In a recent notable case, the Israeli Supreme Court held that the sale of devices that circumvent technological measures which control the access to copyright protected works, neither constitutes copyright infringement in itself nor contributes to an infringement (CA 5097/11 Telran Communications (1986) Ltd. v. Charlton Ltd., in Hebrew).

The two litigants appealed the judgment of the Tel Aviv District Court (the court of first instance in these proceedings; a Hebrew summary of the District Court's judgment is available here; the full judgment in Hebrew is available here), which held that Telran infringed Charlton's copyright by selling decoding smart cards that allowed end-users to watch encoded live telecasts of the 2006 FIFA World Cup held in Germany. Charlton had acquired an exclusive license to distribute the telecasts in Israel.

Justice Zvi Zilbertal delivered the opinion of the Court, with Justices Rubinstein and Amit concurring. Zilbertal ruled that Telran had not exploited any of the exclusive rights of the copyright owner – it did not broadcast the World Cup (rather, it supplied the smart cards that facilitated watching the telecasts which were transmitted by foreign television networks). Telran therefore did not perform an infringing act, as defined by the statute. Zilbertal further held that Telran was not vicariously liable for copyright infringement. He arrived at this conclusion after finding that the foreign television networks did not unlawfully broadcast the World Cup to Israel, reasoning that the transmission of encoded signals which are imperceptible without a decoder, is tantamount to 'not-broadcasting' to Israel. Although Telran's customers did, in fact, watch the World Cup, merely viewing copyright protected content is not among the exclusive rights designated to the copyright owner under copyright law. Such viewing does not require a license and is therefore non-infringing. Absent direct copyright infringement, there can be no vicarious infringement.

Regarding the circumvention of technological access control measures, Justice Zilbertal ruled that during the relevant period (and to date), the sale of circumvention devices like the decoding smart cards at issue, is not an infringing act. Justice Rubinstein, in his concurring opinion, expressed dismay over the resulting situation, where "a sinner might profit from his sin". Rubinstein called on the legislature to "remember that its role is to prevent injustice in a changing world" and enact the necessary protective provisions in the Copyright Law. Justice Amit opined in dictum that Telran's sale of decoding smart cards could be considered "making available" a copyrighted work pursuant to the Copyright Law of 1911 (which is the legal framework that governed the case). However, Justice Amit deferred to the legislature's decision not to enact any pertinent statutory provisions in this matter within the Copyright Law of 2007, and refrained from making any binding ruling on the topic.

Justice Zilbertal added an intriguing statement, though equivocal (in law.co.il's opinion): what was previously perceived as defenses to copyright infringement, such as fair use, are not defenses but rather permitted activities that are deemed "users' rights". Zilbertal mentions that the pertinent chapter in the Copyright Law is titled "permitted uses" and activities that the Copyright Law outright permits cannot be regarded as violating acts. In Justice Zilbertal's opinion, this is a substantive stipulation in the statute, and not merely a technical defense argument. With this conclusion, Zilbertal deviates from two Supreme Court judgments (the Hebrew University case (Hebrew summary is available here; the full judgment in Hebrew is available here) and the Premier League case (Hebrew summary is available here; the full judgment in Hebrew is available here)), which have both held that while there is no infringement in making "permitted uses", such uses are detrimental and therefore do not preclude a finding of contributory infringement by a middleman that induced or caused the infringement.

According to Justice Zilbertal, "when no infringement materializes, there is no infringement to "contribute" to. Hence, because the end-users carried out a permitted act, the middleman "contributed" to a permitted act – and in any event the middleman cannot be found to have infringed the copyright owner's rights, as these have not been violated… The mere fact that the copyright owner suffered an economic loss, or "significant damage" due to the aggregation of numerous permitted acts, does not imply that the person who contributed to these permitted acts has committed copyright infringement." Zilbertal also added, contrary to the ruling in the Hebrew University case, that even if "permitted uses" are deemed a defense and not a legal right, the defense can apply to the middleman as well.

The case was remanded to the District Court, to determine whether Charlton has an actionable claim for unjust enrichment.