New Zealand: Continuing Controversy Over Proposed Changes to Copyright Law

Last Updated: 28 June 2010
Article by Claire Tompkins and Ian Finch

The Copyright (Infringing File Sharing) Amendment Bill (Bill) introduced to the New Zealand Parliament in February of this year amends the Copyright Act 1994 (Act) to provide new enforcement measures against the unauthorised sharing of copyright material via the Internet. Remedies available include fines of up to $15,000 and temporary suspension of Internet accounts. The latter remedy, in particular, continues to generate controversy.

The Bill repeals section 92A of the Act (enacted by section 53 of the Copyright (New Technologies and Performers Rights) Amendment Act 2008), which would have required Internet service providers (ISPs) to adopt a policy providing for the termination of a repeat infringer's Internet account. Various civil liberty groups protested against section 92A – the section also raised considerable debate among academics and lawyers (as have similar provisions around the world – for example, in France, with the enactment of the HADOPI regime, and in the UK with the approval of the Digital Economy Bill 2010). As a result, section 92A was never brought into force.

Even the more hard-line rights holder supporters conceded that there were elements to section 92A that were not ideal, including the fact that there was no independent entity to review notices sent to infringers, and the potential for many more entities to be caught under the ISP definition and potentially face Internet termination than was originally intended due to the breadth of the definition of ISP.

New section 122 of the Bill (which replaces section 92A) has also been the subject of similar discussion and protest, but this is more subdued – probably because changes have been made in an attempt to address many of the concerns regarding section 92A. For example, copyright owners must now seek orders for suspension of an Internet account at the District Court, rather than the ISP itself being required to assess the evidence against an account holder itself. Another change is a new definition for Internet service provider for the purposes of section 122, which is intended to exclude universities, libraries, and businesses that provide Internet access to their members or employees, but are not in the nature of a traditional ISP such as Telecom (although whether or not it achieves this aim is also being debated).

Why amend the Act?

The Act currently provides civil and criminal sanctions for infringement of copyright. However, in practice (as is the case in other jurisdictions), current enforcement measures are ineffective in countering infringing file sharing. A survey of more than 1,000 New Zealanders carried out by TelstraClear in 2009 found that all households surveyed claimed to have copied some form of content in the previous 12 months and 46% of households interviewed had peer to peer file sharing programs installed on their home computer. Music (82%), software (49%), movies (35%) and games (31%) were the most widely copied (http://www.telstraclear.co.nz/company-info/media-release-template.cfm?newsid=348). Another recent survey (the Synovate Ltd Survey 2009 – "Young New Zealanders & Movie Downloading" ( http://www.nzfact.co.nz/press_releases/NZFACT%20Synovate%20Study%20Report%2020.10.09.pdf) commissioned by NZFACT found that two in five people aged 15-35 in this country have downloaded illegal copies of movies free of charge.

Most Internet users are publicly identifiable by their IP address only (and for most users, this address is dynamic and therefore changes each time they access the Internet). Therefore, for each infringement, a copyright owner must seek a court order to obtain the identity of the infringer from that infringer's ISP (ISPs are able to reconcile an IP address with an individual user/account). The cost of seeking such an order, and then taking infringement proceedings, is generally much higher than the likely award of damages for the infringement (most of which is by individuals in a non-commercial context).

Successive New Zealand Governments have recognised both the extent of the problem and deficiencies in the Act, and attempted to remedy these deficiencies first with the amendments made to the Act in 2008 and now with the Bill.

The Bill's stated aims, as set out in the explanatory note on page 2, are to provide a regime that will:

  • deter file sharing that infringes copyright;
  • educate the public about the problem;
  • compensate copyright owners for damage sustained from copyright infringement by file sharing;
  • provide sanctions for serious copyright infringers; and
  • limit ISP liability that may result from account holders' infringing file sharing.

The proposed notice and takedown regime

Under the proposed scheme, account holders will receive infringement notices from rights holders via their ISP, warning that they are infringing copyright and that continued infringement may result in enforcement action. The scheme provides timeframes in which subsequent notices can be sent with 'quarantine periods' aimed at allowing account holders a reasonable time to stop their infringing activity.

The first notice (called a 'detection notice') will have an educational focus and advise the account holder that further evidence of infringement will be recorded by their ISP. It will also outline that enforcement action may be taken if the account holder receives a third notice. Second and third notices ('warning notices' and 'enforcement notices', respectively) will contain a list of the alleged infringements pertaining to that account holder since the detection notice, and will caution that the Copyright Tribunal (Tribunal) may award compensation based on that list.

If an account holder receives three notices from one copyright owner, that owner may apply to the Tribunal for a compensation award. Copyright owners may also make an application to the District Court for an order requiring the ISP to suspend the account holder's Internet access for a limited period.

The Bill also provides a mechanism by which account holders can challenge infringement allegations.

Sanctions

The Bill extends the jurisdiction of the Tribunal to the making of awards of compensation of up to $15,000. It is intended that claims will generally be heard on the papers but account holders may request a hearing or the Tribunal may order one. In a hearing, neither party may be legally represented without leave of the Tribunal. Copyright owners are also able to seek a court order suspending a repeat infringer's Internet account for up to six months. These orders are in addition to the usual remedies available under the Act.

ISPs and their liability

The Act currently provides 'safe harbours' (exclusions from liability) for ISPs in certain limited circumstances for copyright infringement occurring over the ISPs' networks. Further to that, the Bill extends the safe harbour to ISPs where they have knowledge of file sharing infringements occurring over their networks, provided they comply with their obligations under the Bill.

Practical workings

Copyright owners send ISPs information about infringements detected at certain IP addresses. ISPs must then match each IP address with the relevant account holder's details and issue an infringement notice to the account holder. Sections 122D to 122H set out in detail the workings of the Bill and are summarised in the explanatory section of the Bill. Various timeframes apply as to when the different forms of notice can be sent.

The detection notice is issued the first time an infringement against a particular copyright owner is matched to an account holder. No further infringement notices can be sent for three weeks after the date of the detection notice, but a record is kept of all infringements by the account holder against the same copyright owner from that date. The account holder has one week in which to challenge the detection notice. If the challenge is not rejected within three weeks after the date of the detection notice, the detection notice is cancelled.

A detection notice expires nine months after it is issued, or four weeks after an enforcement notice is issued. If a further infringement occurs at least three weeks after a detection notice is issued, a warning notice is issued. This lists all infringements since the date of the detection notice. The same time limits and provisions about challenges apply as with a detection notice. If, at least three weeks after a warning notice, a further infringement occurs against the same copyright owner, an enforcement notice is issued. The same provisions apply as with a warning notice, but after an enforcement notice is sent the copyright owner has four weeks in which to take enforcement action against the account holder.

Likely points of contention

Suspension of an Internet account

Those who oppose suspension of accounts as a remedy argue it is a restriction on a basic human right to access the Internet (reference NZLawyer article from Webb Henderson). However, under the Bill, if an ISP is ordered to suspend the account of an account holder as provided for under the Bill, such termination does not mean that a subscriber will be denied access to the Internet or will lose major services. What is lost is the ability to access the Internet via a specific account for a specific (short) period of time.

ISPs maintain the right to restrict or terminate a subscriber's service at any time. This discretion is typically available to them under their existing contractual terms with their customers. Therefore, the Bill does not create an environment for termination that does not already exist.

Another reason put forward for not introducing suspension as a remedy is that "it won't work anyway" because determined infringers who have their account suspended with one ISP will simply shift to another ISP (as there is no all-encompassing block like the one provided under the recently enacted French legislation).

The suggestion that users may obtain services from another ISP upon suspension of their existing account belies the argument that suspension deprives infringers of rights of access to the Internet. The "won't work anyway" argument also overlooks that the primary effect of the Bill is to inconvenience and deter casual infringers. It is reasonably common ground that recidivist or organised infringers are unlikely to be deterred by even the most draconian remedies.

There have been a number of surveys around the world which show that users are likely to respond positively to a graduated response program. For example, the '2008 Digital Music Survey' by Entertainment Media Research (at www.entertainmentmediaresearch.com) showed that 70 per cent of users would cease infringing activities after one notice from their ISPs. The 2009 Synovate Ltd survey referred to above found that over 60 per cent of respondents in New Zealand would cease infringing activities if their Internet connection could be suspended or terminated by an ISP.

These surveys make it clear that an initial notice, where it leads to an ultimate sanction (such as suspension of an Internet account), is likely to get results and that in most instances, there will be no need to rely on further consequences.

Copyright owners are likely to support the inclusion of the suspension of an Internet account as an ultimate sanction for repeat copyright infringement and consider the threat of this sanction alone will be instrumental in deterring casual/repeat infringers.

Fees payable

The current proposal permits ISPs to charge copyright owners for costs incurred in relation to the graduated response program. However, the Bill makes no provision for the level of such charges nor the proportionality. Conceivably, an ISP could charge for all costs associated with the program – which could include general running costs of their businesses and salaries of those employees involved in the system.

They could also charge a single rights holder for the cost of running the entire system (which would include acting on the notices of other rights holders). Clearly, there should be a reasonableness requirement for the fees. Any fees charged would also need to be proportional and based on volume of notices and parties involved. There is likely to be contention over whether fees are paid and how much.

At the end of the day, the process must be workable. If the fees charged to copyright owners are more than minimal, copyright owners are unlikely to use the process set out in the Bill to deal with infringing file sharers. Instead, they will be forced to resort to traditional methods to protect their works, including litigation, of which joinder of ISPs as a party to the infringement remains a possibility.

Timeframes

Under the Bill as it currently stands, some timeframes appear unreasonably short while others are unduly long. There also appears to be some ambiguity around the 'quarantine period' and when it applies. The timeframes need to be sufficient so as to provide time for the relevant action to be taken by ISPs, account holders and copyright owners, but not so long as to render the program practically useless as a real enforcement tool.

What constitutes an infringement?

Movie studio owners are expected to be among the most significant users of the graduated response system. Due to the nature of file sharing, these owners will not usually obtain evidence of reproduction of the whole, or arguably a substantial part, of a film. For example, investigators will generally only be obtaining 30 seconds of film in order to evidence an indisputable match.

BitTorrent has become the preferred way to distribute movies and TV shows, and works by downloading bits and pieces of the requested file from multiple computers, and then reassembling them into one file after it receives all the pieces. The established methodology for verification of a film (involving the conversion of large amounts of data into smaller, 'hash' values, which identify the original content) would be to obtain 30 seconds of footage from a film in order to evidence an indisputable match.

As a result, an interpretation of part of a copyright work that requires a 'substantial' part of that work be captured as evidence of the infringing file sharing activity may be problematic for file sharing infringement. This has been recognised with a new definition of 'infringement' for the relevant sections of the Bill where 'infringement' is defined as meaning "an incidence of file sharing that involves the infringement of copyright in a work, or part of a work, by a user".

However, arguably, "part of a work" will be interpreted in light of the common law on the subject which holds that, in order for reproduction of a part of a work to be an infringement of the whole, it must be a "substantial" part of the whole. Although this test is not quantitative (but rather qualitative), it is not certain that 30 seconds of footage of film downloaded from a BitTorrent swarm would necessarily constitute a "substantial" part.

Therefore, it remains unclear whether it will still be necessary to show evidence of copying (via uploading or downloading) of a "substantial" part of the film, and if so whether the 30 seconds would amount to such a substantial part. Ideally, the Bill should explicitly exclude a requirement that any such "part" be a substantial part in order for its downloading (without the consent of the copyright owner) to constitute an illegal activity.

Infringement against the "same copyright owner"

Under the sections dealing with 'warning' and 'enforcement' notices, it is a condition for the progression to either of these types of notices that the subsequent notices be in respect of infringements against 'the same copyright owner'.

This requirement will render the scheme less effective as an ISP can have logged many infringements by a single account holder before meaningful consequences ensue. In addition, the scheme is likely to be more complex and expensive for the ISPs to manage.

For example, when copyright owners A, B, C, and D all detect infringement by subscriber X on a single day, or even in a single online session, each complaint must be handled completely separately (ie if none of the other complaints existed). Each will generate the sending of a separate detection notice to the subscriber, start a separate clock ticking before a challenge is due, open a separate 21-day calendar before another infringement of a work by the same copyright owner can lead to a warning notice.

The major film studios and music companies are expected to be the primary users of the graduated response process. These entities generally operate country to country via representative bodies. Thus in New Zealand the major film studios are represented by NZFACT and the major music labels by the Recording Industry Association of New Zealand. It would be appropriate that all infringements for the same representative body count towards the escalation in process.

It is possible that copyright owners could provide third parties with an exclusive licence to enforce the notices (as provided for under the relevant sections of the Bill)– in which case, a licensee would then be entitled to take action against any notice that infringes an exclusive licence, and each such notice on behalf of any rights holder from whom the third party has an excusive license (allowing for quarantine periods) would count to escalating the process.

However, in practice, copyright owners are unlikely to wish to grant such licences. An alternative is to include in the Bill a new definition of 'copyright owner' which includes designated persons. The use of such agents will make the process easier to manage for copyright owners and ISPs.

Other issues

Other likely points of debate include the appropriate definitions for "Internet service provider", "file sharing" and "infringement", the content, methods and frequency of reporting between ISPs and copyright owners, and what records will be required to be kept by ISPs and owners and for how long.

Conclusion

Overall, the Bill is a step in the right direction toward a solution to the problem of illegal file sharing in New Zealand. It provides the basis for a new framework for dealing with copyright infringing behaviour, and has real potential to provide a cost-effective, credible regime to deter individuals from infringing via peer-to-peer file sharing, whilst ensuring to a great extent that privacy of individuals is respected and that the measures are proportionate to the infringing actions.

However, there are a number of issues yet to be resolved. These will have a significant impact on whether or not the system is workable in practice. Submissions closed on 17 June 2010. There will now be the opportunity to provide oral submissions to the Select Committee. The Commerce Committee is then due to report back to Government on the Bill by 17 October 2010 after the hearing of oral submissions.

Claire Tompkins is a senior associate and Ian Finch a partner at James & Wells Intellectual Property specialising in all areas of IP enforcement including anti-piracy work.

An edited version of this article was published in NZ Lawyer Magazine, June 2010.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

James and Wells is the 2009 New Zealand Law Awards winner of the Intellectual Property Law Award for excellence in client service.

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