Liability Of Internet Service Providers For Copyright Infringement

This article considers the liability of Internet service providers (ISPs)^[1] and similar carriers^[2] for copyright infringement, and consists of three sections. First, Australian legal and policy developments are examined. Secondly, litigation and policy papers from the USA, EU and other overseas jurisdictions are discussed. Finally, a suggested approach to liability for copyright infringement on the Internet is proposed.

Any discussion of the liability of Internet service providers or other like carriers must begin with the decision of the High Court in Telstra v APRA^[3] (Telstra). The case involved music (in which APRA owned copyright) played to persons ‘on hold’ on the telephone.^[4] When the caller who was put on hold used a conventional phone, the High Court held by majority that Telstra had infringed APRA’s right to cause the works to be transmitted to the subscribers by a diffusion service.^[5] When the caller who was put on hold used a mobile phone, the High Court held unanimously that Telstra had infringed APRA’s right to broadcast the works.^[6] This case is important for ISP liability as it is the leading authority on the diffusion right, on which APRA based its claim against ISPs.^[7]

The Court held that there are three elements of s 31(1)(a)(v) which must be satisfied:

All of the judges who were involved in the Telstra litigation except Gummow J at first instance^[12] held that Telstra infringed APRA’s broadcast right when on hold music was played to a caller on a mobile phone.^[13]

In June 1996, APRA sent a letter to all ISPs alleging that the ISPs were infringing the ‘diffusion right’ of the musical works which it owns, and demanding a license fee of $1 per subscriber.^[14] The ISPs disputed their liability, and so APRA commenced a test case against OzEmail in the Federal Court.^[15] This case has now been settled. However, in order to predict whether APRA would have succeeded, it is necessary to consider the three requirements for s 31(1)(a)(v) set out by the majority in Telstra.
First, is there a “diffusion service”? According to the majority in Telstra, distribution involves the spreading abroad or dispersal of the thing being distributed.^[16] An ISP’s main purpose is to transfer material from the Internet to its users,^[17] which is typically done via telephone lines using a modem. The transfer of material involves “distribution” in the sense described above, and the telephone lines constitute “wires” (or “other paths provided by a material substance”) as required by s 26(1). Hence, an ISP is involved in a “diffusion service”.^[18]
Secondly, the requirement that works must be transmitted to the premises of subscribers would be much easier to meet in the Internet context than it was in Telstra, and s 26(5) would not be needed to deem subscribers. An ISP’s customers constitute the requisite subscribers, who would enter into a contract with the ISP to provide Internet access into their home or business.
Third, has the ISP caused that transmission? As noted above, there would almost always be a contract between the user and the ISP by which the ISP undertakes to provide the service to the user.^[19] Hence s 26(4) would be satisfied without the need to resort to s 26(5) to provide a deemed agreement. Since the ISP is the “person operating the service” (because of s 26(4)), by s 26(2) the ISP is deemed to have caused the transmission.
Thus, on the reasoning in Telstra,^[20] APRA may well have been successful against OzEmail in its test case, since as an ISP it appears to infringe the diffusion right in the musical works^[21] owned by APRA.^[22]
Could APRA (or other copyright owners) pursue both an ISP and a telecommunications carrier,^[23] for infringement of a diffusion right when Internet access is provided via a conventional phone? Only the person who operates the service can be deemed to have caused the transmission, whether or not they provide physical facilities for the transmission.^[24] The ISP is the “person operating the service”, because it has undertaken to provide the service to the subscribers.^[25] In our view, the telecommunications carrier cannot also be held liable for infringement of a diffusion right, unless the acts done by the telecommunications carrier are considered to be a separate diffusion service. The better view is that there is only one diffusion service, and hence only the ISP will be liable.^[26]

Some commentators have suggested that an ISP may be liable for authorising^[27] copyright infringement.^[28] Authorise means “sanction, approve, [or] countenance”.^[29] For an ISP to be liable for authorisation, it must know, or have reason to suspect, that infringements are taking place.^[30] We submit that ISPs have reason to suspect that infringements are taking place, given the controversy over the Internet and copyright.^[31] However, the cases suggest that an ISP also needs to have the power to prevent infringement to be liable for authorisation, and this involves an element of control.^[32] It is unclear whether ISPs have the technical capability to monitor and control the infringement of copyright by its users.^[33] It also appears that under the Telecommunications (Interception) Act 1979 (Cth), ISPs do not have the legal power to distinguish all legitimate uses from infringing uses.^[34] Hence, ISPs may not be held liable for authorisation under the present law.^[35]

In August 1994, the Copyright Convergence Group release a report entitled Highways to Change: Copyright in the New Communications Environment which recommended the abolition of the diffusion right,^[36] and the introduction of a broad-based, technology-neutral right to authorise transmissions to the public.^[37] In July 1997, the Attorney-General released a discussion paper entitled Copyright and the Digital Agenda.^[38] The Attorney-General proposed a new broadly-based technology-neutral transmission right, and a right of making available to the public.^[39] The latter right is designed to cover interactive on-demand services.^[40] In relation to ISP liability, the Attorney-General proposed that the issue should be determined by reference to principles of authorisation, and that there should not be a legislative provision specifically dealing with the liability of ISPs for the exercise of the transmission or making available right.^[41] However, in a joint press release of April 1998, the Attorney-General and the Minister for Communications, the Information Economy and the Arts, apparently changed government policy in this area.^[42] According to this press release, ISPs will not be held liable for copyright infringement “simply because the infringement occurs on the facilities of the carrier or ISP”. Legislation is currently being drafted which reflects this policy. The effect of this proposed legislation in relation to ISPs is as follows:^[43]

Should this be the approach adopted in Australia? In order to answer this question, it is necessary to look at the divergent approaches that have been taken, and proposed, overseas.

A number of overseas countries and bodies have considered the issue of copyright on the Internet, and in particular the liability of ISPs. In essence there are two approaches: holding ISPs strictly liable, and holding them liable only where they possess some level of knowledge or control.

Debate in the US concerning ISP liability under existing law has focused on breaches of the Copyright Act^[50] and on the theories of contributory infringement or vicarious infringement, which concern holding a defendant liable for the infringement of another.^[51] Contributory infringement requires the defendant to have knowledge, actual or constructive, of the principal infringement and to also materially contribute to it.^[52] Vicarious liability requires the defendant to have practical^[53] control over the principal infringer, and also to financially benefit from the principal infringement.^[54] US law exempts common carriers from liability.^[55]
A number of cases have considered the liability of BBS operators and ISPs in the US.^[56] The first of these was Playboy Enterprises v Frena^[57] where a BBS operator^[58] was held to contravene Playboy’s distribution^[59] and public display rights^[60] when another party posted Playboy photos onto the defendant’s BBS, notwithstanding that the defendant was unaware of the presence of the infringing material. This decision preceded Sega Enterprises v Maphia^[61] (Sega) and Religious Technology Center v Netcom^[62] (Netcom), which preferred to treat the liability of the defendants under contributory infringement. Both cases found that there was sufficient evidence to grant a preliminary injunction. Both cases held that the provision of the ability to copy was sufficient to prove material contribution to the infringement;^[63] whether there was liability depended on the extent to which the defendant knew of the infringement. In Sega, the BBS operator was aware of the copying and indeed had encouraged it; in Netcom, the ISP had been informed that there was allegedly infringing material on the Internet but had refused to remove it since the ISP claimed that it could not determine whether the material was the subject of copyright. Whyte J in Netcom recognised that it was difficult for a BBS operator to detect infringement, and where it was difficult for a BBS operator or ISP to verify infringement, they would have a defence against contributory infringement.^[64] In relation to vicarious infringement, Netcom declined, as a matter of law, to find ISPs liable on this basis since there was no direct financial benefit flowing from the infringement to the BBS operator or ISP.^[65]

Commentators have argued that the level of liability that is imposed on ISPs in relation to defamation, whether the ISP knew or had reason to know of the defamatory material,^[66] should be imposed on ISPs in relation to copyright infringing material.^[67] This would have the benefit of not requiring any additional monitoring if ISPs are already required to look for defamatory material, but there are more difficult problems in verifying that a work is infringing copyright as opposed to being defamatory. In addition, if liability related to practical control, liability would be different according to the services offered by the defendant service provider and their relative size,^[68] thereby providing a disincentive for ISPs to exercise control over their network.^[69]
The Information Infrastructure Task Force has released two papers, the Green^[70] and White Papers, to develop policy on the Internet.^[71] The White Paper argued that transmissions and publications on the Internet should be afforded copyright protection.^[72] Despite submissions from ISPs that they could not monitor all the material on the Internet, the White Paper recommended ISPs should be liable for that material consistent with the strict liability standard imposed elsewhere by the Act.^[73] In addition, as between the ISPs and copyright owners, ISPs, due to their control and commercial benefit derived from their subscribers, are better placed to deal with infringements by subscribers.^[74] There is now legislation which deals with ISP liability which is awaiting the approval of the President after passing Congress in October 1998. The legislation, The Digital Millennium Copyright Act,^[75] clarifies that ISPs will not be liable for third party copyright infringements unless they have received notice which complies with the Act of the allegedly infringing material and fail expeditiously to remove, disable or block access to that material to the extent practically possible for a certain period of time.

The UK has not addressed the issue in great detail, but its relevant statute states that storage of a copyrighted work on a computer amounts to copying and that a temporary or incidental reproduction on a computer is also copying.^[76] This has led some to speculate that the UK is predisposed to finding ISPs liable for copyright infringement.^[77] However, a report suggests that the UK may focus more on Internet development than copyright protection.^[78]

The EU has principally concerned itself with attempting to harmonise copyright law. The European Court of Justice has held that the EC Treaty^[79] applies to copyright,^[80] and this treaty allows the Council of Ministers to issue Directives to aid harmonisation. The effect of developments in the EU are twofold: a recognition that the issues raised by the Internet require cross-border solutions;^[81] and that the traditional protection for copyright owners will be maintained despite the technological challenges that are faced.^[82] The EU is not settled on the extent to which ISPs are liable for the acts of others on their networks.^[83] The Commission has postulated the concept of Internet self-regulation, involving members of the public informing ISPs of violations of copyright as a global solution to Internet regulation since this has the benefit of decentralising control of the Internet.^[84] There is now pending EU legislation which, though it does not deal with ISP liability, states that a temporary reproduction of no economic significance is not an infringement, and this would appear to exempt browsing.^[85] This may indicate a reluctance to detrimentally affect Internet use, an approach that could be extended to ISPs’ liability. However, this may be influenced by Article 10(1) of the EC Human Rights Convention which secures the right to freely receive and distribute information and ideas across boundaries without interference.

In Canada, a report has advised not holding ISPs liable for their subscribers’ copyright infringements if they can show an absence of actual or constructive knowledge of infringement and show attempts have been made to limit infringements.^[86] This policy position appears to stem from the view that the Internet should be encouraged, and not hindered, at this stage in its development. In the WIPO meeting in December 1996, it was decided that there would be a new communication right, but the provision of facilities for making a communication did not breach that right.^[87] This would appear to exempt telephony providers, but leave ISP treatment to each individual jurisdiction.^[88] Other countries, such as Japan^[89] and Taiwan^[90] and individual European countries^[91] have released discussions papers on regulating the Internet.^[92]

Whether copyright should apply to the Internet depends on value judgements and policy choices. Copyright law has always had to strike a balance between the competing policy goals of encouraging creativity and allowing public access to information.^[93] This balance is particularly acute if one is concerned with fostering the use of infant technology such as the Internet. To promote further intellectual development, there must be some means of providing copyright protection. Those who think otherwise^[94] ignore this fundamental point: if there is no incentive to create, there will be less material available for public use. As use of the Internet grows,^[95] the more important it is that material on the Internet is protected. Inconsistency between rights in cyberspace and rights in the ‘real world’ will render real world rights redundant.^[96] Thus, we believe that copyright owners should be compensated for infringements that occur over the Internet.^[97]

In our view, liability for infringement on the Internet should not be determined by reference to the diffusion right which is technologically obsolete.^[98] Moreover, we believe any new legislation should specifically address the issue of ISP liability for reasons of certainty, and so that decisions are made on broader policy considerations, rather than on a case-by-case basis. We therefore reject the proposal that existing principles of authorisation are sufficient to regulate this area.^[99]

It appears that it is simply not feasible for copyright owners to pursue Internet users who either upload or download works on the Internet due to possible anonymity^[100] and economic viability.^[101] In our view ISPs should be strictly liable notwithstanding the moral problems of holding liable an ‘innocent’ entity which has little or know control over infringement, and may not even have knowledge of any specific infringements.^[102] The theme of copyright law is to protect the economic interests of owners against defendants who infringe even if they are not aware of the infringement or do not intend to do it: copyright law is not so much a punishment, but a means of regulating use of a particular form of intellectual property.^[103]
Moreover, the White Paper noted that, as between copyright owners and ISPs, the latter should bear the cost of infringement since they are in a commercial relationship with the actual infringers and can best pass on the costs of copyright liability to those who actually reproduce work.^[104] There have been other proposals that liability should apply to users or manufacturers of technology that could be used to assist in the infringement of copyright over the Internet.^[105] The problem with such proposals is that are they less proximate to Internet infringement than holding ISPs liable: they levy not only those who use the Internet, but others as well.^[106] However, making ISPs liable does not prevent copyright owners pursuing individuals who are commercially exploiting the material and are identifiable.

There appear to be two main options that are open to administer a system of ISP liability in Australia: either a compulsory licence granted to the ISPs so that they can use copyrighted material for a stated fee, or leaving it open to negotiation on market principles, with a final recourse to the courts. Whilst it is possible for commercial settlements to be reached in this context,^[107] in our view a compulsory licence scheme is preferable.^[108] Such a scheme should not result in censorship by ISPs, whereas a settlement system would encourage ISPs to monitor and remove material,^[109] thereby impinging upon users’ privacy.^[110] Moreover, a settlement system in Australia may be unworkable. In order for a copyright owner to seriously threaten an ISP with litigation, the owner would have to point to discrete infringements for which damages would be awarded, as opposed to the general infringing nature of the Internet. The unworkability of such an approach after UNSW v Moorhouse^[111] led to the enactment of a compulsory licence scheme for photocopying on the basis that “if you can’t beat them, join them, and ask for royalties.”^[112]
The Internet requires an international solution due to its disregard for geographic boundaries.^[113] Whilst we believe that a compulsory licensing scheme could be applied internationally, it may be that the approach adopted in Australia is dictated by international considerations. It may be difficult to achieve international harmonisation of laws.^[114] Until such international harmonisation is achieved, there is no reason for Australia not to take the initiative.

[*] Law Students, University of New South Wales. The authors wish to thank Brian Fitzgerald for his comments on an earlier draft of this article.
[1] For the purposes of this essay, an ISP “is an organisation which sets up Internet access for other people or companies.” See J Behrens, “Electronic Communications: Glossary of Technical Terms” (1995-6) 6 Computers and the Law 35 at 36. Examples of ISPs in Australia are Telstra Big Pond and OzEmail.
[2] Such as telecommunications carriers (for example Telstra or Optus), and in the United States, Bulletin Board Service (BBS) operators. However, the primary focus of this article will be ISP liability.
[3] Telstra Corporation Limited v Australasian Performing Right Association Limited (1997) 38 IPR 294.
[4] Telstra participated in the provision of music on hold in three ways: (1) when a person called a Telstra service centre and was put on hold, s/he was played music; (2) Telstra provided the transmission facilities for other businesses to play music to callers who were on hold; and (3) a person who called a subscriber to the “CustomNet” service heard music if the line was busy.
[5] The ‘diffusion right’; Copyright Act 1968 (Cth), s 31(1)(a)(v).
[6] The ‘broadcast right’; Copyright Act 1968 (Cth), s 31(1)(a)(iv).
[7] See discussion on APRA’s claim below.
[8] Compare D Andrews, “Telstra v APRA: Does He/She who Pays the Piper Call the Tune?” (1997) 2 Media and Arts Law Review 194 at 196.
[9] Toohey J, at 304, agreed with Dawson and Gaudron JJ, at 299, about the conclusion with respect to this requirement. See also Kirby J at 328. McHugh J expressed the view that “broadcast or other matter” in s 26(1) referred to matter that has been, is being, or will be transmitted by wireless telegraphy to the public (“broadcast...matter” at 309, 313) or matter that has been, is being, or will be transmitted to the public by similar means (“other matter” at 313). On this view, Telstra was not operating a diffusion service, since the matter it transmitted was not “broadcast or other matter”. Note that McHugh J did not decide the case on this point because Telstra did not rely on it (at 316).
[10] Per Dawson and Gaudron JJ at 299-300, per Kirby J at 333. Toohey J, at 304, disagreed with this conclusion.
[11] Per Dawson and Gaudron JJ at 300, per Kirby J at 333-4. Toohey J, at 305, and McHugh J, at 316, disagreed with this conclusion.
[12] Per Dawson and Gaudron JJ at 304, per Toohey J at 304, per McHugh J at 316 and per Kirby J at 340. See also Australasian Performing Right Association Limited v Telstra Corporation Limited (1996) 60 FCR 221 per Black CJ at 229, per Sheppard J at 248-9 and per Burchett J at 261. Cf Australasian Performing Right Association Limited v Telstra Corporation Limited (1993) 46 FCR 131, per Gummow J at 139-44.
[13] As the primary focus of this article is ISPs, and the Internet is typically accessed via a conventional phone rather than a mobile phone, the broadcast right will not be analysed in detail. One issue for future research is whether an ISP is the person who causes the broadcast when a lap top computer with modem is connected to a mobile telephone. If there is no equivalent of ss 26(2) and 26(4) for the broadcast right, it would seem that it is the mobile telecommunications carrier (such as Telstra, Optus and Vodafone) who causes the broadcast, and hence it (rather than the ISP) may be liable.
[14] See Attorney-General’s Discussion Paper, Copyright and the Digital Agenda, July 1997 at 71; P Knight, “Access Providers Should Put Up A Fight” (1996) 2 CompuLaw Newsletter 57; S Cant, “Internet Law Puberty Blues” (1996) NSW Young Lawyers CLE at 9-11; D Watts, “Internet Legal Issues” (1997) Leo Cussen Institute at 17. Note that this license fee does not extend to websites where money is paid for music, that is “subscription music services”.
[15] See Attorney-General’s Discussion Paper, ibid at 71; S McConnel, “Phone Music Breaches Performance Copyright” (1997) 17 Proctor 20 at 21; “Composers Caught in the Net” (1997) 3 CompuLaw Newsletter 42. As yet, no Australian court has held an ISP liable in these circumstances. In Trumpet Pty Limited v OzEmail Pty Limited (1996) 34 IPR 481, OzEmail (an ISP) was actively and directly involved in the distribution of Trumpet’s shareware program. For a discussion of Trumpet v OzEmail, see J Fitzsimons, “Fine Print in a Shareware License: Trumpet Software v OzEmail” (1996) 2 CompuLaw Newsletter 73; M Pattison and M Weir, “First Case on the Legal Protection of Shareware” (1996) 9 Australian Intellectual Property Law Bulletin 121; C Golvan, “Trumpet: A Comment” (1996) 9 Australian Intellectual Property Law Bulletin 142.
[16] Per Dawson and Gaudron JJ at 299; see also Toohey J at 304.
[17] S Gilchrist, “Telstra v APRA: Implications for the Internet” (1997) 16 Communications Law Bulletin 10 at 11.
[18] Note that according to McHugh J in Telstra, a service is only a diffusion service if it transmits “broadcast or other matter” within his limited definition. Hence, His Honour may not agree with this conclusion. Cf R Cutler, “Music-on-hold Infringes Copyright” (1997) 1 Telemedia 106 at 108.
[19] Cf the facts in Religious Technology v Netcom (1995) 33 IPR 132 at note 58.
[20] Except for the judgment of Justice McHugh.
[21] Note that musical works are not the only class of material with a diffusion right. Literary, dramatic, and musical works are granted diffusion rights by s 31(1)(a)(v), and cinematographic films are granted diffusion rights by s 86(d). In relation to artistic works, the diffusion right is limited to the exclusive right to “cause a television programme that includes the work to be transmitted to the subscribers to a diffusion service” (s 31(1)(b)(iv); (emphasis added). Since photographs are artistic works (s 10(1)(a)), the limited diffusion right for artistic works represents a significant gap in existing law.
[22] However, Gummow J, who held against APRA at first instance, is now on the High Court. Note also that the definition of “broadcast or other matter”, not relied on by Telstra in Telstra v APRA, is likely to be argued by the ISPs. See note 9 supra.
[23] Such as Telstra and Optus.
[24] Section 26(2)(b).
[25] Section 26(4).
[26] Given the agreement between the ISP and the subscribers, the operation of s 26(2), s 26(5) is inapplicable, and should not be used to deem an agreement between the subscribers and the telecommunications carrier.
[27] By s 13(2), authorising others to do an act in relation to the copyright in a work is one of the copyright owner’s exclusive rights. Without the license of the copyright owner, authorising the doing of any act comprised in the copyright of a work (s 36(1)) or Part IV subject matter (s 101(1)) amounts to a direct infringement of the copyright.
[28] See YF Lim, “Internet Service Providers and Liability for Copyright Infringement through Authorisation” (1997) 8 Australian Intellectual Property Law Journal 192. Compare A Bowne, “Trade Marks and Copyright on the Internet” (1997) 2 Media and Arts Law Review 135 at 139-40; K Cooney, “Liability for On-line Images: How an Ancient Right Protects the Latest in Net Functions” (1997) 16 Communications Law Bulletin 5 at 6; S Loughnan, “Service Provider Liability for User Copyright Infringement on the Internet” (1997) 8 Australian Intellectual Property Law Journal 18 at 28-30; S Cant, note 14 supra at 8; D Watts, note 14 supra at 17-18. See also Attorney-General’s Discussion Paper, note 14 supra at 29-32. Authorisation is similar to the doctrines of contributory and vicarious liability in the USA, which will be discussed below.
[29] University of New South Wales v Moorhouse (1975) 133 CLR 1, per Gibbs J at 12, per Jacobs J at 20-1 with whom McTiernan ACJ agreed.
[30] Per Gibbs J at 12-13; cf Jacobs J at 21-2. See also Microsoft Corporation v Marks (1995) 33 IPR 15.
[31] In the Moorhouse case, Gibbs J stated, at 14, that the fact that the University was aware of assertions by the Australian Copyright Council that unlawful practices were commonplace within universities constituted “enough information to raise the suspicion that some infringing copies were likely to be made”. The ISPs may have been put on notice of infringement by the letters of demand sent by APRA. In submissions to the United States Commissioner of Patents and Trademarks in 1994, “on-line information service providers” admitted that they were aware of copyright infringements that occur on their systems: YF Lim, note 28 supra at 200, footnote 84.
[32] University of New South Wales v Moorhouse, note 29 supra, per Gibbs J at 12; WEA International Inc v Hanimex Corp Limited (1987) 10 IPR 349 at 362; Australasian Performing Right Association v Jain (1990) 18 IPR 663. See also YF Lim, note 28 supra at 196, 199-201; S Loughnan, note 28 supra at 29. See also BF Fitzgerald, “Internet Service Provider Liability” in A Fitzgerald, BF Fitzgerald, P Cook and C Cifuentes (eds), Going Digital: Legal Issues for Electronic Commerce, Multimedia and the Internet, Prospect (1998) 153.
[33] This uncertainty is due in part to the ISPs’ unwillingness to provide this information for security reasons. A company has emerged that checks individual websites for infringements of copyright for a fee, see: S Loughnan, note 28 supra at 27. The existence of such a company suggests that it may be possible for ISPs to control infringement in theory, although this may not be economically viable in practice. However, such a company may not be able to monitor email. See K Tickle, “The Vicarious Liability of Electronic Bulletin Board Operators for the Copyright Infringement Occurring on Their Bulletin Boards” (1995) 80 Iowa Law Review 391 at 397; and BF Fitzgerald, ibid.
[34] YF Lim, note 28 supra at 201-11.
[35] In any event, an ISP may be able to avoid liability by taking reasonable steps to prevent infringement, University of New South Wales v Moorhouse, note 29 supra, per Gibbs J at 12, Jacobs J referred at 23 to qualifying an invitation to infringe. Steps which an ISP can take to prevent infringement may include providing warnings when users logs on which indicate what a user can and cannot do, or monitoring its websites to the limited extent that may be technically and legally possible.
[36] Copyright Convergence Group Report, Highways to Change: Copyright in the New Communications Environment, August 1994 at 20, 28.
[37] Ibid at 24. These recommendations were encapsulated in Schedule 5 of an Exposure Draft Copyright Amendment Bill 1996, which was not introduced into Parliament; Attorney-General’s Discussion Paper, note 14 supra at 59.
[38] The aim of the Discussion Paper was to indicate the method by which Australia could implement the international copyright standards agreed at the December 1996 WIPO meeting. See Attorney-General’s Discussion Paper, note 14 supra at 20. See also note 97 infra.
[39] Attorney-General’s Discussion Paper, note 14 supra at 22.
[40] Attorney-General’s Discussion Paper, note 14 supra at 22. According to the report, examples of where the right of making available would be exercised include linking a server (with copyright material) to the World Wide Web, and uploading a document to a World Wide Web site: Attorney-General’s Discussion Paper, note 14 supra at 34.
[41] Attorney-General’s Discussion Paper, note 14 supra at 30.
[42] The Hon Daryl Williams and Senator Richard Alston, “Copyright Reform and the Information Economy”, Joint Media Release, 30 April 1998. See <www.dca.gov.au:80/nsapi-graph/>.
[43] See Department of Communications, The Information Economy and the Arts, Guide to the Government Decision on Copyright Reform and the Digital Agenda at <www.dca.gov.au/nsapi-text/>.
[44] Ibid at 1.
[45] Ibid at 3.
[46] Ibid at 3. This specific scheme for dealing with authorisation liability for ISPs contradicts the application of general principles for authorisation adopted in the Attorney-General’s Discussion Paper, note 14 supra at 30.
[47] Ibid at 3.
[48] Ibid at 4.
[49] Ibid at 2.
[50] The exclusive rights of the owner are contained in s 106 of the Copyright Act 1976 (as codified and amended at 17 USC ss 101-1010 (1988)). They are: (1) copying the copyright work; (2) preparing derivative works; (3) distributing copies of the work; (4) performing the work publicly; and (5) displaying the work publicly. See MD Dobbins, “Computer Bulletin Board Operator Liability for Users’ Infringing Acts” (1995) 94 Michigan Law Review 217. If these acts are done by another without permission or a defence, this amounts to direct copyright infringement: 17 USC s 501.
[51] Note that the functionally similar principle of authorisation, Australia’s mechanism for holding a third party liable is contained in the Copyright Act 1968 (Cth).
[52] Gershwin Publishing v Columbia Artists Management 443 F2d 1159 (1971) at 1162.
[53] See MD Dobbins, note 50 supra.
[54] Shapiro, Bernstein Co v HL Green 316 F 2d 304 at 307 (2d Cir 1963). For these indirect liability claims to be made out, there needs to be proof of a direct infringement, which should not be difficult since the storing of material on a computer’s RAM is copying for the purposes of the act and therefore an infringement: MAI Systems Corp v Peak Computer Inc 991 F 2d 511 (9th Cir 1993).
[55] Section 111 of the US Copyright Act (1976) appears to exempt telephony operators, since they do not control the selection of programs that might be deemed to infringe. See D Andrews, note 8 supra at 198.
[56] These cases have been discussed in many articles, a few of which are: MD Dobbins, note 50 supra; RC Kirkwood, “When Should Computer Owners Be Liable for Copyright Infringement by Users?” (1997) 64 The University of Chicago Law Review 709; K Tickle, note 33 supra.
[57] 839 F Supp 1552 (MD Fla 1993).
[58] In Playboy and the Sega cases, discussed below, the BBS system operated consisted “of electronic storage media, such as computer memories or hard disks, which [was] attached to telephone lines via modem devices and controlled by a computer” and hence no ISP was involved. See Sega Enterprises v Maphia 857 F Supp 679 (ND Cal 1994) at 683. In Netcom, discussed below, the BBS operator was connected by an ISP to Usenet, “a worldwide community of electronic BBSs that is closely associated with the Internet” see Religious Technology v Netcom (1995) 33 IPR 132 at 135.
[59] This was on the basis that the defendant was “supplying a product”. In Netcom, Whyte J, at 143, suggests the basis for this was that the defendant maintained an archive of files for its users. With respect, given the very insignificant analysis on the issue in Playboy, it is by no means clear that this is the case.
[60] Ibid at 1556-7. The Court found that BBS subscribers constituted “the public” for the purposes of the Act.
[61] 857 F Supp 679 (ND Cal 1994). It should be noted that in Sega, the Court stated that it had found a case of both a breach of s 106 and contributory infringement, but it is not clear from the judgement in what way the BBS operator had infringed directly. See criticism of this in Netcom, note 58 supra at 142.
[62] (1995) 33 IPR 132.
[63] In Netcom, this involved operating the system whilst maintaining a supervisory control over the system, even if they didn’t monitor every transmission. In Sega, this involved encouraging subscribers to upload and download material, and also profited by selling hardware that was used to make the copied material useable.
[64] One may not be able to verify infringement if there is a possible fair use defence, there are no copyright notices involved or where the plaintiff cannot verify their ownership: see Netcom, note 58 supra at 145-6.
[65] Netcom at 148-9. Netcom also considered the fair use defence. It concluded that such a defence was not available to Netcom, a conclusion which conflicted with the finding in Religious Technology v FACT.NET Inc 901 F Supp 1519 (D Colo 1995) See E Roditti and A Fontaine (eds), “On-Line Provider Liable for Postings” (1996) 22 Computer Law & Tax Report 1 at 4. For further information on this case, see A Brill and A Packard, “Silencing Scientology’s Critics on the Internet: A Mission Impossible?” (1997) 19 Communications and the Law 1 at 12-17. See also Marobie-SL Inc v National Association of Fire Equipment Distributors WL 709747 (ND Illinois Nov 13 1997).
[66] Cubby v Compuserve 776 F Supp 135 (SD NY 1991) per Leisure J at 473.
[67] S Loughnan, note 28 supra at 26. See also J Fenster, “Fault-Based Libel and Copyright Infringement Liability for On-Line Content Providers and Bulletin Board operators as Information Distributors” (1996) 11 St John’s Journal of Legal Commentary 653 and D Watts, note 14 supra at 18.
[68] See Netcom at 143 where Whyte J stated that Netcom does not create or control the content of information available, whereas some of its larger competitors do. This leads to a dilemma of whether to monitor, the Netcom standard giving an incentive not to monitor. See S Cant, note 14 supra at 9. See also BF Fitzgerald, note 32 supra.
[69] R Hails, “Liability of On-Line Service Providers Resulting from Copyright Infringement Performed by their Subscribers” (1996) 5 European Intellectual Property Review 304 at 306
[70] This paper advocated adopting current copyright law to the Internet with minor changes rather than overhauling the system. See A Butler, “Regulation of Content of On-Line Information Services: Can Technology itself solve the problem it has created?” (1996) 19 University of New South Wales Law Journal 193 at 213.
[71] The Working Group on Intellectual Property Rights, a subcommittee of the Task Force, were directly responsible for these papers.
[72] White Paper at 17. See also G Smirnoff, “Copyright on the Internet: A Critique of the White Paper’s Recommendation for Updating the Copyright Act and How the Courts are already filling in its most important shortcoming, On-line Service Provider Liability” (1996) 44 Cleveland State Law Review 197 at 209-11.
[73] White Paper at 116-7.
[74] Ibid at 117-18. It should also be noted that the White Paper would find browsing on the Internet an infringement: ibid at 64-6.
[75] The relevant part of the legislation is the Digital Copyright Clarification and Technology Education Act of 1997. The text of the legislation is available at <thomas.loc.gov/>.
[76] Copyright, Designs and Patents Act 1988 (UK), s 17(2) and (6). This is consistent with Article 4 of the EC Directive on the Legal Protection of Computer Programs. See G Crown, “Copyright and the Internet” (1995) 11 Computer Law & Practice 169 at 170.
[77] See M Morano, “Legislating in the Face of New Technology: Copyright Laws for the Digital Age” (1997) 20 Fordham International Law Journal 1374 at 1415-6.
[78] See K Hughes, “Copyright in Cyberspace” (1996) 11 American University Journal of International Law and Policy 1027 at 1057.
[79] The Treaty Establishing the European Community.
[80] Coditel v SA Cine Vog Films Case 62/79, [1980] ECR 881 at 894.
[81] See M Morano, note 77 supra at 1376.
[82] Commission of the European Communities, Follow-Up to the Green Paper on Copyright and Related Rights in the information Society, COM (96) 586 Final (Nov 96) at 8, cited in M Morano, note 77 supra at 1405.
[83] Commission of the European Communities, Communication to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions: Illegal and Harmful Content on the Internet, COM (96) 487 Final at 14. (Oct 96), cited in M Morano, note 77 supra at 1417.
[84] Ibid at 13-14, 25. In M Morano, note 77 supra at 1417.
[85] See <www.copyright.org.au/news/news.htm> following from the WIPO treaties of 1996.
[86] The Information Highway Advisory Council, Connection Community Content: The Challenge of the Information Highway containing the Final Report of the Working Group on Canadian Content and Culture Sub-committee on Copyright at 38 in K Hughes, note 78 supra at 1049.
[87] M Morano, note 77 supra at 1409-10.
[88] See Attorney-General’s Discussion Paper, note 14 supra at 13. Also note that there is a new right of making available to the public in the WIPO Copyright Treaty which was designed to cover interactive on-demand services. See also BF Fitzgerald, “Recent International Initiatives Concerning Copyright in the Digital Era” in A Fitzgerald, BF Fitzgerald, P Cook and C Cifuentes (eds), note 32 supra at 22.
[89] Working Group of the Subcommittee on Multimedia Copyright Council, Study of Institutional Issues Regarding Multi Media, February 1995, cited in B Sookman, “Copyright and the Information Superhighway: Some Issues to Think About (Part I)” (1997) 11 Intellectual Property Journal 123.
[90] See G Chen, “The Internet and its Legal Ramifications in Taiwan” (1997) 20 Seattle University Law Review 677.
[91] M Jaccard, “Securing Copyright in Transnational Cyberspace: The Case For Contracting With Potential Infringers” (1997) 35 Columbia Journal of Transnational Law 619 at 623.
[92] See Attorney-General’s Discussion Paper, note 14 supra at 76 where it is noted that Japan and Hong Kong have introduced legislation implementing the 1996 WIPO treaties.
[93] P Loughlan, “Music on Hold: The Case of Copyright on the Telephone: Telstra Corporation Ltd v Australasian Performing Rights (sic) Association” (1996) 18 Sydney Law Review 342 at 344; A Bowne, note 28 supra at 139; M De Zwart, “Copyright in Cyberspace” (1996) 21 Alternative Law Journal 266 at 267; Copyright Convergence Group Report, note 36 supra at 7.
[94] See M De Zwart, ibid at 267.
[95] See for example P Budde, Internet and On-Line Services Markets in Australian and New Zealand, 1997 (privately distributed).
[96] Infringement is likely to be more frequent on the Internet, because many of the disincentives that would normally prevent a user from infringing are not present on the Internet. With digital technology, copying is very easy, and there is a low chance of detection: S Loughnan, note 28 supra at 19-20. See also D Watts, note 14 supra at 16.
[97] There is general agreement amongst the international community that copyright principles will apply to the Internet: Commission of the European Communities, Follow-Up to the Green Paper on Copyright and Related Rights in the information Society, COM (96) 586 Final (Nov 96) at 8. Note that the initial Green Paper was silent on ISP liability. See K Hughes, note 78 supra at 1054. This view is consistent with the White Paper in the USat page 212 and was the conclusion drawn at the December 1996 meeting of WIPO. See M Morano note 77 supra at 1403.
[98] The diffusion right was designed to deal with the long-forgotten ‘theatrephone’: Telstra Corporation Limited v Australasian Performing Right Association Limited, note 3 supra per Kirby J at 331. Kirby J called for legislative reform in this area at 340; see also S Loughnan, note 28 supra at 19.
[99] Cf Attorney-General’s Discussion Paper, note 14 supra at 30. However, note the proposals for new legislation at note 47 supra and accompanying text.
[100] See M Stockton, “Protecting Copyright in Cyberspace: Holding Anonymous Remailer Services Contributorily Liable for Infringement” (1997) 14 Thomas M Cooley Law Review 317 arguing for a higher standard of liability for BBS operators who keep subscriber details anonymous. See also See S Loughnan, note 28 supra at 19. See also BF Fitzgerald, note 32 supra.
[101] Either the end user has no money, or the damages payable for the individual infringement will be too small. See S Loughnan, note 28 supra at 19 and S McConnel, note 15 supra at 21. See also BF Fitzgerald, note 32 supra.
[102] S McConnel, note 15 supra at 21; S Loughnan, note 28 supra at 19, 22-3. See also J Fitzsimons, note 15 supra at 10; P Loughlan, note 93 supra at 343.
[103] It was said in Baker v Selden 101 US 99 at 104 (1879) that the principal object of copyright law lies in the benefits that the public receives from the work of creators, cited in F Cate, “Comment: Law in Cyberspace” (1996) 39 Howard Law Journal 565 at 574. See also S Gilchrist, note 17 supra at 11; S Loughnan, note 28 supra at 21.
[104] See RC Kirkwood, note 56 supra and J Myers, “Speaking Frankly about Copyright Infringement on Computer Bulletin Boards: Lessons to be Learned from Frank Music, Netcom, and the White Paper” (1996) 49 Vanderbilt Law Review 439 at 475-6. It is acknowledged that to the extent that such fees are passed on, the cost of the Internet will rise and the usage may decline as a result.
[105] For example, taxing blank computer disks or computer software and hardware. It has been argued that manufacturers of digital copying machines should be held liable instead: see A Taitz, “Removing Road Blocks Along the Information Superhighway: Facilitating the Dissemination of New Technology by Changing the Law of Contributory Copyright Infringement” (1995) 64 The George Washington Law Review 133.
[106] It is true that if ISPs are liable, the fees levied will be passed on to both those who infringe and those who do not. However, levying computer users includes more non-infringers than levying Internet users via ISPs.
[107] For example, the APRA v OzEmail settlement discussed above. The Frank Music v Compuserve settlement allowed the ISP to continue to operate its BBS for a licence fee. See J Myers, note 104 supra at 478-80. See also G Smirnoff, note 72 supra at 229-30.
[108] Cf M Jaccard, note 91 supra at 661, and D Zimmerman, “Copyright in Cyberspace: Don’t Throw out the Public Interest with the Bath Water” (1994) Annual Survey of American Law 383 at 410-11, which stated that the US Green Paper said compulsory licensing of works on the Internet was unnecessary and undesirable, at 134. Note however, a blanket licence may not be available in all circumstances; for example, there is no equivalent to APRA for photographs. See S Gilchrist note 17 supra at 12.
[109] In a negotiated settlement, ISPs may seek to reduce the fees payable by undertaking to remove infringing works.
[110] See Joint Media Release, note 42 supra.
[111] Note 29 supra.
[112] See J McKeough and A Stewart, Intellectual Property in Australia, Butterworths (2nd ed, 1997) p 183. See also p 204. As recommended by the EU, there are advantages in having collecting societies manage the pursuit of infringements for the owners. K Hughes, note 78 supra at 1055.
[113] See for example the European Union’s approach above.
[114] Such harmonisation has been difficult to achieve in the EU, and, given the different treatment of moral rights issues from countries such as the US compared to Europe, would be no easier to achieve on a global scale. See White Paper at 154; B Kuhn, “A Dilemma in Cyberspace and Beyond: Copyright Law for Intellectual Property Distributed over the Information Superhighways of Today and Tomorrow” (1996) 10 Temple International and Comparative Law Journal 171 at 194, and R Kurz and C Jiminez, “Copyrights On-Line” (1996) 39 Howard Law Journal 531 at 563. See K Hughes, note 78 supra at 1063 where it is noted that the US will apparently only harmonise if it is in their interests.

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