A recent High Court of Australia decision might let Internet service providers off the hook for the moment, but what does it mean for the future?

After completing their university degrees, Michael Malone and Michael O’Reilly established iiNet Limited in Michael Malone’s garage in Perth. By 1995, iiNet grew dramatically, hiring their first employee whose office was Michael Malone’s bedroom... A storeroom held iiNet’s servers.  

From the Malone family garage, iiNet became one of Australia’s largest Internet service providers (ISPs). iiNet was the first company inWestern Australia to offer dialup Internet access to the public, as well as the first organization to base their operations on the Linux operating system. In 1999, iiNet was listed on the Australian Stock Exchange in 1999. iiNet is proud to be the second largest ISP in Australia, which they routinely boast about in a long running and prominent advertising campaign.  

However, being Australia’s second biggest ISP has its pitfalls. One of the pitfalls iiNet faces is becoming a target for the Australian Federation Against Copyright Theft (AFACT). AFACT was established in 2004 to protect the film and television community, retailers and movie fans from the adverse impact of copyright theft in Australia. According to AFACT, movie piracy caused the loss of $1.37 billion in revenue across Australia’s economy, 6,100 jobs and tax losses of up to $193 million.  

On 20 November 2008 AFACT filed a lawsuit against iiNet in the Federal Court of Australia. AFACT claimed iiNet had infringed the copyright of 34 studios by failing to prevent its subscribers from downloading pirated material using the BitTorrent peer-to-peer protocol. The lawsuit was co-filed by these 34 film and affiliated companies, including Village Roadshow, Universal Pictures,Warner Bros and 20th Century Fox as well the Seven Network (an Australian television broadcaster).  

In response to the claim, iiNet issued a statement that they had been passing the reports from AFACT to law enforcement authorities, and that iiNet could not disconnect a customer’s phone line based on an allegation unproven in the courts.  

In 2010 the Federal Court’s Justice Cowdroy found in favor of iiNet. Justice Cowdroy decided that, while iiNet users did infringe the copyrights of the 34 Australian and US copyright owners, it was not iiNet’s responsibility to stop the infringement of its customers. AFACT appealed the decision to the Federal Court Full Court but found a similarly unsympathetic bench; the Federal Court Full Court affirmed the decision of Justice Cowdroy, and AFACT appealed again, this time to the High Court of Australia.  

The High Court of Australia is the most senior court in the Australia. The court only considers matters by special leave, and often of the case as a major test case was confirmed when the High Court granted leave to consider it on 12 August 2011.  

On 20 April 2012 the High Court of Australia confirmed the decisions of the lower courts by a unanimous verdict. In doing so the court set out a test for determining whether the Internet service provider has authorized the copyright breach. The test includes:  

  1. The extent (if any) of the person’s power to prevent the doing of the act concerned;  
  2. The nature of any relationship existing between the person and the person who did the act concerned;  
  3. Whether the person took any other reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.  

The High Court considered a number of facts around the way that iiNet operates in coming to their decision. First, the court noted that iiNet was completely disconnected from the BitTorrent system. iiNet had no power to control or alter any aspect of the BitTorrent system and therefore could not be held responsible for it. Likewise, iiNet did not actively assist its customers to locate copyright infringing content, and therefore was not responsible when it occurred. The High Court also pointed out that iiNet did not have the power to prevent its customers from downloading BitTorrent files and once the material was downloaded, iiNet had no power to remove the material from the customer’s computer.  

Curiously, the High Court also considered it relevant that iiNet did not have the power to prevent its customers from using another Internet service provider to breach copyright. This particular argument seems a bit strange, as the line of reasoning suggests that it is acceptable to assist someone in doing the wrong thing, simply because if you did not facilitate them, they would be facilitated by some other entity. Nonetheless, the court considered this a relevant factor.  

The conclusion reached was that iiNet had no direct technical power at its disposal to prevent a customer from using the BitTorrent system to download the appellants’ films on that customer’s computer.  

While the High Court’s ruling was unanimous and decisive, it does not necessarily mean that this is the end of the matter. AFACT, having failed three times in the courts, is now lobbying the Commonwealth Government for legislative changes to the Copyright Act 1968 to reverse the effect of the ruling. This is in addition to existing discussions between film makers and Internet service providers around creating a code of practice for the Australian market.With an election due in 2013, this could become a politically charged issue. Unfortunately, voters are unlikely to be too sympathetic to the intellectual property rights of a group of 34 film makers and television producers. The final result waits to be seen.