The UK Government on its Digital Opportunity

August 26, 2011

By Sarah Lux 

Earlier this year, the Fortnightly Review reported on the Hargreaves Review and its recommendations for the reform of UK intellectual property law. The UK Government has now released its official response, announcing that it accepts all of the Review’s recommendations and aims to implement measures by the end of this Parliament to ‘realise the Review’s vision and deliver real value to the UK economy, and to the creators and users of Intellectual Property’.

Importance of Evidence

The Review emphasised the need for IP policy to be grounded in clear economic evidence of the impact of regulatory mechanisms on competition and innovation. Professor Hargreaves identified two main areas of concern: the lack of high-quality evidence to support some intellectual property measures and an overabundance of lobbying by private interest groups.

The Response begins with a set of promises geared towards ensuring that UK IP policy is informed by better evidence. In relation to the first concern, the Response notes that the Government has ‘begun an ambitious programme of economic research with partners’, referring readers to an outline of its proposed research. The outline includes plans to:

  • assess possible economic effects of congestion in the trade mark register;
  • study the economic value of public domain works;
  • develop an approach for measuring IP enforcement costs against the effects on rights owners, consumers and the wider economy;
  • link all IP rights to business performance measures;
  • assess the economic cost of invalid patents;
  • assess the volume of orphan works and their impact on creators and users; and
  • develop a methodology for research into economic and social impacts of copyright exceptions.

In relation to the second concern, the Response states that the Government will give limited weight in IP policy-making to evidence that is insufficiently open and transparent, and will make it clear when it is doing so.

However, the Response also states that perfect evidence is an ideal, and that in making IP policy it is sometimes necessary to ‘guess and get on with it’. Accordingly, while the Government will aim to be guided by ‘emerging evidence’, it will continue to prioritise ‘rapid progress’ towards an improved IP system.

Digital Copyright Exchange

The response to Professor Hargreaves’ proposed Digital Copyright Exchange (DCE) is that a DCE ‘has the potential to offer a more efficient marketplace for owners and purchasers of rights’ and that it could contribute up to £2.2 billion per year to the UK economy by 2020. The Government will therefore commission a ‘champion’ of the DCE to undertake preliminary steps towards its creation.  The DCE champion will report back on progress at the end of 2011.

However, the Response implies that the Government will give less weight to the DCE than was envisaged by Professor Hargreaves. Hargreaves recommended that a work which cannot be found after a diligent search of the DCE should be regarded as an orphan work and automatically licensed for use. The Government, on the other hand, regards DCE searches as only ‘a valuable first step’ in searching for the owner of a work, and notes the need for other diligent searches before a work can properly be treated as an orphan. The Government takes the view that compulsory participation in the DCE would be contrary to the Berne Convention.

Orphan Works

The Government intends to make proposals at the end of the year for an orphan works scheme incorporating the safeguards discussed above.

Copyright Exceptions

The Response agrees that greater exceptions to copyright are required in theUK. The Government intends to make proposals at the end of the year for ‘a substantial opening up of theUK’s copyright exceptions regime’.  This will include proposals for:

  • a limited private copying exception;
  • a widened non-commercial research exception (which should cover text and data-mining to the extent permissible under EU law);
  • a widened library archiving exception; and
  • a new exception for parody.

The Response adds that there is a need for wider exceptions at the EU level, since theUK’s scope for action on exceptions is limited. The Government will therefore ‘aim to secure further flexibilities’ at EU level.

Enforcement

Among other measures to improve enforcement, the Government intends to introduce a small claims track in the Patents County Court for cases with £5,000 or less at issue, for use in copyright, design and possibly trade mark cases, to increase access to enforcement by small and medium enterprises.

Patents, Designs and Trade Marks

These areas of intellectual property law received little focus in the Review, which dealt mainly with theUKcopyright regime. However, the Review did make some recommendations on patents and designs.

On patents, the Government undertakes to:

  • resist extensions of patents into sectors which are currently excluded, in the absence of clear evidence that this is necessary;
  • provide for work-sharing with other patent offices in order to address backlogs; and
  • investigate the scale and prevalence of issues with patent thickets as well as potential solutions.

On designs, the Response notes that the IPO has commissioned research on the relative levels of design registration in theUKcompared toFranceandGermanyand on whether theUK’s lower level of registration has impacts on the competitiveness of theUK. It also noted that designs might be included in the DCE or its equivalent.

International Policy and Crime Strategy

Alongside the Response, the Government has released The UK’s International Strategy for Intellectual Property, which outlines the role the UK envisages for itself in working towards an efficient, well-functioning international IP system, and The UK IP Crime Strategy 2011, which discusses the ways in which the UK will continue to enforce IP law domestically.

Conclusion

The Government’s response to the Hargreaves Review was one of resounding acceptance, at least at the level of principle. Despite the long road towards implementation that no doubt lies ahead of these Recommendations, the Government’s positive response increases the likelihood that the principles underpinning the Review, and its key findings, will be considered closely in the upcoming review of Australian copyright.

Sarah Lux is an intellectual property lawyer at Allens Arthur Robinson and an Adjunct Lecturer at the University of New South Wales.

(return to the top of this edition)


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

(return to the top of this edition)


Fordham IP Conference 2011, New York City

June 2, 2011

By Vicki Huang

The Fordham IP conference – “Learn, Debate, Have Fun” – was held on 28 – 29th April 2011 in New York City.  The conference attracted many academics, practitioners, government officials, and members of the judiciary from Europe, the USA and of course Australasia.  This combination triggered a lot of informed debate and it was refreshing to hear input from all sides of contentious issues including views from the bench.

Many of the sessions have been covered by our friends at IPKAT here, here, here, here, here and here.  In addition to those sessions, the Fortnightly Review was lucky to attend several specific sessions on copyright and trade mark law and highlights are outlined below.

In a session on “US Copyright Developments”, Thomas Kjellberg updated the audience on copyright cases against “suburban” downloaders where damages peaked at over $1 million dollars. These cases such as Capital Records v Thomas Rassett have sparked a debate as to whether such awards violate due process.  Kjellberg also discussed the case of Penguin v American Buddha. In that case, American Buddha (a religious not-for-profit), posted ebooks on its website. One of the issues for the court was locating the site of the injury. Was it in New York (home of the plaintiff), or Arizona (the site of the uploader) or Texas (the site of the server)?  The court held that because the location of the infringer may be remote, it would not be fair to use the infringer’s location as the locus of harm. Therefore, even though there was no downloading evidence in New York, that was not to say there was “no injury” in New York.  Rather the test should assess the intent of the infringer.

In a session on “EU and US Initial Interest Confusion in Trade Mark Law”, The Hon. Mr Justice Arnold discussed the development of the doctrine and its actionability under Article 9(1)(b).  He went on to discuss several cases including the recent case of Och-Ziff Management Europe LtdDaniel Glazer discussed US developments with a focus on the expansion of the doctrine to the internet, where trademarks are used in domain names or in meta tags or keywords.  The panel discussed the fine line between confusion and diversion and the fact that US courts are really trying to protect senior mark good will and against unfair competition.  The panel debated what was permissible and indeed healthy free riding.  They also debated the merits of using the initial interest confusion doctrine to police domain names.  The panel agreed that in the current era, consumers are used to deceitful metatags and more wary of commercialised hyperlinks so confusion is a lot less likely. Professor Anne Bartow argued that one can no longer assume that consumers are unsophisticated.  She went on to query whether the law should remedy a situation where there is confusion that is cured before the point of sale.

In a session discussing dilution Law in the European Union & the United States, Trevor Cook (Bird and Bird) began with a discussion of the EU’s approach.  He noted the over-intellectualisation of simple legal tests which was a common complaint in several other panels.  Professor Marshall Leaffer discussed US developments in dilution and the case of Visa v JSL Corp.  In that case, Professor Leafer argued that the question of likelihood of confusion – which is a question of fact – was approached in a fast and loose manner. He also said that the case highlighted that the evidence required to prove a dilution case was very unclear. A European speaker helpfully reminded the audience that reconciling EU and US policy and legal approaches was not simple as there is no unfair competition law in the UK and some other EU states.

The well-attended sunrise seminar on “Rule of Law on the Internet: Feasible or Fantasy”, started with views from Richard Cotton of NBC Universal Media.  He stated that the question was not “whether” we should have a rule of law on the internet, but rather “when” and “how”.  He discussed a fundamental problem being one of attitude, with many downloaders thinking that “if it’s so easy to pirate, it can’t be wrong”.  Piracy is moving from being treated as a nuisance, to a problem that the FBI and homeland security are now enforcing against.

In terms of legitimizing tools, he discussed the development of ancillary markets and goods such as Netflix, and Xbox live which are robust and legitimate markets that rely on internet streaming technologies.  In his view, encouragement of these delivery models will give illegal downloaders a legitimate alternative.  However, he emphasised that the challenge will be to create a culture that will accept copyright piracy as a wrong and likened this to being a parent training a recalcitrant child.

Justice Peter Charleton commented that the EU has compulsory anonymity on internet. And that a cultural problem was that anti-globalism is a big movement so that theft from “anonymous capitalist” was thought to be ok. The panel agreed that IP theft was like drug addiction where demand generates supply.

In the session, “Enforcement Issues Including New Government Initiatives”, Stevan Mitchell (the ESA) and Peter Fowler (USPTO Enforcement) discussed the extent of the enforcement problem.  Twenty five per cent of all internet traffic globally involves unauthorized distribution of copyright files.  One assessment had 43 illegal downloading websites register 146 million hits per day.  Bottom line is that there is a huge appetite for TV and film downloading.  Peter Fowler emphasised the need for cultural change akin to the shift that led to seatbelt wearing.  He also discussed the US “Operation in our Sites” which had been seizing domain names of illegal download sites.  He emphasized that the academic debate over whether creative adaptations should be free was moot as copyright infringement is illegal and a crime.  For enforcement officers there was no debate.  He also highlighted a shift in counterfeiting.  Counterfeiters are now trying to make higher profits by making goods as close as possible to the real luxury item and selling goods on deceptive websites at matching prices (as opposed to a severely discounted price that would indicate a “fake”) in order the maximise profits.

Other paths of enforcement include cooperative agreements between registries to seize domain names.  Importantly it is also to target 3rd party providers eg agents for service and paypal.  If money supply can be cut off, then enforcement agencies will try to do so.

In the session “Trademark Law: Smell and Look-a-likes: a Comparative Analysis” Anna Carboni presented an update on smell and look alike cases including the controversial L’Oreal v Bellure case.  Carboni highlighted the fact that the British Brands study showed the customers can be easily confused by look alike packaging. The panel including Robert Burrell pointed out that surveys used in the British Brands study and other surveys used to support a senior mark owner are flawed due to the prevalence of leading questions.  On another point, Jane Ginsburg re-emphasised that “lured” does not mean confused.  Consumers learn for example, that supermarket shelves are stocked with similar looking house brands.  The Hon. Justice Robin Jacobs agreed saying that judges shop and are also aware of brand generics.  The question should be whether reasonable customers are likely to be confused and whether the company intended to confuse consumers.  Justice Jacobs observed that brand owners are now scared to sue “home brands” which are put out by supermarkets because supermarkets may retaliate and not stock the senior brand.

In the session “Adwords: a Comparative Analysis” Professor Marshall Leaffer discussed the proposition that after the case of Rescue.com, selling trademarks as keywords is “use in commerce” and subject to the Lanham Act.  Professor Barton Beebe discussed the increase in consumer sophistication and that the legal question had moved on from “use” to “likelihood of confusion” and in the future will be preoccupied with predicting levels of consumer sophistication.

Prof. Dr. Peter Ruess presented a convincing case for protection of well-known brands.  Interestingly calling it naïve to use the phrase “comparative advertising” in cases that were clearly “bait and switch”.  The panel seemed divided on the line between “genuine” comparative advertising and the misappropriation of goodwill.  Ruess argued that using the goodwill of a senior mark to lure a customer is not comparative advertising and is not in the public interest.  Professor Beebe argued that encouraging free competition is in the public interest.  The panel seemed divided between recognising the property rights of high investing brand owners and free competition.

Overall this was a fascinating and informative conference.  The program and list of speakers can be found here.  Proceedings of the conference will also be published in an upcoming volume.

Vicki Huang is a Research Associate with IPRIA and a Lecturer at Deakin Law School

(return to the top of this edition)


The Trans-Pacific Partnership Agreement (TPPA) IP Chapter

May 6, 2011

By Melissa de Zwart

Nine countries are currently negotiating the Trans Pacific Partnership Agreement: US, Australia, New Zealand, Singapore, Chile, Malaysia, Brunei Darussalam, Vietnam and Peru. Under the terms of this agreement, signatories will be required to amend their domestic intellectual property laws to comply with the terms of the TPPA. The US draft of the intellectual property chapter of the trade agreement was leaked in February 2011 generating significant controversy regarding its draconian terms. The leaked chapter is available here at Michael Geist’s blog.

Some key aspects of the draft are as follows:

Geographical Indications

A party must provide that geographical indications (GIs) are eligible for protection as trademarks. For this purpose geographical indications are defined as ‘indications that identify a good as originating in the territory of a Party, or a region or locality in that territory, where a given quality, reputation, or other characteristic of the good is essentially attributable to its geographical origin. Any sign or combination of signs (such as words, including geographical and personal names, as well as letters, numerals, figurative elements, and colors, including single colors), in any form whatsoever’.

The TPPA provides for a registration of GIs if recognized by a member party. Of course, in Australia, GI protection currently extends only to wine and spirits, under the Wine Australia Corporation Act 1980 (Cth). This scheme was introduced to give effect to Australia’s obligations under TRIPS and, more specifically, the Australia-European Community Agreement on Trade in Wine 2008 (and it is predecessor signed in 1994). It is precisely this sort of agreement (reached in order to secure access to the European market for Australian winemakers) which would be prohibited by the TPPA.

Article 2 (which deals with trademarks and GIs) provides that no party shall (whether pursuant to an agreement with another government or otherwise):

  • Prohibit third parties from using translated versions of the geographical indications for goods other than wines or spirits;
  • Prohibit third parties from using a term that is ‘evoked by’ the geographical indication;
  • Prohibit third party uses of any component of a multi-component geographical indication protected by virtue of the agreement, even if such components are generic or use would not give rise to confusion (Clause 17).

For the purposes of the Agreement, a term is generic if it is customary in common language as the common name for the goods or services associated with the term or GI (Clause 18).

Clause 19 sets out a range of factors which may be taken into account in determining whether the terms is generic, such as whether:

  • persons other than the person claiming the rights use that term as the name for the product; and
  • the product is imported into the relevant country, in significant quantities, from outside the proposed protected region using the same name.

This is contrary to the current Australian regime, and particularly the Australia-EC Wine Agreement, which prohibits the use of certain traditional expressions and required the phasing out of local uses of specific GIs, despite their long-term use in Australia.

Clause 22 provides for the non-misleading use and/or registration of signs or indications that reference a geographical area that is not the true place of origin of the product of the product or services other than for wines or spirits, provided that:

a)     the sign or indication is used in a manner that does not mislead the public as to the geographical origin of the goods or services;

b)     the use does not constitute an act of unfair competition;

c)      use would not cause a likelihood of confusion with an earlier trade mark or GI; and

d)     the request for registration does not relate to a generic term.
This reflects the two tier system for GI protection provided for in Articles 22 and 23 of TRIPS, which recognize a higher level of protection for wine and spirits, extending to non-misleading and translated uses of GIs.

Copyright

Article 4 extends the rights granted to authors, performers and producers of phonograms to all forms of reproduction of their works/ performances including temporary storage in electronic form.  The temporary reproduction right proved particularly controversial during the negotiations that resulted in the WIPO Copyright Treaty (WCT) and ultimately could not be resolved at that meeting. Rather, it was dealt with by way of the Agreed Statement to Article 8. (‘It is understood that the mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of this Treaty or the Berne Convention. It is further understood that nothing in Article 8 precludes a Contracting Party from applying Article 11bis(2)’). The inclusion of the temporary reproduction right here in the TPPA without further fanfare or disclosure is particularly tricksy on the part of the US and is likely to cause significant debate!

Other notable expansions of copyright include:

  • Prohibition on parallel importation, even of goods manufactured with authorization of the copyright owner outside of the relevant territory.
  • Copyright terms are extended to life plus 70 years for individuals (already the case in Australia) and between 95 and 120 years for corporate works.

The relevant exceptions and limitations are left blank with only a ‘placeholder’ marking their potential inclusion (an ominous lack of attention to detail, given the foreshadowed expansion of rights) although it is noted with respect to the above, one of the possible exceptions would relate to internet retransmission.

Technological protection measures

Technological protection measures are yet again the focus of strengthening efforts. Parties are required to provide that any act of circumvention or dealing in circumvention devices or services shall be subject to civil and criminal penalties. Criminal penalties apply to anyone other than a non-profit library, archive, educational institution or public noncommercial broadcasting entity, who engages in circumvention ‘for purposes of commercial advantage or private financial gain’. Circumvention gives rise to liability independent from any infringement of copyright.

Exceptions and limitations to the anti-circumvention provisions must be confined to the purposes defined in paragraphs (d) and (e).

The narrowness of these exceptions will require amendment of Australia’s TPM provisions which currently require that a TPM be an ‘access control technological protection measure’ which effectively excludes protection of TPMs which protect region coding and TPMs embodied in machines or devices, not directed primarily to protecting copyright.

ISP liability

Article 16 provides for ‘Special Measures Relating to Enforcement in the Digital Environment’. Notably, Clause 3(a) requires parties to provide ‘legal incentives for service providers to cooperate with copyright owners in deterring the unauthorized storage and transmission of copyrighted materials.’ Given the 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 subject to compliance with the US DMCA safe-harbor provisions.

Conclusions

As expressed in this leaked US draft, the provisions of the TPPA, particularly those relating to copyright, appear to be more restrictive than ACTA. Some commentators have hypothesized that the ambit claims made in the leaked document are so extreme that the US is playing a negotiating tactic that allows them to significantly back down from this position and still come out ahead in terms of outcomes. Whilst this remains to be seen, it has reminded us that the parameters of intellectual property rights remain contested and vulnerable to being traded away in the international trade environment.

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

(return to the top of this edition)


A few thoughts on iiNet FFC decision

March 17, 2011

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

(return to the top of this edition)


Spycatcher and Wikileaks: history repeats

February 17, 2011

By Dr Katy Barnett

Who enjoys reading spy fiction, or watching spy movies? I do. There’s something interesting about espionage. Perhaps it’s the secrecy which makes it so fascinating. People love to know secrets: it reflects the broader idea that if something is scarce, it must be good. In his book Influence, Robert Cialdini describes the following experiment at pages 246–7:

One Virginia-based study nicely captured the terrible twos style among boys who averaged twenty-four months in age. The boys accompanied their mothers into a room containing two equally attractive toys. The toys were always arranged so that one stood next to a transparent Plexiglas barrier and the other stood behind the barrier. For some of the boys, the Plexiglas sheet was only a foot tall–forming no real barrier to the toy behind, since the boys could easily reach over the top. For the other boys, however, the Plexiglas was two feet tall, effectively blocking the boys’ access to one toy unless they went around the barrier. The researchers wanted to see how quickly the toddlers would make contact with the toys under these conditions. Their findings were clear. When the barrier was too small to restrict access to the toy behind it, the boys showed no special preference for either of the toys; on the average, the toy next to the barrier was touched just as quickly as the one behind. But when the barrier was big enough to be a true obstacle, the boys went directly to the obstructed toy, making contact with it three times faster than with the unobstructed toy. In all, the boys in this study demonstrated the classic terrible twos’ response to a limitation of their freedom: outright defiance.

If you want to make something attractive, make it secret…then everyone will want to know about it.

The other reason we find spying interesting is because of the vicarious thrill of the chase. Basically we are hunter-gatherers who have an inbuilt love of chasing things down and collecting things. Getting information from another person without them knowing about it is a chase extraordinaire. There’s also a clever problem-solving aspect which is attractive to people like myself, who love a puzzle (the only thing I regret about cancelling my various newspaper subscriptions is that I no longer get the cryptic). In addition, one is spying on the Other Side, and therefore, nefarious and tricky techniques are allowable.

Spy fiction as a genre arose in the 19th century, with its roots in the adventure genre. Novels such as the Prisoner of Zenda, which I love, are precursors of the genre. It is related to detective fiction, and some of the Sherlock Holmes stories straddle the two genres. Public interest in spying was also roused by incidents such as l’affaire Dreyfus, where a young French Jewish Army officer named Dreyfus was convicted of treason after it was alleged that he had leaked French military secrets to the Germans. Later evidence indicated that Dreyfus had not leaked the information and that an Army officer called Ferdinand Esterhazy was in fact the culprit. However, top ranking army officials suppressed the evidence, and engaged in a cover-up. After author Emile Zola wrote a letter in the newspaper, the case had to be reopened, and Dreyfus was eventually exonerated.

The various World Wars, followed by the Cold War, meant that international spy agencies were established and were naturally then the subject of fiction. The Cold War and the Soviet threat provided fruitful grounds for authors, particularly after a number of high profile double agents were uncovered in the 1950s and defected to the Soviet Union: Donald Maclean, Guy Burgess and Kim Philby.

James Bond is a romanticised fictional spy from that era, a dashing hero who seduces women and overthrows the villain every time. There is no doubt as to who is right with depictions of Bond: Bond is the Good Guy, up against guys who are indubitably Bad. Perhaps these novels seek to deal with the anxiety that, despite double agents and the like, the Good Guys are winning. Subsequent spy fiction has more complex portrayals: for example, Le Carré’s fictional spy George Smiley is of a bureaucrat who has to maneuver to get what he wants from the various government departments. Le Carré’s novels are more equivocal about the unethical and unpleasant aspects of the job. Many authors of spy novels in fact had worked in spy agencies themselves, including Ian Fleming, John Le Carré, and Graham Greene (who was a friend of Philby).

In Le Carré’s A Perfect Spy, featuring his anti-hero, Magnus Pym, two threads can be discerned. First, there is the oxymoronic nature of spying: one is breaking the law on behalf of the state, in the name of the safety of the state. One character observes about spying at page 324:

‘Hell…we’re licensed crooks, that’s all I’m saying. What’s our racket? Know what our racket is? It is to place our larcenous natures at the service of the state. …’

The other aspect which comes through is the ‘boy’s own fun’ aspect. There is an account of Magnus’s training at pages 533 – 4:

“Imagine Pym’s enjoyment of this… The fun of it. The free-wheeling unreality. He has chased Buchan’s ghost across the moors of Argyll. He has messed about in rubber boats, made night landings on sandy shores, with hot chocolate awaiting him in the vanquished enemy’s headquarters. He has fallen out of aeroplanes, dipped into secret inks, learned Morse and tapped scatological radio signals into the bracing Scottish air. He has watched a Mosquito aeroplane glide a hundred feet above him through the darkness, dropping a boxful of boulders in place of genuine supplies. He has played secret games of fox-and-geese in the streets of Edinburgh, photographed innocent citizens without their knowledge, fired live bullets at pop-up targets in simulated drawing rooms, and plunged his dagger into the midriff of a swinging sandbag, all for England and King Harry…

Then back to base camp. Somewhere in Scotland to resume the red thread of violence that has been spun into every new thing he is learning. This violence is not only of the body. It is the ravishment that must be done to truth, friendship and, if need be, honour in the interest of Mother England. We are the chaps who do the dirty work so that purer souls can sleep in bed at night. …”

The other thing is that spies are constantly acting a part. It is hard to know when they are telling the truth and when they are lying, and what the nature of the real person is. In The Perfect Spy, Pym tells various people totally contradictory things at different times, and at the moment he says them, he believes what he says entirely. It is as if he is a functional sociopath. Le Carré’s The Little Drummer Girl also plays with this, when the Israeli secret service use an English actress, Charlie, to entrap a Palestinian terrorist. The Israeli chief operative tells Charlie at 136 – 7:

“Do not confuse our play with entertainment, Charlie,” he told her earnestly. “We are not speaking of some enchanted forest. When the lights go down on the stage, it will be night-time in the street. When the actors laugh they will be happy, and when they weep they will very likely be bereaved and broken-hearted. And if they get hurt–and they will, Charlie—they will surely not be in a position, when the curtain falls, to jump up and run for the last bus home. There’s no squeamish pulling back from the harsher scenes, no days off sick. It’s peak performance all the way down the line. If that’s what you like, if that’s what you can handle–and we think it is–then hear us out. Otherwise let’s skip the audition right now.”

What struck me again was that Charlie’s character genuinely believes the part she acting while she is in it – she does not allow herself to think of the deception she is undertaking. She feels sympathy for the people she is with and empathises with them, all the while deceiving them.

Spy Autobiography – Spycatcher

Spies, and spy books, are fascinating. No wonder, then, that autobiographies of spies are big business. If novels are interesting, one would think that an account from a real spy would be far more interesting, particularly if the government is trying to ban people from reading it. Spycatcher was such a book: a autobiography written by Peter Wright, a former Assistant Director of MI5.

In 1987, Spycatcher was No. 1 on the US hard-cover non-fiction book list. The initial print run was 50,000, but this later rose to 760,000. It was apparently a surprise hit: but if one bears in mind the experiment with the toddlers recounted above, the success really shouldn’t have been a surprise. If you want to make something popular, there’s nothing like a bit of scandal to fuel that popularity. Here was an insider’s account of MI5, one that was so scandalous that the British government had attempted to ban its publication in Britain, Australia, New Zealand and Hong Kong (with noted lack of success in Australia and New Zealand). Litigation drew attention to the book, and the British government was largely unsuccessful in achieving the remedies it sought.

After reading the various Spycatcher cases, of course I couldn’t resist reading the book either. My father had it on his bookshelf, and professed that I was free to take it. When I looked at the book, I was interested to see that there was a faded, dog-eared bookmark about one third of the way through. The bookmark apparently dated from around 1988. Dad had never finished the book. And I confess that I had great difficulty finishing it as well. I had to flog myself to read the final chapters.

I have a theory about books. There are two things that make a book enjoyable:

  1. A “hook” to pull you through – that is, a plot line which instils in you the need to know what happens; and
  2. Good writing that is not clichéd or grammatically incorrect.

Some books possess the first aspect in spades, but entirely lack the second aspect (the example I always use is Dan Brown’s The Da Vinci Code). Some books have exquisite writing, but one hates the characters and as a consequence, one doesn’t care what happens to them (the example I use of this is Patrick White’s The Eye of the Storm, which I failed to finish with about 70 pages to go – I just couldn’t be bothered any more).

Wright’s book is written in grammatical English. I’m sure it’s fascinatingly interesting if you happened to work in that area, and know the people of whom Wright is speaking. But there is a real lack of a “hook” to pull you through the book. I think it would have been a more exciting read if Wright had said at the outset, “Little did I know that I was to be working  with some people whom I believe were traitors, although the British government still denies this.” Then I would have spent the book wondering who the traitors were.

As it was, the main parts which interested me were the parts that deal with the oxymoronic nature of spying – one is trusting people who are paid liars and breakers of the law, and the parts which recounted the fun bits of spying.

  • Pages 31-2: “…MI5 operated on the basis of the 11th Commandment — “Thou shalt not get caught” — and…in the event of apprehension there was very little that the office could do to protect its staff.”
  • Page 45, on the initial interview with double-agent Kim Philby, in which Philby was cleared: “I realized for the first time that I had joined the Looking-Glass world, where simple but unpalatable truths were wished away. It was a pattern which was to be repeated time and time again over the next twenty years.”
  • Page 52: “It was boyish fun chasing Russian diplomatic vehicles through the streets of London, up and down one-way streets and through red traffic lights, secure in the knowledge that each driver carried a Police Pass to avoid tickets.”
  • Page 70: “But in the main, the 1950s were years of fun, and A Branch a place of infectious laughter. As Hugh Winterborn always said: “MI5 is a great life, if you can stand the excitement!”

The controversial part of the book seems to have lain in the allegation which arises in the latter part of the book: namely, that the former Director-General of MI5, Roger Hollis, was a Russian double agent. However, as was noted in the various Spycatcher trials, this was not a new allegation, and it had previously been published in a variety of other books and television programs. Indeed, the powers that be were so worried about the possibility of Hollis being a double agent that, as Wright recounts, they pulled him in to interrogate him once again after his retirement.

A book I found rather more interesting is Malcolm Turnbull’s account of the trial, entitled The Spy Catcher Trial – The Scandal Behind the #1 Best Seller. Perhaps I’m strange. I bought the book for the princely sum of 1¢ from Amazon, so evidently no one else is much interested in it anymore, but I enjoyed it vastly more than Spycatcher itself. Turnbull’s book explains precisely why the Thatcher government was desperate to suppress Wright’s book, something I had not really understood with the benefit of hindsight. I had always thought that surely it would have been a better course for the British government to let the book sink into ignominy than give it loads of free publicity?

The British government did not want its mistakes publicly known. It had already faced embarrassment with the exposure of Anthony Blunt, another of the “Cambridge Five” spy ring of which the defectors Philby, Maclean and Burgess were also members. Blunt was Professor of the History of Art at the University of London and Surveyor of the King’s Pictures. He was also a Soviet double agent. He was only exposed in 1963, and the Spycatcher book describes a number of interrogations of Blunt. However, Blunt’s double agency only became public knowledge in 1979 when a book called Climate of Treason was published which outlined the activities of “Maurice”. Blunt sued to prevent publication of the book which immediately drew attention to him. Margaret Thatcher, then Prime Minister, revealed Blunt’s treachery in the House of Commons.

The government was concerned that there would be a similar hoohah when revelations emerged that Hollis had been suspected of being a double agent. In 1981, Chapman Pincher published a book called Their Trade is Treachery in which the allegations against Hollis were revealed. Pincher’s book was based in part on conversations with Peter Wright, and Wright had been flown out to England to talk to Pincher, and had been paid for his services. A week after Pincher’s book had been published, Mrs Thatcher told the House of Commons that Hollis had been cleared by an independent inquiry and that all evidence against Hollis related to events which could equally be attributed to Kim Philby or Anthony Blunt. Turnbull recounts at page 32:

Wright told me Mrs. Thatcher had misled the House of Commons. “The evidence against Hollis was all post-war. It couldn’t have been laid at the door of Philby or Blunt. The Prime Minister was given a misleading brief by MI5.”

Importantly, the government did not object in the least to Pincher’s book, even though it covered very much the same material as Spycatcher. In part, this was because the tenor of Pincher’s book was different: he noted that the secret services had had a problem with Soviet double agents, but concluded that the present day secret services were in the clear. By contrast, Wright’s book alleged that there were still double agents in the service, and that more questions had to be asked about the operations of the secret service. Turnbull’s book argues that the only reason why the government didn’t mind Pincher’s book is because they actually wanted Pincher to bring the Hollis allegations out into the open in the most uncontroversial manner possible so that they could be tidied up and swept away. Nor did Thatcher want her statement before the House of Commons questioned. The inference from Turnbull’s book is that the orders to persist with the case were coming straight from Thatcher herself.

Turnbull gives an electrifying account of his cross-examination of Sir Robert Armstrong, Thatcher’s Secretary of Cabinet, who attempted to justify in cross-examination why action had been taken in the case of Wright but not in the case of Pincher. Suffice to say, Turnbull took Armstrong to pieces. After reading the book I now understand precisely the flavour of the New South Wales Supreme Court case at first instance (Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd (1987) 8 NSWLR 341). Powell JA found that the information contained in Spycatcher was no longer confidential because it had been published in a number of other publications to which the British Government had authorised or at least acquiesced. He said acerbically at page 378 of his judgment, ‘it must have been apparent to anyone who had cause to consider the matter, that, as a result of the acquiescence, or inaction of the British Government, the Service has, for years, leaked like a sieve.’

Wikileaks

This provides a nice segue into modern times. Have things really changed so much since Spycatcher? I suspect that they have not, and Turnbull agrees. On 9 December 2010, Turnbull wrote a column drawing parallels between Spycatcher and Wikileaks. He noted that the British government would have done far better in the Spycatcher debacle if it had not relied on the law of breach of confidence but had simply let Wright publish and ignored the book. In this context, Turnbull said of Wikileaks:

“Mr Assange should make sure that any further documents published do not contain information that would impact on current operations and especially in a way that would put lives at risk. We are engaged in a global struggle with Islamist fundamentalist terrorism and any material which assists our opponents should not be published. Any material which puts the lives at risk of those who help us in that struggle should not be published and to do so is morally reprehensible whatever its legal character.

Governments and politicians should be very careful not to make a martyr of Mr Assange and fools of themselves. Julia Gillard’s claim that Assange had broken Australian laws when it is clear he has not, only demonstrates how out of depth she is in this as in so many other areas.

And one may well ask whether her denunciations would be so shrill if instead of the documents being given to Mr Assange they had been handed to a powerful newspaper group.

If The Australian had received that file and its contents were being dribbled out by News Corporation newspapers would she be accusing Rupert Murdoch of high crimes and misdemeanours? I don’t think so.”

I suspect secrecy just encourages people to want to look, like our toddlers at the start of this post. I’m no different – I’ve been fascinated with the revelations arising from Wikileaks, although like Turnbull, I worry about leaks which might harm operatives or society generally. I would be very careful of how I handled Assange. It seems that most Australians support his actions. Government never looks good if it comes down heavily on people like Wright or Assange.

When I was younger, I confess that I had dreams of being a spy. My A-Level History teacher snorted, “You!?! You couldn’t keep a secret for five seconds!” “Ah ha!” I said. “I bet that if I were a spy, I would run around shouting ‘I’m a spy, I’m a spy, I’m a spy!’ Would you believe me? Of course you wouldn’t. You’d think I was a foolish voluble buffoon. I’d be the best spy ever.” She laughed but said, “Maybe you’re on to something”. I think these are the principles I operate on. If I were trying to hide something, I confess that I’d probably hide it in plain sight, amongst all kinds of other totally irrelevant items. Secrecy makes people curious. Still, secrecy makes for interesting stories.

Dr Katy Barnett is a lecturer at the Melbourne Law School

(return to the top of this edition)


New Models for Book Publishing

February 17, 2011

By Kwanghui Lim

Traditional book publishers have been increasingly challenged by e-books and other digital technologies. We decided to organize a public seminar with industry participants to learn about new opportunities in this area.

A common theme among our speakers was of the growing fault lines between those who create content and those who distribute it. From the point of view of content creators, digital technology is not a bad thing. It presents new ways to reach customers. To a firm like Lonely Planet, printed books, e-books and apps are alternative and useful delivery mechanisms. The heterogeneity is a good thing since each delivery mechanism has its strengths and weaknesses. For example a map-based application on your mobile phone may be useful for navigating the streets of Melbourne, while a printed travel book might be preferred if you are travelling the Australian outback (books are more durable than electronic devices; they also require no electrical power).

Authors are beginning to explore new pricing schemes. For example several authors are trying to sell a larger volume of e-books at lower prices (around $2.99 – $3.99) instead of a small number of regular books at higher prices (say, $10). Other authors are trying “pay what you want” schemes. Our guest speaker Max Barry will be selling his next book as a real time electronic serial, distributing it directly from his website in small chunks and for an attractive price ($6.95). It is too early to know which of these will work well and for whom because the book industry has many different segments of customers with different needs. Furthermore, there are concerns with e-books around the issue of digital piracy. However, we were reminded by one of the speakers that for many authors, obscurity is worse than piracy.

Besides, piracy has long been a threat even with printed books: you will of course remember the photocopy machine which has existed for quite awhile, as well as those suspiciously inexpensive textbooks printed on poor quality paper brought in from various developing countries. It seems to me at least that in the digital world, selling a large volume of e-books at a low price makes a lot of sense. In this context, the serialized e-book has an added advantage because it builds a repeated interaction between the reader the author. Over time this may help create loyalty towards the author.

I see three areas of opportunity and these arise along the fault lines described above.

The first opportunity is with “apps”. It crossed my mind earlier this month that simply repackaging a book as an app gives the author tremendous freedom. With books, the author is stuck with publishing delays, parallel import laws and other legal impediments, not just the need to physically deliver products. With apps, all that is gone. Re-purpose a book as an app and it morphs into a software program, so different rules apply. If you go one step further and make the app exciting to use, you can counteract the myth that printed books are superior. Those who have tried The Elements on an iPad will find it hard to go back to a printed Periodic Table. Similarly, having compared both this app and the book version, I much prefer learning about photography using the app version which is more interactive and has built-in videos.

A second opportunity lies in offering new skills combinations. In order to serialize his next novel, Max Barry combined his computer programming expertise with a passion for writing: he is essentially selling each subscriber a private RSS feed as a separate product. Most people do not have this combination of skills, especially the generation of authors that went to journalism school and did not acquire a technical background. An opportunity exists for people who can bridge this divide and provide new tools and services to help content authors to craft their products and reach customers easily. For example, Graeme Connelly spoke to us about the new “expresso printer” at Melbourne University Bookstore which produces small print runs that were uneconomical in the past. I believe this is only a starting point, e.g., we don’t yet have the equivalent of WordPress for creating books with existing tools being either too complex or too amateurish.

The third opportunity lies in further disaggregating the value chain. I learned from the session that one of the benefits to authors of going with traditional book publishers is their expertise in editing. Publishers convert the messy raw material that is a manuscript into a curated experience that is proof-read, edited and checked. I suspect that the editing activity will split apart into a distinct industry segment, just as has happened in other industries such as semiconductors, which used to be vertically integrated but which now has some firms focusing exclusively on system development and others on chip design or manufacturing. This is pure speculation on my part, but I don’t see why the editing process, while valuable, needs to be tied much longer to the manufacture and distribution of physical products.

It is hard to predict how things will work out and I don’t think the traditional book will completely disappear. This industry is definitely going to be interesting to watch over the next few years.

Kwanghui Lim is an Associate Professor at the Melbourne Business School

This article was cross posted here at Core Economics http://economics.com.au/?p=6702

(return to the top of this edition)


Unauthorised Sequels

August 26, 2010

By Shaun Miller – Partner, Marshalls & Dent Lawyers.

“The Catcher in the Rye” was written by American author J.D. Salinger in 1951.

The book has since become a huge critical and commercial success and is now considered to be a classic work of mid-20th century literature.  The book’s main character, through whom the story is told, is one Holden Caulfield – a 16 year old newly minted private boarding school drop out who embarks on 4 days wandering around New York – a journey of self-discovery, reflections and interactions with an array of characters and New York landmarks including the Natural History Museum and Central Park.

The book is written with a fresh literary “look and feel” – with unique turns of phrase, descriptions and dialogue.

Fast forward to the present day…an American author living in Sweden named Fredrick Colting (writing under the name John David California) wrote a sequel of sorts to Salinger’s famous and celebrated novel, “Catcher in the Rye”.  The sequel, called “60 Years Later: Coming Through the Rye” portrays a 76 year old Holden Caulfield (referred to as “Mr C”) – the famed protagonist of the original work – wandering the streets of New York after having escaped from a retirement home.

Salinger, who died earlier this year, had been living in recluse and was reportedly outraged that the book “60 Years Later: Coming through the Rye” brazenly stole, without Salinger’s permission, Salinger’s exact same character Holden Caulfield (along with a host of other characters from that original book) and placed them in the same location (New York) and used similar turns of phrase, descriptions and dialogue as in the original “Catcher in the Rye”.

Indeed, Salinger was so concerned that his rights had been trampled on that he brought a law suit against Fredrick Colting and his publisher alleging claims for Copyright Infringement and common law Unfair Competition. To review the trial decision Salinger v. Colting, 641 F. Supp. 2d 250 (S.D.N.Y. 2009) click here.  For the appeal, Salinger v. Colting, 607 F.3d 68 (2d Cir. N.Y. 2010) click here.

Issues from the Case

The case raises a host of issues including:

  1. Whether or not characters in books, films or even music lyrics attract the protection of copyright law;
  2. If such characters do attract copyright protection, in what circumstances will the “fair use” exceptions to infringement of copyright – such as parody or criticism and review – apply;
  3. When is a work simply derivative of an original work (and therefore more likely to breach copyright) and when is a work transformative of that original work (and therefore less likely to be in breach);
  4. How does all this fit into the ideas/expression dichotomy that is the cornerstone of copyright law.
  5. How does the overriding imperative of Freedom of Expression – especially in the context of the US Constitution – affect these issues;
  6. Can an author or publisher use the misleading and deceptive conduct sections of Part V of the Trade Practices Act (and the mirror fair trading legislation in the States and Territories) or invoke the common law action of passing off to stop an unauthorised sequel.
  7. Can an author rely on his or her moral rights in their original work to prevent an unauthorised copy;

J.D. SALINGER v FREDRIK COLTING ET AL

But first, let’s turn to Salinger’s law suit against Fredrik Colting and his publisher regarding the contested unauthorised sequel “60 Years Later: Coming Through the Rye”.

What were the Basic Arguments of Each Side?

Both sides acknowledged and agreed that (a) Salinger holds a valid copyright in the book “The Catcher in the Rye” and (b) that Colting had access to that book.

So the first issue that the Judge Deborah A. Batts sought to determine was whether or not there is a substantial similarity between the two books.

Salinger’s lawyer submitted that there were two prongs to the substantial similarity question because Salinger was pleading two separate claims for copyright infringement.  One is of the character Holden Caulfield.  The second is of the book “The Catcher in the Rye”.

Substantial Similarity Claim 1: Copyright in the Character – Holden Caufield

As to the first claim, Salinger’s lawyer said it was beyond doubt that the character Mr C in “60 Years Later” is Holden Caulfield from “Catcher in the Rye”.  The question was whether the iconic character Holden Caulfield was protectable under copyright law.  It was submitted by Salinger’s lawyer that Holden Caulfield was a sufficiently delineated character to be protected under US copyright law.  This was despite there being only a literary description of Holden Caulfield, as opposed to a graphic representation.  This was also despite the character Holden Caulfield only appearing in one work.

Substantial Similarity Claim 2: Copyright Infringement of Other Elements of the Original Work

Regarding the second claim of substantial similarity between the two books themselves, Salinger’s lawyer argued that there was not merely substantial similarity by virtue of the taking of the character, but there were numerous other elements the “60 Years Later” copied including other characters, an attempt to imitate the narrative and the tone, the style and the settings (including Central Park, the cemetery and the Museum of Natural History).  It was argued that the court should go beyond looking at the fragmented literal similarities and look at the total concept and feel of the two works.

Counterarguments – No Substantial Copying

Fredrik Colting’s lawyer argued that the character of Holden Caulfield as published initially is not sufficiently developed and delineated to attract copyright protection.  In any event, Colting’s lawyer contended that even if Holden Caulfield attracted copyright protection (which he disputed) he did not believe there was the taking of sufficient amounts of Holden Caulfield to constitute copyright infringement.

As to the question of breach of copyright in “Catcher in the Rye” itself, Colting’s lawyer submitted that no expression was taken from that book and used in “60 Years Later” i.e. there was no direct copying of the text and that “60 Years Later” has 80 characters in it, only really three of which are from “Catcher in the Rye”. There are 25 characters in “Catcher in the Rye” that do not appear in “60 Years Later”. So there was no substantial similarity between the two books themselves.

Counterarguments – Fair Use

The next issue to be looked at was whether, if “60 Years Later” did substantially copy the character Holden Caulfield and the book “Catcher in the Rye, whether that use was “fair use”.

Colting’s lawyer asserted that “60 Years Later” was written as critical commentary on the relationship between J.D. Salinger and the character he created, namely Holden Caulfield.  “60 Years Later” was an unauthorised fictional examination of the relationship between J.D Salinger and his most famous character – and that the cover of the book (both back and front) will make that clear..  It’s not a sequel.

Colting’s lawyer contended that “60 Years Later” is commentary on the original work because the original work has become an iconic representation of a disaffected youth who has certain characteristics, “60 Years Later” is an analysis of the creation, the creator of that work (i.e. Salinger) and what happens to that character many, many years later when we see the character having lived his whole life.  You start to have more understanding about what the character was and what the original book was and it changes your reading of the original work.  In short “60Years Later” is literary criticism in a fictional form.

Counterarguments – Dangers of Granting Injunctions in Copyright Cases

Colting’s council then raised the issue of the danger of granting an injunction in a copyright case – i.e. a prior restraint against the publication of a book before a full hearing, before a full exploration of all the issues  - noting that the United States Supreme Court has expressed its concern about injunctions in copyright cases and that where there is a colourable fair use defence, that a remedy of an injunction is an extraordinary remedy.  A prior restraint, it was argued, would raise very serious First Amendment issues.

In response to this, Salinger’s lawyer argued that “60 Years Later” was a sequel – pure and simple – and that the only question for the court to determine was whether that sequel was transformative or substantially similar to the original book.  It was contended that “transformative” means: to take an original work and to somehow imbue it with new meaning, message or purpose, to provide something more for the public.

It was submitted that the only way that Colting had transformed the Holden Caulfield character was to make him 76 years old instead of 16 and the only way that Colting had transformed “Catcher in the Rye” was by adding some characters.

Furthermore, it was submitted that “60 Years Later” did not constitute literary criticism or parody.

In essence, Salinger’s lawyer asserted that this was a case about Salinger’s right not to have a sequel published, and not to authorise a derivative work.  i.e. it was a case about Salinger’s right to keep “Catcher in the Rye” and Holden Caulfield frozen in time for the full term of copyright.

Trial Decision of Judge Deborah Batts in the United States District Court

Judge Deborah Batts granted Salinger the preliminary injunction essentially for the reasons that Salinger had argued for one.

In determining that there was a “substantial similarity” between the two books as well as between the character Holden Caulfield from “Catcher in the Rye” and the character Mr C from “60 Years Later” such that it was an unauthorised infringement of Salinger’s copyright, the court cited The Wind Done Gone case (Suntrust Bank v Houghton Mifflin Company 268 F. 3d 1257, 1266 (11th Circuit, 2001) where it was found that “substantial similarity” exists where “an average lay observer would recognise the alleged copy as having been appropriated fro the copyrighted work”.  The court also cited the case of Castle Rock Entertainment v Carol Publishing Group 150 f. 3d 132, 137 (2nd Circuit, 1998) where it was found that under the “ordinary observer” test, two works are substantially similar where the ordinary observer, unless he set out to detect the disparities, would be disposed to overlook them, and regard the aesthetic appeal of the two works as the same.

The District Court then addressed Colting and his publisher’s claim that their novel “60 Years Later” and its protagonist Mr C constitute fair use of Salinger’s copyrighted work.

The court noted that at the constitutional level, while the “Copyright Clause and the First Amendment [are] intuitively in conflict, [they] were drafted to work together to prevent censorship” such that “the balance between the First Amendment and copyright is preserved, in part, by the idea/expression dichotomy and the doctrine of fair use”.

In the United States, the doctrine of fair use was codified in section 107 of the 1976 Copyright Act, which called for a four-factor test:

  1. the purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes;
  2. the nature of the copyrighted work;
  3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
  4. the effect of the use upon the potential market for or value of the copyrighted work.

The court weighed up these four factors in the aggregate and concluded that because Salinger had established a prima facie case of copyright infringement, irreparable harm from that infringement is presumed – so the court preliminarily enjoined Colting and his publisher from manufacturing, promoting, selling, or otherwise disseminating any copy of “60 Years Later” in or to the United States.

Appeal of Decision

Lawyers for Fredrik Colting and his distributor filed an appeal on 23 July 2009 with the Second Circuit Court of Appeals arguing that the injunction barring publication of Colting’s “60 Years Later: Coming Through the Rye” is an “impermissible prior restraint and an unwarranted extension” of copyright protection.

Where the case is up to

A three-judge panel of the US 2nd Circuit Court of Appeals heard arguments in early September 2009 against the injunction.

On 30 April 2010, the appeals court sent the case back to the lower court to determine whether Salinger’s trust will suffer irreparable harm from the publication of Colting’s book.  But in its ruling, the appeals court made clear that it expected Salinger’s trust to prevail.

“Most of the matters relevant to Salinger’s likelihood of success on the merits are either undisputed or readily established in his favor,” the court ruled.

Australian Law

This all raises the question as to whether there is any basis under Australian copyright law or other laws, to allow an author of an original work of fiction to restrain such a book being re-written, for example, in a different time or place but with the same character or characters, or simply restrain a character being recycled in another work.

Where and how does the law balance the rights of the author to maintain control over their fictional characters and the rights of other writer’s to create new works using those characters and therefore contribute to the overall literary culture for the public to enjoy?  Or if existing characters are cordoned off, will the so-called fan author be forced to devise their own characters, thereby enlarging the literary catalogue?

This also raises the question of the need to give authors the economic incentive to create their fictional works in the first place by according those authors copyright in their works – not only enabling the author to prevent the direct verbatim copying of the text of their works, but also the right to write a sequel or prequel, and the right to adapt the work into another medium such as a film.

The issue of character appropriation also highlights the ideas/expression dichotomy.  While there is no copyright in broad-brush generic characters such as star-crossed lovers or evil villains, at what point (if any) – moving along the continuum – do characters become so well defined and originally crafted that they should attract copyright protection.

It is fair to say that under Australian copyright law, “characters” do not receive separate discrete copyright protection.  A literary, non-graphic character can only be a literary work in itself, or a component of a literary work.

Nevertheless, it may be argued that if a new author takes a pre-existing character’s name, described appearance, personal traits and borrows (or steals) from the original character development, reviewing the character’s history and even refers to earlier important plot incidents which shaped the character – it may be argued that if all of those things appear in a sequel, then the author of that sequel has taken a “substantial part” of the original work by appropriating the character pursuant to section section 14 (1) (a) of the Australian Copyright Act.

As we know, when assessing whether a “substantial part” of an original work has been appropriated, courts in Australia will look at the quality or “value” of what has been taken much more so than the quantity of what has been taken.

The test that is often cited is Justice Peterson’s in University of London Press Ltd v University Tutorial “rough practical test” – namely, what is worth copying is prima facie worth protecting”.

But a character can never really be copied in the same way that copying text verbatim can be.  A character can only be re-crafted by the appropriator, who must choose their own collection of words to regenerate the character.

A test which Australian courts would seem likely to adopt was outlined in Zeccola v Universal City Studios where Justice Gray said (at first instance) that the question of substantial similarity “ultimately comes down to the subjective impression of the judge who makes the comparison” between the original work and the appropriated work.

But the possible danger of that test is that judges then become literary and artistic critics, which is probably not what judges are employed to do!

Australian Copyright Law – Defences to Infringement

If it can be established that a literary work has been substantially reproduced (or communicated to the public) by the appropriation of a character, the next issue that arises is whether any defences are available to the infringer.

Under the Australian Copyright Act, possible defences would be fair dealing for the purpose of “criticism or review” and also possibly fair dealing for the purpose of “parody or satire”

Other Breaches of the Law

It also needs to be pointed out that unauthorised sequels may fall foul of other areas of the law.

These include “misleading and deceptive conduct” under section 52 of the Trade Practices Act 1974 (Cth) and its State-based equivalent Fair Trading Acts.  Also, under section 53 (d) of the Trade Practices Act, a corporation (which would be the publisher) shall not represent that it has a sponsorship, approval or affiliation it does not have.

There is also the common law action of passing off.

It could also be argued that the unauthorised sequel breaches the moral rights of the original author.

Conclusion

Perhaps I’ll leave the last word to Holden Caulfield himself.  While Holden Caulfield was trying to think of a profession that he would enjoy, he concluded that although “lawyers are alright” he would not want to be one because “even if you did go around saving guys’ lives…how would you know you weren’t being a phoney?  The trouble is, you wouldn’t”.

That’s a wise observation indeed from a mere fictional character!!!

Shaun Miller is a Partner at Marshalls & Dent Lawyers.  This article is based on a seminar paper that the author presented at a seminar on unauthorized sequels at the Intellectual Property Research Institute of Australia (IPRIA) at the University of Melbourne on 8 October 2009

(return to the top of this edition)


Who Owns the News?

August 12, 2010

By Rebecca Mouy and Jake Goldenfein

News Corporation recently announced that it was about to start charging for online access to its news. It says the future of old media in the digital age is that consumers will pay for online news content in a similar way as for hard copy ‘newspapers’ – and it seems to be far from alone in its plans. But is this a sound approach in legal and business terms?

On 8 July, IPRIA in association with the CMCL and Melbourne Business School (MBS) presented a seminar entitled ‘Who Owns the News’ chaired by Sam Ricketson. Mark Davison and Stephen King (respectively of the Monash Law Faculty and Faculty of Business and Economics) presented on legal and economic perspectives of the future of ‘the news’, and discussant Kwanghui Lim (from the MBS) offered a brief recap of each of the presentations along with some suggested business solutions available to news publishers. Speakers’ slides as well as the podcast for the seminar is now available here so the details will not be canvassed in depth here.

Ownership rights over news

Mark Davison outlined the legal framework for news ‘ownership’ in Australia, concluding there is little copyright protection available for news, especially in the wake of the High Court decision in IceTV Pty Limited v Nine Network Australia Pty Limited [2009] HCA 14 and its application of the Federal Court’s decision in Telstra Corporation Limited v Phone Directories Company Pty Ltd [2010] FCA 44 (see Michael Crawford’s article in an earlier edition of Fortnightly Review for analysis of this case). However, he argued that in the current climate Australia should not follow the US approach of ‘hot-news’ laws or the European database protection in an effort to protect ‘news’.

The ‘hot-news’ doctrine in the US provides a quasi property right in “breaking news” and posits that such news can be misappropriated, eg by other news services. Davison argued that the hot news tort followed in various US States (including New York) relies on vague criteria leading to substantial uncertainty. The European Union database protection laws, on the other hand, have provoked a great deal of discussion on the distinction between ‘collecting’ and ‘creating’ a database. After grappling with this issue for sometime, in 2005 an EC Commission report on database protection stated the net benefit of the law was unproven.

Given the unsuccessful legislative attempts to protect news abroad and the current state of flux in Australia, Davison suggests that the best course of action is not to rush hastily into legislative reform and in the meantime consider whether exclusive rights over information are desirable.

Can the iPad do for news what the iPod did for music?

A vital question facing current news services is how to survive in the age of digital publication and distribution. Economist Stephen King examined the drastic changes the Internet has effected upon the business model for news media organisations.

King discussed the changes digital distribution has brought to news production, mostly in relation to ‘convergence’. He raised the topic of news aggregators such as Google News, which allow users to search by topic and access articles from multiple sources. This gives users an effective tool for sidestepping on-line news providers who limit access to subscribers, and raised the ire of incumbent media outlets such as News Corporation. These aggregators demonstrate the quantity of professional and amateur content produced on-line, and liberate users from relying on established sources of information.

The potential pitfalls of such services are that consumers become more capable of choosing the news sources that support or reinforce individual prejudices. However, once the pretence that official news services provide more ‘objective’ information is jettisoned, it is difficult to maintain that access to more information is not beneficial to consumers. The more raw the source, arguably the less adulterated the information. Personal biases may be more prevalent, but articles can eschew the political or editorial line of an established media outlet. Arguably, numerous amateur sources provide a clearer picture than a single incumbent news service.

The net effect of the Internet upon news production, in King’s view, is thus a benefit to the consumer through increased access. Competition ultimately drives the cost consumers pay for news to nothing. King proposed that in future, consumers might only pay for ancillary services or specialist commentary (perhaps something along the lines of The Economist) rather than factual news.

In this context, he referenced the position of Rupert Murdoch that the ipad will save the newspaper. However he pointed out that this raises the question of whether a specific interaction between a device and content can provide an experience a user is willing to pay for. Arguably, the comparison between the ipad and news with the ipod and music is flawed.

Prior to the ipod and itunes, obtaining music digitally was predominantly illegal, and users knew it. Itunes subsequently provided a service that adequately competed with piracy so that the financial detriment of sating one’s conscience was in-step with user expectations. While the ipad will offer attractive paid news services through specific subscription ‘apps’, there is no moral problem in obtaining free news from other services (also accessible form the ipad). Further, findings demonstrate that paid subscriptions or walls on online news are generally unsuccessful in raising revenue unless very niche. This leaves the difficult conundrum of what kind of business model may succeed for news publishers, and a discussion of the role of public broadcasters.

In discussion, it was suggested that public broadcasters (such as the BBC and ABC) are capable of providing quality journalism with the advantage of government endowment rather than relying on traditional revenue streams such as advertising. However, in response King argued there is little justification for investing taxpayer dollars in a service that is essentially equivalent to services provided by commercial broadcasters. He suggested it also raises questions of editorial independence, especially in reference to investigative journalism. However it was noted the independence of certain commercial publishers is equally questionable, and government endowments continue to produce quality investigative journalism.

Where to from here?

Kwanghui Lim suggested the following business options for news producers.

Close down: Lim suggested that the market is saturated and the only way forward for some newspapers will be to close down. He cited statistics from the Unites States that 42% of people say that they would not miss their newspaper much, and would find it easy to access their news in other ways.

Build complimentary services: This approach requires news producers to further develop current sources of revenue, namely advertising. Lim emphasised that in the current atmosphere, the majority of revenue is made through advertising and not subscriptions.

Fight back: Here news producers would fight against the challenge of the Internet by erecting pay walls or calling for subscriptions. Only a small number of publications have managed to do this successfully, including The Wall Street Journal, The Financial Times and The Economist.

Diversify: News producers could expand to become ‘media supergiants’ following the example of News Corporation. This would allow the substantial benefit of cross-marketing.

Reconfigure: follow example of the radio to create a new market for itself, for example recasting as a local newspaper.

For more from Kwang have a look at his post on the Core Economics website. There is also a good discussion of the issues on ipwars.com.

Concluding thoughts

The seminar provided excellent food for thought. As shifts occur in the market for news production, there is no doubt that legal and economic questions will be raised. What the seminar did not provide is answers – for the simple reason that there are no clear answers yet. Nobody knows which business model might be the most successful or which new technologies will shape the changes to come. If no business model emerges as the prominent or successful way to provide news online we will eventually face the question of whether copyright law is flexible enough to deal with the continuously changing conditions of online media.

Historically the price of news has always shaped the tone of content. When the first cheap newspapers emerged in the early 19th century, the consumer’s predisposition for ideological discussions, commentary on principles, and articles with political flavour were replaced by a developing interest in information and current events. With competition driving the cost to zero, this may equally drive professionally produced content away from in-depth investigation and commentary. As such, business models have been postulated where current events and information are free services, while niche commentary attracts subscription fees. However it is difficult to avoid the trend of competition pushing prices to nil.

Several audience members referenced the maxim that ‘good journalism has to be paid for’. While clearly there is a case for professional journalism, arguably the Internet has also provided a habitat for digital communities dedicated to exposing truths and bringing incumbent powers to account. While the form of content may be changing and the influence of established media dwindling, writers will always write and the modern obsession with sharing information will only grow.

Rebecca Mouy is an LLB candidate at the University of Melbourne.

Jake Goldenfein is an LLB graduate from the University of Melbourne.

(return to the top of this edition)


New Zealand Broadcasters and Orphan Works

July 29, 2010

by Dr Owen Morgan

A Bill currently before the Commerce Select Committee of the New Zealand parliament addresses the problem of orphan works held by broadcasters in their archives.  Submissions have recently closed in respect of the Television New Zealand Limited Amendment Bill (Television New Zealand is the primary public broadcaster in New Zealand.)

There are two main parts to the Bill which amends the Television New Zealand Limited Act 2003.  The first part provides for amendments to the principal Act relating to the functions of Television New Zealand Limited (TVNZ).  In particular, ‘it replaces the TVNZ Charter in section 12 of the Act with a briefer, and less prescriptive, statement of functions’.  The other part, which is the subject of this note, enables TVNZ to rescreen certain programmes held in its archives. The purpose is to overcome the problem that some rights holders cannot be located, therefore TVNZ cannot negotiate terms for rescreening and the programmes languish in the archives.

Clause 10 of the Bill inserts a new Part 4A into the principal Act comprising sections 29A to 29S.  Other provisions add a new Schedule and amend the Copyright Act 1994.  In brief, the effect of these provisions is to permit TVNZ to screen archived works ‘free of charge’ on certain specified ‘delivery platforms’.  Persons with an interest in an archived work lose ‘any rights and privileges’ they may have under contract or under the Copyright Act in relation to the screening of the work.

The actual wording of the Bill states that those rights and privileges ‘cease’. The Bill also sets out a scheme to compensate interested persons including a fund from which compensatory payments may be made to them. The reality is that persons are deprived of their rights, whether they are able to be located or not, in return for a legislatively determined handful of silver.

The Scope of Clause 10

The scope of Clause 10 is determined by the age of the works.  Although the Minister of Broadcasting stated (See Hon Dr Jonathan Coleman in Hansard 23 March 2010), while moving the introduction of the Bill, that, ‘Television New Zealand’s archive is a unique and valuable record of New Zealand’s historical, social and cultural life’; the ‘archived works’ covered by the Bill are restricted to works made before 27 May 1989 (section 29A).  If the Bill is really concerned with ‘New Zealand’s historical, social and cultural life’, then the works covered by the Bill should be determined by two factors: (i) their ‘historical, social and cultural’ value not their age; and, (ii) whether rights holders can be located. Where the works are held should not be a determining factor – in other words, I argued in my submission to the Select Committee that the works should include orphan works held by all broadcasters who screen publicly funded programmes.

Rescreening Free of Charge

Section 29C provides that if TVNZ complies with certain requirements, it may screen archived works on various ‘delivery platforms’ as well as permitting Māori Television Service (MTS – New Zealand’s national indigenous broadcaster) to screen works.  The key requirement is that TVNZ must screen the works ‘free of charge’.  The latter term is not defined.  It is not clear whether the Bill intends that the screening should be free of charge to an intermediate delivery platform such as TV3, or free to MTS or free to the public.  A comment by one of the Members of Parliament who spoke when the Bill was introduced suggests that the term is intended to mean ‘free to air’. (See Jonathan Young in Hansard 23 March 2010).  If that indeed is the meaning of the term, then the way the Bill is drafted may have defeated its purpose.  In practice, it may be impossible for TVNZ and MTS to comply. Their channels are free to air, but they are also screened on pay for view platforms such as Sky Television. Screening an archived work by TVNZ or MTS through Sky Television would appear to be a breach of section 29C (2).

A Dangerous Precedent

Section 29D (1) provides that the ‘rights and privileges’ of persons with an interest in an archived work cease and are replaced by rights provided in the Bill (Rights to Compensatory Payment.).

There is some logic in permitting works to be rescreened where none of the rights holders can be located. However, this provision deprives all rights holders of their rights under both copyright and contract whether those rights holders can be located or not.

Copyright is an exclusive right that enables a right holder to determine the use of a work; and contractual rights and obligations are the subject of negotiations.  This provision sets a dangerous precedent that strikes at the heart of intellectual property law by depriving the right holder of rights without any opportunity to negotiate or to appeal.

It also ignores the reality that money may not be a proper form of compensation.  For whatever reason, a right holder may wish to prevent the screening of a programme.  An example of the lack of thought that has gone into this provision is that it deprives a right holder of moral rights and compensates him/her with money– surely, a unique solution given the nature of moral rights.

Section 29D (2) does provide that a person’s rights and privileges continue to the extent that TVNZ does not screen the work free of charge – however, that would, presumably, be a matter for the interested party to establish.

Severing Clause 10

In my submission to the Select Committee I argued that Clause 10 and related provisions should be severed from this Bill for three main reasons:

  1. Section 3 of the Television New Zealand Act 2003 states that the purpose of that Act is to ‘(a) provide for the existing State enterprise Television New Zealand Limited to be split into a Crown entity conducting a television business and a State enterprise conducting a transmission business’.  The Act is concerned with matters such as ‘Structure and shareholding’, ‘Reporting’, and ‘Ministers and editorial independence’. Detail relating to a scheme to deprive rights holders of their rights in order to allow TVNZ to screen archived works simply does not fit with the Television New Zealand Act 2003.
  2. Clauses 13 and 14 provide for amendment to the Copyright Act 1994.  The subject matter of Clause 10 is the rights provided for under the Copyright Act and under contract.  If the current scheme is to proceed, it should be as part of the Copyright Act where it can be properly assessed against other provisions in that statute.
  3. If the scheme is to proceed, the relevant works should be available to all broadcasters, no matter whose archive they are held in.  This would ensure the widest possible communication of works of interest to the public. The distinguishing feature of orphan, archived works is not that they were first screened by TVNZ. That is just an accident of timing. The works in question are distinctive because they provide a ‘valuable record of New Zealand’s historical, social and cultural life’. TVNZ is no longer the sole broadcaster in New Zealand nor is it the sole free to air broadcaster. TV3 and MTS both have access to public funds and screen programmes of historical, social and cultural value. It is in the public interest that the scheme should be broadened to include all broadcasters.

Dr Owen Morgan is a Senior Lecturer at the University of Auckland

(return to the top of this edition)


Follow

Get every new post delivered to your Inbox.

Join 683 other followers