December 2022

It must be Christmas – there’s a copyright issues paper

Leave a Comment / Copyright / / / , , , , , ,

The Attorney-General has released a Copyright Enforcement Review: Issues Paper.

The Issues Paper begins with a welcome recognition that copyright plays an important role in “Australia’s creative ecosystem and broader economy”:

Copyright infringement may harm Australia’s creative ecosystem and broader economy by reducing or diverting income that creators of, and investors in, original material rely on for their financial sustainability. Copyright owners need to be able to take reasonable steps to protect and enforce their rights as part of a well-functioning copyright system. To this end, the current system includes a range of enforcement mechanisms (including industry-driven and statute-based mechanisms) to address unauthorised uses of copyright material. At the same time, it is important that consumers, service providers and other businesses are clear about when they can use copyright materials and in what circumstances.

Having noted the interests of both the creators and investors and consumers and others, the Issues Paper then declares the Government’s commitment to ensuring that copyright protects Australian artists through a fit-for-purpose enforcement regime:

The Government is committed to copyright laws that protect Australian artists and enable them to earn a living from their creative works. The Australian copyright enforcement regime must remain fit-for-purpose.

Accordingly, the Issues Paper states that the purpose of the review is to investigate whether the enforcement regime is working effectively or there are matters requiring attention:

The Australian Government is undertaking this review to:

• understand current and emerging enforcement priorities and challenges

• gather views from all parts of the copyright system – including owners, users, institutions and service providers – on whether Australia’s copyright enforcement regime remains relevant, effective and proportionate, and

• seek feedback on whether there is any need to supplement or strengthen existing enforcement mechanisms, and if so, how this could be done without imposing unreasonable administrative or economic burdens.

It appears that the background to the review is the increasing prevalence of online copyright distribution and consumption. Thus, the Issue Paper refers to the findings of a 2021 Consumer Survey on Online Copyright Infringement which revealed that 71% of survey respondents had “consumed” copyright material online in the 3 months to April 2021.

Further, the Issues Paper refers to industry data company, MUSO’s statistics for access to online piracy sites from 2017 to 2021 which appear to disclose “no strong upward or downward trend in copyright infringement overall” but, while declines in piracy of TV, films and music since 2017 have been observed, there have been increases in pirating of publishing materials.

The Issues Paper also reports that there is still a significant amount of IP-infringing material in the form of counterfeit goods – defined as goods infringing trade marks or copyright – citing the seizure by Customs of 145,000 counterfeit goods worth more than AUD 66 million in the last 12 months.

Against this background, the Issues Paper asks 3 questions directed to identifying the nature and scale of copyright infringement challenges in Australia:

  1. What challenges have you been facing in relation to copyright infringement in recent years? Are you seeing any changes or trends (including any forms or methods of infringement that are emerging or particularly concerning, or conversely, are becoming less prevalent or concerning)?
  2. Can you provide any data on the scale of current copyright infringement, or the estimated economic impact of such copyright infringement on you, your organisation or your industry more broadly?
  3. Are there any particular drivers of copyright infringement that you see as noteworthy or significant? Have these drivers changed in recent years?

Next, the Issues Paper asks 4 questions directed to ascertaining the extent to which people are using “industry-driven mechanisms”, the costs and weaknesses of such mechanisms and the scope for developing such mechanisms. Such mechanisms include “cease and desist letters” and tools like YouTube’s content ID and Facebook’s Rights Manager schemes.

Turning to “statute-based mechanisms”, the Issues Paper reports that the website blocking scheme introduced in 2015 has resulted in more than 30 cases with more than 1600 sites blocked and some 330 extensions of the “whack-a-mole” variety.

According to the 2021 Online Copyright Infringement Survey, 11% of respondents had encountered blocked websites in the previous 3 months. Of those, 59% gave up trying to access the material and 18% sought lawful access instead. On the other hand, “almost 1 in 5” had used alternative tools to navigate around the block.

Accordingly, the Issues Paper asks:

8 How effective and efficient is the current website blocking scheme as a way of combating copyright infringement and steering online consumers towards legitimate sources of content? For example, is the application process working well for parties, and are injunctions operating well, once granted?

9 Could the way the website blocking scheme operates be improved in any way (for example to address the use of new and emerging technologies to navigate around or through website blocks), including through changes to how the current scheme is practically implemented, or potential amendments to legislation?

(a) What impact would any such changes have on you or your organisation?

(b) Are there any potential broader or unintended consequences (for example, on other aspects of internet traffic management) that should be taken into account when considering changes that may be suggested through this consultation process?

The Issues Paper notes that the “safe harbour scheme”, which introduced a notice and take down scheme modelled on the DMCA, applies only to “carriage service providers” and key cultural institutions such as libraries, archives and organisations assisting people with a disability but does not extend generally to digital platforms.

The Issues Paper then asks:

10 How effectively and efficiently are the authorisation liability provisions and/or safe harbour scheme (and associated notice and take-down process) currently operating as mechanisms for addressing copyright infringement? For example:

(a) How clear are the circumstances in which a party may be considered to have authorised another person’s copyright infringement, given the courts’ interpretation of the authorisation liability to date?

(b) How effective and efficient is the safe harbour scheme (and associated statutory notice and take-down process) in striking the right balance between combatting copyright infringement and protecting the legitimate interests of service providers?

11 Are there ways in which these provisions could be amended to improve their effectiveness or efficiency?

(a) How would such changes affect you or your sector?

(b) Are there any potential broader or unintended consequences that should be taken into account when considering changes that may be suggested through this consultation process?

In its last section, the Issues Paper reports than 150 copyright matters “were brought before the courts” between 2019 and 2021. Of these 60% were brought in the Federal Court and 40% in the court formerly known as the Federal Circuit Court. The Issues Paper also refers to what it describes as the Federal Court’s “expedited claims process” and developments overseas such as the Copyright Claims Board in the United States for disputes up to USD 30,000 and the Intellectual Property Enterprise Court in the UK for claims up to GBP 10,000.

This leads to three final questions:

12 What factors influence your decisions on what action(s), if any, to take through the legal system and/or law enforcement in relation to suspected or alleged copyright infringement?

(a) For example, have you found mechanisms such as mediation, alternative dispute resolution and other non-court remedies to be preferable as ways to resolve disputes?

13 Are the various avenues available through the legal system and law enforcement to address copyright infringement suitable and effective? For example:

(a) Have you sought to engage with the courts or law enforcement in relation to suspected or alleged copyright infringements? If so, please provide (if possible) any data or examples in relation to your experiences.

(c) Are the current civil and criminal remedies under the Copyright Act appropriate?[1]

(d) What barriers (if any) do you face in engaging with the legal system? Could any models introduced in other international jurisdictions to streamline consideration of copyright matters be potentially relevant in an Australian context?

(e) Were you previously aware of the ABF’s Notice of Objection border enforcement application process?

14 Are there any ways in which the current system could be improved? How would such changes affect you or your sector?

In a very welcome move, we have been granted an extended period to make our submissions: they should be submitted by 7 March 2023.

Copyright Enforcement Review Issues Paper

  1. No. I did not inadvertantly miss out (b).  ?

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Damages when the software vendor doesn’t deliver

Leave a Comment / IT, Technology / / / , , , , ,

The NSW Court of Appeal has upheld the decision to award damages for a defective computer system as the cost of replacement and also included a component for an employee’s time spent working on solutions for the problems.

Some facts

SEMF is an engineering and project management consultancy.

In 2013, it engaged Renown to supply and install an upgraded project management and accounting system. The upgraded system was to be based on Microsoft Dynamics SL 2011.

When installed, between 2014 and 2016, the system was defective. The defects related mainly to the module which was supposed to enable SEMF’s employees to generate real-time reports through a web-based browser. SEMF’s employees spent considerable time and effort and incurred significant costs in trying to remedy the defects before Renown conceded it wasn’t possible to fix the problems.

By the time of the trial in 2021, the Microsoft Dynamics SL 2011 software had itself been superseded by the Microsoft Dynamics SL 2015 and then the Microsoft Dynamics SL 2018 package. SEMF had therefore arranged for the installation of a new system based on the 2018 package.

The trial judgment

At first instance, the trial Judge, Ball J found Renown had breached the contract to supply and install the system. His Honour gave judgment for $662,344 comprised of:

  1. $631,894 for the costs of installing a new system based on Dynamics SL 2018, less $52,218 for maintenance fees payable to Microsoft from 2016;
  2. $84,744 paid to Mr McLean, an employee who was found to have been engaged specifically to work on solutions to the problems with the Renown System and the implementation of the Business Portal. However, damages were not allowed for the time of other SEMF employees performing tasks which would not have been necessary had the Renown System not been defective, by reason that the extent of the diversion was not established, a substantial portion of the time claimed was in respect of administrative staff and there was no evidence that SEMF had had to employ additional administrative staff, and the disruption to the business was not so great as to justify an award of damages based on employee costs;
  3. $27,184 for additional licences, $13,935 paid to Plumbline, $7,320 paid to Ms Nicholls, and $800 paid to Pinnacle Analytics. These items either were not, or are no longer, in dispute;
  4. less, a set-off in favour of Renown for $51,315 in respect of unpaid invoices.

On appeal

On appeal, Renown contended Ball J was wrong to assess damages at the date of the trial rather than the breach. It argued further that the damages should be the difference between the value of the system as delivered and the value of the system it had contracted to supply and that no allowance for the employee should be included.

As we all no doubt recall, the measure of damages for breach of contract is:[1]

The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.

Brereton JA (with whom Meagher and Mitchelmore JJA agreed) considered that contracts of this kind for the supply and installation of software systems were analogous to building construction contracts. While the general rule is that damages for breach of contract are assessed at the date of the breach, that is not always the case in such cases as the loss actually suffered can be affected by the date the defects are discovered.

Accordingly, Brereton JA considered SEMF was entitled to its reasonable costs of rectification when those costs were incurred. At [20], his Honour explained:

the principle emerges that the proper measure of damages in a case such as the present is the reasonable costs of rectification, which will be the costs when they were actually incurred (if they have been incurred by the date of trial), so long as they are not unreasonable; or (if they have not been incurred already), the reasonable costs as proved as at the trial, unless it is established that by not conducting rectification works earlier the plaintiff has unreasonably failed to mitigate its loss.

Further, SEMF had allowed Renown an extended period of time to rectify the defects which came to an end when Renown itself concluded it could not fix the defects. Hence, there was no suggestion that SEMF had unreasonably failed to mitigate its loss.

Replacement or fixing the defective module

Renown further contended that the costs of rectification should be limited to fixing the defects in the specific, faulty module.

In a conclusion that will surprise no one who has ever tried to unscramble these things, however, the expert evidence was that identifying the defects and appropriate remedies would be extremely time-consuming and expensive and might never be possible. Accordingly, the expert evidence demonstrated that replacing the whole system with the new 2018 system would be the more efficient and costs effective solution.

A discount because the 2018 system was better than the 2011 system

The next question was whether some discount should be made because SEMF got a better, more modern system – the 2018 version – than what it had contracted for – the 2011 version.

The trial judge accepted there were situations where some allowance for “betterment” should be made. However, they did not apply here. SEMF had not consciously chosen an asset more valuable than the one being replaced. His Honour also considered that, save in one respect, there was no evidence of any benefit to be accounted for.

The exception to this conclusion was in respect of maintenance fees. Before the system was upgraded to the 2018 system, SEMF had not been paying maintenance fees to Microsoft, some 18% of the contract value each year.

In the Court of Appeal, Brereton JA accepted that the 2018 system did bring enhancements and improvements to the user experience over the 2011 system. However, SEMF would have been entitled to upgrade upon payment of the applicable maintenance fees.

There was a disagreement between the experts on whether an upgrade from the 2011 system to the 2018 system would have simply worked or would have required additional work. If such work was required, SEMF had been saved it and its damages might have been reduced on the “avoided loss principle”.

Under that principle, however, Renown bore the onus of proving what work would have been required and so the amount of costs saved. There was no evidence of what work would have been involved let alone its costs so, at [36], this argument failed.

The employee costs

Ball J had allowed for the costs of Mr McLean’s work to be included in the damages, but not other employees. The Court of Appeal upheld these findings.

Mr McLean was a casual employee, engaged for a specific purpose. While Mr McLean was initially engaged to work on a different project, from October 2015 he was engaged full-time to work solely on the implementation and attempted rectification of the system installed by Renown. At [39]: Brereton JA explained:

As a casual employee whose work was solely related to the Renown System, he fell in a different category from the other employees in respect of whom “diversion of time” was claimed but not allowed.

Renown Corporation Pty Ltd v SEMF Pty Ltd [2022] NSWCA 233 (Meagher, Brereton and Mitchelmore JJA)

  1. I thought it was the rule in Hadley v Baxendale (or part of it) but the High Court in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd has ascribed it to Robinson v Harman.  ?

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Some talks (not me)

Leave a Comment / Because I felt like it, Domain names, Patents / / / , , , , , , ,

Coming up to the end of the year, there are events on reforming patent litigation practice and domain name disputes in review.

Patent litigation practice

Calling it “A very IPRIA Christmas”, IP Australia and IPRIA are hosting on 7 December at 5:30 pm an end of year celebration exploring “a wish list of practice reforms for making patent litigation in Australia (including appeals from the Office) more expeditious and cost effective.”

The event will be chaired by Justice Rofe and features Clare Cunliffe and David Shavin KC from the Bar and Lisa Taliadoros from the solicitors’ side of the profession.

Registration is free and attendance can be in person or online – although to assist catering they do ask that you register by the end of Monday 5 December if you are planning to attend at the Law School in Carlton in person.

Domain names

If domain name disputes are more your thing, the Hon. Neil Brown KC is also presenting an “Annual round-up on Domain Name Arbitration”. Topics Neil intends to cover include:

  • how the domain name process works
  • latest trends emerging from the decisions of arbitrators
  • what evidence do you need and how to collect the best evidence
  • the procedures to lodge a claim and how to defend one
  • traps for new players.

While Neil and I haven’t always seen eye to eye in particular cases, Neil has lots of experience both in the UDRP and a number of other regional and country-specific dispute resolution processes.

Neil is giving his talk online via Zoom at 10:00 am (Melbourne time; i.e. UTC +11) also on 7 December 2022.

According to his brochure, there is no need to register; just log-in. I am afraid I cannot reproduce the link so you are probably best just to email him directly.

Some talks (not me) Read More »

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