Australia: ISP´s: Liability For Copyright Infringement Under The New Digital Agenda Act In Australia In Light Of The Napster Case.

On 2 October 2001, the Recording Industry Association of America ('RIAA') and a number of Hollywood studios commenced legal proceedings against MusicCity, Kazaa and Grokster. These three organisations have been set up in the wake of the Napster legal proceedings and effectively allow millions of people to trade copies of songs and movies online. Copyright owners have been successful in muzzling Napster, closing down Scour and crippling Aimster, but the fight is getting harder. Some of these defendants are not based in America. More importantly, the new technology these organisations employ does not rely on the existence of an identifiable legal entity. Unlike the Napster structure, which relies on a central server, these new operations allow file swapping to take place across a loose association of computers around the world.

These people are less inhibited than Napster about admitting that they facilitate copyright infringement. And why not ? Everybody knows that they do so anyway. Who is going to be held accountable though, when the culprits cannot be identified or are out of reach of the law ? Some of these operators don't have the same business plan as Napster and have no intention of ever making themselves available for protracted legal proceedings. The Australian Government can see no alternative, it would seem, other than keeping Internet Service Providers ('ISP') on the hook.

The Revised Explanatory Memorandum ('Explanatory Memorandum') to the Copyright Amendment (Digital Agenda) Act 2000 ('Digital Agenda Act') ¹ in Australia states that the legislation:

The 'Explanatory Memorandum' also states that one of the key purposes of the legislation is to provide greater certainty about the responsibilities of carriers and ISP's to copyright owners and the steps they need to take to avoid infringing copyright.² It says that the amendments are intended to provide a degree of legislative certainty about liability for 'authorising' infringements of copyright.³

The most famous copyright infringement case in history is still being played out in the United States. In December 1999, the RIAA commenced an action against a website operator called Napster alleging contributory and vicarious copyright infringement. Napster's web site enables users to swap and download MP3 music files. The RIAA represents most of the big record companies in the USA who collectively own the rights to the sound recordings in CD's being swapped and downloaded by Napster users. The owners of the musical works in each of the songs on the CD's have also collectively joined the RIAA’s action.

The substance of the action against Napster is that it has authorised copyright infringements. It is being alleged not that Napster itself is directly infringing copyright in the sound recordings and musical works, but that it is authorising others to do so. In July 2000, Napster made a strike-out application on the grounds that it was an internet service provider within the terms of the Digital Millennium Copyright Act 1999 ('DMCA') and therefore came within the special exemption provisions of the DMCA which are known as the ‘safe harbour’ provisions. This submission was peremptorily dismissed by the Court on the grounds that Napster is doing far more than simply providing an internet service.

Under Australian law, copyright may be infringed either by:

(a) doing an act comprised in the copyright ('primary infringement'); or

(b) authorising the doing of an act comprised in the copyright ('authorisation').⁴

The acts comprised in the copyright are set out in the Copyright Act, 1968 ('Act'). To take the example of sound recordings, the acts comprised in the copyright of a sound recording include making a copy of the sound recording, causing the recording to be heard in public, communicating the recording to the public and entering into a commercial rental arrangement in respect of the recording.⁵ The acts comprised in the copyright of a musical work include reproducing the work in a material form, publishing the work, performing the work in public, communicating the work to the public and making an adaptation of the work.⁶

It is unclear whether, prior to the Digital Agenda Act, any of the processes involved in online communications would involve the copying or reproduction of a sound recording or musical work. There is no definition of reproduction or copying in the Act, but it is possible that the practice of proxy caching⁷ may involve a reproduction of copyright material, although the requirements for substantiality and material form may not be met.

However, prior to 4 March 2001, the liability of ISP's for primary infringement of the diffusion and broadcasting rights (now the communication right), as opposed to the copying or reproduction right, was potentially quite broad. In the decision of Australasian Performing Right Association Limited v Telstra Corporation Limited,⁸ the High Court held that Telstra was liable for infringement of the diffusion right owned by APRA in relation to music that was played while telephone callers were put on hold. The case was primarily concerned with the meaning of the diffusion right in section 26 of the Act. The Court held that the person liable for the transmission of material to subscribers to a diffusion service is the person operating the service, even though the copyright material was not provided by the operator and even though the transmission of the copyright material was incidental to the operator's principal service.

In light of the Telstra case, although the point has not been specifically argued before a court, it is possible that an ISP who transmitted unauthorised copyright material on the internet before the Digital Agenda Act came into force would be primarily liable for the infringement of copyright caused by that transmission.

The leading decision on the meaning of the term 'authorising' is that of the High Court of Australia in the case of University of New South Wales v Moorhouse ('the Moorhouse case).⁹ In that case, the High Court held that the word should be given a broad interpretation.

In the Moorhouse case, the University of New South Wales ('UNSW') had placed a number of photocopying machines in its library for the use of students. A copy of an anthology of short stories by Frank Moorhouse was copied and was used as the subject of a test case on authorisation. The High Court held that the conduct of UNSW in placing photocopying machines in its library for the use of students without any copyright warning notices or supervision constituted an invitation to students to infringe copyright. The Court found that such an invitation amounted to authorisation of any infringements of copyright committed, or which were likely to be committed, as a result of that invitation.

The High Court stated that:

In response to the Moorhouse decision, section 39A of the Act was introduced to provide protection in relation to photocopiers installed in libraries or archives provided that a copyright notice is prominently displayed. The Digital Agenda Act extends that protection to computers installed in libraries or archives.¹¹

The Moorhouse decision was based on a line of authorities which inferred authorisation in circumstances where the defendant had facilitated the means by which copyright infringement could take place and, having a measure of control over the infringer, failed to take any action to prevent the infringement from taking place. For example, ABC Radio was found to have authorised infringement of copyright in circumstances where it failed to take any action to prevent listeners, who were licensed to play music on their radios in private, from playing their radios in public places and thereby illegally performing musical works in public.¹² The cases have tended to emphasise that the mere provision of facilities is not enough to constitute authorisation, there must be some connection or element of control as between the infringer and the authoriser.¹³ Recent cases have specifically affirmed the principles established in the Moorhouse case.¹⁴

In relation to the liability of ISP's for the infringement of copyright material on the internet, the Digital Agenda Act adopts the approach of imposing liability on ISP's when they:

Sections 22(6) and 43A deal with primary infringement and sections 36(1A)¹⁸ and 39B deal with authorisation.

The Digital Agenda Act introduces a new section to deal specifically with the ramifications for ISP's of the Telstra case. Section 22(6) provides that a 'communication' is taken to have been made by the person responsible for determining the content of the communication.¹⁹ ISP's will only be subject to primary liability under the new amendments to the Act for anything communicated on the internet if they are responsible for determining the content of the communication. The courts will have to define what is meant by 'determining' the content, but the term would seem to ensure full protection to an ISP in the ordinary course of its business.

However, section 22(6) does not apply to communications which are broadcasts. 'Broadcast' has been redefined in the Digital Agenda Act to mean a communication to the public delivered by a broadcasting service within the meaning of the Broadcasting Services Act, 1992.²⁰ ISP's will, therefore, not be afforded protection under section 22(6) to the extent that they provide a service that broadcasts television programs or radio programs for the purposes of the Broadcasting Services Act.

Section 43A(1) of the Digital Agenda Act deals with issues such as proxy caching. It provides that the copyright in a work is not infringed by making a temporary reproduction of the work as part of the technical process of making or receiving a communication.²¹

Sections 36(1A) and 101(1A) of the Digital Agenda Act provide that, in determining whether authorisation of breach of copyright has taken place, regard must be had to certain key factors:

The Explanatory Memorandum states that the inclusion of these factors in the Act will essentially codify the principles in relation to authorisation that currently exist at common law, in particular, the principles established by the decision of the High Court in the Moorhouse case.

Section 39B provides that:

The Explanatory Memorandum states that new section 39B has the effect of expressly limiting the authorisation liability of persons who provide facilities for the making of, or facilitating the making of, communications. It states that the section provides that such persons are not taken to have authorised the infringement of copyright in a work merely because another person has used the facilities to engage in copyright infringement.²³

In a situation where an ISP provides access to a web site like Napster,²⁴ it is arguable that the ISP will satisfy the criteria for liability established in the Moorhouse case and that nothing in the wording of section 39B of the Digital Agenda Act would operate to change that conclusion. The protection afforded to ISP's under section 39B is circumscribed by the phrase "... merely because another person uses the facilities". The phrase implies that liability for authorisation will apply to ISP's if there is something more than the mere fact of 'use' of the facilities, such as a failure to control the use of the facilities in circumstances where infringement of copyright is likely to take place. In other words, section 39B is consistent with the intention of the Act to codify the principles established in the Moorhouse case.

Considering each of the key factors in section 36(1A) as they might apply to the Napster situation:

Finally, subsection 36(1A)(c) also provides that regard should be had to the relevant industry code of practice which, in this example, would principally be the Internet Industry Association Code of Practice²⁵ ('IIA Code'). The IIA Code is concerned with 'Prohibited Content' as it is defined in the Broadcasting Services Act, 1992 (as amended). The Broadcasting Services Amendment (Online Services) Act, 1999 amends the Broadcasting Services Act 1992 (Cth) to incorporate the regulation of online services. It establishes a complaints regime under which the Australian Broadcasting Authority will investigate complaints from the public about 'prohibited content' or 'potentially prohibited content.'.²⁶ However, this regime is not directed to content which is in breach of copyright.

It is difficult to see, therefore, how the wording of sections 36(1A) and 39B provides any definite comfort for ISP's in Australia in relation to the authorisation of infringements.

The approach taken in the Digital Agenda Act may be contrasted with the position in the USA, where the DMCA specifically states that online service providers will not be liable for infringement of copyright for storing, linking, transmitting, routing or caching infringing material.²⁷ This limitation on liability in the DMCA is expressed to be subject to the obligation of an ISP to expeditiously remove or block access to any infringing materials once it is made aware of such materials by the receipt of a formal notice in a prescribed form sent by the owner of rights in those copyrighted materials.

The REM states that it is the intention of the Digital Agenda Act that an ISP should not be liable in circumstances where they are not responsible for the content of online transmissions. In light of this intention, it is not clear why section 39B does not specifically say this in similar terms to the DMCA. In accordance with the position in the USA, it should only be in circumstances where an ISP has been notified that a particular user is engaging in conduct which constitutes a breach of copyright that any possible liability should attach, if at all. This could have been simply stated in relation to authorisation by ISP's in the Digital Agenda Act.

The fact that the position of ISP’s has not been spelt out could leave ISP's vulnerable to the type of liability established in the Moorhouse case, because there are no clear grounds on which to distinguish the position of UNSW in the Moorhouse case and an ISP in the Napster situation. In fact, the principles established in the Moorhouse case may apply even more emphatically to an ISP. An ISP has the technological ability to find out exactly what its customers are doing in a way which UNSW could not. Furthermore, an ISP has a much closer contractual relationship with its customers than a university does with its students, with the ability to terminate access immediately. It could well be determined by a court, therefore, that the criteria for authorisation established in the Moorhouse case applies to an ISP in the Napster situation.

Until a court declares that the position of an ISP is fundamentally different to that of UNSW in the Moorhouse case, or sections 36(1A) and 39B are amended to exclude ISP's entirely from liability for authorisation of copyright infringement, ISP's will need to take some action to protect themselves against derivative liabilities, at least in circumstances where they are aware of the existence of suspect websites. This would apply particularly to websites like Napster in respect of which there is a 'likelihood' of infringement. The same P2P software utilised by Napster is now being used in new search engines, which will not be restricted to music.²⁸

When the Australian Recording Industry Association ('ARIA') or the Australasian Performing Right Association ('APRA') sues a Napster-like website in Australia, they could join as a party to the proceedings the relevant ISP on the grounds of authorisation (particularly if the website is not turning a profit and could therefore be an unsatisfactory defendant). No real guidance is provided by the Digital Agenda Act as to when or what action should be taken by ISPs to avoid liability as the Explanatory Memorandum promised. Until the copyright issues have been resolved, ISP's operating in Australia would be well advised to notify all their customers of the risk of infringement or to block all access to Napster-like websites, without waiting for any notification of infringement from any of the relevant copyright owners.

If ISP's do not take some action to deal with the ramifications of Section 36(1A)(c) in circumstances where there is a 'likelihood' of infringement by their customers, some messengers could be shot.

1. The Digital Agenda Act came into effect on 4 March 2001.
2. Revised Explanatory Memorandum in "Outline".
3. Revised Explanatory Memorandum at paragraph 56.
4. Section 36 of the Act provides that the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorises the doing in Australia of, any act comprised in the copyright. A similar provision applies to subject matter other than works.
5. Section 85 of the Act.
6. Section 31 of the Act.
7. Proxy caches (or proxy servers) are used by ISP's to allow users to access data more rapidly than if the data were to be retrieved from where it is stored. Rather than retrieving information from its source for each user, it is faster to make a local copy and provide access to this, updating the original only when necessary.
8. (1997) 38 IPR 294.
9. (1975) 133 CLR 1
10. Ibid, Jacobs J at 20 - 21.
11. Section 39A of the Act.
12. Mellor v Australian Broadcasting Commission (1924) All ER Rep 224.
13. RCA Corporation v John Fairfax & Sons Limited (1981) 38 ALR 345 at 354.
14. Tolmark Homes Pty Ltd v Paul [1999] FCA 1355.
15. Section 22(6) provides that: "For the purposes of this Act, a communication other than a broadcast is taken to have been made by the person responsible for determining the content of the communication."
16. The Digital Agenda Act introduces a new Section 36(1A) which specifies an inclusive list of matters that must be taken into consideration in relation to the authorisation of a copyright infringement under Section 36(1) of the Act.
17. Section 39B of the Act.
18. Section 101(1A) refers to subject matter other than works
19. Section 22(6) of the Digital Agenda Act states that: "For the purposes of this Act, a communication other than a broadcast is taken to have been made by the person responsible for determining the content of the communication".
20. 'Broadcasting Service' is defined to mean "a service that delivers television programs or radio programs to persons having equipment appropriate for receiving that service, whether the delivery uses the radiofrequency spectrum, cable, optical fibre, satellite or any other means or a combination of those means, but does not include:

a) a service (including a teletext service) that provides no more than data, or no more than text (with or without associated still images); or

b) a service that makes programs available on demand on a point-to-point basis, including a dial-up service; or

c) a service, or a class of services, that the Minister determines, by notice in the Gazette , not to fall within this definition".

21. Section 43A(1) provides: "The copyright in a work, or an adaptation of a work, is not infringed by making a temporary reproduction of the work or adaptation as part of the technical process of making or receiving a communication."
22. Section 36(1A) provides: "In determining, for the purposes of subsection (1), whether or not a person has authorised the doing in Australia of any act comprised in the copyright in a work, without the licence of the owner of the copyright, the matters that must be taken into account include the following:

a) the extent (if any) of the person’s power to prevent the doing of the act concerned;

b) the nature of any relationship existing between the person and the person who did the act concerned;

c) whether the person took any reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice".

23. Revised Explanatory Memorandum at paragraph 60.
24. The copyright implications of a Napster transaction could be regarded as common knowledge.
25. The Internet Industry Association code for industry self regulation in areas of internet content pursuant to the requirements of the Broadcasting Services Act 1992 as amended which came into force on 1 January 2000.
26. Internet content hosted within Australia is prohibited content if the content has been classified iRC' (Refused Classification) or iX' by the Classification Board.
27. Section 512 DMCA.
28. Pointera is a sharing engine which debuted in mid-2000. It lets users share files through a standard Web browser. Pointera plans to market the search engine as a way to augment existing searches predominantly in a business environment. Gnutella is also producing a new search engine based on file-swapping software.