A few thoughts on iiNet FFC decision

On 24 February the iiNet decision generated significant buzz in the media, academy and anyone with an interest in cyber-regulation or copyright. Kimberlee Weatherall first posted the article below on her blog LawFont, and we are reposting it here to provide our audience with her expert exposition. As mentioned in Kimberlee’s article, Fortnightly Review author David Brennan also wrote a piece for The Age, and hopefully the conversation between these analyses will generate some excellent discussion and commentary within our community of readers and authors.

A few thoughts on iiNet FFC decision

By Kimberlee Weatherall

By now, all the copyright nerds in the world know the headlines: the Full Federal Court has handed down its decision in the iiNet case; that the appeal was dismissed in a 2:1 decision (Emmett and Nicholas JJ; Jagot J dissenting). Most people also will know that the reasoning is very, very different from the Trial Judge’s decision, and certainly contemplates, in a way that the Trial Judge didn’t, that in different factual circumstances an ISP could be liable for authorising infringement by its BitTorrenting users. The various major law firms have issued their summaries, I refer you there for an overview. Assoc Prof David Brennan from Melbourne Uni has expressed his succinct, and compelling view.

The decision is really long: it half looks like all three judges wrote as if theirs was to be the main decision (with others concurring or dissenting more briefly). A close reading reveals why. Although it is fair to say that the majority judges reach broadly the same conclusion on broadly similar grounds (namely, that the AFACT notices did not contain enough information to require action on the part of iiNet), they conceptualise the facts quite differently, and demonstrate important differences of approach. My early thoughts are below the fold. This one’s for people generally familiar with the case and Australian copyright law though – beginners need to start, at least, with the law firm case notes.

Conceptualising the facts

Emmett J’s judgment reads like a borderline one to me: it’s almost like he came within a hair trigger of finding authorisation. He emphasises iiNet’s ‘contumelious disregard’ for the rights of the copyright owners, suggests that iiNet ‘tacitly approved’ of the infringements, and highlights the facts that appear to have come quite close to constituting authorisation. Ultimately, Emmett J is not satisfied that sufficient information was provided by AFACT to trigger authorisation. Emmett J also seems concerned that iiNet ought not be required to bear the whole cost of any system.

Nicholas J seems to view iiNet’s behaviour as far less egregious: it is Nicholas J, for example, who emphasises that iiNet’s apparent ‘indifference’ could not simply be characterised as wrongful, based as it apparently was on a belief that iiNet was not legally obliged to act. One has the sense, however, that insofar as Nicholas J was concerned that iiNet not be held liable for taking a position on the law that was not entirely judicially unsupported, his Honour would be less sympathetic in a future case, where an ISP would no longer be able to take that attitude in light of the decisions in iiNet. It is Nicholas J who seems most concerned with the possibility that ISPs will be incentivized to suspend or terminate users all too readily to avoid future litigation.

Jagot J, the dissenting judge, roundly condemns iiNet’s attitude. Her Honour emphasises iiNet’s refusals to cooperate, in effect holding iiNet responsible for any results of its failure to cooperate – including the fact that it had insufficient information to be, perhaps, fully confident that infringement was occurring. ‘Be it on iiNet’s head’, as Jagot J would have it.

Authorisation: Reaffirming the existing case law

The three judges affirm a more traditional conception of authorisation in copyright than that we saw in the Trial Judgment. They confirm that Moorhouse’s phrase, stating that to authorise is to ‘sanction, countenance or approve’ infringement is to be read disjunctively – one is sufficient. The Judges also reject the apparent attempt by the Trial Judge to revive the Justice Jacob reasoning in Moorhouse from the first instance decision: rejecting the idea that there needed to be some ‘sense of official approval or favour’ in order to show authorisation.

On the meaning of authorisation, Emmett J’s judgment is the most wide-ranging, in that it adopts, perhaps affirms, much of the language from cases like Cooper in a series of phrases drawn from earlier cases. I really wish judges would not repeat a series of phrases about the law in this decontextualised way. It seems practically designed to give comfort to the prospective plaintiff in an authorisation case: you can always find a phrase that suits.

On the meaning of authorisation, I recommend the judgment of Justice Nicholas, which is I think, the easier judgment to read and understand, having ‘synthesised’ the precedent more.

‘Means of Infringement’
The three judges – implicitly or explicitly – reject Justice Cowdroy’s threshold test. Under Justice Cowdroy’s approach at trial, iiNet did not provide the ‘means of infringement, in the relevant sense used in Moorhouse, in that it did not extend an invitation to the iiNet users to use its facilities to do acts comprised in the copyright of the Copyright Owners’ and consequently did not authorise infringement. In other words, this question of whether the party provided the ‘means of infringement’ operates as a threshold test, without which authorisation will not be found.

Justice Emmett almost seems determined to politely pass over this approach by the Trial Judge like a polite host ignoring the uncouth table manners of an ill-assorted guest. Emmett J notes the reasoning of the Trial Judge, using the mild epithet of ‘unconventional’ to describe the structure of the reasons. But once Emmett J has described the primary judge’s approach, this phrase never appears again in the judgment. Both Justice Nicholas and Justice Jagot more explicitly reject the Trial Judge’s approach: Jagot J more fulsomely.

The crux of the case: knowledge
Both Emmett J and Nicholas J were dissatisfied with the information provided in AFACT’s notices: this finding lies at the heart of their rejection of AFACT’s case on authorisation. More or less, the notices provided by AFACT gave rise to ‘reason to suspect’ infringements on the part of iiNet’s users, but not knowledge of specific acts of infringement sufficient to warrant iiNet acting to suspend or terminate internet accounts.

Emmett J thought that AFACT’s notices would have to have included:

  1. Information in writing of particulars of specific primary acts of infringement of copyright of the Copyright Owners, by use of particular IP Addresses of iiNet customers; and
  2. Unequivocal and cogent evidence of the alleged primary acts of infringement by use of the iiNet service in question; at least information as to the way in which the material supporting the allegations was derived, that was adequate to enable iiNet to verify the accuracy of the allegations.

Justice Jagot takes a very different view here: stating that the AFACT notices ‘contained prima facie credible evidence of widespread and repeated infringements of the appellant’s copyright by iiNet customers and users’, rising above the level of ‘mere unsubstantiated or unreliable allegations’. What is more, if iiNet did not have sufficient information to judge the accuracy of the notices, that was iiNet’s own fault: having refused to engage with AFACT, it could not then plead its own ignorance.

Did iiNet have the ‘power to prevent’ the infringements?
All three judges consider that iiNet had the technical and contractual power to terminate or suspend its services to subscribers on the basis of copyright infringement; this was relevant, albeit not determinative (cf the Trial Judge who seemed to say that a power to suspend or terminate could not be reasonable and so wasn’t really relevant). On this question, again I think Justice Nicholas’ judgment is the more interesting one: his Honour talks about the difference between ‘direct’ powers to prevent infringement (ie, to stop that particular act) and indirect powers (like taking away internet access so they can’t do anything, let alone infringe, online).

The judges also talk about another statutory factor, the ‘relationship with the infringer’, but it’s not that interesting. I never really know what to make of this factor anyway. There was a contractual relationship – so? Really, most of the action is in the next of the statutory factors in authorisation: whether iiNet took reasonable steps to prevent the infringement.

Reasonable steps

All three judges accept that sending warnings to users ought to be considered a reasonable step. None of the judges was wiling to accept that people when notified of copyright infringement would simply ignore the notice: not all would be aware that such activities infringe copyright; not all would be aware they can be detected.

Worryingly for many, I suspect, is the fact that all three judges also contemplate that suspension or termination of internet service is also a reasonable step. In this respect, a really important consideration that the various judges point to is the Safe Harbours: specifically, the provision that requires parties wanting to take advantage of the Safe Harbours to have, and reasonably implement, a policy for the termination of the accounts of repeat infringers in appropriate circumstances. This is evidence, to the judges, that termination is contemplated as a reasonable step.

iiNet’s protestations concerning the expense, difficulty, and complication of having a system for sending warnings and following up with suspension or termination fell on deaf ears of two judges. Justice Emmett, of the three judges, seems the most ready to count this as an issue, noting the ‘difficult judgments’ involved, the number of notices received, the many, many issues of design choice in such a system (see paragraphs 206-207). Perhaps for this reason, Justice Emmett is the most explicit in practically setting out his own version of a graduated response system. The key paragraph here is paragraph 210. It’s kind of too long to quote here, but go have a look. In summary, it says that ‘before it would be reasonable for iiNet to take steps to suspend or terminate a customer’s account’, AFACT would need to send notices providing ‘unequivocal and cogent evidence’, and undertake to reimburse iiNet for its reasonable costs. But most extraordinary is the way that the Judges say that AFACT’s notices should set out a series of specific steps that it requests. According to the Judge, AFACT should request the following steps:

  1. iiNet should inform its customer of the particulars of the allegations of primary infringement involving the use of that customer’s iiNet account
  2. iiNet should invite the customer to indicate whether the service has been used for acts of infringement as alleged;
  3. iiNet should request the customer either to refute the allegations or to give appropriate assurances that there will be no repetition of the acts of infringement;
  4. iiNet should warn the customer that, if no satisfactory response is received within a reasonable time, perhaps 7 days, the iiNet service will be suspended until such time as a reasonable response is received;
  5. iiNet should warn the customer that if there are continued acts of infringement by use of the service, the service will be terminated;
  6. iiNet should terminate the service in the event of further infringements.

OK, strictly, Justice Emmett is not saying that iiNet would have to follow this procedure: it’s what AFACT should request. But the suggestion is strong that this is what Emmett J thinks a reasonable set of steps looks like.

Um, judicial legislation anyone?

It’s kind of extraordinary that his Honour would set out a system in such detail. These weren’t, after all, the facts before the court. It’s also kind of extraordinary that this is his version of reasonable steps, when this set of conditions doesn’t look anything like what has been legislated in other countries, like France, the UK, South Korea, or New Zealand. Justice Emmett’s ‘reasonable steps’, if that is what these are (and as I said, it’s not entirely clear) have none of the procedural protections found in other places – and specifically contemplate termination of Internet service – something the UK wouldn’t even do without a further order from Parliament and which requires independent decision-makers in France, South Korea, and New Zealand. So, like, wow.

Justice Nicholas, on the other hand, is only prepared to say that ‘an ISP should be given considerable latitude when working out the detail of such a system. It is always possible to argue that a system for the issue of warnings and termination could be tougher than it is. But it would be difficult to criticise an ISP on that account if it acted in good faith to devise and implement a system that involved taking such steps against subscribers who the ISP was satisfied had used (or permitted others to use) its facilities for the purpose of committing flagrant acts of copyright infringement’ (at para 750).

Other interesting stuff

There’s so much more, but this post is already too long. Look out for:

  1. The various judges’ views on whether iiNet ‘encouraged’ infringement, and Justice Nicholas’ discussion of iiNet’s alleged ‘indifference’;
  2. The discussion of the Safe Harbours (no judge thought iiNet could use it);
  3. The judges’ struggles to give s 112E some meaning;
  4. The issue of who bears the cost. Emmett J is explicit: AFACT should offer to reimburse. Justice Jagot thinks that this could have been part of a conversation that should have occurred. I didn’t really see much from Nicholas J on this question (but the judgment is long, maybe I’ve missed something).

Oh, and here’s something interesting. You will look in vain for references to much overseas case law or any of the mound of academic writing on the issues involved. If anything, this suggests to me the continuing isolation of the Australian law of authorisation from the law in other jurisdictions. Too close an examination of overseas case law might reveal the differences too starkly? Of course, it would also have made the judgment even longer than it already is. I suppose we should be grateful for small mercies.

Where to from here?

Interesting question. We’ll have to see if there’s going to be an appeal to the High Court (or rather, application for special leave). Failing that, it’s back to the negotiations. Questions of cost (who bears it) are unresolved. It’s not clear to me whether there is enough guidance here to lead to a ready deal, despite Emmett J’s attempts to write a Code of Conduct for the industry. Termination of service is something I can’t imagine the internet industry is all that keen on, but AFACT’s hand to demand more than the mere passing on of warnings may have been strengthened by the frequent references to the reasonableness of termination as a response. So, much to think about. I suppose I should be pleased…

Kimberlee Weatherall is a senior lecturer at the University of Queensland

This article was cross-posted here at LawFont

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2 Responses to A few thoughts on iiNet FFC decision

  1. Shaun Larcom says:

    From reading the above summary, two things seem likely. The first is that rightsholders will be able to enforce their rights more easily as they have clear directions on what notification they are to provide to ISPs. Second, this increase in enforcement activity will cost extra resources, although it is unclear who will pay for them. Two of the judges seem to suggest that the extra enforcement costs should fall on the ISPs, one seems to suggest that the rights holders should undertake to reimburse iiNet for its reasonable costs.

    Many people seem disappointed by this decision. I think this is mainly so as they do not agree with current copyright law and think it is too skewed towards the interests of rightsholders. Therefore, they do not want to see any increase in enforcement activity. However, stepping aside from the question of whether the current copyright law is a good one, it is worth asking who should undertake this extra enforcement activity and who should bear the costs?

    The analysis of Reiner Kraakman* some time ago suggests that the ISPs are probably best placed to undertake this enforcement activity, despite being neither the ‘primary authors nor beneficiaries’ of the infringement activity, given their role as ‘gatekeepers’. He defines a gatekeeper liability as ‘liability imposed on private parties who are able to disrupt misconduct by withholding their co-operation from wrongdoers’. He suggests gate keeper liability is preferred over deterring wrongdoers directly when expected penalties against wrongdoers cannot easily be increased. Expected penalties on copyright infringers can be increased two ways, one is to increase direct enforcement levels, and the other is to increase the penalties. Given the principle of proportionality, and the prohibitive costs associated with direct prosecution, it seems that the expected penalties on the infringers cannot easily be increased.

    While the ISPs might be best placed to undertake copyright enforcement activity, should they bear the cost? If we are to believe iiNet’s submission, there would be substantial additional cost incurred by them. However, even if ISPs are not reimbursed by rightsholders for their extra costs, they may still not bear the cost in the end. ISPs may be able to pass on some or all of these extra costs to their customers. Given the dependency many of us have on internet, and the lack of any real substitutes, this seems likely. Therefore, it is likely that this decision will lead to higher internet costs for consumers, evenly spread between those who infringe, and those who do not. As reported in the summary above, the alternative, raised by Justice Emmett is for rightsholders to reimburse the ISPs ‘reasonable costs’. Given that they are the primary beneficiaries, this may seem to be a fairer outcome. However, if we are to believe the rightsholders, and the economic rationale for copyright in the first place, this will likely lead to lower quality, or less, content being produced.

    *Kraakman, Reinier H. “Gatekeepers: The Anatomy of a Third-Party Enforcement Strategy,” 2 Journal of Law, Economics, and Organization 53 (1986).

  2. [...] current global climate regarding ISP liability and the decision of the Full Federal Court in the iiNet decision, this would impose significant pressure on the Australian government to reform the law. This is [...]

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