The Court of Justice of the European Union (‘CJEU’) gave a ruling on whether and to what extent a business providing free Wi-Fi to their customers can be held liable for copyright infringement which was committed by their customers using the free Wi-Fi provided.

Mr McFadden runs a lighting and sound system shop in which he offers access to a WI-FI network to the general public free of charge. Access to that network was intentionally not protected by Mr McFadden in order to draw the attention of customers. In 2010, one of Mr McFadden’s customers used the free Wi-Fi connection to make a musical work available on the internet free of charge to the public without the consent of Sony Music, the rightholder. Sony Music gave Mr McFadden a formal notice as it was his free Wi-Fi connection that was used to infringe their rights and requested (i) payment of damages on the ground of his direct liability for the infringement of its rights; (ii) an injunction against the infringement of its rights and (iii) reimbursement of the costs of giving formal notice and court costs.

Mr McFadden argued that he is exempt from liability under the safe harbour of Article 12 of the E-Commerce Directive (the ‘Directive’). Article 12 limits the liability of providers of mere conduit services for unlawful acts committed by a third party with respect to the information transmitted, on condition that the provider (i) does not initiate the transmission; (ii) does not select the receiver of the transmission; and (iii) does not select or modify the information contained in the transmission.

The referring court referred ten questions to the CJEU to clarify who can be considered an intermediary under Article 12 and what remedies can be sought against mere conduit access providers, like Mr McFadden.

The ten questions can be summarised into three key questions:
1. Is a business which operates a free Wi-Fi which is accessible to the public providing an ‘information society service’ within the meaning of Article 12 of the Directive;

2. To what extent may the service providers liability be limited in respect of copyright infringements which are committed by a third party using his free Wi-Fi; and

3. Can the service provider, Mr McFadden, who is providing free Wi-Fi be forced by an injunction to password-protect the Wi-Fi he offers.

The CJEU held that making a W-Fi network available to the general public free of charge in order to draw the attention of potential customers to the goods and services of a shop constitutes an ‘information society service’ under the Directive.

The CJEU also confirmed where the three conditions of Article 12 mentioned above are satisfied, a service provider such as Mr McFadden, who provides access to a communication network, may not be held liable. Consequently, the copyright holder is not entitled to claim compensation on the ground that the network was used by third parties to infringe its rights. However, the Directive does not preclude the copyright holder from seeking before a national authority or court to have such a service provider ordered to end, or prevent, any infringement of copyright committed by its customers.

Finally, the CJEU holds that service providers can, via an injunction, be forced to collect user identity by password-protecting their Wi-Fi as long as it strikes a fair balance between the intellectual property rights of a rightholder, the freedom to conduct a business of access providers and freedom of information of the network users. Requiring users to reveal their identity to be able to access the free Wi-Fi may also discourage illegal activities such as those that occurred in this matter.

Link to Judgment

Judgment Date: 15 SEPTEMBER 2016