ISP Indirect Copyright Liability Regime: An Economic Efficient Liability Regime for Online Copyright Protection Shaped by Internet Technology

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ISPs’ indirect copyright liability permits regulation where traditional legislation fails to meet requirements of copyright protection in a new digital environment, and makes a third party possibly to prevent or decrease the risk of copyright infringement at low cost. However, though it has been hailed as a forceful tool for governing ISPs’ liability for fierce copyright infringement committed by their users over the Internet in most of the jurisdictions, the strength of this liability regime is still being challenged. Some argued that imposing indirect liability on the ISPs may lead to ISPs’ over-zealous censorship and thereby decrease or limit free access to copyright materials. Meanwhile, the ISPs also argued that it is unfair for them to bear the full social costs generated by their users’ unlawful activities, merely because they are providing facilities and services. So far, dozens of studies have been produced to criticise those arguments and justify ISPs’ indirect copyright liability from legal point of view; however, less attention has been paid to the economic implication of ISPs’ indirect copyright liability and the significance it achieves at the confluence of law and economics. Utilizing an evaluation criterion: economic efficiency-Hicks-Kaldor criterion and a simple economic model: cost-benefit analysis, both are drawn from the theory of economics, this paper examines economic strength of indirect liability regime in the context of ISPs’ liability for online copyright infringement. It employs a string of relevant cases against those who allegedly facilitate copyright infringements to compare the costs and benefits of ISPs’ indirect copyright liability and also three applications of it including vicarious liability, contributory liability and inducement liability. The paper finally concludes that only ISPs’ indirect copyright liability regime shaped by the technology through the development of the Internet is the most efficient liability regime to tackle extensive online copyright infringements and bring long term social welfare to the society. This paper was presented at the 23rd BILETA Annual Conference 2008 on March, 2008, and it has been published in the conference proceeding of the 23rd BILETA Annual Conference 2008.