In McFadden v Sony Music Entertainment Germany GmbH, the Court of Justice of the European Union (“CJEU”) has ruled that providers of free WiFi networks are not liable for copyright infringement committed by third parties using their network.
Tobias McFadden owned a lighting and sound system store and, using the services of a telecommunications business, provided access to a free local WiFi network in the vicinity of his business. In 2010, a user of the free WiFi downloaded a song without the consent of the copyright holder, Sony.
Following a formal notice from Sony, McFadden sought a declaration of non-infringement before the Munich Regional Court. Sony counterclaimed seeking damages on the ground of McFadden’s direct liability for the infringement of its rights. The court granted an injunction against McFadden for direct infringement. McFadden appealed, relying on the mere conduit defence under Article 12(1) of the E-Commerce Directive (2000/31/EC) (the “Directive”).
The Munich Regional Court referred a number of questions to the CJEU regarding the interpretation of Article 12(1) of the Directive. The issues put to the CJEU were:
- Whether a professional who offers a free WiFi network, in the course of business, is providing an “information society service” within Article 12(1) of the Directive.
- The extent of the service provider’s liability in respect of infringement committed by third parties using the network.
- Whether an injunction can be obtained to stop or prevent further infringement.
As previously reported on the blog here, Advocate General Szpunar provided his opinion on the questions referred to the CJEU.
The CJEU considered whether the operation of a free, public WiFi network, such as that offered by McFadden, constituted an “information society service” within the scope of Article 12(1).
When read in conjunction with Directive 98/34 and Article 57 of the Treaty on the Functioning of the European Union (“TFEU”), it was accepted that the term “services” in the Directive means services provided for remuneration. The CJEU stated that a service of an economic nature performed free of charge may also fall within the scope of the definition. On this basis, the CJEU held that offering free WiFi for the purpose of advertising goods and services of a business constitutes an “information society service” under the Directive. McFadden provided the free WiFi access to drive traffic to his website and shop and was therefore able to rely on the mere conduit defence.
The CJEU then considered the limitation of liability for intermediary service providers. If a service provider such as McFadden is able to rely on Article 12(1), rightsholders cannot claim compensation or the reimbursement of costs if that network is used by a third party to infringe its rights. However, the CJEU held that Article 12(1) does not prevent rightsholders from seeking an injunction before the national court to prevent further infringement.
The CJEU stated that, when determining the extent of the measures of the injunction, the national authorities must ensure a balance is struck between the rights of the copyright owner and the service provider. The Directive expressly rules out imposing a requirement on the service provider to monitor information transmitted via a given network. Similarly, a measure which would terminate the internet connection without considering less restrictive alternatives would not strike a fair balance between the two parties. The court held that requiring a service provider to password-protect the internet connection ensuring that users reveal their identity before they can obtain the password would be an effective way of deterring potential infringement.
This judgment should provide some comfort to WiFi providers, such as owners of cafés, restaurants and shops, whose free services might be used by third parties to infringe the rights of copyright owners.