Intermediary liability has become one of the critical flashpoints of Internet governance. A few weeks ago, we celebrated an Australian court decision that denied a bid by copyright holders to make ISPs liable for copyright infringement by people who happened to be using their networks. Yesterday, we all learned of an Italian court decision that seems to have pointed in the opposite direction. Google executives were convicted of a privacy violation because of a video that one of their millions of users posted. The decision raises major concerns as it seems to require Internet intermediaries to monitor user generated content, which would be a disaster for the freedom and openness of the Internet.

But there is more to this case than meets the eye. US news coverage, which concentrates solely on Google’s outraged claims, fails to take into account three broader issues: 1) the fact that Google itself has undercut its exemption from liability claim by implementing monitoring of copyright; 2) the weakness, vagueness and obsolescence of the EU E-Commerce Directive’s liability protection provisions; 3) the politics and law of privacy law in Europe and the way privacy law can be used – for both legitimate and illegitimate reasons – to attack this large global corporation that threatens the business models of entrenched interests.

First, consider the “chickens coming home to roost” angle. While Google claims that it cannot possibly monitor all user-generated content, in Italy the corporation has already made concessions to copyright interests, engaging in surveillance of postings on behalf of copyright holders. It uses an automated recognition system that checks the audio or visual tracks of a video and compares them to a database provided by media companies. One source we know had this experience when trying to upload a video they produced, which used as background music a song by Prince.  Shortly after uploading the video, the person received a notification by Google that the video had been disabled. The person (who is a lawyer) did not think they had engaged in copyright violation, as the activity would have fallen under the Italian equivalent of "fair use" exemptions of US copyright law. But of course the monitoring was automated and did not respect the niceties of applying law to facts. The point is that Google did much more than simply provide "storage" of user-generated content; it engaged in a "monitoring" activity. They are not obliged to do so under the E-Commerce Directive and, most importantly, doing it could very well disqualify them from the exemptions therein, because they would "have actual knowledge of illegal activity or information."

There is also an important political dimension to this story. Google is being targeted because of its prominence and its threat to traditional media. According to a well-positioned source in Europe who must remain anonymous, “Google is under attack in Italy (as elsewhere) under many fronts, some of which are understandable (Google's treatment of privacy/personal data law is laughable, to say the least) other less so (entrenched media businesses see Google as a major threat to their old business models).” Bear in mind that the Italian Prime Minister, Silvio Berlusconi, is a businessman who made his money in traditional broadcasting. Berlusconi has openly called for user-generated videos to be licensed and regulated in a way that could kill user-generated video sites.

Our source continued with some interesting observations about the legal subtleties of this case, and urged that no conclusions about the policy implications be drawn before the judge’s actual reasoning is known:

It may very well be that the judge has simply condemned Google because it failed to notify to the Italian Data Protection Authority that it was engaging in "data processing activities", which is an obligation under European law.  This would not touch at all the role of Google as an intermediary (and thus, by analogy, of other intermediaries). As a matter of fact, the ruling was based on a violation of privacy law (while the charges of defamation were dropped by the judge). …Privacy/data protection issues are excluded from the scope of the e-commerce Directive.  Therefore, it is possible that the final judgment has *nothing* to do with the liability exemptions of intermediaries, except for the fact that they have to respect privacy/data protection law (and it is the non-respect of that law that has *huge* social, economic and political costs).

Finally, the European Union’s E-Commerce Directive 2000 protects intermediaries who fall under three specific categories: providing "mere conduit" or "caching" or "hosting" services.  Google/YouTube certainly does not fall under the "mere conduit" or "caching" category, but seems to provide more than mere "storage." The E-Commerce Directive was written well before the age of user-generated content, and may need to be updated to provide exemption to services that provide a vehicle for users to communicate and a host of complementary services such as tagging, searching, and so on.