30 April, 2012

 

Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16 (20 April 2012)

 

In brief:

 

  • The High Court of Australia ("High Court") has unanimously dismissed the appeal by an alliance of film and television studios ("studios") against iiNet, holding that iiNet did not authorise the copyright infringement of its internet customers. 
  • The High Court confirmed the Full Federal Court's approach to determining liability for authorisation of copyright infringement, holding that it is essential that the factors set out in s101(1A) of the Copyright Act 1968 (Cth) (the "Copyright Act") be taken into account, rather than applying a dictionary definition of "authorisation" or common law principles.
  • Applying these factors to the specific circumstances of the case, the High Court found that iiNet's conduct in not taking steps to prevent the primary infringements of its customers was reasonable given that: 
  • it had no technical power to prevent its customers from using the BitTorrent peer-to-peer file sharing system, to modify the BitTorrent system nor to take down the films that were being shared online by its customers;
  • it had only a power to indirectly prevent primary infringements by terminating the contractual relationship it had with its customers; and
  •  there were factors weighing against iiNet acting on the studios' notices, including that it would be possible for a customer threatened with termination to simply engage with another ISP, iiNet would need to invest time and money in monitoring the conduct of its customers in order to act on the studios' notices to terminate an account, iiNet could be exposed to liability for any wrongful termination of a customer's account and there was no industry code of practice that applied to iiNet in this regard.

 

Implications

 

The High Court's decision was even more firmly in favour of iiNet than in the Full Federal Court, where although the majority found in iiNet's favour, all three judges were critical of iiNet's conduct. Instead, the High Court entirely rejected the studios' submission that iiNet's inactivity in response to its infringement notices demonstrated a sufficient degree of indifference to give rise to authorisation, finding that iiNet was justifiably unwilling to act because of the risks it faced in taking steps based only on the information in the studios' notices. Chief Justice French and Justices Crennan and Kiefel said: "The appellant's submission, that iiNet should be taken to have authorised the infringements unless it took measures with respect to its customers, assumes obligations on the part of an ISP which the Copyright Act does not impose."

 

Similarly, Justices Gummow and Hayne said: "It was not unreasonable for iiNet to take the view that it need not act upon the incomplete allegations of primary infringements in the [infringement notices] without further investigation which it should not be required itself to undertake, at its peril of committing secondary infringement."

 

The studios, and copyright owners generally, would likely have preferred the High Court to stick with the Full Federal Court judgment, which suggested that a division of labour is required between copyright owners and ISPs to prevent online copyright infringements. The situation now is that, in the absence of legislative reform to specifically place obligations on ISPs to implement systems to appropriately respond to complaints of copyright infringement, ISPs will be able to rely on the High Court's decision to absolve themselves of responsibility in similar circumstances.

 

It will now be interesting to see whether the Australian Law Reform Commission ("ALRC"), in its recently referred review into the operation of copyright in the digital environment, recommends that the legislature follows the lead of a number of overseas jurisdictions (including the United Kingdom, New Zealand and Canada) and introduces legislation which places obligations on ISPs to issue infringement notices to its customers.

 

Background facts

 

In 2008, the studios commenced proceedings in the Federal Court, claiming that iiNet authorised its users' infringement of the copyright in their cinematograph films under section 101 of the Copyright Act. The studios had monitored the downloading and sharing of television show episodes and films using BitTorrent by iiNet users over a number of months, and sent iiNet spreadsheets detailing the alleged infringements.

 

The studios essentially argued that, as a result of the infringement notices sent to iiNet, iiNet knew or reasonably suspected that its users' conduct infringed the studios' copyright. They claimed that iiNet had a range of actions reasonably available to it to prevent its users' alleged infringing conduct (including sending a warning notice or suspending or terminating its users' accounts), but did not take any such steps and thereby authorised its users' infringing conduct.

 

Key legislative provision

 

Section 101(1A) of the Copyright Act provides that the following three matters must be taken into account when determining whether authorisation of primary infringements has occurred:

a) the extent (if any) of the person's power to prevent the doing of the act of primary infringement;

b) the nature of any relationship existing between the person and the primary infringer; and c) whether the person took any reasonable steps to prevent or avoid the doing of the act of primary infringement, including whether the person complied with any relevant industry codes of practice.

 

Decision at first instance

 

At first instance, Justice Cowdroy found that while iiNet had knowledge of certain infringing conduct and did not stop that conduct, iiNet's conduct fell short of authorisation of copyright infringement. His Honour held that the provision of access to the internet by iiNet was a "mere precondition" for infringement, and did not amount to providing the "means" for infringement in the sense discussed in University of New South Wales v Moorhouse (1975) 133 CLR 1 ("Moorhouse"). His Honour then went on to consider the matters listed in s101(1A) of the Copyright Act, and found that:

 

  • although iiNet had the contractual power to warn, and ultimately terminate the accounts of, users with whom it had a contractual relationship, iiNet did not have the relevant power to prevent the infringements under s101(1A)(a) because iiNet only had power over the precondition of infringement (internet access), not the means of infringement (the BitTorrent system);
  • although there was a contractual relationship between iiNet and its subscribers, there was not the nexus between the infringing conduct of iiNet's users and iiNet's profitability required under s101(1A)(b); and
  • since iiNet's service was a mere precondition to infringement, it was not a reasonable step to require iiNet to send warning notices and terminate the accounts of users under s101(1A)(c). There was insufficient evidence as to other steps that iiNet could have taken in the circumstances.

 

Decision on appeal to the Full Federal Court

 

Each of Justices Emmett, Nicholas and Jagot observed that the three matters in s101(1A) of the Copyright Act must be taken into account in determining authorisation liability. Their Honours were critical of the approach adopted by Justice Cowdroy in taking these factors into account as an afterthought.

 

In relation to each of the three matters:

  • Each of the judges held in relation to s101(1A)(a) that since iiNet had a right under its customer relationship agreement to cancel, suspend or restrict its customers' internet service in the event of copyright infringement, iiNet did have a technical power to prevent infringement. Further, given that iiNet did in fact frequently warn, suspend and terminate customers' accounts for non-payment of fees, the Court found there was no reason to conclude that the exercise of this power by issuing warnings or temporarily suspending accounts would be unreasonable.
  • In relation to s101(1A)(b), each of the judges found that the nature of the relationship between iiNet and its users was a contractual one, by which iiNet obtained income in return for the provision of internet services. There was a specific term of the contractual relationship that prohibited the use of the iiNet service to infringe copyright.
  • In respect of s101(1A)(c), different conclusions were reached by the judges in terms of what steps had been taken by iiNet to prevent infringements, and whether there were reasonable steps available that had not been taken.
    • Justices Emmett and Nicholas held that, although iiNet's attitude towards the complaints of the studios was dismissive and contumelious, iiNet's conduct did not amount to authorisation of its users' primary acts of infringement. It was found that the refusal of iiNet to act on the infringement allegations was reasonable in the circumstances, since the infringement notices lacked information and it would have been immensely difficult, time consuming and expensive for iiNet to analyse and respond to the notices in that form.
    • In dissent, Justice Jagot found that there were a range of reasonable steps available to iiNet to prevent the copyright infringements, which were not taken, and that the steps that had been taken by iiNet were not sufficient. Her Honour was of the view that the studios' infringement notices provided prima facie credible evidence of infringements, but iiNet had no interest in the reliability of the information provided by the studios and instead adopted a position that it had no obligation to respond. On that basis, her Honour was of the view that iiNet gave tacit approval to the primary infringements.

 

Decision on appeal to the High Court

 

In two separate but consistent judgments, the High Court unanimously dismissed the studios' appeal.

 

In terms of the correct approach to be taken when determining authorisation liability, the judges made observations about the expression "sanction, approve or countenance", which is frequently referred to in the common law cases as to authorisation liability (including Moorhouse). Justices Gummow and Hayne said that it would be wrong to take from this expression one element, such as "countenance" (which was done by the studios in this case), and fix upon it the broadest dictionary definition of the word to expand the core notion of "authorise". Similarly, Chief Justice French and Justices Crennan and Kiefel referred to the danger in placing reliance on one of the synonyms for "authorise" in determining authorisation liability. They said: "Whilst resort to such meanings may have been necessary in the past, attention is now directed in the first place to s101(1A)."

 

In applying the factors in s101(1A) to the circumstances of the case, the judges essentially relied on the facts that:

 

  • iiNet has no involvement with any part of the BitTorrent system and therefore has no power to control or alter any part of it, cannot prevent its customers from using the BitTorrent system and cannot monitor its customers' activities in relation to the BitTorrent system. The only way that iiNet could prevent the primary infringements indirectly would be to terminate the contractual relationship it had with its customers.
  • The infringement notices from the studios did not contain information about how the data had been gathered or how it was to be interpreted by iiNet. Although iiNet did from time to time suspend or terminate users' accounts due to spamming or non-payment, it was not reliant upon the accuracy of third party information to do so.  If iiNet did threaten to terminate its customers' accounts on the basis of the studios' infringement notices, the possible consequences could include:
    • the customers simply going to another ISP;
    •  iiNet being obliged to undertake investigations and monitor its customers' conduct to ascertain whether infringing conduct had ceased, before it actually took the step of terminating the customers' accounts; and
    • iiNet being exposed to the risk of liability for the wrongful termination of customers' accounts.
  • iiNet had a number of general measures in place which were designed to prevent or discourage copyright infringement by its users, including clauses in the customer agreement, a notice on its website which warned that hosting illegal copyright material would constitute a breach of the customer agreement, provision of contact details to which copyright owners could send copyright notices and a "Freezone" service which allowed users to download or stream licensed, non-infringing material without incurring usage charges.

 

On this basis, it was found that iiNet's conduct was reasonable in the circumstances, and did not constitute authorisation of its customers' infringing acts. The studios' appeal was dismissed with costs.

 

Safe harbour provisions

 

In the High Court, iiNet did not rely on the "safe harbour" provisions in the Copyright Act, which limit the relief available against online service providers in certain circumstances. iiNet had failed on this ground in the Full Federal Court, which unanimously held that the "safe harbour" provisions would not have been available to iiNet, since it did not have an adequate policy for the termination of the accounts of repeat infringers in appropriate circumstances. Although these provisions were not considered by the High Court, it is likely that they will be canvassed in the ALRC's review and recommendations.

 

 

For further information, please contact:

 

Lisa Ritson, Partner, Ashurst

lisa.ritson@ashurst.com

 

Marlia Saunders, Ashurst

marlia.saunders@ashurst.com 

 

Homegrown Intellectual Property Law Firms in Australia

 

Leave a Reply

You must be logged in to post a comment.