The litigation currently underway in Australia between the internet service provider iiNet and a group of film and television companies is one chapter in a much bigger story currently playing out around the world. This month’s feature article looks at ISPs and online infringement of copyright, and investigates the likelihood that ISPs and copyright owners may be friends rather than foes in the future.
From Korea, to France, to the United States, to New Zealand, developed economies are wrestling with the question of how to conscript Internet service providers (ISPs) in the fight against illegal peer-to-peer (P2P) filesharing and other widespread forms of online copyright infringement. Some countries have opted for a legislative solution, while others, including Australia, are testing the issue in the courts. Still others say the best way to proceed is to bring ISPs to the table with copyright owners, to develop voluntary industry codes.
The precise impact of online infringement cannot be measured, but the music industry has been on the frontline of P2P filesharing (partly because of the relatively small size of music files) and the worldwide decline in sales of recorded music in the last five years has been well documented. With the spread of faster broadband services, other forms of copyright materials, such as books, film and television shows, games and software are also being illegally shared in increasing volumes.
The solution generally sought by copyright owners is some form of ‘graduated response’ by the ISPs. ‘Graduated response’ describes an enforcement approach in which ISPs send warning notices to subscribers once informed about infringing activity. The specifics vary depending on the jurisdiction but graduated response schemes generally operate as follows:
• Rightsholders monitor the Internet for infringing behaviour by subscribers, and collect IP addresses of such subscribers and evidence of infringements;
• Rightsholders give this information to an infringing user’s ISP to pass on warning notices to the subscriber;
• If, after a specified number of warnings, further infringing activity by the user continues, then some kind of punitive action is to be taken against that user (e.g. account suspension, account termination, throttling Internet speed, a ‘walled garden’, a fine).
When detecting infringing activity, copyright owners can only retrieve a subscriber’s IP address and can only link this to an individual with data from the ISP. This is why cooperation between copyright owner groups and ISPs is integral to any graduated response scheme.
The United Kingdom is currently implementing a graduated response program, following the introduction of the Digital Economy Act in 2010. In the first phase – scheduled to commence in early 2011 – ISP activity will be limited to issuing warning notices, which are expected to serve as a deterrent to infringement, as well as educate people that may not actually know their downloading activity is illegal. Once an ISP obligations code has been in force for 12 months, the telecommunications regulator Ofcom will determine whether ISPs should be obliged to take technical measures against problem infringers. Parliament must approve both the Ofcom report on the need for technical measures and the proposed measures themselves.
Cost is one of the key issues in any graduated response scheme. It is generally assumed that copyright owners will pay the cost of detecting infringement, but who should pay the cost of notification has been hotly disputed. In the UK, the Government announced in September that the cost of notification is to be split 75:25 between copyright owners and ISPs. The Government’s decision stated: “Calls by ISPs and consumer groups for all costs to fall to copyright owners were…rejected. Placing part of the costs on ISPs mean they have a real incentive to ensure they adopt the most effective and efficient process in processing CIRs and issuing notifications.”
A variety of other graduated response schemes are currently in different stages of implementation in South Korea, Taiwan, France, Sweden and New Zealand, while the European Parliament recently pledged its support for the creation of new European copyright law to help reduce digital infringement.
The latest IP enforcement policy statement by the US backs away from a government role in graduated response, only going so far as to “encourage cooperative efforts within the business community to reduce Internet piracy”.
Irish High Court Decision
In Ireland, as in Australia, the issue went to court, with the Irish Recorded Music Association (IRMA) and a number of member companies suing Ireland's largest ISP, Eircom, for allowing its services to be used for infringing activity. In February 2009, the parties came to an out-of-court settlement under which Eircom agreed to adopt measures that would include informing, warning and, in the circumstance of continuing infringing activity, suspending the subscriber.
This led to questions from Ireland’s Data Protection Commissioner about the appropriateness of the settlement and its compliance with Irish privacy law. The matter then went to the Irish High Court, which in April 2010 found that IP addresses collected for the purpose of graduated response did not constitute personal data. As a result of the court’s decision, Eircom began implementing a graduated response scheme in May 2010.
However, this win for copyright owners was short-lived. In October 2010 the High Court ruled in favour of another ISP – a company called UPC – in a legal action brought by four major record labels seeking to force UPC to adopt a ‘three strikes’ graduated response policy (i.e. disconnection for repeated infringement after three warnings). The High Court ruled that laws to identify and cut off internet users for copyright infringement were not enforceable in Ireland, even though illegal downloading “undermines” the business of the recording companies and “ruins the ability of a generation of creative people in Ireland, and elsewhere, to establish a viable living”. The judgement also noted that this gap in Irish legislation meant Ireland was not complying with European law.
The Irish Minister for Communications has since announced his intention to meet with representatives from the music industry and internet providers to “formulate an agreed approach”.
Experience shows that graduated response generates polarised political debate wherever it is on the agenda. Arguments of those in favour include the following:
- Graduated response offers a way for copyright owners to focus their legal attention on repeat infringers and avoid litigating against users that aren’t a significant threat;
- By using a system of tiered warnings, it allows infringing users the opportunity to correct their behaviour without having to interact with law enforcement or courts;
- If successful, the benefits of reduced copyright infringement flow back into the creative industries and the economy in general.
On the other side, critics argue that:
- Graduated response violates users’ rights to privacy, both through increased monitoring of Internet user behaviour and identification of users;
- Internet access is akin to a utility service and measures aimed at suspending or terminating access exceed the bounds of appropriate punishment for copyright infringement;
- Instead of stopping infringing activity, graduated response schemes simply encourage infringers to find new methods;
- Governments could use copyright infringement as a guise to block access to information deemed politically undesirable.
Friends or Foes?
ISPs frequently assert that the solution to online infringement is for copyright owners to offer new business models, which make legitimate online content more accessible and affordable. Copyright owners counter that they already offer a wide range of new models but that no business model can compete against ‘free’.
But while the ISPs and copyright owners are ostensibly on opposite sides of the debate, it may be that over time their interests become more aligned. Within the business divisions of their respective corporations, they are already doing deals with one another (e.g. in Australia, streamed music through AAPT Unlimited; movies, TV shows and sport through Telstra’s T-Box). Consequently, some commentators predict this trend will continue until the overriding interest of both groups lies in consumers paying for legitimate content online.
For this reason some copyright owners advocate an agreed industry code rather than legislation or litigation as the best way to introduce effective graduated response. This route involves ISPs and copyright owners sitting down at the table, possibly facilitated by government, to agree on the best way to organise an effective graduated response scheme in a particular territory.
Developments in Australia
In Australia, the copyright industries contribute 10.3 per cent of the country’s GDP. The rollout of the National Broadband Network (NBN) will provide even greater scope for these content businesses but will also increase the capacity for online infringement.
In 2010, an academic study found that 27.8 per cent of Australian Internet users admitted to using file-sharing services like BitTorrent to access content illegally. This was up from 23.6 per cent in 2008, indicating that the problem was growing.
However, looking at the issue from another perspective, a 2009 study commissioned by Australia’s Intellectual Property Awareness Foundation found that 73 per cent of Australians would stop illegal file-sharing if they received a notice from their ISP alerting them they were in breach of the terms and conditions of their account. It is this kind of outcome that many advocates of graduate response are counting on.
In the 2009 report Australia’s Digital Economy: Future Directions, the Government recognised a “public policy interest” in reaching a solution to online infringement. The report stated: “On the one hand, the Australian economy benefits from a sustainable content industry and from a general respect for legal rights. On the other hand, issues relating to due process and consumer privacy are important. The Government is currently working with representatives of both copyright owners and the Internet industry in an effort to reach an industry-led consensus on an effective solution to this issue.”
The dialogue between the parties came to a halt when 34 American and Australian film and television companies commenced legal action against iiNet, claiming that iiNet had authorised the illegal filesharing of films and television shows by its subscribers. The case commenced in the Federal Court in October 2009 and a decision, in favour of iiNet, was handed down in February 2010. Both sides appealed the decision; the appeal was heard in August and a decision is expected by the end of the year. However, it is likely there will be further appeal to the High Court, so it may take one to two years more for the case to be finally resolved. In any event, as the Federal Court’s Justice Emmett stated during the appeal, “Whatever we decide in this case is not necessarily going to resolve what might still have to be disputed in the future”.
Some copyright owners have echoed this sentiment, saying the case necessarily refers to specific infringements and will therefore have no broad, long-term application.
Until very recently, the Government has expressed its preference for an “industry-led consensus” on the issue. However a recent article in the Australian Financial Review quoted the Attorney General as saying that the Government wanted to “bring the Copyright Act up to date in light of the current technologies” and that such a process would benefit from a review by the Australian Law Reform Commission. It is likely that if the review goes ahead, one of the issues on the agenda will be ISP responsibility for illegal filesharing.
Some copyright industries in Australia are in favour of a very active role for the Government, through legislation to support graduated response. Other content providers would prefer a more industry-based solution, with an industry code on graduated response developed and agreed to by ISPs and copyright owners, and administered either by the industry itself or a body such as the Australian Communications and Media Authority.
If Internet companies continue to diversify into content provision, and grow their income from copyright works, it may be that the more fluid option of an industry code becomes the most attractive option for all parties.
 Department for Business Innovation & Skills, Online Infringement of Copyright (Initial Obligations) Cost Sharing, HM Government Response, September 2010.
 2010 Joint Strategic Plan on Intellectual Property Enforcement, Executive Office of the President of the United States, June 2010. P. 17.
 Irish Times.com, 11/10/10, http://www.irishtimes.com/newspaper/breaking/2010/1011/breaking32.html?via=mr
 Making The Intangible Tangible, The Economic Contribution of Australia’s Copyright Industries, by PricewaterhouseCoopers, prepared for the Australian Copyright Council, 2008.
 ARC Centre of Excellence for Creative Industries and Innovation, 17 May 2010 – available at http://www.cci.edu/publications/digital-futures-2010.
 Sycamore Research and Marketing November 2009, commissioned by IPAF.
 Australia’s Digital Economy: Future Directions, Department of Broadband, Communications and the Digital Economy, 2009. P. 38.
 AFR, by James Eyers, 24 September 2010. P.18.