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The Digital Economy Act's burden on Internet Service Providers

This article looks into the practical effects of the Act on ISPs and whether the obligations on ISPs are proportionate to the rights of copyright owners.

May 2011

Since the Digital Economy Act 2010 (the "Act") was rushed through parliament last year, it has attracted a large amount of criticism and commentary. As mentioned in our article ("Anti piracy law back on course") the Act's attempt to combat the problematic issue of online copyright infringement has led to an unsuccessful judicial review challenge of the Act, Ofcom has been asked to look into whether the technical measures in the Act can actually work in practice and internet service providers ("ISPs") have complained about increased costs and the administrative burden on them in order to comply with the Act's obligations.

This article looks into the practical effects of the Act on ISPs and whether the obligations on ISPs are proportionate to the rights of copyright owners.

mobile ISP

What are these administrative burdens?

At the moment it is proposed that the main burden of the Act will fall upon the fixed line ISPs with more than 400,000 subscribers (as these ISPs represent more than 96% of the internet market). Mobile ISPs are excluded but this exclusion is to be kept under review. The ISPs that are caught by the Act must comply with certain notification requirements. These include the sending of notifications to their users when a copyright infringement report (a "CIR") is received from a copyright owner detailing an "apparent" copyright infringement by a user and keeping a record of the number of CIRs received from copyright owners against its users. They may also have to disclose the personal data of its infringing users, if the copyright owner obtains a court order to do so and report to Ofcom on the process used to match the information provided in the CIRs received to the IP addresses of the relevant user.

To comply with the notification obligations imposed by the Act, an ISP will have to ensure that it has effective measures in place to accurately identify users through use of IP addresses. ISPs will also have to make sure that they collect further information (than is ordinarily necessary) such as contact details, in order to notify their users.

Hotel

The implementation of the administrative measures may prove to be costly especially for smaller ISPs and Wi-Fi operators (e.g. who provide services in hotels and cafes) who also fall under the definition of an ISP under the Act.

Although the obligations under the Act are currently aimed at the larger ISPs, there is the possibility that the threshold will change in the future. In their judicial review action, BT and TalkTalk complained that the definition proposed by Ofcom of which ISPs are caught by the Act may be unfair as it only targets the 7 biggest ISPs in the United Kingdom. While this argument has not been accepted by the High Court, there is the possibility that Ofcom may lower the current threshold to include smaller ISPs. As a result of this, smaller ISPs may have to conduct themselves as if they are compliant with the Act in case the threshold shifts and they are suddenly subject to the notification obligations. This uncertainty may lead to ISPs undertaking further administrative and financial burdens that may not be necessary.

In addition to potential fines of up to £250,000 for non-compliance, smaller ISP players may be hindered from entering the market and the subsequent effect may actually be at odds with the aim of the Government to make access to the internet widely available and accessible.

MoneyAre the ISPs notification obligations crystal clear?

The Act clearly sets out that ISPs have notification obligations that they must adhere to and that there are financial penalties if they do not comply. However, the vague language of the Act and Ofcom's subsequent draft code leaves exactly what is required of ISPs open to interpretation.

For example, the Act states that in a notification the ISP must give advice about steps that a user can take to protect against further infringement. The ISP must also take into account the suitability of different protections for users in different circumstances when giving this advice. This obligation would be very difficult for an ISP to comply with and it would probably be more likely that the copyright owners will have knowledge of the suitability of different protections for infringing users than ISPs would. This provision adds another administrative burden on ISPs because it would not be satisfactory to send a standard notification to all infringing users, instead ISPs will have to modify and tailor notifications to the relevant infringer which is not only time consuming, but costly.

What about the technical burdens?

ISPs may face another financial hurdle because if the notification procedure is not seen to be effective enough in battling online copyright infringement, the Act reserves the right to require ISPs to take "technical measures" against users that are infringing. It is unclear exactly what these measures will entail however the measures could include the limiting, suspending or blocking of an offending user's website and/or access (although secondary legislation will have to be implemented before website blocking measures can be introduced).

blocking solutionsPivotal to the content of the secondary legislation is Ofcom's assessment as to whether it is actually feasible for ISPs to block sites and whether the blocking of sites will be robust enough to prevent the circumvention of the measures imposed. In addition, Ofcom's assessment will try to identify a potential range of costs for ISP blocking solutions. Until this review by Ofcom is complete, ISPs cannot even begin to plan the changes in their procedures to comply with the measures and this will make it difficult to scope the likely cost that these measures will incur.

Are the burdens imposed on ISPs proportionate to the need to protect copyright owners?

The obligations that ISPs have under the Act has led them to question whether this Act goes too far in favour of copyright owners and whether it achieves the balance between protection of copyright owners whilst allowing ISPs to maintain their preferred status of being "net neutral" and a "mere conduit" allowing a fast, effective and interruption free internet service.

ISPs are hopeful that the following issues (amongst others) are taken into account during Ofcom's assessment and whilst preparing the secondary legislation.

Current statutory protection

Copyright owners already have statutory protections under the Copyright Designs and Patents Act 1998 ("CPDA") which provides that an injunction can be granted against ISPs where they know that their service is being used to infringe copyright. To what extent do copyright owners need the additional protection afforded to them under the Act?

copyrightThe sending of a CIR on an "Apparent Infringement"

The Act gives copyright owners the right to request ISPs to send a CIR when there is an "apparent" infringement. The Act gives a standard of proof that the copyright holder will have to abide by, but it is conceivable that the "apparent infringement" standard could lead to copyright owners being over-eager in their use of requests for CIRs. This will inevitably increase the administrative burden on ISPs to comply with the notification procedure. This will also increase the likelihood of ISPs being involved in the enforcement of the Act against infringers.

Conclusion

The rushing through of the Act has brought to light the strong and conflicting views of the industries affected by it. Critics and supporters have been eagerly awaiting to see the decision in the judicial review action. Now that we have it, those who oppose the Act will be waiting to see whether Ofcom's assessment and the secondary legislation which will follow will reflect their concerns.

If you have any questions on this article please contact us.

Internet Service Providers

"Although the obligations under the Act are currently aimed at the larger ISPs, there is the possibility that the threshold will change in the future. "