Movie Studios Fail in Appeal Against Internet Service Providers

In a recent unanimous decision,(1) the High Court ruled that an internet service provider (ISP), iiNet, was not liable for authorising the copyright infringements committed by users who downloaded movies on its network. The ruling brings to a conclusion the copyright battle commenced by the movie studios in 2008.


Facts

The important legal issue in these proceedings was whether iiNet had authorised the infringing acts of its customers who had downloaded unauthorised copies of movies using iiNet's network. The movie studios had argued that iiNet authorised its customers' infringements under Section 101(1) of the Copyright Act 1968 (Cth) through:

• its provision of unfettered internet access to customers;
• its knowledge that some customers were infringing copyright (as a result of infringement notices being issued on behalf of the movie studios); and
• its refusal to warn infringing customers or terminate their accounts.

Decision

In a relatively brief decision, the High Court found that iiNet's conduct did not amount to authorisation. The court noted that Section 101(1A) of the act specifies three criteria that had to be taken into account when determining whether iiNet had authorised the infringing acts:

• the extent of iiNet's power to prevent customers from committing the primary infringements of copyright;
• the nature of the relationship between iiNet and its customers; and
• whether iiNet took any other reasonable steps to prevent customers from committing the infringing acts.

The High Court held that iiNet's power to prevent infringements was limited. The court held that iiNet had limited technical ability to prevent infringements, for the following reasons:

• It did not host infringing content.
• It had no involvement with or control over the BitTorrent peer-to-peer file sharing system used by its customers.
• It did not assist users in finding infringing content.
• It could not actually remove infringing content from customers' computers.

Furthermore, it was noted that even if it could take such actions, iiNet could not prevent customers from using another ISP's services. This left iiNet with only the power to terminate the contractual relationship with its customers, which the court considered an indirect and limited power.

When considering whether iiNet had taken reasonable steps to prevent infringing acts, the court held that the information provided in the infringement notices on behalf of the movie studios did not give iiNet a reasonable basis on which to warn alleged infringing customers or, if necessary, to suspend or terminate their accounts if the infringements continued.

The court noted that the notices provided limited evidence of the infringements. Furthermore, it was impractical and costly for iiNet to verify the allegations contained in the infringement notices without it infringing the movie studios' copyright itself. Finally, the court considered that iiNet's unwillingness to act on the notices was based simply on its assessment of the risks of taking action on such limited information. The High Court concluded that iiNet's failure to act on the infringement notices did not amount to authorisation of copyright infringement by its customers.

Comment

This case deals a severe blow to movie studios in their attempts to hold an ISP liable for authorising the infringing acts of its customers. Importantly, this decision goes further than the 2011 decision of the Full Federal Court. In that case, the court had held that iiNet had not authorised the infringements due to the fact that the infringement notices were inadequate.

Nonetheless, it had hinted that had the infringement notices provided "unequivocal and cogent evidence" of infringement and had the movie studios provided contractual protection to the ISP against costs and liabilities to customers for wrongful termination of accounts, iiNet's failure to act might have been unreasonable and therefore amounted to authorisation.

In this decision, the High Court also referred to the lack of information provided in the infringement notices. However, the High Court also found that iiNet had only an indirect contractual power to prevent the infringing activities of its customers.

The High Court noted that even if iiNet had terminated a customer's account, this did not ensure prevention of the infringing activity. The emphasis of the High Court on iiNet's limited indirect power means that it will not be enough for movie studios simply to address the inadequacies in notices provided to ISPs.

On a final note, three of the High Court judges expressly noted 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."

This is a signal that other alternative approaches (eg, a voluntary industry code) will be needed by movie studios and other copyright owners when dealing with widespread copyright infringements through peer-to-peer file sharing. The outcome of this case has likely increased the bargaining power of ISPs generally in Australia in any negotiations towards an industry code.

The one hope for copyright owners may be found in the High Court's analysis of the degree of control held by ISPs over copyright infringements. On this sort of analysis, other intermediaries - such as social networking platforms or search engines - may be held to have a greater degree of power to control and prevent the infringement of copyright using their services. Accordingly, claims against those intermediaries for authorisation of infringing activities using their services may find greater success.