Australia's High Court rules on ISP's liability for user infringements

Author: Rebecca Giblin (Lecturer, Monash Law School, Australia)

Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16, 20 April 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps095, first published online: June 22, 2012

Australia's secondary liability law has long been broader than that of equivalent jurisdictions, but it was recently reined back when its highest court ruled that ISP iiNet was not liable for authorizing its users' copyright infringements.

Legal context

In 2009, 34 television and movie companies instituted litigation against iiNet, then Australia's third largest ISP, arguing that it had ‘authorized’ the copyright infringements of its subscribers.

Authorization liability has traditionally accrued under Australian law where a defendant has ‘sanctioned, approved or countenanced’ third-party infringement. Since a partial codification of the law was enacted in 2000, courts have also been obliged to consider:

  • the extent (if any) of the defendant's power to prevent the doing of the infringement; 

  • the nature of any relationship between the defendant and the infringer; and 

  • whether the defendant took any reasonable steps to prevent the infringement, including whether they complied with any relevant industry codes of practice.
In the absence of any compelling ‘smoking guns’ to demonstrate that iiNet had actively encouraged infringement, the applicants' argument focused on its inactivity. Like other Australian ISPs, iiNet received thousands of notices each week alleging infringement by its subscribers, from organizations such as the Australian Federation Against Copyright Theft (‘AFACT’). The applicants argued that passing these notices on to customers and then terminating their access if further allegations were made would have been a ‘reasonable step to prevent infringement’, and that iiNet's failure to do so at least indicated that it ‘countenanced’ those infringements. This would have been a stretch even for a law that was already considerably broader than its equivalents in Canada, the USA and the UK.

Facts

At first instance, the trial judge found in favour of iiNet. Given its lack of power over the BitTorrent file-sharing technology which facilitated the infringements, Cowdroy J found that it could not ‘be incumbent on the respondent to stop the infringements’. On appeal, a majority of the three-judge Full Federal Court reached the same conclusion—but in a manner markedly less favourable to iiNet.

Jagot J, dissenting, held that iiNet had already authorized its users' infringements. She was particularly influenced by iiNet's unwillingness to negotiate with rightholders (even in the absence of any judicial authority suggesting it was obliged to do so) and by a press release it issued and made available via BitTorrent the day the litigation was instituted against it, stating its view that it was not obliged to disconnect phone lines based on unproven allegations. In these circumstances she found that it had ‘at least countenanced’ its subscribers' infringements.

Referring to iiNet's ‘contumelious disregard’ for the rights of copyright owners, Emmett J appeared inclined to reach the same conclusion. Ultimately, however, he decided that the notices were simply too flawed for iiNet's failure to act upon them to be unreasonable. Nonetheless, he went on create a ‘roadmap’ for the future: where rightholders had provided sufficient evidence of infringement, undertaken to reimburse the ISP for the reasonable cost of verifying infringement allegations and indemnified it in respect of liability for any mistaken terminations, and where the ISP has still not passed allegations of infringement to its subscribers (and suspended or terminated their access as appropriate), they may well be liable for authorization. Nicholas J had more sympathy for iiNet than his colleagues, but he too left the door open to future ISPs being held liable for similar conduct.

The consensus among academics and practitioners was that this judgment effectively created an unprecedented common law graduated response regime that sharply tilted the playing field in favour of rightholders. In a surprising move however, the applicants looked the gift horse in the mouth and made an ultimate appeal to the High Court.

The strategy backfired. In two separate opinions, the High Court unanimously held that iiNet had not authorized its users' infringements. In the process, it reined back what proved to be an overly-expansive interpretation of the law by the Full Federal Court.

Analysis

This decision considerably reduces the breadth of the Australian authorization law and makes it less attractive to major rightholders as a vehicle for obtaining expansive precedents useful for pushing their enforcement agendas abroad.

Both opinions indicate that ‘countenancing’ can have a broader meaning than ‘authorizing’, finally bringing the Australian view on this point in line with longstanding UK and Canadian authorities. Indeed, the French opinion downplayed the significance of ‘sanctioning and approving’ as well, saying that attention must first be given to the statutory factors rather than the old common law definition.

Applying the statutory factors, French, Crennan and Kiefel CJJ (in ‘the French opinion’) found that iiNet had no technical power to prevent primary infringement since it had no involvement with the BitTorrent technology or power to control or alter it, and because it did not host infringing material or sites that linked to torrent files associated with infringing content. It only had an indirect power to prevent primary infringement by terminating its contractual relationship with subscribers. The notices issued by AFACT ‘did not provide iiNet with a reasonable basis for sending warning notices’ threatening suspension or termination of subscriber accounts. Accordingly, its failure to do so did not amount to authorization of any primary infringement.

The reasoning of Gummow and Hayne JJ (in ‘the Gummow opinion’) was similar. They found that the ‘only disputably practical course of action’ was for iiNet to terminate user accounts after allegations of infringement. This, however, was not a reasonable step, since it would also prevent subscribers from taking advantage of non-infringing internet uses. And, in the absence of any industry code, there was nothing stopping disconnected users from signing up to another ISP and continuing as before, so it was unlikely to bring about any significant reduction of infringement. The Gummow opinion found that it was simply ‘too long a march’ from ‘indifference’, to ‘countenancing’, and so to ‘authorization’.

Practical significance

This decision certainly does not mean that an ISP can never be liable for authorization under Australian law. Indeed, in Cooper v Universal Music Australia [2006] FCAFC 187 an ISP was held liable for its direct involvement with a subscriber's website which was set up to provide links to infringing mp3s of popular songs. If an Australian ISP similarly encouraged or engaged in active involvement with its users' infringements, it certainly could and should be held secondarily liable for doing so. However, the decision does give ISPs some welcome certainty as to their rights and obligations. ISPs will not be liable for opting not to pass on infringement notices to subscribers when they have no involvement in the infringements or any effective power to prevent them.

The court acknowledged the problems copyright owners face as a result of widespread infringement, but made it clear that the common law is not an appropriate source of a graduated response law. This was the correct decision and consistent with the approach taken in other jurisdictions. Given the complexities involved, particularly the costs of enforcement, the need for appropriate safeguards and the potential impact of such a regime on individual consumers, the proper place for development of a graduated response law (if any) is the legislature.

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