The ECJ assessed EU laws on copyright and the enforcement of intellectual property rights as well as laws on the liability of service providers, data protection and privacy in communications. It also weighed the fundamental rights to the protection of intellectual property against the rights to privacy, free speech, the freedom to conduct business, and protection of personal data. It said that, on balance, it would be unfair if courts could force social networks to monitor for illegal file-sharing.
"[EU 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 a national court from issuing an injunction against a hosting service provider which requires it to install a system for filtering ... with a view to preventing those works from being made available to the public in breach of copyright," the ECJ ruling said.
The ruling was prompted by a national court case in Belgium involving music royalties collecting society Sabam and social network platform Netlog. Sabam has claimed that Netlog users were sharing copyrighted music and videos on the site without permission. Sabam said Netlog should have to pay a fee or "give an undertaking to cease and desist from making available to the public musical and audio-visual works from SABAM’s repertoire without the necessary authorisation," the ECJ's ruling said.
In 2009 Sabam asked the Court of First Instance in Brussels to issue an injunction to force Netlog to stop the infringement happening and said it should have to pay €1,000 as a penalty each day that Netlog delayed its compliance with the order. Netlog argued that such an injunction would have been "tantamount to imposing on Netlog a general obligation to monitor" user behaviour and said that that was contrary to Belgian national law.
The social network operators also argued that the injunction could force it to introduce a filtering system to identify and prevent illegal file-sharing. Such a system "would have to satisfy the provisions of EU law relating to the protection of personal data and the confidentiality of communications," Netlog had argued.
Brussels asked the ECJ whether EU law and the fundamental rights to privacy and freedom of expression allowed national courts to issue injunctions to impose such a filtering system.
In a separate case also involving Sabam last year the ECJ also ruled that courts could not issue injunctions to force internet service providers to monitor for copyright infringement.
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 those intermediaries are generally not responsible for the activity of customers and that member states must not put them 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, however, that there was "nothing whatsoever" in the way the Charter was worded or in ECJ case law to suggest that the fundamental right to the protection of IP is "inviolable and must for that reason be absolutely protected".
It said that filtering system would have unfairly affected Netlog's ability to conduct its business because it would have involved the platform "monitoring all or most of the information" it stored.
"That monitoring has no limitation in time, is directed at all future infringements and is intended to protect not only existing works, but also works that have not yet been created at the time when the system is introduced," it said. "Accordingly, such an injunction would result in a serious infringement of the freedom of the hosting service provider to conduct its business since it would require that hosting service provider 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 Enforcement of Intellectual Property Rights Directive], which requires that measures to ensure the respect of intellectual-property rights should not be unnecessarily complicated or costly," the ECJ ruling 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 hosting service providers," it said.
The ECJ said that the rights of users of social networks would also affected by any monitoring for copyright infringement and that therefore those rights also had to be taken into account. It said that because the filtering system "would involve the identification, systematic analysis and processing of information connected with the profiles created on the social network by its users" the monitoring of information could infringe on those individuals' rights to the protection of their personal data.
The filtering system may not be able to distinguish between lawful and unlawful content it could result in lawful content being blocked. Because of this the system could also impinge on individuals' rights to freely impart or receive information, the ECJ said.
"Consequently, it must be held that, in adopting the injunction requiring the hosting service provider 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.