The Legality of Peer-to-peer under EU Law IPG

The Legality of Peer-to-peer under EU Law IPG Meeting Berlin, November 4, 2005 Thibault Verbiest ULYS Partner University of Paris I (Sorbonne) www. ulys. net

Legality of P 2 P under EU Law Ø P 2 P Ø Case study: Music online Ø EU Initiative Ø Copyright protection § Directive 2001 on the harmonisation of certain aspects of copyright and related rights in the information society Ø Internet licensing § Recommandation 2005 on collective cross-border management of copyright and related rights for legitimate online music services

P 2 P Ø What’s P 2 P? Ø From user to user Ø implies that either side can initiate a session and has equal responsibility Ø confusing term, because it has always been contrasted to a central system that initiates and controls everything Ø In practice, two users on a peer-to-peer system often require data from a third computer Ø The two major categories of peer-to-peer systems are file sharing and CPU sharing

P 2 P Ø P 2 P success story? ØNapster popularized P 2 P in 1999 ØCalled a "peer-to-peer network, " but its use of a central server to store the public directory made it both centralized and peer-to-peer ØP 2 P second generation: Kazaa ØFrom Kazaa to large files protocols: Bit. Torrent, e. Donkey

P 2 P

Case study: Music online Ø Global music industry sales declined by some 22% over five years to 2003, a reduction of over US$ 6 billion Ø 870 million unauthorised music files on the internet (all services), January 2005 Ø 8. 6 million concurrent users on P 2 P networks offering unauthorised music files as of January 2005 (6. 2 million in January 2004) Ø 36 million of the 40 million people downloading (9/10) in Europe are still not paying for music they download

The collapse of music industry ?

The collapse of music industry?

The collapse of music industry?

The Empire strikes back! Ø Industry response ØRecord companies have digitised and licensed over a million songs in 2004 ØNumber of online services where consumers can buy music has increased four-fold to more than 230 worldwide –and over 150 of those are in Europe ØIn 2004 downloaded tracks rose more than tenfold over 200 million in the US, UK and Germany combined

The Empire strikes back!

The Empire strikes back!

The Empire strikes back!

EU Initiative Ø Copyright protection ØDirective 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the Information Society § Gradually implemented in all the countries of the European Union!

Copyright protection Ø Rights ØReproduction right ØRight of communication to the public of works and right of making available to the public other subject-matter ØDistribution right

Copyright protection Ø Exceptions Ø Temporary acts of reproduction Ø Libraries, educational establishments, museums Ø Hospitals, prisons Ø For teaching or scientific research Ø Quotations for purposes such as criticism or review Ø Use for the purposes of public security Ø ….

Copyright protection Ø Back door to P 2 P: exception for private use art. 5, § 2 (b) of the Directive ØReproduction Ømade by a natural person Øfor private use Øand for ends that are neither directly nor indirectly commercial, Øon condition that the rightholders receive fair compensation

Copyright protection Ø Exception for private use Ø Implemented in many national legislations § France, Belgium, Germany, … Ø Exception invoked by many P 2 P users dowloading and/or uploading unauthorised music files Ø No clear case law Ø Most recent example in France § TGI de Meaux 21 April 2005 § P 2 P users sanctioned for having uploaded illegal files but released for the dowloading of illegal files on the exception for private use

Copyright protection Ø Action against ISP & P 2 P server administrators ØArticle 8, § 3 of the Directive ØMember States shall ensure that rightholders are in a position to apply for an injonction against intermediaries whose services are used by a third party to infringe a copyright or related right

Copyright protection Ø Landmark case in Belgium (2004) ØSABAM v. TISCALI ØAction grounded on Article 8, § 3 of the Directive ØIllegal music file-sharing through P 2 P ØTISCALI sanctioned as ISP whose services are used by a third party to infringe music copyright

Internet Licensing Ø Improving cross-border licensing for music services ØAbsence of EU-wide copyright licences for online content services § makes it difficult for legitimate online music services to take off § Increase the revenue gap between the US and the EU • US online music market is expected to grow to € 1. 27 billion by 2008 >< € 559 million in the EU by 2008

Internet Licensing Ø July 2005 Study on a community initiative on the cross-border collective management of copyright Ø October 2005 Commission recommandation on collective cross-border management of copyright and related rights for legitimate online music services

Internet Licensing Ø Online music service includes any music service provided on the Internet such as Øsimulcasting Øwebcasting Østreaming Ødowloading Øonline « on-demand » service Øor provided to mobile phones

Internet Licensing Ø Services provided by collective rights managers (CRM) include ØThe grant of licences to commercial users ØThe auditing, monitoring of rights by ensuring payment and terms of licensing; and pursuing infringers (enforcement) ØThe collection of royalties ØThe distribution of royalties to rights-holders

Current situation in Europe • Services provided by collective rights managers (CRM) include – The grant of licences to commercial users; – The auditing, monitoring of rights by ensuring payment and terms of licensing; and pursuing infringers (enforcement); – The collection of royalties; – The distribution of royalties to rights-holders

Top ten CRMs • Services provided by collective rights managers (CRM) include – The grant of licences to commercial users; – The auditing, monitoring of rights by ensuring payment and terms of licensing; and pursuing infringers (enforcement); – The collection of royalties; – The distribution of royalties to rights-holders

Market share of CRMs • Services provided by collective rights managers (CRM) include – The grant of licences to commercial users; – The auditing, monitoring of rights by ensuring payment and terms of licensing; and pursuing infringers (enforcement); – The collection of royalties; – The distribution of royalties to rights-holders

Issues and Answer Ø Commercial online services require a licence for more than one territory which gives legal certainty and insurance against infringements suits for all territories (multi-territorial licence) Ø This demand for a multi-territorial licence cannot be satisfied within the currrent structure of traditional reciprocal arrangements Ø Right holders should benefit from digital transmission technologies by having a choice as to which collecting society to join and to give mandate to for the multi-territorial online management of their rights • Give right-holders the choice to authorise collecting societies of their choice to online rights for the entire EU!!!

Objectives of the EU initiative

Legality of P 2 P under EU Law Ø Conclusion ØEU Initiative § Harmonization of copyright protection • exception for private use: back door for P 2 P users? • Injonction against intermediaries: potential actions against ISP and P 2 P server administrators? § Encouragement to multi-territorial online licensing and multi-territorial CRMs • Facilitate the growth of legitimate online services is the most efficient answer to P 2 P

Legality of P 2 P under EU Law