The Full Federal Court has confirmed that the Copyright
Act does not protect digitally created streams of data representing
the sounds and images of live content which is then
When we're watching a live broadcast of, for example, a
major sporting event, the sounds and images are usually digital
data streamed - and the price to access and broadcast that stream
is usually enormous. The Full Federal Court of Australia has
confirmed that the Copyright Act does not protect the instantaneous
digital transfer of sounds and images that are pieced together to
form live broadcasts (Commissioner of Taxation v Seven Network
Limited  FCAFC 70). Clayton Utz acted for Seven in both the
first instance and appeal proceedings).
Do payments for broadcasting rights = royalties?
The issue in the case was whether payments for broadcasting
rights made by Seven to the International Olympic Committee
(IOC) were royalties and therefore Seven was
obliged to withhold part of the amount paid on account of the
IOC's liability for withholding tax.
Critical to this question was:
whether there was copyright in the international audio visual
signal (ITVR signal) used to create Seven's broadcast of the
Olympic Games; and
whether the use or the right to use the signal included the
use, or the right to use, an "other like property or
If the answer to either of these questions is yes, then Seven
was liable to withhold the tax.
No copyright in an ITVR signal, so no royalties or tax
The Full Court upheld Justice Bennett's ruling that the ITVR
signal provided by the host broadcaster to Seven, and which was
used by Seven to create its broadcast of the Olympic Games, was not
a cinematograph film for the purposes of the Copyright Act. Like
Justice Bennett, the Full Court found that:
the ITVR signal was not taken from any previously recorded
the ITVR signal was a digital signal produced by the host
broadcaster and transmitted by electromagnetic forces, such that,
at any one moment the signal was transmitting only a very tiny
fraction of the sounds and images of the field of play;
there was no technology that allowed that information to be
reproduced without the use of a receiving device;
there was no picture, image sound recorded or permanently
stored in the copper cable that transmitted the signal; and
the payment made for the exclusive rights to broadcast, was not
a payment for an "other like property or right".
The Full Court therefore upheld Justice Bennett's decision
that Seven's payments for its exclusive broadcasting rights
were not royalties, and thus Seven was not liable to withhold tax
on account of the IOC's liability for withholding tax.
A question of forbearance?
At the hearing of the appeal, the Commissioner also sought to
argue that the disputed payment was a royalty because it was
consideration provided by Seven in order to obtain a guarantee that
other persons would not exercise those rights within Australia.
The Full Court rejected this ground as being "fundamentally
misconceived". Seven was the only party to the agreement that
was legally entitled to broadcast in Australia. The fact that the
host broadcaster had a recording of the ITVR Signal was immaterial
because neither the IOC nor the host broadcaster had the right to
broadcast in Australia. Accordingly, there was no forbearance of
the kind argued and therefore the payment was not a royalty.
Lessons for anyone using digital technology - check your
The Full Court's decision again demonstrates that users and
developers of content using digital technology should be careful to
check whether they are protected by any intellectual property
legislation currently in force. It will not, for example, cover
digitally created streams of data representing the sounds and
images of live sporting events like the Olympics unless the signal
is itself a copy of a copyright work or broadcast. More often than
not, copyright will not exist until the first broadcast occurs
using the signal.
Where there is any doubt as to what statutory protections exist,
if any, parties should ensure that they adequately protect their
rights by contract.
The ATO has sought special leave to appeal to the High
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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