By Carolyn Dalton, Executive Director of Policy Australia Pty Ltd

As foreshadowed in a previous post in December last year, the Australian Parliament has now passed amendments to the Copyright Act 1968 to enable rights holders to apply for a court order requiring ISPs to block access to websites operated outside of Australia which provide access to infringing content (usually referred to as ‘site blocking’). The Copyright Amendment (Online Infringement) Bill 2015 passed both Houses of Parliament on 22 June 2015 and received Royal Assent on 26 June 2015.

How does the legislation work?

The new legislation enables copyright owners (and exclusive licensees) to apply to the Federal Court of Australia for an order requiring ISPs to block access to an online location (outside Australia) that has the primary purpose of infringing copyright or facilitating the infringement of copyright. Site blocking orders apply to online locations that have the “primary purpose of infringing copyright or facilitating the infringement of copyright” (new section 115A (1)(c)).

The original draft Bill provided 11 mandatory elements that the Court was required to take into account in determining if an injunction should be granted. These factors included the proportionality of site blocking as a remedy, the flagrancy of the infringement, the impact on likely affected parties, and whether it is in the public interest to make a site blocking order. According to the Explanatory Memorandum (paragraph 6), these factors set an intentionally high threshold.

Parliamentary consideration of the legislation

The draft legislation was sent to the Senate Legal & Constitutional Affairs Legislation Committee. The Committee held one public hearing, and provided its final report on 11 June 2015.

The Committee made 5 recommendations (including recommending that the bill be passed). The Committee’s substantive recommendations were adopted in the final version of the legislation:

  • an amendment to make the list of factors that are to be taken into account by a Court in assessing whether to make a site blocking order advisory instead of mandatory (ie, new section 115A(5) now says a court “may” take these factors into account);
  • an amendment to the Explanatory Memorandum to specify that when an ISP takes reasonable steps to disable access to an online location, this may include a requirement to post a landing page at the blocked online location, specifying that it has been blocked by court order and outlining details of that order;
  • that the Explanatory Memorandum be amended to provide greater clarity and guidance on the issue of services provider costs and liability for compliance with site blocking orders;
  • that the effectiveness of the legislation be reviewed 2 years after its enactment.

Controversial issues

The main debate on the legislation focused on three areas:

  • the appropriate legal threshold for the grant of a site blocking order;
  • the application of the legislation to VPNs and similar technologies; and
  • who should pay the costs of implementing site blocking orders.

Legal threshold

The draft Bill applied to sites where “the primary purpose” is copyright infringement.  Rights holders argued that this threshold was too high, and argued instead that the legal threshold should be lowered, to allow site blocking orders to be made against websites that had “a substantial purpose or effect” of copyright infringement. It was argued that constraining site blocking to sites which had “the” primary purpose of infringement would be too difficult to prove, and would enable infringing sites to circumvent the purpose of the legislation.

Opponents argued that this alternative “substantial purpose or effect” threshold was too low for a remedy such as site blocking, and risked enabling site blocking orders to be made against websites that had substantial legitimate as well as infringing purposes.

The final legislation retained the legal threshold of “a primary purpose” of copyright infringement.  However, an amendment was included in a Supplementary Explanatory Memorandum (paragraph 2) to clarify that an online location may have the primary purpose of infringing copyright, or facilitating copyright infringement, even if the operator of the location derives a commercial advantage of profit from the operation of the location.

VPNs and geoblocking

When the original site blocking policy was announced, the Government published a Frequently Asked Questions document, which included the following Q and A:

Q: Many Australians use a VPN to access Netflix in the US. Is it illegal for me to use a VPN to access Netflix?

  • The Copyright Act does not make it illegal to use a VPN to access overseas content.
  • While content providers often have in place international commercial arrangements to protect copyright in different countries or regions, which can result in ‘geoblocking’, circumventing this is not illegal under the Copyright Act.

This question was subsequently removed from the Government website, which led many people to question the legal status of VPN usage, and whether VPNs and other geoblocking avoidance technologies might be subject to the site blocking regime.

The Senate Committee considering the Bill suggested that the issue of whether VPNs could be caught by a site blocking order should be clarified in the Explanatory Memorandum (although the Committee did not make a formal recommendation on this point).   The Australian Greens moved several amendments to the Bill in the Senate, all of which were rejected by the Government.  These amendments included an attempt to clarify that the use of a virtual private network (VPN) and circumvention of geoblocking technologies did not constitute copyright infringement and therefore potentially subject these technologies to site blocking orders.

As a result, it seems clear that where VPNs and similar technologies meet the required legal threshold, they could be subject to a site blocking order.  However, in practice, it is hard to see where the use of a VPN that has substantial non-infringing purposes (such as encryption for privacy reasons) would in practice meet this threshold.

Costs and indemnities.

In the original Discussion Paper announcing the site blocking reforms, the Government indicated that rights holders would bear the costs of ISPs complying with site blocking orders.   This requirement was absent from the draft Bill as introduced into Parliament, and in the final version of the legislation as introduced.  The Explanatory Memorandum (paragraph 11) says the estimated cost to ISPs of site blocking is $130,825 per year but states that any costs the copyright owners assume would be voluntary.

In relation to the question of whether ISPs require an indemnity to protect them from claims from parties affected by a site blocking order, clarification is provided by paragraph 5 of the Supplementary Explanatory Memorandum, which states that the reasoning of Perram J in Dallas Buyers Club LLC v iiNet [2015] FCA 422 at [20] indicates that services providers acting in compliance with a Federal Court order will not be liable to actions from subscribers from doing so.

Other developments

Site blocking legislation was only one limb of the Australian Government’s crackdown on online copyright infringement.   The other was to require the ISP industry and rights holders to develop a code to address peer-to-peer piracy.

The draft code has been published and sent to the Australian Media and Communications Authority for review and approval.   It contains a system of warning notices, but does not include any requirement for ISPs to throttle services or terminate customer accounts.  It also contains a review mechanism available to any account holder who receives three infringement notices in a 12 month period.  The draft code is currently silent on the critical question of who will pay for the scheme, and negotiations on this point appear to be continuing.

New piracy research released

On 24 June 2015, the Government released a research report on online copyright infringement commissioned by the Department of Communications.   The report found that 26% of Australian internet users consumed at least one item of online content unlawfully over the first 3 months of 2015 (page 3). The most commonly cited influences for what would make infringers stop consuming unlawful content were reduction in cost (39% of infringers), legal content being more available (38%) and content being available as soon as it is released elsewhere (36%) (page 5).

The report claims to be “an authoritative foundation to assess the effectiveness of the measures taken to address copyright infringement” (page 8).  The survey period was 23 March – 13 April 2013.   Netflix launched in Australia on 24 March 2015, so it is unclear whether the results would be impacted by the rapid take up of Netflix in the Australian market, with some estimates suggesting that more than a million Australians subscribed to Netflix in the first 2 months of its local operations.

Further reform?

Another outstanding reform issue is how the Government will respond to a major review of copyright exceptions by the Australian Law Reform Commission (ALRC).   The centrepiece of the review’s recommendations was that Australia should adopt a fair-use style flexible copyright exception.    As part of the Senate consideration of the site blocking legislation, the Opposition Labor Party and The Greens called for the Government to respond to the  ALRC’s report by 17 September 2015.

Policy Australia Pty Ltd represented clients who expressed views on the site blocking legislation, including in favour of retention of “the primary purpose” test as the legal threshold for obtaining a site blocking injunction.