24 Feb 2011

When is an ISP liable for its users' copyright infringements?

If an ISP's customers infringe copyright and the ISP does not take steps to stop it occurring, is it liable for copyright infringement? Today the Full Federal Court found that iiNet was not liable, but gave some guidance on how copyright owners can establish liability, in the eagerly-awaited appeal decision in Roadshow Films Pty Limited v iiNet Limited [2011] FCAFC 23.

The ISP, the infringing users, and the copyright owners

iiNet is an Australian ISP. The Australian Federation Against Copyright Theft (AFACT) served it with notices which alleged that iiNet's customers were infringing the copyright of the major film studios 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.

Last year Justice Cowdroy in the Federal Court found that iiNet had not authorised any copyright infringement by its customers. Roadshow and the other copyright owners appealed that decision.

The Full Court dismisses Roadshow's appeal

The Full Federal Court dismissed Roadshow's appeal on the basis that iiNet did not authorise its users' infringements. Four key points emerge from the two majority judgments:

  • there is no absolute defence for ISPs to claims of authorisation;
  • an ISP can be obliged to take action against a customer, including suspending or terminating his or her account;
  • the content of the infringement notices sent to the ISP is critical – in particular, there must be information about how the material supporting the allegations was derived, that is adequate to enable the ISP to verify the accuracy of the allegations; and
  • ISPs need to have good policies to deal with repeat infringers – better than iiNet's at any rate.

ISPs don't have an absolute defence

The Court did not accept the distinction made by Justice Cowdroy at first instance that, because iiNet provided a "necessary precondition" for, but not the "means" of infringement, it did not authorise copyright infringement.

Instead, the Court re-emphasised the importance of the mandatory factors in section 101(1A) of the Copyright Act – the extent of iiNet's power to prevent the infringing acts, the nature of any relationship existing between iiNet and its customers, and whether iiNet took reasonable steps to prevent the infringing acts.

Also, under section 112E of the Copyright Act, "A person (including a carrier or carriage service provider) who provides facilities for making, or facilitating the making of, a communication is not taken to have authorised any infringement of copyright in an audio-visual item merely because another person uses the facilities so provided to do something the right to do which is included in the copyright."

The Court held that that an ISP will not be merely providing facilities in circumstances where it has cogent evidence of primary infringement. Consequently, section 112E will not be a blanket defence.

What should go into an infringement notice?

Justice Emmett suggested four factors that would make it reasonable for an ISP to suspend or terminate a customer's account in response to an infringement notice:

  • the ISP has been informed in writing of particulars of specific primary acts of infringement of copyright of the copyright owners, by use of particular IP addresses of its customers;
  • the ISP has been asked in writing to communicate with its customer certain information and warnings;
  • the ISP has been given unequivocal and cogent evidence of the alleged primary acts of infringement by use of the service in question, including information adequate to enable the ISP to verify the accuracy of the allegations; and
  • the copyright owners have undertaken to reimburse the ISP for the reasonable cost of verifying the particulars of the primary acts of infringement alleged and of establishing and maintaining a regime to monitor the use of the service to determine whether further acts of infringements occur, and to indemnify it in respect of any liability it reasonably incurred as a consequence of mistakenly suspending or terminating a service on the basis of allegations made by the copyright owner.

In this case, the infringement notices did not provide means of verification, nor did the copyright owners offer to reimburse iiNet.

What was wrong with iiNet's policy for repeat infringers?

ISPs can take advantage of the safe harbour provisions, which bar the court from awarding any damages or other monetary relief, if they adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the accounts of repeat infringers. iiNet said its policy was to terminate the accounts of repeat infringers:

  • when iiNet was ordered to do so by a court;
  • when an iiNet customer admitted to infringing copyright; or
  • when an iiNet user was found by a court or other authority to have infringed.

Unfortunately, as the Court found:

  • customers were never made aware of the policy and could argue that it formed no part of a contract for services and was therefore unenforceable; and
  • the policy was not implemented – "merely attending meetings with the IIA and with other service providers, having its customer relationship agreement reviewed by lawyers and considering the issue internally does not amount to the implementation of a policy. iiNet had no processes in place that resemble a policy."

Now what?

As the Court split 2:1, an application for special leave to appeal to the High Court is likely; indeed it was previously expected that however this appeal turned out, the losing party would try to get the High Court to overturn it.

For the time being, ISPs cannot blithely assume they are safe. While the notices served on iiNet were not adequate, the Court has strongly signalled that ISPs will have to take reasonable steps – which may include suspension or termination of a customer's account – when confronted with unequivocal and cogent evidence of copyright infringement.

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

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.