As I noted yesterday, a legal action has been launched by some 34 applicants from the television and movie industry against Australian ISP iiNet, alleging that iiNet has authorised copyright infringement by failing to take (adequate) steps to prevent sharing and downloading of films and TV shows via protocols like BitTorrent. A kind little birdie has sent me a copy of the Statement of Claim, so I have a bit more info. It makes for some interesting reading.

There are a number of interesting questions at the heart of this potential case:

  1. What, exactly, are ISPs required to do when they become aware that users are potentially infringing copyright? Do they have to terminate people alleged by the movie industry to be ‘repeat infringers’?
  2. How much responsibility will Australian courts put on intermediaries for ‘doing something’ about copyright infringement? So far, Australian courts have been pretty ready to impose liability on people they thought were ‘profiting from copyright wrongdoing’ – Kazaa with its P2P network, or Cooper with his ‘mp3sforfree’ website and his ISP host. What about others whose nefarious or infringing purpose is not so obvious? What, in other words, of more ‘ordinary’ service providers?
  3. When the legislation requires that ISPs, in order to ‘gain absolution’ or immunity from damages, should ‘adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the accounts of repeat infringers’ – what does that really mean? Is it sufficient to terminate only those found liable for infringement? Is the court allowed to determine whether the policy is real or sufficient?

Politically, there are some equally interesting questions. Will the Internet industry respond to the lawsuit by looking for a settlement deal that goes some way towards creating the kind of ‘notice and terminate’ system that copyright owners have been pressing for? Will the government’s past approach of protecting ISPs from liability in order to further the digital economy hold? Or, has the tide turned: are we now in a climate where the courts, like the government, decide to hold ISPs to a higher standard, just as the government is trying to get ISPs to engage more actively in filtering adult content? And is this all just an attempt to promote a certain filter that purports to filter both porn and copyright infringement…?

More thoughts on the law side of things over the fold.

The target
The target of the lawsuit is iiNet. iiNet is not the biggest Australian ISP providing home broadband services by any means – and it is not a 800 pound gorilla like Telstra or Optus. But it is a significant player – this does not look like a lawsuit designed to pick off small fry. It is both a deliberate test case and, as I noted yesterday, a shot across the bows of the entire ISP industry in the continuing standoff between the internet industry and AFACT/MIPI over the copyright owners’ aim of having ISPs sign up to some kind of ‘notice and terminate’/three strikes/graduated response system, which I’ve discussed previously.

The allegations
The basic allegation in the Statement of Claim is that iiNet Users have infringed copyright in a series of movies (such gems as ‘Made of Honour’ but also Ocean’s 13, Happy Feet, Baby Mama and Mamma Mia!), and television episodes (Heroes, Gossip Girl, Prison Break and Bones, among others) – by making them available, transmitting them and copying them – basically, by file-sharing. The claim against iiNet is that it authorised the infringements. The authorisation allegation is pleaded a couple of different ways.

One way of framing it is that iiNet authorised copyright infringement because it:

  1. Knew or had reason to suspect that the iiNet Users were infringing copyright;
  2. ‘Took no action in response to notifications sent by or on behalf of the applicants which identified that the iiNet Users were engaging in’ copyright infringement;
  3. Offered encouragement to the iiNet Users to engage in copyright infringement;
  4. Failed to enforce their own terms of service;
  5. Continued to offer internet service to iiNet customers who were engaging in copyright infringement ‘or whose iiNet Services were being used by other iiNet Users to do so’;
  6. ‘through its own inactivity and indifference permitted a situation to develop and continue where iiNet Users engaged in, or continued to engage in, copyright infringement.

What we see is an attempt to place the activities of iiNet within the framework of cases like the Sharman (Kazaa) case. In that case, which was about the organisation running the Kazaa P2P software, the respondents were held liable for authorising infringement even though they did not have individual control over particular infringements that were occurring: partly because there were technical things they could have done to reduce infringement, but also because ‘far from taking steps that are likely effectively to curtail copyright file-sharing, Sharman Networks and Altnet have included on the Kazaa website exhortations to users to increase their file-sharing and a webpage headed ‘Join the Revolution’ that criticises record companies for opposing peer-to-peer file-sharing.’ In the Sharman case, it wasn’t at all clear that without such exhortations (which in the US they would call ‘inducement’, per the Supreme Court judgment in the Grokster case).

So you could call this one the “inducement claim“. Success here doesn’t depend on showing that iiNet has the power pre-emptively to prevent infringements going on. But it does depend on a finding that iiNet somehow ‘encouraged’ the infringements. I’ll be very interested to see how that case is made out (I don’t have any access to the particulars of the case). If the ‘encouragement’ is limited to marketing to a young and risky demographic, or to providing ‘all you can eat’ or off-peak special services, then I wonder how much ‘encouragement’ we are talking about. I’d be surprised if an ISP as big as iiNet had been so lacking in caution as to suggest in any way they condoned copyright infringement. It also seems to me that the idea that it was iiNet’s conduct which ‘permitted a situation to develop and continue where iiNet Users engaged in, or continued to engage in, copyright infringement’ is a bit of a stretch. One suspects there are other reasons other than iiNet’s conduct why infringement has been happening.

So while this first claim is framed in terms of established caselaw, my guess would be that (depending on the facts shown) it stretches the principle. In short, while the claim as framed fits the literal statements of the law developed in the Sharman case, I’m not sure, subject to the facts which emerge, that it fits the principle of the Sharman case. The encouragement, it seems to me, is likely to be much less clear – which raises a real question how far any court will be prepared to extend the ‘encouragement’ style reasoning.

The other way they frame the claim looks much more like the US claim of vicarious infringement (or the kind of liability imposed on the ISP in the Cooper case). In this version, the applicants are claiming that iiNet:

  1. had the power to prevent the infringements, and continuing infringements;
  2. had a direct and commercial relationship with the iiNet Customers which enabled iiNet to take action against the customers who engaged in infringement;
  3. took no steps, or inadequate steps, to prevent or avoid the infringements/continuing infringements.

The basic idea here, I guess, is that iiNet is benefiting from these activities (by taking fees for internet services); and that iiNet has to take responsibility for the actions of its users. The claim seems to be framed to fit the reasoning of the Full Court in the Cooper case. In that case the court held that a host who knew the nature of the ‘mp3sforfree’ website – and even advertised on the site and provided free hosting – was responsible for the infringement. In essence, the case was that the host should, on being made aware of the nature of the site, have withdrawn hosting services from Mr Cooper, or ‘or otherwise plac[ed] pressure on Mr Cooper to stop his website being used for the predominant purpose of copyright infringements’.

Again, while the case is framed in terms of established law, you would have to say it stretches the principle. In the Cooper case, the basis for the authorisation claim was a high level of involvement by the ISP in a single hosted website. In this case, we are talking about a low level of involvement (providing internet services, not hosting) to a multitude of individuals – and in cases where the infringement is not obvious on the face of a readily observable public website which could be observed by the host, but to be ‘inferred’ (or assumed) from the nature of the traffic from the individual, and the allegations of the movie industry in notices sent to the ISP.

It’s worth noting that as this is the statement of claim, none of the defences or safe harbours that iiNet may rely on are addressed. There is likely more to this case than we have yet seen, because AFACT must have answers to the obvious defences the ISP will raise:

  1. s 39B and s112E: A person (including a carrier or carriage service provider) who provides facilities for making… a communication is not taken to have authorised any infringement of copyright…merely because another person uses the facilities so provided to [infringe]
  2. Part V Division 2AA, the purpose of which is (s116AA) “to limit the remedies that are available against carriage service providers for infringements of copyright that relate to the carrying out of certain online activities by carriage service providers,” provided the CSP fulfils the required conditions. One of those ‘certain online activities’ is ‘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”. The Conditions for Category A’ activities are in s116AH: which does require a policy for terminating repeat infringers (but says nothing about what that policy must look like) and which specifically states that “Nothing in the conditions is to be taken to require a carriage service provider to monitor its service or to seek facts to indicate infringing activity”.

On these, I guess we’ll have to wait and see. As I said up the top – a key question here will be the condition stated in s 116AH. The legislation requires that ISPs, in order to ‘gain absolution’ or immunity from damages, should ‘adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the accounts of repeat infringers’. But what does that really mean? Is it sufficient to terminate only those found liable for infringement? Is the court allowed to determine whether the policy is real or sufficient? There isn’t, on the face of it, much in the way of wording of the statute to suggest that the court engage in some kind of merits review of the nature of the ISPs internal policies. And would a court even be equipped to do such an assessment…?

Will the courts stretch the principle…?

In short: subject to what facts emerge about iiNet’s activities, it seems to me that the claim being framed here seeks to fit the iiNet activities within the frame of the two different ways developed to frame authorisation liability: the Sharman ‘inducement’ style claim, and the Cooper ‘vicarious liability’ type claim. But the case on the facts doesn’t really feel like either Sharman, or Cooper. And authorisation cases are nothing if not factually-focused.

What’s different? At some level, the difference is in a level of culpability or moral responsibility. The original idea of ‘authorisation’ liability was that a person should be liable if they authorised – gave permission for, sanctioned, countenanced, or approved – copyright infringement. Courts have been prepared to extend this concept of authorisation in cases where the alleged authoriser ‘ought’ to be held responsible: which is, at least in part, a kind of ethical question about the reasonable extent of responsibility and liability.

But do we really want iiNet taking moral responsibility for what its users are doing online? Do we want to turn them into police – and not just police, but judge and executioner too, given that the basic claim is that they should policing internet users who are alleged, but not ever proven in a court of law, to be infringing?

To the extent, too, that we are talking about the extent to which a player ought to be held responsible, it seems to me to be relevant to look at what the rest of the industry is going. The iiNet case seems, to me, (and again, subject to what facts emerge) to involve an industry player doing what other industry players do: providing internet service and not monitoring too closely what consumers do with it. Unlike Sharman, or Cooper, we do not have someone here operating ‘beyond the pale’ obviously facilitating what is obviously infringing conduct in an outlaw kind of way.

And what is different, too, is that successive governments have taken trouble to enact into legislation provisions designed to protect the kind of industry player that iiNet is. On one level it’s unbelievable that we have come to this point, where an ISP is being sued for copyright infringement. The government enacted multiple provisions designed to protect ISPs from liability and to ensure that, so long as their activity is confined to being a conduit for others’ communications, they would not be liable. Way back when the Digital Agenda amendments were passed, the Government recognised the “key role in the online delivery of content and the operation of the information economy” played by ISPs, and sought to ensure they would have “greater certainty about the responsibilities of carriers and ISPs to copyright owners and the steps they need to take to avoid infringing copyright”. The Safe Harbours, introduced in 2004 because of the US FTA, were also meant to provide certainty – and protection. And, of course, despite repeated calls by the music and movie industries for ISPs to be required to actively terminate infringing users via some kind of ‘three strikes’ approach, the Australian government has not, at this point, made any move to adopt any such policy. Assuming that iiNet is doing no more than what other ISPs are doing: that is, providing internet services and not engaging in a program of terminating access to people the copyright industry accuses of being infringers, then a court, to find iiNet liable, would have to get itself involved in industry regulation. It would have to ignore or sideline the thrust of the many legislative moves the government has made to protect ISPs who are conduits to communication. As a preliminary view, it seems to me that that would be a significant extension.

It seems to me, then, that there are problems with the claim. I can see why, and how, the copyright owner applicants might argue that if you take the terminology used by the court in cases like the Sharman and Cooper cases, you can frame the conduct of any ISP as fitting within the literal terms of those rulings if you read the terms broadly enough. But that is to miss the principles lying behind the decisions and the kind of decision being made. The question is whether the connection between the conduct of the alleged authoriser and the infringer is close enough that the authoriser ought to be held responsible for the infringer’s conduct. That’s a judgement call, based on ethical views, on what is normal in the industry, and on society’s views of the appropriate extent of responsibility. Once you look at those issues, finding liability for an ordinary industry player will be a hard sell – and a question which I suspect ought to be left to decision-makers other than the courts.

Um, isn’t there something missing here?
Of course, the other really interesting thing about the case is that it is being brought in the absence of any attempt by copyright owners to actually sue individuals for the copyright infringement that they are asking the ISPs to stop. If the copyright infringement is so clear, and so serious, one might expect that individuals would be sued. And, as I’ve said before, I can’t help but think that would be preferable:

[I]f individuals were sued, rather than disconnected, (a) the cost of enforcement would lie on the copyright owners, and (b) consumers, and media, and everyone else, would be clear on what was happening, who it was initiated by, and, in fact, that it was happening. And in the case of Australia, unlike the US, damages are linked to the harm suffered by the copyright owner, so the threat of exorbitant fines of the Jammie Thomas variety would not be there. The advantage of the lawsuit option is that it is public and that everyone takes responsibility for their action. That is not necessarily a bad thing, on all sides. In other words, if MIPI decides to sue individuals, it will, in so doing, at least have to articulate its reasons, justify them to the Australian population at large, and to politicians. Politicians, too, would need to observe the effects of copyright laws and to justify them to the Australian people. I think that’s only appropriate, rather than going through the back door of managing it all second hand through the ISPs.

Should ISPs bear the cost, and take action against people that the copyright industry refuses, itself, to sue? You have to ask yourself why they should.

And then there is the context. We all know that there is a worldwide push on the part of copyright owners seeking to have ISPs adopt a ‘graduated response’. These moves have met, in Australia, with resistance from the Internet Industry, which has repeatedly refused to act as judge and executioner for allegedly infringing users; the government, so far, has declined to step in to require the internet industry to take on such a role. This lawsuit clearly ‘ups the ante’. I wonder whether the copyright owners think they will receive a more sympathetic hearing from a judge? But why wouldn’t a judge see this as a policy issue to be determined in the legislative arena…?

Ah, interesting times. I look forward to following matters as they unfold.