iiNet not responsible for customers’ infringing acts says Australia High Court

The High Court of Australia released its decision in the Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16 (20 April 2012) case earlier today. The panel of five judges, in two sets of reasons, dismissed the appeal from the Full Court. That court held that, on the facts of the case, iiNet, an Australian ISP, was not liable for authorising the infringing acts of its customers.

The key question in the appeal, was whether iiNet authorised its customers’ infringing acts. According to the Court, the key facts on which liability was premised were the following:

  • the provision by iiNet to its customers (and to other users of those customers’ accounts) of access to the internet, which can be used generally and, in particular, to access the BitTorrent system;
  • the infringement of the copyright in the appellants’ films by customers of iiNet who have made the films available online in whole or in part using the BitTorrent system;
  • the knowledge by iiNet of specific infringements, as drawn to its attention by notices from the Australian Federation Against Copyright Theft (“AFACT”), representing the appellants;
  • the technical and contractual power of iiNet to terminate the provision of its services to customers infringing copyright; and
  • the failure by iiNet to take reasonable steps to warn identified infringing customers to cease their infringements and, if appropriate, to terminate the provision of its services to them.

The High Court summarized the case and its findings in a note as follows:

Today the High Court dismissed an appeal by a number of film and television companies from a decision of the Full Court of the Federal Court of Australia. The High Court held that the respondent, an internet service provider, had not authorised the infringement by its customers of the appellants’ copyright in commercially released films and television programs.

The appellants, thirty-four Australian and United States companies, either own or exclusively license the copyright in thousands of commercially released films and television programs (“the appellants’ films”). The respondent, iiNet, provides internet services to its customers under an agreement which requires that the services not be used to infringe others’ rights or for illegal purposes. Users of internet services provided by iiNet infringed copyright in the appellants’ films by making the appellants’ films available online using the BitTorrent peer-to-peer file sharing system. The Australian Federation Against Copyright Theft, on behalf of the appellants, served notices on iiNet (“the AFACT notices”) alleging that iiNet’s customers had infringed copyright in the appellants’ films, and requiring iiNet to take action to prevent the infringements from continuing. iiNet took no action in response to the AFACT notices.

In the Federal Court at first instance, the trial judge held that iiNet had not authorised the infringement by its customers of copyright in the appellants’ films. The appellants appealed to the Full Court of the Federal Court. The Full Court, by majority, dismissed the appeal.

The appellants were granted special leave to appeal to the High Court, where they argued that the majority of the Full Court had not correctly applied ss 101(1) and 101(1A) of the Copyright Act 1968 (Cth). Those provisions make authorising an act comprised in a copyright (without the licence of the owner of the copyright) an infringement of the copyright. They also set out matters which must be taken into account in determining whether a person has authorised such an act. The appellants contended that iiNet had the power to prevent its customers from infringing copyright in the appellants’ films by issuing warnings and suspending or terminating customer accounts. The appellants argued that the AFACT notices provided credible information of past infringements by iiNet’s customers sufficient to raise a reasonable suspicion that acts of infringement were continuing, and that, once iiNet had received this information, its failure to take action amounted to authorisation of its customers’ infringements.

The High Court unanimously dismissed the appeal. The Court observed that iiNet had no direct technical power to prevent its customers from using the BitTorrent system to infringe copyright in the appellants’ films. Rather, the extent of iiNet’s power to prevent its customers from infringing the appellants’ copyright was limited to an indirect power to terminate its contractual relationship with its customers. Further, the Court held that the information contained in the AFACT notices, as and when they were served, did not provide iiNet with a reasonable basis for sending warning notices to individual customers containing threats to suspend or terminate those customers’ 20 April 2012 2 accounts. For these reasons, the Court held that it could not be inferred from iiNet’s inactivity after receiving the AFACT notices that iiNet had authorised any act of infringement of copyright in the appellants’ films by its customers.

The majority decison was written by French CJ, Crennan and Kiefel JJ. Their conclusions for dismissing the appeal were summarized in the following paragraphs:

For the reasons that follow, in our opinion, the conduct of iiNet did not constitute authorisation of its customers’ infringing acts.

The appellants’ submission, that iiNet should be taken to have authorised the infringements unless it took measures with respect to its customers, assumes obligations on the part of an ISP which the Copyright Act does not impose. A consideration of the factors listed in s 101(1A) does not permit a conclusion that iiNet is to be held liable as having authorised the infringements.

The extent of iiNet’s power was limited to an indirect power to prevent a customer’s primary infringement of the appellants’ films by terminating the contractual relationship between them. The information contained in the AFACT notices, as and when they were served, did not provide iiNet with a reasonable basis for sending warning notices to individual customers containing threats to suspend or terminate those customers’ accounts. For these reasons, iiNet’s inactivity after receipt of the AFACT notices did not give rise to an inference of authorisation (by “countenancing” or otherwise) of any act of primary infringement by its customers.

This final conclusion shows that the concept and the principles of the statutory tort of authorisation of copyright infringement are not readily suited to enforcing the rights of copyright owners in respect of widespread infringements occasioned by peer-to-peer file sharing, as occurs with the BitTorrent system. The difficulties of enforcement which such infringements pose for copyright owners have been addressed elsewhere, in constitutional settings different from our own, by specially targeted legislative schemes, some of which incorporate co-operative industry protocols[84], some of which require judicial involvement in the termination of internet accounts, and some of which provide for the sharing of enforcement costs between ISPs and copyright owners.

The minority concurring reasons were written by Gummow and Hayne JJ. Their conclusions were summed up as follows:

Section 101(1A) is so drawn as to take an act of primary infringement and ask whether or not a person has authorised that act of primary infringement. In answering that question there will be “matters” that must be taken into account. These include, but are not confined to, the matters identified in pars (a), (b) and (c). Was there any relationship that existed between the primary infringer and the (alleged) secondary infringer? If so, what was its nature (par (b))? Did the secondary infringer have power to prevent the primary infringement; if so, what was the extent of that power (par (a))? Other than the exercise of that power, did the secondary infringer take any reasonable steps to prevent the primary infringement, or to avoid the commission of that infringement (par (c)).

In answering these questions an ISP is not to be taken to have authorised primary infringement of a cinematograph film “merely because” it has provided facilities for making it available online to a user who is the primary infringer (s 112E).

As indicated earlier in these reasons[156], the power of iiNet as an ISP with respect to the use of facilities provided to subscribers was limited by the nature of their commercial relationship; iiNet could not control the choice of its subscribers and other users to utilise the BitTorrent software, nor could iiNet modify the BitTorrent software or take down the appellants’ films which were made available online.

At all material times iiNet had many thousands of account holders. Was it a reasonable step to require of iiNet that it monitor continually the activities of IP addresses to provide precise details of primary infringements that had been committed, and then take further steps to forestall further infringements? Warnings might or might not have that effect. Evidence was lacking of likely behaviour in that respect by users of ISP facilities. Further, with respect to the AFACT Notices, was it reasonable to expect iiNet to issue warnings or to suspend or terminate the contracts of customers when AFACT had not fully disclosed the methods used to obtain the information in the AFACT Notices? Those methods were disclosed only by the provision of expert evidence during the preparation of the case for trial[157].

In truth, the only indisputably practical course of action would be an exercise of contractual power to switch off and terminate further activity on suspect accounts. But this would not merely avoid further infringement; it would deny to the iiNet customers non-infringing uses of the iiNet facilities. And, in any event, in the absence of an effective protocol binding ISPs (and there is no such protocol) the iiNet subscribers whose agreements were cancelled by iiNet would be free to take their business to another ISP.

In her dissenting reasons Jagot J concluded that iiNet had “moved beyond mere indifference to at least tacit approval of [the] primary infringements”[158]. Her Honour relied particularly upon a press release by iiNet by which it “ensured [that] its customers knew that their accounts would not be terminated … unless AFACT could prove in court the alleged copyright infringements”[159].

The press release was issued by iiNet on the day the litigation by the appellants was instituted, 20 November 2008. It was available for download from its website. The release referred to the intention of iiNet to defend the action and expressed the view that the AFACT Notices were not sufficient to require it to disconnect users of the iiNet service. The significance of the press release was overstated by her Honour.

The “key facts” as to the “indifference” of iiNet upon which the appellants relied in this Court were four in number. They were: (i) the provision by iiNet of the internet connections, a necessary but insufficient step for the acts of primary infringement; (ii) the technical ability of iiNet to control the use of its service and its contractual ability to issue warnings and suspend or terminate accounts; (iii) the evidence provided by the AFACT Notices given before and after suit; and (iv) the absence of action by iiNet in response to the AFACT Notices.

These matters, taken together, do not establish a case of authorisation of those primary infringements which are the Scheduled Infringements in respect of the authorisation of which the appellants seek relief in this Court. The progression urged by the appellants from the evidence, to “indifference”, to “countenancing”, and so to “authorisation”, is too long a march.

The facts of this case are well removed from those which in Moorhouse led Jacobs J[160] to adopt what had been said on the subject of indifference by Bankes LJ in Ciryl[161]. The rhetorical question with reference to what had been said by Bankes LJ, which Whitford J posed in CBS Inc v Ames Records & Tapes Ltd[162], may be asked here:

“Is this again a case of the indifference of somebody who did not consider it his business to interfere, who had no desire to see another person’s copyright infringed, but whose view was that copyright and infringement were matters in this case not for him, but for the owners of the copyright? It must be recalled that the most important matter to bear in mind is the circumstances established in evidence in each case.”

The position of iiNet also differs significantly from that of the respondent company director in Australasian Performing Right Association Ltd v Jain[163]. He was effectively the chief executive officer at the hotel owned by the company where there had been unlicensed performances of musical works. The Full Federal Court said of the respondent that it “was within his power to control what was occurring [but] he did nothing at all”; and that he had “countenanced” the infringements[164].

The present case is not one where the conduct of the respondent’s business was such that the primary infringements utilising BitTorrent were “bound” to happen in the sense apparent in Evans v E Hulton & Co Ltd[165], and discussed earlier in these reasons[166]. Further, iiNet only in an attenuated sense had power to “control” the primary infringements utilising BitTorrent. It was not unreasonable for iiNet to take the view that it need not act upon the incomplete allegations of primary infringements in the AFACT Notices without further investigation which it should not be required itself to undertake, at its peril of committing secondary infringement.

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