The Launch of In the Public Interest: The Future of Canadian Copyright Law

Well might they call him 'uber-copyfighter'. The amazing Michael Geist (and no, I'm not just saying that because I'm currently enjoying his hospitality in Ottawa) has today launched In the Public Interest: The Future of Canadian Copyright Law.

This is quite a book. In essence, it was created/coordinated by Michael Geist in anticipation of the tabling of the Canadian copyright reform bill, C-60. Bill C-60 is the Canadian copyright reform bill, a key part of which is implementation of the WIPO Copyright Treaty. The Bill covers such topical issues as:

• ISP liability for copyright infringement
• anti-circumvention laws
• the right of 'making available'
• performers' rights
• the extension of library/educational exceptions to the digital environment.

Michael's book is a timely addition to this debate, and an amazing achievement. The whole thing was put together in approximately 8 weeks or so: with writing, peer review, and publication. The chapters are individually downloadable and are published under a Creative Commons license. It contains scholarship from 19 or so Canadian Copyright professors, and is now available in time for committee hearings on Bill C-60.

Impressed? You should be. Geist's blog is a regular must-read.

 
I knew it, I just knew it.

The High Court will be handing down its decision in Stevens v Sony - the anti-circumvention law case about mod-chips - next Thursday, 6 October 2005.

Exactly one day before submissions are due in the Legal and Constitutional Affairs Committee inquiry about exceptions to the new TPM laws required by the FTA.

Sigh.

One would think it would be a good idea to extent the LACA deadline slightly. Sony may be about the old law, but the present state of the law is always relevant when you are thinking about what the next set of laws should be. And while strictly speaking Sony is more about the definition of TPMs than exceptions, as the LACA head Peter Slipper recognised, definitional issues are not entirely distinct from issues about what exceptions are needed. If the meaning of 'TPM' is defined broadly, then more exceptions are required.

It's worth pointing out that as far as I know (correct me if I'm wrong), the Australian High Court will be the first 'highest court of appeal' to consider anti-circumvention laws. The DMCA hasn't yet reached the US Supreme Court; nor have such laws reached the House of Lords in the UK (Canada I think doesn't even have the laws yet).

 
Fair Use/Fair Dealing Submissions

via Warwick Rothnie: the Australian Copyright Council is now collecting, and publishing, a list of submissions in the fair use/fair dealing inquiry by the Attorney-General.

Obviously I don't have to point out that I've been doing this for quite some time. I'm glad the ACC has decided to do this too - means more people will have access to the various submissions. Which, for reasons difficult for me to fathom, the AG's Department is not publishing.

 
Well well well - finally we have another female High Court Judge.

Justice Susan Crennan, Federal Court judge since 2003, has been appointed to the High Court, effective 1 November 2005. She's been a Queen's Counsel in 1989 and in 1993-1994 was the first female chair of the Victorian Bar Council.

Notably, IP was one of Justice Crennan's specialties at the Bar, and she has judged a few IP cases, including patent cases, in her tenure on the Federal Court. Will Gummow J have a challenger for his general dominance in IP matters on our High Court?

Congrats!

 
It might look like I've been absent...

But I haven't been really. I've just been quiet.
The main thing that I've aed in the last week or so has been new links to more submissions in the fair use/fair dealing inquiry being run by the Attorney-General's department. In the last week or so I've added links to submissions by:

• Prof. Brian Fitzgerald
• The US Library Copyright Alliance
• The Music Council of Australia; and
• The Arts Law Centre of Australia

happy reading!

 
There's a German Goth in My Finnish Class? A couple of quick links...and a must-read article on criminal copyright enforcement.

No, I'm not learning Finnish. That is the first line of this highly recommended article on Crikey.com.au - Therese Catanzariti, Australian expat in Finland, on Finnish music with a rather nice segue into Kazaa and private copying issues.

In other IP news and reading this morning:

• Warwick Rothnie on the ever-ongoing (or rather, never-going) iTunes Australia saga. Oh, and Warwick - government comments on where the fair use inquiry was at as at the end of August can be found here.
• The Economist on the digital home and the fundamental importance of open standards and interoperability in getting consumers to shift to new devices.

What else I'm reading? Well, there's an article in the AIPJ that I think is well worth a read: it's called "If You Go Down to the Woods Today: Tales from the Front Line of Criminal Copyright Enforcement, and it's a contribution from a barrister. A couple of very interesting points in this paper.

The first relates to the jurisdiction of the Local Court:

• criminal copyright matters can be determined in the Local Court, as a summary matter, even though the maximum penalty is up to 5 years imprisonment - when Local Court and summary matters are usually limited to 2 years;
• notably, this means that we have little access to these judgments - Local Court cases are not recorded in AustLII
• Local Court magistrates do not have expertise in copyright law, and it is difficult to explain the technical aspects to them

The second relates to costs: the prosecution claims cost, and this can be used to encourage an innocent person to plead guilty - the article cites a case where a law firm wrote to an accused, stating that if the accused pleaded not guilty, the law firm would incur significant cost and the accused might be liable. That letter gave examples of recent cases where the accused pleaded not guilty and was found both guilty, and liable for costs of $40,000 - $60,000: this in circumstances where the likely fine for the offence would be around $1,000 - $5,000. The use of costs to effectively increase the maximum penalty for a copyright infringement is deeply troubling. Criminal prosecution for copyright infringement is undoubtedly appropriate in some circumstances. But we do need to be very conscious of the difference between civil and criminal matters and the idea of the penalty set by Parliament as being the standard.

Other matters talked about in the article include:

• the inconsistency of confining charges to a limited number of copyright infringements but sentencing taking other alleged infringements into account;
• the proving of 'knowledge' in circumstances where the level of knowledge may be doubtful, and relying on names and signs on CDs which are not generally known to the public as indicating 'genuine' or 'pirated' CDs
• the issue of venue - and the problem of cases not being brought where the accused is based.

I'll quote a short excerpt from the introduction:

'Copyright piracy is a serious problem and penalties should be severe. ... Criminal sanctions such as the stigma of a criminal record and a jail term may be the only effective deterrent against pirate operations that treat civil damages as just another cost of doing business. ... However, this article questions whether Australian criminal copyright sanctions are inadvertently stronger than they are intended to be because of the fact that matters are handled in the Local Court, the way that the laws work in practice, and the way that the laws are applied by the prosecution and by copyright owners.

This article argues that the criminal copyright laws should be amended to ensure that the laws operate fairly and do not improperly undermine the rights of the accused to defend himself or herself.

This article does not include extensive empirical analysis, and does not pretend to be comprehensive or definitive. However, it is not theoretical, and is not an analysis of 'what would happen if' worst case scenarios. These are real examples in real cases.'

Read the whole thing. It brings to light some of the stuff that usually remains hidden (at least from academic eyes!) about copyright enforcement. The reference is (2005) 16 AIPJ 165 (August edition of the Australian Intellectual Property Journal) (sorry, no link).

 
Yet another government review [slightly revised as at 11:40am]

I hadn't mentioned this, because it seemed to me so much less important than other current government reviews (on TPMs and copyright exceptions), but Attorney-General's are running yet another simultaneous review: this one of the appropriate scope of the ISP safe harbour provisions brought in with the FTA Amendments last year. I wasn't going to blog about this, because it's pretty clear that AGs do not consider this a big deal; do not think it requries wide comment - and in general I'm inclined to agree. But now Warwick Rothnie has commentary here, I'll just note it in passing.

When the government introduced the safe harbour provisions (Part V Div 2AA of the Copyright Act) it limited the benefit of those safe harbours to 'carriage service providers' as defined in the Telecommunications Act. This was pretty weird at the time, because in other countries, including the US, the safe harbours are not so limited - they can be used by online 'service providers' generally. The effect was to cut institutions like Universities out from relying on the safe harbour provisions.

They now look like expanding the safe harbours, and it looks like they are having a bit of a review to make sure they're not missing something important. As far as I can see, there is no real reason why the safe harbours should not be explicitly extended to make sure they cover people other than just official carriage service providers.

If there is something interesting in the review, it is the question of how you expand the safe harbours: do you expand it to 'service providers' generally, or do you allow the Minister to designate people who can have the benefit of the safe harbour? My own preliminary view would be that surely the reference should be to service providers (like the US) - for the sake of technology neutrality. Why require pre-designation as a CSP? Why give the power to designate to anyone? Although arguably one of the benefits of 'prior designation' as a CSP is certainty. Perhaps, on reflection, the best approach is a two part one:

• give the Minister the power to designate some people as carriage service providers with the benefit of the safe harbours, but
• allow the safe harbours to apply to 'service providers' more generally as well - so that those without the foresight to apply for pre-designation can argue they are covered if need be. That would allow people like search engines to argue that they have the benefit of the safe harbours without having to make application.

There is perhaps another issue, which is whether we want the specific US one for non-profit educational institutions to prevent them being liable for activities of their researchers?

As Rothnie has noted, if you want a discussion paper you'll have to seek it from the AGs' Department. But in general, on the scale of 'important current issues in copyright', this one rates pretty low in my opinion.

 
Yes, more Kazaa

Brendan Scott's views are here (pdf) (Brendan runs Open Source Law, a legal practice specialising in open source/IT law issues, in Sydney). I've updated the links post below too. In further developments, Professor Michael Madison (Pittsburgh) has some interesting comments comparing US and Australian approaches to caselaw.

 
More Kazaa comments from the informed...

I've updated the collection of Kazaa comments, below, with these Ed Felten comments. Since Felten is a computer scientist, his comments are definitely worth paying attention to.

 
Damages in Kazaa?

Little flurry of debate over the last couple of days about possible damages in Kazaa. Applicants of course talking "in the billions". I made some comment about this yesterday and at the time, noting the absence of 'statutory damages' in Australia. Without a statutory damages system, damages are based on loss/harm (plus additional damages for flagrancy). But what does that mean when:

• not every download (or anywhere near every download) would be a lost sale?
• many of those downloads would not be in Australia and working out which ones were would be rather challenging to say the least?

Interestingly, in the flurry of attention on Kazaa (of course), I didn't note a little judgment by Tamberlin J - in Eagle Rock Entertainment Limited v Caisley [2005] FCA 1238 - which actually has a little bit of relevance here. It's not, of course, the only judgment on copyright damages in recent times of relevance, but it's nothing if not timely.

In the case, Eagle Rock Entertainment Limited sued Caisley (one of those absent, non-responsive type respondents) for copyright infringement over two things:

• production and sale of unauthorised copies of the DVD in Australia; and
• the making and selling of master copies which were sold to entities in Spain and Brazil which then made and sold unauthorised copies in those countries.

On the question of how much harm in Australia, Tamberlin J had this to say:

there are two alternative approaches to the assessment of damages in relation to the infringements in Australia. The first is the licence fee approach. The relevant question in relation to this approach is whether the applicant and respondent are in actual competition. Where this is the case, an issue arises as to whether the respondent might have been granted a licence by the applicant if it had been sought. In a case where a licence would probably have been granted, the measure of damages can be assessed by taking account of the licence fee or royalty that the respondent would have been made to pay by the applicant for a licence. However, in referring to these general guiding principles, it is important to bear in mind that they are not immutable and that the relevant factors on which damages can be assessed are broad and extensive. An applicant is not normally under a compulsion to grant licences. If the applicant would probably not have granted the respondent a licence, the Court will take into account the losses caused to the copyright owner by the competition posed by the respondent’s sale of unauthorised DVDs. This will normally involve a consideration of any loss that the copyright owner has suffered by diminution of the sales of the copyright work or the loss of the profit that the copyright owner (or exclusive licensee) might otherwise have made.

In the present case, having regard to the extensive material before me and the applicant’s detailed submissions, I do not consider that the appropriate approach to take is one based on the licence fee that Eagle could have charged for the making and selling of the DVD. I do not consider that Eagle would, if requested, have granted a licence to Caisley or that Caisley would have paid the licence fee if he was given the choice between so doing or not using the copyright work. The two parties were in direct competition. I note that, in some instances, the authorised DVD and the unauthorised DVDs were sold from the same website. Therefore, there was a direct deprivation of profits that the applicant would otherwise have made.

This reasoning on the use of licensing fees as a measure of course may not apply in full - Kazaa might argue that they wanted to go 'legit' with the gold files. Of course there is no way the applicants would have provided a license to this mob. But perhaps license fees in other online applications could be a guide...

The case in the Kazaa litigation over 'direct losses' is not as simple - a download is not equivalent to a CD - nor, arguably, to a DRM'd download.

On the master copies, Tamberlin J interestingly allowed the copyright owners to claim for the lost sales in Brazil and Spain (quite a sizeable claim, at $251,000). Could copyright owners in the Kazaa litigation claim for infringements overseas under Australian law?

And then there is 'flagrancy' damages - additional damages under s 115(4) for contumacious behaviour. And what emerges from this judgment is that the amount of flagrancy damages is pretty much a stab in the dark:

'Additional damages are at large. The assessment depends on the particular circumstances of the case. I have been referred to several cases where large amounts of additional damages in the order of $500,000.00 and $350,000.00 were awarded. In the present case, I am satisfied that there has been serious and deliberate infringement by Caisley and that the conduct falls within s 115(4). I regard the infringements and associated conduct referred to by Eagle as flagrant, deliberate and serious. In these circumstances, I consider that additional damages in the order of $90,000.00 are appropriate. In reaching this conclusion, I have taken into account the very substantial amount of damages awarded by way of the other head of damages.'

I'd be interested in anyone else's views on the damages issue...

 
Kim Suffers Her First Blatant Infringement of Copyright...

The irony.

I have a blog about copyright. On it, I put freely available, fairly expert (if I do say so myself) commentary on IP matters. I do that as a public good - I'm paid from the public purse after all.

I allow non-commercial reproduction with attribution.

So when I see an entire post, copied verbatim, without attribution, on a commercial site, I admit, it just makes me cross. Unethical, unnecessary behaviour indeed.

UPDATE: In response to my complaint, the relevant site has removed the post. In response, I have removed their name from this post. The copying, of course, unethical behaviour in my view, but I am glad they have responded quickly to my rather strong complaint!

 
Not so brave? More on Kazaa

[UPDATE/CLARIFICATION: As per the comment to this post: let's be clear on this - I am not meaning to suggest, by the text below, that Wilcox J intended to create work for the court on the Kazaa injunction. As I noted, the issue is in part moot, and as David Starkoff has pointed out, one interpretation of the intention behind the order - and one which I agree with David is a highly likely - is that it is supposed to provide clarity and avoid disputes about what Kazaa was meant to do. My view is that the order will fail to achieve this effect, but that does not impugn the intention behind it. I agree with my commenter that the last thing that Wilcox J could be called is 'cowardly' - the willingness to put a provisional style of order 'out there' is, quite arguably, an admirable thing since it opens up the issue for discussion.]

One canny reader points out that Wilcox J is due to retire soon. Hence my comment that Justice Wilcox is brave by letting himself in for future fights over the scope of any injunction is a little misplaced - perhaps we should see it as letting the court in for further disputes - not himself...

In any event, it's all a little academic, since Kazaa have announced that they will be appealing.

In other Kazaa news, The Tele is reporting that:

The music industry will push for more than $1 billion in damages after its landmark court victory over internet music pirates Kazaa.

As I said earlier, as to the amount of any damages, who knows what an Australian court will order? But here are some key points to remember:

• Australia does not have a system of statutory damages at the moment. So there can be no argument that the copyright owners can elect to receive $x per infringement and just measure hte number of infringements. Here, we differ from the US, where the copyright owner may elect an award of statutory damages - between $750 and $30,000 per infringement) as the court considers just;
• Australia does however have a system for 'aggravated (actually 'additional') damages' for flagrant infringement (s 115(4)), but there is no particular rule about what must be awarded under that provision;
• The basic measure of damages is proven harm, sometimes measured according to the license fees that would be necessary. Given the difficulties of proving the level of harm caused by file-sharing (as the OECD has noted, the data is very inconclusive on this), it is not at all clear what is going to happen on this issue.

Mind you, of course, Kazaa did have a lot of users...

 
This comment from Rimmer deserves to be on the main page, not just a comment

Rimmer on Kazaa in a comment to a post below:

Perhaps some plaudits should be given, too, to Michael Speck. He has been relentless and tenacious in the action against Kazaa. It was by no means certain that this litigation would be successful.
Speck has certainly succeeded - where his overseas counterparts have failed. Perhaps he deserves an "Agent Smith" award (if one can forgive the Matrix allusion).
One can only hope that Hugo Weaving is available to play Michael Speck in a film of the Kazaa litigation.

 
More Kazaa Commentary (UPDATED at noon)

Some more links to peoples' comments on Kazaa:

• UPDATE 6/10/05: a couple of articles are available on Online Opinion: including this piece by Stephen Peach (ARIA), and this piece by Stephen Abood.
• UPDATE 13/9/05: Michael Madison's views (University of Pittsburgh) - interesting comments comparing US and Australian approaches to legal development.
• UPDATE 13/9/05: Phil Tripp's views are here (Tripp is a music business type person, and runs the website themusic.com.au, a news/commentary portal for music biz)
• UPDATE 13/9/05: Brendan Scott's views here (pdf)
• UPDATE 9/9/05: Ed Felten's comments on Kazaa are here.
• UPDATE: Kathy Bowrey's Comments (and comments on many other digital copyright and 'piracy' issues) here.
• UPDATE: David Starkoff (recommended - don't agree with him on everything but it's an interesting view);
• IPKat (just saying it seems a sensible result. Of course, that's not the issue - the issue is the reasoning, which is problematic for reasons I've outlined and Matt Rimmer has also underlined in his comment on this and Geists' blog, quoted in Starkoff).

David differs from my comments on the Wilcox J orders, saying:

on reflection, I think this is Wilcox J’s attempt to provide certainty to the parties. Paragraph 4 of his proposed orders is the usual and expected injunction, par 5 provides that certain conduct (based on Wilcox J’s findings) will not be taken to infringe that injunction. I think it is Wilcox J’s attempt to avoid ongoing supervision, by setting out a practical way that the Kazaa network can continue to operate without being liable for contempt of court.

I take David's point, which is of course 'backed up' by the fact that the judge did not accept every step or action that the copyright owners wanted Kazaa to take - he has singled out just two as things they must do (he did not, on the other hand, suggest that Kazaa start taking down full identity details of its users for the purposes of future prosecution, nor did he accept that Kazaa should bring legal action to enforce its End User License Agreement).

On the other hand, by not stating what actions by a technology provider are, or are not, authorisation, and instead singling out things to do - by not articulating a clear rule, something both Rimmer and I have commented on - Wilcox J has arguably left everyone in the dark a bit and made ongoing supervision inevitable. Wilcox J has said a couple of things that Sharman must do but what would happen, for example, if such actions were taken and were to prove (inevitably) ineffective? Could the copyright owners come back and say those actions are not working, but Kazaa is still authorising infringement? The orders do include a 'liberty to apply' (for further orders). Or are we to read the orders as being the 'rule' we look for in vain in the judgment - the 'this is what technologists (including Kazaa) must do to avoid infringing?' Is this Wilcox J's final word on the limits of what any technologist (including Kazaa) should have to do? It's not clear to me - I'll have to have another read.

Another interesting thing about some of the commentary around is this view that 'oh, well, it doesn't matter because Kazaa is dead/not popular/less important than eDonkey or BitTorrent anyway'. On one level, well yes obviously - if technology has moved on, then the judgment on the facts becomes less important.

On the other hand, the principle remains and can be used - in litigation or in threats of litigation - against other parties. That is, of course, the point of bringing test cases, especially against obvious 'bad actors' like Kazaa.

The force of that threat is reduced by the highly fact specific nature of the judgment, and Wilcox J's failure to state any particular principles or rules. Wilcox J has bent over backwards to underline that his judgment applies to Kazaa's conduct, and not necessarily anyone else's. Technology innovators could quite readily come along and distinguish themselves on any number of bases. But will they? When faced with a battalion of barristers (6, no less, including two silks)?

 
Commentary on Kazaa

I've already put up fairly extensive (albeit initial) comments on Kazaa below. I'm not, of course, the only one to comment on the case: here are some more links:

• Michael Geist on how the Kazaa judgment shows that Australian and Canadian copyright law are moving apart;
• The Australian (news story)
• Copyfight (reporting the story)

It's not much - but I've not yet found all that much apart from news stories.

Let me know if you find more commentary that I should link to here. Also, if there is anyone out there with some comments they want to post, feel free to put them in the comments box or, if that's just too annoying, email them to me so I can post them direct to the blog.

 
Justice Wilcox is a brave judge: some initial comments on the Kazaa judgment

So today, senior Australian Federal Court judge Justice Wilcox handed down his decision in the trial of the Kazaa case. In this case, over 30 applicants - in essence, copyright owners - sued the companies and individuals involved in providing Kazaa software. They alleged all kinds of things, but the essence of the case is this question:

By providing P2P file-sharing software (and through all their other activities), did the respondents (Sharman companies, Altnet companies, and assorted individual directors) authorise the undoubted copyright infringement done by the users of the software?

The result?

• The Sharman companies did authorise infringement. They did not engage in other forms of infringement/illegality alleged by the copyright owners (including direct infringement, conspiracy, misleading conduct under the TPA or unconscionable conduct);
• The directors/head honchos in Sharman are liable for authorising infringement too;
• Some of the other parties avoided liability.

The Australian are calling it 'The Day the Music Died' (a bit odd, given that the market has, of course, moved on from the Kazaa system). Below are some initial thoughts. I'll use headings, because my thoughts are scattered, and relate to various issues.


What is the immediate result of the case?

What Wilcox has done is make certain orders:

• declarations of infringement;
• an injunction against continuing authorisation of infringement, stayed for 2 months in light of the next order;
• instructions to avoid this injunction shutting down P2P software entirely: the court thinks that modifications should be made to the technology, and has instructed the parties to agree to a protocol or will approve one himself - the court has also outlined some steps the judge thinks could be done;
• an order for pecuniary relief (ie, damages) - the amount reserved for determination at a later hearing;
• an order that the respondents (Sharman parties) pay 90% of the copyright owners' costs (this would be on a party/party basis, so wouldn't be the full amount expended by copyright owners. Still, it will be significant).

What, the judge wants to re-design the technology of Kazaa?

Yes, Justice Wilcox has decided that he is quite prepared to get into the nitty-gritty of the technology. He has ordered the parties to agree a protocol whereby filtering (of some kind) may be imposed into the software.

Thus the title of this post: this is a brave move indeed. Given the experience over in the US in the Napster litigation, where similar attempts by a trial judge led to much ongoing disputation about the form of orders that only went away when the litigation collapsed under its own weight, I'm surprised that any judge would want to get into this. All the more so given the traditional reluctance of the courts to grant injunctive relief that will involve forcing parties into an ongoing relationship, which will require 'ongoing supervision' by the court of the order (Patrick Stevedores v MUA (1998) 195 CLR 1 at 46-47).

Wilcox's orders necessarily involve both - the ongoing relationship of the parties and the ongoing supervision:

• an ongoing relationship is required because it seems that it will be the copyright owners who must provide, and update, the list of stuff to be filtered. They will have to provide that to the respondents;
• ongoing supervision because there will be inevitable disputes (if the past relationship between these parties is anything to go by) let alone the settling that must occur.

I am reminded of a comment by Lemley and Reese in an article not that long ago:

'there will always be disputes over what content is infringing. Copyright law is full of gray areas,and copyright owners have a history of trying to extend the law beyond its bounds. A court that decides to stop infringing content while letting the rest of the service continue will either have to enjoin all infringing content in advance (in which case no rational defendant will operate their system at all, for fear of going to jail for contempt) or will be signing up to resolve an endless series of oversight disputes about particular cases'

In effect, Wilcox wanted to split the baby. He didn't want to absolve Kazaa in this case. He wanted to put a stop to some of the infringement. But he also wanted to make it clear that P2P file-sharing could go on. So he tried to tread a middle path. In my view, the middle path here is unlikely to be a viable one. As I mention below, I think the better approach might have been to frame the rule on liability in a way that would catch the bad actor but avoid imposing liability on all technological innovators.

One thing to note however: if you look at the judgment itself, these orders are provisional: Wilcox J has said that (at para 519):

'I have formed some views about the appropriate form of injunctive relief and have drafted some orders. It is convenient immediately to make the orders. However, I will do so on a provisional basis, in the sense that I will be prepared to reconsider the form of the orders, if so requested by any party. I will not receive further evidence in rleation to the nature and form of the orders.'

What are the damages likely to be?

Who knows? This will be determined later, if necessary. A couple of points to note however. Australia does not have statutory damages (unlike the US) - the copyright owners can't argue that they should just get a fixed amount 'per infringement'.

On the other hand, Australia does have additional damages for flagrancy of infringement. It is not clear whether Wilcox J would be prepared to make such an order.

Is this case anything like the Grokster case?

People interested in digital copyright issues of course recall the recent US supreme court decision in Grokster. Like Kazaa, Grokster was about whether a provider of P2P software could be liable for the copyright infringements of its users.


There are some important differences though. In Grokster, the US Supreme Court had to decide whether the 9th Circuit was right to uphold a trial judge's decision granting summary judgment to Grokster and other P2P software providers. Grokster has not, yet, involved a finding that the P2P software provider IS liable - but they could be.

Unlike Grokster, however, Kazaa is a judgment after a full trial. In Grokster the lower courts decided that under existing US precedent, there was in effect no way that the software providers could be liable for copyright infringement of the users. The Supreme Court held that that was wrong, and sent the matter back to lower courts for more detailed consideration.

In Kazaa, however, we have had the full trial. In fact, we have had quite extensive evidence-gathering - despite the grumbles of the judge about the incompleteness of the information presented. This is a final judgment on liability - subject to any appeal (to the Full Federal Court, or, following that, to the High Court). The judge has indicated he would be minded to allow an appeal at this point, if the parties want to pursue it (they need leave because not all the issues are dealt with yet - damages are not yet decided).

One other point. Wilcox J specifically noted that he had thought about Grokster, but that it wasn't relevant. According to Wilcox J,

there was a question in my mind as to whether the Supreme Court's decision [in Grokster] provided any guidance to the resolution of this case. ... I invited the parties to comment about that matter. They all did so. Their comments confirmed my impression that the differences, both factual and legal, are such as to render Grokster of little assistance to me.'

Aren't P2P software providers ok provided their technology has non-infringing uses?

No, that isn't the law in Australia.

As I said above, the issue in this case is whether the Kazaa parties authorised infringement by users. 'Authorisation' is the Australian equivalent to secondary liability under US copyright law (contributory/vicarious liability - we don't draw the same distinction) (see my background website here). But that doesn't mean that tests like the Betamax test, or its re-working in Grokster, are relevant here.

Under section 101 of the Copyright Act, a person can be liable for direct infringement (doing any of the acts which are part of the exclusive rights of the copyright owner) or for authorising the doing of those acts. In Australian law, the classic formulation is that a person 'authorises' infringement when they sanction, countenance or approve infringement (UNSW v Moorhouse). The factors a court has to consider are listed in section 101: a court must consider:

• the extent (if any) of the person's power to prevent the doing of the act concerned
• the nature of any relationship existing between the person and the person who did the act concerned
• 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.

The question is how these factors apply to a provider of technology, like a video-recorder or P2P software.

For a long time, actually, the risk of liability posed to a provider of technology that can be used to infringe copyright has been unclear. The few cases we had (Hanimex in particular) have been unclear. No one has tried, here in Australia, to sue a provider of a video recorder. There are obiter comments by some judges in the High Court and lower down that such a person wouldn't be liable, but things have been unclear.

Indeed, leading copyright authorities in the common law world have criticised Australian law on authorisation for being too copyright-protective. As Laddie, Prescott & Vittoria note, there are two possible meanings of 'authorise':

1. The 'wide view': 'sanction, approve or countenance' infringement; and
2. The narrow view: authorisation means a grant, or purported grant of the right to do the infringing act.

They say that the narrow view is better, but the wide view is the one that prevails here in Australia.


So what happened in this case: why did the Court hold that the Kazaa parties authorised infringement?

The court offers its own little summary of why Kazaa is liable for authorising infringement. Three obvious facts are the starting point:

1. there is widespread infringement on the Kazaa network, which
2. The Kazaa parties undoubtedly knew about and
3. The Kazaa parties provided the facilities (the software) for that widespread infringement.

These facts, however, would not be enough on their own. Mere knowledge is not enough. Mere provision of facilities is not enough (indeed, there is a specific exception that prevents a 'mere' provider of facilities from being liable - section 112E of the Act). The 'clinchers' were in some of the facts of this particular case:

1. The warnings on the Kazaa website about infringement were ineffective to prevent, or even substantially to curtail copyright infringement;
2. There were technical measures that the respondents could have used to reduce, though not to prevent, the sharing of copyright files, which the respondents did not do (and which was not in their financial interests);
3. The financial interests of the Kazaa parties are to maximise, not minimise, music file-sharing:
   
   'The more shared files available through Kazaa, the greater the attraction of the Kazaa website. The more visitors to the Kazaa website, the greater its advertising value and the higher the advertising rate able to be demanded by Sharman. And what is more likely to attract large numbers of visitors to the website than music, especially currently popular ‘hits’?';
   
4. The Sharman parties had included on their materials active exhortations to users to increase their file-sharing, including by a 'Join the Revolution' campaign that criticises record-companies for opposing P2P.
   
   'It seems that Kazaa users are predominately young people, the effect of [Kazaa's] web page [with the slogan, 'Join the Revolution'] would be to encourage visitors to think it 'cool' to defy the record companies by ignoring constraints'

What's really at the heart of the finding of authorisation, then, are some very basic points: in essence, the court:

• accepted that various bits of evidence pointed to quite a few things that indicated that the Kazaa parties had a degree of interaction with, and 'control' over, the conduct of their users; and
• in particular, the court had identified to it two things that Kazaa could do to make infringement harder: keyword filtering, and 'flooding' of search results with copyright warning files.

What brought Kazaa undone in this particular case was the way that their business model worked. You see, searches using Kazaa software returned two types of results:

• blue files (free shared stuff) and
• gold files ('premium' DRM-protected type content, supplied by Altnet people).

The mere fact that gold files could be provided in response to queries meant that something could be done to those queries.

Kazaa wanted to have their cake and eat it too. They wanted to say they weren't controlling the activities of their users on the one hand, and yet on the other sell the ability to engage with users directly, and provide targeted content, as the 'selling point' of the technology. This didn't convince the judge. And while the judge by no means accepted the extensive evidence and arguments offered by the applicants that Kazaa could engage in direct, immediate, and almost complete control of their users' activities, the judge did accept there were certain things that Kazaa could do to make copyright infringement a whole lot more difficult.

Kazaa could put in a filter, like its adult filter, except make it the rule (ie mandated): using things like copyright owner names/performer names, to prevent files getting through. Notably, the court did not accept that filters could be so easily avoided (as they were with Napster!) that they would be pointless. As Wilcox accepted:

'a keyword filter system that was tied to the title of the sound recording or the name of the artist would not be 100% effective. However, counsel for the applicants argued this was no reason to reject the view that the respondents could have used this technique substantially to inhibit copyright infringement'

Alternatively, Kazaa could use the 'annoyance' tactic 'flood' the results page of a Kazaa search using a copyright owners' stuff with empty gold files. Wouldn't this affect users of Kazaa overseas? Well, yes, but that's immaterial:

'The point was made by counsel for some of the respondents, and in relation to any filtering proposal, that the mechanism could not be made specific to Australian users; it would also constrain the access of non-Australian users to the copyright material included on the relevant copyright-owner’s list. That is so, but I cannot regard that as an objection to a filtering mechanism. If it is reasonable for the respondents (or any of them) to adopt a filtering mechanism in order to avoid an infringement of Australian copyright law, it is immaterial whether that step would also have been necessary in order to avoid infringement of the copyright law of some other country.

Actually, I have to say that if Kazaa did do these things, it would probably reduce copyright infringement using the Kazaa network, because they truly would drive users away. In a Wilcox ordered world:

• Kazaa will have to put in annoying things like keyword filters and/or flood search results with empty copyright warning type files; and
• In order to force users to accept the updates with these annoying features, Kazaa will have to apply 'maximum pressure' using 'dialogue boxes' to convince people to update. In other words, really annoying and constant pop up boxes demanding the user upgrades.

Gee, how long do you think Kazaa - already less popular - will last once it puts these in place?

So does that mean if I'm not doing what Kazaa did - if I'm not involved in users' search results - then I'm ok?

Nope. There is no clear, bright line rule in this judgment, unfortunately. Technology innovators are given no clear rules, if you ask me, on what to do to avoid liability. No money quote. None at all.

The court points to four key facts that support a finding of infringement here:

1. ineffective warnings;
2. failure to take steps to reduce infringement
3. active exhortations on people to share; and
4. the fact that it was in the financial interest of Kazaa to encourage more sharing of copyright-protected stuff.

What is not clear is whether the absence of any of these factors would be enough to avoid liability. The judge does not make that call. Nor does the judge make a call on whether he accepts the broad view of authorisation being pushed by the copyright owners in the case. What the judge seems to be saying is that all you can do is weigh up all the factors in an individual case.

Of course, the judge did not need to offer a general ruling - he only had to consider this case. But the absence of any real 'test' for providers of technology puts Australia in a continuing position of uncertainty. And frankly, it will likely chill investment/innovation. Bright line rules are good for investment in innovation. We don't have that here.

In Conclusion

In my view, it was always going to be the case that Kazaa itself went down, on the kinds of facts that we see in this case. What I was hoping was that the judge would find a way to frame a rule relating to the meaning of 'authorisation' in copyright law, so that it caught 'bad actors' without generally chilling innovation.

The court has not done that. The court has caught the bad actor but provided no guidelines for the good actor. The court has remained true to the strict letter of the legislation, which refers to 'factors to be weighed up'. This could chill technological innovators of the good type because there aren't any bright line rules to follow.

But most immediately striking to me is just how brave Wilcox is. In splitting the baby, and trying to get into technological design, I fear that the judge has let himself in for a helluva fight. And it's not like he didn't know that: he saw the litigation as it went on. I fear the dramas will continue as parties fight over orders. We are back in Napster territory again.

 
Kazaa judgment is available online

Available here. More comments soon.