'One-click' hosting provider liable for copyright infringement in Germany

A German court ruled that the hosting provider Netload could be held liable for infringing the rights of computer game rightsholder ZeniMax Germany because Netload had failed to remove infringing material quickly enough when made aware of its existence on its platform. The judgment is not yet finalised.

Munich-based intellectual property law expert Igor Barabash of Pinsent Masons, the law firm behind Out-Law.com, said that it is the first time a German court has ruled that a 'one-click' host has to pay damages for copyright infringement.

A 'one-click' host is a hosting service that allows internet users to upload and share files online without having to register or otherwise agree to a legal hosting agreement. Such services provide anonymity to its users and are commonly used for sharing music and other media files, such as computer games.

ZeniMax had complained to Netload when a user of the hosting service uploaded a copy of its 'The Elder Scrolls V: Skyrim' game to Netload's servers without is permission. ZeniMax began legal proceedings against Netload in January 2012 and asked for the hosting service to remove the infringing content from its servers. However, it claimed that game was only removed in October 2012, months after the request had been submitted.

A district court in Frankfurt ruled that Netload's failure to remove the content quickly enough when notified of its existence meant the hosting provider could not benefit from a defence to liability for infringing material set out under German, and EU, law. It was therefore found liable for copyright infringement.

The EU's E-Commerce Directive protects service providers from liability for material that they neither create nor monitor but simply store or pass on to users of their service. The Directive says that service providers are generally not responsible for the activity of customers and that member states must not put service providers under any obligation to police illegal activity on its service.

Service providers are not liable for infringement via their services if they do not have "actual knowledge" of the illegal activity or, having obtained such knowledge "acts expeditiously to remove or to disable access to the information". Those rules under the Directive are implemented in Germany within section 10 of the Telemedia Act.

The Frankfurt court ordered Netload to provide information on some of the download statistics for ZeniMax's game to help it to calculate appropriate damages it should pay to the rights holder. The information includes how often ZeniMax's game was reproduced by other users.

Barabash said, though, that it is unclear whether ZeniMax will receive any money at all from Netload since the file host is currently in liquidation.

The expert added that whilst the ruling was in line with EU rules, it was unusual. This is because most 'one-click' hosting providers have decided to base themselves outside of the EU.

"Many of the one-click hosts operate outside the EU," Barabash said. "The most famous ones are probably Rapidshare, which started in Germany, moved to Switzerland and then changed its business model to become unattractive to anonymous up/downloads of large amounts of data, and Megaupload, which was started by Kim Dotcom in Hong Kong, but which was shut down by the US Department of Justice in January 2012."

"The one-click hosts that still allow anonymous sharing of sizeable files are based outside of the EU, not only to avoid being subject to the E-Commerce Directive but simply to avoid being within reach of European jurisdiction at all," he said.