ISP avoids liability for internet piracy – for now

ISP avoids liability for internet piracy – for now

ISP avoids liability for internet piracy – for now

Roadshow Films Pty Ltd v iiNet Limited (No. 3) [2010] FCA 24

In a landmark copyright decision, which has been closely watched around the world, Australia’s third largest ISP, iiNet, has succeeded against the major US and Australian motion picture studios. Thirty-four studios argued that by not acting on take-down notices and by allowing the ISP’s users to continue to use BitTorrent to download the studios’ copyright works, iiNet was authorising infringement by the users and therefore liable under the Australian Copyright Act. The case was also the first in which the Federal Court allowed observers to “tweet” commentary on the proceedings via the social networking service Twitter, from inside the courtroom while the case was being heard.

Facts of the case

BitTorrent operates by breaking up files into small pieces for transfer across the Internet. If an Internet user is downloading a film made available using BitTorrent, the user’s computer will seek different pieces of the same file from other computers that are currently online, until eventually all pieces of the file have been obtained and re-compiled on the user’s computer. This usually involves simultaneous uploading and downloading, so that while a user’s computer is downloading pieces of the file from other computers, it will also be uploading the pieces that it has already obtained, to other users seeking that file.

The studios’ case centred around iiNet’s knowledge that iiNet users were using its ISP facilities to infringe copyright. Since at least July 2008, the copyright owners had sent hundreds of take-down notices to iiNet, detailing specific instances of copyright infringement by iiNet users. The studios argued that iiNet’s failure to act upon the notices and prevent the users from continuing to infringe copyright, constituted authorisation of copyright infringement.

The decision

Primary infringement

The Court found that various iiNet users infringed the studios’ copyright in 86 films and television programs using the BitTorrent protocol.

Justice Cowdroy found, on the evidence submitted by the studios, that the users had infringed copyright using BitTorrent, in three ways:

  • by making pirated films available online;
  • by electronically transmitting pirated films;
  • and by making a copy of pirated films.

As none of the iiNet users was a party to the proceedings, the Court did not make any orders restraining the continuing copyright infringement or ordering the infringers to pay damages to the copyright owners.

Authorisation of infringement

Authorisation of copyright infringement has been considered in a line of well-known copyright cases in Australia since at least 1975, including:

  • The University of New South Wales v Moorhouse (“Moorhouse”)- where a University was found liable for authorisation of copyright infringement because it made photocopiers available in a library and did not take reasonable steps to prevent library users from making infringing copies of the books in the library;
  • Universal Music Australia Pty Ltd v Sharman License Holdings Ltd (“Kazaa”)- where the creators and distributors of the Kazaa Media Desktop file-sharing software were found liable for authorising end-users to infringe copyright in music and video files. They were found to have actively promoted and encouraged Kazaa users to infringe copyright; and
  • Universal Music Australia Pty Ltd v Cooper (“Cooper”) – where Mr Cooper was found liable for authorisation of copyright infringement by establishing and maintaining a website, “http://www.mp3s4free.net” on which users were invited to post hyperlinks to music files, most of which were pirated music files. Mr Cooper was aware that the majority of the links on his website related to infringing material, but he did not take any steps to remove those links. Mr Cooper’s internet service provider, Comcen, was also held to be liable for authorisation of infringement, as it actively assisted Mr Cooper in providing his website and benefited financially from the continuing acts of infringement.

Justice Cowdroy held that iiNet had not authorised its users to engage in copyright infringement. His Honour said that iiNet’s position was distinct from that of the respondents in the Moorhouse, Kazaa and Cooper cases, who had provided the “means” of infringement as follows:

  1. the University had provided the photocopiers in close physical proximity to shelves of books;
  2. the makers of the Kazaa software had provided the software to users for the purposes of distributing pirated files between users, and had encouraged users to engage in copyright infringement; and
  3. Mr Cooper and Comcen had provided users with the “http://www.mp3s4free.net” website which allowed users to post links to the infringing material, and had encouraged users to engage in copyright infringement.

In contrast, Cowdroy J said that all that iiNet had done was to provide its users with access to the internet. It had not provided users with BitTorrent, and it was not responsible for the operation of that protocol. Although Internet access was necessary in order for the infringements to occur, the Judge said that it was a precondition but not the actual means of infringement. The Judge also emphasised that the internet could be used for a wide range of non-infringing purposes (as could BitTorrent).

The Judge also held that, contrary to the studios’ assertions, iiNet did have a policy for dealing with infringing conduct by its users. iiNet’s policy was that it would terminate its users’ accounts only if it was provided with a copy of a court order or declaration that copyright infringement had occurred. The Judge said that iiNet’s policy was reasonable given the complexities of copyright law and the potential contractual consequences if iiNet terminated an account (particularly one used for business purposes) and the infringement allegations were later held to be unfounded.

The Judge rejected the studios’ argument that iiNet had the power to control its users’ actions or prevent their infringing conduct. In addition, the Judge found that iiNet had not encouraged its users to engage in copyright infringement (unlike the Kazaa and Cooper cases).

Finally, the Court said the law does not impose a positive obligation on any person to protect the copyright of another.

In summary, Justice Cowdroy held that iiNet had not sanctioned, approved or countenanced copyright infringement by providing an Internet service to its users.

Other findings

In view of the Court’s findings on authorisation it was not necessary for it to consider other issues such as the section 112E “mere provision of facilities” defence or the “safe harbour” provisions. However, the Judge did make some interesting comments about those provisions which may have implications for subsequent cases.

Section 112E “mere provision of facilities” defence

Section 112E of the Copyright Act provides that the mere provision of facilities which are used to infringe copyright, will not constitute authorisation of infringement. iiNet relied upon this section as a defence to the authorisation allegations.

Notwithstanding the Court’s decision that iiNet had not authorised any copyright infringement by its users, Justice Cowdroy held that iiNet would not, in any event, have been able to rely upon section 112E to protect itself from liability. The Judge said that as soon as iiNet became aware (via the studios’ take-down notices) that its users were using the facilities to infringe copyright, iiNet was no longer “merely providing facilities” within the meaning of section 112E.

“Safe harbour” provisions

The “safe harbour” provisions of the Copyright Act were introduced to limit an ISP’s liability in circumstances where it is found to have authorised copyright infringement. An ISP’s liability will be restricted as long as the ISP has complied with certain voluntary steps including compliance with industry codes of practice, and implementation of a repeat infringer policy. As the iiNet case was one of the first Australian cases to consider the “safe harbour” provisions (which are based on similar legislation in the United States), the Court looked to US copyright law for guidance.

The “safe harbour” provisions did not apply in the iiNet case because the Court found that iiNet was not liable for authorisation of copyright infringement. Notwithstanding this, the Court found that iiNet could have relied upon the “safe harbour” provisions if it had been held liable. The Judge said that iiNet’s policy of not terminating users’ accounts in the absence of a court declaration or order that copyright infringement had occurred was a “repeat infringer policy” which would have been sufficient to limit iiNet’s liability in accordance with the “safe harbour” provisions.

However, the Court noted that different standards might apply for ISPs under the “safe harbour” provisions, depending on what types of infringing activities had been authorised by the ISP. For example, in relation to Class A activities (where the ISP provides services for its users to transmit, route or provide connections for infringing material), the Court said that an ISP would have little or no reasonable opportunity to review and analyse the allegedly infringing conduct in order to reach a decision as to whether copyright had been infringed. For Class A activities (as occurred in the iiNet case), the ISP would be reliant upon information provided by a third party (usually the copyright owner) about the alleged infringements and would not have an opportunity to independently verify whether copyright infringement had in fact occurred. In that case Justice Cowdroy said that it was reasonable for an ISP to require the provision of a court order before terminating a user’s account due to copyright infringement.

However, in relation to Class B, C and D activities listed in the “safe harbour” provisions (including caching, storing or referring users to infringing material), the Court suggested that an ISP would be likely to have direct access to the infringing material on its own servers and might therefore be required to meet a higher standard of conduct in circumstances where allegedly infringing conduct was brought to its attention.

Commentary

The decision is a significant blow for the studios who are trying to bring about a change in the behaviour of Internet users. It is impractical for the studios to take action against all of the infringing users. Action against parties supporting BitTorrent is also not an option, unless copyright infringement is encouraged or sanctioned. BitTorrent was developed for programmers wishing to distribute their large software files, not media files. The case also highlights the dilemmas faced by ISPs who are concerned about the burden of being required to act as “judge and jury” in determining what action to take if its users are alleged to have infringed copyright. The studios have lodged an appeal against the Federal Court decision.