In brief

  • In a 2:1 judgment, the Full Federal Court has held the internet service provider iiNet not liable for acts of copyright infringement committed by users of its service.
  • The court left open the possibility that in different circumstances, ISPs may be held liable for authorisation of their users’ infringements.
  • The film studios, who brought the proceedings against iiNet, may yet seek leave to appeal to the High Court of Australia.
  • The issue of ISP liability and digital piracy may be the subject of legislative attention.  

Introduction

This appeal was brought by 34 film studios and associated entities against iiNet. The appeal was against the first instance decision of Justice Cowdroy, in which his Honour held iiNet not liable for the copyright infringement of iiNet’s users.

The key legal issue was whether, by failing to act, iiNet had authorised acts of copyright infringement committed by users of its service. Under the Copyright Act, the authorisation of copyright infringement is itself an act of copyright infringement. The acts of copyright infringement in issue in this case occurred during the course of users unlawfully accessing copies of films using the BitTorrent system of file sharing.

BitTorrent is a decentralised means of file sharing, in which a swarm of computers share small pieces of .torrent files which, assembled together, make a complete file. There was evidence 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 was on notice of its users’ acts of copyright infringement. It had received multiple infringement notices from the Australian Federation Against Copyright Theft (AFACT) and accepted the trial Judge’s finding that the ‘overwhelming majority’ of infringements shown in the AFACT notices involved 100% of the film being copied by the iiNet user and made available online. iiNet also received up to 350 automatic emails a day from the United States alleging copyright infringement.

Studios’ arguments

The key arguments of the film studios were that:

  • iiNet provided the means by which the infringement occurred
  • iiNet had knowledge, or a reason to suspect, that its users were engaging in copyright infringement
  • when notified of actual infringements it failed to take action, and
  • iiNet had the technical and legal means to prevent the infringements.  

iiNet’s arguments

iiNet denied that its conduct satisfied the legal requirements for ‘authorisation’ and contended further that, even if its conduct did amount to copyright infringement, it was entitled to the benefit of the safe harbour provisions in the Copyright Act, which were enacted following the Australia-US Free Trade Agreement.

The safe harbour provisions limit the remedies available against carriage service providers for copyright infringement that occurs in connection with carrying out certain specified online activities. They are available to limit the remedies against a carriage service provider if, for the category of activity carried on by iiNet, the service provider has:

adopted and reasonably implemented a policy that provides for termination, in appropriate circumstances, of the accounts of repeat infringers.

iiNet contended that it had (amongst other things) a repeat infringers policy and would terminate customers’ accounts if a customer admitted to engaging in copyright infringement, or had been found by a court to have infringed.

Majority judgments

In summary, in two separate judgments, the majority Judges found that the notices received by iiNet from AFACT did not contain sufficient information such that iiNet’s failure to act on them amounted to authorisation under the Copyright Act. Justice Emmett commented that ‘while the evidence supports a conclusion that iiNet demonstrated a dismissive and, indeed, contumelious, attitude to the complaints of infringement by the uses of its services, its conduct did not amount to authorisation of the primary acts of infringement’. It would be necessary for iiNet to receive more than a ‘mere assertion’ of copyright infringement before its failure to take action would amount to authorisation. For example, Justice Emmett held that it would have been necessary for the studios to at least

  • provide enough information such that iiNet could verify the allegations of infringement being made. There is a suggestion that this would not mean particularising the alleged infringement in a legal sense, but that providing information about how the material supporting the allegations was derived would assist, and
  • undertake to reimburse iiNet for reasonable costs incurred in verifying the information and establishing and maintaining a regime to monitor infringing conduct, and to indemnify iiNet in respect of liability reasonably incurred as a result of it acting on the allegation of infringement and suspending or terminating a user’s account in error.

The majority Judges did not rule out the possibility that an ISP could be found liable for authorising the acts of copyright infringement of its customers in some circumstances.

Interestingly, the majority Judges found that if iiNet’s conduct had amounted to authorisation, iiNet would not be able to avail itself of the safe harbour provisions in the Copyright Act as iiNet had no processes in place that resembled a policy for dealing with repeat infringers. Further, iiNet’s failure to act in relation to the infringement notices it received from AFACT was not a decision made by reference to any policy it had, but one made ‘for completely different reasons’, including commercial decisions not to risk losing customers to competitors. The majority’s finding is in contrast to the decision at first instance in which Justice Cowdroy found that iiNet had a ‘repeat infringers policy’ which it reasonably implemented, and that this would entitle it to the benefit of the safe harbour provisions.

Dissenting judgment

In a powerful dissenting judgment, Justice Jagot held iiNet liable for authorising users’ acts of copyright infringement.

Her Honour considered that the trial Judge had erred in holding that the relevant test was whether iiNet had provided the ‘means’ of infringement. It followed that the trial Judge had erred in finding that, since the ‘means’ of infringement was the BitTorrent system rather than internet access, iiNet had not authorised the infringement.

Her Honour found that, despite having the ability and knowledge to identify customer accounts on which infringing activity was taking place, and to take action (either in the form of warnings, suspension or termination of accounts), iiNet did ‘squat’. For this reason, Justice Jagot held that iiNet’s conduct amounted to ‘at least tacit approval’ of the infringing conduct and therefore copyright infringement in its own right.

Conclusion

In recent years, courts around the world, including in China, the US and Europe, have grappled with the question:

to what extent should ISPs, search engines and/or YouTube be liable for any acts of copyright infringement committed by their users?

These Australian proceedings are the first to address the question in this jurisdiction. The Full Federal Court decision is a reprieve for ISPs in these particular circumstances but is unlikely to be the last word on the issue.