File hosting service provider – a business model entitled to legal protection as a principle caught in the pitfall of liability?

Veröffentlicht am Veröffentlicht in Allgemein, Datenschutz, Internetrecht, Netzpolitik, Telemedienrecht, Urheberrecht

File hosting services, often referred to as “file hoster” or “share hoster”, are cloud storage services, that provide storage space on the Internet either for a fee or free-of-charge. After a file is uploaded to the server of a file hosting service, the system generates an individual link to the relevant file which the user can – if he wishes – forward to an unlimited number of recipients. Recipients can then directly access the corresponding content via their web browsers by clicking on the link sent to them.

These services are equally practical (especially for memory–intensive content that overextends regular email services) as they are controversial. Since file hosting services are occasionally used to disseminate copyright-protected works, they have been a thorn in the side of right holders for years. Hence, proceeding against the hosting service provider, instead of taking action against the perpetrators and beneficiaries of the copyright infringement, who are often laborious to find or simply untraceable, would seem manifest. Nevertheless, there are numerous legal issues that arise in this context, i.a. in the fields of constitutional law, criminal law, data protection law and copyright law.

The research center for IT-law and network policy at the University of Passau – short For..Net – has profoundly examined the legal implications of file hosting services and drafted an academic legal opinion – particular by the example of uploaded.net – on behalf of the Cyando AG. The substantial research results will be summarized in the following, the original legal opinion can be consulted through the download-link provided below.

The business model of a file hosting service – without regard to its specific form in the individual case – is one of which the legal system approves as a fundamental matter and is hence deemed a legal service. Considering the constitutionally protected freedom of economic activity, a company can develop and offer innovative services, for which a market is arising or existent. It is the duty of the legislator, to restrictively regulate this activity within the scope of to the principle of proportionality – insofar as required by legitimate interests (of third parties).

There is great need both in technical and in commercial respects for the activities and legal opportunities to use services such as this. Decentralized management of media files and the ability to share such files with others in a quick and simple fashion is a fundamental expression of 21st century society’s digital values, in addition to services such as YouTube, Facebook and Wikipedia.

The range of services offered by a file hosting service provider may be legally utilised in a whole host of ways, such as where they are used as virtual „backup“ storage space or for means of flexible data exchange by private individuals and in the commercial sphere. Virtual storage space or so-called „web space“ is a neutral and multifunctional resource.

Thus, the mere provision of neutral product of this kind cannot per se have the effect of creating liability on the part of the provider, even if a sub-section of users intends to use it in a manner that is in breach of the law. Another result can only apply where, in the individual case, the concrete design of the business model aids and abets violations by users of the service to a substantial degree (entailing a so-called significant increase of the risk).

A file hosting service does neither bear liability as a sole perpetrator nor as an accomplice by merely providing its platform. Also, any accessory status by positive act can be ruled out. Although an act of assistance by neutral action is indeed provided, there is nevertheless a lack of the requisite dual intent of an accessory. Nor will a host service provider bear liability as an accessory by omission for copyright infringements of its users under sec. 19a UrhG. Only in cases where the service persistently failed, ignorantly and for a longer period of time, to respond to well-founded requests of a rightholder for deletion, both in objective and in subjective respects as an accessory by omission could be considered.

However, an intermediary may potentially be liable as an interferer where the service in some way deliberately and causally participates in bringing about or maintaining an illegal impairment of copyright by furnishing storage space on its online platform, where in factual and legal respects it was possible and reasonable to expect the provider to prevent a concrete violation. This requires a breach of duties of verification and checking as a ground for liability. The determination of how far these duties go requires a comprehensive weighing of interests in a typical individual case, taking account of the role and remit of the affected party. This weighing of interests serves as a reasonableness test as to the scope of any potential control measures, but it cannot be allowed to extend so far that it calls into question the file hosting service’s entire business model. Taking into account the constitutional protection by art. 12 GG and
art. 14 GG, it is up to the legislator to find a balance between the spheres of risk, in consideration of the principle of proportionality, when one party would practically be deemed to waive legitimate interests because compensation with conflicting interests cannot be reached otherwise.

A cause-free duty of verification and monitoring which would require a file hosting service to actively ensure, without any evidence at all, that no copyright infringements occur on its platform, is incompatible with sec. 7 (2) sentence 1 TMG, and thus statutorily impermissible. Yet, as a basic principle, a file hosting service is subject to a general duty of verification requiring it to immediately delete the specific, referenced file and further comparable files upon learning of the violation. Moreover, a file hosting service will be subject to an enhanced duty of verification and monitoring if, as a result of its business model, it aids and abets copyright infringements to a substantial degree. In such a case, according to jurisdiction, a file hosting service provider will have a general duty to observe the market in the sense of a context-specific duty of monitoring, as soon as it has learned of a concrete infringement. This has met with justified criticism in legal literature, because a general duty to monitor the market bears the risk of a limitless expansion of absolute liability.

A file hosting service provider will find itself caught in a dilemma between data protection and copyright law: If it complies with the data protection law requirements of the legislature and facilitates fully anonymous use of its services within the meaning of the Data Protection Act, it will run the risk of encountering difficulties or indeed finding it impossible to satisfy the duties of verification imposed on it. However, the compliance with legal rules of data protection law should not entail disadvantages to the service provider. The guarantee of anonymous service use is in fact a manifestation of legally compliant behavior in terms of the requirements imposed by the principle of data avoidance (see also sec. 13 (6) TMG, confirmed by the jurisdiction of the BGH regarding teacher – or physician evaluation portals and weighing the interests of data protection and personality rights).

In technical terms, the provider meets its duty of verificationif it offers the option of reporting infringements by e-mail or in a targeted way by means of a „takedown notice“ form. Additionally, in order to prevent future infringements, keyword filters may be used. Keyword filters compare the names of uploaded files with the names of reported works. However, a filter system of this kind must be designed in a proportionate way. The use of so-called hash value filters likewise represents a generally suitable means of satisfying general duties of verification. Jurisdiction demands that operators of file hosting services extend their searches for illegal content to include external link lists. A further option, which is in some sense a hybrid for preventing infringements by users both proactively and reactively, is to impose sanctions on users.

The issue of host service provider liability is also one of public and legal policy nature.Pursuant to current law, the question of a file hosting service provider’s liability for copyright violations on its online platform will be a question of the individual case.The point of departure for any basis for legal liability has to be the fundamental presumption of legality, in other words that the provision of web space is, as a general proposition, a value-neutral and multi-functional resource. In addition to technically reasonable solutions and a climate conductive to innovation, there is a particular necessity for legal certainty. Certainly, the technological development may often be more rapid than some legislation process. Nevertheless, the applicable principles have now been unmodified for almost 20 years. A clear legislative signal who should be held liable for the inevitableabuse of free internet use has long been overdue.

The statutory legitimation of absolute liability for operators of file hosting services would unavoidably mean that providers such as Uploaded would be forced to abandon their service, and would pose the risk of making providers who are registered in foreign countries beyond the reach of the law ever more popular. However, this would be in diametrical conflict with the need to protect the rights industry. For these reasons, and in order to create legal certainty, it would be of particular importance to all parties to enact statutory codifications dealing with the issue of file hosting service providers‘ liability in the very near future.

Precisely as interferer liability (which has partially divergent and conflicting demands in terms of duties of verification) is one of the most disputed issues in copyright law in the information age, the legislature must take action here. The evaluations at European level, which are currently being undertaken, regarding the measures which file hosting service providers must take when violations are reported to them, can be seen as a step in the right direction.

Legal opinion on legality of file-hosting services

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