Background

The last three months have seen a number of significant developments in Australia's fight against online piracy. 

In a landmark decision for content owners and internet service providers (ISPs), on 7 April 2015 the Federal Court of Australia granted a preliminary discovery application brought by Dallas Buyers Club LLC, ordering numerous ISPs to divulge the names and physical addresses of subscribers who have allegedly shared in Australia the film Dallas Buyers Club via peer-to-peer network BitTorrent.   

On 26 March 2015, Communications Minister Malcolm Turnbull introduced the Copyright Amendment (Online Infringement) Bill 2015 (Cth) (Bill) with the aim of reducing online the availability of infringing material.  The Bill introduces a requirement for site blocking at an ISP level.  Notably, the Explanatory Memorandum provides that the Bill is "deliberately prescriptive" and "intended as a precise response to a specific concern raised by copyright owners."

Finally, on 20 February 2015, Communications Alliance released a new draft industry Code of Practice (Draft Code) proposing a "Copyright Notice Scheme" designed to:

  • reduce the prevalence of online copyright infringement or "internet piracy"; and
  • educate users as to which online actions may constitute copyright infringement.

The Draft Code was developed by ISPs, representatives of consumer bodies and a broad coalition of rights holders from the film, music, television and performing arts industries (including APRA AMCOS, ARIA, Australian Screen Association, Copyright Agency, Foxtel, Free TV Australia, Music Rights Australia, News Corporation Australia, Village Roadshow Limited and World Media).

The Draft Code was submitted to the regulator, the Australian Communications and Media Authority (ACMA), on 8 April 2015 for registration.

1. Dallas Buyers Club

The applicants, Dallas Buyers Club LLC and Voltage Pictures LLC, brought an application for preliminary discovery in the Federal Court of Australia requesting the names and addresses of the 4,726 unique IP addresses from which the film, Dallas Buyers Club, was allegedly uploaded using the peer-to-peer network BitTorrent. 

The application was made against a series of ISPs, namely iiNet, Dodo, Internode, Amnet Broadband, Adam Internet and Wideband Networks.  Notably, preliminary discovery applications have not been made against the larger ISPs, including Optus, Telstra or TPG.

The ISPs resisted the application on a number of grounds, including that:

  • the evidence provided by the applicants to identify the infringing IP addresses was not sufficient;
  • any claim against any putative respondent was speculative;
  • pre-conditions which must exist before permitting an order for preliminary discovery had not been met; and
  • the applicants failed to provide evidence that either one of them is the owner of the copyright in the film.

The applicants relied on the software, Maverik Monitor, to identify allegedly infringing IP addresses, claiming that the software was able to identify both the IP address which was uploading the relevant file via BitTorrent, together with the identity of the relevant ISP.  This evidence was provided in the form of an expert report and was not challenged by the ISPs. 

Whilst the Court accepted the ISPs' submissions that a film is distributed by an individual computer downloading "slivers" of that film from multiple computers, the Court rejected the ISPs' argument that the applicants had not sufficiently shown that subscribers infringed copyright because the sliver did not amount to proof that a substantial part of the film had been used.  In rejecting this submission, the Court held that whether the subscriber copied the film was not the relevant question, but rather it was "whether the end-user has made the film available on the internet."

The Court held it was "comfortably satisfied that the downloading of a sliver of the film from a single IP address provides strong circumstantial evidence that the end-user was infringing the copyright in the film", and that there was "a real possibility that the IP addresses identified by Maverick Monitor were being utilised by end-users who were breaching copyright in the film by making it available for sharing online using BitTorrent".  The Court also held that the requirements of the preliminary discovery application were met, in that the contemplated suit had some prospect of succeeding and was not fanciful.

The ISPs argued that if the Court rejected their submissions against granting the application, then the Court should not, as a matter of discretion, order them to divulge their subscribers' personal or private information for a number of reasons, including that:

  • any infringement of the copyright was only minor;
  • any monetary claim made by the applicants against an infringer would be so trivial that no such case could or would be maintained by the applicants; 
  • there was no realistic chance that applicants would be able to obtain injunctive relief;
  • there was evidence that the applicants would engage in the practice of speculative invoicing;
  • the applicants failed to identify serious infringers;
  • dealing with the issue of online piracy should wait until the Draft Code commences; and
  • ISPs were subject to privacy obligations which should be respected.

The Court rejected the ISPs' arguments and held that none of the issues "either individually or cumulatively, would justify [the Court] in withholding relief to the applicants".

However, in granting the application, the Court imposed two important constraints:

  • the applicants must only use the information divulged by the ISPs for the purposes of recovering compensation for infringement and that the information must not be otherwise publicly disclosed without leave of the Court; and
  • the applicants must submit to the Court for approval a draft of the letter they propose to write to those persons identified, prior to that letter being distributed.

2. Site Blocking legislation

The Bill proposes amendments to the Copyright Act 1968 (Cth) (Act), to allow for copyright owner or an exclusive licensee to apply to the Federal Court of Australia for an order requiring a carriage service provider (CSP) to take "reasonable steps" to disable access to an "online location". The Bill does not prescribe what reasonable steps may be, nor does it define what constitutes an online location.

However, the Bill does provide that an injunction will only be granted if the Court is satisfied that the:

  • carriage service provider provides access to an online location outside of Australia;
  • the online location infringes, or facilitates an infringement of, the copyright; and
  • the primary purpose of the online location is to infringe, or to facilitate the infringement of, copyright.

The Bill does not provide any explanation as to the circumstances in which an online location may facilitate infringement. 

The applicant of an injunction must first notify both the CSP and the person operating the online location. However, the Court may dispense with the requirements to notify the person operating the online location, if the Court is satisfied that the applicant is unable to determine the identity or address of the person, or to send notices to that person (despite reasonable efforts by the copyright owner). The Bill does not provide any detail as to what "reasonable steps" to notify the online location will be required or the appropriate method(s) of notification (i.e. by email, physical address or telephone).

Before granting an injunction, the Bill states that the Court must take into account a number of factors, including:

  • flagrancy of the infringement, or the flagrancy of the facilitation of such infringement;
  • whether the online location makes available or contains directories, indexes or categories of the means to infringe, or to facilitate an infringement of, copyright;
  • whether the owner or operator of the online location demonstrates a disregard for copyright generally;
  • whether access to the online location has been disabled by orders from any court of another country or territory on the grounds of or related to copyright infringement;
  • whether disabling access to the online location is a proportionate response in the circumstances;
  • the impact on any person, or class or persons, likely to be affected by the grant of an injunction;
  • whether it is in the public interest to disable access to the online location; and
  • whether the owner has notified the carriage service provider and the person who operates the online location.

In addition, the Court must also take into account whether there are any other remedies available under the Act, any other matter prescribed by the regulations or any other relevant matter. 

The Bill provides that CSPs will not be liable for any costs in relation to the proceedings unless the CSP enters an appearance and takes part in the proceedings.  However, the Bill does not stipulate any requirement for the applicant to pay for the technical process of blocking the online location.  The Communications Minister has estimated that it would cost the telecommunications industry approximately $130,825 a year to implement the Bill.

The Explanatory Memorandum  provides that the Bill is to be regarded as a "standalone injunction power" operating as a no-fault remedy, and "would not affect existing laws on infringement, copyright exceptions or limitations, authorisation liability or any of the safe harbour conditions."

3. The Draft Code

Most provisions of the Draft Code were agreed to by the ISPs and other stakeholders after the Communications Minister and Attorney-General warned that the government may intervene if an agreement was not reached. However, some of the commercial details of the Scheme are yet to be settled, including the funding arrangements and the terms of the indemnity provided to the ISPs by the rights holders.  

On 10 December 2014, the Communications Minister and Attorney General released a statement requiring rights holders and ISPs to "immediately develop an industry code" that includes "a process to notify consumers when a copyright breach has occurred and provide information on how they can gain access to legitimate content".  If the rights holders and ISPs failed to reach an agreement by 8 April 2015, the Federal Government warned that they would prescribe binding arrangements.

The Draft Code will establish a Copyright Notice Scheme (Scheme) that sets out a process whereby individual internet subscribers alleged to have infringed copyright online would be sent a series of escalating notices.

Under the Scheme, if a subscriber receives 3 notices within a twelve month period, any rights holder who caused one of the notices to be sent may then apply to the court seeking access to the personal details of the subscriber.  The Draft Code provides that the ISPs must act reasonably in relation to any preliminary discovery application made under the Scheme, but that it will not provide the personal details of account holders in the absence of any court order or express written authorisation by the account holder.   Given these processes, although a rights holder would still be entitled to seek preliminary discovery outside the Scheme (i.e on the same basis as the Dallas Buyers Club case), it appears unlikely that any rights holders would seek preliminary discovery without adhering to the process of the Scheme.  

Once registered with the ACMA, the Draft Code would have a dual effect:

  • it would be a registered code under the Telecommunications Act 1997 (Cth), enforceable by the ACMA against ISPs; and
  • it will constitute a “relevant industry code” for the purposes of the authorisation provisions in the Copyright Act 1968 (Cth), meaning a court, in considering whether an ISP had authorised copyright infringement by an end user, would need to consider whether the ISP had complied with the Draft Code. Notably, however, the Draft Code does not reverse the earlier High Court decision that determined iiNet had no direct power to prevent its subscribers from using BitTorrent software to infringe copyright and therefore did not authorise such infringements.

Limitation

The Draft Code only applies to ISPs “that supply residential fixed internet access services”. 

Notably, the Draft Code does not apply to intermediary liability more broadly, for example it does not (directly at least) affect the position of a platform provider in relation to infringing content uploaded by an end user.

Copyright Notice Scheme

The Scheme follows a "three strikes" process:

  • A rights holder must “pre-qualify” to enable it to trigger notices by an ISP to its subscribers. This requires an independent audit and verification of the processes which will be used by that rights holder to identify alleged infringements by subscribers. These following processes must meet the test of giving the rights holder “reasonable grounds to believe” that an infringement has occurred. However, they be manual, semi-automated or automated. 
  • In addition to the verification processes, the rights holder must also indemnify the ISP (although the Draft Code does not specify the terms of the indemnity).
  • Once qualified, a rights holder will be able to send infringement reports to an ISP, which must include certain specified information, including identification of the relevant copyright work, the date and time of the infringement and the IP address associated with the alleged infringement.
  • The ISP will then be required to match the IP address specified in an infringement report with an account holder (i.e a subscriber to its access service).
  • If the IP address can be so matched, the ISP must send to the account holder, successively:
  1. an Education Notice, for the first infringement in any 12 month period;
  2. Warning Notice, for the second infringement in any 12 month period; and
  3. Final Notice, for the third infringement in any 12 month period.
  • If 3 notices have been sent to the same account holder within a 12 month period, then a rights holder named in any of those notices may seek an order for preliminary discovery with either the Federal Court of Australia or the Federal Circuit Court, seeking access to the account holder's identity and contact details.
  • To determine whether an account holder has received a Final Notice, any rights holder that sent an infringement report to an ISP in relation to an account holder may request a Final Notice List, which will provide the rights holder with a list of the number of account holders who have both: (i) been issued with an infringement notice in respect of the requesting rights holder; and (ii) who have received a Final Notice in respect of an alleged infringement against the requesting rights holders or any other rights holder. The Final Notice List must not disclose the identity or contact details of account holders.
  • Provided such processes are adhered to, ISPs are required by the Draft Code to act reasonably to facilitate and assist any preliminary discovery application by the relevant rights holder. 
  • If less than 3 notices are given to the account holder within a 12 month period then the “count” resets to zero. However, if an account holder receives a Final Notice for the year, an ISP is not required to process any further infringement reports relating to that account holder.
  • An account holder has an opportunity, upon receipt of a Final Notice, to respond with a Challenge Notice, challenging any of the 3 notices received.  This challenge process is to be administered by an independent Adjudication Panel, established specifically for this purpose.  The Final Notice List will not include any details of account holders who are currently challenging a Final Notice.
  • The Draft Code provides that an ISP must not accept any request by any rights holder to disclose the personal information of an account holder at any stage of the Scheme, unless there is a court order or written permission from the account holder authorising the disclosure.
  • At each stage of the Scheme, there are significant time and content related requirements. Timeframes for the provision of notices and the required content of notices must be strictly adhered to for the relevant obligations to be triggered. However, there are no specified time constraints for a rights holder to make a preliminary discovery application. 

Copyright Information Panel

A Copyright Information Panel (CIP) will be established to administer the Scheme.  The CIP will also be responsible for coordinating  the public education program, including maintaining the content and the operation of a dedicated website.

The CIP will be composed of six members:

  • two representatives from ISPs;
  • two representatives from rights holders; and
  • two members from consumer advocate bodies.

What's next?

Dallas Buyers Club LLC and the ISPs will return to court today to discuss the contents of the draft letter to be sent to subscribers that have allegedly uploaded the film. 

On 26 March 2015, the Bill was passed by the House of Representatives and was referred to the Senate Legal and Constitutional Affairs Legislation Committee.  Submissions closed on 16 April 2015 and a report is due on 13 May 2015. 

As previously stated the Draft Code was submitted to the ACMA for registration on Wednesday 8 April 2015.  If implemented, the Draft Code would see Australia as amongst the first countries in APAC to adopt any kind of graduated response/three strikes regime.

The Draft Code is intended to be in force by 1 September 2015, with an independent evaluation to take place 18 months after commencement.