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The Court of Appeal of Milan rules on Yahoo’s liability with respect to copyright infringement

Italy flagIn January 2015 the Court of Appeal of Milan issued a landmark decision on ISPs’ liability in relation to video-sharing platforms, which might finally settle the current case law in Italy in this area.

One of the main findings of the decision is the irrelevance of the distinction between active and passive providers, which had traditionally been taken into account by Italian courts to rule that, if the hosting provider activity entails some kind of “active” involvement, the liability regime set forth by EU Directive 2000/31/CE (the “E-Commerce Directive“) would not apply.

Moreover, the judgement finally sheds light on the provider’s removal obligation, clarifying once for all that the right holder must expressly and specifically identify the allegedly illicit content before the hosting provider is liable to remove that content.

Factual background

In 2008, RETI TELEVISIVE ITALIANE Spa (“RTI“), the major Italian private broadcaster, sued YAHOO! ITALIA Srl (“Yahoo“) before the Court of Milan for copyright infringement due to the presence of a number of RTI’s videos on the Yahoo Video portal (a platform similar to YouTube in those days). Before filing the claim, RTI had sent Yahoo some warning letters with a generic list of TV programs, without however providing the list of the URLs of such videos (with few exceptions, and in these cases Yahoo promptly removed the videos).

In 2011, the Court of Milan issued a judgement in which it held Yahoo liable for copyright infringement due to its role as “active hosting provider” and accordingly the lack of applicability of the E-Commerce Directive.

On 7 January, 2015 the Court of Appeal of Milan completely overturned the decision of the Court of Milan and rejected all of RTI’s claims.

Decision of the Court

i) Role of the hosting provider: irrelevance of the distinction between active and passive providers

The court of first instance held that Yahoo could not benefit from the liability regime set forth by the E-Commerce Directive, applicable to “passive” hosting providers only. In particular, the judge classified Yahoo as an “active” hosting provider on the basis of the following elements:

(a) an abuse reporting system, whose existence would indicate that Yahoo undertook to monitor the lawfulness of the published material;

(b) the existence of internal functionalities such as a search engine and a button for reporting the related videos, consisting of an automated indexing function;

(c) the license granted to Yahoo by the users on the content uploaded.

Accordingly, the activity carried out by Yahoo would not be covered by the exemption of liability established by art. 14 of the E-commerce Directive.

The Court of Appeal overturned the position expressed by the court of first instance, pointing out that the provider of video sharing services is a hosting provider within the meaning of the E-Commerce Directive and therefore subject to the liability exemption set forth therein. As such, the provider has no obligation of prior verification or ex-ante control, or monitoring, of the hosted content.

In particular, the Court of Appeal stressed that the current technologies are not per se enough to make the services offered by the hosting provider “active”, regardless of the techniques used for managing the uploaded content and the interest of the provider to pursue economic gains.

In fact, such a distinction cannot be found in the E-Commerce Directive, and EU case law clarified that automated activity indexes do not change the nature of the hosting provider (decision C-324/09, L’Oreal vs. eBay). Accordingly, the elements taken into consideration by the court of first instance are not sufficient for exempting Yahoo from the liability regime set forth by article 16 of the E-Commerce Decree.

ii) When is the hosting provider required to remove illicit content?

The Court of Appeal of Milan clarified that in order to have the illicit content removed by the provider, such content must be specifically identified.

In particular, under the E-Commerce Directive, the holder of the rights allegedly infringed can either require the content to be removed by sending a formal notice letter, or by initiating proceedings before the competent court. Under the E-Commerce Directive, such remedies seem to be perfectly equivalent, and in any case the right holder has to specifically identify the content to be removed in order to generate the provider’s removal obligation.

According to the Court of Appeal of Milan, under both Directive 2004/28/CE on the enforcement of Intellectual Property Rights (the “IP Enforcement Directive“), and the E-Commerce Directive identifying the illicit content lies on the claimant, since a technologic platform such as Yahoo cannot be reasonably required to search for contents only generically individuated.

In other words, it is necessary that the right holder expressly indicates the URLs allegedly in violation of his or her rights. Therefore, a generic warning with only the title of the programs is not enough.

Also, it would not be possible to ask for an injunction, forcing the provider to set up a filtering system or at least a monitoring obligation with respect to future violations, as this would go against the freedom of enterprise. Similarly, the hosting provider is not subject to any “stay down” obligation in order to prevent that the same illicit content already removed is uploaded again, as this would represent a burdensome obligation in contrast with the provisions set forth by the E-commerce Directive.

iii) Interaction between the E-commerce Directive and Directive 2001/29/EC

In ruling the above, the Court of Appeal of Milan recalled EU case law with respect to the relationship between the E-commerce Directive and Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society (the “Info Soc Directive“). In particular, the judge clarified that, according to the European Court of Justice’s interpretation, the legal protection of intellectual property cannot be detrimental to other fundamental rights possibly in contrast with it, such as the Internet users’ freedom of information and enterprise. In this respect, free circulation of products and thinking on the Internet would prevail over the right holder’s interest to obtain an injunction aimed at stopping the violation of his or her intellectual property right.

Importance of the decision

This is the first decision issued by an Italian court of appeal in relation to ISP’s liability and certainly represents an historical precedent: even though precedents are not binding in the Italian judicial system, a decision issued by the Court of Appeal of Milan, possibly the most relevant court in Italy in relation to copyright protection, will play a significant role in this area of law.

The decision finally settles the debate among courts and scholars on the difference between active and passive hosting providers and on the duties of the copyright owners to identify the infringing content. It is worth noting that the Italian law implementing the E-Commerce Directive (Legislative Decree 70/2003) provides for an even more protective regime toward ISPs, requiring the latter to remove any infringing content not merely upon knowledge of the unlawful nature, but also after receiving a court order. However, some courts have held that such provision would not apply to “active” providers and in particular video sharing platforms. The Court of Appeal seems to have struck a fair balance between the expectations of right owners and ISPs, ruling, on the one hand that the liability exemption of the E-Commerce Directive applies to every category of hosting provider (including video sharing platforms), and on the other hand that the hosting provider does not need to wait to receive a court order before removing the content, a notice of the right owner being enough, provided that such notice clearly identifies (through the URL) the specific content to be removed. In other words, according to the Court of Appeal of Milan a mechanism similar to that provided by the Digital Millenium Copyright Act (“DMCA“) would be the right solution.