Hosting service providers

[2014] Debates about protection of intellectual property rights in the Internet have gone on for years, intensifying on occasions of spectacular events, such as the trials of P2P (peer to peer) network owners and owners of various websites including Napster, Grokster, KaZaA, The Pirate Bay or Rapidshare.

But currently a new wave of attacks of large media corporations was directed at hosting service providers, which are as far controversial (the attacks, not the providers) as it is difficult to accuse these portals of dissemination of any specific files, contrary to the P2P formula. In Poland, closing down the popular Kinomaniak website constituted such spectacular event.

Disputes concentrate around the crucial question: is full protection of intellectual property rights possible in the Internet – a peculiar genie released from the bottle, a tool for fast and unlimited exchange of information and mass communication. For some lawyers the matter seems quite obvious from a formal point of view: whatever enjoys protection off-line should also be protected in the Internet. Yet a question is raised not about the sense of this rule, but about its feasibility, especially its enforceability. Well, we follow the increasingly common view that protection of intellectual property rights in its current form is an archaism, judicial decisions are ambiguous, and cases are won by those corporations who have the money, lawyers and who are able to „order” any expertise.

The mass character of exchange of any information over the Internet, including the works created by someone’s hands and minds, is so powerful that no enforcement agency can deal with it, even if it was able to identify all cases of copyright infringement, which is unlikely. If someone is able to manage the Internet in such a way – they should receive the Nobel Prize, but we would rather not count on it. What is certain is that we should look differently at the protection of intellectual property rights in the Internet.

Spectacular trials and their repercussions

The fact that the problem is not simple and unambiguous is reflected in the legal proceedings against two world-known sites – KaZaA and The Pirate Bay. Let’s start with the former, which has not been active since 2012. KaZaA was a peer-to-peer formula file sharing platform, which allowed to search files (audio, video, documents) from the browser and an installed application. It was a self-organized distribution network, hence its customers could have searched for files and shared them without participation and intermediation of a central server. We should add that the server was located in different countries during different seasons.

KaZaA’s owners faced courts three times – in the Netherlands, the USA and Australia. In the Netherlands, it was a two-level case. In 2001, the court ordered the owners of the site to modify the program used to transfer files over the Internet in such a manner so that it would not be possible to disseminate copyrighted files. The decision was issued as a result of a lawsuit filed against the program founders by the Buma / Stemra association of Dutch composers, musicians and publishers.

It is peculiar that both this court and other courts in other countries were not able to determine what kind of corrective actions should be taken by the accused. According to various observers, this complex technical matter was overwhelming for the courts.

The Dutch judiciary, however, came to its senses and at the end of March 2002, the Court of Appeals quashed the earlier decision ruling that the KaZaA site was not responsible for the actions of its users. The suing Buma-Stemra association also lost the appeal in front of the Dutch Supreme Court in December 2003.

KaZaA’s owners, this time Sharman Networks, lost identical cases in front of the US and Australian courts in the period between 2004-2005. In both cases no charges of direct violation of the law by the owners were brought – the courts asserted that the users were the ones who violated copyright, but the sites’ owners were aware of it and facilitated their illegal activities. Sharman Networks’ representatives argued that the decentralized structure of their network renders control and monitoring of their users impossible, but these arguments were not accepted by the judges. In both cases, high damages and corrective actions were ordered aimed at file sharing filtering to prevent copyright infringements. In the American and Australian cases, the claimants were large companies including Universal Music, Sony BMG, EMI and Warner Music.

The Swedish website The Pirate Bay is an interesting case due to its political consequences. The site was launched at the beginning of 2004 by a Swedish organization called the Pirate Bureau, fighting for changes in copyright and the related rights, which developed into the Pirate Party in 2006. Yet the portal itself became an independent entity since October 2004. Legal suppression against The Pirate Bay commenced already at the beginning of its operations. In April 2009, a court in Stockholm ruled against the site administrators for participation in the sharing of copyrighted content. Founders of the site were sued by the powerful American companies – Warner Brothers, Columbia Pictures, Sony BMG, EMI, Universal, Metro Goldwin Mayer and 20th Century Fox, and were sentenced to a year in prison and a fine in the amount of 30 million crowns.

In February 2012, the Supreme Court in Sweden rejected the appeal of The Pirate Bay founders, awarded damages in the total amount of 6.8 million and ordered imprisonment from four months to one year. According to the defence lawyers of the Swedish defendants, the decision was outrageous with the court not showing sufficient interest in the case.

At the same time, in the course of the website’s activity, the Swedish Pirate Party grew and it currently has nearly 40 thousand members including two MEPs. The party’s manifesto focuses on the proposal for full freedom of non-commercial use and copying of intellectual property materials and the shortening of the period of copyright protection in case of commercial use. The party also advocates abolition of patents and determined fight against private monopolies, as well as protection of citizens’ privacy. It fights especially against surveillance carried out under the excuse of terrorism threats. In dozens of countries around the world, similar organizations were established on analogous grounds, taking the form of socio-political movements and even political parties.

What follows from the above examples? Some conclusions come to mind:

  • court cases concerning intellectual property rights in the Internet are complex, they last many years as far as Western standards are taken into account, and decisions are not uniform in identical cases (the Netherlands vs. the USA in case of KaZaA);
  • the courts are not prepared for such complex matters in terms of technology, remedial jorders are issued with no idea on how these corrective measures are to be introduced;
  • parties in legal battles are unequal in terms of their position in the market, they resemble the struggle between David and Goliath. Powerful media corporations have at their disposal unlimited legal assistance, expertise and lobbying, which previously used to impress the courts;
  • opposition movements grow in the form of political opposition against the monopolistic position of corporations wishing to indefinitely benefit from intellectual property rights; it seems that these movements will become increasingly relevant which will inevitably lead to amendments in archaic provisions in the field of intellectual property in general and in particular in its protection in the Internet.

Kinomaniak judged without trial. Attacks on hosting service providers.

While we can admit that activities of websites operating in the P2P formula can be controversial and, according to many lawyers (although opinions are divided), they do violate copyrights, then attacks on the so-called hosting websites seem to constitute highly unlawful actions. Meanwhile, large media companies undertake to expand the circle of entities responsible for copyright infringement.

Let’s begin our analysis with the Polish yard. The reactions of media and online discussions in response to the January closure of a very popular Kinomaniak portal, sharing movies and series, demonstrates that there is complete incomprehension of crucial concepts and ignorance of intellectual property rights among editors and media people – hence the people vastly influencing public opinion.

There were some threads in the commentaries which did not at all refer to the core of the problem, which is undoubtedly the protection of intellectual property rights. Well, in order to write something meaningful on this subject you need to read a little, which apparently exceeds the capabilities of the authors and probably bores the readers anyway. It was therefore assumed a priori that the website operated illegally, despite the fact that there is no court decision on this „illegality”. The fact that the founders of the portal were arrested was enough for the media. Anyone, but the Polish media remembering practices of the III and IV Republic should be aware of the fact that in Polish reality the ratio between the number of arrests and the number of legally binding decisions is just like the ration between the number of total tries in a match and the number of goals scored in the first league.

The second „shocking” thread in the comments exposed the founder of the site as a retired CBS (Central Bureau of Investigation) officer. To intensify severity of the situation – it was not a „normal” officer, but an officer who was in charge of detection of serious economic crime. The bloody-mindedness of such message is twofold. On one hand it is suggested that retired officers are allowed less, or even that it is not proper and well seen for them to engage in business activities, on the other hand – and this is a more sophisticated suggestion – that someone who fought against economic crime knows exactly how to run it with impunity. Ergo – he must have been running it.

Finally it has been underlined that Kinomaniak’s operations and activities of similar websites were obviously illegal, but so difficult to prove, and its lawlessness so masked, that apparent criminals should be apprehended like Al Capone – i.e, for something else, in this case for money laundering. So we have another incomprehension of concepts and misleadingness, namely that the allegedly „pirate” sites providing file hosting services are in fact money laundering sites.

We are not judging the guilt or innocence of Kinomaniak owners, but we do oppose the lightness to serve convictions before the courts even began proceedings. Since absorption of the media following Kinomaniak’s closure declined, it is worth to pay some attention to hosting service providers, because there are plenty of them and the problem seems to be growing.

First of all, we should make the reader once again aware that that the media corporations want to enlarge the group of entities responsible for the protection of intellectual property rights to include hosting service providers. This should not be approved, we agree with the opinion expressed by K. Szczepanowska-Kozłowska that „expanding the circle of those responsible for the violation of intellectual property rights is not the appropriate way to search for instruments for effective enforcement of this law” (“Operator rynku elektronicznego a prawo własności intelektualnej” of 12-03-2011).

What are hosting websites? Simply put, these sites provide users with specific IT tools which enable them to store there the content uploaded by users. The portal itself does not add or share any specific content to third parties. Furthermore, hosting service providers draft their terms of use in such a way, that the user must firstly confirm that he or she enjoys copyright to the uploaded materials. Such declaration is a basic condition to render hosting services.

But most importantly, there are laws in force throughout the world which exclude the liability of hosting providers with respect to content posted by users through platforms ensured by such providers. As far as Poland is concerned, it is clearly provided in article 14 of the act on electronic services, passed as implementation of article 14 of the EU E-Commerce Directive No. 2000/31 / EC of 8th of June 2000 on certain legal aspects of information society services. In accordance with its provisions “the service provider is not liable for the information stored at the request of a recipient of the service, on condition that: the provider does not have actual knowledge of illegal activity or information” or “the provider, upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information” (so called notice and take down procedure).

It should also be noted that in accordance with the law, including the Polish law (article 15 of the act on electronic services), hosting service provider is not required to verify and monitor the content placed on the website by its users. It is exempt from liability in respect to the data stored by users – as long as it acts in accordance with the above procedure, and – what is more – it should be indicated the specific infringing content, rather than required to remove all materials; which seems illegal to the potential „victims”.

Meanwhile, media companies, when attacking hosting websites, attempt to overturn foundations on the basis of which exemption from liability for the content on the sites which is not uploaded by the providers is based. If we followed this reasoning, this would mean that all hosting service providers conduct a priori illegal activity, and their operators are liable regardless of whether they apply the „notice and take down” procedure or not. We should agree with the statement of the journal article cited above that from a legal point of view there is no difference between the owner of the shopping centre, which lets out premises on which the goods are offered for sale, and the virtual space offered by hosting service providers. Whereas media companies request that virtual providers be pursued, nobody even comes up with the idea to hold a shopping centre owner accountable for the fact that specific goods infringing IP rights were offered on one of the stands in an illegal way.

The problem of protection of intellectual property rights in the Internet deepens and requires new legislation in some rational future perspective. One of the colourful elements of the social life in the twentieth century were unprecedented fortunes earned by media companies from the royalties collected from all and any possible proprietary activities. Hollywood and great assets of show business stars originated and grew on this concept. At the same time, it was in line with the political interests of the United States, because the fight against piracy was actually caring about the US export.

However, the currently binding laws do not fit into the dynamically developing virtual reality, whether the media companies like it or not. The fight against copyright infringements, conducted on the basis of existing regulations, starts to look more and more like the idiomatic tilting at windmills. This statement is not an encouragement from our side not to react to actual crime, nor an incentive to commit crimes. What we wish for are such amendments in the law which would make an end to the monopolistic position of media companies with unlimited benefits from copyrights at the expense of civil liberties and which would not downgrade respect for the law, which becomes increasingly unenforceable with every week, month and with every year.

Although media companies will still have some power to close several sites and go after their founders, it is time to accept the fact that the times when you could reserve the rights to Mickey Mouse and collect royalties from any person wishing to use its image are gone. These rights resulted from a specific combination of the level of technology development and political interests which will never come back, just like steam engines won’t.


Robert Nogacki, attorney-at-law, Marek Ciecierski

Robert Nogacki, legal advisor, is the owner of Skarbiec Law Firm whose major area of expertise is tax planning.
Kancelaria Prawna Skarbiec, specializes in comprehensive legal advisory services rendered to economic entities.

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