Thursday, April 21, 2011

Copyright Reform for the Internet

The Australian Digital Alliance has released "Internet Intermediaries and Copyright: An Australian Agenda for Reform" (by Kimberlee Weatherall). This is a comprehensive 63 page study. Unfortunately it was released as a hard to read PDF file, so I have extracted the executive summary (appended). Also it is odd, given the subject matter, the report has no copyright notice:

Executive Summary

Digital Economy: the global network of economic and social activities that are enabled by platforms such as the Internet, mobile and sensor networks.1

Australia aims to be a place where innovation in the Digital Economy happens.2 Achieving this goal is essential to Australia"s future economic growth, productivity, and social well-being.3 It will require not just great digital infrastructure, and a population with the necessary skills and entrepreneurial spirit, but a legal environment conducive to investment in the technologies, products, and services that make up the Digital Economy.4

Copyright law is an important part of this legal framework. The goal of copyright law is to encourage the creation of artistic, intellectual, and scientific content, from books and datasets to movies, music, video games, software, and art, by granting to creators exclusive rights to exploit their creations. The creation of new content is an important part of a successful Digital Economy. But, as has been widely recognised, too much copyright protection (or too much intellectual property generally) "may discourage people from innovating because the pathways to discovery are blocked by other intellectual property owners".5

A critical set of actors in the Digital Economy who can be affected by over-broad copyright are the Internet Intermediaries. These are the companies that provide the basic infrastructure of the Internet, and that build and create the services and platforms of the Digital Economy. They include Internet Access Providers (IAPs), web hosts, the providers of online platforms for the creation and exchange of content (such as YouTube, WordPress, and Facebook) – and others perhaps not yet conceived. They are all "intermediaries" in the sense that they stand between customers or end-users, and originators of content or other material. They are not only direct participants in the Digital Economy, but enablers – they build the platforms and infrastructure that can enable other companies to innovate and to take advantages of the efficiencies of the online environment.

If Australia is to achieve its overall innovation goals, and fully realise the potential economic and social benefits of the National Broadband Network (NBN), it will need to ensure that its copyright law appropriately enables Internet Intermediaries to operate and to invest in creating Australia"s Digital Economy. It is difficult to determine in the abstract where the proper accommodation of competing interests in copyright lies. One guide is a comparison with similar countries – Australia"s competitors in the global Digital Economy.6 If Australia"s laws create a less conducive environment for a Digital Economy than the law of Australia"s competitors, this will put Australia at a disadvantage in attracting and retaining innovative digital companies.

Where Australia currently stands

Measured against other jurisdictions, Australia"s copyright law is both less coherent and less amenable to innovation in the Digital Economy. The present legal situation can be understood at a broad level using a basic "traffic light" metaphor: where RED means an activity involves a high risk of copyright infringement, ORANGE means the legal situation is unclear, and GREEN means a low or non-existent risk of copyright infringement (perhaps subject to the company fulfilling certain conditions, such as taking infringing material down on receiving notice).

Table 1: Summary Table: Risk of Copyright Infringement Activity

Table omitted

The legal reality in Australia is that fifteen years after the Altavista search engine was launched, a search engine can still not operate fully from Australia without facing a risk of copyright infringement. Five or six years after the launch of services like Facebook, YouTube and the WordPress blogging platform, the same applies to these Digital Economy companies and services. Current Australian law also creates an uneven playing field: carriage service providers face less overall legal risk than other Internet Intermediaries, even where they perform the same practical function.

Table 1 does not, however, give a full picture of the impact of copyright on innovation, for two reasons. First, it focuses on online activities that we already know about. Innovation is, by definition, doing new things. Doing what is now known – following on from existing, often foreign innovations – is not enough: Australia needs to generate new ideas that can take on the world. Creating the environment in which people can come up with these new ideas, and pursue them through to commercialisation, depends in part on ensuring the law provides some room to experiment.

Australian copyright law provides no such room. By contrast, US law provides two important flexibilities for Internet Intermediaries: the fair use exception, which allows for non- infringement based on a balancing of factors (like the impact of an activity on the market), and the ‘Sony doctrine" – the rule that a person who provides services or technology that has "substantial non-infringing uses" will generally not be held liable for its customers" infringements.


To provide an appropriate legal environment to enable greater innovation in the Australian Digital Economy, two critical changes are needed.

Extend the Safe Harbours

First, Australia should extend its copyright Safe Harbours to benefit all online service providers.

Copyright and Internet Intermediaries: An Australian Agenda for Reform indeterminate legal risk. Extending the Safe Harbours would not, however, be sufficient to create a favourable environment for innovation, because entrepreneurs wanting to introduce new, unanticipated services and products would have little room to move.

Introduce a Flexible Exception into Copyright

Second, Australia should introduce a flexible exception into copyright, in order to promote innovation, create room for experimentation and move from a "permission to innovate" culture to one conducive to taking risks and trying new things, at least where the impact on copyright owners" economic interests is small. This could be done by:

  1. Introducing an exception for fair dealing for the purpose of "transformative use" (or some variation); or
  2. Introducing an open-ended fair dealing exception modelled on fair use as found in US copyright law; or
  3. Introducing a new s 200AB-style semi-flexible exception (or expanding the operation of the existing s 200AB): for example, specifying Internet Intermediaries as another kind of entity that gets the benefits of being allowed to do activities provided they do not contravene the "three step test" in international law.

Of these, using s 200AB is the least desirable option due to its complexity. Options 1 and 2 are similar. Both would help ensure that Australian law properly enables the key technical processes that underpin the operation of the Internet and common online services, as well as ensuring that Australian law provides room for appropriate innovation to spur a thriving Digital Economy.

If Australia chooses not to introduce a new flexible exception, at the very least, Australia should introduce one or more new specific exceptions to address problems identified in this Policy Paper to allow known activities that do not unjustifiably harm copyright owners. To address the gaps identified in this Policy Paper, specific exceptions would be needed to allow at least:

  1. Caching, including proxy and system-level caching;
  2. Web Hosting (including Cloud Computing);
  3. Hosting a User-Created Content Platform (with an exception to allow individuals to make user-generated content); and
  4. Operating a Search Engine.

Some reform to address these activities, currently not allowed under Australian law, would be better than nothing, to at least enable local versions of known services online. However this would do little to encourage future innovation in the Australian Digital Economy.


Executive Summary .. 1
Where Australia currently stands . 2
Solutions 4
Extend the Safe Harbours .. 4
Introduce a Flexible Exception into Copyright 5
1 Background Material . 7
1.1 Terminology: who are the Internet Intermediaries? . 7
1.2 Exceptions in context: the scope of exclusive rights and secondary liability 8
2 The impact of the copyright law on common online activities 11
2.1 Providing network access (internet access providers) . 11
2.2 Caching . 14
2.3 Hosting Content . 19
2.3.1 "Traditional" Web Hosting 20
2.3.2 Cloud Computing .. 22
2.3.3 Hosting a User-Created Content Site . 23
2.4 Search Engines: Web Crawling, Indexing and Display of Results . 25
And then there"s the future 28
3 Advancing the Digital Economy: What Australia Should Do .. 31
3.1 Extend the kinds of entities entitled to Safe Harbours to all online service providers .. 31
3.2 Introduce a flexible exception into Australian copyright law .. 31
3.2.1 Option 1: Fair dealing for the purposes of transformative use .. 33
3.2.2 Option 2: A Fair Use/Open-ended Exception 34
3.2.3 Option 3: Extending 200AB 35
3.2.4 Assessing the options . 37
3.3 Specific amendments 38
4 Conclusion .. 39
Appendix 1: Australia's Digital Exceptions Compared .. 40
Introduction and Summary . 40
Exceptions to liability for (temporary) reproductions .. 41
Liability for transmission (communication) and exceptions .. 46
Summary and commentary on the exceptions covering basic digital and network technology
Appendix 2: Australia's Safe Harbours Compared 51
Appendix 3: Australia's Exceptions for Creative Re-use and Personal Copying Compared . 57
Creative re-use .. 57
Private copying . 62


Internet Intermediaries and Copyright: An Australian Agenda for Reform, Kimberlee Weatherall, Australian Digital Alliance, April 2011

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