Australia: Australian High Court confirms that IINET did not Authorise Copyright Infringement

During April, in an eagerly anticipated decision, the High Court of Australia unanimously held that Internet Service Provider (ISP) iiNet had not authorised the infringement of copyright in the appellants' films by its customers.

BACKGROUND

In November 2008, 34 film and television studios (collectively Roadshow), with the assistance of the Australian Federation Against Copyright Theft (AFACT), commenced proceedings in the Federal Court of Australia against iiNet alleging that it had authorised the infringement of copyright in Roadshow's films by its customers. The Federal Court held that iiNet had not authorised that infringement. The Full Federal Court, in a 2:1 judgment, dismissed the appeal from that decision. That decision was then appealed to the High Court.

THE HIGH COURT'S DECISION

In a unanimous decision, by way of two separate judgments, the High Court dismissed the appeal from the Full Federal Court.

ROADSHOW ARGUMENTS

French CJ, Crennan and Kiefel JJ identified the circumstances that Roadshow relied on to support their argument that iiNet had authorised its customers' infringing acts as including:

• The provision by iiNet to its customers (and to other users of those customers' accounts) of access to the internet, which can be used to access BitTorrent peerto-peer file sharing networks (BitTorrent System)
• The infringement of the copyright in Roadshow's films by customers of iiNet, who made the films available online in whole or in part using the BitTorrent System
• The knowledge by iiNet of specific infringements, as drawn to its attention by notices from AFACT
• The technical and contractual power of iiNet to terminate the provision of its internet services to customers infringing copyright
• The failure by iiNet to take reasonable steps to warn identified infringing customers to cease their infringements and, if appropriate, to terminate the provision of its services to them.

Gummow and Hayne JJ, in turn, characterised Roadshow's case as:

THE LAW

In reaching its decision, the High Court reaffirmed that, in determining whether there has been authorisation of copyright infringement in a film, a court must take into account the factors identified in section 101(1A) of the Copyright Act 1968 (Cth) (Copyright Act). As applied to the facts of this case, this required the court to consider the:

• Existence and extent of iiNet's power to prevent its customers' infringement
• Extent to which reasonable steps to prevent that infringement included warnings, suspension or termination of those customers' accounts
• Impact of the nature of the contractual relationship between iiNet and those customers on those factors.

The High Court noted further that those factors must be considered in the context of section 112E of the Copyright Act, which states that an ISP is not to be taken to have authorised copyright infringement of a film merely because it provided facilities for making the film available online by an infringer.

DETERMINATION OF KEY QUESTIONS

Did iiNet have the power to prevent infringement by its customers?

The High Court reaffirmed that the power to prevent primary infringement is a requirement for a finding of authorisation of that infringement. It considered iiNet's technical and contractual power to prevent its customers infringing another's copyright and held that iiNet did have a limited, indirect power to prevent infringement in that it could terminate the contractual relationship that it had with its customers.

The High Court found that iiNet:

• Had no technical power to prevent a customer from using the BitTorrent System to download Roadshow's films, or to control or alter any aspect of the BitTorrent System (including BitTorrent System clients)
• Did not assist its customers to locate BitTorrent System clients or .torrent files
• Cannot monitor the steps taken by its customers using the BitTorrent System
• Cannot filter the communication of infringing material over its internet service
• Did not have any power to prevent its customers from using other internet services.

Due to this, the Court found iiNet had no direct power to prevent a copyright infringement but could only achieve that result indirectly by terminating the contractual relationship it had with its customers.

Did reasonable steps to prevent infringements (after receipt of AFACT notices) include warnings and subsequent suspension or termination of the accounts of identified customers?

The High Court held that both the nature of the internet and of the BitTorrent System and the absence of an industry code of practice adhered to by all ISPs needed to be taken into account in assessing whether iiNet took reasonable steps to prevent copyright infringement by its customers, given its indirect power to prevent that infringement.

Considering these factors, the Court noted that threatening to terminate, or terminating, the account of an accused infringer would have done little to prevent continuing infringement as that customer could merely obtain internet access from another ISP, and continue using the BitTorrent System to infringe another's copyright.

The Court also referred to the fact that the AFACT notices did not approximate the standard of evidence expected to be filed in a civil proceeding for copyright infringement and that, if iiNet were to terminate the account of a customer accused of copyright infringement based on an AFACT notice, it could be exposed to liability for breach of contract.

French CJ, Crennan and Kiefel JJ concluded that the AFACT notices did not provide iiNet with a reasonable basis to send notices to customers accused of copyright infringement threatening to suspend or terminate their accounts, stating that the inference to be drawn from iiNet's failure to send such notices in the circumstances:

IMPLICATIONS ARISING FROM THE CASE

The case confirms that a party, such as an ISP, will not be liable for authorising copyright infringement by a third party, including its customers, where it does not have the power to prevent that infringement. The case also indicates that there are a number of factors to be considered when assessing the reasonableness of the steps taken or not taken by a party to prevent infringement. These include:

• Whether that party had a reasonable basis for taking those steps (such as whether an infringement notice provided sufficient information to give a reasonable basis for terminating an infringing customer's account)
• The effectiveness of those steps to achieve that result (such as whether that infringing customer could continue infringing by merely changing to another ISP)
• The legal risk it might face if it took those steps (such as whether the ISP may potentially face contractual liability for wrongfully terminating a customer's account on the basis of a notice of infringement).

The implications from the case, so far as an ISP's role in reducing the volume of copyright infringement occurring by means of the internet is concerned, was directly addressed by French CJ, Crennan and Kiefel JJ, who concluded that the:

See the box titled "Where to from here" to find out more about how their Honours comments may result in changes to the Australian legal landscape.

WHERE TO FROM HERE?

For all the benefits that digital technology delivers, the reality is that it also makes it easier for copyright infringement to occur on a massive scale. For content owners, the challenge is to find effective ways of reducing such infringement, be it by technical, legal and/ or commercial means.

Below is our snapshot of key potential reforms/developments in this area:

• Legal reform: In their judgment, French CJ, Crennan and Kiefel JJ refer to the legislative solutions employed in other jurisdictions for addressing this issue, citing specifically the Digital Economy Act 2010 (UK) and the Copyright (Infringing File Sharing) Amendment Act 2011 (NZ). Potentially, Parliament will respond to the iiNet case with reforms of this nature.
• Development of an industry code: The High Court also acknowledged the futility of iiNet terminating the account of a customer accused of infringing copyright in the absence of an ISP protocol that would prevent that customer from shifting to another ISP. Content owners and ISPs may thus continue to work together to establish industry codes that address issues such as copyright infringement in an effective manner.
• Further court action: Content owners could revert to taking direct action against internet users who share their content without authorisation, as they have done in the United States, rather than attempting to hold ISPs liable for authorising that infringement.
• Commercial: Content owners may continue to develop new business models that reduce the reasons for copyright infringement. This may include content owners working with ISPs to implement such business models.
• Technical: Though technical solutions envisaged to date, such as filtering, have not proved effective, technology may well play a role as a solution to this problem of digital copyright infringement.

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