A reply to the sentiment that copyright infringement not resulting in lost sales is benign

June 16, 2011

By Assoc. Prof. David Brennan

A view is held (in both expert and non-expert circles) that unless an infringement of copyright causes proven lost sales, that infringement should not be actionable. Under the logic of this view, to award damages for infringements that do not cause proven lost sales would be vindicating intellectual property rights without triggering incentive effects.

In relation to the damages award in the now famous Larrikin v EMI litigation (comprising a notional usage price of 5% of APRA׀AMCOS royalties paid to the infringers) two of our economists Beth Webster and Paul Jensen have supplied this critique of the law – emphasis in the original:

The sales of ‘Kookaburra’ were not affected in any way shape or form by the success of ‘Down Under’.  Quite simply, Larrikin should not be due any damages at all.

It is worthwhile to think more about (in law and economics) the creation of property rights – including those rights’ remedial scope – for copyright subject matter. A fine vehicle to do this is infringing file-sharing.

Research undertaken at the University of Ballarat in April 2010 reveals something of the global extent of infringing file-sharing. The University’s Internet Commerce Security Laboratory (ICSL) – which is funded by the State Government of Victoria, IBM, Westpac, the Australian Federal Police and the University – was commissioned by Village Roadshow to measure the volume and nature of BitTorrent file-sharing global traffic. It estimated that 97.9% of files made available encoding non-pornographic content were clearly not authorised by the copyright owner. Under the BitTorrent system the term ‘seeders’ refers to people who have completed their download and then make the file available for others to download. That is to say, a seeder is a person who is making that content available online to the public. The ICSL produced a list of what was estimated to be the top 100 seeded files as at April 2010. The top 10 in that list were:

1. The Incredible Hulk[2008]DvDrip-aXXo97065494792.4447: 1,112,628

2. Indiana Jones And The Kingdom Of The Crystal Skull[2008]-aXXo: 1,029,695

3. College[2008]DvDrip-aXXo339166021846.017: 509,576

4. Sherlock Holmes (2009) DVDSCR XviD-MAX: 479,655

5. Avatar (2009) PROPER TS XviD-MAX889790305026.795: 332,665

6. Meet Dave[2008]DvDrip-aXXo: 311,894

7. Lady GaGa – The Fame Monster 2CDRip 2009 [Cov+2CD][Bubanee]: 308,117

8. The Andromeda Strain[2008]DvDrip-aXXo: 284,221

9. Shutter Island (2010) R5 DVDRip XviD-MAX851029283088.936: 282,628

10. 2012 (2009) R5 DVDRip XviD-MAX883775626338.402: 277,043

With this list it should be pointed out that a title like Avatar reappeared twice again in the top 100 list under different file names – i.e. Avatar 2009 DVDScr H264 AAC-SecretMyth (Kingdom-Release) 94,781 seeders and Avatar TS XviD-IMAGiNE(No Rars) 82,977 seeders.

It is commonly considered that unless an infringing file-sharer, but for infringing, would have paid for the relevant content then there is no harm to the copyright owner arising from the infringement. Consider these three published readers’ comments to Asher Moses’s essay-style article ‘Piracy – are we being conned?’ (Fairfax Media, 22 March 2011)

  • Why would they assume that an unpaid download is a lost sale? Kale – Sydney
  • The figures are obviously predicated on the presumption that each illegal download would convert into a legitimate purchase, which is a palpably fatuous assumption to make. The ghost of common sense - My bedroom
  • So are they counting every movie i have downlaoded then as lost revenue? cos i have a surpirse for you, you never were gong to get the money in the first place! [sic] Danny – Melbourne

The commonality of this sentiment is so pervasive that a survey-based analysis of direct loss to the film industry conducted in Australia by IPSOS Media CT and Oxford Economics for the Australian Federation Against Copyright Theft (AFACT) made explicit allowance for it. Deducted from ranks of loss-causing Australian infringers were those who would never have paid to watch the film. That is someone like Danny above. Danny might have unlawfully downloaded Avatar using BitTorrent, but never would have paid to obtain a copy. The AFACT-commissioned survey estimated that 23% of Australian infringers were in Danny’s boat, and so a 23% deduction was made in arriving at the final figure of $575m direct loss to the film industry for the 12 months Nov 2009-Sept 2010.

Is it correct, as our economists Beth and Paul say, that infringement not causing proven lost sales should yield zero damages? Or is it correct, as the Fairfax readers imply, that an infringing download not substituting for an actual purchase should be removed in the calculation of owner harm? And is it therefore correct to make that 23% deduction?  Or, to put it another way, is infringement not resulting in a proven material loss benign?

In economic analysis of copyright law as it applies to (say) the film industry, copyright is justifiable to the extent that it provides an effective promise to film producers and creators that if investment and risk is undertaken to make a film, some of the value that film generates is capable of market appropriation through the conferral of property rights. Avatar is a good case-in-point.  Would it have been created without the promise of copyright? It is difficult to imagine this type of content being produced through non-market means such as philanthropy or public funding. Market demand stimulates such content’s creation. In copyright, property rights in creative expression are deployed as an instrumental device to permit that market demand to induce productive endeavour. This is the incentive effect of intellectual property. It does not mean that those property rights per se generate economic value – the film could be an unmitigated box-office flop. Rather, the rights simply provide a way for a film copyright owner to capture some of the market demand for its film.

Given that copyright in economic theory is a promise of appropriability what, in private law, does that promise mean by taking the form of a property right?  Property as an owner’s right to exclude forges a special norm which governs relations between the owner of the property and users of the property. When relations are governed by a property norm violation by a user means that the owner receives less than the owner deserves, and that the user obtains more than the user deserves. Restitution scholarship regards this as an ‘expense’ to the owner mirroring a ‘gain’ to the user. The expense and the gain are de jure rather than de facto concepts. This restitutionary idea has been applied in intellectual property cases since as long ago as the 1867 patents decision of Penn v Jack where Page Wood VC assessed damages by asking: ‘What would have been the condition of the Plaintiff if the Defendants had acted properly, instead of acting improperly. That condition, if it can be ascertained, will, I apprehend, be the proper measure.’ Here, ‘acted properly’ meant to have paid a reasonable usage price for the use of the intellectual property.

Subsequent UK, US and Australian authority has assessed the lower-end quantum of monetary relief in copyright and patent cases to be the reasonable price for the use of the IP regardless of whether the particular defendant user would have agreed to pay. Indeed this approach is seen in the Larrikin v EMI case itself, where evidence was before the court that a lead member of Men at Work would have resisted paying anything for use of the Kookaburra copyright. But why should at least usage price damages be paid in the Larrikin v EMI litigation, and indeed by people such as Danny in the unlikely event that they are sued for downloading Avatar? For instrumental reasons society has promised the conferral of copyright property. That promise is one of appropriability which entails a particular norm governing relations between owners and users. Failure to at least award usage price damages (or recognise a legal entitlement to such a usage price) represents breach of that promise. It does so by creating the perverse situation of rewarding users who infringe rather than act lawfully. Moreover, why should anyone pay for the enjoyment of Avatar if the law accepts as benign the consumption of ‘you never were gong to get the money in the first place’ Danny?

Stripped away, the point made by the above economists and the Fairfax readers seems to resolve to a more fundamental matter of property delineation. The infringements of the 23% of users identified in the AFACT-commissioned survey should be removed from the copyright promise. That is, removed from the definition of property rights in copyright. Arguably, it presents us with this stunning new conception: copyright is the legal entitlement to exclude the whole world from the exercise of certain defined rights – except those people who would never have paid for the exercise of those rights.

David Brennan is an Associate Professor at the Melbourne Law School

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The Kookaburra laughs again….

April 21, 2011

By Dr Melissa de Zwart

In EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Limited [2011] FCAFC 47 (31 March 2011) the Full Federal Court, comprising Emmett, Jagot and Nicholas JJ, upheld the first instance decision of Jacobson J in Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Limited [2010] FCA 29 (4 February 2010). Each judge gave a separate judgment, Emmett J taking the lead on the approach to the test of infringement, Jagot J focusing upon authorisation liability and the scope of the orders to be made by the Court, and Nicholas J making some observations on the approach of an appellate court to the findings of the primary judge and the nature of ‘substantial part’.

EMI had appealed the decision on the grounds that the primary judge erred in determining that the recording in question involved a reproduction of a substantial part of the ‘Kookaburra’ song, in particular the manner in which the primary judge came to a determination of aural similarity and substantial part. Larrikin also cross-appealed on the basis that the trial judge erred in the finding that two Qantas advertisements did not reproduce a substantial part of Kookaburra, and in the question of EMI’s liability for authorisation of acts of infringement with respect to the reproduction of ‘Down Under’ in Qantas advertisements and other works.

In the unlikely event that the reader requires a refresher on the facts (this being one of the most widely reported copyright cases of the past few years, and one on which everyone has an opinion), the question before the Court was whether the recordings of the ‘iconic Australian musical work’, the Men At Work song ‘Down Under’ involved the reproduction of a substantial part of ‘another iconic Australian musical work’, the campfire classic loved by the Scouting/Guiding movement worldwide, ‘Kookaburra’, originally composed by music teacher, Marion Sinclair. Sinclair composed the little song, to be sung as a round, in response to a competition run by the Girl Guides in 1934. Ownership of the copyright had been acquired by Larrikin Music Publishing with effect from 21 March 1990. (See Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Limited [2009] FCA 799 (30 July 2009).

At first instance, Jacobson J held that the 1979 and the 1981 recordings of ‘Down Under’ (‘the recordings’) infringed copyright in ‘Kookaburra’. However, Larrikin also claimed that EMI had authorised acts of infringement in relation to the reproduction of ‘Down Under’ in other works, including two Qantas advertisements in which ‘Down Under’ was featured. The trial judge held that the Qantas advertisements did not involve the infringement of copyright in ‘Kookaburra’. An order relating to damages was made on 6 July 2010 and discussed in Fortnightly Review.

The Full Court dismissed EMI’s appeal and allowed in part Larrikin’s cross-appeal. In particular, it remanded back to the trial judge the task of determining the matter of authorisation, other than in respect of the Qantas advertisements.

The judgment of Emmett J contains a lengthy discussion of the development of copyright law, not an unusual thing in itself in recent Federal Court decisions, but unusual in this instance due to the fact it begins with a discussion of Roman Law. He observes: ‘The Romans disliked monopolies just as much as common lawyers’ (para. 30) and recognised ‘no exception for copyright’. Rather, questions of ownership with respect to creative outputs were dealt with according to concepts such as ‘accessio’ and ‘specificatio’. However, the invention of printing and other technologies facilitating multiple reproduction necessitated the intervention of the state, and hence the evolution of the modern copyright statutes. After this general discussion, Emmett J considered the relevant test to be applied to the infringement of a musical work, concluding that it involves an objective stage, where ‘the inquiry is whether the alleged infringing work is similar to the copyright work’, and the subjective stage, ie the question whether the copyright work was copied.

Emmett J was prepared to conclude that the primary judge had erred in principle in some respects and that the Full Court should consider de novo the question of infringement. He based this assessment on five key arguments made on behalf of EMI and Hay: first, the primary judge had placed too much reliance on Hay’s performance of ‘Kookaburra’ in conjunction with ‘Down Under’ at certain live performances; second, that he overlooked the importance of ‘Kookaburra’ being a round; third, that the primary judge misapplied the concept of originality; fourth, that ‘the finding of objective similarity was based on a consideration of certain elements of Kookaburra, namely, melody, key, tempo, harmony and structure’, that Jacobson J considered in isolation from each other, and that his Honour ‘appeared to give melody greater weight than the other elements without explaining the basis for that approach’ – this approach being ‘overly mechanistic’; and finally, that Jacobson J had erred with respect to assessing the relative parts of the two works in considering the concept of ‘substantial part.’ Emmet J accepted that the primary judge had only been ‘able to detect the resemblance between the relevant bars of Kookaburra and the Impugned Recordings with the assistance of the experts and of Mr Hay, and that there was force in the submission that the primary judge had become sensitised to the similarities’. In particular, this related to Hay’s admission that for a period of about 2- 3 years from 2002, when he performed Down Under at live concerts, he would sing the words of Kookaburra in place of the flute riff, thus leading Jacobson J to conclude that the ‘short answer’ to the qualitative test requirement was to be found in Hay’s own performance of both works together.

Whilst Emmett J agreed that the ‘short answer’ was not to be found in this way, and on this point the trial judge had erred, his Honour observed (at para. 86):

‘A similarity between part of Kookaburra and the flute phrase is clearly perceptible. True it is that that similarity went largely unnoticed for in excess of 20 years, notwithstanding that each work is said to be an iconic Australian work. Nevertheless, the question is one of objective similarity. The aural resemblance need not be resounding or obvious. The relevant test is not the effect upon a casual listener of the whole of the versions of Down Under in the Impugned Recordings. Sensitised though the primary judge may have been to the similarity, it is not erroneous to direct oneself to the relevant parts of the works, to listen to the works a number of times, and to accept the assistance of the views of experts, in determining the question of objective similarity. In those respects, I do not consider that the primary judge erred.’

With respect to the argument regarding lack of aural similarity, Emmett J noted that there was no similarity between the works in terms of their genres, styles, objects or purposes, but the quotation from Kookaburra was intended to be perceived by listeners as ‘a quotation, or a reproduction, of part of Kookaburra, and the musical genres or styles associated with Kookaburra.’ However, he continued, neither ‘the existence of the quotation or reproduction, nor its capacity to be discerned, is affected by casting it as a tribute or reference to an Australian cliché or iconic melody. The flute phrases in the Impugned Recordings are a clear departure from the genre of a rock anthem, and therefore distinguish the part taken from Kookaburra from the other parts and musical elements of Down Under.’ Ultimately, therefore, what the listener hears is ‘a reproduction of part of Kookaburra’. (para 92).

Emmett J rejected any need to establish animus furandi in order to make out infringement, concluding rather that ‘the quotation or reproduction of the melody of Kookaburra appears by way of tribute to the iconicity of Kookaburra, and as one of a number of references made in Down Under to Australian icons.’ (para. 99) However, the fact that Kookaburra is used in this way is no defence to the infringement action.

Perhaps the most surprising part of Emmett J’s judgment is his lament regarding the state of modern copyright law. He concludes his discussion of the question of infringement with the following:

If, as I have concluded, the relevant versions of Down Under involve an infringement of copyright, many years after the death of Ms Sinclair, and enforceable at the behest of an assignee, then some of the underlying concepts of modern copyright may require rethinking. While there are good policy reasons for encouraging the intellectual and artistic effort that produces literary, artistic and musical works, by rewarding the author or composer with some form of monopoly in relation to his or her work (see Ice TV at [24]), it may be that the extent of that monopoly, both in terms of time and extent of restriction, ought not necessarily be the same for every work. For example, it is arguably anomalous that the extent of the monopoly granted in respect of inventions under the Patents Act 1990 (Cth), being a limited period following disclosure, is significantly less than the monopoly granted in respect of artistic, literary or musical works, being a fixed period following the death of the author or composer, irrespective of the age of the author or composer at the time of publication.

Of course, the significance of the anomalous operation of the Copyright Act can be addressed in terms of the remedies and relief granted in respect of infringement. Nevertheless, one may wonder whether the framers of the Statute of Anne and its descendants would have regarded the taking of the melody of Kookaburra in the Impugned Recordings as infringement, rather than as a fair use that did not in any way detract from the benefit given to Ms Sinclair for her intellectual effort in producing Kookaburra. (paras. 100-101.)

It remains to be seen how this general regret may be taken up in later Federal Court decisions.

Jagot J also considered the argument that the trial judge’s approach to the aural comparison was ‘overly mechanistic’ and ‘fragmented’ but rejected this on the basis that although Jacobson J made use of expert evidence and made reference himself to the fact that he had become sensitised to the similarities during the course of the hearing, the trial judge was entitled to have regard to expert evidence on the question of objective similarity and also to have regard to Hay’s own evidence regarding the playing of the two songs together:

The fact that Mr Hay’s performances are not the infringement sued upon, in this context, is immaterial. As the trial judge put it, the capacity to sing the Kookaburra melody directly over the relevant parts of the Down Under flute riff “graphically” illustrates that the fourth bar of Example D and the second and fourth bars of Example E are unmistakably the melody of Kookaburra. The trial judge was entitled to use that evidence as he did. (para. 218)

Jagot J delivered the leading judgment with respect to the question of authorisation. The trial judge’s findings regarding the Qantas advertisements stands, but the authorisation case, other than in respect of the Qantas ads is to be remitted to the trial judge. The Qantas ads were found by the primary judge not to infringe copyright in Kookaburra and no error in that conclusion had been established. Larrikin’s argument was that by granting licences to reproduce Down Under to third parties EMI and Hay authorised the infringement of copyright in Kookaburra by those uses. EMI and Hay argued that any individual reproduction of Down Under may not involve an infringement of Kookaburra, as Down Under appears in many forms which do not involve Kookaburra, as it did not form part of the original composition, but was added later by Mr Greg Ham.

As the other matters raised by Larrikin in the cross appeal, ie liability of EMI under ss 36 and 115 of the Copyright Act with respect to damages, account of profits, and the ordering of injunctions against EMI, depend upon the determination of the authorisation case, these issues are left to be dealt with by the trial judge.

Nicholas J agreed with the reasoning used and orders made by Jagot J.

The outcome of the appeal reflects the difficulties of applying the test of infringement to musical works, as well as the general frustration that many have had with the outcome ie the finding that a much loved Australian song infringes a tune that many people considered to be a ‘folk song’, and therefore long since out of copyright term. It is likely that musicians will still continue to struggle with the concepts of originality and substantial part. Ultimately, the case reflects nothing new or novel in the approach to the interpretation and application of copyright law, although it will inevitably continue to generate bad press for the doctrine of musical copyright for some time to come.

Dr Melissa de Zwart is an Associate Professor in Law at the University of Adelaide.

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Newsflash: Kookaburra damages award case sounds like bad economics

July 6, 2010

By Assoc. Profs. Beth Webster and Paul Jensen

Yesterday’s decision of Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Ltd (No. 2) – [2010] FCA 698 to grant damages to Larrikin Music heralds a new chapter in bad economics.  To understand why, consider the economic rationale for the existence of IP rights.  As a matter of economic principle, IP rights only exist to stimulate investment in creation of new technology, music or books.  IP rights achieve this by protecting against imitation, thereby enabling their owner to sell their works for a higher price than would otherwise be the case.  So, decisions to award damages for breach of IP rights should depend solely on the loss of profit sustained by the IP owner.

In February’s judgment, (click here for a summary) Justice Jacobson ruled that Men at Work’s song ‘Down Under’ had indeed infringed Larrikin’s copyright in the tune ‘Kookaburra Sits in the Old Gum Tree’.  Yesterday’s ruling dealt with the issue of the damages that this infringement caused.  Using our simple economic framework, it is obvious that damages should only be paid if it can be shown that Larrikin suffered an economic loss as a result of the infringement.  The relevant question is the following: if ‘Down Under’ had not been recorded and sold, would Larrikin’s profits from ‘Kookaburra’ be higher?  The answer is clearly “no”.

So, what did Justice Jacobson rule with regard to damages?  Well, he awarded Larrikin damages equal to 5% of profits since 2002.  Given the success of the song, this will probably amount to several hundred thousand dollars.  Justice Jacobson makes it clear in his judgment that these are not damages for copyright infringement.  So far, so good.  Instead, they are damages payable under s82 of the Trade Practices Act 1974 as a result of misrepresentations made by the composers (and recording companies) of ‘Down Under’ to musical royalty collection agencies APRA and AMCOS.

Say that again?  You mean the damages are due because the composers of ‘Down Under’ falsely filled out their APRA form when identifying who wrote the song (and therefore who was entitled to the royalty revenue stream)?  In other words, they failed to recognise the contribution of the composer of ‘Kookaburra’.  But that’s absurd.  The sales of ‘Kookaburra’ were not affected in any way shape or form by the success of ‘Down Under’.  Quite simply, Larrikin should not be due any damages at all.

However, upon a finding of infringement, the parties agreed that damages be determined by taking a percentage of Men at Work’s royalties.  The parties agreed that the percentage be based on the hypothetical bargain that would have been struck between a willing licensor and a willing licensee of the copyright in Kookaburra.  The judge stated that “this approach is in accordance with the principles commonly applied in assessing damages for the infringement of the rights of the owner of an item of intellectual property.”

Once again, this approach illustrates how IP law and IP practitioners operate under a veil of ignorance with regard to the economic rationale of IP rights.  The problem is quite simple: the law typically assumes that IP rights are based in ‘natural rights’.  Viewed through this lens, Larrikin is entitled to capture some of the value created by ‘Down Under’ because it relied on a tune owned by Larrikin.  But this is clearly flawed logic: the only reason copyright exists is to provide sufficient incentive for artists to create new works.

We don’t use ‘natural rights’ logic to determine the rewards for doctors who save lives, civil engineers who bring us clean drinking water, or teachers who teach our children to read and write, so why should we use this rule for the creators of music?  Hopefully, the outrage over this decision will force a major re-think about the way in which we view IP infringement cases.

Beth Webster and Paul Jensen, IPRIA, University of Melbourne

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Lawyer Michael Crawford reports on a recent conference regarding controversial copyright cases.

March 25, 2010

by Michael Crawford

On March 18th 2010, the CMCL and IPRIA jointly hosted a conference entitled Authorship, Anthems and Authorisation: a legal and economic review of the copyright triptych.  The conference was convened in order to discuss three very significant and recently decided cases; Telstra Corporation Limited v Phone Directories Company Pty Ltd [2010] FCA 44 , Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Limited [2010] FCA 29 and Roadshow Films Pty Ltd v iiNet  Limited (No. 3) [2010] FCA 24.  See our post here for a summary of the cases.

The panel, chaired by Jock Given, consisted of David Brennan of the Melbourne Law School, Melissa de Zwart of the University of South Australia, David Lindsay of Monash University, Beth Webster of IPRIA and Philip Williams of Frontier Economics.

1. Authorship – Telstra case

The decision in Telstra v PDC, a recent judgment of Gordon J of the Federal Court, was discussed in considerable detail by David Lindsay.  In Telstra v PDC, Gordon J applied both plurality judgments in IceTV Pty Limited v Nine Network Australia Pty Limited [2009] HCA 14 in concluding that no copyright subsisted in Telstra telephone directories on the grounds that they were not original literary works.

Dr Lindsay discussed, amongst others, two elements of the case.  The first was her Honour’s reliance on IceTV.  Dr Lindsay commented that, as a matter of basic legal method, Gordon J ought not to have considered the comments in IceTV concerning subsistence as binding law.  This is because, as subsistence was conceded by the defendant in that case, the comments were purely obiter dicta.  That is, the comments were incidental to the holding of the case.

The second and more substantive criticism concerned Gordon J’s insistence that subsistence under Part III of the Copyright Act 1968 requires the plaintiff to identify each author who has contributed to the work in suit.  Telstra’s inability to do this meant that it could not establish copyright in the directories.  Dr Lindsay argued that by insisting on authorial identification as a prerequisite for subsistence, her honour erroneously imposed an additional hurdle not required by Part III of the Copyright Act, which requires only that the work be original.  Dr Lindsay concluded that, to the extent that both Telstra v PDC and IceTV impose this additional obligation of authorial identification, they represent a serious departure from accepted understandings of subsistence under Part III and are wrong. 

Philip Williams also spoke about the decision in Telstra v PDC, in particular about the need for the introduction of a new legal regime for the protection of commercially valuable collections of information that are expensive to compile and, since the decisions in Telstra v PDC and IceTV, not protected by copyright.  However, Dr Williams also cautioned that the creation of any such regime will require considerable care because of the need to protect the beneficial uses to which such information is put by third parties.  The example given was the rise of web-sites which, in response to a particular search query, trawl through on-line auction sites and provide users with a list of the lowest priced items and their locations.  The challenge is thus to create a regime that is flexible enough to permit innovative and desirable third-party uses of database-type information whilst also guaranteeing a level of protection that provides a commercial incentive for organisations to engage in the costly and time-consuming process of compiling a database.

2. Anthems – “Down Under” case

The widely publicised decision of the Federal Court in Larrikin Music v EMI Songs Australia was discussed by Melissa de Zwart.  Dr de Zwart’s pithy summary of the very complex expert evidence provided by the musicologists was most enlightening to those of us who found the discussion in the case impenetrable.  Moreover, her expertise with Power Point enabled a direct aural comparison between Kookaburra and the infringing flute riff from Down Under.  The audience was then asked if they could detect the apparently objective similarity.  Opinion was relatively evenly divided, though perhaps a majority claimed they could hear the similarity.  In any case, that there was a substantial minority who could not hear the resemblance suggests either that the Court did not abide by the “ordinary reasonably experienced listener test” or that lawyers are particularly tone deaf.  One suspects the latter.

3. Authorisation – iiNET case

The final case in the trio was Roadshow Films Pty v iiNet, a case concerning the authorisation liability of internet service providers (ISP’s) whose customers illegally download copyright works using the “BitTorrent” software and the applicability of the ISP safe harbour provisions introduced into the Copyright Act as part of the AUSFTA.

Both issues were thoroughly discussed by David Brennan, who gave a concise summary of the enormous judgment.  Dr Brennan’s critique of both the Court’s legal analysis of authorisation liability and iiNet’s apparently lackadaisical approach to those of its customers who routinely infringed copyright casts doubt over whether the courts are adequately enforcing the bargain which was struck with ISPs, as represented in the changes wrought by the Copyright Amendment (Digital Agenda) Act 2000 and the safe harbour provisions under the AUSFTA.

The final speaker of the day was Beth Webster from IPRIA, whose discussion of the fundamental economic policy goals underlying copyright law complimented the predominately legal analysis of the preceding speakers.  The lively debate which followed Dr Webster’s address showed that the audience enjoyed the opportunity to discuss whether or not the present copyright regime efficiently achieves the economic and social ends it was established to serve.

Congratulations are to go to the CMCL, IPRIA, Jock Given for chairing and, of course, the panellists whose expertise and engaging presentations made for a most entertaining and informative day.

3 Comments | Copyright, damages, economics, iiNet, law, legal, Men at Work, Telstra, Uncategorized | Tagged: , , , | Permalink
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Economist Paul Jensen gives us his perspective on damages in the Men at Work case.

March 25, 2010

by Associate Professor Paul Jensen

This was a fascinating seminar featuring a learned panel who were discussing the implications of three recent contentious copyright cases in Australia. I will focus my attention on Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Limited [2010] FCA 29 (the Larrikin/Men At Work case), primarily because it cuts right to the heart of the fundamental rationale for the existence of copyright. Melissa de Zwart did an excellent job of engaging the audience on this vexed issue. And, by playing the “Kookaburra” and “Down Under” songs to the seminar participants and taking a straw poll, she was able to demonstrate (rather surprisingly) that only around 50% of people can detect the similarities between the two. Despite this, there seemed to be consensus amongst the legal commentators that Men at Work had reproduced a substantial part of the Kookaburra song.

Given this, the more interesting issue is whether (and how much) compensation Larrikin is entitled to. And on this issue, there was some interesting debate. As noted by Melissa, this was an issue that Justice Jacobson provided scant guidance on. In fact, he was careful to state that his judgement made no determination about the issue of damages. However, the lawyer for Larrikin, Adam Simpson, is on the record as stating with regard to damages that: “Obviously the more the better, but it depends. I mean, anything from what we’ve claimed which is between 40 and 60 [per cent] and what they suggest which is considerably less.”

For the legal scholars, the debate on damages hinges on whether the flute riff which constituted the “copying” is in fact an important component (or that it is the “hook”) of the song Down Under. Such logic would suggest that if it is a trivial part of the song, then damages should be minimal, but if it is the key “hook”, the compensation should be much larger. This logic makes perfect sense from the ‘natural rights’ view of intellectual property – where you are entitled to capture the fruits of your intellectual labour (in this case, the contribution that the flute riff made to the total sales revenue generated by the song).

From an economist’s perspective, this makes no sense whatsoever, as Beth Webster was at pains to point out. What matters from an economic point of view is whether the copying has done any damage to the incentive to create new pieces of music. Following this, the logic of the compensation rule should be “damage-based”, not “gains-based”. The focus should not be how much of Men at Work’s revenues Larrikin is entitled to, but how much damage Men at Work’s copying did to the ex ante incentive to create original musical material. The fact that the original creator of the Kookaburra tune licensed it on very reasonable terms only seems to reinforce the notion that Larrikin is entitled to little or nothing.

More generally, this case underpins an important (and ongoing) debate about the rationale for the intellectual property system. In my view, the sort of copying observed in the Larrikin case is not analogous to piracy, looting, or theft. To argue this would be to deny the fundamental nature of information as a non-rivalrous good. As long as such “copying” causes no harm to the incentives to create original material, it shouldn’t be a concern.

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