In a landmark ruling on 20 April 2012, the High Court unanimously dismissed an appeal by 34 Australian and United States film and television studios against internet service provider (“ISP”) iiNet. The High Court held that iiNet had not authorised the infringement by its customers of the studios’ copyright in commercially released films and television programs.

The Court observed that iiNet had no direct technical power to prevent its customers from using the BitTorrent system to infringe copyright in the studios’ films. Rather, the extent of iiNet’s power to prevent its customers from infringing the appellants’ copyright was limited to an indirect power to terminate its contractual relationship with its customers

Facts

The basic facts of the matter were:

  1. The studios own or exclusively license the copyright in thousands of commercially released films and television programs.
  2. iiNet provides internet services to its customers under an agreement which requires that the services not be used to infringe others’ rights or for illegal purposes.
  3. Users of internet services provided by iiNet infringed copyright in the studios’ films by making the studios’ films available online using the BitTorrent peer-to-peer file sharing system.
  4. In 2008, the Australian Federation Against Copyright Theft (“AFACT”), on behalf of the studios, served notices on iiNet alleging that iiNet’s customers had infringed copyright in the studios’ films, and requiring iiNet to take action to prevent the infringements from continuing.
  5. iiNet took no action in response to the AFACT notices.
  6. In the Federal Court at first instance, the trial judge held that iiNet had not authorised the infringement by its customers of copyright in the studios’ films under section 101 of the Copyright Act 1968 (Cth).
  7. The studios appealed to the Full Court of the Federal Court. The Full Court, by majority, dismissed the appeal.
  8. The studios appealed to the High Court. The High Court unanimously dismissed the appeal with costs.

High Court decision

The studios argued the Full Federal Court had not correctly applied sections 101(1) and 101(1A) of the Copyright Act and that iiNet infringed their copyright. Section 101(1) creates a primary and secondary infringement of copyright.

The High Court affirmed the Federal Court’s decision that iiNet was not liable for a primary or secondary infringement of the studios’ copyright as defined under the Copyright Act.

Primary Infringement

A primary infringement occurs when a person makes the film available online without the copyright owner’s consent. iiNet’s customers are liable for a primary infringement.

Under section 22(6), iiNet is not liable for any primary infringement in respect of the conduct of its customers as it does not ‘determine the content of the communication’.

Secondary Infringement

A secondary infringement is where a person authorises the making available online of the film without the copyright owner’s consent.

Section 101(1A) provides criteria that must be taken into account when determining whether the secondary infringement of authorisation of infringing conduct has occurred. That is:

  1. the extent (if any) of the person’s power to prevent the copyright infringement;
  2. the nature of any relationship between the person and the copyright infringer; and
  3. whether the person took any other reasonable steps to prevent or avoid the doing of the copyright infringement, including complying with any relevant industry codes of practice.

However, section 112E provides that ISPs will not be taken to have authorised any copyright infringement merely because another person uses the facilities to infringe copyright.

The Studios’ Position

The studios argued that iiNet went beyond the ISP exception in section 112E and was not merely providing facilities which were used by their customers to infringe copyright. The studios attempted to show iiNet authorised their customers’ primary infringement by contending that:

  1. iiNet had the power to prevent its customers from infringing copyright in the studios’ films by issuing warnings and suspending or terminating customer accounts. The court held that an alleged authoriser must have a power to prevent the primary infringements of copyright.       The extent of iiNet’s power was limited. It had no direct power to prevent the primary infringements and could only ensure that result indirectly by terminating the contractual relationship it had with its customers. However, this would not prevent the continuation of the infringement where the customer could easily engage another ISP for access to the internet. 
  2. The AFCAT notices provided credible information of past infringements by iiNet’s customers sufficient to raise a reasonable suspicion that acts of infringement were continuing, and that, once iiNet had received this information, its failure to take action amounted to authorisation of its customers’ infringements.

The AFACT notices did not identify any iiNet customers. Although IP addresses were supplied, it was found that they are not synonymous with persons or legal entities. That is, an IP address might not be a computer in the sole use of an individual.

The court found iiNet had no obligation to employ staff in the pursuit of information for AFACT to identify customers from the IP address. Also, it was held that iiNet had no responsibility to impose penalties on its customers purely on the allegations of AFACT. This was largely influenced by the fact that at the time, AFACT had not fully disclosed the methods used to obtain the information in the AFACT notices.

iiNet chief executive Michael Malone welcomed the ruling and appealed to the studios to work with ISPs on legal online content and said, “increasing the availability of licensed digital content is the best, most practical approach to meet consumer demand and protect copyright.”

What next?

For now, ISPs are not responsible for the infringing conduct of their users, but copyright law experts believe this will change. It is likely that ISPs could be targeted in future and pressure will remain on internet providers to do something about piracy on their networks. AFACT is already pressuring the government to change copyright laws to crack down on piracy.