Hollywood takes on Australia's third largest ISP - and loses

A recent decision of the Australian Federal Court has reignited debate around the liability of Internet Service Providers (ISPs) for copyright infringement.¹ Solicitor Jessie Parker and summer clerk Grace Boos discuss what implications this landmark decision may have on New Zealand's rewrite of section 92A of the Copyright Act 1994.

Roadshow Films v iiNet

M ore than 30 major motion picture studios, including big names such as Universal Pictures, Warner Bros and 20th Century Fox, collectively brought proceedings against iiNet, Australia's third largest ISP, claiming copyright infringement.

The facts can be summarised as follows:

• The studios had advised iiNet that certain internet users with iiNet accounts were using a peer to peer (P2P) file sharing system to illegally download films and televisions shows.

• The studios demanded that iiNet take steps to stop the copyright infringement e.g., sending a warning to the infringers and, if that was not sufficient to stop the infringement, suspending or terminating their internet accounts. iiNet refused.

Under Australian copyright law, a person who authorises the infringement of copyright is treated as if they themselves infringed copyright directly. The issue for the Federal Court was whether iiNet, by failing to take any steps to stop infringing conduct, authorised the copyright infringement of its users.

The Federal Court held that iiNet did not authorise the copyright infringements because:

• the infringements were a direct result of the use of a P2P file sharing system that iiNet did not create or control;

• the steps available to iiNet to prevent the infringements (i.e., issuing warnings and terminating users' accounts) were not reasonable in the absence of judicial consideration as to the extent of the infringement on each account, therefore iiNet did not have the power to prevent the infringements occurring as required under the Australian Copyright Act; and

• iiNet did not sanction, approve or countenance the infringements.

The Federal Court noted that:

• iiNet provides a legitimate business which is not intended or designed to infringe copyright;

• there is a difference between providing the means to infringe copyright (e.g., the P2P file sharing system) and providing a precondition to infringement occurring (e.g., iiNet's internet services);

• Australian law does not place a positive obligation on any person to protect the copyright of another; and

• termination of an account would prevent the affected user from using the internet legitimately even though that user had contracted and paid for this service.

Impact on the section 92A debate

For those following the section 92A debate, the Federal Court's reasoning may sound familiar. The Telecommunications Carriers' Forum raised similar arguments on behalf of New Zealand ISPs. It is clear from the Copyright (Infringing File Sharing) Amendment Bill introduced into Parliament this week that the Government has found those arguments somewhat persuasive.

The bill repeals section 92A of the Copyright Act, which would have required ISPs to adopt a policy providing for the termination of a repeat infringer's internet account. It introduces a new three stage approach for P2P copyright infringement. Under the new provisions an ISP does not infringe copyright, despite possible knowledge of a P2P copyright infringement, as long as it complies with its obligations under the Act.

1. Notice regime for P2P copyright infringement

A right holder must send "reasonable evidence" of alleged P2P copyright infringement to the appropriate ISP². The reasonable evidence required will be prescribed by regulation. The ISP will then identify the relevant account holder and pass on a "detection notice" from the right holder that informs the account holder that infringing has occurred and is illegal. An ISP will issue a "warning notice" if a further infringement occurs in relation to the same right holder at least three weeks after the date of the detection notice (provided the detection notice has not expired). If, at least three weeks after a warning notice, a further infringement occurs an "enforcement notice" may be issued.

The account holder may dispute these infringement notices by sending a challenge, in the prescribed form, to the ISP that issued the notice. An ISP that receives a valid challenge to an infringement notice must immediately forward it to the relevant right holder if the challenge raises an issue that should be addressed by the right holder rather than by the ISP.

After an enforcement notice is issued the right holder has four weeks in which to take enforcement action against the account holder.

2. Copyright Tribunal for claims up to $15,000

For claims under $15,000, a right holder will be able to take the matter to the Copyright Tribunal. The Copyright Tribunal may award a penalty for P2P copyright infringement, the amount of which will be prescribed by regulation. Claims will generally be heard on the papers, however account holders may request a hearing or the Tribunal may order one.

Decisions of the Copyright Tribunal may be appealed to the High Court, but only on points of law.

3. Sanctions for serious infringers

Claims over $15,000 must be pursued in the District Court or High Court, as appropriate.

Right holders will also be able to seek a court order suspending a repeat infringer's internet account for up to six months. The court will determine whether this remedy is appropriate in the circumstances, taking into account matters such as:

• multiple users of shared accounts;

• the effects on businesses that may face having their accounts suspended due to the actions of employees; and

• vulnerable users.

Comment

Although the revised approach does not address all ISP concerns, it goes some way to address an issue that was recognised by the Australian Federal Court - that it is unreasonable to expect an ISP to suspend or terminate its users' accounts in the absence of judicial consideration. However, it is clear that the Minister of Commerce favours the involvement of ISPs in the process, and does not quite draw the same distinction as the Federal Court between the means to infringe copyright (e.g., a P2P file sharing system) and the precondition to infringement occurring (e.g., internet services).

The bill provides for the new P2P copyright infringement regime to come into force on 1 October 2010. We will keep you updated on further developments.

¹ Roadshow Films Pty Ltd v iiNet Limited (No. 3) [2010] FCA 24.

² The bill addresses concerns about the broad definition of "internet service provider" by adding a new definition that is specific to P2P copyright infringement. The intent is that the new P2P copyright infringement provisions will only apply to ISPs who have the technical capability to identify IP addresses with account holders. This will exclude universities, libraries, and businesses that provide internet access to their members or employees but are not in the nature of a traditional ISP.

Enquiries and information

For more information on any of the cases, articles and features in Commercial Quarterly, please email Diane Graham or call her on 64 9 916 8849.