Third-party insurance in cyberspace

Internet service providers must perform a tricky balancing act to avoid falling foul of the law, writes Suzanne Garben. Suzanne Garben is a partner in the media litigation department at Denton Wilde Sapte.

As the first libel case involving a UK-based internet service provider (ISP), Lawrence Godfrey's action against Demon Internet has sparked a wave of publicity. In March last year, an English court for the first time addressed the issue of an ISP's liability for the dissemination of defamatory third-party material.

The case raises important issues for all those who make third-party material available online. But how far-reaching are its consequences?

Before jumping to conclusions, it is necessary to consider the facts. It involved a forged 'posting' sent to an ISP, Demon Internet. The posting purported to come from Mr L Godfrey but was in fact an anonymous forgery, and contained material which was "squalid, obscene and defamatory" of him. Godfrey notified Demon of the forged posting by fax on 17 January 1999 and requested its removal. However, the posting remained available to users until its expiry on or about 27 January 1999. Godfrey claimed damages for libel from the date he notified Demon that the posting was defamatory.

No one disputed that the material was defamatory. At issue was whether the ISP should be held liable.

Part of Demon's defence was that it was not at common law the publisher of the posting and, even if it was, it could defend itself using Section 1 of the Defamation Act 1996. Godfrey sought to strike out these parts of Demon's defence in March last year.

The court held that Demon could not rely upon the defence that it did not publish the posting. There was publication each time a Demon user accessed the posting.

The statutory defence which requires a defendant to show that (i) he is not the author, editor or publisher of the statement complained of, (ii) he took reasonable care in relation to its publication and (iii) that he did not know, and he had no reason to believe that what he did caused or contributed to the publication of a defamatory statement, was also rejected. Although the court held that Demon was clearly not the author, editor or publisher, Demon was unable to prove the second or third points above.

Settlement was reached before trial whereby Demon agreed to pay £15,000 plus costs to Godfrey. What then is the effect of this case?

The Demon case hinged on the fact that Godfrey had given notice to the ISP of the material and no action was taken. Therefore the case does give guidance with regard to satisfying the requirement that the site owner did not know and had no reason to believe that what it did caused or contributed to the publication of a defamatory statement. When a site owner receives notice of a defamatory statement posted to its site it must act.

In this case, the statement was clearly defamatory and there was no basis for any delay in removing it. However, other cases may be less clear.

There does not seem to be any basis for press reports that ISPs will now be sued every time their servers carry defamatory material. Where third-party material is posted directly to a site, the owner can still argue that it is not acting as author, editor or publisher. Obviously the site owner must also satisfy the second and third elements of the defence.

It involves a difficult balancing act. A site owner will want to avoid taking on a full editing or publishing role in relation to third-party material as it will fall foul of the first element of the statutory defence. Unfortunately the case gave no guidance as to what lesser actions would constitute taking reasonable care other than to suggest that doing nothing would not. We suggest that "best practice" would be to establish, record and follow a complaints procedure which could be presented to the court as evidence that the site owner was acting reasonably.

After settlement, Demon's parent company pledged to "press the Government for recognition that ISPs should not be liable for the millions of items carried on the internet every day". In order to deal with the law as it stands in the Defamation Act 1996, ISPs must deal with complaints in a reasonable manner according to an established protocol.

Nonetheless, clarification of the application of Section 1 of the Defamation Act 1996 to the internet is undoubtedly needed and it is hoped that it will be addressed in the forthcoming E-commerce Directive.