AUSTRALIAN DEMOCRATS DISSENTING REPORT

Copyright Amendment Bill (No.2) 1997

AUSTRALIAN DEMOCRATS DISSENTING REPORT

31 MARCH 1998

Parallel imports of sound recordings

Copyright Amendment Bill (No 2) 1997

1. Summary

2. Structure of report

3. Background

4. What is the “Australian music industry”?

5. What is copyright?

6. Sound recordings

7. Parallel import provisions

8. Copyright is property

9. What the Bill is supposed to do?

10. Theory supporting removal of parallel import restrictions

11. Relevant major reports

12. International agreements and monopolies

13. Cost of CDs

14. Choice of CDs

15. Free riding

16. Circumventing copyright laws

17. Onus of proof

18. Royalty payments

19. Piracy

20. Using Copyright laws for industry policy

21. Jobs

22. Profits

23. Transitional provisions

24. Censorship

25. Taxation

26. Multinationals and independents

27. Promoting Australian talent

28. Other countries

29. The future

30. Conclusion

1. Summary

The decision

International agreements

Copyright laws

Effects of parallel importing

Technology

Prices

Dollar values

Availability

Monopoly profits

Australian culture

Piracy

Royalties

Jobs

Taxation

Transition provisions

Reversing the onus of proof

Censorship

Conclusion

2. Structure of report

This report presents a summary of the major arguments presented before the Committee, both in written submissions and in the public hearings which form the foundation for our deliberations. The arguments presented are not comprehensive, but rather the significant arguments presented to the Committee. The arguments are then assessed in the Conclusion. The Table of Contents provides a guide to the breadth of issues before the Committee and the matters of particular concern to the Australian Democrats.

3. Background

The Coalition Government proposes to amend the Copyright Act 1968 (the Act) to remove the parallel import restrictions on sound recordings. This was an election commitment which the Coalition claims was a measured, fair and practical response to the problem of unduly high prices for music sound recordings in Australia [1].

This is an ongoing debate in Australia which may be traced back to the Copyright Law Review Committee in 1988 [2] and followed soon after by the Prices Surveillance Authority report in 1990 [3]. The Labor Government of the day courted the issue and decided to leave it for another time [4]. The Coalition Government set out in its election materials [5]:

That time has now arrived, and the Senate is presently considering provisions which will remove copyright control over importation of legitimate copies of sound recordings – that is, removing the parallel import provisions in the Act as they relate to sound recordings.

The Government claims to have sought the views of a wide cross section of the Australian music and copyright industries including representatives of performers, record producers, music publishers and consumers [6].

The Australian Democrats welcome the discussion and review of the intellectual property laws of our country and the participation of Australians in the international debate about intellectual property laws. The Democrats policy on parallel import provisions in the Act have been put by Senator Andrew Murray in his Minority Report for the Senate Legal and Constitutional Legislation Committee [7] considering the Copyright Amendment Bill 1997:

4. What is the “Australian music industry”?

The range of submissions received by the Committee show the Australian music industry is made up of, at least the following component parts [8]. This listing is not complete, but rather provides an indication for the diversity of the interests represented by the Australian music industry:

Imposed over this structure are the different styles of music. The Australian Bureau of Statistics [26] lists “popular” music as making up 91% of all recorded music. The nature of “popular” remains unclear.

The Australian Bureau of Statistics [27] estimated the total income of the music business was $1,064 million. The Country Music Association of Australia [28] values the country music component of the Australian music industry at $258 million (in 1996).

The Prices Surveillance Authority [29] report sets out the place of copyright in the music industry:

5. What is copyright?

In modern times copyright has an economic foundation [30]. The economic rationale for copyright is based on the concept of “market failure”. The PSA report [31] set out the theory:

This must however be balanced:

The Australian Copyright Council [34] set out the purposes of copyright law:

6. Sound recording copyright

A “sound recording” is “the aggregate of the sounds embodied in a record”, where “record” is defined to mean “a disc, tape, paper or other device in which sounds are embodied” (section 10 of the Act). Copyright in a “sound recording” lasts for 50 years after first publication (section 93 of the Act). There may be some overlap with other works, such as literary, dramatic, musical and artistic works.

Copyright in a “sound recording” is the right to carry out certain acts exclusively, so that the same act by another would infringe copyright. Section 85 of the Act (Nature of copyright in sound recordings) provides:

7. Parallel import provisions

The parallel import provisions for original literary, dramatic, musical or artistic works (sections 36 to 39) and other works, such as sound recordings (sections 101 to 112), are dealt with separately in the Act, although the provisions are similar.

The Act is intended to protect works in a “material form” [35]. Where a “sound recording” is subject to copyright protection under the Act, the parallel import provisions in the Act confer a distribution right on the copyright owner which makes it illegal for copyright “sound recordings” to be imported without the permission of the copyright owner [36]. The effect of these provisions is to prevent the sale in Australia of materials purchased in another jurisdiction, even though that material may have been legally purchased in that jurisdiction.

Section 102 of the Act (infringement by importation for sale or hire) provides:

Section 135 of the Act (restrictions of importation of copies of works etc.) provides for the issuing of notices in writing to the Comptroller General of Customs by a copyright owner that they object to the importation of copies of their works, or subject matter other than works. Where copyright material is imported into Australia and there is a notice in force the Comptroller General may seize those copyright materials (subsection 135(7) of the Act).

The purpose of these provisions was set out by the Australian Copyright Council:

It is noteworthy that section 102 of the Act clearly allows a person to import a sound recording for their own use [38].

8. Copyright is property

In Australia copyright protection is granted by the Act through a range of exclusive rights which attach to certain expressed works [39]. Copyright is a form of property, a personal right or a combination of both recognised in Australia by section 196 of the Act, which provides:

The Australian Record Industry Association [40] stated that copyrights in musical works and sound recordings were property owned and paid for, and that removing parallel import restrictions would “wipe out” that property right and its component parts [41].

Rough Cut Music Pty Ltd [42] put the argument succinctly:

The Country Music Association of Australia [43] also addressed the issue that the music industry has evolved with copyright protections:

9. What the Bill is supposed to do?

The objectives of the Government's proposal are set out in the Explanatory Memorandum [44] to the Bill, which provides, in part:

The Government proposes two options [45]. Option one is to amend the parallel import restrictions in the Act and option two is a voluntary price capping agreement between the Government and the Australian music industry. The Government chose option one as the simplest and most effective means of achieving lower prices for consumers, which was also consistent with the Government's election commitments and micro-economic reform agenda [46] as well as the Government's analysis of the issue over many years, showing this as the only effective means of lowering the retail price of sound recordings [47]. This conclusion was based on the following “main” assumptions:

The Government also states that it will review the decision within three years of the assent of the legislation [49].

To Part 2 of the Democrat's Dissenting Report

To Part 3 of the Democrat's Dissenting Report

Footnotes

[1] Copyright Amendment Bill (No. 2) 1997, second reading speech, Hansard, 20 November 1997, at page 10971.

[2] Copyright Law Review Committee, The Importation Provisions of the Copyright Act 1968, September 1988.

[3] Prices Surveillance Authority, Report No 35, 13 December 1990.

[4] Copyright Amendment Bill (No. 2) 1997, second reading speech, Hansard, 20 November 1997, at page 10971; a Bill was introduced in 1992, but lapsed with the calling of an election: see House of Representatives Hansard, 16 December 1992, at page 3894 for the Government's response to the PSA report; Attorney General's Department, Submission 180, at page 3.

[5] Coalition Policies, Art for Art's sake,1996 Election Policies, at page 21.

[6] Although there was concern expressed before the Committee that the Australian music industry was not adequately consulted prior to the introduction of the Bill: see for example, International Managers Forum (Australia) Ltd, Submission 171, at page 7; Boosey & Hawkes, Submission 47, at page 1; Australian Songwriters' Association Inc. Submission 137, at page 1.

[7] Senate Legal and Constitutional Legislation Committee, Copyright Amendment Bill 1997, October 1997, at page 94.

[8] see Prices Surveillance Authority, Report No 35, 13 December 1990, at pages 23-28 for a schematic representation of the network of copyrights and description of the Australian music industry.

[9] note review in Prices Surveillance Authority, Report No 35, 13 December 1990, at page 57; note the role of publishing companies, for example, Mushroom Music, Submission148.

[10] Australian Music Publishers' Association Limited, Submission 147.

[11] Australian Mechanical Copyright Owners' Society, Submission 147.

[12] Australasian Performing Rights Association, Submission 145.

[13] Australasian Performing Rights Association, Submission 145, at page 2.

[14] note review in Prices Surveillance Authority, Report No 35, 13 December 1990, at pages 59 and 62.

[15] Media Entertainment and Arts Alliance, Submission 170.

[16] Media Entertainment and Arts Alliance, Submission 170, at page 5.

[17] International Managers Forum (Australia) Ltd, Submission 171.

[18] note review in Prices Surveillance Authority, Report No 35, 13 December 1990, at pages 50, 64 and 70.

[19] Shock Records Pty Ltd, Submission 90. Shock Records Pty Ltd is also involved in exporting and publishing.

[20] Australian Record Industry Association, Submission 153, at page i.

[21] Australian Record Industry Association, Submission 153, at pages 3-4.

[22] note review in Prices Surveillance Authority, Report No 35, 13 December 1990, at page 72.

[23] Woolworths Limited, Submission 160, represent large businesses and their views are different to the small businesses; this submission drew considerable criticism for the figures relied on by Woolworths Limited from PolyGram Pty Ltd, letter to Committee, 20 February 1998 and Sony Music Entertainment (Australia) Limited, letter copied to Committee, 6 February 1998.

[24] Sanity, Submission 154; interestingly Sanity later wrote to the Committee on 16 February 1998 and set out clearly that it believed unrestricted importing would affect promotion, the timely and cost effective supply of products to customers and increased piracy. The submission and the letter contradict each other on several matters.

[25] Australian Music Retailers Association, Submission 150, at page 4.

[26] Australian Bureau of Statistics, Business of Music, Publication No. 4142.0, Canberra, 1996, at page 8.

[27] Australian Bureau of Statistics, Business of Music, Publication No. 4142.0, Canberra, 1996, at page 4.

[28] Country Music Association of Australia, Submission 48, at page 3.

[29] Prices Surveillance Authority, Report No 35, 13 December 1990, at page 19.

[30] Interestingly, China was able to build significant cultural and scientific advances without copyright or customary equivalents: see P Drahos, A Philosophy of Intellectual Property, Dartmouth, Sydney, 1996, at page 15.

[31] Prices Surveillance Authority, Report No 35, 13 December 1990, at page 19.

[32] Prices Surveillance Authority, Report No 35, 13 December 1990, at page 20.

[33] Prices Surveillance Authority, Report No 35, 13 December 1990, at page 39.

[34] Australian Copyright Council, Submission 164, at page 2.

[35] There are no formal requirements for obtaining copyright protection. Once certain statutory requirements have been satisfied the copyright owner gains certain exclusive rights - sections 10, 21-24, 27-29, 31 and 32 of the Copyright Act 1968 (Cth).

[36] see sections 101 to 112 of the Copyright Act 1968 (Cth).

[37] Australian Copyright Council, Submission 164, at page 4; see also Report of the Copyright Committee (Gregory Committee), London, 1952 at paragraph 280.

[38] see Prices Surveillance Authority, Report No 35, 13 December 1990, at page 28.

[39] see sections 31 and 85 of the Copyright Act 1968 (Cth).

[40] Australian Record Industry Association, Submission 153, at page 1.

[41] see also P Farnan, Submission 146, at page 4.

[42] Rough Cut Music Pty Ltd, Submission 144, at page 2.

[43] Country Music Association of Australia, Submission 48, at page 4.

[44] Copyright Amendment Bill (No 2) 1997, Explanatory Memorandum, at page 2; see also the Hon. Daryl Williams, Attorney-General, Copyright Reform: The Government's Agenda, Eighth Biennial Copyright Law and Practice Symposium, Maritime Museum, Darling Harbour, Sydney, 7 November 1997.

[45] Copyright Amendment Bill (No 2) 1997, Explanatory Memorandum, at page 3.

[46] Copyright Amendment Bill (No 2) 1997, Explanatory Memorandum, at page 11.

[47] Copyright Amendment Bill (No 2) 1997, Explanatory Memorandum, at page 12.

[48] Copyright Amendment Bill (No 2) 1997, Explanatory Memorandum, at page 12.

[49] Copyright Amendment Bill (No 2) 1997, Explanatory Memorandum, at page 13.