The ECJ ruling means national courts cannot force ISPs to use filter systems, installed at ISPs' own expense and used for an unlimited period, to monitor all its customers' electronic communications to prevent illegal file-sharing. It said that such an order would breach ISPs' rights to freely conduct business and individuals' rights to privacy, free speech and the protection of their personal data.
The ECJ assessed EU laws on copyright, intellectual property rights enforcement, data protection, privacy and electronic communications and the free movement of information when making its ruling. It also considered rights contained in the EU's Charter of Fundamental Rights.
"[The laws] ... read together and construed in the light of the requirements stemming from the protection of the applicable fundamental rights, must be interpreted as precluding an injunction made against an internet service provider which requires it to install a system for filtering; all electronic communications passing via its services, in particular those involving the use of peer-to-peer software; which applies indiscriminately to all its customers; as a preventive measure; exclusively at its expense; and for an unlimited period, which is capable of identifying on that provider’s network the movement of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold intellectual-property rights, with a view to blocking the transfer of files the sharing of which infringes copyright," the ECJ ruling said.
The ECJ was ruling in a case involving Belgian ISP Scarlet and music royalties collecting society Sabam.
Scarlet had been ordered by a Belgian court to filter traffic that infringed copyrights belonging to members of Sabam, but the ISP appealed, claiming it would force ISPs to carry out "invisible and illegal" checks on internet users' activity. In 2010 the Brussels Court of Appeal said it could not rule on the matter without first referring two questions to the ECJ.
Brussels asked the ECJ to determine if delivering an injunction against the ISP forcing it to filter content suspected of copyright infringement contradicts a person's right to privacy and protection of personal data. It also asked the ECJ if a national court should balance the extent with which it orders screening to take place with the impact it would have on those fundamental rights.
The EU's Copyright Directive says copyright owners can obtain a court order against intermediaries whose services are used for piracy. But the E-Commerce Directive says that ISPs are generally not responsible for the activity of customers and that member states must not put ISPs under any obligation to police illegal activity on its service.
Under EU data protection laws personal data must be "processed fairly and lawfully" and be collected for "specified, explicit and legitimate purposes and not further processed in a way incompatible with those purposes". The laws also state that information can only be processed if a person has given their unambiguous consent and if that consent is explicitly given.
Separate EU laws set out in the EU's Privacy and Electronic Communications Directive also state that storing and accessing information on users' computers is generally only lawful "on condition that the subscriber or user concerned has given his or her consent, having been provided with clear and comprehensive information … about the purposes of the processing".
Under the EU Charter of Fundamental Rights individuals generally have a right to privacy and protection of personal data. The Charter also confers rights on free speech, the freedom to conduct business and states that intellectual property (IP) "shall be protected".
The ECJ said that although that the protection of IP is a fundamental right under EU law, it is not "absolutely protected" and has to be balanced against other fundamental rights. It ruled that the Belgian court had not struck a "fair balance" between the rights of Sabam and those of Scarlet when ordering it to filter online traffic.
"In the present case, the injunction requiring the installation of the contested filtering system involves monitoring all the electronic communications made through the network of the ISP concerned in the interests of those rightholders," the ECJ said.
"Moreover, that monitoring has no limitation in time, is directed at all future infringements and is intended to protect not only existing works, but also future works that have not yet been created at the time when the system is introduced. Accordingly, such an injunction would result in a serious infringement of the freedom of the ISP concerned to conduct its business since it would require that ISP to install a complicated, costly, permanent computer system at its own expense, which would also be contrary to the conditions laid down in [the EU's Directive on IP rights enforcement], which requires that measures to ensure the respect of intellectual-property rights should not be unnecessarily complicated or costly," the ECJ said.
"In those circumstances, it must be held that the injunction to install the contested filtering system is to be regarded as not respecting the requirement that a fair balance be struck between, on the one hand, the protection of the intellectual-property right enjoyed by copyright holders, and, on the other hand, that of the freedom to conduct business enjoyed by operators such as ISPs," it said.
The ECJ said that by unfairly balancing Scarlet's rights, the Belgian Court's injunction would also have infringed on the rights of Scarlet's users.
"The contested filtering system may also infringe the fundamental rights of that ISP’s customers, namely their right to protection of their personal data and their freedom to receive or impart information," the ECJ said.
The ECJ said that Scarlet users' IP addresses were personal data worthy of protection because they could lead to individuals' identification. It said that the Belgian court's proposed injunction would have forced Scarlet to conduct "a systematic analysis of all content and the collection and identification" of those addresses.
The broad filtering system Scarlet was ordered to use had the potential to "undermine freedom of information" because it may not be able to "distinguish adequately between unlawful content and lawful content, with the result that its introduction could lead to the blocking of lawful communications," the ECJ said. The Court added that differing exceptions to copyright law across the EU would have made it difficult to distinguish what content was lawful.
"Consequently, it must be held that, in adopting the injunction requiring the ISP to install the contested filtering system, the national court concerned would not be respecting the requirement that a fair balance be struck between the right to intellectual property, on the one hand, and the freedom to conduct business, the right to protection of personal data and the freedom to receive or impart information, on the other," the ECJ said.
The Open Rights Group (ORG), which campaigns for internet freedoms, said the ECJ ruling was a "victory for freedom of expression online".
"It draws a thick line in the sand that future copyright enforcement measures in the UK can not cross. Invasive and general surveillance of users is unacceptable. This helps to nail down the limits of powers to curtail people's freedom to communicate online," the ORG said in a statement.