AFACT v iiNet: the case that could shut down the Internet

The case for copyright infringement brought against iiNet by a consortium of 34 movie studios and Channel 7 represented by the Australian Federation against Copyright Theft (“AFACT”) will be the first test case to determine the scope of an Internet Service Provider’s liability for copyright infringement conducted by users under Australian Copyright Law.

Depending upon who you ask lawyers for the consortium would have you believe that this is a simple case that iiNet has no hope of winning. iiNet on the other hand has pledged to “vigorously defend the Federal Court action” denying that they have in any way given support or encouragement for its users to breach copyright.

We’ve interviewed various legal experts including Steve White the Principal of Steve White Computer Law and other lawyers who preferred not to be quoted by name to help you understand this case. (Disclosure: as well as being a tech journalist I am also solicitor with experience in copyright law.)

The first thing to understand is that this case is a civil action which means that AFACT is suing iiNet to either obtain money (damages) or an injunction (a court order to make or stop iiNet from doing something). They are doing this under sections 115 and 116 of the Copyright Act 1968 (as amended) which are the provisions which deal with infringement of copyright. Since this is not a criminal prosecution the directors of iiNet are not at risk of jail terms or fines.

Understanding copyright

Copyright is a set of exclusive rights given by the government to individuals and companies who produce books sound recordings cinematographic works (TV shows and movies) computer programs and artistic works (photos sculptures dance etc.). The exclusive rights given to copyright holders include the right to reproduce the work (copy) cause the work to be seen in public (broadcast) or communicate the work to the public.

If a person does anything which is an exclusive right of a copyright holder without the copyright holder’s permission (except for a few legal exemptions) they have infringed the copyright and may be sued for damages (recovery of financial loss) obtain an injunction against them (where the court tells them to stop doing something) or obtain a court order (where the court tells them to do something).

Reading through the Statement of Claim (which is a public document) one can see the approach that AFACT has taken against iiNet. The first 56 Particulars of the claim establish the basis that AFACT have for taking iiNet to court by stating that the studios suing iiNet are the copyright holders and have complied with the conditions to obtain copyright protection.

Particular 57 is not likely to be contested as it merely states the iiNet is an ISP. Particular 58 specifies what iiNet as an ISP does and is also not likely to be contested.

The case against iiNet is largely contained in Particular 59 which alleges that iiNet Customers have breached copyright by making available electronically transmitting and making copies of the copyrighted materials. It will be necessary for AFACT under the balance of probabilities to prove that this was the case by presenting evidence of the breaches of copyright. The court will then need to decide on the validity of the evidence as to whether copyright breaches took place.

Particular 60 alleges the iiNet Customers made further copies of the films onto DVD. Steve White believes that this Particular is largely irrelevant as any of the actions detailed in Particular 59 would be sufficient to establish a breach of copyright (and frankly it is hard to imagine how AFACT could know that iiNet customers burned downloads to disc unless they have been staking out people’s houses.)

The court fight will revolve around Particular 63 which alleges that iiNet knew copyright breaches were going on but did nothing to prevent copyright infringements. According to White “the critical question is to what extent the ISP is responsible for the acts of others.” If AFACT can show that iiNet through its actions or inactions was encouraging breach of copyright and if the court determines that the precedent set in the Kazaa case (Universal Music v Sharman Networks) is relevant then iiNet may be liable for indirect breach of copyright under s101 of the Copyright Act. This is what AFACT is claiming under Particular 64. White however believes that “On the basis of the statement of claim without any further particulars it is difficult to see that the movie companies have good claims. In the absence of encouragement to actually infringe the rights of the movie companies which is contradictory to the ISP’s terms and conditions the claim does not appear to be going anywhere.”

AFACT may be hard pressed to prove the allegations set out in Particular 65 that “iiNet has authorised the doing of the acts of iiNet Users” to infringe copyright.

As a defence it is likely that iiNet will rely on the safe harbour provisions of the Copyright Act (Division 2AA) which exempt an ISP from liability if all they do is merely transmit data automatically cache data (without specifically caching copyrighted material) store data at the direction of a user or provide a search facility subject to conditions specified in the Copyright Act.

While the Copyright Act lists in general what an ISP is required to do in order to qualify for safe harbour protections such as terminating repeat infringers in appropriate circumstances what this wording translates to in practical terms has not yet been determined in court — and this is what this court case is all about: establishing that.  

iiNet argues that it would not be appropriate for an ISP to accept evidence provided by the movie industry to cut off someone’s internet and phone line — and that it would need a court order to do so. The movie industry is arguing the opposite. It’s not clear from the wording of the Copyright Act which is correct so a court will have to decide.

Of course White’s view is not shared by everyone. Ian McDonald the Senior Legal Officer at the Australian Copyright Council disagrees. He believes that iiNet infringed copyright by virtue of making copies of infringing material either in their cache or even by virtue of being stored temporarily in their routers. McDonald believes that “Where material is being cached temporarily through an ISP’s network then they have reproduction occurring even if they are not aware of it.” McDonald believe the issue will come down to what remedy AFACT will have against the ISP which could include an account of lost profits or other damages.

Whatever the outcome the case will finally test the safe harbour provisions of the Copyright Act and will if successful against iiNet change the way Australians will be able to access the Internet.

The relief that a court may grant in an action for an infringement of copyright includes an injunction (subject to such terms if any as the court thinks fit) and either damages or an account of lost profits.

Listen to an interview with Nicolas Suzor of Electronic Frontiers Australia

Interviewer: David Neiger. (Apologies for the poor audio quality.)