This is a guest-blog from The Jamster on a related decision in the land of Oz, which imposes liability on the carrier in the middle that seems to go beyond the liability in Grokster for the direct infringer, an odd and disturbing result:
Yelnick's description of the "search for intent" in the Grokster decision as "chilling" has a strong resonance, especially for ISPs, with the decision last week of the Australian Federal Court in Universal Music Australia v Cooper.
This decision concerned an application by some 35 Australian and foreign music labels for injunctions and other relief against Cooper, the owner of a website (www.mp3s4free.net), and the ISP which hosted the website, on the ground that Cooper had infringed copyright through facilitating unauthorised down loads of popular tracks through his website. The website contained popular music charts from Australia and around the world together with catalogues of tracks in those charts with links to other websites from which the tracks could be downloaded. These links were created by third parties using software tools provided on the website, and thus, as the court concluded, with the necessary permission of Cooper. Evidence from the ISP's Access Log File, obtained by the Applicants on execution of Anton Piller orders, showed that in a 12 day period immediately prior the website had attracted over 5 million visits from 214,000 unique host computers identified through IP names of the visitors, of whom more than 61,000 were shown as conducting searches on the website.
The Court held that Cooper had not infringed the Australian Copyright Act by "making available online" or "electronically transmitting" copyrighted material because "it is the remote websites which make available the sound recordings and from which the digital music files are downloaded as a result of a request transmitted to the remote website". The evidence showed that the remote websites could be accessed directly through a browser or through a search engine such as Google or Yahoo, and that after a request had been made the file was downloaded directly to the user and not through Cooper's website. In this the Court relied heavily on Universal City Studios v Reimerdes 111 F.Supp.2d 294 (SDNY 2000).
The Court also held that Cooper had not infringed the "communication right" granted to the owners of the copyright under the Australian Copyright Act because he was not responsible for determining the material made available on the remote sites, that being the responsibility of the owners of those sites. The Court specifically rejected the contention of the Applicants that Cooper's power to control the links on his website enabled him to determine the content available for communication through his website.
However, the Court held that Cooper had authorized copyright infringement in breach of the Copyright Act because he had sufficient control of his website to prevent infringement if he so wished. The Court found that Cooper had designed and created a well organised and user friendly website which enabled users to access and download copyrighted material through clicking on the links on the website. The website contained numerous references to linking and downloading from which the Court inferred that Cooper knowingly approved the use of his website in this manner. Although the software tools on the website allowed third parties to add links without Cooper's permission, the Applicants pointed to, and the Court accepted the existence of, other tools which Cooper could have used which required the permission of the website operator before links could be added. The Court also found that disclaimers on the website warning of the dangers of copyright infringement, far from exonerating Cooper, in fact pointed to his awareness of the existence of illegal MP3 files on the Internet.
To this point the judgment is unexceptional on legal and factual grounds. The name of the website itself was a giveaway, and Cooper clearly intended to benefit from advertising on the website.
The Court then turned its attention to the ISP, a relatively small operation hosting about 2,000 web sites and with some 8 employees, which claimed not to be aware of the nature of the web sites activities. The Court noted the existence of an arrangement between Cooper and the ISP under which the ISP hosted the web site for free in return for advertising on the web site. It found that this provided a substantial financial benefit to the ISP, especially given that it was a highly trafficked site. Because the ISP comprised a "small, tightly knit operation", it was likely that all employees would have been aware of the nature of the arrangement. It disregarded evidence by employees of the ISP that they had not visited the web site. It inferred that someone must have visited the web site at the time of entering into the arrangement in order to see whether it was likely to attract traffic. It also inferred that someone must have subsequently checked the site to ensure that the advertising was still there - otherwise the ISP would derive no benefit from the arrangement. This was a "course which one would have expected a reasonable, astute and internet host such as [ISP] to have taken". It also noted that an employee provided continuing technical advice and services to Cooper. It stated that as the ISP hosted the web site and provided the internet access it could have prevented the infringing acts by taking down the web site. In reaching its findings on evidentiary issues, the Court construed adversely the failure of the principals of the ISP to give evidence at the hearing. The Court accordingly held that the ISP had also authorised a breach of copyright for which it was liable.
Despite the scepticism of the Court of the "professed ignorance" of ISP employees about the site, it clearly drew an adverse and disturbing inference from the failure of the ISP to investigate a highly trafficked site, the logic of which ignores the realities of telecommunications. The necessary implication that an ISP can ignore low trafficked sites, while in an immediate sense re-assuring, gives the lie to the principle when an attempt is made to draw the line on visitor numbers at which the obligation to investigate kicks in. The Court held that being in the top 30% of trafficked web sites was sufficient - a decision which will undoubtedly concern larger telecommunications companies.
When the Court considered the ISP's claim for protection under the safe harbour provisions of legislation implementing the US/Australian Free Trade Agreement (the US Free Trade Agreement Implementation Act 2004 referred to by the Court as the "FTA Act"), it moved further onto the slippery slope of intent. This was both unfortunate and unnecessary; the Court had already found that the FTA Act had no retrospective effect.
The FTA Act introduced a copyright protection regime based on the US model which was more favourable to copyright owners than was perceived to be the case under the Australian Copyright Act. Following representations by Australian telecommunications carriers, the Australian Federal government included in the FTA Act safe harbours similar to those available to US carriers, including the introduction of a mechanism for take-down notices of alleged infringing copyright.
Although the Court had already decided that the FTA Act did not apply retrospectively, it nevertheless proceeded to examine whether, had it been effective, the ISP would have been entitled to the benefit of the safe harbour provisions. It found against the ISP, in a series of circular arguments which depend for their validity on the awareness of the ISP of the likelihood of copyright infringement, because:
. Despite its awareness that copyright material was likely to be infringed, it had not adopted and implemented a reasonable policy for terminating accounts of repeat infringers;
. It had received a direct financial benefit from the infringing activity through the arrangement for free advertising; and
. It did not act expeditiously to remove and disable access from the links and facilities hosted "notwithstanding that the circumstances made it apparent that copyright material was likely to be infringed."
In reaching these conclusions, the Court relied principally on the evidence of two employees that the ISP had referred the alleged copyright infringement to Cooper, that Cooper had responded by claiming that he hosted no material on his website that infringed copyright, and that the ISP had accordingly taken no action. Had the safe harbour provisions been in effect at the time, the ISP would have received a formal take-down notice from the copyright owner, and on complying with it, would have been protected from further action against it not only by the copyright owner but by the owner of the website.
This decision has wide reaching ramifications for carriers in other areas outside copyright infringement, including especially with respect to the carriage and hosting of pornographic and defamatory material. Apart from technical issues of the nature considered in Cooper and Grokster, making a judgment call on copyright infringement is easier than determining whether particular web sites infringe pornographic laws. Prior to the US/Australia Free Trade Agreement, various Australian laws provided safe harbours for protecting ISPs and telecommunications carriage service providers against breaches for content carried or hosted on their systems. For example, section 91(1) of the Fifth Schedule to the Broadcasting Services Act of 1992 as amended (Commonwealth) exempts carriers from state laws where the carrier has otherwise complied with the provisions of that Act, especially in relation to observance of industry codes. These laws recognise the difficulty of imposing obligations to monitor all content carried or hosted on their systems. The availability of the safe harbour is generally qualified in that the ISP must be unaware of the nature of the content. The legislative history of these laws indicated an intention that more was required to create the requisite state of "awareness" than mere allegations to that effect by an aggrieved party. In this it appears to be different from the position which applies in the UK where once an aggrieved party raises a complaint the ISP is said to be aware of the nature of the underlying material. The consequence is, as in Cooper, an ISP waits for the parties to resolve the matter in court at its peril.
Like Grokster, most would probably agree with the outcome of the mp3s4free decision. However, the reliance of the Court in Cooper on intention was taken too far, and was completely unnecessary for the interpretation of the FTA Act. As a consequence, it now has chilling implications for the Australian telecommunications industry.