced that it is to begin a "rolling programme" of legal action against major filesharers. The BPI has commenced legal action against 28 UK filesharers, currently unidentified, and has announced that it is seeking damages and injunctions to stop filesharers making copyrighted music available over filesharing networks.

The move follows the BPI's warning in March of this year that it would take legal action against filesharers unless they stopped sharing music. Since that time, the BPI has sent out over 350,000 instant messages to users uploading tracks to other P2P (Peer-to-Peer) users on file sharing applications such as Kazaa, Imesh, Grokster, Bearshare and WinMX networks.

The action coincides with and forms part of the action being taken by the International Federation of the Phonographic Industry against 459 file sharers in 6 European countries. Although the RIAA in America has brought numerous civil lawsuits against filesharers, 261 in September for example, this is the first time any such action has been brought in the UK courts.

Comment

The BPI has made it clear that they are only pursuing those filesharers who are "large-scale uploaders". This reflects the fact that proving loss against someone who only downloads music, above the amount the recording company would have made if the P2P downloader had legitimately downloaded the recording in question, would be very difficult, and the amount of damages obtained would be small.

If the BPI is able to prove, on the balance of probabilities, that a person has uploaded a number of tracks to other P2P users, then although proving loss will still be very difficult, the amount of damages could be significantly higher. The BPI will need to prove that the person uploaded infringing copies of recordings, and also the number of times such copies were uploaded. To prove further loss, other than the loss of profits made by the relevant recording company on each upload (i.e. the money the recording company would have made if the P2P downloader legitimately downloaded the track), the BPI will need to show that the downloading party would on average, or in practice, have made further infringing copies of the track (i.e. by offering it for further download on a P2P network). This would be a difficult point for the BPI to establish.

The only other recourse for the BPI would be to apply for "additional damages", which are available under section 97 of the Copyright Designs and Patents Act 1988. However, these may only be awarded where, with regard to all the circumstances, (a) an infringement of copyright is "flagrant" and/or (b) the person infringing the copyright accrues a benefit from the infringement (i.e. financial gain). The latter category does not apply to P2P uploaders as they obtain no benefit from making tracks available. Such damages would therefore only be awarded in this case if the infringement was particularly flagrant. This, again, would be difficult for the BPI to prove; although if it could show that the user had received one of the warning messages published by the BPI on the P2P network, this would at least prove that the user was on notice that his or her activities were an infringement of copyright. However, a finding on flagrancy is likely to depend upon the extent of the infringing acts.

There may also be issues with the fact that the BPI, as yet, does not know the actual identity of the P2P users who it alleges have carried out the "large-scale" uploading. To obtain such information the BPI successfully made an application to the court for various orders of disclosure against UK ISPs (Internet Service Providers) to require the ISPs to identify the P2P users. Currently, the BPI has only been able to identify the users by their IP addresses. Unless the ISPs appeal the decision of the court, which was made on 14 October 2004, the ISPs must provide the P2P user's details to the BPI within 14 days of the orders being made.

A similar application for Orders of Disclosure, made by the Canadian Recording Industry in March of this year, failed because the Canadian court decided that, where a P2P user merely made their legitimate MP3 collection available online, this was not a breach of copyright. In his judgment, which is apparently currently under appeal, Judge von Finckenstein stated that:

"I cannot see a real difference between a library that places a photocopy machine in a room full of copyrighted material and a computer user that places a personal copy on a shared directory linked to a P2P service."

The judgment, which would not apply in the English Courts (see below), was based upon the fact that a P2P user may not actually know how many other users had downloaded recordings, or even if downloads had taken place at all. P2P applications, such as Kazaa, merely allow a user to identify a "shared" area of his or her hard disc. The user then has to take no further action to "upload" the files to other users; the downloading user can search the contents of the "shared" area and click to download the tracks without the permission of the uploader.

The Canadian court held that the act of copying the recordings, and therefore the copyright infringement, was not carried out by the user uploading the tracks, but by the person downloading the tracks. The court therefore refused to issue an Order requiring the ISPs to identify the P2P users.

In the English proceedings, the BPI is expected to claim that the uploading P2P users have infringed the various copyright in the recordings. The BPI will rely on two provisions of the Copyright Designs and Patents Act:

• Section 16, which provides that "Copyright in a work is infringed by a person who without the licence of the copyright owner does, or authorises another to do, any of the acts restricted by the copyright." (16(2).)
• The acts restricted by copyright include: copying the work (16(1)(a)); issuing copies of the work to the public (16(1)(b)); and, importantly, communicating the work to the public (16(1)(d)).
• Section 20(2), which provides that communicating the work to the public includes "the making available to the public of the work by electronic transmission in such a way that members of the public may access it from a place and at a time individually chosen by them."

The wording of Section 20 was amended to include the wording at 20(2) on 31 October 2003, when the UK implemented the Copyright in the Information Society Directive. Therefore, whilst an argument similar to the argument that was successful in the Canadian case may have been at least arguable in the UK courts before 31 October 2003, such an argument would not be available now.

However, and as indicated above, if the court finds that an infringement or infringements of copyright did occur, the BPI will still need to prove loss to obtain any significant damages from the "uploader". This will be difficult, and it may be that the BPI will attempt to obtain an injunction to stop the uploaders from uploading recordings rather than attempt to prove any significant damage. Given that, according to the BPI, 15% of filesharers are responsible for 75% of all "illegal" internet file sharing, if the BPI were able to prevent that 15% offering tracks for upload, then this would have a significant impact on the problem of illegal downloads.

One problem for the BPI is that, if they are successful in obtaining a judgment against an individual, the damages may be too small to act as a deterrent to other uploaders. The BPI states that its main objective in taking legal action is to discourage illegal uploading, however the complexity of obtaining significant damages against a P2P uploader may result in a small amount of damages being awarded and which, therefore, may even have the opposite effect. It is for this reason that the BPI may decide in favour of making confidential financial settlements, which will remain secret, so that the threat of legal action remains a deterrent to other P2P users.

A further problem for the BPI is that in the UK, criminal proceedings may not be brought against a person for communicating the work to the public unless the person was acting in the course of business or to such an extent as to affect prejudicially the owner of the copyright. P2P is essentially "free", and it is therefore unlikely that anyone uses P2P to share music files in the course of business. If criminal proceedings were brought against a P2P user, it would therefore most likely be because the actions of the user prejudicially affect the owner of the copyright. Whether the courts will find that making tracks available on a P2P network prejudicially affects owners of copyright is unknown. As with "additional damages" in civil proceedings, which depends on whether the P2P user's actions are flagrant, it may well depend upon the number of recordings offered for download and the number of times tracks were downloaded.

The BPI, and other such organisations worldwide, clearly have a difficult job to do to raise awareness about the problems of filesharing and to try and prevent people illegally downloading tracks. A particular challenge for the BPI will come from the fact that P2P has evolved and, even if the BPI is successful in discouraging one form of P2P filesharing, it is likely that another form of filesharing will become more popular.

For example, BitTorrent, a P2P file swarming system, is now very popular. BitTorrent breaks down the files into small "chunks" and allows a downloader to download the file from many different users, often hundreds. At the same time, the downloader must offer the "chunks" of the file he or she has already downloaded to other downloaders. Such a system will make it incredibly difficult, using the existing laws of copyright, for the BPI to take successful action against any BitTorrent user, as it would be incredibly difficult to identify who actually copied which part of each file.

The most likely solution for the BPI, and other such organisations worldwide, will be to ensure that legal downloading sites offer a service which is a real alternative to using P2P software. This means that such services will need to compete on price and, which is often something that makes illegal downloading attractive, on release dates. The good news for the BPI is that, combined with the threat of legal action (and the unknown consequences of such action), the increasing popularity of existing online music services, such as Apple's iTunes, may have already had an impact on the number of people using P2P.

If you would like any further information on music or other filesharing, or to discuss any IT Law or Intellectual Property issues affecting your business, please contact Susan Barty on +44 (0)20 7367 2542 or at [email protected], Lucy Kilshaw on +44 (0)20 7367 2044 or at [email protected], Phillip Carnell on +44 (0)20 7367 2430 or at [email protected]