Plunder downunder: How to read the iiTrial piracy verdict

Legal experts have questioned the extent to which the High Court of Australia's decision in the copyright stoush between ISP iiNet and the film industry sets a new legal precedent for future copyright infringement cases.

A major investigation by iTnews in the wake of the court decision reveals relief and clarity for the internet industry on issues of liability in the digital age.

But the victory is tempered by fears of over-confidence among ISPs and by the scale of the film industry's legal losses. The lack of an obvious path forward suggests something has to give.

When the High Court of Australia handed down its judgment late last week, some legal observers were taken by the judges' collective brevity.

Stripping out the obligatory background on the Copyright Act and the recap of factual circumstances and lower court arguments, the High Court's majority decision can be read in a matter of pages.

It's a stark contrast to the 2009 Federal Court trial and 2010 full bench appeal, where the judgments were hundreds of pages long.

"Despite the fact this was a case that took a long time to argue in the Federal Court and in the Full Federal Court, and involved a lot of amicus curiae briefs, the actual application of the principles to the facts was relatively straightforward and simple," Griffith Hack principal Wayne Condon says.

"I think the High Court cut through the morass of various ways the case was put and made a relatively simple application of Section 101(1A) [of the Copyright Act], which I think is a relatively refreshing approach to this area of the law."

Lawyers canvassed by iTnews were generally appreciative of the High Court's distillation of the case's complexity. Most agreed it provided some clarity on the liability of internet intermediaries for the actions of their users.

Such brevity is not uncommon in High Court judgments, Cooper Mills partner Peter Moon says.

"These people get to the point, state it authoritatively and get off the bench. You'd be surprised how brief a lot of High Court judgments are."

Condon says that the court's few words don't undermine the importance of the decision. "It's well expressed. It's briefly expressed, but that doesn't undermine its authority and gravitas," he says.

Where that brevity potentially bites is in the extent to which one can hold up the High Court's iiTrial judgment as a new precedent for determining whether an accused party - through its actions or inaction - authorises allegedly infringing activities.

Strained interpretations

Authorisation is the core tenet of iiTrial. At its heart is whether iiNet effectively authorised the actions of its customers by allegedly failing to act on notices of internet piracy.

The case drew heavily on a 1975 High Court judgment between the University of New South Wales and author Frank Moorhouse, concerning photocopies of books made in a university library.

Moorhouse is responsible for a particular judicial definition of 'authorise' - 'sanction, approve, countenance'.

It was up to the film industry - represented in court by the Australian Federation Against Copyright Theft (AFACT) - to prove that iiNet sanctioned, approved and countenanced the infringing actions of users on its network. By definition, iiNet could then be taken to have "authorised" those infringements.

One potential weakness in the film industry's case was their focus on 'countenance' over the other definitions of authorisation [section 499, 2009 trial]. Justice Dennis Cowdroy made it clear in his original judgment that proving only 'countenance' wasn't enough to satisfy a finding of authorisation.

"It is to be noted that the judicial authority refers to all three words (sanction, approve, countenance) together, separated by commas and therefore all are to be considered," Cowdroy wrote.

"That is, the inquiry is not whether the alleged authoriser sanctioned, approved or countenanced the infringement, it is whether they sanctioned, approved, countenanced the infringement."

The internet industry is undoubtedly relieved the argument was rejected at every legal turn. Lawyers interviewed by iTnews say the right call was made.

"[The film industry] were trying to argue for the broadest possible interpretation of authorisation," Condon says.

"The general countenancing infringement concept was one that has, in the previous cases, been put forward and ultimately [been] rejected.

"As a matter of general law relating to authorisation of infringement of copyright, but also within the terms of Section 101(1A) of the Copyright Act, you need to look at the three aspects set out in that section to determine whether or not authorisation occurs. Mere countenancing is not enough."

King & Wood Mallesons partner Maurice Gonsalves concurs: "It's not unexpected that copyright owners would try and push the boundaries because that's in their interests to do so.

"But I think the example of the court saying, 'No, we need to draw the line here', really confirms, I think, the common understanding of the doctrine of authorisation rather than the more strained interpretation of it, which the studios were trying to push.

"My view was always that the attempt by the film studios to make iiNet liable was really pushing the limits of the doctrine of authorisation beyond what it was intended to do. The judgment ... was very much in line with my understanding of the law."

Gonsalves notes the film studios use of the words sanction, approve and countenance as "synonyms" for authorisation.

"They took countenanced, which is potentially the broadest of the three, and said, 'On one meaning of countenanced you could say that iiNet were countenancing', but that's not the correct meaning," he said.

"You can't just apply the widest meaning of the synonym and say that's the law. That's not the law.

"At least [the High Court judgment] shows that a more expansive interpretation pushing beyond Moorhouse is not the law."

The future for Moorhouse

The by-product of iiTrial was an expected new legal precedent to determine authorisation in the digital age. That's been achieved to some extent, though notably within the confines of a specific set of facts and not in any way that supersedes or otherwise displaces the existing benchmark: Moorhouse.

"I think it's right to at least query how [iiTrial is] going to be used as precedent for the next authorisation case that will come up presumably in different circumstances," Baker & McKenzie partner Adrian Lawrence says.

"I don't think it's attempted, for example, to overturn Moorhouse. Certainly the court didn't suggest that Moorhouse is no longer good law and it would be surprising if they had, given that's a long standing high court authority.

"But does [iiTrial] add a huge amount, even in the digital space? I do wonder."

In some ways, it could be argued the length of the judgment severely limits its applicability to cases where the facts are materially different to those in iiTrial. The judgment is simply not prescriptive of its broader applicability to other cases of authorisation.

Lawrence believes the lack of prescription to sate broader cases of authorisation is a deliberate omission.

"They've quite clearly come out with a short, sharp judgment on the issue, and they've really said, 'We're not going to speculate in other areas that are not relevant specifically to the decision we've made. Here's our decision on the key points, that answers the question, that's it'," he says.

Cooper Mills' Peter Moon is dismissive of any link between the lack of detail in the judgment and lack of broader applicability of the case law. "The High Court's always mindful of the fact that where a case largely depends on its particular facts, there isn't a lot of point in then rabbiting on about it, because it only tells you about those facts."

King & Wood Mallesons partner Maurice Gonsalves adds: "At the end of the day each case depends on its own facts, so you've got to analyse the facts and work out whether or not what's been done or failed to be done in this case amounts to authorisation.

"Whilst precedent is important [to authorisation cases], if the facts are different you're going to have a different outcome."

The applicability of the iiTrial judgment to even another ISP accused of authorising similar acts of infringement on its network could be brought undone by the network assets they hold.

"I obviously accept the evidence the court has found that iiNet had no capacity to prevent people from using BitTorrent, but I've certainly been associated with ISPs that did have technology that allowed them to stop clients from using BitTorrent," Moon says.

"I've certainly known ISPs where, for reasons of shaping when traffic was out of control, needed to prioritise some traffic and slow down others, they had routing equipment that was perfectly capable of picking out BitTorrent and other protocols and shaping it or if they wanted to shut it down altogether, they could.

"iiNet didn't have that capacity on the evidence we've been given. [But] if another ISP came to me [for a new case], one of the first questions I'd be saying to them is, 'iiNet was in the clear because it had no capacity to specifically deal with BitTorrent, but do you have this routing equipment?'.

"If the answer was yes, I'd say, 'There we go. You're immediately in a different basket than iiNet."

Read on for whether ISPs are off the hook on copyright indefinitely, and whether the Government is prepared to intervene.

There is real danger that iiNet's clean sweep on authorisation could lead to overconfidence in the internet industry with respect to copyright.

The High Court's judgment effectively reversed gains made by the film industry in the full bench appeal before the Federal Court. It was, in the words of Baker & McKenzie's Adrian Lawrence, "back to [being] a pretty good win for iiNet and for the ISP industry generally".

He notes the track record of rights holders in pursuing intermediaries through the Australian legal system is increasingly fraught with lack of success.

"It is becoming increasingly difficult for copyright interests to be successful in these kinds of cases, which I don't think is a deliberate bias either way, but I do think it is taking a view of how copyright works that is a strict view on the legislation, and requiring a plaintiff to make sure they absolutely have all of their ducks in a row to win a case like this," Lawrence says.

"I think that's a little bit of a theme coming through copyright cases that have made it through to the higher levels of the Australian courts in the past few years."

The High Court judgment in iiTrial does little to shed waning perceptions of ISP liability.

"A general concept that follows from the decision is there can be some sort of breathing of relief from the ISP industry to an extent that in any given set of circumstances, it's going to be a reasonably high hurdle that a copyright owner is going to have to satisfy to make an assertion of authorisation on behalf of the ISP," Griffith Hack's Wayne Condon says.

"It's not going to be in many instances that the ISP is held liable."

Clayton Utz senior associate Timothy Webb sees the judgment as effectively providing ISPs "a blanket defence" against similar allegations of copyright infringement.

But Lawrence says the door on ISP liability is not completely closed.

"If you look at the decision it doesn't absolutely say that an ISP under no circumstances could be liable. It leaves that possibility open, but it does seem that the circumstances for that to be the case would, on the High Court's reasoning, be pretty unusual," he says.

"There are a number of elements that the two decisions [majority and minority] in the High Court focused on that seem to say, 'Look, an ISP in the ordinary course is not really the right kind of defendant for these kinds of actions'."

Cooper Mills' Peter Moon is hopeful that the "chest-thumping" over iiTrial subsides so the real work can begin.

"iiNet's entitled to its day in the sun. It's run a mighty battle and it's won, so why wouldn't you have a beer and say, 'How good are we?' But then we all have to move on from that," Moon says.

"What do we as a community make out of copyright? What are we we going to do in future?

"We're going to have to take a step back and look at what all this means, and we really need a calm environment in which to do that."

Hungry for change

Within hours of the High Court judgment, the film industry began pushing for legislative reforms aimed at protecting the rights of copyright owners.

The move was unsurprising; the studios had exhausted their legal options in Australia with no clear answer on how they should police their rights in the digital age.

In addition, legislative change has long been seen as an end-game of the studios, although they must now convince a government that, until now, has favoured an industry-negotiated solution over legislative change.

"It's up to the Government if it feels legislation is warranted," King & Wood Mallesons' Maurice Gonsalves says.

"I think the position of the Government has quite consistently been for some time that they want the parties to get together and sort it out. They want the rights holders and ISPs to come together and agree on a scheme."

Such a scheme has been under negotiation for some time. Discussions have included the Federal Attorney-General's Department since late last year.

However, buoyed by the High Court victory, the Communications Alliance is anticipating major changes to the internet industry's bargaining power when the sides convene next. iiNet, meanwhile, would be happier to simply walk away.

That potentially sets up a dangerous game of chicken, circumvented only by a perceived lack of interest from both sides of politics in addressing the copyright issue with legislation.

"Anyone from AFACT who's got the courage to telephone Stephen Conroy and say, 'Minister, we would like you to introduce some restrictive new legislation', that'd be a pretty optimistic thing to do because this Government's not doing it and I can't detect any great heat from the opposition to do it," Cooper Mills' Peter Moon says.

"It's not in anyone's political interests to bash up the ISPs in the next three to five years in Australia."

One thing in the film industry's favour is the majority ruling of the High Court.

"The concept and the principles of the statutory tort of authorisation of copyright infringement are not readily suited to enforcing the rights of copyright owners in respect of widespread infringements ...," Justices French, Crennan and Kiefel wrote.

According to Baker & McKenzie's Adrian Lawrence, the statement is suggestive of the need for legislative change to combat copyright issues in the digital age.

Clayton Utz's Timothy Webb adds, "Both the majority and minority [High Court] judgments expressly indicate that these sorts of issues, to the extent [the court's] findings are not adequate to resolve the matter, are best resolved by legislative processes."

Some clues to the High Court's preference to let parliament deal with the issue are decidedly more subtle.

Says Moon, "The High Court judges sometimes give subtle backhanders to earlier judges. They're always very delicate in the way they do it.

"If you take a look at that really central range of paragraphs in the judgment - 117 through to 120 - there's a reference in paragraph 119 where they talk about attempts by earlier judges to meet 'a judicially perceived need to keep the statute law abreast of the times'.

"What they're basically saying is earlier judges tried too hard to twist the law into shape and that's not our job, That's parliament's job."

Read on for the film studio's more pressing issue - what to do now that copyright notices are dead.

While an industry- or government-led solution might be some time away, the film studios face a more pressing problem.

The High Court has effectively disabled the practice of copyright owners sending reams of notices to ISPs that detail alleged cases of infringement.

"I think they've really shot these types of notices between the eyes," Griffith Hack's Wayne Condon says.

"In a practical sense I think [the High Court] might have sounded the death knell of this approach of providing notices to ISPs of allegedly infringing conduct with a view to giving rise to a responsibility or obligation for the ISP to take action based upon [those notices]."

The full bench of the Federal Court provided a prescriptive set of conditions under which the studios might improve the notices to the point where ISPs were obliged to action them.

The High Court, however has reset that bar almost impossibly high.

It noted that the information in AFACT's notices "did not approximate the evidence which would be expected to be filed in civil proceedings in which interlocutory relief was sought by a copyright owner in respect of an allegation of copyright infringement".

The inference is clear - the studios must produce notices to a court's evidentiary standards for the notices to even be considered legitimate enough to be acted upon.

"That's a pretty significant amount of evidence, proof, documentation," Baker & McKenzie's Adrian Lawrence says.

"What [the High Court] seems to be saying is, 'Look, to make the circumstances reasonable for iiNet to get involved here, you would have to have proof ... as if you were running up to court to get an interlocutory injunction', which is well beyond what you would normally expect in a standard copyright letter of demand."

Even if the studios produced interlocutory-standard copyright notices, it's far from a certainty that they'd compel an accused ISP to act.

"I think there's a question in the case - and the judges don't really give us the answer to this and they would say they don't need to to make this judgment - I think there's a feeling at least that even then, that might not be enough," Lawrence says.

King & Wood Mallesons partner Maurice Gonsalves concurs. "Even if the notices had provided all the evidence in the world it's still not going to mean the ISP has an obligation to take action."

Cooper Mills' Peter Moon says the studios have been "left high and dry".

"[The High Court's] basically said that in an environment of changing technology it's up to parliament to figure out the answers to these things," he says.

"I am very glad I am not responsible for figuring out government policy on copyright issues in 2012 in Australia."