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The liability of ISPs and other providers of hardware and software facilities for copyright infringement
by Peter Knight, Clayton Utz
Peter Knight is a partner in Technology and Intellectual Property at Clayton Utz.
Peter Knight discusses the Canadian decision in Society of Composers, Authors and Music Publishers of Canada v Canadian Association of Internet Providers and ors 2004 SCC 45. In this case, the Canadian Supreme Court considered the issue of whether internet service providers (ISPs) should be liable to copyright owners because they communicate material protected by copyright over the internet. Knight provides a useful summary of the decision, and compares the Australian and Canadian positions relating to "communication". The article concludes by looking at ISP liability under the proposed FTA changes to the Copyright Act.
Society of Composers, Authors and Music Publishers of Canada v Canadian Association of Internet Providers and ors 2004 SCC 45 (Supreme Court of Canada, McLachlin CJ, Iacobucci, Major, Bastarache, Binnie, Arbour, LeBel, Deschamps and Fish JJ, 30 June 2004)
The highest Court of Appeal in Canada, the Supreme Court, recently handed down judgment in this matter, which examined the fundamentals of the new right of "communication" in Canadian copyright law, and the statutory defences provided by the copyright law. It is a decision which provides insights into the equivalent provisions of the Australian Copyright Act 1968 (Cth), in particular the meaning of sections 22(6), 36(1A) and 39B, introduced by the Copyright Amendment (Digital Agenda) Act 2000 (Cth) and, by contrast, the new provisions which are proposed to augment and amend the existing Australian law set out in the US Free Trade Agreement Implementation Act 2004.[1]
Background
These proceedings originated in the Canadian Copyright Board, (Copyright Board) the equivalent of the Australian Copyright Tribunal, with an application by the Canadian Society of Composers, Authors and Music Publishers of Canada (SOCAN, which has a function somewhat the same as APRA in Australia) seeking payment of a statutory royalty (Tariff 22) by Canadian providers of internet infrastructure. The basis of the application was that the providers were responsible, in part, for the communication, or authorized the communication, of music over the internet to Canadian internet users.
The appeal raised questions regarding who should compensate copyright owners whose works are unquestionably being transmitted across the internet.
The internet infrastructure providers, the appellants in the Supreme Court, relied upon section 2.4(1)(b) in the definition of "telecommunication" in the Canadian Copyright Act, RSC 1985 c. C-42 (Canadian Act), which provides:
(b) a person whose only act in respect of the communication of a work or other subject-matter to the public consists of providing the means of telecommunication necessary for another person to so communicate the work or other subject-matter does not communicate that work or other subject-matter to the public; [emphasis added]
Further, they rightly observed that it is not just music which is transmitted across the internet, but a vast amount of other material, the passage and content over which they have little, or no, control.
It is to be noted that the claim of SOCAN was not concerned at all with whether the person downloading music was doing so from a "legitimate" music provider, such as Apple's iTunes website in the United States, which is licensed by the copyright owners in the United States, or from an illegitimate source. SOCAN's position was that those who provided the means of communication should contribute to the remuneration of the music copyright owners, on the basis that a proportion of the traffic passing over their facilities was music of some kind.
The Copyright Board found that it could only consider granting a royalty if the relevant copyright act, communication, occurred within Canada, and that this could only be so if the provider of the music content downloaded over the internet, or rather the "host" from which it was downloaded, was located within Canada (unless, perhaps, the content provider had "the intention to communicate [the content] specifically to recipients in Canada"). [2] The Copyright Board further found that the ordinary activities of internet infrastructure providers could not be regarded as "communication" within the meaning of the Canadian Act, unless they did something more than act "as a mere conduit" of copyright material.
On appeal, the Federal Court of Appeal took a slightly different view. It decided that the Copyright Act had a broader reach, and could apply to any act which had a "real and substantial connection with Canada". A broader range of activities could be infringements under the Act than just communication from a host server within Canada, and a broader range of sources could give rise to a liability on the part of internet service providers (ISPs) who "enabled' such communications to Canadian end-users. The Court agreed with the findings of the Copyright Board regarding the nature of the ordinary activities of internet infrastructure providers, but found that such providers often improve upon the communication between host and end-user, for example by "caching" frequently visited sites. Even if for purely technical reasons, this constituted sufficient additional intervention, to make the internet service providers liable to SOCAN under Tariff 22, because it was optional and not "necessary".
Decision of the Supreme Court
The Supreme Court did not entirely agree with the decision of the Federal Court of Appeal. The majority (LeBel J dissenting) agreed with the Court below regarding the scope of the conduct which might amount to copyright infringement in Canada, the situs of the host server being merely one possible factor among many which might give rise to sufficient connection with Canada to amount to a "communication" caught by the Canadian Act. However, the Supreme Court disagreed upon the scope which should be given to the exception in section 2.4(1)(b). The Supreme Court found that the word "necessary" in the exception should be read broadly, so as to encompass any reasonably useful and proper means to achieve the benefits of enhanced economy and efficiency. As a consequence, even the creation and use of caches to improve the speed and efficiency of responses would be regarded as within the exception regarding "necessary means", so long as the ISP is not directing its activities to specific content. [3]
Communication
Binnie J, delivering the majority judgment, recognised that SOCAN was in a difficult position, it not being an "attractive prospect" for SOCAN to attempt to recover royalties from foreign suppliers of music content over the internet.[4] However, his Honour observed that the purpose of section 2.4(1)(b) was to strike a reasonable balance between the competing interests of encouraging copyright owners to create content and of intermediaries providing telecommunications infrastructure. In this case Parliament had decided, in order to avoid "unnecessary layering" of copyright liability, that those engaged in the "wholesale" stage of the communication activity should not be caught up as well as those providing the content communicated.[5]
I conclude that the Copyright Act, as a matter of legislative policy established by parliament, does not impose liability for infringement on intermediaries who supply software and hardware to facilitate use of the Internet. The attributes of such a "conduit" ... include lack of actual knowledge of the infringing contents, and the impracticality (both technical and economic) of monitoring the vast amount of material moving through the Internet, which is prodigious."
However, his Honour noted that an ISP may well engage in other activities which target or promote the acquisition by its customers of particular data, such as providing specific links to sources of on-line music, and this activity may well be outside the protection afforded by section 2.4(1)(b).
Authorization
Given that the providers of music content over the internet to Canadians, from host servers inside or outside Canada, may be infringing by communication, would the ISPs be liable for "authorization", on the basis that they provide the means of communication? There was no doubt that the ISPs knew that music was being communicated across their systems, and the availability of such music is a powerful inducement for end users and content providers to sign up with internet access providers.[6] It was here that the fact that a good deal of material other than music is also transacted over the internet operated on the judgment of the Supreme Court:
The operation of the Internet is obviously a good deal more complicated than the operation of a photocopier, but it is true here, as it was in the CCH case,[7] 7 that when massive amounts of non-copyrighted material are accessible to the end user, it is not possible to impute to the Internet Service Provider, based solely on the provision of Internet facilities, an authority to download copyrighted material as opposed to non-copyrighted material.[8]
His Honour added, however, that where the activities of the ISP cease to be content neutral, such as when it has notice that a content provider has posted infringing material on its system and fails to take remedial action, it may then have a liability for authorization. [9] However:
The knowledge that someone might be using neutral technology to violate copyright (as with the photocopier in the CCH case) is not necessarily sufficient to constitute authorization, which requires a demonstration that the defendant did "[g]ive approval to; sanction, permit; favour encourage" (CCH, para 38) the infringing conduct. ... A more effective remedy to address this potential issue would be the enactment by parliament of a statutory "notice and take down" procedure as has been done in the European Community and the United States.[10]
"Communication" under the Australian Copyright Act
The Copyright Amendment (Digital Agenda) Act 2000 (Digital Agenda Act) introduced to the Australian Copyright Act 1968 (Copyright Act) the current right of "communication to the public" which comprises both of the rights of broadcasting and distribution by cable, and extends to dissemination of copyright material on the internet. The Copyright Act now defines "communicate" to mean:
... make available online or electronically transmit (whether over a path, or a combination of paths, provided by a material substance or otherwise) a work or other subject matter.[11]
Clearly, like the activities of a conventional broadcaster or a provider of a cable diffusion service, the activities of the providers of internet infrastructure fall within this fairly broad definition of the word "communicate".
To overcome this problem, and achieve the same balance of competing interests which section 2.4(1)(b) of the Canadian Act sought, the Australian legislation takes a different path. Sections 22(5) and (6) provide instead:
(5) For the purposes of this Act, a broadcast is taken to have been made by the person who provided the broadcasting service by which the broadcast was delivered.[12]
(6) For the purposes of this Act, a communication other than a broadcast is taken to have been made by the person responsible for determining the content of the communication.
Hence the issue of whether a person has engaged in "communication to the public" is to be determined by the altogether unexplained notion of "determination of the content". What could it mean? It seems that the legislation has chosen to replace one uncertainty with another. Section 22(6) may make the new right of communication to the public exceptionally narrow - potentially a narrower right than under the legislation prior to the amendment. It is not clear why a person who acquires material for redistribution, who knows of the content but who does not determine content (because the supply of the content has been contracted out to the supplier of it), should not be infringing the copyright in the content. For example, a hotel operator who acquires in-room videos from a provider of this service, or an ISP who commissions the provision of text, pictorial, video or sound recording content, perhaps from an overseas supplier may well not be "determining the content of the communication" before it is communicated. However they would have been liable before the new law was introduced and these are examples of the sort of conduct which Binnie J in the Canadian Supreme Court would have regarded as being outside the scope of section 2.4(1)(b) of the Canadian Act. It is not clear what degree of intervention an ISP or other network communications provider must have before it may be understood to be "determining the content". Would caching amount to sufficient intervention, even if by some automated process?
By contrast, under the new section 22(5), a communication to the public by way of a "broadcast" is "taken to have been made by the person who provided the broadcasting service by which the broadcast was delivered". A person who makes a broadcast is therefore under a much stricter obligation than other communication service providers. This, quite properly, places a fairly large onus on a broadcasting service to screen all material before it goes to air. One may wonder why the same burden is not placed upon ISPs to screen their material which is provided by third parties, other than from customers which they cannot control.
"Authorization" and sections 36(1A) and 39B of the Australian Copyright Act
The Digital Agenda Act also introduced sections 36(1A) and 39B in respect of works (and equivalent provisions in sections 101(1A) and 112E in respect of other subject matter), which deal with authorization. Section 36(1A) provides:
(1A) In determining, for the purposes of subsection (1), whether or not a person has authorised the doing in Australia of any act comprised in the copyright in a work, without the licence of the owner of the copyright, the matters that must be taken into account include the following:
(a) the extent (if any) of the person's power to prevent the doing of the act concerned;
(b) the nature of any relationship existing between the person and the person who did the act concerned;
(c) whether the person took any reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.
And section 39B provides:
A person (including a carrier or carriage service provider) who provides facilities for making, or facilitating the making of, a communication is not taken to have authorised any infringement of copyright in a work merely because another person uses the facilities so provided to do something the right to do which is included in the copyright.
Both these provisions address the issues which arose before the Canadian Supreme Court, but it is to be noted that the deal only with the authorization issue, and not with the issue of communication itself (as section 2.4(1)(b) of the Canadian Act does). Hence the defence of merely providing "facilities" goes only to authorization, and not to the underlying act of communication to the public. This suggests that the mere provision of facilities does amount to communication; otherwise, sections 36(1a) and 39B would be otiose. On the other hand, if a person "determines the content" of a communication, how can that person take advantage of section 36(1A)?
Section 39B also relies upon an expression, "facilities", in respect of which no legislative assistance or explanation is provided. Because it is clearly intended to extend beyond a mere provider of a communications network (by reason of the words "including a carrier or carriage service provider" in parentheses), it must refer to the provision of other facilities (by a person who "determines the content" of the relevant communication). In this way it might extend, using the words of Binnie J quoted above, to "intermediaries who supply software and hardware to facilitate use of the Internet", that is, those who provide products, not merely those who provide communications facilities.
Further amendments under the US Australia Free Trade Agreement
The US Australia Free Trade Agreement (FTA) requires Australia to implement further amendments to the Copyright Act to provide a much more detailed hierarchy of conditional limitations on ISPs' liability. The limitations on liability set out in the FTA require that a court should not be able to give monetary relief against an ISP, and that the court's ability to compel or restrain certain ISP actions, such as terminating accounts or disabling access to infringing copyright material, is to be restricted.
Pursuant to the US Free Trade Implementation Act 2004 (Cth), if the FTA is ratified, Part 11 of Schedule 9 (item 191) of the Act will introduce a new Division 2AA of Part V of the Copyright Act, which applies equally to all "carriage service providers" (as defined in the Telecommunications Act 1997 (Cth)), not just ISPs. This sets out four "categories" of relevant activity:
Category A activity: by providing facilities or services for transmitting, routing or providing connections for copyright material, or the intermediate and transient storage of such material in the course of transmission, routing or provision of connections;
Category B activity: caching of copyright material through an automatic process ("caching" is defined as "the reproduction of copyright material on a system or network controlled or operated by or for a carriage service provider in response to an action by a user to facilitate efficient access to that material by that user or other users");
Category C activity: storing, at the direction of a user, copyright material on a system or network controlled or operated by or for a carriage service provider; and
Category D activity: referring users to an online location using information location tools or technology.
Each of these types of activity is subject to different conditions to establish limits on carriage service providers' liability, which are set out in a large table which will be included in the new section 116AH.
These are subject to a proviso in subsection (2) 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 except to the extent required by a standard technical measure mentioned in condition 2 in table item 1 in the table in subsection (1).
The conditions that must be satisfied for carriage service providers to enjoy limited liability become more stringent for each category from Category A to Category D. This reflects that the carriage service provider has greater access to and control over the copyright material communicated or which the carriage service provider assists to communicate.
However, the carriage service provider will be presumed to have complied with these conditions if it can point to evidence suggesting its compliance. In addition, carriage service providers will not be required to monitor or investigate their systems and networks for copyright infringement, apart from as required by relevant industry codes. [13]
One is compelled to ask how these specific provisions with respect to carriage service providers are meant to co-exist with the existing provisions of section 22, 36, 39B, 101 and 112E, to which no change has been made. The retention of these provisions unaltered serves to reinforce the view that these provisions must have a broader meaning than may otherwise have been thought. Some guidance in this regard may be given by the Federal Court of Australia in the proceedings which are currently before it in respect of the Shaman Networks "Kazaa" facilities, and those parties which provide fileswapping software which can be used for "peer to peer" copying of files from the computers of one internet user to the other.
[table to be inserted]
Footnotes
1 Part 11 of Schedule 9 (item 191).
2 (para 139).
3 It is interesting to note that neither the Copyright Board nor the Supreme Court had to decide whether this conduct would amount to the making of a copy, and hence an infringement of another of the copyright owner's exclusive rights, as SOCAN did not sue on, presumably because it did not own (in the same way that APRA does not own), such right.
4 (para 81).
5 (paras 90 and 114).
6 (para 121, quoting Evans JA of the Federal Court of Appeal).
7 CCH Canadian Ltd v Law Society of Upper Canada, [2004] 1 SCR 339, 2004 SCC 13; cf University of New South Wales v Moorhouse and Angus & Robertson (Publishers) Pty Ltd, (1975) 133 CLR 1; 6 ALR 193; [1976] RPC 151
8 (para 123)
9 (par 124)
10 (par 127)
11 Section 10, Copyright Act.
12 Section 10 defines "broadcast" as "a communication to the public delivered by a broadcasting service within the meaning of the Broadcasting Services Act 1992". This essentially means radio and television, but does not include the provision of data (such as teletext), nor point-to-point provision of programs, such as video on demand, as well as any other services which the Minister declares not to be broadcasting services (section 6(1) Broadcasting Services Act 1992)
13 Proposed section 116AJ
March 2005 contents
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