February 2009

RECENT DEVELOPMENTS IN COPYRIGHT LAW

In Brief:

1) Productivity Commission to review restrictions on the Parallel Importation of Books under the Copyright Act 1968 (Cth) ( " Copyright Act ").

2) Television and film industries fight online video piracy: Australian internet provider (" ISP ") iiNet has been accused of infringing copyright by permitting its users to download films and TV shows through file sharing.

3) High Court to hear IceTV appeal: the reproduction of television program schedules into an aggregated guide is claimed to have infringed copyright.

4) Legality of Software Back-ups: Federal Court decision in Racing & Wagering Western Australia v Software AG (Australia), [1] suggests that holders of mainframe computer software licenses are entitled to copy and test system software for security and disaster recovery purposes under s 47C and s 47F of the Copyright Act.

1) Parallel Importation of Books - review commissioned

On 7 November 2008, the Assistant Treasurer and Minister for Competition Policy and Consumer Affairs requested that the Productivity Commission review the relevant provisions in the Copyright Act which regulate the parallel importation of books.

Under current copyright laws, an author or publisher may sell the rights to produce copies of a book to foreign publishers to be sold in overseas markets. [2] Local booksellers are prevented from importing titles already published in Australia without permission from the copyright owners. [3] However, booksellers can import directly from the foreign publisher, where local publishers have not supplied a book in Australia within 30 days of its first publication overseas. [4]

The report, to be released by May 2009, will cover:

• the effectiveness of the parallel import provisions in achieving the objectives of the Copyright Act ;
• whether the benefits to the community from the provisions outweigh any costs, including restrictions on competition and the impacts on all relevant industry groups;
• options for reform to the current provisions and any transitional arrangements that should accompany any reform. [5]

2) Video Piracy: Film studios launch copyright suit against iiNet

Members of the Australian film and television industry, along with the Australian Federation Against Copyright Theft (" AFACT ") initiated proceedings in the Federal Court on 20 November 2008, against ISP iiNet for allegedly failing to prevent customers from downloading videos illegally.

AFACT Executive Director Adrianne Pecotic (speaking of behalf of Village Roadshow, Universal Pictures, Warner Bros Entertainment, Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox Film Corporation, Disney Enterprises, Inc and the Seven Network) claimed that iiNet had ignored numerous notices identifying thousands of illegal file transfers carried out via iiNet's network by its customers. [6]

The issue under the Copyright Act is whether iiNet has 'authorised' the copyright infringement. The applicants are seeking a ruling that iiNet infringed copyright by failing to take reasonable steps to prevent unauthorised use of illegal video copies by iiNet customers via the iiNet network.

iiNet Managing Director Michael Malone has denied the allegations, asserting that iiNet has not breached any laws and had repeatedly passed on copyright holders' complaints to law enforcement agencies for investigation. [7]

At the directions hearing on 6 February 2009 Cowdroy J requested that iiNet outline the key issues in contention. Three main issues were raised:

1. whether iiNet authorised acts of infringement;
2. whether iiNet escaped liability, even if its customers infringed copyright; and
3. whether iiNet was protected under the Copyright Act or was required to discontinue services for infringing customers.

iiNet did not dispute the existence of copyright for the allegedly pirated titles.

His Honour tentatively set a final hearing date for 5 October 2009, which is estimated to run for 2 weeks.

The dispute will be an important test case for ISP liability, as peer-to-peer file sharing remains a growing problem for rights owners in the film and television industry.

3) High Court to hear IceTV appeal

On 26 August 2008 the High Court granted IceTV special leave to appeal the decision of the Full Federal Court in Nine Network v IceTV. [8]

Background

Nine Network claimed that IceTV had infringed its copyright of its television programme schedules by aggregating Nine Network schedules. The Network distributed schedules to aggregators, including IceTV, two weeks before the start of the broadcast week. Aggregators used this information to produce their own guides incorporating information from various television networks. Nine Network claimed that IceTV's interactive electronic guide reproduced a substantial part of its television programme schedules by copying the time and title information.

At trial, [9] Bennett J found that Nine Network's television programme schedules were "literary work" within s 10(1) of the Copyright Act 1968 (Cth). [10] However, it was held that IceTV's conduct had not taken a substantial part of those works. Nine Network successfully appealed to the Full Federal Court.

The High Court Appeal

IceTV is challenging the Full Federal Court's findings that IceTV had appropriated a substantial part of Nine Network's programme schedules. [11] In their application for special leave to appeal, [12] IceTV submitted that the material obtained from Channel Nine (the time and title information) were only small components of a much larger aggregated guide [13] and did not satisfy the originality requirement of copyright as they were not new pieces of information. [14]

The Court directed counsel to be 'familiar with the academic writing in this field' [15] and indicated that they may consider the United States approach in Feist Publications Inc v Rural Telephone Service Co . [16] The United States Supreme Court held that when information is taken from a directory or collection of facts and rearranged, then the copyright is destroyed. The High Court also suggested that it may depart from the House of Lords decision in Ladbroke (Football) Ltd v William Hill (Football) Ltd , [17] indicating that the concept of "originality" may require re-evaluation in the electronic age. [18]

4) Legality of software backup copies

The Federal Court decision in Racing & Wagering Western Australia v Software AG (Australia), [19] suggests that holders of mainframe computer software licenses are entitled to copy and test system software for security and disaster recovery purposes under s 47C and s 47F of the Copyright Act. [20]

Background

Racing & Wagering Western Australia (RWWA), which runs the West Australian TAB, entered into a non-transferable, non-exclusive licence with Software AG (SAG), to run database management software on its mainframe computer. Mainframe computers form a specialised sector of Australia's IT industry with only 60 in operation across the country. RWWA was highly dependent on the software for its betting business and arranged with a third party, KAZ Technology Services, to use KAZ's premises as a "warm" disaster recovery site. [21] RWWA stored a mirror-image disk copy on KAZ's mainframe computer, to be uploaded onto the memory of KAZ's mainframe only during an actual disaster recovery situation or routine testing.

Party Submissions

RWWA claimed that the disaster recovery copy was permitted under the Licence Agreement with SAG or alternatively under the Copyright Act . [22] SAG contended that RWWA's storage and testing of the back-up breached cl 12.3 of the licence and entitled SAG to claim additional licence or maintenance fees. [23]

Clause 12.3 provided:

"12.3 Software AG hereby expressly authorises the Licensee to copy the System(s) (in object code only) and the Documentation for archival or emergency restart purposes provided that no more than 3 copies made by the Licensee of the then current system version shall exist at any time and all old versions shall be destroyed." [24]

SAG also claimed that RWWA was "outsourcing" to KAZ in breach of cl 1.5.

Clause 1.5 provided:

"The Licensee shall not assign, sub-licence, sell, lease, encumber, charge or otherwise in any manner, attempt to transfer this Licence or any of its rights or obligations hereunder. The Licensee may not allow any third party to operate the System on its behalf as part of any outsourcing, facilities management, application service provision or similar type of arrangement." [25]

McKerracher J's Findings

McKerracher J held that cl 12.3 of the Licence Agreement permitted RWWA to reproduce the software for emergency restart purposes. [26] His Honour utilised both the principles of contractual construction and the expert witness evidence to determine the meaning of the technical terms within cl 12.3. [27] In defining the key terms of cl 12.3, McKerracher J held that:

• "The System" in the mainframe industry means 'the system installed' [28] ;

• The reproduction of the software for "emergency restart purposes" includes the capacity of RWWA to establish a disaster recovery site as a precaution, in anticipation of an emergency. [29]

In reaching these conclusions, His Honour took into consideration the importance of the mainframe computer to the function of RWWA's overall business: 'the whole concept of emergency restart means that as an essential party of a highly sophisticated business environment, the restart is required as quickly as reasonably possible.' [30]

RWWA was not found in breach of cl 1.5 of the Licence Agreement. In accepting the evidence of RWWA's expert witness, McKerracher J rejected the suggestion that the arrangement between KAZ and RWWA constituted outsourcing, as RWWA had retained responsibility for the disaster recovery process. [31]

McKerracher J also discussed whether RWWA's conduct was authorised under the Copyright Act . Section 47C allows back-up copies of computer programs under specific circumstances. [32] As the court had already accepted that the purpose behind RWWA's disaster recovery site was to facilitate efficient system restart should the mainframe fail, [33] McKerracher J accepted that the purpose fell within s 47C(1)(c)(ii) [34] or (iii). [35]

The Court also held that RWWA was entitled to test the disaster recovery copy pursuant to s 47F, which permits the reproduction of computer programs for testing the security of the original copy. [36] The software was reproduced and tested for the sole purpose of ensuring that if the system at the main premises was destroyed, the system could be recovered. [37] In establishing these steps, McKerracher J found that s 47F protected the tests carried out by RWWA. [38]

The Federal Court also indicated that the phrase 'testing in good faith' in s 47(1)(b)(i), should be construed broadly in light of the legislative purpose s 47F which anticipated that the making of a back-up copy of a computer program 'that is incidental to the normal back-up copying of business data for security purposes' [39] should not constitute copyright infringement [40] .

The court dismissed SAG's cross-claim and issued a declaration that SAG is not entitled to additional licence of maintenance service fees [41] .

Implications

The case suggests that courts may place a heavy emphasis on expert witness evidence when construing licence agreements of a highly technical nature. Furthermore, the decision provides a rare examination of the application of the Copyright Act in the security testing of mainframe computer software and indicates that the statute will operate to protect licensees who copy and test system software 'in good faith' for security and disaster recovery purposes.

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© Stephens Lawyers & Consultants, February 2009. Researched and written by Colette Downie, edited by Katarina Klaric.

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