December 2005

THE AUSTRALIA-USA FREE TRADE AGREEMENT INTELLECTUAL PROPERTY - A REVIEW

SYNOPSIS

This newsletter sets out the major changes to Australian intellectual property law introduced by the Australia-US Free Trade Agreement (" the AUSFTA") [1] since its introduction into law on 1 January 2005, and describes how the changes have taken effect to date.

Changes to Copyright Law

Creative Works

The AUSFTA introduces some changes to the Copyright Act 1968 (Cth) ( " Copyright Act") [2] which governs Australian law on copyright. Previously, creators of literary, musical and dramatic works, sound recordings and films could benefit from copyright protection of their work for the duration of their lifetime plus fifty years after their death. The AUSFTA extends the term of copyright protection given to creators to the duration of their lifetime plus seventy years after their death. The AUSFTA also gives performers greater rights in relation to their performances which will allow them to control and collect better royalties for broadcasts of recordings of their performances.

Digital Copyright Protection

Copyright owners can protect work stored in a digital format (such as a music file) where the machine or computer that accesses the file contains a technological device known as a technological protection measure ('TPM') that physically prevents users loading unauthorised copies of the file on the computer. Australia first introduced legal protection for TPMs with the Digital Amendment (Digital Agenda) Act 2000 (Cth) which set out that people who tried to use technologies to get around or circumvent the TPM in order to access unauthorised copies (a circumventions device) were liable for copyright infringement. The AUSFTA would give further protection to TPMs, and the provisions must be implemented within two years of the introduction of the AUSFTA.

Changes to the Therapeutic Goods legislation

When seeking marketing approval for pharmaceutical products applicants must certify that they have notified the relevant patent holder that they intend to market their product, or if this is does not apply, that no valid patents exist in relation to the product they intend to market. Penalties including fines of up to $110,000 apply for false and misleading statements made in the certification. Additionally, vexatious litigation is discouraged. A patentee who is found to have instituted infringement proceedings without a reasonable prospect of success faces a maximum penalty of $10 million.

Criminal Provisions

In regards to copyright infringement the AUSFTA extends the types of activities that are deemed to be criminal offences. Also, there has been an increase in civil powers to seize material that infringes copyright.

Liability of ISPs

The AUSFTA adds to existing provisions in the Copyright Act that set out how Carriage Service Providers (" CSPs") which includes Internet Service Providers (" ISPs") can avoid liability for authorising copyright infringement that takes place on websites hosted on their servers. CSPs who comply with certain conditions such as terminating the accounts of subscribers who repeatedly infringe copyright on their servers, removing material from their servers that they know to be infringing, and complying with industry codes relating to protecting and monitoring their servers lower their exposure to liability under the Act.

DETAILED REVIEW

Introduction

The AUSFTA was introduced into Australian law on 1 January 2005 through the US Free Trade Agreement Implementation Act 2004 ( " USFTAI Act") . [3] The AUSFTA was intended to benefit Australian businesses by liberalising trade and harmonising laws with the world's most powerful economy, thereby increasing bilateral investment. [4]

This newsletter considers how the AUSFTA has extended intellectual property ( "IP") ownership rights and powers of enforcement through the USFTAI Act, and discusses how the changes have taken effect in the nine months since the introduction of the AUSFTA.

Copyright Duration

Under the Copyright Act, the term of copyright protection has been increased from 50 years to 70 years from the time of:

(a) the death of author, in the case of literary, dramatic, musical or artistic works (including photographs), or time of publication if the author is unknown or used a pseudonym [5] and

(b) the first publication in the case of sound recordings and cinematograph films. [6]

The term of copyright protection remains at 50 years from the time of first broadcast in the case of television and sound broadcasts [7] and to 25 years from the time of publication in the case of published editions [8] . This change does not affect the status of works in which copyright did not subsist before 1 January 2005. Works that are now out of copyright, for example musical works created before 1955, will not benefit from the extended term of protection.

Performer's Rights

The AUSFTA introduced increased rights for performers in Part XIA of the Copyright Act. In addition to existing rights, performers are given the exclusive right to authorise the communication of unrecorded performances to the public. [9] This allows performers to prevent streaming of unauthorised recordings of their performance over the Internet or radio.

Significantly, the changes give performers co-ownership rights in sound recordings of their performance [10] , providing performers with rights to license their sound recordings and collect royalties. A negative impact of this amendment is increased fees for users of protected sound recordings, who must now pay royalties to multiple owners. [11]

Performers' moral rights in sound recordings are not yet protected in Australia by copyright law. However, the USFTAI Act will give performers moral rights in their performance once the WIPO Performances and Phonograms Treaty (WPPT) comes into force in Australia.. [12]

Technological Protection Measures

Section 10(1) of the Copyright Act defines a technological prevention measure ('TPM's) as a device, product or a component incorporated into a process, that is designed, in the ordinary course of its operation, to prevent or inhibit infringement of copyright material by (a) ensuring access to the material is made solely through use of an access code or process, or (b) by putting in place a copy control mechanism. [13]

Examples of TPMs include regional-coders and a password registration system that requires a user to enter a password to install piece of software on a machine. Circumvention devices aim to bypass these measures by allowing users to access the protected data. [14] Australia has two years to implement the AUSFTA provisions which broaden protection of TPMs. The AUSFTA changes would redefine TPMs to include technologies that 'control access' to copyright material. [15]

The definition of "prevent or inhibit" in section 10(1) was given a narrow interpretation in Stevens v Kabushiki Kaisha Sony Computer Entertainment (S tevens) [16] by the High Court of Australia on 6 October 2005. In that case, consumers could only play authorised copies of CD-ROM games on Sony PlayStation consoles, as the consoles required the boot ROM to read access codes that were only present on authorised copies of the CD-ROMs. Sony alleged this constituted a TPM in the PlayStation console. Stevens sold mod chips that modified the console and allowed users to play unauthorised copies of games.

The High Court found that the boot ROM and the access codes were not a TPM under section 10(1), accepting the interpretation given to the words "designed … to prevent or inhibit the infringement of copyright" in the section by Justice Sackville at first instance in the Federal Court. [17] The Full Court of the Federal Court had overturned the decision of Justice Sackville on appeal. [18]

Justice Sackville had interpreted the words narrowly to mean denying access to a copyright work or limiting a person's capacity to make copies, thereby "physically" preventing or inhibiting someone from undertaking acts which if performed might lead to copyright infringement. [19]

The High Court further rejected the proposition that TPMs must merely have a general deterrent or discouraging effect on those who might contemplate infringement. [20] In this case, the boot ROM and access codes on the CD-ROM did not prevent or inhibit the infringement, which the High Court found took place at time of burning the CD-ROMs; they only prevented access to the computer program and the users' visual apprehension of the results of running the program. [21] They therefore did not constitute a TPM within the meaning of section 10(1).

The High Court's narrow interpretation of TPMs partly rested on the intention of the drafters of the Copyright Amendment (Digital Agenda) Act 2000 (Cth) which brought in the TPM provisions. [22] One might therefore expect that when the AUSFTA provisions are introduced, the new protections for devices that "control access" will be given a broader interpretation by the courts.

Provisions further expand the type of actions found to be infringing to include use of circumvention devices, in addition to activities such as manufacturing, importing and commercially dealing with them. [23] This means that simply using a circumvention device may be criminal, regardless of whether copyright material is accessed or infringed. Separate civil and criminal penalties are introduced in relation to acts committed that infringe the TPM provisions. [24]

The AUSFTA also gives increased protection to other technological means of controlling copyright infringement, including electronic rights management information (" ERMI") which is electronic data that identifies works, authors of works and terms and conditions of using such work. Persons who distribute copyright material whose ERMI has been removed may be found liable under civil provisions even if they lack commercial motivation. Further, not only is the copyright material protected, the provisions create a separate criminal and civil offence for dealing with ERMIs that have been removed. [25]

The AUSFTA provides protection for encoded broadcasters (pay TV) by expanding the parties who can bring an action to include channel providers and anyone with an interest in copyright in the broadcast in addition to criminalising the use of broadcast decoding devices to gain access to an encoded broadcast. [26] Further protection has been given to pay TV signal-encoding under a decision by Attorney-General's department on 30 June 2005 to criminalise unauthorised access of Pay TV signals following a 6 month review. [27]

Material Form

Infringement of copyright works takes place when someone makes an unauthorised reproduction of the work "in material form" [28] , which raises problems in digital environments. For example, when a user runs a word processor application on a desktop computer, a copy of data may be made to a temporary storage medium such as random access memory (RAM). Traditionally, these temporary copies in RAM were not considered to be reproductions in material form because the temporary copies could not themselves be reproduced. [29]

The AUSFTA updated the definition of 'material form' in the Copyright Act to include 'any form in storage', whether or not it can be reproduced. [30] The effects of such changes would arguably widen the control of copyright owners considerably. For example, watching a DVD would constitute copying since loading a part of the disc into RAM constitutes a reproduction because whether or not that part in RAM is itself reproducible is no longer relevant. [31] This could allow copyright owners to control the number of times a purchaser of authorised DVD ROM watches it.

However, there are some limitations within the Copyright Act that limit the effects of the broader definition. Exceptions exist where the reproduction is made as part of a technical process of use (incidental reproductions) from a non-infringing copy [32] , and where temporary copies are made in the process of communication (under laws existing before the introduction of the AUSFTA) [33] . It could also be argued that there is an implied license attached to physical media (for example, DVD-ROMs) permitting the purchaser to load content on the media multiple times.

The existence of multiple, overlapping individual exceptions for the many types of reproduction and copying that take place in digital systems is one reason why academics are investigating the viability of introducing a broad "fair use" exception into Australian copyright law, in place of the complex piece-meal list of fair dealing exceptions currently in place. [34]

Applying for Marketing Approval of Therapeutic Goods - Certificate Required

On January 1 2005, the AUSFTA introduced a patent certification scheme in the Therapeutic Goods Act 1989 (Cth) [35] , requiring applicants who seek to register therapeutic goods on the Australian Registry of Therapeutic Goods ( "ARTG") to provide one of two certificates.

(1) The applicant may provide a certificate to the effect that the applicant believes that it is not marketing, and does not propose to market, the therapeutic goods in a way that would infringe a valid claim of a patent that has been granted in relation to the therapeutic goods.

(2) Alternatively, the applicant may provide a certificate that sets out that:

(a) a patent has been granted in relation to the therapeutic goods

(b) the applicant proposes to market the therapeutic goods before the end of the term of the patent; and

(c) the applicant has given the patentee notice of the application for registration or listing of the therapeutic goods under the section.

The applicant claiming ignorance of a valid patent claim will be liable to a penalty of $110,000 in the event that such a certification is found to be 'false or misleading in a material particular.'

Additionally, vexatious litigation is discouraged. A patentee who is found to have instituted infringement proceedings without a reasonable prospect of success faces a maximum penalty of $10 million.

The changes raised concerns that the requirement imposed onerous obligations on applicants seeking to list complimentary medicines on the ARTG that rely on readily-accessible public data, and also "originators" who rely on their own safety or efficacy data [36] .

To address these concerns, a new Therapeutic Goods Amendment Bill (No. 2) 2005 ( the "Bill") was introduced on 15 September 2005 that limits the operation of the patent certification scheme. If the Bill passes through Parliament, the changes would only impose obligations on applicants seeking approval to market generic medicines who must submit evidence as to safety of or efficacy of the goods and may rely on evidence or information supplied by another person.

Criminal Penalties

Criminal penalties and procedural measures now apply more stringently to serious breaches of Australian IP laws. The AUSFTA required the creation of offences for wilful copyright infringement on a commercial scale, including significant wilful infringements and infringements motivated by commercial gain. [37] It also adds the element of intention of obtaining a commercial advantage or profit to several crimes relating to the unauthorised use of copyrighted material. [38] I t further provides increased civil powers to seize and destroy suspected counterfeit goods (without compensation). [39]

Criminalisation of IP infringement raises serious questions about the nature and purpose of criminal law. Its increasing presence in Australian IP law since the AUSFTA amendments and the more recent decision to criminalise Pay TV infringement has concerned public interest groups. [40]

Liability of ISPs

Internet Service Providers ( "ISPs") (who are classified as CSPs) may be found liable for authorising activities that infringe copyright such as music download activities if those activities take place on websites hosted on their servers.

Section 101(A) of the Copyright Act sets out a list of factors that help determine when an ISP has authorised infringement. Courts will consider:

(1) the extent of the ISPs power to control the acts

(2) the relationship between the ISP and the person infringing the copyright, and

(3) whether the ISP took reasonable steps to prevent the act such as complying with industry codes. [41]

Section 112E of the Copyright Act provides limited protection for CSPs (which include ISPs) by setting out that a person (including a CSP) will not be liable for authorising infringement of an audio-visual item merely because they provide facilities for making a communication that is used for infringing purposes.

In Universal Music Australia Pty Ltd v Cooper [42] , the Australian Federal Court held that Cooper's website'mp3s4free.net' which had hyperlinks to other websites storing mp3s, breached provisions in the Copyright Act as the technology was designed and promoted to encourage copyright infringement. E-Talk, the ISP hosting the site was found to authorise the copyright infringement because:

(1) E-Talk was aware of possible copyright issues on the website and had told Cooper to remove the website.

(2) An E-Talk employee was "knowingly involved" in the establishment, maintenance and operation of the site.

(3) The ISP did not intend to act further in relation to the website as there was a perceived substantial financial advantage that the ISP derived from hosting the site. [43]

New safe-harbour provisions

The AUSFTA introduced safe-harbour provisions in the Copyright Act [44] that grant immunity from liability to CSPs (including ISPs) who comply with certain conditions. The provisions operate concurrently with the existing authorisation provisions. In order to determine which conditions they need to comply with CSPs are divided into categories according to their activities. [45]

The categories are defined as:

Category A - providing facilities or services for transmitting, routing or providing connections for copyright material, or the intermediate and transient storage of copyright material in the course of transmission, routing or provision of connections. This category would cover the typical ISP who provides access to the internet.

The conditions attached to this category require that any transmission of copyright material be initiated by anyone other than the CSP. Also, the CSP must not make any modifications to the material other than those made as part of a technical process.

Category B - caching copyright material through an automatic process. The carriage service provider must not manually select the copyright material for caching. This category would cover an ISP who provides proxy services. This category requires CSPs to limit access in accordance with the conditions of access imposed by the person who posted the material. Additionally, the CSP must remove or disable access once it becomes apparent that the material has been removed or disabled from the originating site. Also, the CSP must not make any modifications to the material other than those made as part of a technical process.

Category C - storing, at the direction of a user, copyright material on a system or network controlled or operated by or for the carriage service provider . This category would be populated by hosting services which provide websites.

Category D - A carriage service provider carries out a Category D activity by referring users to an online location using information location tools or technology. This final category refers to search engines and online directories. Both category C and D share identical conditions that proscribe the receipt of a financial benefit that can be directly attributable to the infringing activity. Each category also requires the removal or blocking of infringing material if they know of the infringement or become aware of facts or circumstances which make the infringement apparent.

This situation may arise where a person claiming to be a copyright owner contacts an ISP to inform them that they believe infringing material is hosted on their servers. There is concern that ISPs may be forced to take down material that has not yet been found, by any court, to infringe. This could lead to uncertainty for ISPs and motivate copyright owners to send such notices in a spurious manner. [46]

In addition to the above category specific conditions, the Safe-Harbour conditions require CSPs to terminate accounts of repeat infringers and comply with all relevant industry codes.

Stephens Lawyers & Consultants have an extensive practice in copyright law, technology law and patent law in relation to pharmaceutical products. They are well positioned to advise on these matters.

For further information contact:

Stephens Lawyers & Consultants

Level 3, 530 Lonsdale Street

Melbourne VIC 3000

Phone: (61 3) 8636 9100

Fax: (61 3) 8636 9199

Email: stephens@stephens.com.au

All correspondence to:

PO Box 13286 Melbourne Law Courts

Melbourne VIC 3000

* Written by Ilana Lichtenstein. Edited by Katarina Klaric. Research and assistance provided by Catherine Macneil and Janine Bye.

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