The legal implications of the controversial new Copyright (Infringing File Sharing) Amendment Act 2011 (Act) have been considered in a number of articles, including our recent article Full Stream Ahead - Are There Leaks in New Zealand's New Internet Piracy Law? The Act will be accompanied by the recently-released Copyright (Infringing File Sharing) Regulations 2011 (Regulations), which are intended to address a number of procedural gaps in the Act. Provisions to be included in the Regulations were proposed in a recent paper by the Minister of Commerce (Minister) (available on the Ministry of Economic Development's (MED) website.

The commercial efficacy of the Act has been of particular concern to rights owners and internet protocol address providers (IPAPs), such as internet service providers. The Regulations shed further light on the commercial implications of complying with the Act, and whether the Regulations are likely to assist the Act in achieving its purpose.

Fees and Cost Recovery

The Act provides that, when an IPAP receives a notice of alleged copyright infringement from a rights owner (Rights Owner Notice), the IPAP must then give notice to the relevant account holder of the alleged infringement (Infringement Notice).

There is much interest in the fee IPAPs can charge rights owners for administering a Rights Owner Notice. Whether the fee is affordable for rights owners, and whether IPAPs can recover their compliance costs from rights owners, may determine whether the Act provides a financially viable regime.

The Regulations provide that an IPAP can charge a rights owner up to $25 per Rights Owner Notice sent to the IPAP. The Minister proposes reviewing the fee six months after the Act comes into force on 1 September 2011, as the MED has recommended calculating the fee based on the number of Rights Owner Notices sent, and the volume of notices is uncertain at this stage.

There is significant tension between IPAPs and rights owners as to the appropriate fee, if any, to be charged to rights owners for filing Rights Owner Notices. Setting the fee too high would add to the considerable cost incurred by rights owners in acquiring the information needed to file a Rights Owner Notice, such as the relevant internet protocol (IP) address. A high fee may also inhibit rights owners from filing a large number of Rights Owner Notices, which would hinder the Act's purpose of aiding the ability of rights owners to enforce their rights, and educating the public through the notice system. Rights owners have indicated that 15,000 Rights Owner Notices (at a cost of $375,000, at $25 per notice) may be filed per month for the first few months after the Act comes into effect (Illegal Peer-To-Peer File Sharing, Minister of Commerce). However, the Minister is of the view that rights owners must bear the significant proportion of implementation costs, as rights owners are likely to benefit from the Act by aiding the enforcement of their rights and encouraging compliance with the law.

IPAPs have also claimed that the Act is an unwanted burden with significant compliance costs. However, IPAPs benefit from the safe harbour granted from third party liability if they comply with the Act. IPAPs also arguably benefit indirectly from account holders who conduct illegal file sharing, due to the significant bandwidth used to download files. It is also arguably open to IPAPs whether they take the risk of not complying with the Act, and therefore not being granted the safe harbour from liability. Practically, the status quo may be maintained if IPAPs do not comply with the Act, as IPAP third party liability is a legal issue which is yet to be determined in New Zealand. However, a rights owner can seek an injunction to require an IPAP to comply with the regime.

Despite the tension between IPAPs and rights owners, the fee of $25 per Rights Owner Notice sits (perhaps sensibly) between the average full cost recovery fee of $40 suggested by the Telecommunications Carriers Forum, and the $2 fee generally suggested by rights owners.

The maximum amount the Copyright Tribunal can award in a claim is $15,000, through which rights owners may be able to recover some of their enforcement costs. It is possible that, even if the maximum amount of $15,000 is awarded in a proceeding, rights owners will not recover all costs associated with filing Rights Owner Notices related to that proceeding (let alone recover any damages for the infringement). For example, the cost of sending 700 Rights Owner Notices, which could all relate to one account holder, would be $17,500 (at the filing fee of $25 per notice). However, rights owners will not know the identity of account holders, so may be unable to effectively target particular infringers or manage the number of Rights Owner Notices sent to an account holder.

With a maximum amount for an award, and the potential for several Rights Owner Notices to relate to the same proceeding, there will not be a consistent basis for calculating an award. This means that there will be difficulty in making an award which reflects the nature of the infringement (as the Act "requires").

Content of Rights Owner Notices

The Minister is aware that notices must contain sufficient detail to allow IPAPs to easily match alleged infringements with account holders. The Regulations require that details of the relevant copyright work must be contained in a Rights Owner Notice, including any unique identifiers of the work. This may be an issue where files are labelled differently to the actual content of the file. For example, a file named "harrypotter.mp4" could contain any one of the Harry Potter movies, or may not contain a Harry Potter movie at all. This can also make identifying the rights owner difficult. Using the incorrect details of the alleged infringement could lead to an account holder challenging the notice sent to them.

Rights Owner Notices must also include the date and time (to the nearest second) of the alleged infringement, as well as the relevant IP address and file sharing software. This highlights the difficulty of matching dynamic IP addresses to an account holder.

The Regulations are silent on what form Rights Owner Notices must take. However, it is proposed that IPAPs can choose the method of receiving Rights Owner Notices from rights owners. This should benefit IPAPs, who can select their preferred method, which we expect would usually be an electronic filing process.

The detailed information required means it will be important for rights owners to ‘tick all the boxes’ when collecting and providing information in Rights Owner Notices. The omission of even some of the required information may mean an IPAP can reject the Rights Owner Notice. There is also the risk that a corrected Rights Owner Notice cannot be re-submitted within the set timeframe.

Content of Infringement Notices

The Minister emphasises that a purpose of the Act is to educate the public. This is reflected in the Regulations by requiring Infringement Notices to include a link to an MED website with details of the infringing file sharing regime and account holders' obligations.

Much of the information required for Infringement Notices could be pre-prepared in a standardised format. However, matching the Rights Owner Notice details to an account holder is likely to take a significant proportion of time when preparing Infringement Notices. Infringement Notices must also include a unique notice identifier indicating the notice number and type of notice (whether a detection, warning or enforcement notice). Ongoing costs are likely to be incurred by recording and matching the unique notice identifiers with any future Infringement Notices sent to the account holder.

The Regulations leave it open to IPAPs to choose what form to use for Infringement Notices, and which method to send them by. Email is likely to be more efficient, but all methods may sometimes encounter difficulties in proving that the account holder has received the notice.

Challenge Process

The Regulations also prescribe a form for a challenge notice to be used by account holders.

Overall Efficacy

The filing fee of $25 per Rights Owner Notice appears to take a middle-ground. Given the volume of Rights Owner Notices which may be filed with IPAPs, it is yet to be seen whether the filing fee will undermine the Act's purpose of providing a viable enforcement process for rights owners. Ensuring that rights owners and IPAPs 'tick all the boxes' for the notice process will also be important for implementing the regime efficiently. The impact of the fee on the volume of Rights Owner Notices filed, and therefore Infringement Notices sent to account holders, will also affect the Act's purpose of educating account holders.

Even if the regime provided by the Act is not financially viable, there may be deterrent value by merely having the Act in place, along with the process to enable enforcement of rights owners' rights. The significant publicity (and controversy) around the Act to date may have at least partly achieved its purpose of educating account holders.