Archive for May, 2012

Agreements to block parallel imports

Friday, May 11th, 2012

According to the Age today, a number of (fashion) importers have agreed with their overseas manufacturers that the manufacturers will not supply orders to online purchasers in Australia:

Importers close door on overseas online stores by Rachel Wells.

The Gerry Harvey-esque arguments about how GST makes local retailers uncompetitive get a run again but, as previously noted, Prof. Gans is not convinced by that (in the context of digital downloads).

This announcement seems like particularly good timing given Senator Conroy’s plans to have somebody inquire into something.

Maybe this is not exclusive dealing in contravention of s 47 of the Competition and Consumer Act 2010 because does not have the purpose, and it is not likely to have the effect, of substantially lessening competition, but:

(a) I hope they talked to the lawyers before they started making what might be thought of as “admissions”; and

(b) the record companies didn’t get away with the argument.

I guess we can look forward to some further instalments in this story.

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The price of digital downloads in Australia

Thursday, May 3rd, 2012

Apparently inspired by this report, Senator Conroy, the Orwellian named Minister for Broadband, Communications and the Digital Economy,[1] has acted to announce a new inquiry to be undertaken by the House of Representatives’ Standing Committee on Infrastructure and Communications.

Reports here and here.

According to that second report, someone trailed a coat on the issue last week when ACCC Commissioner Ed Willett appeared before the Joint Committee on the National Broadband Network.

Now, as a purchaser of digital files, I am hardly unbiased but it does seem hard to justify price differentials of 50% or more. Seems like there is economic reasoning that challenges the Gerry Harvey-esque explanations.

Only problem, almost 20 years ago, the Prices Surveillance Authority recommended (what became in effect) this provision and some record companies got into big trouble trying to circumvent their own corresponding provision, but it would seem nothing has changed. Gartner analyst, Brian Prentice, reported here might be on to something suggesting the problem is the territorial nature of copyright itself. A (copyright) world without borders. Imagine!


  1. He is afterall the man who wants to impose filtering on the internet.  ↩

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Roadshow: second look

Wednesday, May 2nd, 2012

Now I’ve had some time to look at the Roadshow decision, I think it falls near the territory of the House of Lords’ Amstrad ruling but doesn’t go as far as the Supreme Court of Canada’s CCH Canada ruling.

The only issue before the High Court was whether or not iiNet (the ISP) was liable for authorising the infringements of copyright committed by 11 of its subscribers, who made available online various infringing copies of films through BitTorrent (even though it can be used for lawful purposes, I think I’ll let you go find your own copy if you’re so inclined). Given that iiNet had no role in BitTorrent, its subscribers’ choices to use BitTorrent or what they downloaded with BitTorrent, the film companies sought to put iiNet’s liability on the basis that (at [5]):

  • the provision by iiNet to its customers (and to other users of those customers’ accounts) of access to the internet, which can be used generally and, in particular, to access the BitTorrent system;
  • the infringement of the copyright in the appellants’ films by customers of iiNet who have made the films available online in whole or in part using the BitTorrent system;
  • the knowledge by iiNet of specific infringements, as drawn to its attention by notices from the Australian Federation Against Copyright Theft (“AFACT”), representing the appellants;
  • the technical and contractual power of iiNet to terminate the provision of its services to customers infringing copyright; and
  • the failure by iiNet to take reasonable steps to warn identified infringing customers to cease their infringements and, if appropriate, to terminate the provision of its services to them. [1]

As you no doubt know by now, the High Court ruled unanimously that iiNet did not auhorise the infringements of the film companies’ copyrights.

The first thing to note is we’ve got those 2 teams giving separate judgments again: (French CJ, Crennan and Kiefel JJ; Gummow and Hayne JJ). Not quite sure where that is going although 2 members of team 1 will still be there after June 2013.

Next, all 5 judges agreed whether someone is liable for authorising is largely a question of fact to be determined in all the circumstances.

Then, despite what we had all thought since Moorhouse, all 5 judges agree that “authorise” does not mean “sanction, approve, countenance”. “Countenance” in particular includes connotations which ‘are remote from the reality of authorisation which the statute contemplates’ (at [68]) and go well beyond the ’core notion of “authorise”’ (at [125]).

Instead, in deciding whether or not there has been an authorisation all 5 judges directed attention to the 3 criteria specified in 101(1A) and 36(1A):

(a) the extent (if any) of the person’s power to prevent the doing of the act concerned;

(b) the nature of any relationship existing between the person and the person who did the act concerned;

(c) 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.

All 5 judges recognise that the 3 s 101(1A) criteria are not exhaustive; they are the starting point (at [68]) and essential (at [135]), however, in this case at least they are the only criteria considered.

In applying these 3 factors, the 2 judgments reach pretty much the same conclusions:

(78) The extent of iiNet’s power was limited to an indirect power to prevent a customer’s primary infringement of the appellants’ films by terminating the contractual relationship between them. The information contained in the AFACT notices, as and when they were served, did not provide iiNet with a reasonable basis for sending warning notices to individual customers containing threats to suspend or terminate those customers’ accounts. For these reasons, iiNet’s inactivity after receipt of the AFACT notices did not give rise to an inference of authorisation (by “countenancing” or otherwise) of any act of primary infringement by its customers.

(146) The present case is not one where the conduct of the respondent’s business was such that the primary infringements utilising BitTorrent were “bound” to happen in the sense apparent in Evans v E Hulton & Co Ltd[165], and discussed earlier in these reasons[166]. Further, iiNet only in an attenuated sense had power to “control” the primary infringements utilising BitTorrent. It was not unreasonable for iiNet to take the view that it need not act upon the incomplete allegations of primary infringements in the AFACT Notices without further investigation which it should not be required itself to undertake, at its peril of committing secondary infringement.

These conclusions, however, summarise the results of a very multi-faceted and many layered inquiry. Any “power” that iiNet had was too “indirect” or “attenuated” essentially because:

  • iiNet had no involvement in BitTorrent or a user’s choice to use BitTorrent or what the user used BitTorrent for;
  • unlike Grokster (pdf) and Kazaa, iiNet did not encourage its users to use BitTorrent or seek to profit specifically from their infringing use;
  • iiNet did have a contractual power to suspend or terminate an account for breach (including for copyright infringement) but:
    • its obligation was to provide internet access which could be used for non-infringing or infringing purposes, not just infringing purposes;
    • terminating an account would not stop the user just using a different account, possibly with a different ISP;
    • iiNet would be liable for breach of contract if it suspended or terminated a user in response to an allegation and it turned out the user was not in fact infringing copyright. [2]

A third consideration highlighted in both judgments was the inadequate notice of infringements given through the AFACT notices. Remember, in keeping with Gibbs J, [3] the film companies argued that iiNet had knowledge that its requirement that users not infringe copyright was being ignored.

It was accepted that iiNet knew that more than half of its user’s usage involved BitTorrent (although not all of that constituted infringements). (at [38], [92]; but iiNet was no different to any other ISP in that regard).

The film companies also sent iiNet on a weekly basis AFACT notices which purported to set out information about subscriber’s accounts that were being used to communicate infringing copies. By the trial, iiNet accepted that these AFACT notices did in fact identify infringements. There were, however, a number of problems.

Most importantly, when the notices were sent, there was no explanation of how they were prepared or how they worked (not that that would have made any difference to how iiNet would have treated them) [4]; it was only after discovery and provision of expert evidence that iiNet could understand them sufficiently to accept their veracity ([34] and [75], [138]).

This raises the question: what is iiNet’s situation now that it has had explained to it and accepted as reliable the AFACT notices? That seems rather less clear.

The ‘reasonableness’ of iiNet’s inaction was at least in part predicated on its lack of knowledge given the problems with the AFACT notices.

First, French CJ, Crennan and Kiefel JJ say at [69], however,  that there cannot be liability for authorisation without power to prevent the primary infringement and, as already noted, any such power is lacking or too indirect. Gummow and Hayne JJ do not make so explicit a statement (and their Honours endorse imposition of liability where infringement is “bound” to happen). Nonetheless, their Honours do at several points emphasise the presence or absence of control, or direct power to control, the primary infringement as key facts. For example, [127] and in contrast to Moorhouse at [144] from which iiNet’s situation was “well removed”.

Secondly, the High Court seemed very reluctant to leave iiNet with the burden of having to check back to see whether a particular user was still infringing particularly in circumstances where it would have been dependent on the use of the film companies’ technology to do so. So French CJ, Crennan and Kiefel JJ said:

(74) Whatever responses iiNet received to warnings, iiNet would be obliged to update the investigative exercise underlying the AFACT notices either itself or by reference to subsequent AFACT notices (allowing an appropriate interval for compliance with a request to cease infringement) before proceeding further.

(75) Updating the investigative exercise in the AFACT notices would require iiNet to understand and apply DtecNet’s methodology – which, among other things, involved a permission to DtecNet from AFACT to use the BitTorrent system to download the appellants’ films. Before the filing of experts’ reports in the proceedings, the information in the AFACT notices did not approximate the evidence which would be expected to be filed in civil proceedings in which interlocutory relief was sought by a copyright owner in respect of an allegation of copyright infringement. Also, any wrongful termination of a customer’s account could expose iiNet to risk of liability. These considerations highlight the danger to an ISP, which is neither a copyright owner nor a licensee, which terminates (or threatens to terminate) a customer’s internet service in the absence of any industry protocol binding on all ISPs, or any, even interim, curial assessment of relevant matters.[5]

Thirdly, both judgments refer with approval to the Blank Tapes case and the majority’s recognition there that manufacturers of products such as blank tapes and video recorders, which have both lawful and unlawful uses, will not be liable for authorising copyright infringement even if they know it is likely that their products will be used to commit infringements (at [53] and [130]).

Both judgments conclude with calls for the legislature and/or co-operative industry codes to deal with the challenges these issues pose. It had seemed that a co-operative industry code required the near death experience in the Full Federal Court for motivation, but at least the 5 major ISPs kept plugging away.

Finally, what is the status of Moorhouse itself? Here the difference with Amstrad and CCH Canadian comes clearest. The House of Lords plainly thought Moorhouse was a copyright liability too far and, as the Roadshow High Court interpreted the judgment, limited authorisation to cases where the defendant granted, or purported to grant, the primary infringer the right to do the infringing act. The Supreme Court of Canada went even further and held that a law library was not liable for authorising infringements by photocopying in largely similar circumstances to Moorhouse (if one can overlook any difference between a reference library for lawyers and a university library). In contrast, the Roadshow High Court explained that the University was liable in Moorhouse because of the extent of its control over the photocopier, the books and the primary infringer’s activities: the circumstances in Roadshow were “well removed” from those in which liability was imposed on the University (at [144], see also [69]). This approach may reflect the legislative codification of criteria from Gibbs J’s judgment, but it also reflects the way iiNet put its case (at [60] – [61]).

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


  1. Slightly different formulation by Gummow and Hayne JJ at [142].  ?
  2. [66] – [70], [73]; [139] Gummow and Hayne JJ go so far as to point out that termination would deny the user access to the internet for non-infringing activities. Despite the criticisms directed at Higgins J’s opinion in Adelaide Corporation, all 5 judges appear to agree with his Honour’s view that a right to terminate a contract was wholly disproportionate (but, of course, there are all those other factors to, er, factor in). The Grokster / Kazaa point is made explicitly only by Gummow and Hayne JJ at [101]  ?
  3. See e.g. at [58] and at [14] in austlii’s online version of Moorhouse.  ?
  4. See the evidence recounted by Jagot J at [308] – [318] in the Full Court.  ?
  5. See also the summary of iiNet’s argument at [62] and Gummow and Hayne JJ at [138] – [139] and [143].  ?
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