The italian Supreme Court rules on the liability of active hosting providers and on the damages for copyright infringement

With Order no. 39763/2021, the Italian Supreme Court has confirmed important principles with regard to the liability of active hosting providers and the compensation for damages due to copyright infringement, confirming the conclusions already reached by the Court of Rome and the Court of Appeal of Rome.

In the case in question, RETI TELEVISIVE ITALIANE S.p.A (RTI) had taken legal action against the US company TMFT ENTERPRISES LLC-Break Media (Break Media), claiming that the latter had, without authorization, hosted, on its portal, 40 videos uploaded by its users and extracts from various episodes of RTI’s television programs, thereby infringing its intellectual property rights. The Court of Rome had found that the defendant’s conduct infringed RTI’s copyright pursuant to articles 78 ter and 79 of the copyright law, ordering the defendant to pay damages of €115,000.00. The ruling was then confirmed by the Rome Court of Appeal, and later appealed before the Court of Cassation by Break Media.

With the ruling in question, the Supreme Court has, first of all, focused on the model of the active hosting provider, already identified by case law as the “provider of information society services that performs an activity that goes beyond a merely technical, automatic and passive service, and puts in place an active conduct, competing with others in the commission of the offense”. As such, this cannot rely on the general exemption from liability set forth by art. 16of Legislative Decree 70/2003, which refers exclusively to passive hosting providers, i.e. providers whose conduct is merely neutral, mechanical and passive. The responsibility of the active hosting provider is subject, therefore, to the normal provisions on civil liability for aiding and abetting the dissemination of illicit products.

In the present case, the Court notes that the technical expertise carried out in the courts of the merits proceedings had identified in the activities of Break Media a number of indicators of “active” conduct, such as ” [… ] (a) the selection of audio-video content for advertising purposes; (b) the development of an operating system incompatible with the model of the passive hosting provider; (c) the creation and distribution of digital entertainment content linked to the selection of content and placed on the home page; (d) the presence of a de facto editorial team, namely a group of people assigned specifically to the selection of content for advertising purposes“. For these reasons, states the Court, it appears the clear intention of the Break Media to contribute and collaborate with the third party in the offence. That said, the Supreme Court therefore confirmed the responsibility of Break Media for infringement of RTI’s intellectual property rights.

The Supreme Court then ruled on the issue of equitable compensation for damages, where their exact amount cannot be determined, stating that Article 158 of the Copyright Law identifies a twofold criterion for their quantification and, more precisely, the infringer’s profits and the reasonable royalty.

The first criterion refers to the actual economic advantages that the infringer has achieved, taking into account “the possible cost referable to the purchase of the rights of economic exploitation of the work, but also the revenues achieved by the infringer on the market“. In compliance with the normal principles on the burden of proof, this requires the demonstration of the infringer’s profits by the IP right owner.

The second criterion, on the other hand, which constitutes the “minimum compensation threshold” due to the owner of the rights, makes it possible to liquidate the damage based on the royalties that should have been paid to the owner in the presence of a license, between the parties, of the infringed work. It implies a posthumous diagnosis of the probable value of the copyright on the market at the time of the infringement, considering (i) the prices in the specific sector; (ii) the intrinsic value of the work; (iii) the profit made by the owner of the work during the period of its lawful use; (iv) any other concrete element.

On this basis, the Court of Cassation, having ascertained the copyright infringement and the related liability of the company Break Media as an active hosting provider, confirmed the Court of Appeal’s order that the latter pay damages in accordance with the reasonable royalty criterion and ordered Break Media to pay the costs of the proceedings.