The controversial new amendments to the Copyright Act that came into force on 1 September 2011 received a large amount of media coverage. The amendments allow copyright owners to seek compensation from those who infringe their copyright by illegally file sharing (for example, downloading movies, music or software in breach of copyright).

While perhaps not obvious at first glance, the amendments bring new risks for employers.  Compensation is payable by account holders, not individual users.  This means that employers will be liable in instances where employees use work internet connections to infringe copyright.

How the new Act works

As a result of the Copyright (Infringing File Sharing – Copyright Reform) Amendment Act owners of copyright content such as movies, music or software can record the IP address of internet connections that download that copyrighted content.  If a copyright owner becomes aware of copyright infringement, they can complain to the relevant internet service provider (ISP).

Once the complaint is received, the Act provides a three strikes process for the ISP to follow.  The ISP (for example, Telecom) is required to identify the account holder for the relevant IP address, and send out first a detection notice, then a warning for the second infringement, and finally an enforcement notice for the third infringement.

If an account holder is given an enforcement notice, the copyright owner is able to apply to the Copyright Tribunal for an order that the account holder pay compensation of up to $15,000, payable by the account holder.

Exceptions and further penalties

If the Tribunal considers that it would be "manifestly unjust" to order compensation, it can decline to do so.  As this discretion has not yet been tested, the meaning of "manifestly unjust" is uncertain, but the threshold is clearly a high one.  Given this, and given that the offence is one of strict liability, we consider it unlikely that the Tribunal would consider an award against an employer manifestly unjust simply because the infringement was committed by an employee.

In certain circumstances, the account holder can challenge the warning given by the ISP.  However, there are strict deadline and format requirements to follow, so an account holder wishing to challenge a warning will need to act promptly.

For serious infringements, there is also the possibility for the District Court to order suspension of the account holder's internet access for up to six months.  In considering a suspension order, the District Court is able to take into account factors such as the identity of the infringing user.

Issues for employers

Because employer account holders will be liable for their employees' infringements, employers should ensure their policies on internet use cover file sharing.  Those policies should make very clear the consequences for employees of any breach of those policies, including any possible disciplinary procedures.  If employers provide home internet access (or wifi access in the workplace) this should be covered in the policy.

Employers should also implement appropriate IT protection in order to prevent file sharing at work.  Simple measures such as blocking file sharing websites, limiting downloads and monitoring employees' internet use will help protect against copyright infringement.

Employers should also ensure that they can identify individual employees' internet use, so that instances of infringing file sharing can be traced back to the relevant employee.

The Act does not mention whether employer account holders will be able to claim reimbursement for compensation and costs from user employees who infringe copyright.  Policies can include a right to reimbursement from employees of infringement fees and costs incurred in the investigation.  If you want the ability to deduct, that needs to be agreed.