Civil Code, Art. 2976(1); Act on Certain Information Society Services, Art. 5(1); Directive 2000/31/EC, Art. 14
Plaintiff (the Czech National Group of IFPI) sought protection against unfair competition of the defendants, providers of internet hosting services operated mainly under the brand names “Hellshare” and “Hellspy” and accessible to the public on their websites. In particular, the plaintiff complained of the defendants' remuneration of users of their service, the rate of which was depending on the number of downloads of files uploaded by those users. Furthermore, the plaintiff challenged the implementation of a search engine for stored files.
The Supreme Court found held that the limitation of the liability of hosting service providers within the meaning of Art. 5(1) of the Act on Certain Information Society Services (Art. 14 of the E-Commerce Directive) refers to a liability for the data which the provider stored at the request of a user of the service. In that regard, the Supreme Court concluded that the plaintiff in this case did not claim the defendants´ liability for the (illegally) stored data (i.e. liability for the stored content), but rather for an unfair incentive model of their service encouraging the users of the service to upload the illegal content which gives rise to a different ground (type) of liability (i.e. liability for the business model).
In a situation where the settings of hosting service allow its users to make information (data files) infringing third parties' intellectual property rights (copyright protected sound and audiovisual recordings) available to the public to a considerable (i.e. competitively significant) extent, such a business model of that service may, depending on the specific circumstances, result in unfair competition practice, irrespective of whether the provider of that service is (at the same time) liable for the stored data or not.
Particularly, the Supreme Court found unfair competition practice in payment of remuneration to the users of defendants´ hosting service, the amount of which was directly linked to the number or extent of downloads of files stored by these users, without the defendants´ adequate verification whether such remuneration is paid to these users as a result of infringement of the intellectual property rights or not.
Regarding the implementation of the electronic search engine into the defendants' service, the Supreme Court found that such an implementation does not, in principle, constitute unfair competition practice as long as the file searching is performed by a neutral, purely technical and automatic means of processing information.