Australia: Hollywood film studios fail in their bid to hold ISP iiNet liable for its customers' infringing acts

Intellectual Property Alert
Last Updated: 25 April 2012
Article by Nicholas Cole and Judith Miller

The High Court of Australia has unanimously held that Internet Service Provider (ISP), iiNet did not authorise its customers to infringe copyright in the appellants' films. iiNet's customers used the internet access provided by iiNet to share films using the BitTorrent peer-to-peer filesharing system. The basis of the decision was that iiNet did not have the power to prevent the infringement.

Effectively this leaves the film studios (and other content owners) with three choices:

  1. To pursue individual infringers directly
  2. To work with ISPs to establish industry codes that address issues such as copyright infringement in an effective manner; or
  3. To lobby for legislative intervention.

In November 2008, 34 film and television studios (with the assistance of the Australian Federation Against Copyright Theft (AFACT)) commenced proceedings in the Federal Court of Australia against iiNet. They alleged that it had authorised the infringement of copyright in the appellants' films by its customers using the internet access it provided to them to share those films using the BitTorrent system. Prior to commencing proceedings, AFACT had sent iiNet numerous notices containing spreadsheets showing that individual iiNet customers were involved in copyright infringement. AFACT and the studios considered that AFACT failed to take sufficient action in response to these notices. The Federal Court held that iiNet had not authorised its customers' infringement of the copyright in the appellants' films. The Full Federal Court dismissed the appeal from that decision. That decision was then appealed to the High Court.

The High Court's decision
The High Court unanimously dismissed the appeal from the Full Federal Court's decision. The question before the High Court was whether iiNet had authorised its customers' infringement.

The High Court reaffirmed that, in determining whether there has been authorisation of copyright infringement in a film, a court must take into account the factors identified in section 101(1A) of the Copyright Act 1968 (Cth) (Act). This required the court to consider:

  • The existence and extent of iiNet's power to prevent its customer
  • The extent to which reasonable steps to prevent that infringement included warnings, suspension or termination of those customers' accounts
  • The impact of the relationship between iiNet and those customers on those factors.

The court noted that those factors must be considered in the context of section 112E of the Act, which states that an ISP is not to be taken to have authorised infringement of a film merely because it has provided facilities for making it available online by an infringer.

Did iiNet have the power to prevent infringement by its customers?
The High Court held that iiNet only a limited indirect power to prevent that infringement since it had no direct technical power to prevent its customers infringement. So, for example, iiNet had no technical power to prevent a customer from using the BitTorrent system to download the appellants' films on that customer's computer, nor did it have the technical power to control or alter any aspect of the BitTorrent system.

The High Court also held that the extent of iiNet's contractual power to prevent infringement by its customers was limited. It had no direct power to prevent that infringement and could only ensure that result indirectly by terminating its contract with its customers.

Did reasonable steps to prevent infringements (after receipt of AFACT notices) include warnings and subsequent suspension or termination of the accounts of identified customers?
The High Court held that the nature of the internet, the BitTorrent system and the absence of an industry code of practice adhered to by all ISPs were all factors to be taken into account in assessing whether iiNet took reasonable steps to prevent infringement by its customers, given its indirect power to do so.

Considering these factors, the court noted that threatening to terminate or terminating the account of an accused infringer would have done little to prevent continuing infringement as that customer could merely obtain internet access from another ISP to continue using the BitTorrent system to infringe copyright.

Where to from here?
Had the decision of the High Court been different, content owners would have had a simple line of attack against ISP for the infringing acts of their customers. Now content owners in Australia will have to address copyright infringement via the internet in one of three ways:

  • Change of law: Parliament could intervene. The High Court noted a number of the legislative solutions employed in other jurisdictions, citing specifically the Digital Economy Act 2010 (UK) and the Copyright (Infringing File Sharing) Amendment Act 2011 (NZ) and these should be a guide for any legislative response.
  • Industry codes: The High Court acknowledged the futility of iiNet terminating the account of a customer accused of infringing copyright in the absence of an ISP protocol that would prevent that customer whose account is terminated by one ISP shifting to another ISP to continue infringing. Content owners and ISPs will need to work together to establish industry codes that address the issues of copyright infringement in an effective manner. These codes must include agreed frameworks for responding to copyright infringement and provide a commitment to supporting the rights of content owners. Notwithstanding that Michael Malone, the CEO of iiNet, has expressed his willingness to work with the studios, the bargaining power of the studios is greatly diminished as a consequence of this decision.
  • Direct action: Film studios could consider taking direct action against copyright infringers rather than suing ISPs. Although, if the experience of the record companies in the US is indicative, direct action is unlikely to prove an effective form of response.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

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