Interview: Copyright hangs in the balance

The High Court of Australia is due to decide the iiNet case later this year. How important will that decision be in the context of the negotiations between copyright owners and ISPs?

The decision is important not only for the current relationship between ISPs and copyright-dependant industries, but more generally in setting the scope of the exclusive rights conferred under the Australian Copyright Act 1968. Notwithstanding a codification which came into effect in 2001 Australian authorisation law (secondary liability) operates largely in the shadow of the 1975 decision of University of NSW v Moorhouse, which creates a relatively expansive rule that favours rights holders. It is possible that the High Court here might take the opportunity to adjust that position.

Whichever side is unsuccessful before the High Court will likely lobby most strongly for statutory reform. This is perhaps especially true for those in copyright-dependant industries. That is because ISPs do have – in the event of ISP liability being established by the High Court – an existing safe harbour to manage that liability. Here a critical requirement of the safe harbour is that the ISP "must adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the accounts of repeat infringers" which is discussed below in answer to the next question.

Copyright dependant industries – in the event of a firm denial of liability – have no obvious mechanism to require ISPs to take action to curb peer-to-peer infringement by their customers. This is because the logic of the safe harbour (unlike public law graduated response regimes such as Hadopi) is predicated upon the existence of copyright liability in the ISP. The safe harbour is then intended to encourage ISPs to comply with its requirements to avoid that liability by deterring customer infringement, and ensure that the copyright liability does not interfere with legitimate activity. Thus, if the position of iiNet is emphatically found by the High Court to be not authorising the infringements that it had been given repeated notice of, the current safe harbour remedial limitations would have no role to play in regulating the behaviour of ISPs in provision of services which facilitate peer-to-peer file sharing. Such a result would vindicate an iiNet internal view that it was "not obligated to do squat" on the film studios' notices, and it is difficult to imagine rights holders not agitating for prompt legislative intervention to displace that outcome.

What sort of agreement between rights owners and ISPs would you like to see emerge in Australia?

In Australia there has been an inability of carriage service providers eligible for the safe harbour remedial limitations to agree upon a repeat infringer policy with copyright owners within an industry code. The provisions of the safe harbour relating to any such code require that "it must be developed through an open voluntary process by a broad consensus of copyright owners and carriage service providers".

Some guidance on a repeat infinger account termination policy was offered indirectly in the judgment of Justice Emmett in the intermediate appeal in the iiNet case. The judge there set out when the termination of a customer's account might be required of an ISP so as to avoid liability for authorising a notified infringement. In summary it entails:

1. An ISP has been informed in writing of the particulars of specific acts of infringement of copyright of the rights holder, by use of a particular IP address allocated to a customer of the ISP.
2. That ISP has also been requested in writing to take the following steps:
1. to inform its customer of the particulars of the allegations of primary infringement involving the use of that customer's account;
2. to invite the customer to indicate whether the service has been used for acts of infringement as alleged;
3. to request the customer either to refute the allegations or to give appropriate assurances that there will be no repetition of the acts of infringement;
4. to warn the customer that, if no satisfactory response is received within a reasonable time (perhaps seven days) the service will be suspended until such time as a reasonable response is received;
5. to also warn the customer that if there are continued acts of infringement by use of the service, the service will be terminated;
6. to terminate the service in the event of further infringements
3. For point 1 above the ISP must be provided by the rights holder with unequivocal and cogent evidence of the alleged infringement. Mere assertion is insufficient, and a verifiable basis for the allegation must be supplied.
4. The rights holder must also undertake:
1. to reimburse the ISP for the reasonable cost of verifying the particulars of the primary acts of infringement alleged and of establishing and maintaining a regime to monitor the use of the ISP's service to determine whether further acts of infringements occur; and
2. to indemnify the ISP in respect of any liability reasonably incurred by it as a consequence of mistakenly suspending or terminating a service on the basis of allegations made by the rights holder.

With one rider this seems to me to provide a useful starting point for a discussion on the contours of any industry code relating to account termination of repeat infringers. The rider is that it is unclear precisely what Justice Emmett intended at 4(a) by a "regime to monitor the use" of the service. To my mind that can only mean a system to cross-match a right holder's notices as against a database maintained by the ISP of when any particular customer was allocated a particular IP address.

The Kookaburra/Down Under case received a lot of press coverage in Australia. In the end, Men At Work were asked to pay 5% of royalties from 2002. What do you make of that royalty rate?

In my view there was nothing particularly remarkable about this decision, once the iconic nature of the plaintiff's work and the defendants' infringement is put to one side. In view of the finding that the defendants reproduced in Down Under a recognisable part of the musical work Kookaburra all that was left to determine was damages based upon how much the defendants ought to have paid if they had bargained rather than infringed.

In the case, the infringement loosely equated to the defendants having sampled from Kookaburra. Sampling is a type of copyright use usually licensed in the popular music industry, but for which each use is inherently unique. While there was no market rate that could be used, there was evidence of a variety of comparable bargains. These bargains, together with the full context of the exercise of rights, led the trial judge to the conclusion that had a fair bargain been struck between the parties (whether in the early 1980s or in 2002) it would have been agreed that 5% of the Down Under performance royalties would accrue to the plaintiff. That 5% was the price that should have been paid.

The notional bargain methodology was used by the court with the consent of all parties. It has been criticised by some who have claimed that because the sales of Kookaburra were not affected in any way shape or form by the success of Down Under, the plaintiff should not have been awarded any damages at all. I disagree with this strict harm-based approach to assessing damages in either IP cases or proprietary tort cases more generally. The property rule should remain that infringements (or trespass) not causing lost sales must lie within the exclusive right of the owner, and should be remedied at a minimum by damages assessed at a reasonable usage price. That is a clear rule which ensures that no user should be in a better position for acting unlawfully rather than lawfully.

What is your opinion of the recent Federal Court decision in favour of Optus on streaming of free-to-air sports events on a two-minute delay? Do you think that case could also be headed to the High Court?

I should clarify a few of things. The OptusTV Now system operates so that, once programmed by a customer, four central copies are made of a designated programme with each copy in a different format so as to be capable of render on different platforms – Apple, Android. It is only on the Apple platform (the ubiquitous iPhone) that the customer may commence replay within about two minutes from the time the recording commenced – referred to in the trial decision as "near live" playback. A customer's recorded programmes are made available and transmitted to only that customer's device. The system enables this to occur in relation to local television broadcasts within the five most populous Australian cities; it is not limited to sports programming, but extends to all programming included within those broadcasts. Also, the decision comes in the wake of the US Cartoon Network case and the Singaporean RecordTV case, which also found in favour of commercial entities providing services similar to OptusTV Now. Both the US and the Singaporean cases were cited in the Australian decision.

The trial decision is being appealed to the Full Federal Court with hearing dates set for mid-March 2012. Central to the trial decision is the role perceived to be played by a time-shifting exception in the Australian Copyright Act 1968. It provides (as revised in 2006) a free exception to copyright "if a person makes a cinematograph film or sound recording of a broadcast solely for private and domestic use by watching or listening to the material broadcast at a time more convenient than the time when the broadcast is made". The decision has several highly contestable aspects that will be reconsidered on appeal. Here I will focus on only three: who exercises the exclusive rights, how can the time-shifting exception apply to all four copies, and can near-live truly be "a time more convenient"?

The first issue in the case is who exercises the right "to make a cinematograph film of the broadcast". The trial judge determined this to be the Optus customer by heavy reliance on the drafting of the time-shifting exception. This seems to be a very odd approach, and one which presupposes application of the exception. Frankly the exception does not provide an answer to the question of who is exercising the exclusive rights. A more fitting approach is to consider the primary rights-exercise question aside from whether the exception applies. The exception should be considered, but separate from the question of who is exercising the rights.

In considering the exception the trial judge found that it applied to all four copies made by the Optus customer. Although the exception requires that the copy be made solely for viewing at a more convenient time, this purpose was found to be met even in relation to the copies made that were incompatible with the relevant customer's device. Thus, the Android copy automatically made by an Optus customer using an iPhone was found to fall within the exception even though it could not be rendered on the customer's iPhone. This seems a very elastic interpretation of the provision.

The judge also interpreted the more convenient time purpose for "near live" playback to be "concerned with what the viewer subjectively thinks is a more convenient time for him or her". Under the judge's reasoning, "near live" playback was no bar to this more convenient time purpose so interpreted. In a telling passage the judge reasons that:

If a person can watch a broadcast "near live", away from a television, that may enable him or her to do something else. For example, the person may want to finish a task at work in the time it would take to travel home, because he or she knows that, once he or she finishes the task, he or she can view the broadcast "near live" when travelling home late or while still at work.

What is described here as time-shifting could equally be retransmission.

What was your take on the use by Wikipedia and other websites of blackouts and online protest to stop the PIPA and SOPA legislation in the US? What are the implications for future copyright-related legislation?

In my view the US legislative proposals, which entailed judicial oversight, were not going to "endanger free speech both in the United States and abroad" and did not "set a frightening precedent of Internet censorship for the world" as asserted by Wikipedia's founder Jimmy Wales. I consider copyright to be a primary institution to further freedom of expression by promising people with intelligence and creativity opportunities to garner market rewards from their intellect without having to rely upon patronage or the politburo. Macaulay's 1841 warning remains today: "I can conceive no system more fatal to the integrity and independence of literary men, than one under which they should be taught to look for their daily bread to the favour of ministers and nobles."

There are copyright-dependant industries that rely upon copyright laws being relevant and effective in their application to the internet. There are other undertakings which do not depend so much upon copyright, but on volunteers and donations. Wikipedia falls into the latter – well evidenced by Jimmy Wales's public letter which commences: "Today I am going to ask you to support Wikipedia with a donation..." There should be freedom for both copyright dependant industries and non-copyright dependant undertakings to operate and develop in the internet age. That happens now, and would continue to occur long after the contested reforms were passed. I am less confident that some copyright-dependant industries can survive as attractors of capital and employers of talent if copyright law is not kept relevant to changing technology.

The realpolitik of the blackout is undeniable. I regard it as an important moment in modern copyright history when the battle lines between information producers and information liberationists were vividly crystallised. To the extent there is a view that copyright-dependent industries should be pressured to abandon the market and follow the Wikipedia model, that view necessarily seems to entail replacing the dignity of earning with the indignity of begging.

What do you think are the three biggest challenges facing copyright owners in Australia?

i) The political impacts of the blasé normalisation in the Net Generation of unlawful peer-to-peer distribution;

i) The ramifications of the High Court decision in IceTV for works authored in sequential or collective settings;

i) The increasing trend of Australian judges to take a minimalist view of copyright owners' rights and a maximalist view of copyright exceptions.

Of those challenges it is only the second that I can suggest a solution: statutory adoption in Australia of the US work-for-hire doctrine. I'll leave the Net Generation and the judges for others to ponder.