The Authors' Take - Demystifying the ‘Honest’ Infringer: Reorienting Our Approach to Online Copyright Infringement using Behavioural Economics

Demystifying the ‘Honest’ Infringer: Reorienting Our Approach to Online Copyright Infringement using Behavioural Economics

by Sabesh Asokan

There is an intriguing paradox at the heart of online copyright infringement: while most people perceive themselves as law-abiding and honest, the practice of unlawfully downloading copyright material is widespread. How might we explain this contradiction? Could the answers inform our approach to addressing online infringement? These are questions I sought to confront in my upcoming contribution to JIPLP.

To shed light on these issues, I turned to research in the sphere of behavioural economics and psychology. In a recent work, Dan Ariely examined the disconnect between individual self-concepts of honesty and the propensity to engage in dishonest behaviour. In the context of intellectual property law, Ariely’s work suggests that the social acceptability of online copyright infringement, and negative perceptions of the creative industries fuel infringement. This is because people’s moral intuitions about what constitutes acceptable behaviour are shaped by the norms within their social groups, and people often rationalise dishonest behaviour as justified retribution against wrongdoers.

Yet, existing approaches to tackling copyright infringement have failed to effectively address these core beliefs which drive individuals to infringe. The prevailing response to online copyright infringement among developed countries has been to strengthen and expand laws against copyright infringement. Particularly notable developments have been the introduction of graduated response systems and the growing use of website blocking injunctions. While legal measures excel at reducing the supply of infringing content, they have only had modest, transitory success in reducing the demand for such content. I suggest that this is because legal solutions presume infringing behaviour is based on a rational assessment of the costs and benefits associated with infringement, whereas the psychological and structural drivers of infringement are far more complex.  

To reorient our approach to copyright infringement, I examine how social norms, market strategies, and digital architecture can target key drivers of online infringement left unaddressed by legal solutions. Particular highlights include: exploring how to deliberately cultivate a norms-based intellectual property system, examining the potential of blockchain technology to enhance access to legal content, and investigating how to shape the architecture of the Internet to ‘nudge’ consumers to select legal content.  

The approach I suggest does not demand that we dismiss the value of the law in addressing infringement. Instead, by recognising the value of other instruments in the regulatory toolbox alongside the law, we can begin to craft a more nuanced approach, sensitive to the full breadth of its causes.

[This is an Authors' Take post, which provides readers with an insight into current IP scholarship, featuring preliminary comments and thoughts from authors of articles accepted for publication in forthcoming issues of the Journal of Intellectual Property Law & Practice (OUP).] 

The Authors' Take - CJEU addresses restrictions by object under Article 101 TFEU in the context of online sales platforms

CJEU addresses restrictions by object under Article 101 TFEU in the context of online sales platforms

by Stephen Barratt

On 6 December 2017, the Court of Justice of the European Union (CJEU) revalidated the assertion that the preservation of luxury is an aim capable of shaping the presumption that a practice is outside the scope of Article 101 Treaty on the Functioning of the European Union (TFEU).

The CJEU had appeared to reject this proposition in Pierre Fabre Dermo-Cosmétique, C-439/09 EU:C:2011:649 (Pierre Fabre). Not so, said the CJEU in Coty Germany GmbH v Parfumerie Akzente GmbH, C-230/16, EU:C:2017:941, explaining that the – seemingly unequivocal and independent – assertion at paragraph 46 of Pierre Fabre was actually a function of the specific factual background.

The German court of first instance, Landgericht Frankfurt am Main (Regional Court, Frankfurt am Main, Germany), had been required to assess the legality of a distribution contact, by means of which Coty Germany, a luxury cosmetics supplier, was seeking to prevent its distributor selling via online outlets with any discernible third party presence. This would prevent the distributor, Parfumerie Akzente, from using its preferred online outlet, Amazon.de.

Litigation ensued when Parfumerie Akzente refused to agree to the supplementary terms (an agreement regarding physical sale locations was already in place). The court of first instance applied Pierre Fabre, judging the agreement to be in violation of Article 101 and hence unenforceable.

The matter was brought, on appeal by Coty Germany, before the referring court, the Oberlandesgericht Frankfurt am Main (Higher regional court, Frankfurt am Main, Germany). This court asked the CJEU to delineate Article 101 in relation to agreements designed to preserve the luxury aura of products, and also with regard to the specific agreement under dispute. The first question asked which principles are engaged when determining a restriction by object for the purposes of Article 101(1) TFEU. The second asked it to weigh these principles against the factual matrix outlined by the referring court, a proportionality enquiry. The CJEU was also asked to advise on the application of Regulation (EU) No 330/2010 (The Block Exemption Regulation). Coty Germany did not exceed the market power threshold so, even if the agreement did invoke Article 101, it could be presumed exempt if not deemed to be a ‘hardcore restriction’.

The CJEU, having dealt with Pierre Fabre, referred to a trade mark case, Copad v Dior, C- 59/08, EU:C:2009:260, in which it had expounded the link between a product’s luxury aura, its quality and its value to consumers. Unfortunately, the CJEU’s reasoning begs the question of how a normative assertion grounded in trade mark law retains its validity in the markedly different legal context of competition, especially given that commentators remain equivocal about such extension of a trade mark’s origin function.

On the proportionality of the measures, the CJEU’s view was that, unlike the blanket internet ban in Pierre Fabre, the agreement in question was allowable because internet customers could still purchase the goods, albeit via the distributor’s own website. It relied on a Commission report which showed that 90% of consumers used this purchase method. Significantly - as is habitually the case in the internet age - the value of this aspect of the judgment is transient, rooted as it is in current consumer behaviour.

Less easily expunged and all the more deserving of critical attention is the CJEU’s conclusion regarding luxury auras. It must be hoped that a future case will give the CJEU the chance to clothe the essentially subjectivist stance it took in Coty with an adequate rational framework. In the meantime, the matter returns to the referring court for adjudication, with Coty Germany – and the luxury cosmetics industry in toto - expected to be vindicated.

[This is an Authors' Take post, which provides readers with an insight into current IP scholarship, featuring preliminary comments and thoughts from authors of articles accepted for publication in forthcoming issues of the Journal of Intellectual Property Law & Practice (OUP).]

The Authors' Take - Spiegel Online: Do copyright exceptions and fundamental rights make easy bedfellows?

Spiegel Online:

Do copyright exceptions and fundamental rights make easy bedfellows?

Tito Rendas[*]

Universidade Católica Portuguesa – Faculdade de Direito

In Spiegel Online – a reference to the Court of Justice of the European Union (CJEU) made in the context of proceedings opposing German politician Volker Beck and news publisher Spiegel Online GmbH – the German Federal Supreme Court (BGH) referred a number of questions about the interpretation of exceptions laid down in Article 5 of the InfoSoc Directive, in particular the exception for the reporting of current events and the quotation exception.

Most notably, the BGH asked about the way in which the Charter of Fundamental Rights of the EU should be taken into account in determining the scope of exceptions. As EU copyright enthusiasts know, the traditional canon of strict interpretation of exceptions has been consistently mitigated by the CJEU’s understanding that interpretation must also ensure the exceptions’ effectiveness and the observance of their purpose. Moreover, in interpreting exceptions like quotation (C-145/10, Painer) and parody (C-201/13, Deckmyn), the CJEU has attempted to strike a fair balance between the intellectual property rights of authors and the fundamental rights of users. Generalising this approach to the remaining exceptions would be a welcome move by the Court.

But the most important among the six questions referred by the BGH is whether the fundamental freedoms of information and of the press may justify exceptions beyond those listed in Article 5. On the one hand, a negative answer would be consonant with the closed nature of the catalogue of exceptions, proclaimed in Recital 32 of the Directive. On the other hand, opening up the catalogue, even if only in carefully delimited circumstances, would amount to an injection of much-needed flexibility into EU copyright law. In the absence of legislative reform in this regard, such a solution would give national courts some breathing space to openly accommodate unforeseen and socially valuable uses of protected works.

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[*] The author acted as legal adviser for the Portuguese Government in Case C-516/17, Spiegel Online. Nonetheless, the views expressed in this post are his own and do not necessarily reflect the official position of the Portuguese Government.

[This is an Authors' Take post, which provides readers with an insight into current IP scholarship, featuring preliminary comments and thoughts from authors of articles accepted for publication in forthcoming issues of the Journal of Intellectual Property Law & Practice (OUP).]

The Authors' Take - Coty Germany v Parfümerie Akzente

AG WAHL interprets competition provisions in relation to selective distribution agreements for luxury cosmetics

by Stephen Barratt

University of Southampton, School of Law

In his Opinion of 26^th July 2017 in Coty Germany GmbH v Parfümerie Akzente GmbH, C‑230/16, Advocate General (AG) Wahl provided his interpretation of Article 101 TFEU and Regulation (EU) No 330/2010 (the Regulation). The request for a preliminary ruling came from the German Higher Regional Court (Oberlandesgericht Frankfurt am Main), and was made in the context of a dispute between cosmetics giant Coty Germany and one of its distributors, Akzente.

The question is whether Coty’s new selective distribution agreement, which prohibited the discernible use of third party websites, is precluded by EU antitrust provisions. Azkente wanted to use Amazon.de to market the goods, thereby gaining access to Amazon’s enormous active user base as well as lower marketing costs and the option to have orders fulfilled by Amazon itself.

Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) prohibits agreements which distort competition, either by object or effect. Under the Regulation, vertical agreements are presumed to be exempted from Article 101(1)  TFEU via Article 101(3) TFEU, provided that neither the supplier’s nor buyer’s market share exceeds 30%.

Does the agreement distort competition?

According to the AG, the agreement falls outside Article 101(1) TFEU. This is because, when factors other than price are taken into account, Coty’s requirement does not cause appreciable anti-competitive effects.  In reaching this conclusion the AG adopted the view – extant in both competition and trade mark decisions – that a luxury product loses its value to the consumer if it becomes commonplace. The preservation of this ‘aura’ is therefore capable of offsetting anti-competitive effects. This qualitative assessment, or ‘appreciability’ test, is a source of uncertainty for parties when drafting agreements. The Opinion, if followed by the Court, should be welcomed by the Luxury Cosmetics industry, worth €203b in 2016. Its effect is to create a presumption that an agreement aiming to preserve prestige is not caught out, provided it is non-discriminatory and proportionate.

Clarifying Pierre Fabre

However, if the ‘object’ of an agreement is deemed to be anti-competitive, Article 101(1) applies and no qualitative analysis occurs. This, the AG explained, was what led the court in Pierre Fabre Dermo-Cosmétique , C-439/09, EU:C:2011:649 (Pierre Fabre), to declare ‘the aim of maintaining a prestigious image is not a legitimate aim for restricting competition’.  In that case an absolute ban on internet sales was classified as restriction by object. A full and much needed delineation of the ‘object’ category will have to wait for a future reference but a comparison between Pierre Fabre and the instant case indicates that proportionality is a key factor whether a ‘sufficient degree of harm’ has occurred.

The AG went on to confirm that, even if Article 101(1) did apply, the agreement would qualify for the Block Exemption under the Regulation. An agreement cannot benefit from the exemption if it is deemed to be a ‘hardcore restriction’. This is along the same lines as a restriction by object under Article 101(1), but more user-friendly because it sets out prohibited restrictions. The AG concluded that a restriction on discernible third party platforms constitutes neither a territorial limitation nor a restriction of passive sales.

So, a probable reprieve for luxury cosmetics suppliers, but the rapid evolution of the e-commerce sector means the proportionality assessment could soon favour distributors. Nor is the debate settled about law’s role in protecting prestige, although the interdependent evolution of trade mark law means the concept is fairly entrenched. 

[This is an Authors' Take post, which provides readers with an insight into current IP scholarship, featuring preliminary comments and thoughts from authors of articles accepted for publication in forthcoming issues of the Journal of Intellectual Property Law & Practice (OUP).]

The Authors' Take - Stella McCartney v IMAX Srl

The protection of the ‘eco-friendly’ Falabella bag by Stella McCartney in a recent decision of the Court of First Instance of Milan

by Mario Pozzi

Roedl&Partner Law Firm, Milan – Italy

On 9 March 2017, the Court of First Instance of Milan granted protection to the Falabella Bag by Stella McCartney (Tribunale di Milano, Stella McCartney Ltd v IMAX Srl, Decision No 2790/2017). A competitor, Imax S.r.l., was found to have infringed the Community designs and trade marks owned by Stella McCartney Ltd. 

The Milan court first ascertained the validity of the designs and trade marks owned by Stella McCartney (in terms of novelty, individual character, distinctive character) and then declared Imax’s conduct infringing of the rights in the Falabella bag (thus ascertaining the likelihood of confusion risk). The bag marketed by Imax was very similar to Falabella, in that it replicated all its main characteristics (shape, chain with a faceted shape that follows the whole edge of the bag fixed to the bag with a visible stitching). In particular, the court considered that the fact that the materials of the bags were different was not sufficient in order to avoid a finding of infringement. 

For these reasons, the Court of First Instance of Milan ordered the withdrawal of the infringing bags from the market as well as prohibiting any repetition of the unlawful activity. 

As far as damages are concerned, the court awarded a sum of €80.000,00 calculated on the basis of the advantages obtained by the infringer. Moreover, the court awarded Stella McCartney moral damages. According to the court, the fact that Imax S.r.l. produced the infringing bags with leather was capable of causing a damage to Stella McCartney’s eco-friendly brand image.

Italian court have become more sophisticated and severe in assessing infringing activities. The “new” trend to compensate also moral damages is such as to grant IP owners, especially those operating in the field of fashion, greater protection and confidence in starting proceedings for the protection of their rights. Overall, decisions like the Falabella one could represent a good deterrent for wannabe infringers.

[This is an Authors' Take post, which provides readers with an insight into current IP scholarship, featuring preliminary comments and thoughts from authors of articles accepted for publication in forthcoming issues of the Journal of Intellectual Property Law & Practice (OUP).]

The Authors' Take - Stichting Brein v Jack Frederik Wullems (Filmspeler)

CJEU applies right of communication to the public to sale of multimedia players

by Karin Cederlund and Nedim Malovic

Sandart&Partners Advokatbyrå KB

In a 2017 decision (Case C‑527/15, Stichting Brein v Jack Frederik Wullems (Filmspeler)), the Court of Justice of the European Union (CJEU) held that the sale of a multimedia player, with pre-loaded hyperlinks to pirate websites, constitutes a communication to the public, within the meaning of Article 3(1) of Directive 2001/29/EC (InfoSoc Directive). The CJEU also excluded that consumers’ streaming from illegal sources would be exempted from the reproduction right under Article 5(1) of the InfoSoc Directive (temporary copies exemption).

Communication to the public

The CJEU referred to its previous case law and held that an act of communication to the public under Article 3(1) of the InfoSoc Directive requires the fulfillment of two conditions: (1) an 'act of communication' (2) directed to a 'public'. The CJEU concluded that the sale of the multimedia player at issue must be considered as a ‘communication’. The communication would encompass all persons purchasing the media player and having an internet connection. According to the CJEU, those persons could access the protected works at the same time, by streaming the works on the internet. Hence, the communication would be aimed at an indeterminate number of potential recipients and involve a large number of persons. It would be therefore a communication to a ‘public’ within the meaning of Article 3(1) of the InfoSoc Directive.

When assessing whether the works are communicated to a ‘new’ public, the CJEU recalled the presumption adopted in Case C-160/15, GS Media, i.e. the user/defendant’s profit making intention. The court noted that multimedia players were supplied with a view to generate a profit, the price for the players being paid to obtain direct access to protected works available on streaming websites without the consent of the copyright holder. Hence, the provider of the device must be presumed to have knowledge of the unlicensed character of the works accessed this way.

Temporary copies exception under Article 5(1) of the InfoSoc Directive

Among the conditions of this exemption there is that the sole purpose of the act of reproduction is to enable transmission in a network between third parties by an intermediary or a lawful use of a protected work. 

According to the CJEU, the reproduction acts at issue (streaming by users of the multimedia player) would not seek to enable transmission in a network, nor the lawful use of a work. Hence, unlicensed streaming of copyright content could not fall within the scope of Article 5(1). Holding otherwise would also conflict with the three-step test in Article 5(5) of the InfoSoc Directive. 

[This is an Authors' Take post, which provides readers with an insight into current IP scholarship, featuring preliminary comments and thoughts from authors of articles accepted for publication in forthcoming issues of the Journal of Intellectual Property Law & Practice (OUP).]

The Authors' Take - find out what JIPLP authors are writing about!

In the fast-moving world of intellectual property law, JIPLP has always sought to guarantee not only the highest quality of legal analysis (for which we are indebted to dedicated, enthusiastic and passionate authors and reviewers), but also the most timely publication, to ensure that readers can access the most up-to-date and relevant scholarship. Our reviewers normally complete their reviews within 2 weeks and the articles are then edited and sent into production within a short period of time, thus resulting in a production cycle that rarely exceeds 6 - 9 weeks from final acceptance to advance online publication (inclusion in a paper issue may require an additional period of time, as issues are planned months ahead). We are extremely proud of these results and a great thank you goes to everyone involved in JIPLP, from our authors and reviewers, to our commissioning editor, Sarah Harris, and the entire team at OUP, led by Guy Edwards.

To give readers a chance to find out what our authors are writing about, even before their works are published in JIPLP, we are starting a new section on this blog - "The Authors' Take". In this section, selected authors of accepted pieces (articles and Current Intelligence notes) will share some preliminary thoughts and comments with our readers, providing a "sneak peek" into their work and analysis. Through these new and original contributions, we hope to give an even more timely overview of the latest IP scholarship and to allow readers and authors to connect more directly. As always, we welcome your feedback and suggestions on how we can improve or build upon this initiative.

On behalf of our editorial team, a heartfelt thank you to all the authors that will be involved in this series.