Australia: Three strikes and you're safe: iiNet wins in the Australian High Court

Focus: iiNet has triumphed in the copyright infringement case brought against it by the film industry
Services: Commercial, Intellectual Property & Technology

The result

iiNet has triumphed in the case brought against it by the film industry.

The High Court of Australia dismissed the film industry's appeal, and held that iiNet's conduct did not constitute authorisation of the infringements of copyright carried out by its customers.

The history

Proceedings were brought against iiNet by a group of 34 separate applicants, and were conducted on the applicants' behalf by the Australian Federation Against Copyright Theft (AFACT). The applicants included major motion picture studios both in Australia and the United States.

The proceedings were brought on the basis of allegations that iiNet had failed to take reasonable steps to prevent contraventions of the Copyright Act 1968, after being notified by AFACT that some iiNet customers were illegally downloading films and TV programmes using the internet service provided by iiNet.

AFACT investigated the infringement of copyright by iiNet users, who were downloading films and television programmes using a peer-to-peer system known as the BitTorrent protocol. AFACT provided details of the users' infringing activities to iiNet, and wanted iiNet to first warn the allegedly infringing subscriber, and if this was not enough to stop the infringement, to suspend and ultimately to terminate the subscriber's internet service (commonly known as the "three strikes"). Alternatively, AFACT suggested that iiNet should block certain websites to reduce the opportunity for its subscribers to engage in illegal downloading.

The primary issue was whether iiNet, by failing to take any steps to stop infringing conduct, authorised the copyright infringement of these iiNet users (an infringement under s101(1) of the Copyright Act).

Both the Federal Court (at first instance) and the Full Court of the Federal Court (on appeal by AFACT) had found in favour of iiNet.

The High Court appeal

The appeal to the High Court centred on whether iiNet authorised its customers' infringing acts. For these purposes, the High Court considered section 101 Copyright Act 1968.

Under the Copyright Act there is a primary infringement of copyright in a film where a person makes the film available online without the consent of the copyright owner. It is a secondary infringement to authorise the making available online of the film without the copyright owner's consent.

Section 101(1A) sets out the matters that must be taken into account in determining whether or not a person has authorised the infringing conduct. These are:

  • the extent of that person's power to prevent the doing of the infringing act
  • the nature of any relationship existing between that person and the infringer, and
  • whether the person took any other reasonable steps to prevent or avoid the infringement, including whether they complied with any relevant industry codes of practice.

The Court determined that because iiNet has no involvement with any part of the BitTorrent system, and no power to control that system, iiNet had no direct technical power to prevent a customer from using the BitTorrent system to download films in breach of copyright. iiNet only had an indirect power to prevent the primary infringement by terminating its contractual relationship with its customer (the primary infringer).

If iiNet terminated an account with its customer, that customer could sign up with another ISP to access the internet and continue to infringe copyright.

In the Court's view, the fact that iiNet did not terminate customer accounts after receipt of the AFACT notices was not due to iiNet's indifference and lack of concern in relation to the infringement, but that iiNet was unwilling to act because of the risks of taking steps based only on the information in the AFACT notices (such as liability for wrongful termination of a customer's account). It found that the information contained in the AFACT notices did not provide iiNet with a reasonable basis for sending warning notices to individual customers.

Accordingly, the Court held that iiNet had not authorised the infringements of copyright carried out by its customers.

What now?

iiNet and other ISPs will no doubt take comfort in the view that, in merely providing a service allowing subscribers access to the Internet, they are not accountable for the activities undertaken by these subscribers.

The issue of illegal downloading remains a real problem for rights holders, and they will no doubt now look for another solution.

On the basis that the issue of illegal downloads is not going to go away, one compromise might be for both the ISPs and the rights holders to accept that fact and come to an agreement as to the payment of a royalty by the ISPs (perhaps based on a per customer or download volume basis). This would acknowledge an acceptance by the ISPs that a proportion of their revenue is indirectly driven by illegal downloads. It would also amount to an acceptance by the rights holders that, in this era of the internet and digitisation, infringement will unfortunately occur and that they may need to seek revenue from less traditional sources.

The chances of Australian ISPs agreeing to such a scheme have, however, likely lessened dramatically following the High Court decision in iiNet's favour, so rights holders may be forced to go it alone and look for other options in an attempt to determine the boundaries of liability.

Options available include lobbying for legislative change, or pursuing other targets (such as the online services or websites through which pirated material is most obviously shared). A more pro-active solution might be to develop a commercial model that discourages piracy and encourages the legitimate purchase of copyright material.

Whatever the next step in the battle against piracy may be, the relative infancy of the internet means the legal boundaries will continue to be explored, and legislation will continue to have to play catch-up with technology.

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.

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