Bills Digest No. 12  1999-2000 Copyright Amendment (Importation of Sound Recordings) Bill 1999


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details

Passage History

Copyright Amendment (Importation of Sound Recordings) Bill 1999

Date Introduced: 26 May 1999

House: The Senate

Portfolio: Attorney-General

Commencement: Upon Royal Assent except Items 3 and 4 of Schedule 1 (which commence when the section that they amend, s. 44C, commences).

Purpose

The Copyright Amendment (Importation of Sound Recordings) Bill 1999 amends the Copyright Act 1968 (the Copyright Act) to allow for the parallel importation into, and sale in, Australia of compact discs and other 'sound recordings' which contain film clips or other ancillary material protected by copyright, or which are packaged with other copyright protected material.

Background

Copyright protects the way ideas are expressed - in the language of copyright the expression of an idea is known as a 'work'. It does this by giving the person who creates a work a monopoly over the way in which the work may be exploited.(1) Exploitation of a work includes amongst other things its reproduction, publishing, broadcast or performance. Creators can license different aspects of the exploitation of their work, for instance, the right to import into, and sell in, Australia, copies of their work.

One type of work protected under Australian copyright law is a 'sound recording', which is defined to mean the collection of sounds embodied in a disc, tape or other device in which sounds are embodied.(2) Compact discs (CDs) are nowadays the main example of 'sound recordings'. There are other works, and hence copyrights, associated with a CD. The words of the songs (lyrics) on a CD are separate works and have their own copyright. In the same way, if a CD includes a film clip, the film clip is a separate work which may be protected by a separate copyright.

Parallel importing is the importation of works which have been legitimately purchased overseas (purchased without infringing the creator's copyright in the overseas country) by someone other than the authorised importer.(3) Until legislative reforms in 1991, parallel importing into Australia of all types of work was prohibited.(4) Historically this has allowed authorised importers to control the Australian market for items such as books and recorded music. However, in 1991 the Parliament relaxed the prohibition on the parallel importation of books.

In 1998 the Parliament passed the Copyright Amendment Act (No. 2) 1998 which removed the prohibitions on parallel importation in respect of 'sound recordings'. The passage of the legislation was strongly opposed by members of the Australian music industry, including both artists and record companies.(5) The Act has the potential to significantly diminish the major record companies' monopoly over the Australian recorded music market.

The record companies have reacted in two ways. Firstly, they have challenged the provisions of the Copyright Amendment Act (No. 2) 1998 in the Federal Court, in a test case brought against an unauthorised importer.(6) Those proceedings have not yet been determined.

Secondly, the record companies have also found a practical way to circumvent the intended effect of the Copyright Amendment Act (No. 2) 1998. The companies, which are the authorised importers into Australia of CDs, often also own the copyright under which the CDs are produced for purchase by parallel importers overseas. This has enabled the record companies to combine other copyright protected works with sound recordings, and to use the prohibition on the parallel importation of certain works other than sound recordings, to prevent the importation of the combined product.

Thus the record companies have begun to include film clips on CDs, even although it is not possible to view the film clip with devices that normally play CDs (such as CD players). The film clips are included simply so that the record companies can invoke the protection of the Copyright Act over the entire CD as an article. The companies have been threatening parallel importers of the CDs with legal action under Pt V of the Copyright Act (dealing with infringement of copyright), in order to discourage parallel importation.(7)

The parallel importers have brought the practice of the major record companies to the Government's attention.(8) The Minister in his Second Reading Speech(9) described the practice as taking advantage of a loophole currently in the Copyright Act. This Bill seeks to close the loophole in the Copyright Act. By so doing, the major record companies' monopoly on recorded music will again be compromised.

To date, there does not seem to have been much publicity about the Bill, probably because it only further implements the Government's plan to open up the recorded music industry, revealed in the Copyright Amendment Bill (No. 2) 1998. It appears that the peak interest groups, including the record companies, have yet to comment on the Bill.

It may be reasonably assumed, however, that significant parts of the music industry will oppose the Bill on the grounds that they opposed the Copyright Amendment Bill (No. 2) 1998. For a discussion of those grounds, the reader is referred to IRS Bills Digest No. 197 of 1997-98.

In summary, the main objections to allowing the parallel importation of CDs included:

  • that to confine the Bill to CDs alone and not other forms of copyright material constituted a half-hearted commitment to the economic principle said to underlie the Bill;
  • parallel importers gain the benefit of CD marketing and promotion at the expense of the authorised distributors;
  • the major record companies would have less resources and less incentive to invest in up and coming Australian artists;
  • there would be less or no incentive for organisations such as the Australian Record Industry Association (ARIA) to fund operations for the detection and apprehension of infringing copies of CDs, and this task would fall to the Australian Customs Service which is ill equipped to perform it;
  • the Bill is inconsistent with Australia's obligations under TRIPS.(10)

Arguments to the contrary, in favour of the parallel importation of CDs included:

  • the Bill will result in cheaper CD prices and a greater variety of copyright protected recorded music in Australia;
  • the Bill will increase competitiveness in the Australian recorded music industry and will lead to the eradication of inefficient industry practices.

Main Provisions

Schedule 1

The salient items are items 2 and 7. Item 2 inserts a new section (proposed s. 10AB) into the Copyright Act, that is designed to close the loophole referred to above. Section 10AB deems cinematographic films and other works included on an article, or works which are included in the packaging or container of an article, to be accessories,(11) when the article contains a sound recording and

a likely use of the article is to play it by using a machine that, as ordinarily used, is not capable, whether with or without the aid of some other device, of causing visual images to be seen.(12)

This section aims to treat any film clips that are included on a CD, or any artwork that appears on the packaging of a CD, as accessories to the sound recording on the CD. The section is somewhat complex because it also seeks to exclude from its operation other multi-media articles which happen to contain both sound recordings and cinematographic films, such as digital video discs (DVDs) and CD-ROMs. The impact of the Bill is intended to be limited to the recorded music industry, and so the section focuses on articles which are primarily sources of sound or music.

In this regard, the operation of s. 10AB is further refined in s. 10AB(2), which provides a non-exhaustive list of the factors which should be taken into account when deciding whether or not an article is designed to be used by a machine not capable (in its ordinary use) of causing visual images to be seen. The factors include the nature of the article, the way it is marketed, the nature of the sound recording and the nature of the cinematographic film contained in the article.

The operation of s. 10AB(2) is best illustrated by the following example. By reference to the factors listed above, it is apparent that the film recording on a DVD will not be treated as an accessory to the sound recording which accompanies it. The nature of the article - which is played by a DVD video player, the way it is marketed - as a video, and the nature of the recordings - the sound recording is integral to the film recording, all indicate that s. 10AB does not apply to such an article.

Having deemed that film clips and works on the packaging are accessories to CDs, item 7 then amends the Copyright Act to allow for the parallel importation of non-infringing CDs with non-infringing accessories. It does this by effectively excluding the operation of ss. 102 and 103 of the Act, which prohibit importing infringing copies for sale or hire, or selling or letting for hire works which a person knew, or should reasonably have known, were infringing copies. Under the new s. 112D, it will be lawful to import both non-infringing copies of sound recordings and non-infringing copies of sound recordings with non-infringing accessories.

The Bill also makes some minor consequential amendments of a technical nature to the definition of 'non-infringing accessory', to provide that a work can be an accessory, rather than merely be embodied in an accessory.(13) These amendments extend to the provisions of the Act introduced by the Copyright Amendment Act (No. 1) 1998, which have not yet commenced.(14)

Concluding Comments

The Bill is remedial legislation, designed, as has been seen, to counter an unforeseen response to the Copyright Amendment Act (No. 2) 1998 with respect to the parallel importation of recorded music. It is likely that the Bill will succeed in remedying the defect in that Act.

The Bill has been referred to the Senate Standing Committee on Legal and Constitutional Affairs, which is due to report on 10 August 1999.

It should be pointed out that different requirements apply in relation to non-infringement of copyright by copies in the case of a sound recording on the one hand, and an accessory to a sound recording on the other. A copy of a sound recording does not infringe copyright if it is made with the consent of the owner of the copyright in the sound recording in the country where the copy was recorded, or where the original recording was made, or if those countries do not protect the copyrights, then with the consent of the maker of the sound recording.(15) By contrast, a copy of an accessory does not infringe copyright if it is made in a country which is a party to the Berne Convention(16) or a member of TRIPS, and without infringing the owner's copyright in the accessory in that country.(17)

The difference in requirements with respect to non-infringing copies reflects the fact that accessories are, and can relate to, works other than sound recordings. However, it is arguable that the requirements for non-infringement are stricter in relation to accessories than sound recordings, which is perhaps something of an anomaly.

Finally, it is observed that the Copyright Act now contains frameworks for the parallel importation of books and recorded music (together with accessories), but not other types of work, such as cinematographic films (for instance, in the form of DVDs). As the author of a recent research study states:(18)

The piecemeal approach adopted in the past to reform parallel importing item-by-item (books, sound-recordings and packages) cannot be justified on economic grounds. It might be preferable to reform in one step the entire copyright law.

The removal of all prohibitions on parallel importation, so as to allow the importation of all types of works, is likely to be an emerging issue.

Endnotes

  1. J. McKeough and A. Stewart, Intellectual Property in Australia, 1991, p. 95.

  2. s. 10 Copyright Act 1968.

  3. McKeough and Stewart, op. cit., p. 140.

  4. Sections 37 and 38 of the Copyright Act; see also Interstate Parcel Express Co Pty Ltd v Time-Life International (Nederlands) BV (1977) 138 CLR 534.

  5. See, for example, Senate Legal and Constitutional Committee, Official Committee Hansard, 3 February 1998, pp. 18, 27, 51.

  6. BMG Music Pty Ltd & ors v Much More Music Pty Ltd (currently before Justice Hill).

  7. Explanatory Memorandum, p. 1.

  8. Sen I Campbell, Hansard, Senate, 26 May 1999, p. 5392.

  9. ibid.

  10. Agreement on Trade-Related Aspects of Intellectual Property Rights set out in Annex 1C to the Marrakesh Agreement establishing the World Trade Organisation, done at Marrakesh on 15 April 1994. One commentator notes that 'the TRIPS agreement neither sanctions nor prohibits parallel importing': J. Revesz, Trade-Related Aspects of Intellectual Property Rights, Staff Research Paper, Productivity Commission, May 1999, p. 45.

  11. Accessory is defined in s. 10 of the Copyright Act to mean, amongst other things the packaging or container for an article, or a label on an article or its packaging, a written instruction or other information provided with an article.

  12. Sch 1 cl. 10AB(1).

  13. Items 1, 5 and 6 of Sch 1.

  14. See items 3 and 4 of Sch 1 of the Bill. The relevant provisions of the Copyright Amendment Act (No. 1) 1998 will commence on 31 December 1999, unless proclaimed earlier: s. 2(2).

  15. Note that additional requirements apply where the sound recording is of a literary, dramatic or musical work in which the copyright subsists in Australia: s. 10AA(2) Copyright Act.

  16. International Convention for the Protection of Literary and Artistic Works concluded on 9 September 1886

  17. s. 10 Copyright Act.

  18. J. Revesz, op. cit., p. 51.

Contact Officer and Copyright Details

Andrew Grimm
27 July 1999
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

IRS staff are available to discuss the paper's contents with Senators and Members
and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1999

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1999.

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