05 Mar 2015

Draft industry code to introduce a three strikes approach to combat online copyright infringement

by Timothy Webb, Peter Key-Matuszak

The Draft Code broadly proposes a "three strikes" system, but there are still some details to be ironed out.

On 20 February 2015, the principal telecommunications industry body in Australia, Communications Alliance, published a draft Copyright Notice Scheme Code for public comment. The Draft Code proposes a "three strikes" graduated response scheme to help deter internet users from infringing rights holders’ copyright.

What led to the Draft Code being created?

The Draft Code followed years of rights holders’ failed attempts at holding a major Australian internet service provider (ISP) liable for copyright infringement under the authorisation provision of the Copyright Act 1968 (Cth).

Decisively, in 2012 the High Court refused to hold that iiNet was liable under this provision for authorising its account holders to infringe rights holders’ copyright. According to the Commonwealth Attorney-General, this decision changed the impact of the provision, and meant that the Federal Government would need to consider "legal incentives" to encourage co-operation between ISPs and rights holders.

On 30 July 2014, the Government released a discussion paper that proposed to extend the scope of liability under the authorisation provision. To avoid liability under the proposed extended provision, ISPs would have had to take reasonable steps to discourage online copyright infringement by their users. Yet within two months of the discussion paper’s release, the Minister for Communications admitted that the proposal had drawn criticism from "everyone" for being "inadequate from one level or another".

Instead of proposing further measures, on 10 December 2014, the Attorney-General George Brandis and Minister for Communications Malcolm Turnbull asked ISPs to work with rights holders and consumers to develop a binding industry code. They further said that if these stakeholders could not agree on a code by 8 April 2015, the Government would introduce its own binding code or industry standard, and would amend the Copyright Act to require ISPs to block foreign websites that linked to infringing content.

In response, Communications Alliance formed a working committee to develop a code, together with rights holders and consumer representatives. The Alliance published the Draft Code in time to comply with the legislatively required thirty day public comment period.

The Draft Code

The Draft Code only applies to ISPs that supply residential fixed internet access services, and only to ISPs that provide internet to more than a "threshold number" of account holders. Public education, rather than punishment, is the cornerstone of the Draft Code’s proposed scheme. The scheme would be overseen by a new Copyright Information Panel, which would also be responsible for co-ordinating a public education program. The Panel would consist of two rights holder representatives, two ISP representatives and one consumer representative.

The copyright notice scheme

Each device that accesses the internet is assigned a unique internet protocol (IP) address, which is assigned by ISPs. The Draft Code outlines steps that rights holders and ISPs would take if a rights holder detected and verified that an IP address was used to allegedly infringe its copyright:

1. Within seven days of detecting an alleged infringing act from an IP address, the rights holder can pass the IP address and details of the alleged infringement to the ISP. The rights holder must give an indemnity to the ISP at or before the first time it sends this infringement report to the ISP.

2. Within seven days, the ISP must take reasonable steps to match the IP address to an account holder.

3. The ISP must send a notice to the account holder about the detected alleged infringement in accordance with the following process:

(a) On the first occasion that the rights holder reported an alleged infringement using the IP address, the ISP will send an Education Notice to the account holder. The Notice will state that the IP address allocated to that account holder may have been used to infringe copyright. The Notice will warn about the consequences of further infringements, and refer to educational material and legal alternatives. The ISP will not pass the account holder’s personal information to the rights holder.

(b) If a second infringement using the same IP address is reported within 12 months of the ISP sending the Education Notice, the ISP will send a Warning Notice. This Notice will contain a warning that if the account holder received another notice, the rights holder may commence court proceedings against the account holder. The Notice will suggest that the account holder seek legal advice.

(c) If a third infringement using the same IP address is reported within 12 months of sending the initial Education Notice, the ISP will send the account holder a Final Notice. This Notice will explain that the rights holder could immediately seek a court order that would compel the ISP to reveal the account holder’s details to the rights holder. The rights holder could commence a direct copyright infringement action against the account holder. The Notice will require that the account holder acknowledge receiving the Notice, and should explain how to challenge the Notice.

4. Within 28 days of receiving the Final Notice, the account holder can challenge the Final Notice for a $25 fee. An independent Adjudication Panel will review the notice. If the challenge is successful, the Panel can ask the ISP to treat the Final Notice as if it was never sent, and the account holder will be refunded the $25 fee.

5. If the account holder chooses not to challenge the Final Notice, then a rights holder can seek a court order to compel the ISP to facilitate an expedited preliminary discovery process against the account holder. With the details from that discovery, the rights holder could then commence a direct copyright infringement action against the account holder.

Non-agreed issues in the Draft Code

Some issues in the Draft Code are still not agreed between ISPs and rights holders, including:

  • the terms of the indemnity that a rights holder must give an ISP when it sends its first infringement report to that ISP;
  • the ‘threshold number’ of account holders to which ISP must provide internet for the Code to apply to that ISP;
  • the maximum number of infringement reports that an ISP must process per month; and
  • how the costs of the scheme should be fairly split between rights holders and ISPs.

Next steps

The Draft Code is available for comment until 5.00 pm on 23 March 2015.

Between 23 March 2015 and 8 April 2015, Communications Alliance will review the public comments and may amend the Draft Code.

By 8 April 2015, Communications Alliance will submit the final code to the Australian Communications and Media Authority (ACMA). Under the Telecommunications Act, the ACMA will need to be satisfied:

  • with the content of the submitted code;
  • with the process by which Communications Alliance sought, considered and published public comments on the code; and
  • that Communication Alliance consulted with certain bodies about the development of the code, including the ACCC, Telecommunications Industry Ombudsman and a body that represents the interests of consumers.

The ACMA does not need to be satisfied that ISPs agreed with other stakeholders on the content of the amended Code. However, the Federal Government may not be satisfied that the code adequately addresses online copyright infringement if there remain key issues that are not agreed between ISPs and rights holders.

If the ACMA is satisfied with the submitted code, it would become a registered industry code under Part 6 of the Telecommunications Act. If an ISP contravened this registered code, then the ACMA could direct the ISP to comply with the code. If the ISP continued to contravene the code, then it could face civil penalties under the Telecommunications Act.

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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.