Against the background of the Australian Government’s current review into convergence and the upcoming Australian Law Reform Commission (ALRC) review into the suitability of current copyright exceptions, recent Federal Court litigation in Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No 2) [1] sheds some light on the practical complexities that converged platforms can cause.

The Players

So who is involved? Firstly we have the sports bodies; the NRL and AFL – these companies own the copyright in broadcasts of their respective sporting codes. A lot of people watch sport in Australia, so these rights can often go to the highest bidder for a large sum.

Next, we have Telstra, which has made a $100 million + licensing deal with the sporting bodies to be the exclusive online broadcaster of NRL and AFL matches. Being the exclusive licensee means that Telstra alone has the rights to broadcast the matches online. Telstra and the sporting bodies are all parties in the litigation against Optus. When discussing the case, these three entities will be referred to together as “the rightsholders”.

Next up, we have Optus, Telstra’s main competitor in the mobile market and creator of the TV Now service as a value-add for its mobile customers (and as a reason to woo new customers to its network).

Lastly, we have you: the user. As shall be seen later, much of the Court’s decision rested on whether you, the private individual - the customer, was causing the recording to happen and be streamed to your device, or whether it was actually Optus that was responsible for this.

TV Now Service

The service at the centre of this controversy is Optus’ TV Now service – how does it actually work? Optus’ mobile customers have access to an electronic program guide (EPG) that lists all the programs screening on the free-to-air channels – this is effectively a digital TV guide. Users can schedule programs from the EPG to be recorded and stored on Optus’ cloud. A user can then play back a recorded program as many times as they want within a 30 day period, after which the recording is automatically deleted.

TV Now records four different versions of a broadcast (each being a format necessary to be delivered to a different category of device – for example, an iPhone will require a different format to a desktop PC). Users can only watch programs they have themselves set to record - other users cannot view programs recorded by others, only ones that they have selected to record themselves.

Optus launched the service in August 2011 and almost immediately; there were reports of potential legal action. Optus took an action under section 202 of the Copyright Act – in copyright terms, this is effectively a pre-emptive strike against the other parties. By taking an action under section 202, Optus took the question of TV Now’s legality directly to the Court.

The Decision

The decision was handed down by Rares J of the Federal Court and centred on the exception in section 111 of the Copyright Act which allows, amongst other things, an individual acting in a private and domestic capacity to record programs broadcast on TV for the purposes of watching it at a more convenient time – commonly referred to as “time-shifting” a program. This amendment in its present form was brought in in 2006 and permitted what had become a commonplace practice in the community given the pervasiveness of video and hard disk recorders in people’s homes.

Optus essentially argued that users recording and streaming programs via their TV Now service were within the section 111 exception and therefore no copyright infringements were taking place – and that therefore the rightsholder’s permission wasn’t needed to operate the service.

On the other hand, the rightsholders argued that it was Optus that was actually making the recordings and then communicating these to their users - such use would be outside the scope of the section 111 exception and would infringe the rightsholder’s copyright unless Optus had permission. Given that Telstra had an exclusive licence from the rightsholders for online broadcasting, it’s unlikely that Optus would have got such permission.

So, the key legal issue before the Court was whether TV Now fell within the scope of the section 111 exception. In working this out, Rares J considered seven different questions, some of which were dealt with together:

Question 1 – who actually ‘made’ the recordings of the broadcasts

This question is important because the ‘user’ needs to make the recording for section 111 to apply. Unlike other private use exceptions in the Copyright Act, section 111 does not require that an individual owns the equipment on which the broadcast is being recorded.

Optus argued that it was the user, by pressing the record button that initiated and made the recording. The rightsholders instead argued that it was Optus that made the recording, given that the company’s equipment was being used to record and store the broadcasts. The rightsholders argued that Optus was effectively making the recordings on behalf of the user.

The Court agreed with Optus, reasoning that “the user is solely responsible for the creation of those films. He or she decides whether or not to make the films and only he or she has the means of being able to view them. If the user does not click “record”, no films will be brought into existence that he or she can play back later. The service that TV Now offers the user is substantively no different from a VCR or DVR”. [2]

As for the role of Optus’ equipment in facilitating the recording, Rares J saw an analogy with University of New South Wales v Moorhouse [3]. In Moorhouse, the High Court found that a university library authorised copyright infringements taking place on its photocopiers as it failed to take reasonable steps to prevent such infringement occurring.

In Rares J’s view, in the same way the university itself was not held to actually be engaged in the act of photocopying, Optus could not itself be said to be engaged in the act of recording the broadcasts solely by providing the means by which the recordings were made. In one way, this approach tests the boundaries of Moorhouse, as the university’s role in relation to the operation of the photocopier infrastructure was arguably a more distinctly separate one than Optus’ role in and connection to the TV Now infrastructure.

Question 2 – was recording the films an infringement of copyright?

If it could be shown that the recordings were made outside the scope of the users’ private and domestic capacity or not for the purpose of viewing at a more convenient time, then the recordings would be outside the scope of section 111 and would be infringing.

Optus argued that copyright in the broadcasts was not infringed as users were within the scope of section 111. The company’s terms and conditions for accessing the service (which users had to view and agree to before being able access the service) stipulated that copyright would be infringed if copies of broadcasts were used for purposes other than their private and domestic use or watching the broadcast at a more convenient time.

The rightsholders countered on several grounds, including (i) that Optus had no evidence of the user’s purpose or intention for recording the broadcast, nor could Optus know whether the user’s need to record fell within an acceptable purpose under section 111 (ii) that watching a recorded broadcast “near live” didn’t amount to actually “time-shifting” that broadcast and (iii) making four recordings was outside the “sole” purpose element of section 111.

The Court found in Optus’ favour; reasoning that the rightsholders had been unable to prove that someone watching a sports broadcast on their device could be doing so for circumstances that were not private or domestic for that individual. As for the question of the four recordings – the court accepted that the user was unaware of this process and held that section 111 is not limited to only one copy of a recording – rather, the threshold should be no more than the amount needed for the user to watch the broadcast at a later time. Each possible platform for viewing the recording needed a different video format, so copies made by the user were still solely for the use under section 111.

On the additional question of whether TV Now allowed users to watch broadcasts “near live”, the court held that “The meaning of the expression “a time more convenient than the time when the broadcast is made” in s 111(1) does not preclude watching a film “near live” if the viewer finds that to be more convenient. The section must be concerned with what the viewer subjectively thinks is a more convenient time for him or her” [4] – so, even though the later time can be quite short (for example 3 minutes), it was the Court’s view that this would still be considered a “later time” for the purposes of section 111.

Question 3 and 5 – Does Optus communicate the film when the user plays it?

If the rightsholders could prove that it was Optus that actually making the communication and not the user, then Optus would be outside the scope of section 111 and streaming recordings would be infringing.

The rightsholders argued that when users clicked “play”, Optus communicated the recordings to them whereas Optus argued that it was the user (not Optus) communicating the material back to their own device.

The Court considered the issue in terms of section 22(6) of the Copyright Act, which states that “a communication other than a broadcast is taken to have been made by the person responsible for determining the content of the communication.”

In the Court’s view, this was the user – not Optus, as the user was the person that caused the recording to be made when he or she selected a program to record and following this, when clicking play, determines that the video be streamed to them. Optus’ system doesn’t allow users to stream video that they did not set to record and thus, the party responsible for determining the content of the communication was the user.

According to Rares J, “The user of the TV Now service had previously determined that the content of what he or she caused to be recorded would be the program or show he or she selected. By seeking to play it, the user determined that his or her device would display the recording just as if he or she had inserted a video cassette or DVD into a VCR or DVD player and pressed “play” [5]. Following this, “by clicking the “play” button on his or her compatible device, the user communicated the film to his or her device by determining that the film would be made available online or electronically transmitted to that device” [6].

Issue 4 and 6 – Was the communication “to the public”?

Even if the initial making of the recording was within the scope of section 111 and not infringing, if it could be shown that the streaming of the recorded video by TV Now or the user was a communication to “the public” for copyright purposes, then this could be an infringement.

The rightsholders looked to the principle in Telstra Corporation Ltd v Australasian Performing Right Association Ltd [7], summarised as “if a work is communicated in circumstances where the copyright owner can expect a fee, the communication is made “to the public” regardless of whether it is made to only one person or a private audience” [8]. So, if it could be shown that the recordings were being communicated in a commercial setting, it would be unlikely to be considered private or domestic.

Optus instead argued that as its users made the recordings and streamed them to their devices for their private purposes, any subsequent communication was not ‘to the public’ as only the individual user received the recorded broadcast and the recording and communication in this circumstance was covered by section 111.

It was the Court’s view that that even though TV Now users did constitute the rightholder’s ‘public’ (in that users could have watched the broadcast live), those users could have recorded those same broadcasts on their VCRs or DVRs at home – without paying a fee to the rightsholders. It therefore follows that the commercial detriment element of Telstra was not present. It is worth noting that television broadcasts operate on a different business model and that the Court had little regard to the potentially detrimental effects on online broadcast business models. This is particularly relevant given that Optus was providing TV Now as part of its commercial service.

Rares J then reasoned that TV Now made a separate recording for each user and streamed only that recording to them, and as such recordings was made legitimately with section 111, subsequent communication of that recoding for this purpose to the specific user was not ‘to the public’ and thus not infringing.

It is worth noting that in considering the detriment to the copyright owner, there was no consideration of the ‘three-step test’; a threshold test concerning the boundaries of copyright exceptions. The three-step test is rooted in key international copyright treaties including the Berne Convention and TRIPS Agreement and limits copyright exceptions that operate too generally or conflict with a copyright owner’s normal exploitation of a work or operate in such as way as to unreasonably prejudice a copyright owner’s legitimate interest.

As it currently stands, the reasoning on issues 4 and 6 could have implications well beyond the TV Now service. For example, the Court’s construction of “communication to the public” could mean that password protected or access-restricted servers could be used to overcome the question of the ‘the public’ when communicating material – even in situations when copyright owners may usually be remunerated for such use.

Issue 7 – is the streamed file an “article or thing”?

If it could be demonstrated that the streamed file was “an article or thing” being distributed for the purposes of trade by Optus, then this would be an infringement of the rightsholders’ copyright by way of sale as per section 103.

The Court found that no infringement took place - given earlier findings that recording and communicating as part of TV Now was within the scope of section 111. Further to this, the specific article was found to be the hard drive on Optus’ premises and this object was not distributed to the users as part of the service.

Beyond the decision

The first stage of the proceedings went very much in Optus’ favour. As a result of the decision, Optus’ can continue TV Now in the way it has been operating, no doubt to the chagrin of the rightsholders.

This was the first Australian decision to consider cloud-based technologies in terms of the private use exceptions. The decision as it presently stands, has expanded the scope of section 111 beyond its previously assumed limits. A key question will be whether such an expansion will push the exception beyond its original policy intention and outside of the scope of the three-step test. This is especially interesting given that Optus, a commercial entity, is providing a service that relies on exceptions intended to operate in a private and domestic context.

The decision provides us with an interesting real-world example of maintaining what is commonly referred to as the “copyright balance” between rightsholders and users. The decision challenges existing business models and whilst there may be immediate short term gains for Optus’ customers, the long term detrimental effects such as the loss in revenue streams, could lead to an overall loss of investment in content which will end up negatively affecting those same customers.

The rightsholders have appealed the decision, and the Court has granted the parties an expedited hearing, which will take place in the coming weeks. There is some urgency to this in that the main football season runs between March and October every year, and sports bodies and online broadcast licensees no doubt want to have the matter settled before the season progresses too far, particularly when you take into account that it is an Olympic year and broadcast rights for the event do not come cheaply.

Outside of the litigation, representative from sports governing bodies have been in talks with government with the aim of amending copyright legislation to secure their broadcast rights. There has not been any firm indication of how or when such a measure would be implemented, but the Commonwealth Ministers for Communication and for Sports have flagged the issue as one of concern, in the case of the Minister for Sports - particularly if the outcome of a devaluing of online broadcast rights would reduce funding to sports development.

Given what is at stake, there is tension between some of the parties. AFL CEO Andrew Demetriou commented during an interview that ““They [Optus] are not paying for it; they are lifting it. It is akin to stealing and all it will do is that if sports can't rely on that revenue, they will slug the consumers.” [9]

Optus took Mr Demetriou to Court alleging that his comments constituted “misleading and deceptive conduct” under Australian Consumer Law as Optus prevailed in the earlier copyright litigtion about TV Now [10].

Edmonds J of the Federal Court found that “read as a whole, in the context of the interview given, and in light of the manner in which Optus’ TV Now service operates, Mr Demetriou’s statements are not misleading or deceptive” [11].

International Issues

Other jurisdictions are also considering similar issues. In the decision, Rares J noted

The US Second Circuit decision of Cartoon Network, LP v. CSC Holdings, Inc [12], which considered whether individuals receiving streamed TV content constituted “the public”, and the Singapore Court of Appeal decision Record TV Pte Ltd v MediaCorp TV Singapore Pte Ltd [13] which considered streaming of recorded TV broadcasts to specific users that had requested the recordings be made.

The contest over sports rights is also being played out in the UK. Recent UK High Court and European Court of Justice decisions have come down largely in favour of a pub owner using a cheaper Greek TV decoder box to screen Premier League matches in her venue instead of using the more expensive UK decoder box - which raises interesting questions about the value of exclusive rights to broadcast sporting matches as well as the extent to which access to content can be restricted between national borders in the EU. The complexity with this case is that whilst screening the matches appears to be non-infringing, screening related material such as Premier League music, graphics and other such content may still raise a copyright issue.

What Next Domestically?

Given the present climate in which the cloud is fast becoming a vehicle for both content storage and delivery, it is important to get some guidance on these issues from the courts. It is relevant to bear in mind that this is just part of a copyright continuum. Technological changes have a particular effect on copyright law - from the early days of the photocopier to the home VCR, to MP3s and now cloud-based storage and broadcasting, technological developments will continue to ask questions of the Copyright Act.

Since its inception, the Copyright Act has adapted to new technologies, be it through the courts or through legislative reform. The TV Now appeal and the forthcoming ALRC review indicate that copyright law is beginning its adaptation to this next phase of technologies, just like it has in the past and will continue to do so in the years to come.

Endnotes

[1] Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No 2) [2012] FCA 34

[2] Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No 2) [2012] FCA 34 at [63]

[3] University of New South Wales v Moorhouse [1975] HCA 26

[4] Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No 2) [2012] FCA 34 at [80]

[5] Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No 2) [2012] FCA 34 at [91]

[6] Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No 2) [2012] FCA 34 at [94]

[7] Telstra Corporation Ltd v Australasian Performing Right Association Ltd [1997] HCA 41

[8] Singtel Optus Pty Ltd v National Rugby League Investments Pty Ltd (No 2) [2012] FCA 34 at [101]

[9] SingTel Optus Pty Ltd v Australian Football League [2012] FCA 138 at [9]

[10] SingTel Optus Pty Ltd v Australian Football League [2012] FCA 138

[11] SingTel Optus Pty Ltd v Australian Football League at [21]

[12] Cartoon Network, LP v. CSC Holdings, Inc 536 F 3d

[13] Record TV Pte Ltd v MediaCorp TV Singapore Pte Ltd [2010] SGCA 43