The fallout from iiNet: markets and laws failing in face of net piracy

Last week the Federal Court of Australia released its important decision in the iiNet case. As many commentators have pointed out, the court declined to require Australia’s ISPs to disconnect those of its subscribers who are repeat copyright infringers.

In the course of reaching this decision, the court made a number of important rulings about the liability arising from the use of BitTorrent networks including the following:

• Seeders and peers that make music available for sharing are infringers under Australia’s making available right.
• The transmission of copyright files as part of a BitTorrent swarm constitutes a transmission (communication) to the public by participants in the stream and is infringing.
• A peer that downloads a copyright file over an unauthorized BitTorrent network infringes the reproduction right of the copyright owner.
• There can be liability for the transmission over a BitTorrent network even if some part of the transmission occurs outside of Australia.

The court also strongly suggested that operators of BitTorrent sites would be liable for copyright infringement for having authorized infringement.

As noted above, the court held that in the circumstances of the case, an ISP that simply provides internet connectivity to subscribers does not by that act alone authorize the subscriber’s infringing activity.

The result of the case has left many Australians thinking that some solution to stemming illegal file sharing is necessary. One solution being discussed is an industry wide code of practice between ISPs and content owners. The establishment of a code would have legal effect as it is an express factor in the Australian Copyright Act for determining whether a person authorizes an infringement.

Another solution being discussed is a state sanctioned graduated response system. The Sydney Morning Herald just published an article, Markets and laws failing in face of net piracy, pointing out that there was a real problem to be addressed and that something needed to be done. The article put it this way:

“In his ruling last week, Justice Dennis Cowdroy noted this was the first case of its type in the world, with global ramifications. The illegal downloading of movies, TV programs and music on a large scale was not disputed…

While many revel in the status quo – an illegal but uncontrollable free-for-all – the ruling sent a chill through the film, television and music industries, and indeed all holders of downloadable intellectual property. Copyright holders can and have sued individual users, but illegal file sharing is so pervasive that they could go broke trying to plug all the holes.

A High Court appeal is likely because of the impact of the case. It goes to the heart of global movie, TV and music distribution, which in its prime was a system of astonishingly profitable cartels. However, ISPs’ viability would be at risk, too, if they were to be liable for all independent user activities. The court ruling confirms that the system for protecting copyright and intellectual property is broken; the law has failed to keep pace with the internet.

Content providers are entitled to look to governments for a legislative answer, although great care must be taken not to trample online freedom. Britain and France are among countries considering a ”three strikes” rule to force ISPs to warn serial offenders against illegal downloads, with eventual termination of their accounts. The problem is that internet access is seen as a basic right in modern society.

Still, if illegal downloading of ”free” content continues unabated, everyone will suffer the consequences. Generating high-quality content involves costs, which are often considerable, and if creators of content cannot make money the flow will cease. This applies whether the content is film, television, music or, indeed, journalism. The twin legislative and market failures challenge content providers and users alike. Greed, whether for profits or ”free” material, may kill the goose that lays the golden egg.

Both the law and business models must evolve to take account of the new means of distribution and user expectations, so material becomes legitimately available online. That may require lower prices offset by higher sales volumes. The music industry has begun to embrace a download model. There are no easy answers, and no law can provide them. The one certainty is that any business that clings to the past and resists the new realities of an online world will be history.”