As fast internet access at work becomes standard, and the boundaries between
leisure and work diminish, companies are exposing themselves to a new area of
liability - copyright infringement claims and possible prosecution based on
what their employees are downloading privately at their desks.

The battle against illegal file sharing has effectively been abandoned against peer-to-peer (P2P) networks for legal reasons and because of the difficulty of tracking down defendants operating offshore. Legal action against individuals is also being run down for a variety of reasons, including the PR backlash when a case comes to court.

As a result, enforcement bodies ­ whether in relation to music, film or software ­ are determined to seek out an easier target: the companies whose computer networks have been used for file sharing.

Case law in the UK often places direct liability on a business for the acts of wayward staff if there is a “sufficiently close connection” between the nature of the employment and the infringing act.

Enforcement activity in the past in relation to file sharing has mostly been for music shared by home users. But business software is also being shared via P2P networks. In 2006 the Federation Against Software Theft (Fast) secured court orders against 10 ISPs to divulge the details of 150 subscribers who were sharing anti-virus software through the Kazaa and Gnutella networks.

Although such action has been rare, there will be more lawsuits against businesses because the enforcement agencies are on much surer ground when claiming the employer is responsible for software as opposed to music or film files.

In April new powers were given to trading standards officers to enforce the criminal provisions of copyright legislation ­ previously their intellectual property mandate was limited to trademarks. Early in 2008, new powers are expected for private licensing organisations and trade bodies such as Fast to enforce copyright in their own name, rather than indirectly supporting actions by members.

The liability of individual company directors is another concern. In one recent case Dacs, the copyright collecting society for artists, brought a private prosecution against an international art book publisher and 10 of its directors. The prosecution was withdrawn after evidence of a copyright licence was found ­ but not
before the High Court had confirmed that criminal proceedings could
be used in the commercial arena.

Sometimes the preliminary steps alone can be damaging enough even if no legal proceedings follow. Police, trading standards and rights owners have wide powers to seize evidence, such as hard drives. And if this causes business disruption, they are exempted from liability if their actions were reasonably necessary.

Companies must set explicit internal policies for sharing files on company systems or using bandwidth for personal downloads. But they should be aware that this will still not prevent major disruption should there be a search and seizure following a tip-off by an employee or contractor. Nor will it prevent directors being named as defendants if they turn a blind eye to what is happening on the shopfloor or in the IT department.

Robin Fry is head of intellectual property at law firm Beachcroft