The ruling for the first time clarifies UK law on how internet service providers can share liability for the copyright infringing actions of their users, according to one intellectual property law expert.
"It is the first case of its kind on when a service provider over the internet will be liable for authorising copyright infringement by others, so it is of significant interest to ISPs and service providers who've always had this nagging worry about to what extent they can be caught up in the infringing activities that go on by people using their services," said Kim Walker of Pinsent Masons, the law firm behind OUT-LAW.COM.
Newzbin is a company that charged users 30p per week for access to its indexing and collation of media files posted to discussion groups on the Usenet system.
It claimed that it did no more than a search engine such as Google and should not be liable for its users' actions but the Court heard that it told volunteer editors to carry out collating and reporting tasks to make it easier to download material and told them to focus their activity on films.
Because of its knowledge of the infringements and its editorial involvement in making that infringement easier it shares liability for the downloading, the Court said.
"People look at our site for movies, games and apps, pretty much in that order," said guidance for editors quoted by Mr Justice Kitchin in his ruling. "If you report movies, then you get rewarded for it because we want you to report them …you're benefiting the entire community a LOT more by making movie posts and decoding the cryptic filenames people come up with."
"[Newzbin] well knows that it is making available to its premium members infringing copies of films," said Mr Justice Kitchin. "[It] operates a site which is designed and intended to make infringing copies of films readily available to its premium members; the site is structured in such a way as to promote such infringement by guiding the premium members to infringing copies of their choice and then providing them with the means to download those infringing copies."
The case was taken by major film producers including Twentieth Century Fox; Universal; Warner Brothers; and Disney.
Newzbin is a company with 700,000 members, some of whom pay the 30p per week for the premium service. Last year it earned £1 million in revenues, £360,000 in profits and paid dividends of £415,000 to shareholders, the Court heard.
The site claimed that it did not know that copyright infringement was going on via its services and that it would take action against any infringement it found, including removing any editor making 'reports' to help users find copyrighted material.
But the High Court found that this claim was contradicted by evidence that the site operators must have been aware of infringement, and that the whole system was designed with the aim in mind of easing infringement.
"In light of … the structure of Newzbin, the categorisation of content and the encouragement given to editors to report films, I have no doubt that [Newzbin] is and has been aware for very many years that the vast majority of films in the Movies category of Newzbin are commercial and so very likely to be protected by copyright, and that members of Newzbin who use its NZB facility to download those materials, including [the studios'] films, are infringing that copyright," said Mr Justice Kitchin.
The studios claimed that Newzbin 'authorised' the infringement. Though various parts of the service contained notices telling users not to infringe copyright, Mr Justice Kitchin said that these were just "window dressing … inconsistent with the structure and operation of the Nezbin system and the advice given to editors".
The site was guilty of authorising infringement, he said.
"A very large proportion of the content of the Movies category is commercial and so very likely to be protected by copyright. This has not led the defendant to install some kind of filtering system which, on the evidence, it could easily have done. To the contrary, it has actively encouraged its editors to make reports on films, has rewarded them for so doing," he said.
"I am entirely satisfied that a reasonable member would deduce from the [Newzbin's] activities that it purports to possess the authority to grant any required permission to copy any film that a member may choose from the Movies category on Newzbin and that [it] has sanctioned, approved and countenanced the copying of the [studios'] films," said the ruling.
The judge also said that by designing its system and advising its editors in the way that it did, it had "procured and engaged in a common design with its premium members to infringe the [studios'] copyrights".
The Court rejected the company's claims that, like Google or other search engines, it was simply a web service with no active part in the process of infringement.
"This service is not remotely passive. Nor does it simply provide a link to a film of interest which is made available by a third party," said the ruling. "To the contrary, the defendant has intervened in a highly material way to make the claimants' films available to a new audience, that is to say its premium members."
"This ruling lays down the rules for those, whether ISPs or service providers who operate indexing services, as to what they can and can't get away with," said Walker. "This tells them that provided their business plan isn't really based on infringement then on the whole they should be OK. "