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The High Court has rejected the constitutional challenge to the validity of the “1%” cap on licence fees payable by broadcasters to the record companies on very narrow and specific grounds.

Section 109 of the Copyright Act 1968 provides a compulsory licence for the broadcasting to the public of sound recordings. Section 152, however, caps the royalty payable to record companies by broadcasters at 1% of the gross earnings of the broadcaster.

No such limitation had applied to the “corresponding” copyright in sound recordings under the 1911 Act.

The 1911 Act was repealed when the 1968 Act came into force on 1 July 1969. Section 220 of the 1968 Act provided that sound recordings in which copyright subsisted immediately before 1 July 1969 qualified for copyright under the 1969 Act effectively as provided for under the 1968 Act.

The record companies argued that the imposition of the 1% cap was an acquisition of their property in sound recordings made before July 1969 otherwise than on just terms in contravention of s 51(xxxi) of the Constitution.

The High Court has unanimously rejected that claim.

French CJ, Gummow, Hayne and Bell J said the record companies’ argument was predicated on a wrong assumption. They no longer owned copyright under the 1911 Act which had been qualified. Rather that copyright had been terminated and replaced with a new and different copyright under the 1968 Act. So at [10] and [11]:

[10] The assumption by the plaintiffs is that the copyright presently enjoyed in respect of the pre?1969 recordings, and which will expire in accordance with the extended term fixed by the operation of the Free Trade Act upon the 1968 Act, is that which arose under the 1911 Act and was carried forward by the 1968 Act, but with the impermissible imposition upon those copyrights of the “cap” in the compulsory licensing system introduced by the 1968 Act. The Commonwealth denies that assumption. The Commonwealth submission, which should be accepted, is that upon the proper construction of the 1968 Act: (a) copyrights subsisting in Australia on 1 May 1969 under the Imperial system were terminated; (b) thereafter, no copyright subsisted otherwise than by virtue of the 1968 Act; and (c) to that copyright in respect of sound recordings there attached immediately the compulsory licensing system including the “cap” upon the royalties payable thereunder.

[11] It should be emphasised that the plaintiffs do not assert that the 1968 Act is invalid by reason of its bringing to an end the operation in Australia of the Imperial system without the provision of just terms. To do so successfully would be to leave them with such rights in respect of the pre?1969 recordings as they had under the 1911 Act and the 1912 Act, and without any copyrights subsisting under the 1968 Act. Rather, the plaintiffs seek to attack the validity of the attachment to their rights under the 1968 Act of one aspect of the compulsory licensing system for sound recordings. For the reasons which follow, that attack must fail.

Heydon J to similar effect at [63]:

In short, the 1968 Act did not preserve the second to sixth plaintiffs’ rights under the 1911 Act and the 1912 Act. It abolished those rights. It substituted for them distinct and fresh rights – some more advantageous to those plaintiffs, some less. Thus ss 109 and 152 did not cause any property to be acquired. Property may have been extinguished by other provisions, but the plaintiffs’ case was not concerned with them.

After considering the application of s 51(xxxi) of the Constitution to statutory intellectual property rights generally, Crennan and Kiefel JJ reached the same conclusion at [129], pointing out at [130] that the record companies could not accept s 220 of the Copyright Act as valid and at the same time contend that ss 109 and 152 were invalid.

[129] When ss 8, 31, 85, 89(1), 207 and 220(1) of the 1968 Act are read together, it is clear that the copyright of the relevant plaintiffs under the 1911 Act, which included the exclusive right to perform the record in public, is not continued under the 1968 Act; rather it is replaced. Whilst it is true that, as the plaintiffs submit, certain records in which copyright subsisted under the 1911 Act are brought within the scheme of the 1968 Act, that is achieved by the re enactment, in substance, of qualifying provisions in the 1911 Act in, and for the purposes of, the 1968 Act. The effect is that the plaintiffs’ entitlement to sue for infringements under s 101 of the 1968 Act in respect of sound recordings in which copyright subsists pursuant to s 89(1) is an entitlement to sue in respect of infringements of the copyright in sound recordings contained in s 85, which replaces the copyright in records under s 19(1) of the 1911 Act. Inasmuch as ss 109 and 152 operate to qualify a record manufacturer’s exclusive rights by providing an exception to infringement, it is the exclusive rights under s 85 which are affected, not the exclusive rights under the 1911 Act (which have been replaced).

[130] Whilst the plaintiffs mount no attack on the validity of provisions of the 1968 Act which effect the replacement of the relevant plaintiffs’ copyright under the 1911 Act with a copyright under the 1968 Act, their attack on the validity of ss 109 and 152, which depends on the continuing subsistence of copyright under s 19(1) of the 1911 Act, is untenable. If the plaintiffs were to attack the validity of the provisions of the 1968 Act which effect the replacement of copyright under s 19(1) of the 1911 Act with a differently constituted copyright under s 85 of the 1968 Act, they would risk being left not only with the awkwardly expressed copyright under s 19(1) of the 1911 Act in respect of records, but also with a copyright, the term of which was limited to 50, rather than 70, years.

Now the High Court have reminded themselves of all these matters, they will be primed for the tobacco companies challenge to the validity of the Tobacco Plain Packaging Act 2011, the hearings for which start in April.

Phonographic Performance Company of Australia Limited v Commonwealth of Australia [2012] HCA 8

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Foster J has ruled that radio stations do not have to pay an additional licence fee to the record companies for simultaneously transmitting their radio broadcasts over the internet.

If you want to understand how recorded music is licensed to the radio stations, this is a good place to start.

The broadcasting of recorded music over the “airways” by the commercial radio stations is covered by licence agreements with PPCA. When the radio stations broadcast recorded music as part of a “program”, the audio stream is split between the FM and DAB+ radio bands and a webcast service; that is, the audio stream is sent to 3 different distribution means.

In deciding what is comprehended within the broadcast right under the Copyright Act (see ss 85(1) and 10(1)), it is necessary to determine what is included in a “broadcast service” under the Broadcasting Services Act. The relevant Ministerial Determination under this legislation excluded from the definition of “broadcasting service”:

.. [any] service that makes available television programs or radio programs using the Internet

but then excepted from that:

… [any] service that delivers television programs or radio programs using the broadcast services bands.

Foster J considered this definition required him to focus on what was “the service” and not just the means of transmission:

130 The service which transmits the very same radio programs at essentially the same time both to the FM transmitters and beyond and to the web stream servers and beyond is the one service. On the facts before me, the members of CRA who stream their radio programs on the Internet do so only as part of a program package which also simultaneously transmits those programs via frequency modulated radio waves to the consumer’s FM receiver. In truth, the service is but one service being a service which combines various delivery methods or platforms and which delivers the same radio program using the broadcasting services band. It falls within the exception to the exclusion set out in the Ministerial Determination.

131 Therefore, in my view, the service provided by the members of CRA is a broadcasting service.

132 That being so, the simulcast transmission of the same radio program via the FM waves and the Internet is also a “broadcast” within the current definition of that term in s 10(1) of the Copyright Act and, for that reason, is within the scope of the licence which PPCA agreed to grant to the members of CRA and which it did grant from time to time to members of CRA upon the terms and conditions set out in the Member Agreement.

Phonographic Performance Company of Australia Ltd v Commercial Radio Australia Limited [2012] FCA 93

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At first instance, Rares J has ruled that Optus’ TV Now service does not infringe the copyright in broadcasts of the AFL or the NRL (its the first round only as, by agreement, leave to appeal to the Full Court was given to whichever party lost before the decision was handed down).

The pressures of time mean that I can only provide a very brief synopsis at this stage: however, his Honour has also published a very helpful Summary in what would probably be considered more user friendly language (and length).

To recap: Optus offered its 3G mobile (cellular) customers – well the personal and small and medium business ones – with a service in which they could choose to record a broadcast of a free to air (FTA) television broadcast. Once a customer chose a recording, Optus’ equipment recorded the FTA transmission (in 4 different formats: PC, Apple, Android and iOS) on Optus’ servers and the customer could then chose to replay the recording at a later time (within 30 days) by having it streamed to their computer, iOS or Android device. All customers got some storage (45 minutes) as part of their subscription, but could pay for more. (For Optus’ descriptions see here and here.)

Back in 2006, the law was amended to make it clear that time shifting (what used to be called home taping such as when people had VCRs) or format shifting of FTA broadcasts for personal use did not infringe copyright in the broadcast or any underlying works. See s. 111.

In finding that there was no infringement, Rares J had to deal with 7 issues. For present purposes, however, the key finding was that it did not make any difference whether or not the customer used their own equipment in their own “house” or the equipment was owned by someone else or located elsewhere.

When the legislation to amend s 111 was introduced it underwent some amendment of its own and Rares J noted that the further amendments were stated to be intended to:

“The bill adds new copyright exceptions that permit the recording or copying of copyright material for private and domestic use in some circumstances. This amendment makes it clear that private and domestic use can occur outside a person’s home as well as inside. The amendment ensures that it is clear that, for example, a person who under new section 109A copies music to an iPod can listen to that music in a public place or on public transport. (Rares J’s emphasis)

and

57 The Minister then explained in the Senate, repeating the words of the Further Supplementary Explanatory Memorandum, why cl 111(1) had been reworded saying (ibid):

“This relates to time shifting. … This amendment substitutes a new section 111(1), which removes the requirement that a recording of a broadcast under section 111 must be made in domestic premises. This amendment provides greater flexibility in the conditions that apply to time-shift recording. The development of digital technologies is likely to result in increasing use of personal consumer devices and other means which enable individuals to record television and radio broadcasts on or off domestic premises. The revised wording of section 111 by this amendment enables an individual to record broadcasts as well as view and listen to the recording outside their homes as well as inside for private and domestic use.” (Rares J’s emphasis)

Thus, it appeared Parliament did not intend to draw a distinction between equipment owned and operated by the viewer in his or her own premises. Accordingly, his Honour considered (at [63]):

… the user of the TV Now service makes each of the films in the four formats when he or she clicks on the “record” button on the TV Now electronic program guide. This is because the user is solely responsible for the creation of those films. He or she decides whether or not to make the films and only he or she has the means of being able to view them. If the user does not click “record”, no films will be brought into existence that he or she can play back later. The service that TV Now offers the user is substantively no different from a VCR or DVR. Of course, TV Now may offer the user a greater range of playback environments than the means provided by a VCR or DVR, although this can depend on the technologies available to the user.

Like the 2nd Circuit in Cartoon Network, his Honour considered (at [66]) that there was no real or sufficient distinction between the characterisation of a user of the service to record a FTA broadcast and someone who used a VCR or DVR to do so.

Rares J noted the careful contractual obligations imposed by Optus to ensure that users promised to use the service only for their own private or domestic purposes and, in recognition of the ordinary experience of life, was prepared to infer that was typically the purpose for which the service was used, even apparently in the case of small and business customers.

The other major issue for comment at present is who makes the communication when the customer pressed the “play” button. Rares J recognised that, in a sense, Optus made the communication as it was its servers which transmitted the stream to the customer. Having regard to the deeming provisions in s 22(6) and (6A), however, his Honour considered that the more correct characterisation was that it was the customer him or herself who made the communication. It was the individual customer who decided what was recorded and who also decided whether, when and to where it was transmitted. In reaching this conclusion, Rares J distinguished the situation in Roadshow where a Full Court had found that there could be a communication to the public by transmission of Bittorrent streams between computers without any human intervention. At [91], Rares J considered that the role of the customer of the TV Now service was very different from that of someone who just clicked on a link on a web page. His Honour commented at [95]:

It may appear odd that Optus, which has stored the films in its NAS computer, does not “communicate” (make available online or electronically transmit) the film in the compatible format, but that is because it did nothing to determine the content of that communication. The user initially chose to record the program so that later he or she could choose to play the film so recorded using the TV Now service. Optus’ service enables the user to make those choices and to give effect to them. But in doing so, Optus does not determine what the user decided to record when he or she later decides to play it on the compatible device he or she is then using to watch the film. Hence, the user, not Optus, is the person responsible for determining the content of the communication within the meaning of s 22(6) when he or she plays a film recorded for him or her on the TV Now service. Thus, the user did the act of electronically transmitting the film within the meaning of ss 86(c) and 87(c).

Needless to say, there are quite a few “other” points in Rares J’s 115 paragraphs:

Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No 2) [2012] FCA 34

For a more recent “no volitional act, therefore no infringement” case in the USA see Prof Goldman’s ‘Photobucket Qualifies for the 512(c) Safe Harbor (Again)–Wolk v. Kodak‘

There seems to have been a similar success in Singapore; but Rares J considered the TV Catch Up case in the UK less helpful as the legislation and type of usage in question was rather different. A question on communication to the public has been referred by the English court to the CJEU.

Lid dip: Copyright Council

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The 1709 blog has a good summary of the arrest of Megaupload.com’s Kim “Dotcom” in New Zealand for allegedly copyrights in the USA.

Case 1 (Hew Griffiths aka ‘bandido’)

Case 2 (Richard O’Dwyer)

Meanwhile, some controversy is brewing because the FBI has seized the domain name and apparently blocked any access to the site even by those who have stored material legitimately in the service. Does that mean we all need to start worrying what will happen if our online back-up service is being used by alleged pirates too?

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The internet is all a twitter over the prospect that a 23 year old British subject, Richard O’Dwyer, may be extradited from the UK to the USA to face criminal charges for copyright infringement.

Well guess what, it has happened before albeit from this far away destination.

Mr Griffiths has apparently served his time (in both Australia and the USA) and had this to say to an enterprising journalist.

Lid dip: Graham Dent for the boing boing link!

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The Ninth Circuit has affirmed the trial court’s summary dismissal of UMG copyright claims against Veoh on the basis of §512(c) – the ‘hosting’ safe harbour. UMG argued 3 reasons why §512(c) did not apply:

First, UMG argues that the alleged infringingactivities do not fall within the plain meaning of “infringe-ment of copyright by reason of the storage [of material] at thedirection of a user,” a threshold requirement under§ 512(c)(1). Second, UMG argues that genuine issues of factremain about whether Veoh had actual knowledge of infringe-ment, or was “aware of facts or circumstances from whichinfringing activity [wa]s apparent” under § 512(c)(1)(A).Finally, UMG argues that it presented sufficient evidence thatVeoh “receive[d] a financial benefit directly attributable to. . . infringing activity” that it had the right and ability to control under § 512(c)(1)(B). We disagree on each count, andaccordingly we affirm the district court.

Each of these requirements has a counterpart in our US Free Trade Agreement ‘inspired’ – see s 116AH items 1 and 4 and therefore should repay consideration.

On the knowledge / awareness point:

At [11], Judge Fisher noted that UMG had not notified Veoh of any infringing material under the DMCA before commencing proceedings. After noting at [12] that Congress placed the burden of policing infringements on copyright holders, Judge Fisher continued at [13]:

The 1709 blog has a good summary and links here.

As Techdirt points out, however, the costs of the litigation drove Veoh out of business.

Next up, presumably, the Ninth Circuit’s decision in the appeal from Viacom v Youtube.

Although, as noted above, the decision has potential ramifications for the corresponding Australian provision, I am not convinced it has much to say on Roadshow v iiNet (which concerned Category A activity, not Category C anyway) where the AFACT Notices seemed to provide specific notice (once properly explained).

UMG Recording Inc v Shelter Capital Partners LLC., Case: 09-55902, 9th Cir. December 20, 2011

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While we wait with bated breath for the High Court’s deliberations on Roadshow v iiNet (transcript of hearing here, here and here), it is worth noting that the CJEU (formerly the ECJ) has struck down an injunction against an ISP which required the ISP to monitor all its users’ traffic and filter (block) copyright infringing material.

SABAM, the Belgian authors’ collecting society (counterpart to APRA) obtained an interlocutory injunction against Scarlet, an ISP. SABAM contended that some of Scarlet’s customers were using its services to engage in peer-to-peer file sharing of copyright materials without authorisation. It obtained from the Belgian courts an order that Scarlet implement a system of filtering to ensure that its users were blocked or otherwise made it impossible for them to send or receive in any way, files containing a musical work using peer-to-peer software without the permission of the copyright owners.

It was common ground between the parties that this would require Scarlet to introduce a system for filtering:

–        all electronic communications passing via its services, in particular those involving the use of peer-to-peer software;

–        which applies indiscriminately to all its customers;

–        as a preventive measure;

–        exclusively at its expense; and

–        for an unlimited period,

which is capable of identifying on that provider’s network the movement of electronic files containing a musical, cinematographic or audio-visual work in respect of which the applicant claims to hold intellectual property rights, with a view to blocking the transfer of files the sharing of which infringes copyrigh

It was also common ground between the parties that such a system would require :

–        first, that the ISP (Scarlet) identify, within all of the electronic communications of all its customers, the files relating to peer-to-peer traffic;

–        secondly, that it identify, within that traffic, the files containing works in respect of which holders of intellectual-property rights claim to hold rights;

–        thirdly, that it determine which of those files are being shared unlawfully; and

–        fourthly, that it block file sharing that it considers to be unlawful.

That is, the ISP would have to monitor all the traffic across its network.

While the CJEU recognised that IP, in this case copyright, was a fundamental right. It also recognised that its protection needed to be balanced against the protection of other fundamental interests. It was necessary to strike a fair balance between the rights of copyright owners, ISPs and their customers. This injunction did not do that and so was incompatible with Community law (we would say “invalid”):

47      In the present case, the injunction requiring the installation of the contested filtering system involves monitoring all the electronic communications made through the network of the ISP concerned in the interests of those rightholders. Moreover, that monitoring has no limitation in time, is directed at all future infringements and is intended to protect not only existing works, but also future works that have not yet been created at the time when the system is introduced.

48      Accordingly, such an injunction would result in a serious infringement of the freedom of the ISP concerned to conduct its business since it would require that ISP to install a complicated, costly, permanent computer system at its own expense, which would also be contrary to the conditions laid down in Article 3(1) of Directive 2004/48, which requires that measures to ensure the respect of intellectual-property rights should not be unnecessarily complicated or costly.

49      In those circumstances, it must be held that the injunction to install the contested filtering system is to be regarded as not respecting the requirement that a fair balance be struck between, on the one hand, the protection of the intellectual-property right enjoyed by copyright holders, and, on the other hand, that of the freedom to conduct business enjoyed by operators such as ISPs.

50      Moreover, the effects of that injunction would not be limited to the ISP concerned, as the contested filtering system may also infringe the fundamental rights of that ISP’s customers, namely their right to protection of their personal data and their freedom to receive or impart information, which are rights safeguarded by Articles 8 and 11 of the Charter respectively.

Thus, the filtering injunction did not strike a fair balance between the protection of IP and the rights of ISPs and their customers.

Case C-70/10 Scarlet Extended SA v SABAM, 24 November 2011.

IPKat has the text of the CJEU’s Summary and as they point out, the CJEU’s ruling has some interesting implications for the filtering injunction ordered by Arnold J in Newzbin 2.

Of course, in Australia, we do not labour under a Charter of Rights. Section 116AH(2) of the Copyright Act 1968 does, however, place some limits on a “carriage service provider’s” obligations to monitor:

(2)  Nothing in the conditions is to be taken to require a carriage service provider to monitor its service or to seek facts to indicate infringing activity except to the extent required by a standard technical measure mentioned in condition 2 in table item 1 in the table in subsection (1),

which is a rather more anodyne protection. Also, under the Telecommunications Act, carriers and carriage service providers have prohibitions on disclosing information related to communications (which is not the same thing as a prohibition on monitoring), but there are important exceptions including disclosures authorised by or under law. Cf  e.g. ss 276 and 280.

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The videocast of the 3rd Annual Francis Gurry Lecture is now available:

De-linking intellectual property from exclusive rights

by James Love, Director, Knowledge Ecology Limited. The blurb says:

The traditional justification for IP rights-atemporary monopoly to stimulate innovation and inverstment-is increasingly being questioned. If knowledge is more valuable when widely shared, and if freedom to use knowledge is socially and economically important, we need to de-link intellectual property protection from exclusive rights. But how?

I personally found the Q & A session helped crystallise what Mr Love was arguing. Very thought-provoking.

Apparently, the written paper will provide more explanation and amplification in due course. In the meantime, you may get an understanding of how Mr Love’s proposals could work in a pharmaceutical context here and here

Lid dip: Andrew Christie

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Last Friday, the Commonwealth Attorney-General released a Consultation Paper on ‘Revising the Scope of the Copyright Safe Harbour Scheme’.

As reported then, there were two components to that review.

Over the weekend, the second component – streamlining the notice and take down procedures – has been edited out of the revised version (pdf) (doc version via here).

So now, the consultation paper just relates to re-defining “carriage service provider“.

There’s a fact sheet on how the scheme currently works. Unfortunately, the links to the previous review and submissions seem to have been taken down.

Last Friday’s post referred to the US-Australia Free Trade Agreement. The relevant provision is in chapter 17. So far as the protections apply to service providers, Art. 17.11 paragraph 29 provides:

(xii) For the purposes of the function referred to in clause (i)(A), service provider means a provider of transmission, routing, or connections for digital online communications without modification of their content between or among points specified by the user of material of the user’s choosing, and for the purposes of the functions referred to in clause (i)(B) through (D), service provider means a provider or operator of facilities for online services or network access.

This may be contrasted with the corresponding provision in the “parent” of article 17.11, §512(k) (pdf) of the US Copyright Act which defines service provider for the purposes of the DMCA safe harbours as follows:

(1) Service provider.—(A) As used in subsection (a), the term “service provider” means an entity offering the transmission, routing, or providing of connections for digital online communications, between or among points specified by a user, of material of the user’s choosing, without modification to the content of the material as sent or received. (B) As used in this section, other than subsection (a), the term “service provider” means a provider of online services or network access, or the operator of facilities therefor, and includes an entity described in sub- paragraph (A).

At least, the US definition appears to make it clear that a service provider may be one who provides services not just, as the Australian legislation seems to have been drafted to reflect, only providers, or operators, of facilities for such services. Given the nebulous nature of the term ‘facilities’, however, that may be a difference more imagined than real.

Although it doesn’t provide any “binding” authority like the Free Trade Agreement, the EU directives proceed on the basis of persons providing “information society services”. See e.g. art.s 12 -15 of the E-Commerce Directive, DIRECTIVE 2000/31/EC (pdf).

Lid dip: Leanne O’Donnell.

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Links to the Consulatation Paper on the Copyright safe harbour scheme for carriage service providers.

Broadly, the safe harbour schemes provide some protection from some remedies for carriage service providers:

Category A – acting as a conduit for internet activities by providing facilities for transmitting, routing or providing connections for copyright material
Category B – caching through an automatic process
Category C – storing copyright material on their systems or networks, and
Category D – referring users to an online location (for example, linking).

The first problem is that the definition of csp isFrom

in

the Telco Act (i.e.) those providing the, er, telephone service. Didn’t cover Google or Yahoo or a whole host of other Internet service providers. The Australian definition is much narrower than the US definition. So, the Government is exploring broadening this.

There may be a question of what the US Free Trade Agreement permits.

The second question is looking at ways to streamline the notice system.

Lid dip Libby Baulch

Submissions must be in by 22 November 2011.

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