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The CJEU has drained parts of the E-Commerce safe harbor, but by how much?

The CJEU has drained parts of the E-Commerce safe harbor, but by how much?

When the CJEU handed down its decision in Google and Google France vs. Louis Vuitton on March 23, 2010, brand owners were both disappointed and optimistic.  Although the Court had held that because Google was not using third parties’ trademarks in its own commercial communications when it was offering them for selection as AdWords (meaning that there was no registered trademark infringement), the Court was reasonably explicit in suggesting that Google could be infringing other areas of law (such as passing off or unfair competition) and gave the impression that the exemptions from liability found in Section 4 of the E-Commerce Directive might not benefit Google.

When you read Articles 12-14 of Section 4, you notice that the “hosting” exemption of article 14 does not mention any need for the acts in question to be either technical, automatic or passive, in contrast to Articles 12 and 13 which both state, explicitly, that only “automatic” activities are exempted.  However, Recital 42 to the Directive provides:

(42) The exemptions from liability established in this Directive cover only cases where the activity of the information society service provider is limited to the technical process of operating and giving access to a communication network over which information made available by third parties is transmitted or temporarily stored, for the sole purpose of making the transmission more efficient; this activity is of a mere technical, automatic and passive nature, which implies that the information society service provider has neither knowledge of nor control over the information which is transmitted or stored.

Although intended to aid interpretation, if anything Recital 42 makes interpretation of Articles 12-14 more difficult.  Its first eight words indicate that it informs interpretation of all three articles, but:

  1. The exempted acts are limited to “only” those which constitute “the technical process of operating and giving access to a communication network”.  This certainly includes article 12 (conduit exemption), and is relevant for article 13 (caching), but what sort of “hosting” (article 14) is part of operating or giving access to a communications network?
  2. The type of network in relation to which acts may be exempted is one over which “information made available by third parties is transmitted or temporarily stored”.  This doesn’t add much, except to say that the service provider must be acting as an intermediary.
  3. The acts (limited to operating or providing access to the network) are further limited to those whose “sole” purpose is to make “transmission” more “efficient”.  This sounds like caching alone, since a conduit exists to make transmission possible, not more efficient.
  4. The exempted acts (i.e. those technical processes of operating and providing access to a network populated by third party material for the sole purpose of making transmission more efficient) must, as they also certainly will be if they meet the foregoing criteria, be of a “mere technical, automatic and passive” nature.

Since “hosting” is not a technical aspect of network access or operation, and has nothing to do with the “more efficient” transfer of the material being hosted (it’s completely circular), Recital 42 seems to rule out the application of Section 4 to any exemptions in relation to “hosting”.  Yet article 14 exists, and even exists without its application being expressly limited to “automatic” acts in contrast to article 12 and 13.  Can Recital 42and Article 14 be reconciled?

The CJEU in Google and Google France doesn’t say how it reconciles these provisions, but simply says that Recital 42 requires acts of a neutral intermediary service provider to be of a mere technical, automatic and passive nature in order to qualify for exemption under Section 4, including Article 14.  And that’s binding on all 27 Member States.

This may well have surprised Google.  Like the E-Commerce Directive, 17 U.S.C. §512(a) and §512(b) (conduit and caching exemptions) both have an explicit requirement of an “automatic technical” process, whereas §512(c) (hosting) does not, and no court has prevented ISPs from relying on that exemption on the basis that there is an implicit requirement that the hosting act in question be of an automatic, technical and passive nature.  The difference in the CJEU’s interpretation of these otherwise similar provisions demonstrates a philosophical difference that could have repercussion (in the form of the need for larger budgets) for international business.

Does this mean that Google cannot rely on article 14 if it is found to infringe a third party’s rights by its hosting of ads (whose very appearance Google controls (exclusively) and whose contents are created with Google offering assistance)?  The CJEU says that is a question for Paris, and we await the French court’s judgment with interest.