Mr Justice Arnold also made key findings on the nature of the terms used and demands made in letters to alleged infringers warning them of the consequences of their actions, the Open Rights Group (ORG) said.
"The decision has ramifications for how the Digital Economy Act (DEA) will function because it provides more details about how copyright owners can seek the details of alleged infringers and subsequently pursue them through the court," Peter Bradwell of the ORG said in a blog.
Mr Justice Arnold was ruling in a case involving internet service provider (ISP) O2 and pornography companies. The judge ordered O2 to disclose the names and addresses of customers accused of illegal file-sharing following a request by Golden Eye on behalf of Ben Dover Productions. He said Golden Eye could not receive the information on behalf of 12 other companies who made pornographic films.
In his ruling Mr Justice Arnold said "an unknown percentage" of the O2 customers that Golden Eye identified as alleged infringers will not have committed an offence. He said that flaws in using IP addresses as a means to identify infringers would lead to some of those people being wrongly identified. The judge also said that the letter Golden Eye intended to send to the alleged infringers was "objectionable".
Golden Eye and the porn companies had asked the court to force O2 to release the names and addresses of 9,124 subscribers who had been identified as allegedly downloading pornographic films without the rights holders' permissions. The alleged infringements had been sourced to individual IP addresses.
Mr Justice Arnold accepted evidence from consumer charity Consumer Focus that IP addresses can lead to individuals being misidentified and said that, as a result, some of the individuals Golden Eye and the other firms allege are infringers "will not be guilty of having committed the infringements".
Mr Justice Arnold said Golden Eye's draft letter would need to be reworded before being sent out to the alleged infringers. The judge cited a number of problems with the existing draft, including that the company had suggested it was following an official protocol when none exists for intellectual property rights enforcement.
Other problems with the letter included that Golden Eye had not clearly stated that a court had still to determine the merits of infringers' individual cases and that is not "sufficiently explicit" in acknowledging that those individuals may not in fact be guilty of an offence.
The judge also said that 14 days was not enough time to respond to the letter and that Golden Eye's threat to make "an application to your ISP to slow down or terminate your internet connection" was not justified. Even amending the wording to say that a "request" would be made rather than an "application" would not be justified, he said.
Mr Justice Arnold also said it was "unsupportable" for Golden Eye to claim £700 from every allegedly infringing O2 customer. This is because both Golden Eye and Ben Dover "know" that not all the individuals identified will have been guilty of an offence and because it does not know the "scale" of the infringement by those individuals who have infringed, he said.
"What [Golden Eye] ought to do is to proceed in the conventional manner, that is to say, to require the [O2 customers] who do not dispute liability to disclose such information as they are able to provide as to the extent to which they have engaged in P2P (peer-to-peer) filesharing of the relevant [Ben Dover] copyright works," the judge said.
"In my view it would be acceptable for [Golden Eye] to indicate that they are prepared to accept a lump sum in settlement of their claims, including the request for disclosure, but not to specify a figure in the initial letter. The settlement sum should be individually negotiated with each [O2 customer pursued]," he said.
The ORG said that the findings should shape how a new anti-piracy code currently being worked on by telecoms regulator Ofcom functions in practice.
Under the DEA Ofcom is required to write a new anti-piracy code of practice. In a draft version of the code the regulator previously published, Ofcom said that internet users should receive three warning letters from their ISP if they are suspected of copyright infringements online.
Details of illegal file-sharers that receive more than three letters in a year would be added to a blacklist, the draft code said. Copyright holders would have access to the list to enable them to identify infringers.
Under Ofcom plans individuals would have to pay £20 in order to appeal against a notification letter. Cases would be heard by an independent appeals body. Ofcom and the Government have been working on finalising the code which had been expected to have been published by now.
"The new ruling means that letters sent by copyright-owners or their representatives will have to properly safeguard the legitimate interests of consumers, in particular those who are innocent of wrong-doing," Bradwell said. "This should significantly restrict the ability of such companies to send out intimidating ‘pay now – or else' letters in the future."
The ruling also shows that Ofcom's code should not solely rely on IP addresses as a way of identifying infringers, Bradwell said.
"The fact that there will be an unknown percentage of errors in a given sample of IP address matching such this should have significant ramifications for the Digital Economy Act," he said. "For example, it should seriously undermine the idea that to challenge an allegation of infringement an internet subscriber should have to pay £20 to appeal."
"[The] judgment highlights the need for Ofcom to check that allegations of copyright infringement under the DEA by copyright owners ... is supported by reasonable and robust evidence that there may have been copyright infringement on that connection. Ofcom need to set a strong standard of evidence in the forthcoming Initial Obligations Code, and make provisions on the means of obtaining evidence," Bradwell said.
"If Ofcom do not make such provisions in the Initial Obligations Code there is a risk that a high number of entirely innocent subscribers will be placed on the 'copyright infringement list' (after three notifications), which means they would be subject to technical measures once the 'technical stage' of the DEA commences," he said.
In the High Court ruling, Mr Justice Arnold had determined that Golden Eye, on behalf of Ben Dover Productions, was entitled to the names and addresses held by O2 under the terms of a 'Norwich Pharmacal Order' so as to pursue claims for compensation against individuals who are alleged to have illegally downloaded copyrighted material. In the UK courts can issue what is called a Norwich Pharmacal Order to force the release of information.
The judge said that the rights of the alleged pirates to the protection of their privacy and personal data was outweighed by the right of Golden Eye and Ben Dover to enforce their intellectual property rights.
"Golden Eye and Ben Dover Productions have a good arguable case that many of the relevant [O2 customers] have infringed their copyrights," Mr Justice Arnold said. "I am satisfied that they do intend to seek redress for those wrongs and that disclosure is necessary to enable them to do so."
"In these circumstances, I conclude that [Golden Eye and Ben Dover's'] interests in enforcing their copyrights outweigh the [O2 customers'] interest in protecting their privacy and data protection rights, and thus it is proportionate to order disclosure, provided that the order and the proposed letter of claim are framed so as properly to safeguard the legitimate interests of the [O2 customers], and in particular the interests of [O2 customers] who have not in fact committed the infringements in question," the judge said.
The judge said the Norwich Pharmacal Order will require Golden Eye to bring any cases against the alleged infringers at the Patents County Court if it chooses to pursue court action. There is a cap on both damages and costs that restricts the amount of money losers of Patents County Court intellectual property cases have to pay out.
However, Mr Justice Arnold also ruled that Golden Eye could not take action on behalf of 12 other porn production companies.
Mr Justice Arnold said the "competing interests" it had weighed up in favour of Golden Eye and Ben Dover were in fact weighted more favourably towards the alleged infringers in the case of the 12 other rights holders. This was because of the commercial arrangements those firms had made with Golden Eye, he said. The judge therefore said those companies would have to apply for a Norwich Pharmacal Order themselves if they wanted to pursue the individuals. The companies would "almost certainly" be granted the order, he said.
"I have not accepted that the agreements between Golden Eye and the [other porn companies] are champertous," Mr Justice Arnold said. "Nor have I been persuaded that those agreements mean that [those companies] are not genuinely intending to try to seek redress."
"It does not follow, however, that it is appropriate, when balancing the competing interests, to make an order which endorses an arrangement under which the [other porn companies] surrender total control of the litigation to Golden Eye and Golden Eye receives about 75% of the revenues in return. On the contrary, I consider that that would be tantamount to the court sanctioning the sale of the Intended Defendants' privacy and data protection rights to the highest bidder," the judge said.
"Accordingly, in my judgment, to make such an order would not proportionately and fairly balance the interests of the Other Claimants with the [O2 customers'] interests," he said.