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Cloudflare goes public, warns of threats posed by copyright infringing users

By | Published on Monday 19 August 2019


Internet services company Cloudflare filed to go public last week. Within the necessary papers required before its IPO, the company warned potential investors that being drawn into copyright infringement lawsuits was a significant threat to its future.

Cloudflare provides various services to website operators. And that includes some website operators who are seen by some copyright owners as being prolific infringers, aka piracy outfits. Copyright owners of that kind – which includes the music industry – have long called on Cloudflare to do more to crack down on infringers among its customer base. They have even gone so far as to accuse the firm of being liable for contributory copyright infringement for its failure to do so.

For its part, Cloudflare has always insisted that it can’t be tasked with policing the internet, and that it can’t disconnect customers simply because of accusations of infringement from any one copyright owner. To that end its position has generally been that it can only take action against an allegedly infringing customer when a court orders it to do so.

To test that position, some copyright owners have sought court orders, which generally Cloudflare has responded to by withdrawing services. In a small number of cases Cloudflare has also withdrawn services from clients on its own volition, though not usually because of allegations of copyright infringement.

Cloudflare services over nineteen million websites and says in its IPO filing that at least 100 of these are considered pirate sites by copyright owners. Noting that is has already faced several lawsuits as a result of this, it says: “There can be no assurance that we will not face similar litigation in the future or that we will prevail in any litigation we may face. An adverse decision in one or more of these lawsuits could materially and adversely affect our business, results of operations, and financial condition”.

While in the past it has claimed safe harbour protection whenever it is actually accused of liability for its customers’ infringement, Cloudflare warns that this option may not always be available. It also notes that the reach and technicalities of the copyright safe harbour are “highly unsettled and in flux” in the US and elsewhere. It makes specific reference to the recently passed Copyright Directive in the EU, which could affect its liabilities, it says.

The filing then warns: “If we are found not to be protected by the safe harbour provisions of [America’s] DMCA [Digital Millennium Copyright Act], CDA [Communications Decency Act] or other similar laws, or if we are deemed subject to laws in other countries that may not have the same protections or that may impose more onerous obligations on us, we may face claims for substantial damages and our brand, reputation, and financial results may be harmed. Such claims may result in liability that exceeds our ability to pay or our insurance coverage”.

Of course, frank warnings about worst case scenario threats are a requirement of formal filings before floating on a stock market, and as such documents of this kind are often filled with doom and gloom. And it sits alongside all the other bumf explaining why this is a company you should definitely want to invest in.

Still, while Cloudflare may not be expecting things to ever get as bad as laid out in its filing, it does show that the internet business does have concerns and is facing something of a juggling act to ensure it stays on top of it all.