Geoblocking is not copyright infringement: Productivity Commission

Geoblocking should be permitted, a fair use exception for copyright infringement should be implemented, and the awarding of patents should be more restricted, according to the Productivity Commission.

The Productivity Commission has published a draft report on intellectual property arrangements, making recommendations and findings on circumventing geoblocking technology, implementing a fair use exception for copyright infringement, expanding the safe harbour scheme, combating piracy with better access to copyright material, making publicly funded research openly accessible, and restricting the awarding of patents.

The Intellectual Property Arrangements: Productivity Commission Draft Report [PDF], published by the commission on Friday morning, put forward its package of reforms to "rebalance" the intellectual property system in Australia, saying the current system benefits "vocal" rights holders to the detriment of consumers, and thwarts technological innovation.

"When innovation is cumulative, IP rights can reduce the flow of benefits from new ideas and processes," the report says.

"Indeed, overly strong restrictions on diffusion can be so detrimental to innovation that it can undo the benefits of the IP system in the first place."

The commission addressed a number of issues for the government, including recommending that it make it clear that circumventing geoblocking technology is not an infringement of copyright; recommending that it avoid entering international agreements that ban the circumvention of geoblocks; recommending that the current "fair dealing" exceptions be replaced by a broader "fair use" exception; finding that making better use of timely and cost-effective access to copyright materials would combat online piracy more effectively than punitive measures; and finding that the public would derive more benefit from the length of copyright being shortened from 70 years after death to 15 to 20 years after creation.

Among other things, it also recommended that the safe harbour scheme be expanded to cover cloud and streaming services; an open access policy be implemented for publicly funded research; business methods and software be excluded from being patentable; an objects clause be incorporated into the Patents Act; the innovation patent system be abolished; and higher patent fees be explored.

The commission said all intellectual property policy should be developed according to the overarching ideals of effectiveness, efficiency, adaptability, and accountability.

In regards to allowing geoblocking, the commission said the behaviour should be allowed in order to provide Australians with equal access to online materials. With the geoblocking technology currently being implemented, Australian consumers are frequently given access to lower-quality services with more limited catalogues for streaming services at a higher price point than is available to their overseas counterparts.

"Studies show Australian consumers systematically pay higher prices for professional software, music, games, and e-books than consumers in comparable overseas markets. While some digital-savvy consumers are able to avoid these costs (such as through the use of proxy servers and virtual private networks), many are relegated to paying inflated prices for lower-standard services," the commission said in its report.

"The Australian government should make clear that it is not an infringement of Australia's copyright system for consumers to circumvent geoblocking technology, and should seek to avoid international obligations that would preclude such practices."

As well as removing pervasive geoblocks, the commission made the finding that overall, timely access to movies, TV shows, and games is far more effective than punitive measures when it comes to combating online copyright infringement.

"Surveys reveal much online copyright infringement is out of sheer frustration from poor access. The best antidote to copyright infringement is accessible and competitively priced online content, not draconian penalties and big brother enforcement," said Commissioner Karen Chester.

"It appears clear that pursing court-based enforcement against websites, ISPs, and individuals has not been successful, and possibly less successful in Australia than elsewhere," the draft report adds.

"What has appeared to work in incentivising consumers to purchase content is timely and cost-effective availability. Research suggests a clear link exists between the timely and cost-effective availability of copyright content in Australia, and rates of infringement. Various survey studies consistently demonstrate that where copyright-protected content is made available to consumers, the vast majority prefer paid, legal consumption."

This ties in with research conducted by the Department of Communications last year, which found that users who consume paid content in addition to downloading copyright-infringing content actually spend more on purchasing content than users who consume only non-infringing content.

"Rights holders' most powerful tool to combat online copyright infringement is making content accessible, timely, and affordable to consumers," Australian Communications Minister cum Prime Minister Malcolm Turnbull admitted at the time.

There should also be broader, open-ended copyright exceptions, the Productivity Commission said, with the recommendation being to implement a United States-inspired fair use exception, as the current fair dealing exception is "too narrow and prescriptive", and cannot evolve to suit the use of copyright content in the digital world.

"One of the key advantages of a fair use over a fair dealing exception is that the law can adapt to new circumstances and technologies," the draft report says.

"Under a fair dealing exception, legislative change is required to expand the categories of use deemed to be fair. In contrast, under fair use, courts have the latitude to determine if, on the facts, a new use of copyright material is fair."

In determining whether copyright infringement constitutes fair use, the assessment should take into account such factors as the purpose and character of the use; the effect on the market; the proportion of the work used; and commercial availability. Courts should also have regard to a non-exhaustive list to be included in the fair use exception, as well as case law from the US, the commission stated.

In its response to the draft report, the Copyright Agency objected to the implementation of a fair use provision, saying it would prevent the protection of Australian content.

"A US-style fair use arrangement to copyright are [sic] out of context with the Australian system, and would be a wrecking ball to Australian writers, creators, publishers, and the local creative industries," said Copyright Agency CEO Adam Suckling.

"Our copyright system has proven it can evolve, and continue to evolve to encompass developments in technology, business practices, and consumer behaviour. Introducing fair use will do none of these. But it will further erode the ability to create Australian content in small industries in a very small marketplace."

The Productivity Commission recognised that there have been arguments that a fair use policy would diminish any incentive to create new works, impacting the industry's profitability and employment, but said it "considers that industry perspectives on the costs are overstated and premised on flawed assumptions".

The current safe harbour scheme should also be extended to cover advents in technology since the legislation came into effect, the commission added; namely, cloud and streaming services.

"Expanding the coverage of Australia's safe harbour regime to other online service providers will improve the system's adaptability as new services are developed; is consistent with Australia's international obligations; and is an important balance to the expanded protections for rights holders Australia accepted as part of its international agreements," the draft report notes.

The commission also took the view that the current patent system needs to be overhauled, as it is "defensive" and prevents companies and individuals from entering the market. As such, some areas should no longer be patent protected, fees for patents should be higher, and patent time frames should be reduced, the commission said.

"Contrary to views that more patents are always better, Australia's patent system is poorly targeted. Some patented inventions border on trivial and protection can last too long," Commissioner Jonathan Coppel argued.

"Only genuine innovations should be granted patent protection, and patent fees need to be higher to discourage rights holders from hanging on to patents longer than they need to."

The draft report said the current system allows for a high number of poor-quality patents, which prevents follow-on innovation from occurring, consequently halting competition and increasing costs for consumers.

"To raise the quality of patents, the Australian government should increase the degree of invention required to receive a patent, abolish the innovation patent, redesign extensions of term for pharmaceutical patents, limit business method and software patents, and use patent fees more effectively," the draft report recommends.

"True innovation and creativity will be rewarded, while consumers will have better access to new and cheaper goods and services. Australian firms won't have to engage in costly workarounds that hinder follow-on innovation," Coppel added.

Business methods and software (BM&S) should be completely excluded from being patentable, the commission recommended, because the patent term is "far longer than the development cycle of BM&S". It pointed to open-source software as proof of a more beneficial alternative for the community.

"[BM&S] patents have rarely spurred software innovation, but provided strong incentives for strategic behaviour to block competitors and hinder software development," the draft report argues.

"In some cases, the BM&S is obsolete by the time a patent for it is granted ... The open-source movement demonstrates that incentives to innovate and disseminate new software can occur in the absence of patent protections."

In another recommendation, the commission said government-funded research should be made more open and accessible to the public.

"All Australian, and state and territory, governments should implement an open-access policy for publicly-funded research," the draft report says.

"The policy should provide free access through an open-access repository for all publications funded by governments, directly or through university funding, within 12 months of publication. The policy should minimise exemptions."

The Productivity Commission is accepting submissions on its draft report by June 3, with public hearings to follow later that month.