The Australian Law Reform Commission (ALRC) has released its much anticipated second consultation paper for its Inquiry ‘Copyright and the Digital Economy’ (Discussion Paper).

The Inquiry to which the paper relates is the most extensive investigation of the operation of copyright laws in the digital economy ever undertaken in Australia.

The Discussion Paper contains 42 proposals for reforming the exceptions and statutory licences provisions of the Copyright Act 1968 and is intended to form the basis for further consultation with stakeholders before the ALRC issues its final report and recommendations to Government. 

The major proposed reforms include:

  • the introduction of a broad flexible exception for fair use of copyright materials, incorporating a number of “fairness factors”, and the repeal of many current exceptions in the Copyright Act; 
  • an alternate model, should a broad ‘fair use’ exception not be enacted, that would amend the current fair dealing exceptions to recognise new exceptions and a set of “fairness factors”. 
  • a wholesale change to the regime for retransmission of free-to-air televisions broadcasts;   
  • the replacement of certain statutory licences with voluntary licensing schemes; 
  • limitations on the remedies available for infringement for ‘orphan works’; and   
  • prohibitions on ‘contracting out’ of certain copyright exceptions. 

The closing date for submissions in response to the Discussion Paper is 26 July 2013.

Below is a brief overview of these key elements of the Discussion Paper.

A broad flexible exception for fair use

The central recommendation is the introduction of a US-style fair use exception. The ALRC has concluded that a fair use exception is suitable for the digital economy, assists innovation, is sufficiently certain and internationally compliant and better able to adapt to new technologies, services, licensing environments and consumer practices.

The proposed fair use exception would have the following four “fairness factors”, which would be a mandatory checklist of factors to be considered by a Court when the defence is invoked:

  1. the purpose and character of the use;
  2. the nature of the copyright material used;
  3. in a case where part only of the copyright material is used – the amount and substantiality of the part used, considered in relation to the whole of the copyright material; and
  4. the effect of the use upon the potential market for, or value of, the copyright material.

The factors already appear in Australian fair dealing exceptions for the purposes of research or study.

The ALRC noted that equivalent factors appear in the laws of the five countries that adopt the fair use model (ie the United States, Singapore, Israel, the Philippines and South Korea).

The proposed fairness factors would be non-exhaustive and no factor would be more important than, or carry greater weight than, others. 

The ALRC’s proposal also contains a non-exhaustive list of what it calls ‘illustrative purposes’. This illustrative list is intended to operate as examples of the broad types of uses that may constitute fair use. Included in the list are purposes in the Copyright Act's existing fair dealing provisions, as well as number of new categories such as ‘non-consumptive use’, ‘private and domestic use’, ‘education’, ‘public administration’ and ‘quotation’.  

The ALRC has not recommended standalone exemptions, or the incorporation within the permitted purposes, for ‘social use’ or ‘transformative use’ or to permit back-up and data recovery. 

The ALRC’s fair use proposal, if implemented, would replace many of the exemptions in the Copyright Act with a single, potentially broad, exemption that focuses on the character, purpose and context of the copying. The proposal is said to be technology and format neural. The defence applies whenever the fairness factors are satisfied.

Implications: This proposal would involve the most substantial change to the Australian copyright regime for decades. The introduction of a new US-style fair use regime would invest the Courts with considerable latitude to determine when infringement did and did not occur.

An alternate model: an amended fair dealing regime

The Copyright Act currently provides a number of specific fair dealing exceptions, including for the purposes of research or study, criticism or review, parody or satire, and reporting news.

The Discussion Paper recommends that if a general fair use model is not enacted, then the Copyright Act should exempt fair dealing in other contexts such as for ‘non-consumptive use’, ‘libraries and archives’, ‘private and domestic purposes’, ‘quotation’, ‘education’ and ‘public administration’.

It also recommends simplifying the fair dealing provisions for legal professional advice and requiring that new and existing fair dealing provisions be subject to the fairness factors outlined above.

Under the alternative model, Australia would retain an, albeit enlarged, purpose-based approach to copyright exceptions and there will be specific criteria governing the ‘fairness’ of a particular dealing.

Implications:  Even under this more limited proposal, the Courts would be invested with substantially more latitude to determine when infringement did and did not occur.

Re-transmission of Free-to-Air Broadcasts

The Copyright Act presently allows for the retransmission of copyright protected films and sound recordings in free-to-air broadcasts subject to payment of a statutory licence fee. These provisions do not cover any retransmission of a free-to-air broadcast if it takes place via the Internet.

The ALRC has proposed that the statutory licensing scheme in Part VC be repealed, which would effectively leave the extent to which legitimate re-transmission occurs to negotiation between the parties, i.e. broadcasters, transmitters and underlying copyright holders. 

As an alternative, if the existing statutory license scheme is retained, the Discussion Paper recommends that the exception for retransmissions on the Internet be repealed and the Part VC licensing scheme apply to retransmission by any technique, subject to geographical limits or reception. 

The ALRC also recommended amending the Copyright Act’s broadcasting exceptions to apply to transmission of radio or television programs using the Internet.

Implications: These proposals would significantly change the way in which copyright holders are compensated for re-transmission of free-to-air broadcasts, and extend the broadcasting exceptions to internet transmissions, including (potentially) content made available via ‘on demand’ internet services.

Other Statutory Licences

Parts VA, VB and VII Div 2 of the Copyright Act establish statutory licensing schemes in relation to the use of copyright works by educational institutions, the Crown and institutions assisting people with a print disability. 

The ALRC has proposed that these statutory licence schemes also be repealed. The effect of this would mean that governments, educational institutions and institutions assisting people with a print disability will need to negotiate licences commercially with rights holders. 

The ALRC acknowledges that voluntary licensing is not always practical and that, where a voluntary licence is withheld by the rights-holder, fair use exceptions may be insufficient to safeguard the public interest. It has requested submissions as to what further exceptions, if any, should be enacted if the statutory licence schemes in parts VA, VB and VII are repealed.

Implications:  This proposal would significantly change the way that institutions, including the government, would need to obtain rights to copyright works in a market-driven model.

Orphan Works

Orphan works refers to copyright material where an owner cannot be identified or located by someone seeking to obtain the rights to use the work. Use of a copyright work in such circumstances may constitute infringement unless a defence or exemption applies. 

In digital environments, the problem of orphan works is increasingly prevalent, as works (in particular, photographs) are often placed online without identifying rights information. The inability to use, or risks associated with using, orphan works may be reducing their productive and beneficial value within the Australian digital economy. 

The ALRC has proposed that remedies for infringement of orphan works be limited where a ‘reasonably diligent search’ has been conducted and the rights holder has not been found. The Discussion Paper provides some guidance about what constitutes a ‘reasonably diligent searche’ and envisages industry guidelines, orphan work registers and collecting societies playing a role.

Implications:  Although the proposal is stated to assist libraries and other institutions, it has a potentially much wider operation for businesses in the media space seeking to use copyright works which cannot be coursed to a rights owner.

Contracting Out of statutory exceptions

Currently copyright owners and copyright users are capable of contracting out of the effect of the statutory exceptions to copyright, except in relation to the reproduction of computer programs for technical study, back-up, security testing, and error correction. 

The Discussion Paper suggests that contracting out is a particular problem for users such as libraries and universities, that claim that their statutory rights are curtailed by licence agreements.  It described the issue as involving “a collision between two important legal principles: statutory rights reflecting public policy, on the one hand; and freedom of contract, on the other”.

The ALRC has concluded that the best way to approach this problem was to apply a limitation on contracting out to specific exceptions that are “clearly for defined public purposes”.

The proposal would prohibit contracting out in relation to the amended libraries and archives exceptions and to specific fair uses (eg. for the purposes of research or study, criticism or review, parody or satire, or reporting news) and involve changes to corresponding TPM provisions.

Implications:  These proposals, if implemented, would result in copyright owners losing a significant degree of control of their copyright works which they would currently enjoy under market-driven licences and by reason of their use of TPMs to control access and use.