Apr 19, 2012
THE High Court has spared internet service providers liability for millions of acts online piracy carried out routinely by Australians prompting celebration across the sector.
After three years fending Hollywood's lawyers through lower circuits, the country's highest federal court today found that Perth-based iiNet could not be held responsible for the trade of thousands of pirate movies and music files by its customers.
The unanimous decision upheld a finding by the full bench of NSW Federal Court in February last year that iiNet did not authorise its customers to breach copyright online.
"Today the High Court dismissed an appeal by a number of film and television companies from a decision of the Full Court of the Federal Court of Australia," the High Court said in a summary of the ruling posted on its site today.
The ruling finally gives certainty to internet providers around Australia that feared being exposed to millions of dollars in damages claims by copyright owners unless they took on the daunting task of policing it.
Film companies lose appeal against iiNet
iiNet's online video victory
iiNet was potentially facing damages bill for hundred of thousands of pirated movies shared by its customers and meticulously catalogued by Hollywood private investigators in preparation for the law suit.
In an official statement, iiNet chief executive Michael Malone took a conciliatory tone over the outcome by appealing to studios to work with ISPs on legal online content.
"Increasing the availability of licensed digital content is the best, most practical approach to meet consumer demand and protect copyright.
"We have consistently said we are eager to work with the studios to make their very desirable material legitimately available to a waiting customer base -- and that offer remains the same today," Mr Malone said.
Earlier, on hearing the news, Mr Malone simply tweeted: "Appeal dismissed!"
Simon Hackett, his friend and founder of Internode, which iiNet acquired late last year tweeted: "Sanity prevails."
The landmark litigation was the first of its kind to reach trial stage anywhere in the world and it has attracted attention of the behemoths of both the international entertainment and internet sectors alike.
The case, believed to have generated over $12 million in legal fees, has been a legal windsock for the ISPs trying to decipher their potential liability for online copyright protection.
It has put the core foundations of Australian copyright law under the microscope and painstakingly teased them apart to test their resilience in the internet age.
It has also reanimated negotiations between telecommunications carriers and copyright holders over how to tackle rampant online piracy that were long on ice.
The entertainment industry lobby has also enjoyed a louder voice in its efforts to secure better legal protection for copyright owners online.
Apart from seeking a victory, it's understood that AFACT pursued the litigation in order to demonstrate that amendments to US copyright laws adopted here as part of free trade agreements with the Washington were unworkable in Australia.
The case first went before Federal Court Justice Denis Cowdroy in November 2008.
AFACT sought to convince the court that iiNet effectively gave its customers a green light to share unlicensed movies on peer-to-peer networks by refusing telegraph copyright infringement notices generated by Hollywood investigators to its customers.
As a key part of its multi-layered defence, iiNet persistently argued that it wasn’t reasonable to act on the notices without a court order. It also argued that privacy provisions in telecommunications laws made it unreasonable to use its customer information to act on the allegations in any way.
It also sought refuge in safe harbour provisions in the copyright act that limit ISPs' liability for damages in cases where they have a policy for dealing with customers that repeatedly infringe copyright and they act as a "mere conduit" in the process.
In February 2010, Justice Cowdroy emphatically ruled that iiNet did not authorise its customers to breach copyright.
Justice Cowdroy found that iiNet had not supplied customers with the means to infringe copyright by providing internet connections leaving it with no "power to prevent" as described in authorisation law. He found, instead, that the BitTorrent peer-to-peer file-sharing software was the means.
iiNet prevailed again in February 2011 when AFACT appealed to the full bench of the Federal Court, walking away with a two-to-one decision in its favour.
However, the ruling left internet providers in a far less certain legal position than the primary judgement had.
Crucially, none of the judges found that were no circumstances in which in ISP could be found to have authorised piracy as the industry hoped.
It left open the possibility that AFACT might succeed in another trial after tweaking its notification practices.
Two of the judges, said, however that a higher threshold of knowledge of the piracy activity was required for iiNet while the third found that it had been met.
Complex legal arguments over iiNet's ability to seek protection in telecommunications laws and limit its liability through safe harbour laws also fell in AFACT's favour.
Both sides of the industry began to crave legal clarity and the AFACT won an application to take the case to the High Court. It was heard before the five judges over two days last December.
The summary ruling handed down in the High Court today echoed the Justice Cowdroy's original findings:
"The Court observed that iiNet had no direct technical power to prevent its customers from using the BitTorrent system to infringe copyright in the appellants' films. Rather, the extent of iiNet's power to prevent its customers from infringing the appellants' copyright was limited to an indirect power to terminate its contractual relationship with its customers."
Last August, The Australian revealed that then Attorney-General Robert McClelland had instructed department secretary Roger Wilkins to oversee secret negotiations between copyright advocates and carriers to attempt resolve the problem
iiNet's rivals have preferred to keep their distance from the case industry body Communications Alliance which has been instrumental in the negotiations.
Yesterday at investor presentation, Telstra chief executive David Thodey said it was possible to reach an agreement with copyright holders.
"I think we can get our way through this one. We're interested to see what the court ruling is but whether it goes one way or another I think we've got a plan to handle it," Mr Thodey said.
Some of Hollywood's largest film studios have lost their High Court appeal in a landmark case over illegal internet downloads.
In a unanimous decision, the High Court found that Australia's second largest internet service provider, iiNet, had not authorised copyright infringements.
The court also ruled that iiNet had no technical means to prevent its customers from using the Bit Torrent system to infringe copyright through file sharing.
"The extent of iiNet's power to prevent its customers from infringing the appellants' copyright was limited to an indirect power to terminate its contractual relationship with its customers," the court said in a statement.
The Australian Federation Against Copyright Theft (AFACT) was challenging a Federal Court ruling in February last year that iiNet was not liable for its users' copyright infringements.
AFACT had taken the Perth-based company to court alleging it had failed to stop its customers illegally downloading movies and television shows.
In the initial case in 2010, the studios had tried to prove that iiNet not only failed to take steps to stop illegal file-sharing, but also breached copyright by storing the data and transmitting it through its system.
The High Court has unanimously given a judgement that the only fix is a legislative fix. It would seem apparent that the current Australian Copyright Act is incapable of protecting content once it hits the internet on peer-to-peer networks.
AFACT managing director Neil Gane
The federation of 34 film, television and music companies - including the Seven Network, Warner Bros, 20th Century Fox, Walt Disney Studios and Village Roadshow - said iiNet and other internet companies should be charged if customers downloaded copyrighted material.
iiNet chief executive Michael Malone said the company had neither encouraged nor supported unauthorised file sharing or downloading.
"Today's High Court five-nil ruling confirms that iiNet is not liable for 'authorising' the conduct of its customers who engaged in online copyright infringement," Mr Malone said in a statement.
Mr Malone said he believed that content partnerships between ISPs, legal websites and copyright holders had done more to reduce online piracy than court battles.
"Increasing the availability of licensed digital content is the best, most practical approach to meet consumer demand and protect copyright," he said.
AFACT managing director Neil Gane said the group would lobby for changes to copyright laws.
He said the ruling showed Australian legislation had failed to keep up with technological change, and the Government should follow the lead of countries such as the United States and overhaul laws to protect copyright online.
"The High Court has unanimously given a judgement that the only fix is a legislative fix," Mr Gane said.
"It would seem apparent that the current Australian Copyright Act is incapable of protecting content once it hits the internet on peer-to-peer networks, and the recommendation of the High Court is for amended legislation."
Shares in iiNet had been placed in a trading halt before the decision was announced.
The halt has since been lifted and at 12:30pm (AEST) iiNet shares were 2.3 per cent higher at $3.10.
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