20 Apr 2012

iiNet wins in High Court

Timothy Webb talks to BRR Media about iiNet's victory in the High Court and what it means for ISPs, copyright owners, and preventing online copyright infringement.

iiNet wins in High Court
David Bushby, BRR Media
Tim Webb, Senior Associate, Clayton Utz

David Bushby

Good afternoon and welcome to the BRR Legal Brief looking at the major legal issues affecting Australian business. I am David Bushby and today we're broadcasting live from Clayton Utz's office here in Sydney to talk about the iiNet case which was handed down in the High Court just this morning.

To discuss what the victory for iiNet means for ISPs and for copyright owners is Timothy Webb from Clayton Utz here in Sydney.

Tim, iiNet's victory obviously very huge and great news for not just iiNet but the ISP industry I imagine. Was this the expected result?

Tim Webb

I think it was on one view always going to be difficult to predict and that’s because there really are some very complex legal issues involved here, and in addition to that you had a dissenting judge at a Full Federal Court level. So you had a split in the judges who'd already considered the issue.

Having said that, I think most commentators, including me, expected that iiNet would be successful and there are a couple of reasons for that.

Firstly, the iiNet was successful at first instance before Justice Cowdroy and also before the Full Federal Court. So it had some form in winning.

Secondly, the rights-holders did have a particularly difficult time before the High Court at the hearing of the matter. The iiNet submissions were much better received by the bench than the rights-holders', so that suggested that iiNet would win.

David Bushby

If we can take a closer look at the High Court's decision this morning, what were the key factors in iiNet's victory in this case?

Tim Webb

I think there are two.

The first is one of the factors under the legislation that the Court had to consider, which is iiNet's power to prevent the acts of infringement by its internet subscribers. On that front, the Court held that iiNet had no direct technical power to prevent users from using the BitTorrent peer-to-peer protocol so it had no direct power to prevent. Indeed at best all it had was an indirect contractual power to terminate access to the internet as a whole. So it didn’t think there was much power to prevent specifically vis-à-vis the infringement of copyright.

The second thing that was significant was that the information in the AFACT notices as they were served at the time did not provide iiNet with a sufficient need for it to take action. That was for various reasons including that the quality of the evidence that was provided and the risk of liability to iiNet if it did terminate users' accounts. In all the circumstances, the Court said you couldn’t infer that inactivity by it necessarily meant there was authorisation. It was reasonable for it to act as it did and those collectively meant that iiNet won the case.

David Bushby

Well of course obviously the case was brought against iiNet so what does it mean firstly for iiNet and then just as importantly what does it mean for all ISPs?

Tim Webb

With respect to iiNet, most immediately it means that it hasn’t infringed copyright on these facts. It won't be restrained from providing internet services to its customers who downloaded these films, etc, and it also won't have to pay any money to the rights-holders.

More broadly for the industry and ISPs, on one view the finding in this case means that as long as ISPs do not have the technical power to prevent the use of BitTorrent by their users, then as long as they don’t actively encourage copyright infringement, then in effect they have a defence to authorisation infringement. So they're off the hook as long as they don’t encourage and as long as they don’t technically control or have a relationship with BitTorrent.

David Bushby

Well turning to the copyright owners and the 34 studios who I guess would be licking their wounds as we speak, what does it mean for those studios, what does it mean for other copyright owners? Where does this case now leave them?

Tim Webb

Sure. I think there's a whole range of options open to the rights-holders. One of the obvious one is to take steps against the individual users whom they identify.

There are problems with that though and as the judgment today referred to an article where that approach of suing and going after the individual users is a teaspoon solution to an ocean problem. So that has its difficulties.

Another option would be that they could start again and issue the notices that they previously issued to iiNet or another ISP but improving them – providing better evidence and offering to pay the costs and indemnify the ISP against any liability for wrongfully terminating the accounts. So they could go down that path, but perhaps it's unlikely.

The most obvious way forward for them is to lobby government for legislative change. So the Court itself noted both in the minority and majority judgments that these issues may be better dealt with by a legislative solution and that's happened in other jurisdictions such as the UK and New Zealand. So I expect we’ll see intense lobbying by the rights-holders of the government.

And finally I mention of course a monetised solution – usually users are downloading unlawful infringing content because either they don’t have access to it or it costs too much to get lawful content and so there are of course options for the rights-holders to seek to address those concerns and thereby reduce the incidents of infringing conduct.

David Bushby

Well Tim I want to take your point about lobbying and legislation change. The hearing for this case of course was heard late last year and the judges have since been deliberating until today.

While that was happening though you had the Government holding secret meetings with the ISP industry. You also had the Communications Alliance together with some of the major ISPs and the Internet Industry Association put together a draft infringement notice scheme.

Now that we've had this decision though is that same onus still on industry and Government to sort this out or with this decision today, now that the High Court has passed judgment, is the current law sufficient?

Tim Webb

I think it’s a matter of the owner shifting somewhat in that the judgment was unanimous albeit split judgments and reasonably clear. It really was a very clear victory for iiNet and ISPs more broadly.

The consequence of that is you would expect their negotiating position in industry discussions to significantly improve and indeed they would be quite content you would expect with the current state of the law in this respect.

The consequence of that is rights-owners not being happy with the decision would need to lobby Government and seek to have the law changed at a legislative level. So it really shifts the bargaining power if you will and the need for rights-owners if they want the law changed to go via another means rather than legal proceedings.

David Bushby

Well just finally Tim do you have any final key tips for ISPs out there that might be looking to react to today's decision?

Tim Webb

Sure David. I'll raise a couple, one of which is quite obvious and that is this isn’t sort of carte blanche ISPs can do what they like and not infringe copyright. Clearly they should not encourage copyright infringement by their users and indeed if they do, that would almost certainly take their conduct outside the scope of this decision and they could be liable for authorising copyright infringement.

The second point to note is that ISPs should have a written repeat infringer policy for dealing the termination of accounts of repeat infringers and that enables them to rely on what are known as the safe harbour provisions in the Copyright Act in the event that they are found to infringe. So it's useful for them notwithstanding this decision to ensure they have and maintain that repeat infringer policy.

David Bushby

Well Tim some great insights there for business and I really appreciate you taking the time to talk to us so soon after the case today so thank you again.

Tim Webb

No problem at all. Thanks David.

David Bushby

And viewers thank you for tuning in today. We look forward to having your company for next week's BRR legal brief.

If you have any questions please contact Timothy Webb on twebb@claytonutz.com

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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.