In brief

Submissions to the Australian Government’s consultation on online copyright infringement have now closed. The rights holders and ISPs are no closer to agreement on the appropriate way forward.

Introduction

Submissions to the Australian Federal Government’s consultation on Online Copyright Infringement (which we reported on here1) have now closed. Submissions were requested in relation to 10 specific questions but few submissions responded to those questions directly. Instead, most made general observations on the two key proposals outlined in the Government’s July 2014 discussion paper, being to:

  1. change to the test for authorisation liability, and
  2. allow injunctions to block access to overseas websites that are 'primarily aimed' at facilitating online piracy.

A wide range of views are expressed in the submissions. Generally, however, the submissions reflect a divide between those who say ISPs are making money from and should therefore be held liable for the infringing behaviour of their users and those who say rights holders should enforce their own rights directly against infringing users.

The Government’s preference is for the rights holders and ISPs to negotiate a scheme for dealing with online infringers along the lines of overseas schemes. The overseas schemes allow rights holders to complain to ISPs about users they believe are sharing content online. This results in the users being warned and then sanctioned after repeated allegations. Participation in such a scheme would help ISPs avoid liability for authorisation under the Government’s proposal.

A key area of debate is over who should pay for any new scheme. Rights holders generally take the view that each side should bear its own costs, where ISPs say if a scheme is introduced, rights holders should largely fund it. There is also debate as to how much it will actually cost - ISPs claim it will be significant; rights holders say the cost of sending notices once the scheme is set up is likely to be trivial.

In relation to enforcement, ISPs take the view that decisions regarding allegations of infringement and punishment of infringers should fall to an independent body, such as a tribunal or court. Rights holders advocate for a scheme that results in automatic sanction by the ISP, unless the user successfully contests the allegation.

The two sides also disagree strongly over whether the High Court’s decision in the iiNet2 case (which held iiNet not responsible for its account holders’ unauthorised use of the BitTorrent system to distribute films online) should stand.

A number of representative key submissions are examined in more detail below.

Rights holders

Rights holders were generally supportive of the Government’s proposal to make it easier to hold ISPs liable for authorisation. However, they expressed some concern about the effectiveness of the proposed changes and argued that without a change to the law, ISPs would not have a sufficient incentive to negotiate a scheme. Rights holders were also generally supportive of the introduction of a scheme that would involves repeat offenders having their connection speed lowered ('shaping').

One of the more comprehensive submissions came from Music Rights Australia (MRA). MRA observes that although over 30 licenced music sites offer a wide array of music to Australian consumers legally, online piracy continues, with one survey reporting that 26% of consumers access music through unlicensed channels.

MRA’s preferred approach is for an industry scheme to be developed that compels all parties to participate. In particular, MRA seeks a legislatively enacted regime under which an ISP will be forced to negotiate an industry scheme with rights holders if it wishes to avoid authorisation liability.

MRA considers that the Government’s proposed change to the test for authorisation is unlikely to achieve its stated aims and could introduce uncertainty that would affect more than just ISP liability. It also argues that, given the potential uncertainty, the proposed change would likely result in another test case in which the Court might still reach the same conclusion as in iiNet. MRA therefore argues for a legislative change focusing solely on online infringement and deeming authorisation where an ISP has actual knowledge of infringement by a subscriber but does nothing about it.

MRA supports the proposal for blocking injunctions but believes the proposed 'dominant purpose test' should be dropped to make it easier for rights holders to obtain those injunctions.

Foxtel makes similar arguments to MRA and suggests the introduction of provisions creating a graduated response scheme would be preferable to a more general change to authorisation law. Foxtel also denies that there is any issue with availability or pricing of online content given its recent changes to its pricing structure and its policy of 'fast tracking' international television programs to Australia.

A large number of additional submissions were received from other rights holder groups making similar arguments to MRA and Foxtel.

ISPs

The main submissions received from the ISP sector were from iiNet and Telstra.

iiNet opposes the Government’s proposed changes, with its key arguments being:

  • the proposed changes are vague and will unsettle existing law having much wider consequences than the discussion paper acknowledges,
  • the extension of authorisation liability would reduce the incentive for rights holders to negotiate and pay for an appropriate industry scheme,
  • rights holders can pursue infringers directly but choose not to do so and instead are seeking to have ISPs bear the cost and adverse publicity of enforcement,
  • despite the economic damage the Government and rights holders claim results from online infringement, they are unwilling to pay for a scheme to end it,
  • in New Zealand, where a notification scheme has been introduced, the Hollywood studios have not made use of the scheme, citing the NZ$25 cost per infringement notice, a price iiNet says covers only a fraction of the actual cost to the ISP of dealing with each notice,
  • the root cause of online infringement is the lack of availability of timely and reasonably priced content, which the proposals do nothing to tackle, and
  • blocking injunctions will be ineffective as there are simple workarounds available to circumvent such blocks.

As a major shareholder in Foxtel as well as the country’s largest ISP, Telstra has an interest in both sides of the debate. Telstra supports the introduction of a notice scheme that would lead to repeat offenders being pursued individually by the rights holder in a dedicated forum (a model similar to a scheme recently introduced in New Zealand). Telstra’s support is on the basis that the rights holders pay for the costs and indemnify the ISPs against any liability arising from participation. It opposes any scheme that would result in customers’ internet access being terminated.

Telstra opposes any changes to the authorisation provisions in the Copyright Act and makes the point, made by many stakeholders, that it is not clear that the proposed changes would produce a different outcome to that achieved the iiNet case.

Telstra supports the Government’s proposal to allow injunctions blocking access to overseas websites facilitating online copyright infringement.

Consumers

Choice opposes both the Government’s proposal for extended authorisation liability and for blocking injunctions.

Choice argues, like iiNet, that the root cause of infringement is the lack of timely and reasonably priced legal access to content, and calls instead for government action to promote competition in the provision of online content. It claims that Australian consumers are paying approximately 50% more than overseas consumers for the same content and argues that Australian law should not support measures such as geo-blocking that perpetuate this disparity. It also cites the estimated 200,000 Australians currently subscribed to NetFlix, (despite NetFlix not formally operating in Australia) as proof that most consumers are willing to pay for content where it is available at a reasonable cost.

Choice opposes the introduction of blocking injunctions on the basis that they will not work and will be costly for ISPs to implement, increasing consumer costs.

The Legal profession

The Intellectual Property Committee of the Business Law Section of the Law Council of Australia (Law Council) rejects the proposal for changes to the law of authorisation and the proposed blocking injunctions.

The Law Council is concerned that the changes proposed to authorisation law will not have the desired effect and will unsettle the law generally, not just in relation to ISPs. The Law Council argues that the decision in iiNet was consistent with the existing case law, both Australian and international.

Where next?

Following the closure of the consultation, Malcolm Turnbull, the Federal Communications Minister, is reported to have said that the Government’s proposal was a 'failure' and that the Government would have to go back to the drawing board.3 It is not yet clear if the Attorney General agrees with his ministerial colleague’s assessment but it would not be the first time that an apparent difference of opinion between the two on the subject has become public.4 It is therefore unclear if the Government intends to pursue its proposed changes or whether it does indeed intend to go back to the drawing board.