Bills Digest No. 197 1997-98
Copyright Amendment Bill (No. 2) 1997
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
Date Introduced: 20 November
1997
House: House of Representatives
Portfolio: Attorney-General
Commencement: Upon
Royal Assent unless otherwise stated in the Schedules.
Purpose
To amend the Copyright Act 1968 so as to allow
the parallel importing of non-counterfeit copies of sound recordings.
Background
Copyright protects the way in which ideas are expressed
by controlling the reproduction, publishing, broadcasting or other performance
of the work.(1) Therefore, the form of words chosen, the illustrations
used, the layout or organisation of a combination of the two may be subject
to copyright. Protection of copyright is free and automatic and there
is no system of registration required under Australian copyright law.
Proper copyright protection laws are beneficial to the economy as they
protect the interests of creators and therefore encourage innovative activity.
The existence of copyright allows creators to generate an income from
their creativity by either receiving royalties or other payments for their
work. Copyright similarly fosters investment in creative works by businesses.
Parallel imports are 'goods manufactured outside the
jurisdiction by or under the authority of the owner of an industrial property
right relating to these goods, but imported by someone other than an authorised
importer or distributor'.(2) The prohibition of parallel importing results
in a segregated market:
The effect of prohibiting parallel importation is to
facilitate geographical division of the market [used in a loose sense
to refer to the demand for and supply of particular copyright material]
for the copyright material in question. The copyright in particular
material can be partially assigned along geographical lines. The assignee
is then assured that when selling the copyright material within the
geographical area described in its assignment that it will not be competing
with the same material from a different source.(3)
The Copyright Amendment Bill 1997 will remove a number
of prohibitions in the Copyright Act 1968 regarding parallel imports.
This Bill, the second copyright Bill for 1997, will remove the prohibitions
on the parallel importation of records and compact discs.
A sound recording does not usually involve a single copyright,
but rather several copyrights; most commonly it involves copyright in
a musical work (music for a song, symphony) or works and/or copyright
in a literary work (lyrics) or works, as well as copyright in the sound
recording itself.'(4)
This Bill was referred by the Senate on the recommendation
of the Selection of Bills Committee to the Senate Legal and Constitutional
Committee on 2 December 1997 for inquiry and report by 23 March 1998.
The Committee received around two hundred submissions, indicating that
the topic is somewhat controversial. The majority report of the Committee
recommended that:
- The Copyright Amendment Bill (No 2) 1997 be passed;
- The Government seek advice from the Attorney-General's Department
confirming there are no potential indirect effects of the Trade Related
aspects of International Property (TRIPs) Agreement on the Bill;
- The Government examine the desirability of applying uniform laws to
govern the importation of all forms of intellectual property;
- The Government consider the desirability of the Productivity Commission
undertaking a comprehensive inquiry into the music industry to determine
whether there is a need for an industry policy or industry assistance;
and
- The Government examine the effect that the passage of the Bill might
have on composers where a CD containing their work is imported:
- From a country with no copyright law, or
- A country with a copyright law that does not recognise copyright owners,
or
- A country with a copyright law that provides for compulsory licences.(5)
The minority report of Senators Bolkus, McKiernan and
Murphy and the dissenting report of Senator Stott Despoja did not support
the Bill in its current form.
Prices of Sound Recordings
The 1990 Prices Surveillance Authority Inquiry Into
The Prices of Sound Recordings found that the 'prices in Australia
have consistently been much higher than overseas for many years.'(6) The
report of the Prices Surveillance Authority found high prices to have
been:
underpinned by three factors - demand is relatively
price inelastic compared with other products; there is, an absence of
domestic price competition and there is a restriction on import competition
arising from the importation provisions of the Copyright Act 1968.
The Australian Consumers' Association noted, in its submission
to the Inter Departmental Committee Inquiry Into CD Prices that Australian
CDs were comparatively overpriced:
Despite sophisticated arguments to the contrary from
vested interests in the music industry, in June 1996 average retail
prices for music CDs in Australia were 43% higher in price than in the
US and an average of 22.7% higher compared to retail prices in the UK,
New Zealand and Singapore.
In evidence to the Senate Legal and Constitutional Committee,
Professor Allan Fels, Chair of the Australian Competition and Consumer
Commission, estimated that the current gap between Australian CD prices
and US prices after tax corrections was about $4.60 and that there were:
...two aspects of the present prices which have to
be of concern. The first point is that, if there is a permanent fall
in the value of the Aussie dollar, then eventually, as happens with
all industries, the devaluation effect will get reflected in the prices.
They will go up in this industry a bit more slowly than in others. Most
industries quickly adjust to devaluations. This one adjusts more slowly.
The second point is that it is quite clear at the present time that
the industry has been restraining its prices because of fear of legislation.
If there is no legislation, there will be a steep rise in CD prices.(7)
Professor Fels further gave evidence that:
...there has been massive pressure by ARIA and the
multinational record companies to stop the reform because it is against
their worldwide interests. They have done everything. They have poured
huge amounts of money into this. They have hired consultants all over
the place to try to destroy our report, but they have failed, not because
our report is that good but because the facts are incontrovertible.
There is the price difference and the fact that the removal of the restrictions
would cause a fall in price to the benefit of the people.(8)
The Music Industry's Views
There has been considerable opposition to the Bill from
members of the Australian Music Industry, both the artists and the record
companies. For example, the Executive Director of the Australian Record
Industry Association (ARIA) Mr Emmanuel Candi argued that the Bill was
not committed to the economic principle claimed and that it had many downsides:
If the economic principle itself were being pursued
in regard to copyright items, then this bill should properly have
just covered the gamut of copyright items. If it is the economic principle
that is at stake, copyright covers books, movies, CD-ROMs, computer
programs, sound recordings and musical works.(9)
Mr Candi further argued that the fact that parallel importers
would secure a 'free-ride' (in terms of advertising and promotion costs)
on the larger and more established companies would disincline the latter
to actively promote CDs in Australia.(10)
Mr Brett Cottle, Chief Executive of the Australasian
Performing Rights Association, also noted his concerns that, among other
things, if the Bill were to be enacted:
...there will be no less than three discrete regimes
of treatment of importation under the Copyright Act: one for books,
one for recorded music, and one for other forms of intellectual property,
including software.(11)
Mr Cottle also criticised the Explanatory Memorandum
for its:
...complete absence of any reference to imports from
many Asian countries....As a result of this [proposed] legislation,
if CDs are imported into this country from countries such as Taiwan,
the Philippines, Thailand or, closer to home, Papua New Guinea, there
will be no royalty paid to the composer anywhere.(12)
The Senate Legal and Constitutional Committee received
a number of submissions to the effect that Australian recording artists
would be significantly disadvantaged by the Bill. This was partly due
to the fact that it was anticipated that record companies would have less
incentive to invest in up and coming Australian recording artists. The
Explanatory Memorandum acknowledges that the investment in artist development
by the major companies may change but counterbalances it with the view
that the royalty income of Australian recording artists may in fact increase.(13)
Arguments in Favour of the Bill
The removal of prohibitions on parallel importing will
free up trade and result in cheaper CD prices for the Australian consumer;
There will be an increase in the availability of copyright
material which should lead to an increase in the choices of compact discs
available.(14)
The removal of prohibitions on parallel importing will
end the geographic division of the market and will therefore end the extraction
of 'unduly high profits from consumers' and 'inefficient practices'.(15)
The use to date of copyright law to prohibit parallel
importing and give distributors exclusive rights in a regional market
is not consistent with the intention of copyright law (ie to protect ideas).
Copyright law has been acted as a de facto barrier to trade.
Arguments Against the Bill
Currently companies like ARIA invest millions of dollars
looking for illegal copies and having them withdrawn from sale. Were the
Bill to pass, there would be no incentive for this activity to continue
and there is no substitute mechanism in place for identifying illegal
copies and preventing their sale. For example, Customs do not have the
resources to check the legality of imports. Therefore, it is possible
that non-genuine products might become more widely available which leads
to issues of quality control and consumer protection.
Dumping of stock in Australia could occur thereby depriving
performers and songwriters of their royalties.
Professor Bewley argued that the changes proposed by
the Bill could result in less artists touring Australia and in less money
being available for the promotion of Australian recording and performing
artists.
The Australian Copyright Council also opposed the Bill
for various reasons, including the fact that:
...this bill clearly reduces copyright protection in
Australia and this is completely inconsistent with other efforts by
the Australian government to encourage higher standards of copyright
protection in countries with little or no current copyright protection.
It is sending the wrong message.(16)
International obligations
At the moment, 'no multi-lateral international treaty
requires its members to prohibit parallel importing'.(17) Nevertheless,
there are some provisions of the Bill which might potentially conflict
with international obligations.
The Australian Copyright Council expressed the view that
the Bill was inconsistent with Australia's obligations under international
agreements:
[the bill in our view]...is inconsistent with the TRIPS
agreement. Under the TRIPS agreement, members of the World Trade Organisation,
including Australia, are required to empower customs officials to seize
pirated copyright goods on notice by the copyright owner. The TRIPS
agreement defines pirate copyright goods as goods made without the consent
of the right holder in the country of production. In our view, recordings
made under compulsory licence are not made with the consent of the copyright
owner. They are made under compulsory licences.(18)
This assertion was supported by Mr Warwick Rothnie, a
partner in Mallesons Stephen Jaques and an expert in copyright law, who
stated that the Bill potentially places Australia in breach of TRIPS:
...TRIPs does not lay down any particular rules about
parallel imports. That is clear from article 6 of the agreement. The
problems that we see arise from later provisions in relation to enforcement,
and that is article 41 and article 51 in particular.
Article 41 requires members of TRIPs or the World Trade
Organisation to provide effective enforcement procedures for intellectual
copyrights, of which copyright is one, and article 51 requires members
to prevent the importation of pirated copyright goods. 'Pirated copyright
goods' for these purposes is defined in a footnote in the treaty, which
is set out in our advice. In very broad terms, it means goods that have
been made without the consent of the copyright owner and which, if made
in Australia, would have been an infringement of copyright here.
The bill in its present terms rules out importation
and sale in Australia of pirated copyright goods in probably three situations.
The first situation is in those countries where there is no copyright
law. The second situation is in those countries where the recordings
can be made through mechanical licences. The third situation quite possibly,
and I will say this is more qualified than in the first two situations,
is situations where unauthorised compilation type records--the sort
of 'best of' type recordings--are being made. These three types of goods
are not legitimate copies in any sense. They are not made with the consent
of any copyright owner and, quite clearly, fall within the definition
of pirated copyright goods for the purposes of TRIPs.(19)
As noted above, the Senate Legal and Constitutional Committee
recommended that this issue be further examined by the Attorney-General's
Department.
Main Provisions
Item 2 inserts a definition of 'non-infringing
copy' into subsection 10(1) of the Copyright Act 1968 (the Principal
Act).
This will basically include copies which do not breach
copyright law in their country of manufacture and were made with the consent
of the owner of the copyright. Pirated copies, which are made without
the copyright owner's consent, are excluded by this definition of non-infringing
copy.
Item 3 is one of the main changes proposed by
the Bill and will insert section 44D into the Principal Act. Proposed
section 44D will provide that copies which do not offend the definition
of 'non-infringing copy' in item 2 will be allowed to be imported into
Australia without breaching copyright. This will allow the parallel-importation
of, for example, compact discs. There is no change to the permissibility
of importing a compact disc for personal use.
Item 5 inserts proposed section 112D which
provides that the importation into Australia of a non-infringing copy
of a sound recording does not breach copyright in the sound recording.
As with item 2 above, the non-infringing copy must not have infringed
copyright in the country where it was made or if that country does not
have copyright protection then the copy must have been made with the consent
of the maker of the sound recording.
The owner of the copyright is defined as the person who
held the copyright at the time of the publication of the sound recording.
Proposed section 130A reverses the onus of proof
so that once a person claiming that their copyright has been infringed
has proved that a copy of a sound recording has been imported and offered
for sale or trade etc then the onus falls on the defendant to prove that
the imported item is a non-infringing copy. This reverses what would otherwise
be the expected onus of proof as, generally speaking, the claimant in
any case must prove all elements of their case. Whereas in this instance,
once the claimant has proved the things listed in section 37, 38 , 102
or 103 (whichever is applicable) then it is up to the defendant to prove
that the sound recording was a genuine article (ie not a pirated copy)
and was therefore within the definition of a 'non-infringing copy'. If
the defendant is unable to prove this (even if the sound recording happened
to be a non-infringing copy) the copyright owner's case is proved (item
6).
Item 8 stipulates that the amendments described
in the Bill will only apply to sound recordings imported into Australia
after the commencement of the Act.
Schedule 2 - Amendment of penalties
Proposed subsection 132(6A) makes it an offence to contravene
the remainder of the subsection (which includes selling, hiring or otherwise
trading with an item that infringes copyright when the person knew or
ought reasonably to have known that it infringed copyright) and provides
a penalty of up to 500 penalty units or up to 5 years imprisonment. One
penalty unit is currently $110.00 under section 4AA of the Crimes Act
1914 (Cth). In relation to offences committed by a corporation, subsection
4B(3) of the Crimes Act 1914 allows a court to impose up to five
times the specified penalty.
The introduction of this subsection, together with the
repeal of existing subsections 133(1),(2) and (3) serves to substantially
increase the penalties for offences under the Principal Act.
Item 3 inserts paragraphs 133A(1)(c) and (d)
which will remove the distinction currently made in the Principal
Act between a first offence and a subsequent offence. The pecuniary penalty
is not substantially altered although imprisonment is now available as
a sentencing option for a conviction of a first offence.
Concluding Comments
The provisions of the Bill have attracted a great deal
of interest as demonstrated by the large number of submissions received
by the Senate Legal and Constitutional Committee and views on the desirability
of allowing parallel importing diverge widely.
Endnotes
- See Bailey, B Copyright: APRA: Retailers Face the Music Department
of the Parliamentary Library Research Note no. 1 August 1996-97 for
a discussion of this issue.
- D.R. Shanahan, Australian Law of Trade Marks and Passing Off, The
Law Book Company, 1990.
- Davison, M.J. Parallel Importing of Copyright Material in a Digital
Age: Why it Should be Lawful and Why it May Never Be (1997) 25 FLR
263-280, 264.
- Prices Surveillance Authority, 21.
- Senate Legal and Constitutional Committee report on the Copyright
Amendment Bill (No. 2) 1997, April 1998, 67-68.
- Inquiry Into The Prices of Sound Recordings (1990), Report
no. 35, Prices Surveillance Authority, pxxi
- Evidence to Senate Legal and Constitutional Committee, 3 February
1998, Hansard, 1.
- Evidence to Senate Legal and Constitutional Committee, 3 February
1998, Hansard, 4.
- Evidence to Senate Legal and Constitutional Committee, 3 February
1998, Hansard, 18.
- Evidence to Senate Legal and Constitutional Committee, 3 February
1998, Hansard, 21.
- Evidence to Senate Legal and Constitutional Committee, 4 February
1998, Hansard, 57.
- Evidence to Senate Legal and Constitutional Committee, 4 February
1998, Hansard, 58.
- Explanatory Memorandum, 8.
- Davison, M.J. Parallel Importing of Copyright Material in a Digital
Age: Why it Should be Lawful and Why it May Never Be (1997) 25 FLR
263-280, 271.
- Ibid., 271.
- Evidence of Ms Elizabeth Baulch, Executive Director of the Australian
Copyright Council, to Senate Legal and Constitutional Committee, 4 February
1998, Hansard, 65
- Davison, M.J. Parallel Importing of Copyright Material in a Digital
Age: Why it should be lawful and why it may never be vol 25 No.
2 FLR 263-280 at 276.
- Ibid., 65.
- Evidence to Senate Legal and Constitutional Committee, 27 February
1998, Hansard, 172.
Susan Downing
11 May 1998
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