Monday, April 30, 2012

NRL v Optus in the Full Federal Court: victory for Telstra

In a rapid piece of work, the Full Federal Court (Finn, Emmett and Bennett JJ) handed down a unanimous judgment in the Telstra v Optus dispute over recording of AFL and NRL games, National Rugby League Investments Pty Limited v Singtel Optus Pty Ltd, [2012] FCAFC 59, on 27 April 2012. As reported by Bram in February  Optus had since July 2011, been offering its subscribers access to the TV Now service, which (subject to payment of the relevant fee) allowed users to select to record TV programs being shown on free-to-air TV, provided  that the 'record' button was selected prior to the commencement of the relevant show. The AFL and NRL had an exclusive deal with Telstra regarding the broadcast of footage of AFL and NRL games via the internet and mobile phones (a deal which is both lucrative and an important source of fudning for both codes). The Optus model was seriously and deliberately 'disruptive' of this licensing arrangement.

The Full Federal Court focused on the meaning of  'make' and 'maker' in the Copyright Act, concluding the Optus, or Optus together with the subscriber, was the maker of the film, sound recording or copy of the game (Rares J at first instance had found this was the subscriber, thus immunising Optus against liability through reliance upon s111). Following on from this finding, the FFC concluded that Optus was not entitled to rely upon the 'private and domestic use' exception under s111. This is consistent with Bram's own thoughts on the intended scope of that provision (which was introduced for time shifting, a practice which had previously been an unauthorised use under Australian law, it was never intended as a foundation stone of a commercial business model).

The Court held: 'Optus could be said to be the maker in that the service it offered to, and did, supply a subscriber was to make and to make available to that person a recording of the football match he or she selected. Alternatively Optus and the subscriber could be said to be the maker for Copyright Act purposes as they acted in concert for the purpose of making a recording of the particular broadcast which the subscriber required to be made and of which he or she initiated the automated process by which copies were produced. In other words, they were jointly and severally responsible for the act of copying.' [para 4]
Looking at the question of who does the copying, the Court noted that the TV Now service was designed, provided and marketed by Optus to enable programmes to be received, copied, stored and streamed to a subscriber's mobile or PC device. The Court considered the correct characterisation of the 'maker' of the copies in the context, noting the four possible alternatives:
'(i) they were made by Optus but as agent for the subscriber;
(ii) they were made by the subscriber as a principal using a facility made available by Optus pursuant to its contract with the subscriber;
(iii) they were made by Optus as a principal using its own technology but subject to its contractual obligation to store and to allow subscriber viewing of the recordings so made at the time(s) of his or her choosing; or (iv) they were made jointly by Optus and the subscriber both of whom, consistent with their contract, acted in concert with one another pursuant to a common design to have a broadcast copied on Optus’ technology and made available to be viewed by the subscriber.' [para 53]
Looking at the provisions of s 86(a) and s 87(b), the Court concluded that the term 'make' is directed to the creation of a physical thing  ie the embodiment of the copyright subject matter. This action is undertaken by the automated copying system: a system 'configured designedly so as to respond to a third party command to make that copy' [para 64]. 

The Court places a heavy emphasis on the creation, promotion and operation on the TV Now system being designed solely to be in constant readiness to respond to subscriber demands. This resulted in the Court finding that Optus was a 'maker' of the recordings. The Court then considered if the subscribers were also makers of the copies. They concluded: 'The subscriber, by selecting the programme to be copied and by confirming that it is to be copied, can properly be said to be the person who instigates the copying. Yet it is Optus which effects it. Without the concerted actions of both there would be no copy made of a football match for the subscriber. Without the subscriber’s involvement, nothing would be created; without Optus’ involvement nothing would be copied. They have needed to act in concert to produce – they each have contributed to – a commonly desired outcome. The subscriber’s contributing acts were envisaged by the contractual terms and conditions. How they were to be done were indicated by the prompts given on the Optus TV Now TV guide page. The common design – the production of the selected programme for transmission to the subscriber – informed the solicitation and the taking of a subscription by the subscriber; it was immanent in the service to be provided.' [para 76]

On this basis, both Optus and the subscriber could 'both properly be said to be jointly and severally responsible for the act of making the copies'. [para 77] The preferred view of the Court was that both Optus and the subscriber, acting together, were the makers of the copies.

With respect to s 111 the Court observes that: 'There is nothing in the language, or the provenance, of s 111 to suggest that it was intended to cover commercial copying on behalf of individuals. Moreover, the natural meaning of the section is that the person who makes the copy is the person whose purpose is to use it as prescribed by s 111(1). Optus may well be said to have copied programmes so that others can use the recorded programme for the purpose envisaged by s 111. Optus, though, makes no use itself of the copies as it frankly concedes. It merely stores them for 30 days. And its purpose in providing its service – and, hence in making copies of programmes for subscribers – is to derive such market advantage in the digital TV industry as its commercial exploitation can provide. Optus cannot invoke the s 111 exception.' [para 89] Bram agrees that the position argued for by Optus was way outside the envisaged scope of s111 and the system as developed and marketed by Optus goes beyond the analogy of a home video recording device, not the least because it allows platform as well as time shifting (a commercial advantage clearly not lost on Optus). The Court observed that analogies are not particularly helpful in this context (noting the differing outcomes in US cases dealing with indirect liability, such as Cartoon Network LP, LLLP v CSC Holdings Inc 536 F 3d 121 (2nd Cir 2008))

Given the joint and several liability, Optus having alone been sued, it was liable as the person who did the acts of copying.

It is likely, although unknown at this time, that Optus will appeal.

Friday, April 20, 2012

iiNet in the High Court: A long march from "indifference" to "authorisation"

And so, finally, we reach the end of this saga, which commenced in the Federal Court in 2009 (with the gathering of data by AFACT commencing in 2008), Roadshow Films Pty Ltd v iiNet [2012] HCA 16.
In two joint judgments, (French CJ, Crennan and Kiefel JJ and Gummow and Hayne JJ) the High Court unanimously held that iiNet had not authorised the infringement of copyright by its customers who were distributing and accessing films using BitTorrent.
Both judgments focus specifically and narrowly on the concept of authorisation. The judgments avoid becoming entangled or distracted by questions such as what all those overlapping sections (s101(1), s 101(1A) and s112E) actually mean!  The Gummow and Hayne JJ judgment does observe that s112E "seems to have been enacted from an abundance of caution" [para 113]. They also leave the safe harbour provisions alone given their defeat in the Full Federal Court.
The judgments both progress on the basis that the test is to apply the questions from s101(1A):

"In determining, for the purposes of subsection (1), whether or not a person has authorised the doing in Australia of any act comprised in a copyright subsisting by virtue of this Part without the licence of the owner of the copyright, the matters that must be taken into account include the following:
(a) the extent (if any) of the person's power to prevent the doing of the act concerned;
(b) the nature of any relationship existing between the person and the person who did the act concerned;
(c) whether the person took any other reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice."

These are treated largely as questions of fact, with the answer to be drawn from the findings on these facts. See para 63:
"The appeal can be determined by asking interrelated questions informed by s 101(1A). Did iiNet have a power to prevent the primary infringements and, if so, what was the extent of that power (s 101(1A)(a))? Did reasonable steps to prevent those infringements (after receipt of the AFACT notices) include warnings and subsequent suspension or termination of the accounts of all customers identified as infringing the appellants' copyrights (s 101(1A)(c)), if such customers failed to cease communicating infringing material using the BitTorrent system? How does the relationship between iiNet and its customers (s 101(1A)(b)) bear on each of those questions? It will be observed that these are largely questions of fact and the ultimate question of whether iiNet authorised the infringements will be an inference to be drawn from those facts." [see also para 135 for Gummow and Hayne JJ judgement].

The French judgment then considers the contractual and factual relationship between iiNet and its subscribers. Noting the lack of an industry code which would given iiNet greater guidance regarding how to act in the face of infringement notices, their Honours conclude that iiNet in fact had little power to prevent infringement. Termination on the basis of an AFACT notice was not regarded as sufficient to require termination of a user's service and terminated customers could easily obtain their internet services from elsewhere. iiNet's refusal to act was not indifference but rather a recognition of their own limited power and the limitations of the AFACT notices.

Drawing upon tort law, Gummow and Hayne JJ consider the scope of "authorisation" in this context. They conclude that the arguments for authorisation liability seek to impose a positive duty of care on iiNet which could only be discharged by taking active steps regarding infringement by customers [para 115]. They conclude that: "the power of iiNet as an ISP with respect to the use of facilities provided to subscribers was limited by the nature of their commercial relationship; iiNet could not control the choice of its subscribers and other users to utilise the BitTorrent software, nor could iiNet modify the BitTorrent software or take down the appellants' films which were made available online." [para 137]

The provision by iiNet of internet connection, combined with its technical and contractual controls, and its lack of response to the AFACT notices did not constitute a case of authorisation of primary infringement: "The progression urged by the appellants from the evidence, to "indifference", to "countenancing", and so to "authorisation", is too long a march."[para 143] It was not unreasonable for iiNet to refuse to take the steps to disconnect users on the basis of the AFACT notices.

This decision leaves the way open for a statutory response to the secondary liability question: see para 79.