Kylie Pappalardo has an excellent case note on Telstra Corp Ltd v Phone Directories Pty Ltd [2010] FCA 44 (Full decision). This case continues the process that began when the High Court tightened the requirements of originality and authorship in IceTV, applying that logic to contain the previous FCAFC authority of Telstra v Desktop Marketing to its facts. The result is very interesting for Australian copyright law: there is no longer any certainty that telephone directories will be protected by copyright, bringing Australia more into line with international authority on this point.

[ reposted from EFA ]

Michael Geist is reporting that the text of the secret Anti-Counterfeiting Trade Agreement (ACTA) chapter on internet enforcement has been leaked. As suspected, the text is unlikely to require major changes to Australian law, but it does do two very concerning things:

• Increased pressure on intermediaries (ISPs) to monitor and police their networks: in the recent iiNet litigation, the Federal Court found that ISPs were under no obligation to terminate the accounts of subscribers that the film industry alleged (without proof) were infringing copyright. This is a contentious point, and we expect to see the copyright industry lobby for legislative change. The ACTA provides them with more ammunition to argue for a three-strikes policy, which is unfortunate.
• Increased entrenchment of the harshest level of copyright sanctions: my biggest concern with ACTA is what it means for the way that international copyright law is developed. Copyright is such an important part of the framework that governs the way that we interact online – it underpins nearly every aspect of modern communication. Because the balance between providing authors with an incentive to create and users with the ability to access is so critically important, the way in which copyright policy is made is also critically important for a society. The ACTA, a secret plurilateral agreement, ensures that the role of the public is minimised, allowing corporate rightsholders to set the agenda for copyright policy.

See Michael Geist’s blog for more information:

The draft chapter finally puts to rest the question of whether ACTA in its current form would establish a three strikes and you’re out model. The USTR has recently emphatically stated that it does not establish a mandatory three strikes system. The draft reveals that this is correct, but the crucial word is mandatory. The draft U.S. chapter does require intermediaries to play a more aggressive role in policing their networks and the specific model cited is the three-strikes approach. In other words, the treaty may not specifically require three-strikes, but it clearly encourages it as the model to qualify as a safe harbour from liability. The specific provision, which is another pre-requisite for intermediary safe harbour from liability, states:

an online service provider adopting and reasonably implementing a policy to address the unauthorized storage or transmission of materials protected by copyright or related rights except that no Party may condition the limitations in subparagraph (a) on the online service provider’s monitoring its services or affirmatively seeking facts indicating that infringing activity is occurring;

And what is an example of a policy provided in ACTA? The treaty states:

An example of such a policy is providing for the termination in appropriate circumstances of subscriptions and accounts in the service provider’s system or network of repeat infringers.

This leaks shows how deceptive the USTR has been on this issue – on the one hand seeking to assure the public that there is no three-strikes and on the other specifically citing three strikes as its proposed policy model. Given the past U.S. history with anti-circumvention – which started with general language and now graduates to very specific requirements – there is little doubt that the same dynamic is at play with respect to three strikes.

Of course we already have such a requirement in Australian law, but the iiNet decision means that ISPs do not need to rely on the safe harbours in order to avoid secondary copyright liability. By continuing to push this idea, though, the copyright lobby threatens to change the discourse – and influence the legislature – to make it much easier to introduce three-strikes in the future.

A core chapter of my PhD has just been accepted for publication as an article by Berkeley Technology Law Journal. You can view the pre-print here: The Role of the Rule of Law in Virtual Communities (forthcoming BTLJ 2011) (PDF).

There is a severe tendency in cyberlaw theory to delegitimize state intervention in the governance of virtual communities. Much of the existing theory makes one of two fundamental flawed assumptions: that communities will always be best governed without the intervention of the state; or that the territorial state can best encourage the development of communities by creating enforceable property rights and allowing the market to resolve any disputes. These assumptions do not ascribe sufficient weight to the value-laden support that the territorial state always provides to private governance regimes, the inefficiencies that will tend to limit the development utopian communities, and the continued role of the territorial state in limiting autonomy in accordance with communal values.

In order to overcome these deterministic assumptions, this article provides a framework based upon the values of the rule of law through which to conceptualise the legitimacy of the private exercise of power in virtual communities. The rule of law provides a constitutional discourse that assists in considering appropriate limits on the exercise of private power. I argue that the private contractual framework that is used to govern relations in virtual communities ought to be informed by the values of the rule of law in order to more appropriately address the governance tensions that permeate these spaces. These values suggest three main limits to the exercise of private power: that governance is limited by community rules and that the scope of autonomy is limited by the substantive values of the territorial state; that private contractual rules should be general, equal, and certain; and that, most importantly, internal norms be predicated upon the consent of participants.

A few weeks ago I lodged EFA’s submission on legitimacy and transparency in Mandatory ISP Filtering, written by myself, Kylie Pappalardo and Irene Graham. We received a lot of negative feedback at EFA for engaging with the DBCDE on this issue, but I think it’s very important. Stepping back from my opposition to the Labor Government’s plan to introduce mandatory filtering, the issue is theoretically quite complex.

I oppose filtering on three main grounds:

1. it’s security theatre – it cannot, in its current form or any currently imaginable forms, provide greater security for Australians, and will certainly not help in combatting child sexual exploitation;
2. the current plan is ludicrously ill-defined; the goals are not clear, and there is no indication of how the filter is meant to achieve those goals;
3. there is a great risk to liberal democratic ideals when the government begins to censor material based on unaccountable procedures and criteria.

I think it’s important to note that I am not ideologically opposed to filtering; I think that there are, at least in theory, legitimate ways in which the government can impose restrictions on the material that is available online. I am acutely opposed to the current plan, but it is important to explain why I am opposed and avoid extremist conceptions that would undesirably tie the hands of democratically elected government in regulating online speech.

This submission addresses the third issue only. It attempts to map a framework for when mandatory filtering may be legitimately imposed. In doing so, as I said, we have received some negative feedback from those who believe it would have been better to maintain absolute opposition to any filtering scheme. I have to disagree here; the framework we set out in this paper sets very high standards of accountability in filtering that would, if reached, mean that my concerns about legitimacy would be greatly alleviated. (As a side note, in terms of the campaign, I believe that it is better to be involved in the development of policy than to maintain a strictly outsider position.)

I think that this paper makes a strong argument in addressing the concerns about legitimacy in Labor’s ill-defined filtering scheme, and I particularly want to thank Kylie Pappalardo and Irene Graham for their crucial help in putting it together.

• EFA’s submission to DBCDE transparency consultation (PDF)

[edit: now with more slides! PDF (3MB) ODP (5MB)]
My final seminar for my PhD is this Tuesday. All are welcome; let me know if you’re interested in coming along!

Date: Tuesday 16 February 2010
Time: 11:00am -12:00pm
Venue: Z Block Room 1124, QUT Gardens Point campus

Panel Chairperson/Principal Supervisor: Prof Brian Fitzgerald, Faculty of Law
Other Panel Member: Dr John Banks, ARC Centre of Excellence for Creative Industries
External Panel Member: Professor Louise Longdin, Auckland University of Technology

This thesis considers how the law should regulate the exercise of private governance power in virtual communities? This question centres on the legitimacy of governance in the way that community norms are created and enforced. This is the project of digital constitutionalism, which seeks to articulate a set of limits on private power that will best encourage innovation and autonomy and simultaneously protect the legitimate interests of participants in these increasingly important spaces. In answering this question, I provide a normative framework based upon the broad ideals of the rule of law through which to conceptualise the tensions about governance that arise in virtual communities.

This thesis argues that the flexibility inherent in the private contractual law model that is currently used to govern virtual communities should be informed by constitutional principles – particularly those of the rule of law – in order for the law to properly address the tensions that arise out of private governance.

Rule of law values highlight three main themes that should serve to limit the abuse of private power in virtual community governance: a suggestion that participants ought not be subject to arbitrary punishment; that rules be general, equal, and certain; and, most importantly, that legitimacy in the rules is derived primarily from the consent of participants. This thesis argues that these values should be taken into account in interpreting contractual terms of service and the application of contractual doctrine in order to create a regulatory framework that supports autonomy and innovation in virtual communities whilst simultaneously limiting the abuse of power from illegitimate governance.

Warwick Rothnie is reporting that the Federal Court has declined to follow Desktop Marketing (which held that telephone directories were protected by copyright in 2002) in light of the High Court’s decision in IceTV (which held that copyright was not infringed by taking time and title information from a timetable). Decision is here: Telstra v Phone Directories [2010] FCA 44.

This is very interesting. The argument that IceTV effectively overrules DMS was inevitable, given Telstra’s near monopoly on a relatively lucrative compilation of information. Telstra argued that IceTV’s discussion of DMS was obiter and that the Federal Court would still be bound by the older Full Federal Court decision. As Warwick highlights, Justin Gordon explains that that contention was incorrect: ([46], citations removed)

Before turning to the facts, mention must be made of the decision of the Full Court of the Federal Court in Desktop Marketing. In that decision, copyright was found to subsist in certain editions of WPDs and YPDs. The Applicants submitted that the resolution of the present case remains governed by the outcome in Desktop Marketing and that the High Court’s comments on copyright subsistence in IceTV should be regarded as obiter dicta. I reject that contention. Firstly, IceTV is binding authority on the proper interpretation of the Copyright Act. The reasoning of both plurality judgments establishes principles of law beyond copyright infringement. Secondly, the High Court directly warned of the need to treat Desktop Marketing with particular care: see IceTV at [52], [134], [157] and [188]. Thirdly, Desktop Marketing [...] did not deal directly with the issue of authorship. Rather, all issues in respect of copyright had been conceded other than that of originality. In fact, Finkelstein J (at first instance) questioned the assumptions the parties had made about authorship: Telstra Corporation Ltd v Desktop Marketing Systems Pty Ltd [2001] FCA 612 at [4]. Finally, the facts of this case are significantly different. The WPDs and YPDs in question are different. Moreover, the Genesis Computer System which stored the relational database and which was used in the production of some of the WPDs and YPDs in issue in these proceedings (after September 2001 in the case of YPDs and late 2003 in the case of WPDs) was not in use in Desktop Marketing[...].

Very interesting. It seems that the High Court’s decision in IceTV is already having flow-on effects, bringing Australian copyright law more into line with the higher standard of originality required in the US and other jurisdictions for copyright protection. It seems that Her Honour’s decision was predicated on the lack of identifiable authorship as well as the lack of originality of contributions. The rising importance of authorship is quite interesting; it is something that has been somewhat neglected in copyright law in the past. (See Tim Wu, ‘On Copyright’s Authorship Policy’ 2008 U. Chi. Legal F. 335 (2008) (pre-print at SSRN).)

Justice Cowdroy’s decision in Roadshow v iiNet held that a person who provides facilities that are used for infringement but does not play a more active part — for example by intentionally designing the system to profit, or providing facilities in circumstances where there are only limited non-infringing uses, or explicitly inviting or promoting the use of the system for infringement — will not be held to ‘authorise’ those infringements, because it does not provide the ‘means’ for infringement.

This construction minimises the role of the Category A safe harbour, which is designed to insulate ISPs who “facilities or services for transmitting, routing or providing connections” (s 116AC) for copyright material from monetary damages for copyright infringement. What is the extent of the overlap between this safe harbour and Cowdroy J’s intrepreation of authorisation for ISPs?

The crucial question is whether an ISP will ever be in a position to have authorised infringement but be able to rely on the protection of the safe harbours. It seems that a purely passive general purpose ISP could not, as it would never infringe. Accordingly, the hypothetical ISP must be engaged in some sort of other activities – it must be found to be inviting or promoting copyright infringement, designing its systems to profit from infringement, or perhaps engaged in the provision of a filtered feed where it exercises some form of control over what its users may access. These extra circumstances would give rise to an inference that the ISP is providing the ‘means’ of infringement and would, prima facie, be liable for the infringing acts of its users.

In these cases, the next question becomes whether such an ISP would be entitled to rely on the safe harbours? The safe harbours provide protection where the primary infringement occurs “in the course of carrying out”(s 116AG) activities – relevantly, “providing facilities or services for transmitting, routing or providing connections for copyright material”.(s 116AC) In the paradigmatic case, an ISP who only provides the facilities for infringement will not be liable for authorising any infringements; so this question is really whether the extra circumstances that are required for liability to accrue will necessarily not be “in the course of carrying out” the provision of facilities or services and accordingly remove an ISP from the protection of the safe harbours.

It seems likely that many of the acts that would cause liability to accrue for authorisation would not fall within the definition of being “in the course of carrying out” the provision of facilities or services. In our only authority, we can take the example of the ISP in Cooper. This ISP negotiated an agreement not to charge Cooper for the hosting of his website in return for advertising revenue from the high levels of traffic his website attracted. While this relates to Category C activity, we can imagine a scenario where an ISP negotiates a similar monetary incentive for infringement, or otherwise encourages its users to infringe. Some of the examples come out of the judgment – if iiNet drew a direct financial benefit from infringement and set up its service in order to benefit from infringement, it would probably have been held to have authorised that infringement. Would this still be done ‘in the course of’ providing facilities or services for communications? While there would be some circumstances where an ISP would be liable for authorisation that do not strictly relate to its provision of access, I think that we would have to conclude that an ISP that is promoting or benefiting from infringement is still acting ‘in the course of’ providing access. Prima facie, then, the safe harbours will operate where the ISP is playing some active role in the infringements of its users.

Whether the safe harbours will protect such an ISP then depends on the conditions for compliance set out in s 116AH, which require that an ISP must “adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the accounts of repeat infringers”, and must not initiate or modify transmissions of copyright material. The second two requirements are relatively straightforward and easy to comply with. The ‘reasonable’ implementation of a ‘repeat infringer’ policy, however, may be a different matter.

I think that in many cases where an ISP designs its service to encourage or directly profit from its users infringements, or provides a service that has limited non-infringing uses, it will probably fail the repeat infringer test. The requirement is not only to have a policy, but to ‘reasonably implement’ it. We see in particular authority from the US in Aimster that a provider that wilfully blinds itself to infringement or structures its activities in such a way that it cannot identify repeat infringers will not be held to ‘reasonably implement’ such a policy. The safe harbours, in this construction, would only have operation in a sliver of circumstances where the ISP acts in sufficient bad faith to ‘authorise’ infringement but in sufficient good faith to ‘reasonably implement’ a policy for termination of repeat infringers. In practice, this sliver would appear vanishingly small.

Does such an interpretation mean that the transmission safe harbour has no practical effect? I think that it will have little effect in the case of ‘bad faith’ ISPs, but there may still be circumstances where ‘good faith’ ISPs are held to ‘authorise’ the infringement of their users. Part of the reason that iiNet did not authorise was that it had no control over BitTorrent; so the analysis would change where ISP had more control, or with a different protocol over which ISPs have more control in general. The particular scenario that comes to mind is similar to the cases in the US in the 90s, where ISPs who wanted to provide a ‘cleaner’ experience for their users found themselves potentially liable for their increased control. So, for example, an ISP who offers some sort of filtered service may, if their filters are good enough, exercise sufficient control over what its users can access that it would have the ability to prevent infringements when it is provided with actual or constructive knowledge that it could be held to ‘authorise’ any infringements. In these circumstances, the safe harbours will be useful: as long as the ISP ‘reasonably implements’ some termination policy, it will be insulated from monetary damages.

This is one hypothetical, but it seems clear that the Category A (transmission) safe harbour does still have some (limited) application in Australian law. This doesn’t really come up in US jurisprudence, because the US safe harbours extend beyond ISPs to service providers more generally. Nevertheless, it seems as though the Australian transmission safe harbour still has a role to play in providing certainty for good faith ISPs who wish to do something more than ‘merely’ providing the facilities for infringement.

Who will shed a tear for ss 39B and 112E?

The limited role of the transmission safe harbour remains much broader than that of ss 39B and 112E, which provide that

A person (including a carrier or carriage service provider) who provides facilities for making, or facilitating the making of, a communication is not taken to have authorised any infringement of copyright in a work merely because another person uses the facilities so provided to do something the right to do which is included in the copyright.

On the analysis of Cowdroy J, it is apparent that there are no circumstances where an ISP would be held to have ‘authorised’ an infringement but done no more than provide the “facilities for making, or facilitating the making of, a communication”. Justice Cowdroy rejects this construction, but accepts that it would “highly unlikely” that either of the hypotheticals he poses where s 112E would be useful would result in a finding of authorisation liability.([572]-[573]) This is based off the Full Federal Court authority in Cooper that states that s 112E “‘…presupposes that a person who merely provides facilities for making a communication might, absent the section, be taken to have authorised an infringement of copyright in an audio-visual item effected by the use of the facility’.”([573], quoting Cooper [2006] FCAFC 187, [32]). Justice Cowdroy found himself bound to accept the Full Federal Court authority, although it left “little room for s 112E to have meaningful operation.”([574])

There certainly seems to be some inconsistency in this view, as either s 112E has no practical effect, or Cowdroy J’s rationale for authorisation liability must be incorrect to the extent that a person who does no more than provide facilities will not provide the ‘means’ of infringement and therefore be liable for authorisation. While there is some room to argue that because authorisation is a question of fact that it is technically possible (but practically inconceivable) that someone may authorise for ‘merely’ providing the facilities, this seems, with respect, quite strained. The better view – which Cowdroy J may not have been entitled to reach – would seem to be either that ss 39B and 112E operate to limit liability in some circumstances where the provider does something more than ‘merely’ provide the facilities for infringement, or that ss 39B and 112E have no practical effect. I think that the best construction is that of Wen Wu, who argues that

Ultimately, if recourse must be had to [s 101(1A)] and other authorisation factors, sections 39/112E are superfluous and were probably introduced out of an abundance of caution. (unpublished)

The ‘means’ of infringement: tracing a line through Moorhouse, Tape Manufacturers, Cooper, and Kazaa (via Sony)

The iiNet judgment traces an interesting line through authorisation liability in the context of technology cases. Cowdroy reads the technology authorisation cases (Moorhouse, Australian Tape Manufacturers, Cooper, and Kazaa) as predicating liability firstly upon whether the defendant has provided the ‘means’ of infringement; a complex factual determination that depends on the context, but seems to implicitly incorporate the Sony test of whether the technology has substantial non-infringing uses and an intention test that goes to the design of the system and the invitation to infringe.

The conclusion that Cowdrow J draws is that iiNet does not provide the ‘means’ to infringement, because (a) the internet has many ‘lawful uses’ (Tape Manufacturers) (cf Sony, ’substantial non-infringing uses’); and (b) iiNet has not actively supported the system that is the ‘means’ of infringement (the BitTorrent system, as a whole). Crucially, one does not infringe merely by using the internet – users need to do something else (seek out BitTorrent trackers and files) in order to infringe. If iiNet had played a more active part in the infringement, then it may be seen as providing the ‘means’ (in Moorhouse, this was by providing a copier in a library and effectively extending an invitation to infringe (per Jacobs J) or where it was ‘likely’ to be used for infringement (per Gibbs J); in Kazaa this was the advertising, predominantly ‘join the revolution’; in Cooper it was the knowledge and intent that most files on the website were infringing). What makes this interesting is that ‘means’ appears to incorporate intent in some way, although it is not exactly clear how this plays out.

Only after the ‘means’ are identified do the other factors become relevant – control, power to prevent, and knowledge of infringements. It would seem that the best reading of Cooper is that the ISP in that case was that while it did not provide the ‘means’ by hosting Cooper’s website, it was drawn into his infringement by the support it gave him with knowledge and intent that the files were predominantly infringing. No such relationship of control or support existed between iiNet and anyone providing BitTorrent services.

Much of this reasoning appears to depend on a finding that the internet is much more useful for non-infringing uses (not a ‘human right’, but performs a “central role in almost all aspects of modern life”).([411]) This distinguishes general technologies that “have lawful uses” (Tape Manufacturers) from technologies like Kazaa and Cooper’s website, whose ‘predominant’ or ‘overwhelming’ uses are to infringe ([412]). This seems explicitly draw Australian authority into line with the development of US authority in Sony, that developers will not be liable for products that have “substantial non-infringing uses”, and the exception that was drawn in Grokster holding developers liable where they ‘induced’ infringement. In this way, Cowdroy neatly reads Moorhouse in line with Sony and both Cooper and Kazaa in line with Grokster.

This is actually quite a neat distinction. Rather than treating every link in the chain that makes infringement possible as the ‘means’ of infringement and then having to carefully examine factors such as control, power to prevent, and knowledge, Cowdroy J has managed to articulate a distinction between mere facilities and services that are actually either designed to aide infringement, promoted to do so, or have little other purpose than to facilitate infringement. This puts an end to the classic confusion – if iiNet are liable for the acts of its users, surely the electricity company can also be liable, because but for their power, infringements could not occur. By interpreting ‘means of infringement’to require some more active role, Cowdroy J has created some certainty for the providers of general use technologies.

The role of s 101(1A)

A potential problem on appeal may be whether this definition of ‘means’ is consistent with s 101(1A), which requires that in addressing authorisation, a court must take into account control (power to prevent), relationship, and reasonable steps taken. If the enquiry is ended by the definition of ‘means’ of infringement, these factors may not be adequately taken into account. Justice Cowdroy dealt with this by relying on Kazaa and Metro as authority that 101(1A) did not change the common law for authorisation([415]); the statutory considerations are therefore relevant, and must be considered, but they seem to be subsumed within the threshold question of whether the respondent provided the ‘means’. So, in this case, iiNet did not have a power to prevent because they had no control BitTorrent – which meant that iiNet did not provide the ‘means’.([424],[444]) Similarly, there was nothing in the relationship of iiNet with its subscribers that suggested that iiNet authorised their infringements – unlike Kazaa.([452]) Finally, the Court found that iiNet had no reasonable steps it could have taken to prevent infringement.([458]) It would seem, in Cowdroy J’s framework, that if any of these factors were different, iiNet may be taken as having provided the ‘means’ for infringement (though they are not determinative of themselves). The same goes for knowledge and encouragement, which are relevant but not statutory factors.([463], [473]). More analysis is required as to how exactly the statutory factors inform both the finding of whether a technology provides the ‘means’ of infringement and the questions that must be asked after the means have been identified, but, as a complex question of fact, Cowdroy J’s use of a distinction based upon the ‘means’ does not seem to fall into an error of law and seems to provide a useful way to distinguish active from passive actors.

More detailed analysis

Cowdroy’s reading of Moorhouse confines liability to what he identifies as providing “the true ‘means’ of infringement’.([381]) In context, Moorhouse was to be read as imposing liability when copying machines were placed in close proximity with library books; the inference to be drawn is that UNSW authorised library users to copy library books.(UNSW v Moorhouse at 14 (Gibbs J); 21 (Jacobs J, McTiernan ACJ agreeing).) Only after proper ‘means’ of infringement had been established were the quesitons of control, power to prevent, and knowledge of infringements relevant.([382]) The implication is that in an authorisation case, “it is of fundamental importance to decide, in the particular circumstances of each case, whether the person alleged to have authorised actually provided the ‘means’ of infringement. Context is all important in authorisation proceedings.” ([382])

Armed with this distinction, Cowdroy J then considers the judgments in Cooper and Kazaa. Cooper’s website was the proper ‘means’ of infringement, because “The website is clearly designed to – and does – facilitate and enable this infringing downloading”, and that Cooper “designed and organised it to achieve this result”([391]-[392], quoting Cooper [2005] FCA 972, [84]). Cooper went well beyond Moorhouse in that “Mr Cooper intended that the website be used to infringe copyright.”([392]) Cowdroy J finds support for the distinction in the FCAFC decision, where Branson J found that what was required was not just the provision of a technical capacity, but one which was “calculated to lead to the doing of [the infringing] act”([394], quoting 156 FCR 380, [41]).

Justice Cowdroy traced a similar distinction in Kazaa, it was the intention to invite infringement that made the Kazaa Media Desktop the ‘means of infringement’ (following the reasoning of Gibbs J in UNSW v Moorhouse) or the ‘explicit invitation’ (following the reasoning of Jacobs J) ([397]).

Interestingly, Cowdroy J considered that Comcen, the ISP hosting Cooper’s website, did not provide the ‘means’ of infringement, but was liable because it was “so complicit in the existence of the website (which was the ‘means’ of infringement) that it provided such facility in the same way that Mr Cooper himself did”([398]) (based upon its knowledge that the website was used predominantly infringing and the financial benefit it purposely drew up in contractual arrangements with Cooper to benefit from high levels of traffic).

Applying this reasoning to whether iiNet provided the ‘means’ of infringement, Cowdroy J continues:

It is important to distinguish between the provision of a necessary precondition to infringements occurring, and the provision of the actual ‘means’ of infringement in the reasoning of Gibbs J in Moorhouse. As discussed earlier, a photocopier can be used to infringe copyright, but on the reasoning of Gibbs J and Jacobs J, the mere provision of a photocopier was not the ‘means’ of infringement in the abstract.”([400]
[...]
In the present circumstances, it is obvious that the respondent’s provision of the internet was a necessary precondition for the infringements which occurred. However, that does not mean that the provision of the internet was the ‘means’ of infringement. [...] ([401])

The use of the BitTorrent system as a whole was not just a precondition to infringement; it was, in a very real sense, the ‘means’ by which the applicants’ copyright has been infringed. This is the inevitable conclusion one must reach when there is not a scintilla of evidence of infringement occurring other than by the use of the BitTorrent system. Such conclusion is reinforced by the critical fact that there does not appear to be any way to infringe the applicants’ copyright from mere use of the internet. There will always have to be an additional tool employed, whether that be a website linking to copyright infringing content like Mr Cooper’s website in Cooper, or a p2p system like the Kazaa system in Kazaa and the BitTorrent system in the current proceedings. Absent the BitTorrent system, the infringements could not have occurred.([402])
The infringing iiNet users must seek out a BitTorrent client and must seek out .torrent files related to infringing material themselves. In doing so, they are provided with no assistance from the respondent. The respondent cannot monitor them doing so or prevent them from doing so.([403])

Accordingly, it was the “use of the BitTorrent system as a whole which is the ‘means’” of infringement, not iiNet’s service.([404]) iiNet could accordingly not be said to authorise any infringements.

Because iiNet had no connection to the BitTorrent system (unlike the ISP in Cooper, which ‘actively supported’ the creation and upkeep of Cooper’s website), it could not be drawn into the liability of anyone who did actually provide the ‘means’ of infringemnet.([407]-[408])

[ edit: full decision is now available: Roadshow Films Pty Ltd v iiNet Limited (No. 3) [2010] FCA 24. More commentary to come. ]

More analysis on iiNet, after I have seen the written summary of the judgment. Justice Cowdroy found that iiNet did not ‘authorise’ the infringements of its users. In coming to this conclusion, Cowdroy J drew a distinction between iiNet and Moorhouse, Jain, Metro, Cooper, and Kazaa based upon what it meant to provide the ‘means’ of infringement:

“There does not appear to be any way to infringe the applicants’ copyright from the mere use of the internet. Rather, the ‘means’ by which the applicants’ copyright isinfringed is an iiNet user’s use of the constituent parts of the BitTorrent system. iiNet has no control over the BitTorrent systme and is not responsible for the operation of the BitTorrent system.”

This is very interesting; it suggests that not every link in the chain that enables infringement will constitute providing the ‘means’ of infringement. It seems to make sense, but it does change the way we have come to think about infringement. Having said that, Cowdroy J did not find that ss 39B and 112E, which insulate a provider from liability where it merely “provides the facilities” for infringement, would have prevented iiNet from being liable. This suggests that the scope of ss 39B and 112E are not particularly greater than the Moorhouse test for infringement, which is something the Philips Fox report suggested, but has never been made clear.

Interestingly, as a finding of fact, Cowdroy J found that iiNet had actual knowledge of infringements and did not act to stop them.

So, the decision was based primarily upon the Moorhouse test for infringement – whether iiNet ’sanctioned, approved, or countenanced’ the infringements of its users. Justice Cowdroy found, in relatively strong terms, that iiNet could not be seen as authorising any infringements, as “iiNet has done no more than to provide an internet service to its users.” His Honour contrasts this clearly with the most recent secondary liability cases, where there was clearly bad faith in the actions of the providers: “This can be clearly contrasted with the respondents in the Cooper and Kazaa proceedings, in which the respondents intended copyright infringements to occur, and in circumstances where the website and software respectively were deliberately structured to achieve this result.”

In coming to this conclusion, Cowdroy J worked through the requirements for authorisation liability in s 101, which include the extent of iiNet’s power to prevent infringements and whether iiNet took any reasonable steps to prevent or avoid infringements. Very interestingly, His Honour found that a scheme for notification, suspension and termination of customer accounts is not “a relevant power to prevent copyright infringement” pursuant to s 101(1A)(a); nor is it a ‘reasonable step’ pursuant to s 101(1A)(c). It seems that here the Judge must have been impressed with iiNet’s arguments that disconnection of internet access is not a correct or reasonable response to allegations of copyright infringement. Given the way in which Cowdroy J distinguished the earlier authorisation cases, it seems that the factors in 101(1A) are more likely to be relevant where the provider has some sort of more fine-grained control over the network or service that provides the actual ‘means’ to infringement; not just a big switch on the entirety of a customer’s network connection.

This is an excellent finding of fact – it shows that Cowdroy J rejects AFACT’s argument that it would be ‘reasonable’ to disconnect users based upon unproved allegations of infringement. Clearly a win for the interests of users.

This finding of fact in itself is sufficient to allow iiNet to escape liability. Justice Cowdroy, however, also made some findings of facts on the safe harbours, in case of any appeal. Interestingly, His Honour held that the safe harbours would have covered iiNet’s actions if it were liable for authorisation; the critical finding here is whether iiNet reasonably implemented a policy for termination of the accounts of repeat infringers. In explicitly turning to US authority, Justice Cowdroy found that though it was not a policy of the form that AFACT would have liked, iiNet did reasonably implement a repeat infringer policy. There’s not much detail on this point in the summary, but this will be an important consideration in the future. We were a bit concerned for a while that the safe harbours, which many of us had assumed were designed to cover ISPs in iiNet’s position, did not provide adequate certainty. It seems that that may now have been rectified, at least for passive ISPs, and the interpretative battle lines will have to be redrawn around content providers now – particularly sites like YouTube who are more directly involved in any infringements.

All in all, this seems like a very strong win for iiNet. The two main findings of fact – that iiNet did not ‘authorise’ and that iiNet’s policy was ‘reasonable’ – will make it extremely difficult for AFACT to appeal. Having said that, an appeal does seem inevitable. I will provide some more information when the full text of the judgment is available.

And with one tweet, iiNet CEO Michael Malone announces the result that we’ve all been waiting for:

IiNet did not authorize the infringements #iitrial

More analysis will follow when the full written judgment is handed down, but it is apparent that the Judge was convinced that iiNet has no control over bittorrent and is not responsible for the acitons of its users in the circumstances alleged by AFACT. From the preliminary information available, this sounds like a decision that is absolutely consistent with the theory of secondary copyright liability developed in the US case of Sony v Universal: the lack of control over the system means that iiNet has no legal responsibility over its users, despite knowledge that some users are obviously infringing copyright. In terms of the decision in Moorhouse, iiNet could not be seen as ‘approving, sanctioning, or countenancing’ the infringing acts of its users. This decision seems to fill the gap with the Kazaa and Cooper decisions in Australia, which both found that the intermediary in question facilitated and encouraged the infringements that occurred.

This provides important certainty for ISPs in Australia: “the mere provision of access to internet is not the means to infringement”. It also seems that more generally, this has important ramifications for innovation in Australia; in contrast with Kazaa, if you provide facilities that assist in infringement, but do not have control and do not act in bad faith, you will not be liable for secondary copyright infringement.

AFACT has been ordered to pay iiNet’s costs. Expect an appeal, but this first instance decision seems quite strong in favour of iiNet.

Stay tuned for further analysis.