Australia: Technology and IP roundup: recent case law

The ever increasing developments in technology have seen the judicial community adapting and moulding traditional legal doctrines to meet the needs produced by change. Three recent cases consider the application of established law in the context of internet usage. The Google and iiNet cases consider the liability of parties who provide internet facilities that can be used by service users to infringe the intellectual property rights of third parties while the TPG case considers the penalties that will be imposed for misleading consumers who use popular search engines.

Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49

Facts

Google Inc (Google) provides a search facility offering users of its search engine two types of results; 'organic' results presented in order of relevance to the users search (as calculated by a complex algorithm), and 'sponsored' links which are determined by Google's 'AdWords' program. Sponsored links were those results appearing at the top of the webpage and to the left of the browser. The "Sponsored" link results were generally shaded a yellow colour and carried with them the words 'Sponsored result'. Advertisers pay Google for the use of certain keywords in the Adwords program which directs users of the search engine to their website. Evidence before the Court showed that Google's account managers often assisted companies in choosing keywords that would divert traffic from competitor's websites to their own.

The ACCC asserted that four of Google's 'sponsored' links constituted misleading or deceptive conduct in contravention of section 52 of the former Trade Practices Act 1974 (Cth) (now clause 18 of Schedule 2 to the Competition and Consumer Act 2010 (Cth)). The links contained a heading which corresponded to the user's search, but took the user to a competitor's website. By way of example, one of the links was a link with the heading 'Harvey World Travel' but which took users to the website 'www.statravel.com.au'.

Legal findings

The critical question in the case was whether Google had engaged in misleading and deceptive conduct through its sponsored links. At first instance, Justice Nicholas of the Federal Court found that Google merely provided the technical facility to allow the advertisements and so did not actually make, endorse or adopt the representations conveyed by the search results which were the subject of the complaint.¹

On appeal, the Full Federal Court found that Google was not simply passing on a statement by an advertiser; rather, Google presented the user a direct response to their search query. In this sense, Google was informing the user that the content of the sponsored link was relevant to the user's query about the subject matter of the keyword.² The algorithms used by Google in presenting search results were as important as the keywords selected by the advertising company and therefore Google was much more than a 'mere conduit' for the misleading representations.³ Further, Google was not saved by the terms of its contracts with advertisers that attempted to shift responsibility for the content of the advertisements onto the advertising company.⁴

Conclusions

This case represents a challenge to the immunity companies enjoy from liability for the misleading representations of advertisers (often referred to as the 'publisher's defence'). Where a publisher conducts its business on the internet and plays some part in directing or disseminating what advertisements a user is directed to, on the Full Court's reasoning this will not be treated as if it were a 'billboard' for advertisements. The publisher will not be considered a mere conduit for the content of those advertisements and escape liability for misleading conduct by others.

Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16

Facts

In this case the High Court considered whether the internet service provider (ISP) iiNet had authorised its customers to infringe copyright in the appellant's films for the purposes of section 101(1) and (1A) of the Copyright Act 1968 (Cth). The appellants constituted 34 Australian and United States companies that owned or exclusively licences the copyright in commercially released films and television programs. The appellants contended that a significant number of iiNet's customers had infringed the copyright of the appellants by downloading and distributing films via the BitTorrent peer to peer file sharing system.

Law and findings

Under section 101(1A) of the Copyright Act, three matters must be considered in determining whether authorisation has been given to infringe copyright: the extent (if any) of the person's power to prevent the doing of the act concerned, the nature of any relationship existing between the person and the person who did the act concerned and whether the person took any other reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.

In applying these considerations, the majority of the Court looked to the relationship that iiNet had with its customers. It found that while the relationship involved the provision of technology, iiNet had no direct technical power at its disposal to prevent a customer from using the BitTorrent system to download films.⁵ Rather, iiNet could only prevent customer infringement indirectly by terminating the contractual relationship it had with its customers.⁶ As a customer could simply sign up with another ISP, iiNet did not have the power to prevent continuing infringements of its customers.⁷ The majority also found that it would be unreasonable to expect iiNet to rely on the voluminous technical data provided to it by the appellants as a basis on which to take action against its customers and expose it to liability under its contracts.⁸

Conclusions

The case provides guidance on what power and control a party must have to prevent copyright infringement so as to make it authorise such conduct. Interestingly, the majority noted that the law relating to authorisation of copyright infringement in its current state is ill-suited to enforcing the rights of copyright owners in respect of widespread infringements arising out of peer to peer sharing due to the difficulties in enforcing the rights of copyright owners. Specially targeted legislative schemes such as that introduced in the United Kingdom would go some way to addressing these issues.

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (No 2) [2012] FCA 629

In this case Justice Murphy of the Federal Court considered the appropriate penalty to be paid by TPG after the Court found that it had engaged in misleading or deceptive conduct in representing that an unlimited ADSL2+ broadband internet service could be acquired at a cost of $29.99, when in fact a home telephone service also needed to acquired at a cost of $30 per month.⁹

Legal findings

The Court ultimately ordered that TPG pay a pecuniary penalty of $2 million as the advertisements were 'seriously misleading', clever marketing strategies were employed to minimise the qualifying information in the advertisement, and TPG's behaviour indicated that there was a risk of repeat contraventions.¹⁰ The Court rejected TPG's argument that its liability should be lessened due to the fact that it had sought legal advice in relation to the advertisements demonstrated that the contravention was not deliberate.¹¹ Also relevant to the assessment was the fact that the advertisement was effective in increasing TPG's customers from 9,000 to 107,000 during the campaign in 2011 and was responsible for revenue of $59.3 million. Justice Murphy noted however that this was 'not the worst possible case' which would warrant an order for the maximum penalty.¹²

In relation to the injunctions sought, his Honour stated the ACCC seemed to seek injunctions as a matter of course and that they were not entitled to injunctive relief merely as a vindication of its success in establishing contraventions.¹³ However, in the circumstances of the case, his Honour noted that an injunction for 3 years was appropriate because the contraventions were in clear breach of TPG's previous s.87B undertakings, and the advertisements were similar in many respects to those that led to the undertakings being given. ¹⁴ His Honour considered that the terms of any injunction should be limited to the case brought by the ACCC and should not extend to broader conduct other than advertising.15

Conclusions

This case is an example of the size of penalty that will be imposed in circumstances where a company is at risk of engaging in repeat misleading or deceptive conduct. It also demonstrates that where an advertisement is seriously misleading, a company will not be able to reduce its liability by simply pointing to the fact that legal advice was received as evidence that it 'took the issue seriously'.

Footnotes

¹Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49 per Keane CJ, Jacobson at [36]
²bid at [92]
³bid at [94]
⁴Ibid at [97]
⁵Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16 per French CJ, Crennan and Kiefal JJ at 483
⁶bid at 484
⁷bid at 485
⁸bid
⁹ACCC v TPG Internet Pty Ltd [2011] FCA 1254
¹⁰bid at [69]
¹¹Universal Music v ACCC (2003) 131 FCR 529
¹²141
¹³Australian Competition and Consumer Commission v TPG Internet Pty Ltd (No 2) [2012] FCA 629 at [19]
¹⁴bid at [25]-[29]
¹⁵bid at [35]

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