Last Friday 27 April, the Full Court of the Federal Court handed down its unanimous decision in National Rugby League Investments v Singtel Optus, in which the Court upheld the football leagues’ appeal and held that Optus, the provider of a cloud-based TV recording service, was liable for copyright infringement by the provision of its service.

This decision impacts content owners and cloud-based service providers. It suggests that, where an automated cloud-based service “fetches” and stores copies of copyright content at the user’s command, both the service provider and the user can be considered “makers” of the copies, with the result that both parties need to be licensed by the copyright owner to avoid copyright infringement. Although the Full Court was careful to disclaim this outcome as a general proposition, this appears to be the effect of the Court’s reasoning.

Given Optus’ investment in its cloud-based TV recording service, it is highly likely that the copyright issues in cloud-based services will not be resolved until a High Court decision or further legislative amendment following the present ALRC Copyright Inquiry on copyright exceptions.

Background

We previously reviewed the trial judge’s decision, Optus v NRL (No 2), back in February.

To recap, Optus launched a cloud-based TV recording service, TV Now, which enables its customers to record free-to-air television programs on Optus’ servers and watch those recordings at a later time on their PC or mobile device through an internet connection. The copyright owners in broadcasts of football matches, the National Rugby League and the Australian Football League, together with the exclusive licensee, Telstra, claimed Optus infringed their copyright by providing the TV Now service.

The trial judge held that:

  • the user was the sole maker of a TV recording on Optus’ servers;
  • the “time-shifting” exception in section 111 of the Copyright Act exculpated the user’s conduct in making the recording; and
  • the user did not infringe the communication right in “streaming” the recording through an internet connection because the communication was not “to the public”.

The appeal to the Full Court (Justices Emmett, Finn and Bennett) focussed on the trial judge’s first two conclusions.

Optus was a or the maker of the recording

The Full Court overturned the trial judge’s decision that the TV Now user was the sole maker of a TV recording. In their Honours’ view, the essence of the exclusive right to “make a copy” is the idea of engaging in conduct to embody images and sounds in a physical article. The Court considered that Optus’ role in making the copy – capturing the broadcast signal and embodying the images and sounds onto its servers – was so “pervasive” and “proximate” that, even though the process was entirely automated, it made Optus a maker or the maker of the recording.

Further, while not reaching a firm conclusion, the Full Court preferred the view that, in the circumstances, both Optus and the user, acting together, were the makers of the recording. In the absence of a defence, therefore, they both would be jointly and separately liable for copyright infringement.

Optus was not protected by the “time-shifting” exception

The Full Court held that Optus was not protected by the “time-shifting” exception in section 111 of the Copyright Act. Reviewing the legislative background materials, the Court rejected Optus’ submission that Parliament had intended the “time-shifting” exception to operate to allow individuals to outsource their “time-shifting” activities to commercial third parties. Nor, their Honours wrote, was it permissible for the Court to impute such a policy outcome, however desirable, to the legislature.

It followed that, whether Optus was a joint maker or sole maker of the recordings, Optus was liable for copyright infringement by its provision of the TV Now service.

Rumblings for other cloud-based services?

Although the Full Court was careful to qualify its reasons to the particular relationship between Optus and the users, and to the nature and operation of the TV Now technology, we think the decision has broader implications for other cloud-based services. The decision suggests that where an automated cloud-based service “fetches” and stores copies of copyright content at the user’s command, both the service provider and the user can be considered “makers” of the copies, with the result that both parties need to be licensed by the copyright owner to avoid infringement.

Given Optus’ investment in the TV Now service, we think it is likely that Optus will seek special leave to appeal to the High Court.

The NRL v Optus case will also impact on the current ALRC Copyright Inquiry on copyright exceptions and may lead to the introduction of amending legislation.