04 February 2010

Users, not ISPs, liable for copyright infringement after iiNet decision

Today's landmark copyright decision in Roadshow Films Pty Ltd v iiNet Ltd (No. 3) [2010] FCA 24 is a welcome one for internet service providers (ISPs). It means that an ISP will not be liable for copyright infringement merely for providing access to the internet, even when it has knowledge of copyright infringement by its customers and does not take steps to stop it occurring.

iiNet, an Australian ISP, had been served with notices by the Australian Federation Against Copyright Theft (AFACT), alleging that iiNet's customers were infringing the copyright of the major film studios - specifically by sharing and downloading films and TV shows via the BitTorrent peer-to-peer protocol.

The copyright owners and their exclusive licensees then launched legal action against iiNet, alleging that it had authorised its users' copyright infringement.

Did iiNet authorise the infringement?

Copyright owners do not have to sue the actual infringer of their copyright - and often, it's simply not worth doing it financially. The Copyright Act allows them to sue intermediaries who have authorised the infringement, but this turns on:

• the extent (if any) of the intermediary's power to prevent the infringement;
• the nature of any relationship existing between the intermediary and the infringer; and
• whether the intermediary took any other reasonable steps to prevent or avoid the infringement, including whether the person complied with any relevant industry codes of practice.

The case had significant implications for ISPs who are routinely sent infringement notices by copyright owners. If the copyright owners were successful, ISPs could have been forced to take responsibility for the infringing acts of their customers.

Justice Cowdroy held that there was no authorisation because:

• iiNet only provided the means of accessing the internet, but not the means by which infringement occurred, namely, BitTorrent - it had no control over BitTorrent;
• iiNet's scheme for notification, suspension and termination of customer accounts was not a power to prevent copyright infringement; and
• iiNet did nothing that sanctioned, approved or countenanced the infringement - it did not, for example, structure software to make infringement easier or encourage customers to infringe.

Was there a safe harbour for iiNet?

The Copyright Act establishes a safe harbour for carriage service providers, which includes ISPs, similar to that in the USA's Digital Millennium Copyright Act.

Because iiNet had not authorised the infringement, Justice Cowdroy did not strictly need to decide how the section affected iiNet. However, he held that, if it had authorised the infringements, iiNet would have been protected.

In order to qualify for the safe harbour, an ISP must adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the accounts of repeat infringers. The Court found that the requirements of the repeat infringer policy itself are minimal, with significant latitude granted to ISPs to determine the policy. Although iiNet did not implement the policy sought by AFACT, notices on its website and the terms of its customer agreements were sufficient to meet the safe harbour requirements.

What power did iiNet have anyway?

Under section 276 of the Telecommunications Act, carriers or providers cannot disclose or use any information or document that relates to the contents or substance of a communication that it carried, and learnt of because it carried it.

iiNet's position was that this applied to its position: it couldn't have the power to prevent infringement if it couldn't use the knowledge of infringement it gained by virtue of being the ISP.

Again, although it was unnecessary for Justice Cowdroy to decide this issue, he didn't agree - this doesn't bar an ISP from acting.

How many infringements?

One other interesting issue in the case was the number of primary infringements by iiNet subscribers. Justice Cowdroy held that the act of infringement occurs when the pirated file is made available through the BitTorrent system - which happens once. The subsequent "transmissions" of the files are not further infringements. This is a crucial issue for any future infringement case as the number affects the damages (and indeed, any characterisation of a person as a "repeat" infringer).

What should you do now?

Whichever way the decision went, it was always likely that an appeal would be made, and so Justice Cowdroy's judgment is unlikely to be the final word on this important issue.

For now, however, ISPs can breath a little easier. Their routine business of providing access to the internet will not, by itself, mean that they authorise their customers' acts of copyright infringement. Nor are they obliged to contact customers or terminate their accounts in response to notices from copyright owners.

For copyright owners, this decision shuts off a potentially powerful way of reining in online copyright infringement and has global implications in terms of how this difficult issue should be addressed.

John Fairbairn and Timothy Webb acted for the Internet Industry Association in relation to the proceedings.

26 February 2010: The decision in this case is being appealed to the Full Federal Court.