This has cleared the way for the UK communications regulator Ofcom to spell out how the 3-strikes system would work by publishing

a draft code for consultation that would require large internet service providers (ISPs) to inform customers of allegations that their internet connection has been used to infringe copyright.

However, an IP address on its own doesn't identify the person responsible for the alleged infringement -- the use of an open wifi network is an obvious reason why not. This touches on one of only four grounds allowed for appeal (in the original draft, other reasons were permitted, but Ofcom has now narrowed this down "following a direction from the [UK] Government"):

the act constituting the apparent infringement to which a copyright infringement report relates was not done by the subscriber and the subscriber took reasonable steps to prevent other persons infringing copyright by means of the internet access service;

Although far from complete, the current code already imposes an unnecessary burden on ISPs that are merely providing the digital plumbing. Worse, it starts from the assumption that those accused of infringement are guilty, and must prove their innocence in an appeals process – but how on earth do you prove a negative: that you didn't download a file?

What makes this even more deplorable is that the copyright industries still haven't provided any credible, independent evidence that unauthorized file sharing is damaging them. In fact, as Techdirt has shown in its report The Sky is Rising, they are all flourishing. This means that fundamental rights are being harmed, and costs incurred, without justification and probably for no ultimate benefit, since determined downloaders will simply switch to using VPNs or other means. The longer the great Digital Economy Act farce drags on, the more absurd it becomes from every viewpoint.

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"The ISPs' failed legal challenge has meant yet another year of harm to British musicians and creators from illegal filesharing."

John McVay, CEO of Pact, said: "Rather than needlessly spending more time and money on further legal challenges, BT and TalkTalk now need to focus on working with rights holders and the Government in implementing the Digital Economy Act with immediate effect."

“Once again a judge has made it extremely clear that the Digital Economy Act is a fair, focused, proportionate and efficient system for consumers and the creative industry,” she added. “Rather than individuals being hauled into court, the DEA makes it possible to conduct a mass consumer education programme. BT and TalkTalk need to stop fighting and start obeying the law.”

The Film Distributors’ Association president Lord Puttnam CBE hoped the court decision would put an end to “a long chapter of uncertainty, and the DEA can now help in implementing a mass consumer education programme so that people, especially young people, can come to appreciate the damage piracy inflicts on the whole of the creative community”.

The British Video Association’s director general Lavinia Carey added: “Several other countries are adopting this measure and it would be bad for Britain’s creative industries to be left behind more forward thinking nations who are supporting their creative economies at this difficult time of transition towards increased digital consumption during this period of recession.”

That's the case for the attempted blocking of Newzbin2 in the UK. The judge, Justice Arnold, ordered the ISP BT to take a two-stage approach (possible thanks to the pre-existing "Cleanfeed" system it had set up to block child pornography).

If an IP address matches one of those contained in the blocking list, the request to access the site is routed to a proxy server where the exact URL – the specific address including the directory and filename – is examined. If that matches too, access is denied. The judge specified this technique, rather than simply ordering the IP address to be blocked, for an important reason, which he explained in one of his rulings:

the Studios now accept that the order should refer to IP address re-routing and not IP address blocking. It appears that IP address blocking could lead to "overblocking" of sites or pages that ought not to be blocked.

What Firth's analysis shows is how even relatively "sophisticated" censorship systems that aim to minimize damage to other sites can lead to overblocking because not every situation can be foreseen or planned for. Now imagine what SOPA/PIPA will do.

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The first likely step, which could be just days away, will be to ask ISPs to block some of the biggest illegal websites. It is not known yet which sites – and, therefore, which ISPs will be targeted. If ISPs do not block these sites voluntarily, the BPI will ratchet up the pressure and will seek court orders – citing 97A and the MPA case – requiring them to do so.

"In my judgment it follows that BT has actual knowledge of other persons using its service to infringe copyright: it knows that the users and operators of Newzbin2 infringe copyright on a large scale, and in particular infringe the copyrights of the studios in large numbers of their films and television programmes," said Justice Arnold in his ruling at the high court in London.

"[BT] knows that the users of Newzbin2 include BT subscribers, and it knows those users use its service to receive infringing copies of copyright works made available to them by Newzbin2," Arnold added.

BT will remove the FUP controls currently applied to customers with ‘atypical’ usage. Today atypical users are restricted at 300GB usage and account for less than 0.5% of the BT customer base. BT will not target any individuals with restrictions based on usage levels. However, we still have traffic management policies that will restrict certain applications / protocols, such as P2P, when the network is busy. As BT continues to invest in the network and network bandwidth we can now remove these restrictions and ensure the experience of the wider customer base.

It's unfortunate that in a piece which wrongly charges BPI with making things up, you have misrepresented what our Chief Executive said. He did not say that "BT broke the law in not stopping file sharing", as you assert.

BT fosters a reputation as a socially responsible company. BPI has questioned whether it's appropriate for such a company to do nothing about 100,000 instances "a small sample" of the illegal behaviour that BT knows is occurring on its network. BT knows about this activity because BPI provides detailed weekly notifications enabling BT to verify each and every infringement. BPI's notifications are based upon robust copyright infringement detection techniques which have been accepted by the UK High Court in over 150 cases.

We understand that BT employs very sophisticated traffic and network analysis technologies that allows it to see the proportion of network traffic that is P2P. We have never said that all P2P traffic is illegal, because not all of it is. But the weekly notifications we send to BT relate solely to music files which we know are being shared illegally.

Since 2003, annual UK broadband revenues have increased from £0.6 billion to £2.7 billion (2008). Recorded music revenues have fallen every year in the same period, principally due to illegal filesharing. It is therefore not difficult to see that the growth of BT's consumer broadband business has been assisted by the increase in illegal filesharing.

Other ISPs are recognising that it is not sustainable in the long-term for a high percentage of ISPs revenues to be based on the transmission of illegal data, and that in future they need to share in revenues from providing high quality entertainment services for their customers

"It's shameful for a company like BT to know that a high percentage of the traffic it carries is illegal material but do nothing," Taylor told The Mirror. "If you operate a commercial service and know it is being used to break the law, taking steps to ensure it is used legally is a cost of doing business."

They send us a list of IP addresses and say 'this IP address was involved in a breach on this date'. We look at that say 'well what do you want us to do with this? We can't release the person's details to you on the basis of an allegation and we can't go and kick the customer off on the basis of an allegation from someone else'. So we say 'you are alleging the person has broken the law; we're passing it to the police. Let them deal with it'.