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 proposed.(6)
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 opposite conclusion.(8)
Items 9–14 deal with the liability of carriage
service providers (CSPs). CSPs are businesses that supply internet or
telecommunications services.(9)
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 D activities.
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 provisions.(15)
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 claim.
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 legislation also.
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 copyright-holder.(18)
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’ above.
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 authorisation.
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 liability.
This Bill proposes two changes to this scheme:
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.
Concluding Comments
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. 4.
-
See Robert Zoellick, ‘Letter to Mark Vaile’, Washingon, DC., 17
November 2004.
-
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 [1969]. Article 31(2)(b) of
that convention provides that such letters are considered ‘context’
for the purposes of interpreting the Agreement.
-
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.
http://www.pcworld.idg.com.au/index.php?id=1297863376.
-
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
2004.
-
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 United States.
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.
