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iiNet: The whys and what nows

Last week the Federal Court ruled that internet service providers are not responsible for copyright violation by their customers. This is an important decision not just for iiNet, which spent around $4 million defending the case, but for all ISPs in Australia and, indeed, globally.
Written by Stilgherrian , Contributor on

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Last week the Federal Court ruled that internet service providers are not responsible for copyright violation by their customers. This is an important decision not just for iiNet, which spent around $4 million defending the case, but for all ISPs in Australia and, indeed, globally.

Justice Dennis Cowdroy's full judgement is almost 200 pages long. So in this week's Patch Monday podcast Stilgherrian summarises the key points.

Peter Black, who teaches internet law at the Queensland University of Technology, helps us understand the decision, and discusses the response by Communications Minister Stephen Conroy, who's calling for the industry to develop a code of conduct for dealing with piracy.

Plus we bring you Stilgherrian's idiosyncratic wrap-up of the week's IT news — everything you would have read yourself if you weren't so busy.

Patch Monday now also accepts your audio comments. Either Skype to "stilgherrian", or phone Sydney 02 8011 3733.


Stilgherrian: This is ZDNet Australia's Patch Monday. I'm Stilgherrian. And looking back at last week, the biggest IT news story simply has to be the Federal Court win by iiNet, Australia's third largest ISP over the movie industry.

Michael Malone: We are delighted with the results, obviously, but largely just relived that it's over now. We so welcome the outcome that Justice Cowdroy is saying that ISP's of Australia don't have a positive obligation to stop copyright.

Stilgherrian: That's iiNet CEO Michael Malone welcoming Thursday's judgement by Justice Dennis Cowdroy. And that judgement was very clear, internet service providers are not responsible for copyright infringement done by their customers. Normally I leave telco-related stories like this to Twisted Wire, the podcast by my colleague Phil Dobbie — but that's not until Thursday, so we decided to cover this huge story today. Right now, in fact, we'll leave the news summary to the end of the program for a change.

Now in a moment we'll talk with Peter Black, he teaches internet law and can help us understand the implications of this complex case. The judgement is nearly 200 pages long. But first the background.

The case was started by a group of 34 film and TV studios, big players including Roadshow, Walt Disney, Paramount, Sony, 20th Century Fox, Universal and Warner Brothers, and more. They were suing iiNet, because some of their customers had been using BitTorrent to illegally share copyright films and TV programs — I'm sure you know what I mean. The studios lobby group AFACT, the Australian Federation Against Copyright Theft, hired some investigators. They joined iiNet as customers, then joined BitTorrent, started downloading copyright material and they logged everything. AFACT then sent infringement notices to iiNet that iiNet refused to do; well it was never exactly clear what AFACT wanted them to do. But certainly they did expect iiNet to do something about it, up to and including perhaps terminating the accounts for repeat offenders.

iiNet for its part said these notices were merely allegations, that AFACT should take them to the police. AFACT therefore claimed that because iiNet knew about the copyright violation, but wasn't stopping it, they were therefore authorising it. Now that's a specific legal term. And that made iiNet responsible.

The Federal Court heard evidence for four weeks late last year. And on Thursday last week Justice Cowdroy handed down his decision. And this is the first case like this anywhere in the world that's gone all the way through to a judgement. So there's massive interest. As I say, that judgement is 200 pages long. Yes, I've read all of it.

I'm not a lawyer, but here's my summary. Was copyright violation happening? Yes, a lot. That's been proved. But did iiNet authorise it in that technical sense? No, says Justice Cowdroy and he gave three reasons. One, iiNet was just providing an internet connection; they didn't invent BitTorrent, they didn't control it or support it. Two, they didn't have an appropriate legal power to stop copyright infringement. Now that's a complex one, and I'll come back to it. And three, iiNet wasn't encouraging this, in that the legal phrase, it was not sanctioning, approving or countenancing the copyright infringement. So iiNet is off the hook. But more than that, Justice Cowdroy said that even if he had ruled that iiNet had authorised the violations, iiNet would still have been protected by the so-called safe harbor provisions in the copyright act. Safe harbor means that as a carriage service provider, as long as an ISP has a process in place for dealing with repeat offenders they're protected.

OK, there's obviously a lot more to it than that, and I've linked to the full judgement in a few useful reports on the website; it's interesting reading. Obviously, iiNet was very pleased with the result.

Malone: We so welcome the outcome that we said from the very beginning that we didn't believe we ever authorise copyright. Now, there are customers out there around the world, not just in Australia, that are downloading lots of their material illegally. It's not unreasonable for them to seek ways to be able to stop that. I guess our view has been: no, this isn't the proper way to be able to do it. The best way is to make the material legitimately available.

Stilgherrian: The Internet Industry Association boss Peter Coroneos was also pleased.

Peter Coroneos: Well, we're naturally pleased at the outcome of the case. We thought the judge directed his mind quite closely to the important policy distinction here, and that is the distinction between providing access to the internet, and providing the means by which copyright infringement can occur.

Of course, we have to look at the bigger picture here that there is an international campaign afoot to try and force ISPs to accept responsibility for the acts of their customers. This is not an issue that's confined to Australia. Our position has always been to argue for balance. Balance between the legitimate rights of content owners, on the one hand, and the legitimate rights of those who make the internet possible as intermediaries.

Stilgherrian: AFACT is rather less pleased. Here's their executive director Neil Gane.

Neil Gane: Today's decision is very disappointing to the film industries who launched the case, and to the 50,000 Australians who are employed in the Australian film industry. But we believe this decision was based on a technical finding, centred on the court's interpretation of how infringements occur and the ISPs' ability to control them. We are confident the government will not intend a policy where rampant copyright infringement is allowed to continue unaddressed and unabated across the internet.

Stilgherrian: Neil Gane kept repeating that number, 50,000 film industry workers. That actually includes everyone down to the cinema popcorn fillers and the staff at your local video shop. Now although AFACT is still considering its next steps, everyone expects them to appeal the decision. However on Friday, Communications Minister Senator Stephen Conroy, seemed to support iiNet's strategy. In an interview for the ABC television program Hungry Beast, he clearly wanted conversation, not more court cases.

Stephen Conroy: In Australia, unfortunately, because of a refute to even hold a dialogue, and I've been trying for two years to encourage the sectors to have a dialogue. They've got themselves into a court battle with a decisive outcome in favour of iiNet and the ISPs. But what I would still hope is that we can bring them together to sit down, settle our differences, create a code of practice that actually protects both parties.

Stilgherrian: That's Senator Stephen Conroy. Well, to get our heads around all this I spoke with Peter Black, who teaches Internet Law at the Queensland University of Technology. The big message to come out of this case is that the ISP's job is just to shunt data from point to point. It's not their job to get down into that and decide what is and is not legitimate traffic.

Peter Black: Yes that's just right. And I think that's a very practical and common sense approach that the court has taken. It's not the role of an ISP to be a judge, lawyer, executioner. That there are other people with that particular role in the process, the role of the ISP is simply to provide people with access to the internet. And once they have that access to the internet then they are free to do whatever they like, including perhaps using BitTorrents.

Stilgherrian: So there's three key factors that ruled against authorisation. One is clear to me that iiNet does not control, did nothing BitTorrent. The other ones I'm less clear about, particularly the middle one, this whole relevant power to prevent those infringements occurring. I'm reading this in the context that for an ISP to get involved in these allegations of infringement, and then cut off a customer, which is to cut them off from the whole internet rather than just stop them infringing. That's what that's about?

Black: Yes, that's right. That comes from a recent amendment to the Copyright Act that sort of sets out some of the factors the court has to look at. And as to whether it's a relevant power to prevent copyright infringement, what Justice Cowdroy does is that he had to look at what an ISP can really practically do in terms of having some sort of process by which he could suspend or terminate accounts. And the view that he's done, I think, quite rightly takes is that it's not really the role of an ISP to investigate, determine who it is who's been infringing copyright and to act upon that. That is really a legal determination that has to be done by a court and not merely by an ISP. And so because of that, that sort of factor was wavered in favour of iiNet.

Stilgherrian: Now this fits in with this concept of safe harbour, which the safe harbour rules are written in a quite complicated way, but it seems to me again that's the same concept. That as long as you are not acting in bad faith, that you are just shunting the packets around, you are immune, if that's not a technical legal term, from being chased for this. There was a big section on reinforcing those safe harbour rules, even though they don't have to apply in this case. I understand that's very important globally.

Black: Yes, there's a couple of different things I think to say about the safe harbour. The first thing to remember is that the tests for authorisation and the safe harbours are different. And so even if the court or appeals court was to take the view that iiNet had authorised copyright infringement, they would still then later be able to rely on the safe harbours.

And that leads me to the second point there, which is why Justice Cowdroy considered the safe harbours. Because everyone I think respects that this is going to be appealed. And it would be open, perhaps, to an appeal court to overturn Justice Cowdroy's findings with respect to authorisation. Finding that iiNet had authorised copyright infringement, which means they would then need to go on and consider whether they could nonetheless escape liability by relying on the safe harbours. So that's why Justice Cowdroy went on to look at those in a bit of detail.

The third thing, I think need to know about the safe harbour, which ties into your question, is that the safe harbours are very important internationally. Now the Australian safe harbours are modelled on the safe harbours that exist under the American copyright law, but they are considerably more narrow. Whereas the Austrian safe harbours are really only applied to any internet service provider or carriage service provider. The American safe harbours are much broader and more or less applied to any provider of content on the internet as well. And so there had been some concern, because of the narrow way which the Australian safe harbours have been drafted and whether they would still cover an ISP, such as iiNet in this particular instance. And so it was quite important and significant, both for Australian law but also for the implications globally that Justice Cowdroy was willing to find that they would be able to rely on the safe harbours.

Stilgherrian: And what I find interesting about that is that there is repeatedly these very clear statements throughout the judgement. The ISP's not responsible, you know, without any ifs or buts. It seems like Justice Cowdroy is trying to make it very clear in many ways that these are separate roles.

Black: Yes, most definitely. And again, I think that's a very practical and common sense approach that his honour has taken. It also, I think, perhaps shifts the onus of the debate back onto the entertainment industries and potentially onto the parliament. Because he is very much saying that, look it's not responsibility of the ISP. The ISP simply provides access to the internet and that's the end of the story.

Whereas the entertainment industries wanted very much that the ISP had a responsibility to stop copyright infringement — potentially all copyright infringement on their network. And obviously the judge was not willing to go down that path, which I think we both agree was the right decision. But it does mean that the entertainment industries, and AFACT, and alike, I think will now be lobbying the Labor Government and perhaps governments in countries around the world that more or less make ISPs' responsible. And this is where we go down the path of the three strikes and you're out type proposals that have been introduced in some countries around the world, have been debated about in other countries around the world, and is potentially part of the anti-counterfeiting trade agreement.

Stilgherrian: What I find interesting though is that on Friday, the Communications Minister Senator Conroy did speak to the ABC's Hungry Beast program of all investigative outlets —

Black: I saw that, yes.

Stilgherrian: — where he faces a mature approach by both the movie industry and the internet industry having a conversation and coming up with a code of practice is the absolute preferable outcome. That sounds like he (perhaps it's because it's an election year) that he does not want to get into this three-strike rule just yet.

Black: No, I find it amusing he obviously wants a dialogue on this issue. He isn't prepared to have a dialogue on other issues, but that's by the by.

Stilgherrian: Yes. Let's leave those other issues off the table just for the moment, because it's another whole topic.

Black: Sure, yes. It's quite clear that he really has enough on his plate, dealing with Telstra dealing with the NBN dealing with filtering before going into the mire of a copyright report once again. The Howard Government have been through nearly two waves of quite extensive copyrights and reforms, and it's always a long, drawn-out, complicated process.

That said, copyright has traditionally been the province of the Commonwealth Attorney-General as opposed to communication. So it is possible that McClelland as a dream might want to get involved, but again, I just can't see it happening. Or the statement that Conroy made reflects what everyone has been saying in this particular space and sector for sometime. And that, the way forward to deal with the issue of all of this content that's available on the internet is not to deal with more suits and not to deal with sweeping reforms that Copyright Act to make various people liable.

It's time that for the ISPs and the content providers to sit down and think about new business models, so that they can make money, with their content, which they deserve to do as content creators and content providers. And work out a way to make money with this new infrastructure arriving clinging to old, outdated business models. So hopefully Conroy's comment will just be another little push for the entertainment industries, but they need to start looking forward rather than backwards.

Stilgherrian: More than perhaps a little push. Because if you combine Senator Conroy's statement on Friday, with the judgement itself I noticed that woven through the judgement is what I called really quite a big slap down of AFACT. The cross-examination of iiNet CEO Michael Malone was described as unnecessarily hostile and intemperate. The judge was critical of the tone of their letters, saying essentially that they were trying to portray themselves as a quasi-statutory authority whose notices we were required to pay attention to. And one of the most damning paragraphs I'll read it in full:

The applicants [that is the film industry and AFACT] appear to premise their submissions on a somewhat binary view of the world, whereby failure to do all that is requested and possible to cooperate with copyright owners to stop infringement occurring, constitutes approval of copyright infringement. Such a view is not the law. It is possible to be neutral. It is possible to prefer ones own interests to those of the copyright owners.

I would expect that AFACT would be licking their wounds after this comprehensive slap down as I say. How unusual is this level of criticism of an applicant's case?

Black: I mean it's not unprecedented. Judges will at various times make comments about the way that the parties have had run a case before them. But particularly when findings of facts turn, perhaps, on the credibility of the witnesses and the way that the approach has been run. So it's not unprecedented. But it certainly is unusual. You don't see language that strong coming through in Federal Court decisions very often. And so hopefully you would think that AFACT would, as you say, lick their wounds. But also, they'd hopefully realised that because so much of the decision is in critical findings of facts and credibility against the AFACT, it makes it very hard for an appeals court to overturn those thought finding facts, because they haven't had the benefit of seeing the witnesses and hearing the evidence for the first time. So that should also be, reading between the lines, a strong hint to them that they may struggle on an appeal.

Stilgherrian: So we combine that with the minister's very clearly stated desire that he wants them to go away and come up with a code of practice. We had Michael Malone by iiNet on the steps of the Federal Court Thursday morning saying that he wants to open a dialogue and come up with solutions to this. You've indicated that an appeal would be fairly difficult. So assuming all that, what would the time line be for AFACT to attempt an appeal, compared with how long it takes to get a code of practice together?

Black: In assuming they go down the path of an appeal, and I think that is probably still the most likely option. An appeal would be hard, but it's not to say there aren't issues they could argue on appeal. And that's not to say that they potentially with a consent of judges might get a different finding. It probably wouldn't end up being heard until the end of this year, or towards the end of this year. And again then there wouldn't be a decision until sometime in the first half of next year.

Of course, if you then have a decision of the full Federal Court, no matter which way it goes, there's then the option for either party to appeal once again to the high court, seek special lead and go down that path appealing to the High Court. Which again could add another year at least, if not more, onto this whole process.

So if they do want to litigate this to the very bitter end, this could just be the beginning, and we could be going down another sort of two years of this process. Whereas what they, I think, what the judge is suggesting they do, what Michael Malone wants them to do, what Stephen Conroy wants them to do, what I would want them to do, is to sit down and start actually working out either some sort of code of conduct, or be it some sort of new business model so that they can get in a just financial award for the content that they've created and wish to distribute.

Stilgherrian: As another commenter put it, I think litigation is not a sustainable business model.

Black: That's so true, but again the entertainment industries all over the world haven't seemed to have realised that. I mean, in the United States they continue to go down the path it's still an individual. They don't seem to be in a real hurry to embrace new business models and new ways of structuring their business and new ways of making money, instead they seem determined to cling to the ways of the past, and cling to a strategy through litigation. Which, no matter what business you're talking about, it's never a good approach.

Stilgherrian: Peter Black, thank you very much for your time.

Black: You're welcome. Thank you.

Stilgherrian: Peter Black teaches Internet Law at the Queensland University of Technology. You're listening to Patch Monday.

Time for a look at the week's IT News:
The South Australian Government was forced to overturn new electoral laws following a flood of negative comments online. The new laws would have required anyone making political comments during official election periods to give their real name and address. Whereas previously that rule had only applied to the traditional media and paid political advertising. It wasn't clear whether the new law would apply only to the websites of mainstream media outlets, or to all blogs and their commenters, or even to Twitter.

Attorney-General Michael Atkinson ended up saying that the law would be reversed after the state election on the 20th of March, and that would apply retroactively. In the meantime they wouldn't prosecute anyone who failed to identify themselves.

Personally I reckon the law was silly. But I'm worried that laws take months to work their way through Parliament, and all that's published online quite openly. But geeks didn't notice and object until the advertiser newspaper in their Adelaide Now website stirred the pot. And that all happened after the laws were already passed and enforced. I've written more about that over at ZDNet.com.au. Meanwhile, the South Australian Opposition has called for the attorney-general to be sacked for breaching the ministerial code of conduct.

A review into Victorian Police information security said that it's mostly due to good luck that more serious breaches haven't occurred. In 2008, information on a surveillance target had gotten into the hands of the suspects. The Office of Police Integrity report says that there was "a lackadaisical attitude to information security among staff". Crime department and regional investigators failed to adhere to protocols for access to and release of information based on the need to know principle. And regularly released large amounts of data to other units by email.

Microsoft will start selling its Surface table-top multi-touch system in Australia this week. The platform provides a computer screen as large as a small table that acts as a touchscreen. It's been used for purposes as varied as military tactical overviews and in restaurants.

The Department of Defence has announced a panel of vendors to supply computer equipment to all federal government agencies on a short-term basis. The Gershon Review said in 2008 that hardware should be sourced on a whole-of-government basis. But the Department of Finance only got the tender issue the week before last. Defence needs new computers more urgently than that, so they've coordinated this interim panel. The vendors are in alphabetical order: ASI Solutions, Acer Computers Australia, Data#3, or is that just Data 3? Datacom Services, Dataflex, Dell Australia, Ethan Group, Lenovo and Hewlett Packard. No one in the second half of the alphabet you notice there. Maybe they just went down the list of applicants until they'd found nine.

And on Friday the Symbian Foundation announced that its mobile operating system is now completely open source. But will that be too little too late for Nokia? For details of those stories and much more, the place to go is ZDNet.com.au.

And that's all for this week. A little longer than usual, hope you don't mind. Next week, public key infrastructure and federated ID. It sounds very geeky, but it's actually of immense social value and implications. How do you log into different systems with one ID while still preserving your privacy? And we'll return to that security problem with the governments supplied laptops; we just didn't have time this week.

If you have any comments on the program, please leave them at the website, ZDNet.com.au/blog/patch-monday. Don't forget the hyphen. You can also leave audio comments via Skype or the phone. The Skype ID is "stilgherrian", the spelling's on the website. Or phone Sydney, 02 8011 3733. You've been listening to Patch Monday, I'm Stilgherrian for ZDNet Australia.

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