Increasingly customers at hotels, restaurants and bars expect a free Wi-Fi service to which they can wirelessly connect their laptops, mobiles and tablets to access the internet and surf the web. If such Wi-Fi is access protected, they request the login details. Traders have kept up with such demand with most of them offering Wi-Fi access within their premises free of charge as part of their service.

In offering such service, these traders are granting customers the possibility to access content through a Wi-Fi network provided by the operator of the business with little or no controls. In fact, customers may download data that is copyrightable. Does this expose the operator of the business to copyright infringements? This is the question that was referred to the Court of Justice of the European Union (CJEU) by a German court following a court case initiated by a retailer against Sony Music.

The legislative framework within which the context of this case is set is the E-Commerce Directive. This EU directive provides a defence to liability of intermediate providers of mere conduit services for unlawful acts committed by a third party with respect to the information transmitted. This so-called ‘mere conduit defence’ exonerates service providers for infringements committed using their service as long as they have not initiated the transmission; selected the recipient of the transmission; or selected or modified the information contained in the transmission.

Nonetheless, even if such defence is successful, national courts are still allowed to require the service provider to terminate or prevent an infringement.

Non-compliance can attract fines

The preliminary reference was made by the Munich regional court which was hearing a lawsuit filed by a retailer of lighting and sound systems. In his shop, the retailer offered a free Wi-Fi network accessible to the visiting public without passwords. In 2010, a user of the network downloaded a musical work in which Sony Music owned the copyright. Sony successfully brought an action against the retailer for damages and an injunction. The retailer appealed the decision on the grounds that he was not the actual party that infringed the copyright and was protected under the mere conduit defence pursuant to the E-Commerce Directive. The appellate court referred the case to the CJEU for guidance.

Prior to the delivery of the judgment of the Luxembourg Court, Advocate General Szpunar issued his opinion on whether the operator of a business that offers a free Wi-Fi network is liable for copyright infringements committed by users of that network.

The Advocate General (AG) concluded that the mere conduit defence under the directive must be interpreted to cover an operator of a local free Wi-Fi service, who offers that service to the public as an accessory to his principal economic activity.

He observed that consequently such operators should be precluded from liability for damage related to copyright infringements committed by third parties using the Wi-Fi service.

This was the case even if there was no direct economic benefit since it was a service offered free of charge, but was offered in an economic context, intended to increase consumer footfall.

The AG expressed the view, however, that an injunction can be imposed on such providers and non-compliance can attract fines. This is in line with the E-Commerce Directive, which grants the possibility to rightholders to seek injunctive relief.

In trying to strike a fair balance between the interests of rightholders and retailers, the AGl provided guidelines on the terms on which an injunction can be granted.

On a general note, he advised that restrictions must be consistent with freedom to conduct a business, freedom of information and the right to intellectual property protection. Specifically, he considered that measures intended to order termination of internet connections or force Wi-Fi operators to introduce password protection do not strike a fair balance between the rights and interests involved.

Similarly, he considered that imposing an obligation on such operators to monitor all communications passing through a network to determine whether any copyrightable material was transmitted is disproportionate.

The AG’s interpretation of the scope of the ‘mere conduit’ defence is welcome news for business owners using free Wi-Fi. The AG’s opinion fell short of considering whether the scope of the E-Commerce Directive extends to the operation of a free Wi-Fi network where there is no economic context. It remains to be seen whether the CJEU will concur with the opinion of the AG or extend the scope of the defence beyond the AG’s interpretation.

jgrech@demarcoassociates.com

Dr Josette Grech is adviser on EU law at Guido de Marco & Associates.

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