December 2004
Recent Developments in Copyright Law
Changes to Copyright Legislation
As a result of the Australia-United States Free Trade Agreement ("AUSFTA") [1] , substantial amendments have been made to copyright legislation by the US Free Trade Agreement Implementation Act 2004 (Cth). This Act was assented to on 16 August 2004, with the substantial provisions relating to copyright commencing on the latter of 1 January 2005, or the day on which AUSFTA comes into force. Additional amendments are also proposed in the Copyright Legislation Amendment Bill 2004 (Cth) which is currently before parliament. The changes resulting from this legislation are outlined in this newsletter.
Universal Music Australia Pty Ltd & Ors v Sharman Licence Holdings Pty Ltd & Ors, Federal Court of Australia (1.)
This case, which is commonly known as the Kazaa Case, is currently before the Federal Court. The primary issue in this case is whether the defendants have authorised copyright infringement under the Copyright Act 1968 (Cth) by making available the Kazaa program, which allows swapping of files including sound recordings. Further details of this matter are given below.
Microsoft Corporation v Ezy Loans Pty Ltd, Federal Court of Australia, 2 September 2004 (2.)
In this case, the Federal Court awarded damages totalling $590,625 against a second-hand computer vendor who was loading Microsoft programs on computers other than in accordance with the terms of his licence from Microsoft. See below for further details regarding this case.
Recent Changes to Copyright Legislation
US Free Trade Agreement Implementation Act 2004 (Cth)
The US Free Trade Agreement Implementation Act 2004 (Cth) (" USFTAI Act") was assented to on 16 August 2004. The purpose of the Act was to implement AUSFTA. The provisions of the Act largely commence on the latter of 1 January 2005, or the day on which AUSFTA comes into force.
The major changes introduced by this legislation relating to copyright law are:
- Extension of the term of protection of most copyright material by 20 years;
- Introduction of new economic and moral rights for performers in sound recordings;
- Alteration of the term of protection for photographs to match other artistic works;
- Provision of a scheme whereby Carriage Service Providers can limit the remedies available against them under the Copyright Act if they satisfy certain conditions;
- Widening of criminal provisions to include copyright infringement that was undertaken for commercial advantage, financial gain, or was significant on a commercial scale;
- Introduction of new provisions relating to unauthorised receipt and use or distribution of encoded program carrying signals;
- Provision of broader protection for electronic rights management information;
- Widening of the range of unauthorised reproductions that infringe copyright under the Copyright Act to include reproductions in any manner or form, including temporary reproductions; and
- Introduction of compensation provisions for existing agreements frustrated by specific amendments contained in the USFTAI Act.
Copyright Legislation Amendment Bill 2004 (Cth)
The Copyright Legislation Amendment Bill 2004 (Cth) is currently before parliament. The purpose of the Bill is to amend the Copyright Act 1968 (Cth) and the USFTAI Act to ensure Australia fully complies with its obligations under AUSFTA.
The amendments proposed:
- Narrow the scope of the incidental copies exception to temporary copies made as a necessary part of a technical process of use. This includes preventing the exception from applying to temporary copies made from a copy which would have been an infringing copy if made in Australia, which is intended to cover situations in which a temporary copy is made by accessing online an infringing copy that is located out of Australia; [2]
- Alter the conditions that Carriage Service Providers must comply with to limit the remedies available against them under the Copyright Act. The government has stated that these provisions will be clarified in forthcoming regulations; [3]
- Make minor amendments to criminal offences under the Copyright Act and create an additional offence relating to knowingly using an infringing encoded broadcast;
- Provide that recognition of a person or corporation named in a label on a record or its container as the maker of that recording or the owner of the recording copyright does not imply that the person is the only maker or owner; and
- Limit the application of transitional provisions regarding the extension of the term of copyright protection by the USFTAI Act to two years.
Microsoft Corporation v Ezy Loans Pty Ltd [2004] FCA 1135 (1.)
In Microsoft Corporation v Ezy Loans Pty Ltd, [4] the Federal Court held the respondents, Ezy Loans Pty Ltd and Earl Davis, had breached copyright in computer programs under the Copyright Act 1968 (Cth) (" Copyright Act"). In addition, the conduct of the respondents was also held to have infringed registered trade marks contrary to the Trade Marks Act 1995 (Cth), and the respondents were also found to have breached the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1989 (Qld).
The respondents sold and rented second-hand computers to the public. In preparing the computers for sale or rental, the hard drives of the computers were wiped and additional memory and some software was installed. The applicants, Microsoft, alleged that the respondents engaged in hard loading, in that they reproduced Microsoft's copyright programs, including Microsoft Windows and Microsoft Office, onto the second-hand computers without licence from Microsoft. [5] The applicants also alleged that with either knowledge or constructive knowledge that Microsoft's copyright was being infringed, the respondents sold, offered for sale, supplied, offered to supply or distributed infringing Microsoft Programs. [6] The Court upheld both of these claims, finding infringement had occurred.
The respondents held a licence with Microsoft as Microsoft System Builders. This provided that the respondents were licenced to install one copy of a Microsoft Original Equipment Manufacturer ("OEM") Program on a computer system supplied by them on the condition that they supply each computer system to their customer with all the associated components of the Microsoft Program, including the original disks, manuals, certificates of authenticity and end user licence agreements.
Contrary to this licence, the Court found that the respondents had, in many cases, not supplied the associated components of the Microsoft Programs with computers on which they had installed these programs, even when these components were requested by the customer. In addition, the Court also accepted evidence that OEM Programs were installed on more than one computer.
The Court held that in addition to being liable for breaches whilst he was a sole trader, Mr Davis was also jointly liable for the conduct of Ezy Loans as a joint tortfeasor and a director of the company. The Court awarded injunctions that restrain the respondents from further infringing copyright in any Microsoft Program and damages for the infringement that had occurred. In assessing the amount of damages, the Court noted "not only that the respondent's conduct was flagrant but that their approach to this proceeding demonstrates, 'a deliberate pattern of conduct by the respondents in which they recognised the illegality of the enterprise they were engaged in and actively sought to conceal it'". [7] Accordingly, the Court awarded both compensatory damages totaling $240,625 for the amount that would have been received from licence fees for each copy of Microsoft Windows and Microsoft Office supplied, and $350,000 in additional damages, to send a clear signal of the Court's disapproval of the respondents' conduct.
Universal Music Australia Pty Ltd & Ors v Sharman Licence Holdings Pty Ltd & Ors (2.)
Universal Music Australia Pty Ltd & Ors v Sharman Licence Holdings Pty Ltd & Ors , [8] commonly referred to as the " Kazaa Case", is currently being heard in the Federal Court. The respondents ("Sharman Parties") supply the computer program Kazaa, which is available for download via the internet. This program allows a user to distribute and receive files from the computers of other users, including sound recordings in which copyright is owned by the applicants. Sharman allegedly profits from this process through selling advertising space on the freely downloadable version of Kazaa, and through subscription fees for a second version of the program, Kazaa Plus.
The applicants have alleged that by providing the program for download, the respondents are infringing their copyright by authorising the reproduction of files that they know or should have known infringe the applicants' copyright in sound recordings. [9] In particular, the applicants claim that the respondents have access to technology that would allow copyright material to be filtered out of search results obtained by users based upon the names of artists in whose work copyright currently subsists. The applicants have sought declarations that the respondents have infringed their copyright in sound recordings, injunctions restraining the Sharman Parties from breaching copyright in the sound recordings of the applicants, and damages or an account of profits pursuant to the Copyright Act. The applicants have also alleged that the respondents have contravened the Trade Practices Act 1974 (Cth).
In response, the Sharman Parties claim that effective filtering of copyright material is not possible; that they do not monitor and cannot control the activities of the Kazaa users; and that peer-to-peer software such as Kazaa has a legitimate use and therefore, following the US Betamax decision, [10] the Sharman Parties cannot be held liable for copyright infringement.
In the US case against Sharman Networks Limited and others, the Court of Appeals for the Ninth Circuit followed the Betamax decision and held that the defendants were not liable for contributory or vicarious copyright infringement. [11] The Court held that as the software was capable of substantial non-infringing use the copyright owners needed to demonstrate that the defendants had reasonable knowledge of specific infringing files and failed to act on that knowledge to prevent infringement. As the copyright owners had not done this, the defendants were not liable. [12] This result is currently being appealed to the US Supreme Court.
In a similar case regarding Kazaa brought in the Netherlands, the Dutch Supreme Court held the makers of Kazaa could not be held liable for copyright infringement using the software. [13]
The decision in the Australian case is expected in 2005, with an additional hearing to determine damages if the claims are upheld.
© Stephens Lawyers & Consultants, December 2004
Department of Foreign Affairs and Trade, Australia United States Free Trade Agreement, at http://www.dfat.gov.au/trade/negotiations/us_fta/final-text/index.html
[2] Explanatory Memorandum, Copyright Legislation Amendment Bill 2004 (Cth) 4.
[3] Commonwealth, Parliamentary Debates, House of Representatives, 9 December 2004, 27, (Philip Ruddock, Attorney-General).
[5] Computer programs and compilations of computer programs are literary works under s 10 of the Copyright Act. Sections 13, 14, 31 and 36 of the Copyright Act provide that it is an infringement of the copyright in a literary work for a person to reproduce or authorise the reproduction of a literary work in a material form without the licence of the copyright owner.
[6] Section 38 of the Copyright Act provides that copyright is infringed if a person, without the licence of the copyright owner, sells, lets for hire, or by way of trade offers or exposes for sale or hire an article, or by way of trade exhibits an article in public if the person knew, or ought reasonably to have known, that the making of the article constituted an infringement of the copyright.
[8] Federal Court, NSD110/2004.
[9] Copyright Act 1968 (Cth) s 112. See discussion at n 6 above for a description applicable to this section.
[10] Sony Corp. of America v Universal City Studios Inc 464 U.S. 417 (1984). In this case the makers of Betamax VCRs were held not to be liable for use of their VCRs to infringe copyright even though they knew they could potentially be used in this way, as the machines were capable of commercially significant noninfringing uses. This case was cited with approval by the High Court of Australia in Australian Tape Manufacturers Association Ltd and Others v The Commonwealth of Australia (1993) 176 CLR 480.
[11] Metro-Goldwyn-MayerStudios Inc. & Ors v Grokster Ltd. & Ors, 380 F.3d 1154 (9 th Cir. 2004).
[13] Kazaa v Buma/Stemra, LJN-no. AN7253, Zaaknr: C02/186HR, 19 December 2003.