It is arguable that the current exception,
with or without the exception to the exception , does fit this
test. However, Australia and the United States have now reached
agreement that the exception should be amended in the manner
These items effectively narrow the exception
to infringement and broaden the exception to the exception. In
other words, they make it more likely that people will be found to
have infringed copyright. In the Guide, it was pointed out that the
exception to the exception effectively gave digital media a level
of protection not available to non-digital media.(7) For
example, simply reading an infringing copy of a book is not an
infringement in itself, where watching an infringing copy of a DVD
will be. The extension of the exception of the exception to cover
material produced overseas which would have infringed if it were
made in Australia extends this unique end-use protection for
digital products further.
The addition of the word necessary through
items 2 and 6 could pose interpretative problems. For example, is
it necessary to make a temporary copy if another machine is
developed which does not have to make a copy in order to play the
material? What if such an invention is patented and only available
at high cost by a monopoly supplier? In the absence of legislative
guidance these issues would be resolved by courts, if they arise
through litigation. How they are resolved could create
anti-competitive effects or render users of older technologies
infringers under the Copyright Act.
Another possible concern is the effect on
parallel importing of proposed paragraphs 43B(2)(a)(ii) and
111B(2)(a)(ii) in items 3 and 7. These provide that the exception
to the exception includes situations where the original media would
have been an infringing copy if the person who made the copy had
done so in Australia . On one reading, this could mean that it is
an infringement to play products even legitimately
purchased overseas, as such products may have infringed if they had
been made in Australia, if the copyright owner had provided an
exclusive publication license within Australia. This would
undermine Parliaments several attempts to liberalise copyright law
to allow the parallel importing of certain copyright products.
Whether this is the effect will depend on the interaction between
these new provisions and the definition of infringing copy in
s. 10 of the Copyright Act. In the absence of clear
Parliamentary intent to ensure that temporary copies can be made of
legal parallel imports, it is possible that courts will come to an
Items 9 14 deal with the
liability of carriage service providers (CSPs). CSPs are businesses
that supply internet or telecommunications
The USFTAI Act established a new regime for
determining when CSPs might be liable for copyright infringements
by users over the CSPs network or service. In short, CSPs can be
liable for a monetary remedy for certain activities unless they
comply with certain conditions.(10) These conditions
have been called the safe harbour .
Items 9, 10, 12 and 14 deal
with the financial benefit test. According to the test, CSPs may be
liable for Category C and D activities if they have received a
financial benefit directly attributable to the infringing
activity.(11) A Category C activity occurs when a user
of the CSP causes copyright material to be stored on the CSP s
system or network.(12) A Category D activity occurs when
the CSP refers users to an online location using information
location tools of technology .(13)
Item 9 would delete the
current definition of financial benefit , which provides that
financial benefit does not include a benefit that merely results
from the level of activity on the [CSP s] system or network . Under
the current test, merely receiving usage fees from the infringing
user is not enough to attract liability. Item 14
proposes a new test for what is a financial benefit, based on a
comparison between what a CSP charges and industry practice in
relation to charging for services . In determining whether a
financial benefit has been obtained, a court must consider whether
the CSP has obtained a benefit greater than that which it would
have received if it charged according to industry practice .
Items 10 and 12 would omit
the current knowledge requirement in the financial benefit test.
Currently, a CSP is only liable on the grounds of receiving a
financial benefit if they knew, or ought reasonably to have known,
that the infringement was taking place. Items 10 and 12 would
remove that requirement, so that CSPs can be liable even if they
are not aware, or could not reasonably have been aware, that
infringement is occurring on their network.
Items 11 and 13 provide a new
awareness test for the safe harbour associated with Category C and
Under this test, CSPs may be liable if they
fail to act expeditiously to remove or disable access to the
copyright material or the link to copyright material on their
system once they become aware that the material is infringing, or
become aware of facts or circumstances that make it apparent that
the material is likely to be infringing.
This is a whole new ground for CSP liability,
not contained in the USFTAI Act.
AUSFTA requires a prescriptive scheme for
determining CSP liability based on the safe harbour concept.
Similarly, AUSFTA clearly provides that financial benefit should be
a ground for liability regardless of awareness (Article 17.11.29
(v)(A)), that is, financial benefit and awareness are meant to be
separate and distinct grounds, not necessary elements of the same
ground. Items 10 and 12 would ensure that the Copyright Act more
accurately reflects AUSFTA obligations. However, AUSFTA does not
provide a definition of financial benefit . It is at least arguable
that the existing definition is an appropriate adaptation
consistent with AUSFTA.
The USFTAI Act implemented only part of the
required ISP liability scheme, although it authorised the making of
regulations that would deal with the remainder. AUSFTA clearly
requires that awareness of infringement or circumstances that
indicate infringement is likely should be a ground for liability
(Article 17.11.29 (v)(B)), so regulations along similar lines were
always anticipated.(14) This Bill would incorporate that
ground directly into legislation, rather than allowing regulations
to define the scope of the ground.
See the Guide for general comments about
potential areas of concern in AUSFTA s CSP liability
The current Bill would make claims against
CSPs easier by lowering the standard for the financial benefit test
and reducing the elements that need to be proved in an infringement
Parliament might want to carefully consider
the new test for financial benefit (item 14). In requiring courts
to compare pricing between that of the CSP and the industry
practice , CSPs may be dissuaded from considering innovative
business models and pricing practices. The very notion of an
industry practice in charging of services seems anathema to a
competitive market economy which achieves its dynamism through
businesses that are prepared to depart from industry practice .
This dynamism is particularly apparent in the internet service
industry, in which providers regularly and creatively compete on
price, bandwidth, service and technology.(16) The test
as proposed might be a disincentive to provide pricing models which
attract high volume internet users, as such plans might also
attract a disproportionate amount of copyright infringers (such as
peer-to-peer file-sharers). Under the Bill, CSPs might be liable
simply for obtaining a financial benefit higher than their
competitors as a result of high volume use by infringers even if
they are unaware or could not reasonably have been aware that
infringement is occurring.
The difficulty is in differentiating between
CSPs who deliberately and actively seek infringing users as a core
part of their business model and those whose business model has
another purpose but attracts infringing users incidentally.
Reference to industry practice seems to be a blunt instrument with
which to separate these groups and many in the latter category
might be caught, to the detriment of those businesses and their
non-infringing users. An alternative approach might be to empower
some administrative agency with competence in detailed
microeconomic analysis, such as the Australian Competition and
Consumer Commission, to produce more detailed criteria or make
determinations on individual cases.
Under AUSFTA, the awareness test is linked to
the process for notification of infringement. This process provides
a system for copyright owners to send take-down notices informing
CSPs of copyright infringements across their network. It also
provides an opportunity for the alleged infringer to provide a
counter-notice refuting the allegation. Different obligations arise
for CSPs depending on the nature of the take-down notice and
whether a counter-notice is received. Also, AUSFTA requires that
monetary remedies be available against people providing false
information in notices and counter-notices.(17)
Under the Bill, rules regulating the use of
notices and counter-notices remain a matter for regulations.
Parliament is asked to adopt the awareness test without knowing
what the Government intends for the rules governing how copyright
holders may bring infringements to the attention of CSPs. Without
any regulations, CSPs could be liable for keeping material on-line
after receiving notification of infringement in any form, from any
person (not just the copyright owner). This would create a powerful
incentive for CSPs to remove any material that is subject to a
take-down notice, regardless of the veracity of the notice, without
any requirement for the CSP to give the alleged infringer an
opportunity to respond to the allegation of infringement.
Regulations may provide offences for vexatious or false take-down
notices to provide some protection against misuse. They might also
provide a process for counter-notification. Given that the proposed
approach is to place the punitive provisions in legislation, it
might have been appropriate to provide these checks and balances in
An additional concern is that the wording in
items 11 and 13 appears to provide little room for the CSP to put
material back up once a counter-notification is received. Under the
scheme provided by AUSFTA, CSPs are to restore material after
receiving a counter-notification from the alleged infringer, unless
the copyright owner commences judicial proceedings within a
reasonable time. The wording of items 11 and 13 does not provide
that a CSP remains in the safe harbour if they restore material
after receiving a counter-notification. The test is simply
awareness of circumstances that make it apparent that the material
is likely to be infringing . This seems to require the CSP to make
its own judgement as to the likelihood that the material is
infringing, even after receiving a counter-notification. If a court
subsequently finds that judgement to have been wrong, the CSP may
be held liable. Given that a CSP might also be liable under breach
of contract for wrongly removing non-infringing material, this
would put the CSP in the invidious position of choosing whether to
risk liability to the copyright holder or liability to the alleged
infringing user. It is possible that regulations made under s.
116AJ of the Copyright Act could provide procedures and remedies to
make the obligations of CSPs clearer, but again Parliament is asked
to approve legislation before seeing the checks that might be
provided in regulations.
Items 15 and 30 make
amendments to the provisions of the Copyright Act relating to
certain onus of proof in proceedings relating to the ownership of
copyright in sound recordings (item 15 deals with civil proceedings
and item 30 with criminal proceedings).
The USFTAI Act provided that performers share
the copyright in sound recordings. Previously the makers of the
recording had been the sole presumptive
Sections 130 and 132B provide that a name
affixed to a label on a record can be admitted as prima
facie evidence that the person named is the copyright owner.
This makes it easier for copyright owners to assert their rights by
affixing a label to their product. Items 15 and 30 amend these
provision to ensure that they do not imply that the person named is
the only copyright owner. This recognises that copyright
in sound recordings may now be shared by one or more persons.
AUSFTA requires that Australia provide that
performers have rights in sound recordings.(19) These
changes were appropriately made through USFTAI Act. These current
proposed amendments are consequential to those changes.
These proposed changes are logical
consequences of the USFTAI Act s provision for performers to share
in the copyright in sound-recordings.
Items 17 29 deal with the
criminal offence provisions of the Copyright Act. For the most
part, these amendments would replace and with or in all the
provisions that concern infringements performed by way of trade
and with the intention of obtaining a commercial advantage
or profit (or similar provisions) (items 18 28).
As noted in the Guide, the use of the word and makes prosecutions
of copyright infringers more difficult by requiring prosecutors to
show both elements.(20) Replacing and with or means that
prosecutors will have to show only one of these elements.
Item 17 is a slightly
different change, ensuring that making an infringing copy with the
intention of obtaining a commercial advantage or profit is added as
a distinct offence.
Item 29 ensures that these
changes do not operate retrospectively.
AUSFTA s Article 17.11.26(a)(ii) clearly
provides that criminal offences should apply to wilful
infringements for the purposes of commercial advantage or profit .
The USFTAI Act had provided that the intention to obtain commercial
advantage or profit had to be proved in addition to the existing by
way of trade element. The words proposed in the new Bill are a much
more accurate implementation of AUSFTA, as the intention to obtain
commercial advantage or profit should stand on its own as the basis
for an offence (regardless of whether or not it can be proved that
the infringement was by way of trade ).
This is a minor and technical change that more
accurately reflects AUSFTA. However, as pointed out in the Guide,
another means to achieve compliance with AUSFTA would have been to
replace by way of trade with intention of obtaining a
commercial advantage or profit , rather than providing them as
necessary or alternative elements.(21) Intention to
obtain commercial advantage or profit is a slightly broader concept
because it may include infringements that go to improving the
commercial position of a business even through infringing articles
themselves will not be traded (such as the use of infringing
software for in-house commercial uses). Providing this element
alone would more appropriately harmonise Australian and United
States law.(22) The configuration proposed by the
current Bill could produce some unexpected results as courts try to
grapple with differences between the two elements.
Items 32 41 deal with laws
relating to encoded broadcasts (that is, subscription television
and radio). As with the criminal provisions, many of these changes
involve amendments to the criminal offences relating to infringing
use of encoded broadcasts so that by way of trade and intention of
obtaining a commercial advantage or profit are made alternative
rather than both necessary elements (items 32 38). The same
analysis and comments apply as those under Criminal Provisions
Items 39 and 40 add an
additional offence for the knowing use of encoded broadcasts which
have been accessed without authorisation by way of trade or with
the intention of obtaining a commercial benefit or profit. The main
difference between this offence and the offence in s. 135AS (1A)
seems to be that commercial use of the broadcast is offence even if
the offender was not the person who decoded the broadcast without
Article 17.7 of AUSFTA requires
criminalisation of the end-use of infringing satellite TV
broadcasts. This amendment provides criminalisation for end-use,
but only where a commercial purpose is involved.
As noted in the Guide, the USFTAI Act did not
provide a criminal offence for the non-commercial end-use of
infringing broadcasts as AUSFTA requires.(23) These
amendments do not remedy this deficiency.
The Government has put its view to the US that
Australia s civil remedies for non-commercial end-use are
sufficient disincentives, but has nonetheless promised a review of
the law by 1 July 2005.(24) US Trade Representative
Zoellick remains unconvinced, saying that the US is firmly of the
view that Article 17.7.1(b) of the Agreement requires
criminalisation of this activity, including viewing of pirated
signals in the home. (25) However, the US has been
prepared to proceed with entry into force of AUSFTA on the basis of
the Government s promised review.
The United States view that Australia has not
complied with AUSFTA is almost certainly correct. Article 17.7.1
unambiguously provides that:
Each party shall make it a criminal offence:
(b) wilfully to receive and make
use of, or further distribute, a programme-carrying signal that
originated as an encrypted programme-carrying signal knowing that
it has been decoded without the authorisation of the lawful
distributor of the signal.
Australian law, even assuming the passage of
the current Bill, does not provide any criminal offence for
wilfully receiving or using unauthorised decoded signals unless
this is for a commercial purpose.
Items 42 61 make amendments
to provisions of the USFTAI Act which provided a transitional
scheme to deal with contracts which where disrupted by extensions
to the copyright term made through the Act. In short, where a
person had entered into a contract with another (before Royal
Assent was given to the Act) to make use of material but, as a
consequence of the USFTAI Act, that use would now be an
infringement, the scheme provided that such a person could apply
for compensation for resulting losses from the copyright owner, or,
if compensation was not paid, use the material as planned without
This Bill proposes two changes to this
AUSFTA does not make any specific requirements
regarding the transitional scheme. The scheme was Australia s way
of dealing with some of the consequences of implementation. The
changes seem to be the result of recent negotiations with the
United States preceding entry into force and have been formalised
in the recent Vaile Zoellick correspondence.
These changes are unlikely to be
controversial. The original transitional scheme did seem to be
open-ended and potentially open to profiteering. The Bill s
proposed time limit for the scheme will provide greater certainty
for copyright owners and, by clearly limiting compensation to costs
incurred, should prevent profiteering under the scheme.
For the most part, the
amendments proposed in this Bill will achieve closer compliance
with the Agreement. This is true in the area of CSP liability,
encoded broadcasts, onuses of proof and the criminal provisions. In
the area of encoded broadcasts, this Bill still does not go far
enough in achieving compliance with the Agreement and Parliament
can expect this issue to remain a matter of concern to the United
States until an offence is provided for non-commercial end-use of
unauthorised decoded pay TV signals.
The suggestion that the Bill makes only minor
and technical amendments to the Copyright Act understates the
significance of the changes.(26) Although they are
certainly technical , almost all of the proposed amendments will
affect substantive rights and/or increase the likelihood of
prosecution for copyright offences.
The CSP liability provisions are likely to be
the most controversial part of the Bill. In effect, they put the
punitive elements of the safe harbour scheme in legislation while
leaving the checks and balances to regulations. It is impossible to
provide an overall assessment until the entire scheme can be seen.
However, based on the legislative provisions alone the awareness
test seems to put CSPs in the difficult position of judging and
acting on alleged infringements, with potential liability whether
they remove disputed material or keep it on-line. In addition, the
proposed financial benefit test seems to be a blunt instrument for
separating legitimate, innovative CSPs from those deliberately
profiteering from copyright-infringing users. It risks encouraging
conformity in CSP pricing over innovation, at the expense of both
smaller internet entrepreneurs and consumers.
As with the USFTAI Act, this Bill does not
exploit those areas of AUSFTA that would allow Australia to provide
new exceptions or limitations as a counter-balance to the new
copyright protections.(27) This Bill, like the USFTAI
Act, makes significant changes to Australia s copyright regime
without rigorous public consultation with stakeholders or experts.
As a result of both pieces of legislation, Australia can expect
uncertainty in copyright law, at least until courts develop
interpretations that make sense of the American law which have been
grafted on to the Australian system. As Australia lacks much of
America s legal context such as a constitutional Bill of Rights,
the doctrine of fair use, or the narrower test of originality in
copyright law these American elements could produce quite different
results in Australia to those in the United States.
Finally, Parliament might note with concern
the process that has preceded this Bill. Through the Vaile Zoellick
correspondence, the Government has effectively created new
obligations for Australia. Some of the flexibility in
implementation offered under the Agreement has been reduced through
Minister Vaile s detailed assurances to the United States on
specific implementation models. The lack of Parliamentary
involvement or scrutiny of the negotiations leading to the Vaile
Zoellick correspondence stands in sharp contrast to the involvement
in the decision to ratify the Agreement.(28)
See Mark Davis, US Forces FTA Changes to Copyright,
Australian Financial Review, 16 November 2004, p.
See Robert Zoellick, Letter to Mark Vaile , Washingon, DC., 17
Article 21.9 of AUSFTA requires dispute settlement panels to
interpret the Agreement in accordance with Articles 31 and 32 of
the Vienna Convention on the Law of Treaties .
Article 31(2)(b) of that convention provides that such letters are
considered context for the purposes of interpreting the
See Varghese, op. cit., 23 on this exception to the exception
This is known as the Berne three step test . For more
explanation see Jacob
Varghese, Guide to copyright and patent law changes in the US Free
Trade Agreement Implementation Bill , Current Issues Brief
No.3, Parliamentary Library, Canberra, 2004-05, p. 23
See Vaile Zoellick correspondence.
See Varghese, op. cit., 23.
For further discussion see Kimberlee Weatherall, Weatherall
s Law (website), Melbourne, 4 December 2004. http://weatherall.blogspot.com/
See s. 87, Telecommunications Act 1997.
See Varghese, op.cit., 24 25.
See items 4 and 5 of the table in s. 116AH, Copyright Act (as
amended by the USFTAI Act).
See s. 116AE, Copyright Act (as amended by the USFTAI Act).
See s. 116AF, Copyright Act (as amended by the USFTAI Act).
See Varghese, op. cit., 26.
ibid., p. 27.
For a recent example of the competitive nature of the industry
see Howard Dandah, Primus blasts broadband speed to 6Mbps , PC
World, 22 November 2004.
See Varghese, op. cit., 26.
See ibid., 5 6.
See ibid., 3.
See ibid, p. 16.
ibid, p. 17.
See 17 US Code 506.
See Varghese, op. cit., p. 20.
See Mark Vaile, Letter to Robert Zoellick , Canberra, November
Zoellick, op. cit.
Senator Chris Ellison (Minister for Justice and Customs),
Copyright Legislation Amendment Bill: Second Reading Speech ,
Debates, Senate, 30 November 2004, p. 1.
See Varghese, op. cit., p. 36 38 for further discussion.
Joint Standing Committee on Treaties and the Senate Select
Committee on the Free Trade Agreement between Australia and the
This paper has been prepared to support the work of the
Australian Parliament using information available at the time of
production. The views expressed do not reflect an official position
of the Information and Research Service, nor do they constitute
professional legal opinion.
Published by the Parliamentary Library, 2004.