On 20 April 2012, the High Court handed down the much-awaited decision in the matter between Roadshow Films Pty Ltd & Ors and iiNet Limited. The decision raises an interesting question as to when an internet service provider will be found liable for authorising infringement of third party’s copyright by its customers.

The matter first arose in 2008, when a number of Australian and United States companies (Appellants) which either own or are the exclusive licensees of copyright in a variety of films and television programs brought proceedings for copyright infringement against iiNet (Respondent), at the time the third largest internet service provider in Australia.

The Appellants alleged that customers of the Respondent engaged in conduct which amounted to infringement of the Appellants’ copyright in a number of movies and television programs. The evidence gathered by the Australian Federation Against Copyright Theft (AFACT) on behalf of the Appellants sought to establish that the Respondent’s customers used the BitTorrent file-sharing program to download and make available online unauthorised copies of the Appellants’ copyright works. It was alleged the Respondent engaged in secondary copyright infringement by authorising the infringement by its customers.

In assessing whether the Respondent has authorised infringement of copyright by its customers, it is necessary to consider the matters set out in section 101(1A) of the Copyright Act 1967 (Cth). These matters include the extent of the Respondent’s power to prevent the primary infringement, the nature of the relationship between the primary infringer/s and the Respondent and whether the Respondent took any other reasonable steps to prevent or avoid the primary infringement.

The Appellants argued that the Respondent authorised infringement of the Appellants’ copyright works by its customers. The Respondent was informed of the alleged infringement by receiving notices from AFACT which contained details of the alleged infringement. In the circumstances, the Appellants contended that the Respondent was in a position to stop the infringement. The Respondent had the contractual power to terminate or suspend the accounts of customers allegedly infringing the Appellants’ copyright. It also had the technical power to prevent the infringement.

Contrary to the Appellants’ arguments, the Respondent submitted that it had no direct control over the conduct of its customers. While the Respondent had the contractual power to terminate or suspend customer accounts, it did not possess sufficient information to exercise that power. The Respondent argued that the information contained in the AFACT notices was incomplete in that it would have required further investigation by the Respondent for it to identify the potential infringers and to verify whether or not infringement had occurred.

Therefore, suspension or termination of customer accounts on the basis of AFACT notices alone could have exposed the Respondent to liability for breach of its contracts with customers if ultimately the customers were shown not to have infringed the Appellants’ copyright. In those circumstances, the Respondent’s failure to act on the AFACT notices was reasonable and did not amount to authorisation of copyright infringement.  

At first instance and again on appeal to the Full Federal Court, the Respondent was held not liable for authorising copyright infringement. The Appellants sought leave to appeal to the High Court.

In a unanimous decision, the High Court dismissed the appeal. Two sets of reasons were handed down – the first by French CJ, Crennan and Kiefel JJ, the second by Gummow and Hayne JJ.

The Court held that the Respondent did not possess the technical power to prevent its customers from using the BitTorrent system to download and share the Appellants’ copyright works thereby infringing the Appellants’ rights. The Respondent was not in control of and could not modify the operation of the BitTorrent system. Further, the Respondent was unable to take down the infringing content because it did not host it.  It therefore did not authorise the infringement within the meaning of section 101(1A).

The Respondent’s ability to prevent infringement was limited to its indirect contractual power to suspend or terminate customer accounts. That said, the Court noted the limited effectiveness of this power in circumstances where it would be open to a customer whose account was terminated to obtain an equivalent service from another internet service provider. Suspension or termination of accounts would also result in preventing customers from legitimately using the Respondent’s services.

Both judgements appear to suggest that the current provisions of the Copyright Act are insufficient to deal with the issue of wide-spread copyright infringement occasioned by peer-peer file sharing, indicating the need for potential legislative intervention.

The decision provides a useful guide as to circumstances that are unlikely to give rise to liability on the part of an ISP for authorisation of copyright infringement. However, it cannot be said that such liability could never be established. While the Respondent was successful in defending the Appellants’ claim in this instance, it is clear that each case will turn on its own facts. In this regard, it is worthwhile noting Justice Emmett’s comments in the Full Court whereby his Honour identified circumstances which, if satisfied, may require an ISP such as the Respondent to suspend or terminate a customer’s account.

These circumstances included notification by the copyright owner of the specific acts of infringement and identification of steps to be taken by the ISP in respect of the infringement (such as issuing warnings and suspending or terminating the account of a customer if infringement does not cease), providing the ISP with “unequivocal and cogent evidence” of the alleged infringement (distinguishing the insufficient evidence provided by AFACT in the present case), and providing an undertaking by the copyright owner to reimburse the ISP for the reasonable costs of verifying the alleged infringement and monitoring it as well as to indemnify the ISP in respect of any liability the ISP may incur as a consequence of mistakenly suspending or terminating a customer’s account on the basis of the copyright owner’s allegations.

It is arguable that failure by an ISP to act if all of the circumstances set out above are satisfied may amount to authorisation of copyright infringement by the ISP.