In brief

  • In a unanimous decision, the High Court has held the internet service provider iiNet not liable for acts of copyright infringement committed by users of its service. 
  • The High Court found that iiNet did not have the technical power to prevent the infringements taking place on its networks, as it did not control the BitTorrent system of file sharing. 
  • iiNet did have indirect power to prevent the infringements using contractual rights established in its terms and conditions, although the High Court found that iiNet’s failure to enforce these rights on the basis of the notices provided by AFACT was not unreasonable.
  • While the decision is a win for iiNet, the High Court emphasised that the test for authorisation is largely a question of fact, and left open the possibility that ISPs could be held liable for the copyright infringing activities of their customers in other circumstances.
  • The decision will not provide much comfort for other players in the online space, such as content aggregators like YouTube or Google Video, where those entities have the technical power to prevent the copyright infringing activities of their users.

Background

The appeal was brought by 34 Australian and US film studios and associated entities against the Full Federal Court’s decision in favour of iiNet in 2011.

At issue in the appeal was whether, by failing to take action once put on notice of the copyright infringing activities of users of its service, iiNet was itself liable for copyright infringement. Under the Copyright Act, the authorisation of copyright infringement by others constitutes copyright infringement in its own right.

The primary acts of copyright infringement in this case occurred when iiNet’s users unlawfully accessed copies of films using the BitTorrent system of file sharing. The BitTorrent system allows a ‘swarm’ of ‘peers’ to share small pieces of .torrent files which, assembled together, make a complete file.  

Previously in the litigation it had been established that iiNet knew that about half of all the traffic on its service was via the BitTorrent system of file sharing and that a substantial proportion of BitTorrent traffic involved copyright infringement. iiNet also accepted that the ‘overwhelming majority’ of infringements shown in the notices received by iiNet from the Australian Federation Against Copyright Theft (AFACT) involved 100% of the film being copied by the iiNet user and made available online.

Authorisation liability

Section 101(1A) of the Copyright Act provides that at least the following matters are relevant to determining whether a person is liable for copyright infringement by authorisation:

  • the person’s power to prevent the infringement, and the extent of that power to prevent,
  • the nature of any relationship existing between the person and the infringer, and
  • whether the person took any other reasonable steps to prevent the infringement, including by complying with relevant industry codes.

The appellants argued that iiNet had the technical power to control the use of its service as well as contractual power to terminate the provision of its service to customers who had infringed copyright and that its failure to warn customers of their infringement and, if appropriate, terminate the provision of services to those customers amounted to authorisation in circumstances where it had been put on notice of those infringements by AFACT.  

High Court findings

iiNet lacked direct power to prevent the copyright infringing activities of its users

The High Court found that iiNet had no direct power to prevent the copyright infringement of its users, including as it:

  • had no ability to control the BitTorrent system,
  • could not directly prevent users from downloading a BitTorrent client, which enabled them to use the BitTorrent system, or the .torrent files which allowed them to access particular content,
  • was not able to monitor the steps taken by its users using the BitTorrent system, including to identify specific content which users sought to access, and
  • could not remove content from a user’s computer once it had been downloaded by them and could not block the further communication of that content by the user.

iiNet’s contractual relationship with its customers gave it indirect power to prevent the infringements by terminating their accounts

iiNet did have an indirect power to prevent the infringements occurring on its networks by terminating its contractual relationship with customers. The ‘Customer Relationship Agreement’ which iiNet had in place at the relevant time gave iiNet the express right to immediately suspend, cancel or restrict a customer’s internet access where the access was misused, including if the customer infringed a third party’s rights or failed to comply with laws when using iiNet’s service.

Notwithstanding this express contractual right, the High Court found that iiNet had ‘limited’ power to prevent the infringements given it could only prevent the infringements indirectly by terminating its contractual relationships with its customers. The High Court also recognised that in the absence of a binding industry protocol, iiNet in any case could not then prevent customers from using other internet services to infringe copyright.  

iiNet’s lack of action in response to the notices of infringement did not amount to authorisation

Although iiNet had the indirect power to prevent its users’ copyright infringement by terminating those users’ internet accounts, the High Court found that iiNet’s failure to do so did not give rise to liability for authorisation. The notices of infringement provided by AFACT did not constitute a reasonable base for iiNet to take action against customers in the form of warning notices containing threats of suspension or termination, including as the methods for obtaining the information contained in the notices had not been disclosed. Given the risk of liability for iiNet if it wrongfully terminated users’ accounts, its failure to act in these circumstances did not amount to it authorising its users’ infringement of copyright.

Copyright Act ‘not readily suited’ to enforcement in a digital era

Justices French, Crennan and Kiefel, in their joint judgment, acknowledged that the tort of authorisation in the Copyright Act does not equip content owners well to enforce their rights in the face of widespread infringement through peer-to-peer file sharing. The Judges commented that the issue of widespread online piracy has been specifically dealt with by legislative amendment in other jurisdictions, including in the UK under the Digital Economy Act 2010 and in New Zealand in the Copyright (Infringing File Sharing) Amendment Act 2011. Some such offshore targeted schemes involve the implementation of co-operative industry protocols.

Negotiations between ISPs and content owners in Australia in an attempt to settle on a cooperative scheme to address online copyright infringement were taking place even as the iiNet litigation was appealed first to the Full Federal Court and then to the High Court. The outcome of these negotiations will now no doubt be influenced by the High Court’s decision. In the absence of agreement at an industry level to a cooperative scheme, legislative amendment may be next on the cards.