Case law update: Football Association Premier League Ltd v British Telecommunication Plc and others [2017]

The High Court recently ordered a number of Internet service providers (“ISPs”) to block access to Internet servers that allowed viewers to illegally view English Premier League games. Mr Justice Arnold (the “Judge”), who heard this case, noted that whilst this matter dealt with established copyright principles, this was the first time the Court had dealt directly with the Internet servers providing the illegal streams, as opposed to just the websites that advertised the infringing content.

 Technical note: Before dealing with the details of this case, it is worth reviewing the basics of how illegal streaming works. There are numerous websites, which advertise streaming of live Premier League games. Once the viewer selects a game to view, the website lists a number of links to other websites which purport to show the game. When one of the links is clicked the first website directs you to a second website hosted on a server, which then streams the game directly back to the viewer, circumventing the initial website. Previously, when websites that advertise content have been blocked they reappear with a slightly website name (and a different IP address). They are then able to re-link the viewers to the servers that show the infringing content. Therefore, an effective anti-piracy law would seek to target the servers that host the content, as opposed to merely the websites that advertise it.

Background

Whilst the Claimant was the Football Association Premier League Ltd (“FAPL”), they were supported by a number of other right holders including the Rugby Football Union, the England and Wales Cricket Board and the British Broadcasting Corporation (The fact that the Claimant had the backing of some of the biggest UK sports rights holders indicates how important this issue is). The Defendants’ are the leading ISPs in the United Kingdom and included British Telecommunication, SKY UK and Virgin Media. The Claimant sought an injunction, pursuant to Section 97A of the Copyrights, Designs and Patents Act 1988 (which implements a variety of European Community law) (the “Act”) against the Defendants’ requiring them to prevent their customers from accessing the servers which illegally show Premier League games.

The Judge noted that in a previous case (FAPL v British Sky Broadcasting) in 2013 he had dealt with a similar request for an injunction, however in the three years since, the situation has been complicated in a number of ways:-

  1. The ‘traditional’ method of blocking streaming services, which consisted of blocking websites that advertised Premier League games, needed updating. Since 2013 there has been a range of new devices that connect directly to televisions (ie: the popular Amazon Fire stick). These devices then access the streaming servers directing, avoiding the need to use specific websites;
  1. Accessing illegal and increasingly high quality streaming services requires less technical know-how than ever before. Customers that purchase the Amazon Fire stick simply plug the device into their TV with the software already uploaded;
  1. There is large proportion of the public that believe these new streaming devices are legal, and that because such devices are freely available (from legal websites) accessing streaming services through them is perfectly fine; and
  1. Many servers which provide the illegal streams are now based off shore, and do not respond to requests by rights holders to take down material (see ‘Alternative measures’ section below).

As a result of these factors, viewers are increasingly using illegal services as a substitute for paid subscriptions, which undermines the value of the rights being offered by the FAPL. Considering that the FAPL rights are now worth £1.7 billion, the stakes involved in resolving the issue are high.

The Blocking Order (“the Order”)

The Order contained a confidential list of IP server addresses, which were to be blocked in the first instance (These had been identified by a contractor employed by the FAPL). In addition the Order aimed to address the issues outlined in 1 – 4 above, in the following ways:-

  1. The Order is ‘live’, so it only works when the Premier League games are being broadcast;
  2. The list of servers to block will be reset every week, meaning new infringing servers get quickly blocked whilst old servers get unblocked if they are no longer infringing;
  3. The Order is only valid until the end of the current Premier League season (22 May 2017). This allows the Order to be tweaked if necessary in time for the next Premier League season; and
  4. Finally as a safeguard (against unjustified blocking) a notice must be given to the hosting server and the operating website once a relevant IP address is blocked. This means the hosting server, operating website or one of the Defendants’ have the opportunity to apply to set aside the Order.

Jurisdictional requirements

The Judge then outlined the Court’s jurisdiction to make the Order by going through the relevant criteria:-

  1. The Defendants are service providers within the meaning of regulation 2 of the Electronic Commerce (EC Directive) Regulations 2002, SI 2002/2013;
  1. Both the operators of the servers and the users of the servers infringe the Claimant’s rights. The reasoning behind the Judge’s conclusion are summarised briefly below (for more detail see paragraphs 30 – 42 of the Judgment):-
  • When a user streams the football match, it illegally creates copies of the game in the memory of the device the game is being watched on.
  • The steps taken by the providers of the streaming service are deliberately intended to allow users to illegally watch a live Premier League game.
  • The servers are designed to be, and often are, viewed by a large number of users.
  • It is often the case that the servers are not only infringing the rights of the FAPL, but also profiting from doing so, through advertising revenue.
  • Whilst the servers often operate from abroad (as previously outlined) they are aimed at UK consumers and therefore are in effect operating under UK law; and
  1. The Defendant’s services are used to commit the infringement, and the Defendants are aware that this is the case.

Reasons for Order

Having established the wording of the Order and that jurisdiction was satisfied, the Judge looked at the balance between the Defendants’ right to carry on its business and the Claimants’ copyright. Overall the Judge held that the terms of the order were appropriate for the reasons explained below:

Effectiveness and dissuasiveness (ie: will the Order see a reduction in piracy)

Here the Judge drew on experience of similar blocking orders made by the High Court. In particular he highlighted previous orders in connection with ‘Bit Torrent’ websites (which enabled users to illegally download music) and online streaming websites, which enabled users to watch pirated films. Academic research done on the effect of these orders concluded:-

  1. ‘Bit Torrent’ blocking orders reduced traffic to the affected websites by 90% from the UK (whilst they can still be accessed, the technical know how required to do so is high); and
  1. Piracy by the users in the UK affected by the blocking orders fell by 22% and in turn subscription websites like Netflix saw a rise in users.

The Judge also stated, as he alluded to earlier in the Judgment, that he hoped the Order would educate UK consumers that using online streaming services was illegal.

Substitutability (ie: that users will simply use non blocked servers)

The Judge made two main observations:-

  1. Drawing on the EU case (see judgment paragraph 55) which blocked the music download website Pirate Bay, the fact that users could use other websites, did not detract from the effectiveness of the blocking order in reducing piracy; and
  1. The flexible nature of the Order allows for it to be updated as servers come and go. So whilst there will inevitably be some servers still offering illegal streaming this will be reduced.

Alternative measures

The Judge looked at what methods had previously been tried and whether the Order was the best way to combat online piracy (see Judgment paragraph 57 – 63). His observations included that:-

  1. Previously the Premier League has tried to engage with hosts of the servers showing the football games, but it proved difficult, due to the fact that many of these hosts operate from offshore; and
  1. It has been difficult preventing the sale of devices (ie: on Ebay or Amazon) that are configured to access infringing material. Sellers have become quite sophisticated in the way they market the devices to avoid detection.

Having regard to such factors the Judge was of the opinion the Order was an appropriate method of prevention. It was not unnecessarily complicated or costly to pursue and the targeted nature of enforcement meant the Order did not prevent legitimate trade. The main purpose of these streaming servers was to show infringing material and any legitimate content they did show was minimal and was not a reason for not granting the order.

Comment

When introducing this case the Judge referred to the ‘traditional’ method of preventing streaming being inadequate, and ‘traditional’ in this context was not even a decade old. The difficulty for lawmakers is how to keep up with innovative infringement methods and indeed it seems inevitable there will be lag periods between these new methods and an appropriate legal response. When an appropriate legal response was devised in this case, it is noticeable how labour intensive it is for the rights holder. Every week during the Premier League season the Order is reset and updated to incorporate newly infringing servers and each newly blocked server has to receive notice of this blocking order. Whilst this seems like a burden on the FAPL who have to pay to detect infringing servers, the pace of change online means the battle against illegal streaming requires such an unremitting and flexible approach.

Equally, as the Judge observed, a key part of the problem is the perception of online infringement. People are either unsure whether online streaming is a crime or they think it is less of a crime. What further clouds the issue in people’s minds is the existence of devices such as the widely available Amazon Fire Stick, which is designed to facilitate infringement (but is itself legal).

Whilst at the date of this article, a quick search online for an illegal football stream shows that the options have been severely reduced; it will be interesting to assess the situation in 12 months. To misquote former British Prime Minster Harold Wilson, ‘ a year is a long time online’.

Click here for the full Judgment text

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The Takeover Appeal Board, upheld a previous ruling that the Takeover Code was breached during the acquisition of shares in Rangers International Football Club plc.

On 13 March 2017, the Takeover Appeal Board published its decision to dismiss an appeal by the Chairman of Rangers International Football Club plc (“Rangers”), David King. The appeal concerned a ruling that Mr King had cooperated with three other individuals in acquiring shares in Rangers and did not offer to purchase the shares of the remaining shareholders, as he was required to do under the Takeover Code (the “Code”).

The Code

The Code is managed by the Panel on Takeovers and Mergers, whose remit is to supervisor and regulate takeovers of Public companies. This matter concerned two main parts of the Code:-

  1. Mandatory bid obligation (Part 9 of the Code )

When any person or persons ‘acting in concert’ (defined below) acquire an interest in shares that carry 30% or more of the voting rights, they are obliged to extend an offer to acquire the remaining shares of the company in question. The primary responsibility for complying with this obligation falls on the person whose acquisition triggers the mandatory bid (ie: the person whose purchase means its goes over the 30% threshold).

  1. ‘Acting in concert’ (Code definitions)

This is where one person cooperates, either formally or informally, with others to (a) consolidate control of a company (which is defined as either (i) an interest in shares, which is outright ownership of the shares OR (ii) the right to own shares, that equals 30% or more of the voting rights) OR (b) frustrate the successful outcome of an offer for the company. When applying this definition it is assumed that where a person’s close relatives or related trusts are involved, they will be ‘acting in concert’ (“Presumption 5”).

Background

The matter concerned two acquisitions (the “Acquisitions”):-

  1. On 31 December 2014, Mr George Letham, Mr George Taylor and Mr Douglas Park (the “initial buyers”) acquired an interest in Rangers shares at 20p a share. Mr Lathem subsequently admitted he had ‘acted in concert’ with the other two other buyers to acquire these shares which all together constituted 19.8% of Rangers; and
  1. On 2 January 2015, Mr King acquired an interest in Rangers shares at 20p a share, using a company incorporated in the British Virgin Islands called New Oasis Asset Limited (“Oasis”). Oasis was in turn owned by a company incorporated in Gibraltar called Sovereign Trust International Limited (“Sovereign Trust”). Sovereign Trust had one corporate director, Sovereign Management Limited, which was a sister company of Sovereign Trust. In turn, Sovereign Trust is a trustee of Glencoe Investments Trust, incorporated in Guernsey, of which Mr King and his family own the beneficial interest.

It subsequently became apparent, through emails between Mr King and Mr Letham that they were aware of their respective purchases and that their Acquisitions would equal over 30% of the shares in Rangers. Shortly after the completion of the Acquisitions in early 2015, Mr King’s nominees replaced the existing directors on the board of Rangers and Mr King was appointed chairman.

Panel on Takeovers and Mergers – Initial ruling of the Executive and the Hearing Committee

After an investigation which had lasted over a year, the Executive branch (who manage the day to day supervision of takeovers), ruled on 7 June 2016 that Mr King had ‘acted in concert’ with the Initial Buyers and that Mr King must make an offer to the remaining shareholders at 20p a share. Mr King requested that the Hearing Committee review the Executives’ decision. The Hearing Committee upheld the Executives’ decision for a number of reasons, including:-

  1. It was apparent, through correspondence between all the parties that the purpose of the Acquisitions was to affect a change of control in the board of Rangers (which it achieved);
  1. Mr King and Mr Letham had, prior to the Acquisitions, cooperated to try and gain control of Rangers. In October 2014, two joint proposals by Mr King and Mr Letham, had failed to materialise. The Committee pointed to this behaviour, as a strong indicator of the parties intentions during the Acquisitions (ie: to gain control of Rangers); and
  1. Having deciphered the trust structure through which Mr King had acquired the shares in Rangers (see above), it was Mr King who was the ultimate beneficial owner and the mandatory obligation contained in the Code fell on his shoulders.

Appeal to the Takeover Appeal Board (the “Board”)

The Hearing Committees’ decision was appealed on a number of grounds, including:-

  1. That Mr King himself did not acquire the shares in Rangers (see above trust structure).

Verdict: The Board pointed to Presumption 5 of the Code, which states that related trusts are presumed to be acting in concert with each other. There was no evidence to rebut this presumption and Mr King had to comply with the Code’s mandatory obligation under code 9.

  1. Mr King stated his previous collaborations with Mr Letham in October 2014 were not relevant to the subsequent Acquisitions.

Verdict: The Board dismissed this argument and decided it was perfectly reasonable to consider previous behaviour to ascertain whether it was appropriate to infer the parties had acted in concert on the Acquisitions.

  1. Mr King stated that the Hearing Committee had misunderstood his intentions (being to restore proper corporate governance to Rangers).

Verdict: The Board held that Mr King’s justification or motivations were not relevant to deciding whether the Code had been breached.

  1. Mr King argued there was no benefit (to the shareholders) in him being required to offer the shares at 20p a share to the remaining shareholders, because they had since increased in value.

Verdict: This was dismissed, as any benefit or otherwise to shareholders of the complying with the mandatory obligation is not a consideration when deciding whether the Code has been breached.

As such the appeal was dismissed and Mr King had until 12 April 2017 to make the offer to the remaining shareholders at 20p a share.

Comment

This matter is useful in demonstrating how the Code is applied in three key ways:-

  1. When Mr King drew the Board’s attention to the reasons behind his involvement in Rangers, he was seemingly claiming that ‘ends (improved corporate governance) justified the means (breaching the Code)’. The motivation and intention behind an acquisition (whether positive or otherwise), whilst important for the parties involved, have no bearing on the application of the Code;
  1. Parties cannot circumvent the mandatory obligation under Code 9 by purchasing shares through an elaborate trust structure. On this basis the threshold for rebutting Presumption 5 of the Code, that related trusts are acting in concert, would seem to be high; and
  1. Past dealings between the parties, whilst not conclusive evidence of future co-operation, act as helpful guidance when considering whether parties had ‘acted in concert’ as defined under the Code.

This article does not include all aspects of the ruling, for the full statement by the Board see their website