Toward the extension of obligations to other intermediaries in the internet

Hacia la extensión de las obligaciones de otros intermediarios en internet

Ernesto Rengifo García^*

^* The author extends special thanks to Lina Maria Diaz who’s collaboration was relevant to the fulfillment of this article.
Abogado Universidad Externado de Colombia, director del Departamento de la Propiedad Intelectual de la Universidad Externado de Colombia y profesor de Derecho de Contratos de la misma Universidad. Contacto: Ernesto.rengifo@uexternado.edu.co

Fecha de recepción: 2 de agosto de 2014. Fecha de aceptación: 2 de septiembre de 2014.

Abstract

It is well known that the copy diminishes the individual value of the creation and discourages the effort of the creator. Because of this, the responsibility of internet service providers (ISP) concerning copyright infringement by their users has been a subject of great controversy for more than a decade. This discussion has led to a consensus in the sense that the ISP will not be responsible when their participation in the infringement is limited to transmitting, linking, caching, and disseminating information generated by third parties, as long as other requirements are met, such as adopting and communicating policies intended to prevent infringements. However, the development of new business models and the expansion of services available online have raised the question of whether it is possible to extend the secondary or indirect liability regime to other intermediaries such as internet advertising services and financial transaction providers.

In order to analyze the liability regimes that could be applied to these intermediaries, it is important to take into account the following points, which will be developed in this paper: i) to understand the operation of online advertising and payments and the economic magnitude of these businesses, ii) to understand the liability regime presently applied to the ISP, iii) to study the objections that have been raised against the extension of such regime to online advertising and financial transaction providers, and finally, iv) to analyze how through recent legislative initiatives such as the proposed pipa, sopa, and open bills in the United States, efforts have been undertaken to overcome the objections and to offer effective and expeditious mechanisms to protect copyright in the internet.

Keywords: Copyright, Internet service providers, civil liability, telecommunications, Comparative Law.

Resumen

Es bien sabido que la copia disminuye el valor individual de la creación y desalienta el esfuerzo del creador. Debido a esto, la responsabilidad de los proveedores de servicios de internet (PSI) relativa a la infracción de derechos de autor por sus usuarios ha sido un tema que ha suscitado gran controverisa durante más de una década. Esta discusión ha dado lugar a un consenso en el sentido de que el PSI no será responsable cuando su participación en la infracción se limita a la transmisión, vinculación, almacenamiento en caché, y la difusión de la información generada por terceros, siempre y cuando se cumplan otros requisitos, tales como la adopción y la comunicación de las políticas destinadas a prevenir infracciones. Sin embargo, el desarrollo de nuevos modelos de negocio y la expansión de los servicios disponibles en línea han planteado la cuestión de si es posible extender el régimen de responsabilidad secundaria o indirecta a otros intermediarios, como a los proveedores de publicidad en internet y a los proveedores de transacciones financieras.

Con el fin de analizar los regímenes de responsabilidad que podrían aplicarse a estos intermediarios es importante: i) entender el funcionamiento de la publicidad y los pagos en línea, así como la magnitud económica de estas actividades; ii) comprender el régimen de responsabilidad que se aplica actualmente a la PSI; iii) estudiar las objeciones que se han planteado en contra de la extensión de dicho régimen a nuevos intermediarios; y finalmente, iv) analizar cómo a través de recientes propuestas legislativas (pipa, sopa y open en Estados Unidos) se han realizado esfuerzos para superar las objeciones y ofrecer mecanismos eficaces y ágiles de protección de los derechos de autor en internet.

Palabras clave: derechos de autor, proveedores de servicios de internet, responsabilidad civil, telecomunicaciones, derecho comparado.

Introduction to the subject

In his “Defense of Sextus Roscius Amerinus” Cicero said that “Lucius Cassius, whom the Roman people used to consider a most impartial and able judge, used constantly to ask at trials, ‘to whom it had been any advantage?’ The life of men is so directed that no one attempts to proceed to crime without some hope of advantage”¹.

The question that arises from Cicero’s suggestive statement and that this work seeks to answer is if internet intermediaries (credit card and advertising providers) undertake copyright infringement in the hope of taking advantage.

The Economist magazine in one of the main articles of its July 20, 2013 issue, titled “The Curious Case of the Fall in Crime”², reported that in spite of recession and unemployment crime had greatly diminished in big cities around the world due to technological advances and other factors, among which it underlined one of psychological character: “the main deterrent to crime is the fear of being caught”.

Does this criterion apply in the internet? Is it scary to be caught loading or downloading copyright-protected content in the internet or helping to do it? It would be risky to affirm, as the British magazine does about crime in the analogue world, that crime in the internet concerning copyright has decreased; on the contrary, we can say that piracy has grown with technology and that illegal loading and downloading in the internet do not produce the fear of being caught. Also, those activities generate huge profits.

It is well known that the copy diminishes the individual value of the creation and discourages the effort of the creator. Because of this, the responsibility of internet service providers (ISP)) concerning copyright infringement by their users has been a subject of much discussion for more than a decade³.

This discussion has led to a consensus in the sense that the ISP will not be responsible when their participation in the infringement is limited to transmitting, linking, caching, and disseminating information generated by third parties, as long as other requirements are met, such as adopting and communicating policies intended to prevent infringements⁴.

However, the development of new business models and the expansion of services available online have raised the question of whether it is possible to extend the secondary or indirect liability regime to other intermediaries such as internet advertising services and financial transaction providers.

In order to analyze the liability regimes that could be applied to these intermediaries it is important to take into account the following points, which will be developed in this paper: i) to understand the operation of online advertising and payments and the economic magnitude of these businesses, ii) to understand the liability regime presently applied to the psi, iii) to study the objections that have been raised against the extension of such regime to online advertising and financial transaction providers, and then, iv) to analyze how through recent legislative initiatives such as the proposed pipa, sopa, and open bills in the United States, efforts have been undertaken to overcome the objections and to offer effective and expeditious mechanisms to protect copyright in the internet.

The starting point to undertake the study of this problem is to understand the operation of the payment systems available in the internet, the diffusion of advertising online, and the economic magnitude of these businesses.

At present, the dissemination of advertising in the internet is one of the most profitable services online. In fact, the report on revenue derived from advertising in the internet carried out by the Interactive Advertising Bureau (IAB internet advertising revenue report) points out that this revenue amounted to $36.6 billion dollars in 2012⁵.

Since the inception of the internet, several mechanisms have been created to disseminate advertising, including marketing emails, and advertising in social networks, through search engines and mobile devices such as cellphones and tablets, digital videos, and several kinds of exhibitions like banners and pop-ups.

The dissemination of advertising online implies the participation and mediation of several actors⁶, such as the advertisers, who have a product or service to be promoted in the internet; the advertising managers, who do the promotion work for the advertisers; and the web editors, webmasters⁷, and administrators of web pages, who forward the advertisement selected by the advertiser to the public.

Several systems that may be related to the effectiveness of advertising have been established for the remuneration of these actors. In the Cost by click (CBC) system the amount to be paid by the advertiser will be given by the number of times the web bloggers click in the advertisement; in the Cost by Thousand Impressions (CTI) system the total value of the advertisement will depend on the number of times it appears in the web page, regardless of whether the bloggers do or do not click on it; while in the cases where the advertiser must pay a determined amount for each user who enters the site and places enough information in it to know that he is a potential buyer, we are dealing with the Cost by Lead system⁸.

This means that profits obtained from advertising by the web site where the advertisement is exhibited will greatly depend on the number of visitors to it, since the probability that a visitor clicks on an advertisement or becomes a potential buyer will increase as the number of visitors is greater⁹.

Since the internet is a worldwide center for the exchange of information, the quality of the content in a web site will determine the number of its visitors. This is why a way of attracting them is to make available to the public material that may be protected by copyright, such as videos, songs, movies, books, etc.¹⁰.

On the other hand, the already mentioned report carried out by the Interactive Advertising Bureau shows that there is an increasing variety of advertisers using the internet to promote their products and services¹¹. This has created the need for mechanisms to allow payments online, in order that the supply created by the internet is met by an effective demand through the same means. In this way a new business opportunity was opened for financial transaction providers such as banks and credit bureaus, who had to create tools to enable their users to administer their resources in the cyberspace by making all kinds of transactions, from electronic transfers to payment of utilities, including, naturally, copyright works.

All this testifies to the creation of very profitable business methods by the new providers and intermediaries in the internet. It still is questionable, however, whether the activities they run into within their trade is enough to declare them responsible for copyright infringement and to oblige them to pay compensation to copyright holders or to adopt supervisory or safeguard measures to reduce the infringements.

I. Secondary liability

In order to answer the foregoing question it is necessary, therefore, to understand the liability regimen presently applied to the internet services providers.

The responsibility of the ISP for copyright infringements by their users has been regulated in several countries. This was made in the United States by the issuance of the Digital Millennium Copyright Act of 1998 (dmca), which has served as a model to most of the laws tackling the subject; and in Europe by the Directive 2000/31/CE from the European Parliament and Council regarding certain juridical aspects of services in the information society, especially electronic commerce in the internal market, and also by Spanish Law No. 34 of 2002.

The DMCA, for example, contains a list of circumstances that would limit the corrective measures or compensation mechanisms to be imposed on the ISP in case their users incur in copyright infringements. The dmca does not establish exceptions to copyright in the internet, but, we must insist, it limits the amount and the compensation mechanisms to which the ISP could be condemned when copyright infringement is proven¹².

The restrictions will be applied as long as the participation of the ISP in the infringement is limited to transmitting, linking, storing, and disseminating information generated by third parties. These circumstances or exceptions are known as “safe harbors”¹³.

Moreover, for the dmca to be applicable and for a web site to be considered a safe harbor certain requirements must be met. The first one is that the ISP may be qualified as “Service Provider” following the definition contained in the dmca¹⁴. Also, the ISP must adopt and communicate policies intended to avoid infringements; on having knowledge of an infringement through its services, the ISP must take all necessary measures to withdraw the infringing material and could not interfere with the technical mechanisms adopted to identify and protect works in the web¹⁵.

Then, considering that the dmca did not limit the reach of copyright, the diffusion of protected material in the internet also requires the express authorization of their authors. And this makes it possible that the ISP be condemned for the infringements committed in their networks under the regimen of contributory liability.

This second liability regimen applicable to the ISP establishes, in general terms, the following: “A person is responsible for the infringement (or for any other act not allowed) of an actor or of a third party only when: (1) the behavior of the actor is a punishable conduct, (2) there are circumstances in which it is ‘fair’ to affirm that another person is responsible for the acts of the infringer”¹⁶.

Within this context, for a ISP to be condemned for contributing to the commission of copyright infringements through the service he provides it is indispensable that there is a direct infringer, which means that it must be proven that a video, a book, or a video game was placed in the web by a cybernaut and copied by others thanks to a web site without the express authorization of the owner of the video, the book, or the video game. Also, the circumstances in which it is fair to affirm that the ISP is responsible for the direct infringement have been presented in two categories: by having consciously and materially contributed to the commission of the infringement (contributive liability), or because having the faculty of supervision over the infringer he does not exercise it and derives some direct or indirect benefit from the infringing conduct (vicarious liability)¹⁷.

By comparing the assumptions for the application of the dmca with those of the regimen of secondary liability it can be inferred that if one of the regimens might not apply the other would, since the factual assumptions that must be proven to apply the latter regimen correspond with certain exceptions of “safe harbor”.

In fact, for a ISP whose business model implies to accommodate or reference protected material not to be declared responsible for the conduct of his users he must prove that he ignored the commission of the infringement, while for the contributive liability to be applicable the actual knowledge of the infringement is required in addition to a material contribution to the same¹⁸. On the other hand, the doctrine of vicarious liability implies that a direct benefit from the infringement is obtained and that the possibility to control it or avoid it has existed, assumptions in which it is impossible to apply the exceptions established in the dmca.

In other words, the “safe harbor” exceptions are only the first step to attribute the responsibility of the isp. The second step, after concluding that neither of those exceptions takes form, is to evaluate if the ISP is responsible for the acts of a third party according to the general rules of civil responsibility. And depending on the conclusion reached, the ISP could be condemned to pay monetary compensations or only to adopt precautionary measures such as limiting the access to the services supplied by him in the web¹⁹.

II. Relevant cases

After outlining the regimen of responsibility applicable to the ISP in the United States, it is useful to examine if this regimen can be extended to other intermediaries in the internet, such as the financial transaction providers and the internet advertising services.

Considering the nature of the secondary responsibility and the assumption of application of the “safe harbor” regimen it is possible to infer that both of them can be applied to other intermediaries in the internet such as advertisers and financial transaction providers.

In fact, the secondary responsibility helps to determine in what cases a person may be responsible for the acts of a third party, and in the United States this doctrine has been applied even in a transversal way in cases of copyright infringement. So, the United States Supreme Court pointed out in the case MGM Studios Inc. v. Groskter: “[t]he Copyright Act does not expressly render anyone liable for infringement committed by another, […] these doctrines of secondary liability emerged from common law principles and are well established in the law”²⁰.

In Perfect 10 v. Amazon.com it reads: “[c]laims against service providers for direct, contributory, or vicarious copyright infringement, therefore, are generally evaluated just as they would be in the non-online world”²¹.

As indicated, for the “safe harbor” exceptions to take effect it is necessary that the defendant may be qualified as a Service Provider following the definition established in the dmca²². In broad terms, this definition determines that a ISP is whoever offers and realizes the processes and jobs needed for the internet to be accessible to the final consumers, regardless of the service involved, that is, whether the ISP is a search engine, a cyberlocker, or a social network such as Facebook, as long as the isp, in development of his activity, limits itself to the transmission, linking, caching, and dissemination of content generated by third parties. For being such a broad definition, the dmca would extend to all ISP presently operating and those that can exist in the future.

However, and based on the cases that will be set out below, it can be said that neither of the two modalities of subsidiary liability (contributive or vicarious) has been easily applicable to protect copyright in the internet, either because the owners of the protected works have not proven that the ISP had knowledge of the commission of the infringement to be able to avoid that its conduct were covered by the stipulations of the dmca, or because it was not exactly established in what consisted the material contribution of the ISP in the configuration of the infringement so that it could be declared subsidiary liable²³.

The cases Robert Hendrickson v. eBay Inc. et al.²⁴ and Perfect 10, Inc. v. CCBILL LLC²⁵ illustrate the difficulty faced by copyright owners at the time of proving that they correctly notified the ISP about infringements committed against their rights through the site provided by the same, a requirement contemplated in Section 512 (c) (3) of Title 17 of the United States Code, in order that the ISP is ordered to withdraw the infringing content from the web or is condemned, in case he does not do it.

The web site of eBay brought together a great number of cibernauts who bought and sold all kinds of goods and services, including pirate copies of a documentary titled “Manson” owned by the plaintiff Robert Hendrickson, who took legal action intending that eBay were declared responsible for having contributed to the infringements committed by its users.

The Court of the Central District of California considered that, according to the available evidentiary material, there was no doubt that the conduct of eBay was covered by the stipulations of the dmca because the plaintiff did not notify the defendant in duly form, since he did not include in his communications a statement on the good faith and truthfulness of his affirmations and did not provide enough identification of the infringing material²⁶.

In the case Perfect 10, Inc. v. CCBILL LLC it also was concluded in second instance at the Court of Appeals of the Ninth Circuit of the United States that the notifications of infringements sent by Perfect 10, owner of the copyright, to two isp, CWIE y CCBILL (the first offered web hosting and connection and the second allowed the use of credit cards for subscription payments), did not comply with the legal requirements to consider the ISP sufficiently informed of the infringement so that they be declared responsible.

The Court’s reasoning admits that the dmca establishes limitations to the compensation the ISP must pay in case an infringement is proven²⁷, and points out that for those limitations to be applicable it is necessary that the ISP adopts reasonable measures intended to avoid infringements.

Starting from the text of Section 512 (c) of the United States Code, the Court considered that the reasonableness of those measures implies that the ISP has current knowledge of the infringement, for which it is necessary that the holder of the copyright informs the ISP in duly form, that is, complying with the formal requirements established in the same section.

Applying the same logic, the Court considered that the notifications sent by Perfect 10 did not create in cwie and ccbill a current knowledge of the infringements because none of the several communications complied with the requirements that they be in writing, be sent to the agent designed by the isp, provide sufficient identification of the infringing material, and contain a sworn statement on the good faith and truthfulness of the same²⁸.

In the opinion of the Ninth Circuit, the need that the notification to the ISP meets all the requirements is not merely a formal point but a substantial one, because it is on its basis that the provider blocks access to the infringing material or removes it; and if the notification is defective, is blocked, or non-infringing material is removed, the freedom of expression consecrated in the First Amendment of the U.S. Constitution ends up being affected.

On the other hand, in cases like Perfect 10 Inc. v. Visa International Service Association et al., as in Elsevier Ltd. and John Wiley & Sons Inc. v. Chitika Ic et al., the copyright holders unsuccessfully sought that the doctrines of contributive and vicarious liability were applied to those intermediaries.

In the first case, the Court of Appeals for the Ninth Circuit of the United States recognized that the payments service provided by Visa for the legal acquisition of works produced by Perfect 10 encourages disregard of copyright by allowing the infringer to derive economic benefit from his conduct, but it sustained that the reproduction, alteration, and exhibition of the material of Perfect 10 in the internet may occur without the Visa services, so that the activity of Visa cannot be considered as a material contribution in the terms of contributive liability²⁹.

Indeed, the question that emerged in this case was whether the payment process constituted an essential step in the copyright infringement or if there was inducement -the other element from which the contributive liability can be inferred- when payments systems were offered for illegal content provided in a web site. The Court of Appeals of the Ninth Circuit sustained that the defendants did not induce consumers to buy pirate products when they used their credit cards.

The Ninth Circuit also pointed out that if subsidiary liability were to be extended in such degree to intermediaries, peripherally involved third parties also would end up being liable: among these, companies that produce computer screens, provide storage services or develop software for image edition, and even utility companies that provide electricity to the internet.

Regarding the vicarious liability, the Court of Appeals sustained that the defendants absolutely did not have the right to stop the infringing activity: “They cannot stop websites from reproducing, altering, or distributing infringing images”³⁰.

Curiously, the Court of Appeals did not analyze, as an element of vicarious liability, the direct financial interest that the online payments systems had in the infringing activity because it considered that Perfect 10 had failed to prove that the defendants had the right and the capacity to control the users’ infringing conduct. The economic benefit obtained with the use of online payments systems in pirate sites, therefore, was not considered³¹.

In the same way, also in the case Perfect 10 v. CCBILL the Court of Appeals of the Ninth Circuit affirmed that the possibility of obtaining pirate material in the sites where CCBILL y CIEW offered their services and the works of Perfect 10 were illegitimately exhibited did not attract web site subscribers and so the subscription payments in those sites could not be considered as “the collection of a direct economic profit derived from the infringement”, an indispensable requirement to declare the vicarious liability of the isp³².

Thus, several questions arise about the effects that would cause an extension of responsibility to the intermediaries in the internet for acts of third parties. For example, whether this could affect the operation of the web or produce an impact in the judicial system by increasing the number of claims against subjects that could potentially be declared responsible.

In the case Elsevier Ltd. and John Willet & Sons Inc. v. Chitika Inc., and kapil Dev Saggi, the authors of pharmacology books that were being illegally downloaded thanks to a web page named “Pharmatext.org, Free Pharma EBooks”, sued the company Chitika, advertising manager of that page, with the purpose of having it declared responsible of the downloading³³.

The District Court of Massachusetts denied the pretension by considering that a direct copyright infringement had not taken place since none of the downloads had been made in the United States; in second place, because even if the infringements had occurred, Chitika did not consciously contributed to the same since the web sites where the page “Pharmatext.org, Free Pharma EBooks” directed the bloggers was automatically opened without human intervention. Finally, the District Court quoted the case Perfect 10 only to say that to make economically profitable the commission of infringements could not be considered as a material contribution that resulted in the declaration of responsibility against Chitika³⁴.

Without prejudice to what has been mentioned and to the inconveniences that exist in determining the responsibility of the isp, in 2011 the most famous animations producer in the world, Disney Enterprises Inc., achieved that the Southern

District Court of Florida, United States, rejected the motion to dismiss an action undertaken by it against Hotfile Corp et al. for copyright infringements committed by the latter’s subscribers. The Court’s main foundation in this case was that the business model of Hotfile, as ISP of a web site that allows its users to share material protected by copyright in exchange for an economic retribution, could lead to consider the ISP secondarily responsible for the infringements by encouraging disregard of copyright³⁵.

Afterwards, on December 3, 2013 the Southern District Court of Florida declared Hotfile Corp et al civilly liable for copyright infringement³⁶, on the basis of the business model employed by the cyberlocker and due to the ability the same had to stimulate and control the users’ infringing behavior.

Hotfile had two main income sources: first, the monthly subscriptions its users were willing to pay to make a big number of downloads with greater speed, and even for movies that still were being shown in the movie theaters; and second, the “Hotlink” system, designed to share movies and television series without having to enter the Hotfile web site.

In addition, the cyberlocker paid its “affiliate” users for sharing movies and videos as long as these were downloaded, at least, by one thousand more users, that is, the “subscribers”. Concerning this point, Hotfile recognized that one of its objectives was to increase the number of its affiliates and the amount of their payments depending on the number of times the files were downloaded, while it discouraged those users that only employed its servers to store personal files³⁷.

The above mentioned facts led the Southern District Court of Florida to declare as proven the direct responsibility (for own fault) and the indirect one (for a third party fault) in copyright infringement. Concerning the direct responsibility, the Court considered that thanks to the control Hotfile exercised over the servers where the infringing copies were found, it had played a leading role, together with its owner, Anton Titov, in the offer of infringing material and its massive distribution, for which reason their participation in the infringement had been personal and direct.

Now then, the foundation to declare the contributive responsibility of Hotfile was that, in spite of knowing the infringements, it not only failed to adopt the technological measures aimed at avoiding them, but materially contributed to them by adapting its technological platform to make sure of always having attractive material for its subscribers. In addition to this, the fact that the ISP could control and monitor its users’ behavior and had obtained a direct profit from the infringement was a valid reason for the Court to declare the vicarious responsibility of Hotfile³⁸.

As a last point in connection with Disney v. Hotfile it is important to highlight that although the issue of the “safe harbor” exceptions was not dealt with, these would have not been easily applicable since, as was pointed out, the defendants did not take measures to avoid the infringements; on the contrary, Hotfile had several electronic addresses (URL) for infringing files in the web, so that in case one of these addresses was deactivated at the request of the copyright holders, another address would be instantly activated without the user (affiliate) having to again upload the file to the web³⁹.

At any rate, in the light of the mentioned cases and notwithstanding that the two liability regimens could be applied to all the ISP precisely for the fact of being ISP -and also because the secondary responsibility encompasses all areas of law-, it is felt that their application to other intermediaries has not been equally effective; this is so because it is not easy to demonstrate the assumptions allowing their application, v. gr., the existence of a direct copyright infringement, the knowledge of the infringing conduct by the intermediaries and, above all, the most difficult requirement to satisfy which is proving that the intermediaries have materially contributed to the infringement.

III. Regulatory projects

In order to fill that void, two bills were proposed in the United States: the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act⁴⁰ (PIPA) and the Stop Online Piracy Act (SOPA)⁴¹.

The purpose of these two proposed bills was to reduce copyright infringements online by allowing intermediaries in the internet, that is, both the traditional ISP and the advertisers, payment service providers, search engines, domain name registrars, etc., to take measures against websites dedicated to committing such infringements, especially those located in other countries.

The proposed bills empowered the Attorney General to seek judicial enforcement of the obligation of ISP to restrict access to sites defined as infringers⁴². Moreover, SOPA established in its section 103 that providers of online payment services and managers of advertising in the internet should deny their services to offending websites, both those in the United States and those located in other countries.

Criticism of the proposed bills was strong and abundant. It was affirmed that if they were approved the operation of the internet would be affected. Since web pages located out of the United States would be punished, this would imply worldwide application of U.S. law. It also was sustained that the proposed bills would violate the First Amendment of the U.S. Constitution by limiting freedom of expression in the internet. Moreover, it was pointed out that they would allow the State to constantly keep under surveillance the activities of the cybernauts, and also that social networks like Facebook and YouTube would disappear⁴³.

Most of the criticism of sopa concerned Sections 102 and 103 of Title I. The first one allowed the Attorney General to obtain a Court’s order against pirate sites. Therefore the isp, search engines, payments processors and ad networks would be forced to take predictable and reasonable technical measures against the infringing sites. Orders were specifically foreseen, for the ISP to block access to the infringing sites; for the search engines to stop providing link services to those sites; for the payment processors to stop payment transactions of U.S. users, and for the ad networks to end the exhibition of advertisements in infringing sites in the name of those sites⁴⁴.

Section 103 seeks to create a system to facilitate the notice that copyright holders must give to payments processors and ad networks on the use of their services by infringing sites. This section was to be applicable to all those sites, local or foreign, that were directed to audiences in the United States⁴⁵.

The social unrest generated by the sopa and pipa initiatives prevented their approval in the United States Congress⁴⁶. Nevertheless, and since the need persists of protecting copyright in the internet, a third legislative initiative, called “Online Protection and Enforcement of Digital Trade Act” (open) was presented to the U.S. Congress, also containing several dispositions intended to force intermediaries to deny their services to websites that are declared as infringers⁴⁷.

At any rate, none of these initiatives would modify the norms on civil responsibility applicable to the intermediaries, that is, the “safe harbor” exceptions and those related to indirect responsibility for the actions of third parties; but they would seek to establish mechanisms so that an authority (judicial in the first case, administrative in the last one) forced the intermediaries to adopt the necessary and reasonable technical measures to prevent financing of offending websites.

In OPEN, the Section titled “Saving clauses” determines that nothing in the dispositions of Section 337 A, that would be introduced in the United States Code if the bill is approved, would be interpreted as a limitation or extension of the means of civil or penal compensation available to any person in the United States for copyright infringing activities in the internet, according to any Federal or State law.

And concerning the secondary responsibility, it is also pointed out that the law would not be interpreted as a limitation or extension of the vicarious or contributive liability as foreseen in the respective law. The proposed bill reads:

Interpretation rules related to the vicarious or contributive responsibility.- Nothing in this section shall be construed- (A) To enlarge or diminish vicarious or contributive liability for any cause or action available under title 17, United States Code, or the Lanham Act, including any limitations on liability under section 512 of such title 17…

It is precisely in section 512 where the liability exceptions mentioned supra are outlined, which allow to have a web site as safe harbor.

OPEN provides that copyright (and trademark) holders may submit claims to the U.S. International Trade Commission (an independent federal agency known in the United States for settling certain conflicts concerning patents), by stating under oath that a web site is involved in a copyright infringement, and identifying the providers of payments services and the advertisers, with the purpose that the Commission orders them to adopt measures to avoid the payments and the display of advertisements in the web sites after having determined the existence of an infringing activity.

OPEN is very similar to sopa to the extent that it seeks to stop the flow of funds to infringing sites. However -and this is one of their differences-, under open the payment service providers and the ad networks would not assume legal obligations until the Commission issued the respective order; on the contrary, sopa seeks to impose obligations to the intermediaries on the basis of the statements of copyright holders.

In contrast to the U.S. precedents based on civil liability trials, a Swedish court in the case Sony Entertaiment et al. v. Pirate Bay, applying penal norms intended to determine liability for complicity acts on the part of the isp, Pirate Bay, and its administrators for infringements occurred in its files exchange network, considered irrelevant to analyze the degree of knowledge that the defendants might have had about the infringing activities that their content providers and users materialized in their networks and systems, because the defendants must have been conscious of the risks of their operative system⁴⁸. So, the discussion goes on.

IV. National Law

In Colombian law the secondary liability is ruled by general norms of civil liability of the Civil Code and by special rules contained in particular statutes of copyright recognition and protection.

Concerning the first ones, derived from the Napoleonic Code of 1804, there are two that would apply to determine the responsibility of the isp: “One who has committed a crime or fault, who has caused harm to another, is obliged to compensation” (C.C 2341), and the rule of responsibility for the actions of others according to which, “Every person is responsible, not only for his own actions to the effect of compensating the harm, but for the actions of those that are in his care. (…) But the responsibility of such persons will end if with the authority and care that their respective quality confers them, they were not able to prevent the action” (C.C. 2347). This means that the legislator’s will, in this case, is to protect the victim by placing the responsibility, not in the infringer himself but in the third party that the law considers liable.

Therefore, to the extent that the ISP may prevent the infringing action for having control on the platform and knowledge that the available content is illegal, he must take the necessary measures to forestall the commission of the conduct and in this way evade the responsibility that could be attributed to him.

The following are typical elements of liability for the actions of others: “1. That a subordinating and dependence link exists between two persons; 2. That this subordinating and dependence link is of private law; 3. That both persons are capable of crime or misdemeanor; 4. That the subordinate or dependent person has committed a crime or illicit action, and 5. That the victim proves the responsibility of the subordinate or dependent person”⁴⁹.

It is evident that the responsibility takes form against a third party and that the mentioned requirements are established for the purpose that the person who controls or cares for the actions of others in virtue of a legal or contractual link assumes the full compensation for the harm caused by other subject of law. The question is whether on the basis of this criterion a presumption iuris tantum is derived against the controlling or dominant subject.

About the responsibility for the action of others the Colombian Supreme Court of Justice has pointed out:

… in one of its possible modalities, the contractual indirect liability, also called reflected or legal liability, occurs when someone is ordered by law to respond to third parties for the harmful effects of activities realized by other persons who are under his custody or care or of whom, in dependency situations, that person receives business tender, principle of general character that is formulated with absolute clarity in incise 1 of article 2347 of the Civil Code […] complemented afterwards with the indication of the assumptions in which, in the opinion of the legislator, this type of liability is better identified, and ending, in the final incise, by declaring in the just mentioned precept that this liability is configured if the persons to whom it is attributed in principle attest in a conclusive manner that notwithstanding the authority and care that their respective subordinating quality confers on them, they could not prevent the action that caused the harm for which compensation is required of them⁵⁰.

So the dominant party, even when acting with sufficient control and due diligence, only would be exonerated of responsibility against third parties if he can prove that the event giving rise to the damage was inevitable.

At any rate, it is good to point out that the liability figure for actions of a third party applied to the ISP could be inferred as long as it is proven that he had or could have control on the infringing actions of third parties. If such control is not proven it is very difficult to apply this modality of extra contractual civil responsibility (tort law).

Now then, with respect to the level of protection based on special provisions, Andean Decision 351 of 1993⁵¹ contains a norm on the matter. Article 54 reads: “No authority, or natural or juridical person, may authorize the use of a work, interpretation, phonographic production, or radio broadcasting, or lend support for their use, if the user does not have the express and previous authorization of the copyright holder or his representative. In case of non-observance they will be jointly responsible”.

In recognizing joint liability, this norm requires that some of its elements be subject to judicial interpretation in order to understand their actual meaning and reach; especially the expression, “or lend support for their use”, from which joint liability could derive not only for the mere providers of access to the internet but also to other, more sophisticated isp, who although do not materially contribute to the infringement, technically, financially, or commercially encourage it. But here we are in the area of speculation because in the Andean region there has not been a judicial precedent to clarify the situation. Still, and in the light of the legal text, it is clear, for example, that if a cloud computer service provider lends support for a work to be used without the authorization of the copyright holder, he would be jointly liable for the infringement⁵².

Furthermore, since Colombia’s Free Trade Agreement with the United States already entered into force, the country committed itself to adopt legislative mea-sures to regulate ISP limitations with similar provisions to those included in the dmca. This makes it all the more important that the secondary liability regimen, the safe harbor exceptions and the legislative initiatives being discussed in other countries are understood in Colombia⁵³.

Article 16.11 of the tpa, related to the observance of intellectual property copyright, stipulates that each party should adopt “legal incentives so that service providers cooperate with copyright holders in dissuading the unauthorized storage and transmission of copyright protected materials; and legislative limitations concerning the reach of the available resources against service providers for copyright infringements they do not control, start, or direct, and that occur through systems or networks controlled or operated by them, or in their representation”.

The Treaty defines the ISP as service providers online, regardless of the type of service they provide or the business model they use for that purpose. It is pointed out that the ISP cannot be convicted to pay monetary compensations to the creators, but only to restrict the entry of infringing users to their web sites, when their activity is limited to transmit, link, or temporarily storage content created by third parties. They also should adopt a mechanism that allows them to receive notifications from copyright holders when these consider that their rights are being infringed, in order that ISP adopt the pertinent measures⁵⁴.

It must be underlined that the regimen that will derive from the Trade Promotion Agreement will not exclude the application of the general regimen of civil responsibility (tort law) or of the special norm contained in the Andean Decision. Consequently, a claim for damages which is excluded by the Treaty’s regimen (“these limitations will exclude pecuniary compensations”), may be raised with the exercise of a general action of civil responsibility or with the use of the special Andean norm.

Final evaluation

Going back to electronic payment operators, it is convenient to highlight the following statements from the already mentioned case Perfect 10 Inc. vs. Visa International Service Association et al, not made by the dissenting judge but by the majority opinion:

The defendants can refuse to process credit card payments for those images, but while this refusal would reduce the number of those sales, that reduction is the result of indirect economic pressure rather than an affirmative exercise of contractual rights.

We recognize that the financial pressure frequently is very strong, but precisely for this reason we doubt in extending the vicarious liability law to encompass any kind of financial pressure.

It is an article of faith of the free market that, subject to certain limited exceptions, one can refuse to deal with anyone for any reason, and by refusing to deal with the offending websites, these providers could limit infringement⁵⁵.

We can observe, then, that although the payment systems providers would not materially contribute to the infringement, those systems do make it easier and economically more profitable for the infringers. Even if the infringement itself is not the payment, because the violation consists of the reproduction, alteration, and distribution of the images, the transcribed statements show the effective intervention that electronic payment operators could have in the reduction of infringements of protected content. The Ninth Circuit recognized that the suspension of payments with the use of credit cards would reduce sales in the offending sites or where infringing material is marketed. And that is what all this is about.

If the European Union could settle the simmering conflict between the principle of free circulation of goods and the principle of territorial validity of intellectual property rights by making the distinction between the existence and the exercise of those rights; and if U.S. law foresaw the protection of content in the internet without ignoring its importance as a marketplace of business, trade, and information, the challenge is to achieve that the free circulation of ideas, business models, and the freedom of expression do not affect the rights of creators⁵⁶.

The European Court of Justice in the case L’Oréal v. eBay pointed out that the safe harbor privilege foreseen in article 14 of the European Directive on Electronic Commerce only applies for neutral activities of the electronic market operator. According to the European Court, this article “should be interpreted in the sense that it applies for an electronic market operator when he does not perform an active role that allows him to acquire knowledge or control of the storage data. This operator performs such role when he provides his consistent assistance, in particular, to optimize the presentation of the sales offers in question or in promoting such offers”⁵⁷.

In view of this it is relevant to ask if in truth the operators of payment systems online or those who provide advertising services in infringing sites of the internet may proclaim themselves as genuinely neutral⁵⁸. This, of course, is the quid of the matter.

To protect copyright in the internet and to regulate the responsibility of service providers and intermediaries several factors must be considered, such as making sure that access to information is easy, the creation of new businesses and services is allowed and, of course, the freedom of expression of the cybernauts is possible⁵⁹.

But it is also necessary that the actors of the private sector cooperate in the reduction of the disregard for copyright, adopting technical measures to prevent infringements. Business models in the internet at the cost of copyright imply the loss of the individual and social value of the creation.

Alternative mechanisms are needed, like fostering of education of the cibernauts respect to copyright⁶⁰ and encouraging self-regulation on the part of the intermediaries; and measures that make the respect for copyright in the internet profitable and that assure to copyright holders the ownership of the revenue derived from the exploitation of their creations. An example of this last case is found in the recent alliance between YouTube and Egeda⁶¹.

In short, the fight against piracy in the internet requires that all actors involved recognize the importance of the issue and take steps commensurate to the role they play in it. So, it is for copyright holders to facilitate the identification of infringing sites; for technological companies to provide technical tools needed to block the infringer one he has been identified, or to restrict the financial means that support his functioning; for companies holding trademarks to pay more attention to the sites where their distinctive signs appear and to indicate in what web sites they wish to advertise and in which ones they do not; for the fans and cibernauts to recognize their basic role in this controversy, because they are the final recipients both of the copyright protected material and of the advertising available in illegal sites. Their demand in infringing sites constitutes an additional economic incentive for the perpetuation of piracy and so they, as the other parties involved, must take action.

One final thought, as timely as that of Cicero, from Jaron lanier’s recent book Who owns the future? serves as the postscript of these lines: “When copying is easy, there is almost no intrinsic scarcity and therefore market value collapses”. Therefore, to persecute the money that encourages the infringement will help to rescue the intrinsic value of the creation.

Notes

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