The Federal Court of Australia last week dismissed claims against the country's third largest ISP for authorising copyright infringement in a claim brought by a group of 34 claimants, including many major Hollywood film studios. The studios complained of the ISP's lack of action against widespread copyright infringement by its subscribers through the use of file sharing software BitTorrent. The case is the latest fight in the worldwide battle between rightsholders and service providers over who should shoulder the burden for rampant online piracy committed by individuals.

Business Impact:

  • With piracy and IP infringements on the internet still costing the music, film and other industries dearly, the rightsholders are looking to the providers of the services being used by the infringers for an effective remedy and recompense.
  • With those service providers – auction houses, search engines and ISPs – running successful and profitable businesses online, liability as a contributor or authoriser of infringements is a significant threat to their business models.
  • The success of the ISP in this case demonstrates the challenge rightsholders face in moving away from their often hollow victories against individual infringers to instead engage service providers.
  • As in this case, the liability of service providers often rests on the local law of accessory or secondary liability, which varies significantly around the world. This decision obviously goes against rightsholders. A decision the other way would have been the more powerful precedent, but this outcome will nevertheless influence the approach of both sides on the debate to future litigation around the world.

Summary

In Roadshow Films Pty Ltd v iiNet Limited (No.3) (2010), a group of motion picture studios from the US and Australia brought proceedings for copyright infringement against Australia's third largest ISP, iiNet. It was alleged that iiNet had authorised the making of copies, and the communication to the public, of the whole or a substantial part of the claimants' films without consent (and that it continued to do so). It was alleged that the ISP had done so flagrantly, and injunctions were sought requiring the ISP to (a) take all reasonable steps to disable access to online locations that had been used to infringe the claimants' copyright; and (b) terminate the accounts of repeat primary infringers; ie, the ISP's subscribers who had been alleged (and were held to have) made the copies of the copyright works concerned.

Australia has previously ruled in favour of rightsholders in respect of the authorisation of copyright infringement. In 2005, the makers of peer to peer network Kazaa were held liable for authorising the infringements of their users (Universal Music v Sharman), it having been found that it was in Sharman's financial interest to increase amounts of file-sharing on its network, that Sharman encouraged users to infringe, and that it was Sharman's intention that the Kazaa system be used to infringe (it having been deliberately structured to achieve such a result).

However, in iiNet the attack was on a provider of the internet itself. The Court found that iiNet knew of infringements and did not act to stop them. But it was not providing the 'means' for infringement, merely a precondition of it, namely, access to the internet. By merely providing internet access, iiNet could not be seen as sanctioning, approving or countenancing copyright infringement. The action therefore failed. Even if the claimants had succeeded on authorisation, the Court held that iiNet would have benefitted from safe harbour provisions in the Australian Copyright Act, as it had a sufficiently robust repeat infringer policy for dealing with subscribers who used its service to infringe copyright. This was held so despite the fact that iiNet would not take action against a subscriber until a Court had found the subscriber liable for an infringement. We wait to see whether this case will be appealed.

Providers generally without a positive obligation to police their services

In coming to its conclusion in iiNet, the Court noted that Australian law recognised no positive obligation on any person to protect the copyright of another.

The same sentiment was expressed in the UK in L'Oréal v eBay, the judge concluding that under UK law eBay was under no legal duty to prevent infringement of third party trade marks by its sellers, despite it having been aware of and profited from such activity (although some issues in this case have been referred to the European Court of Justice ("ECJ"). For more details on this case see our newsflash of 27 May 2009).

In Europe generally, enshrined in European law, is the concept that online service providers should have no obligation to monitor the activity of their users for compliance with the civil and criminal law, as per Article 15 of the E-commerce Directive (2000/31/EC). The scope of this principle has been tested in Belgium, where in SABAM v Scarlet (2007) the Court ordered a Belgian ISP to implement filtering software to block the use of file sharing software to exchange music files unlawfully. Quite apart from the technical difficulties associated with such a task, it is arguable that it comes too close to imposing a duty to monitor. Scarlet has appealed, and the case has just last week been referred to the ECJ for consideration – but it is likely to take a couple of years to get a decision.

Rightsholders vs service providers

In any major jurisdiction, establishing primary liability for online infringements is rarely a challenge, but the sheer number of infringers means that individual victories are often pyrrhic. They barely affect the mass of infringers and may not even lead to rightsholders recovering their costs (even the huge $2 million award made against Jammie Thomas-Rasset in the US was reduced on appeal last month to a rather more modest $54,000, which the defendant is unlikely to be able to afford in any case).

The greater prize for rightsholders is to bring their weapons to bear on the providers of the (usually legitimate) services which are being misused by infringers, in the hope of either forcing those services to make greater efforts to prevent infringements, to pay compensation for them, or both. Thus in recent times we have seen Viacom pursue video-sharing website YouTube in the US (ongoing), the conviction of individuals behind the BitTorrent tracker The Pirate Bay in civil and criminal proceedings in Sweden supported by the IFPI (but an appeal is pending and the tracker is still active), Louis Vuitton attacking Google's sponsored search business (on which the ECJ will rule this year) and L'Oréal unsuccessfully seeking to hold auctioneer eBay responsible in the UK for trade mark infringements by its sellers (see above) – as Tiffany similarly failed against eBay in the US.

The rightsholders have sought to hold the service providers liable as accessories, as either having committed the primary acts of infringements as joint-tortfeasors, or as being contributors or authorisers of the infringements. But these laws differ from place to place and there is no harmonisation in the EU, leading to inconsistent results. In parallel proceedings between eBay and L'Oréal, eBay has triumphed in France and Belgium, L'Oréal in Germany, while eBay lost out in France in a similar case against brought by Louis Vuitton. Back in 2006, the Gowers Review of Intellectual Property declined to make any recommendation for legislative reform of accessory liability, noting only that the outcome of lawsuits similar to Australia's Kazaa case in the UK was "uncertain". Gowers suggested this position may need to be reviewed, if other measures – such as voluntary cooperation and data sharing between rightsholders and ISPs – failed to achieve results.

New legislation coming into force around the world

Some years after Gowers and many governments have given up on hopes the industry will work things out themselves. While a global solution is unlikely any time soon, a number of individual governments are taking similar steps to introduce new schemes designed to combat online infringement when, as can be seen from the above, old laws drafted before such infringements existed have proved ineffective. In the UK, this has come not by way of reform of accessory liability but by a new notification regime. The Digital Economy Bill is set to require ISPs to notify subscribers each time they are alerted to their having allegedly committed infringements by rightsholders, with ISPs to potentially have to take the harsher step of suspending the accounts of persistent offenders if warnings go unheeded. For more details see our newsflash of 25 August 2009.

New legislation in France (the so called law HADOPI) imposes a three strikes – warning, second warning, suspension – regime on infringers. Despite earlier objections, the Constitutional Council of France has now upheld the law, although last month it reportedly found a new objector, the French data protection agency.

There are similar proposals for new laws in several other jurisdictions including New Zealand, with the level of controversy associated with such measures – which generally seek to threaten serial offenders with the ultimate sanction of disconnection – illustrated by the fact that the country first introduced legislation in early 2009, but postponed its implementation almost immediately following public protests.

Australia may now revisit this area, after the iiNet decision, which can be found in full here