Author:	Bryan Mercurio BA (Hons), JD (Hons), LLM (UNSW) Associate Lecturer, University of New South Wales Faculty of Law
Subjects:	Copyright Australia (Other articles) Copyright Law Infringement (Other articles) Internet Service Providers - Law and Legislation (Other articles)
Issue:	Volume 9, Number 4 (December 2002)
Category:	Refereed Articles

Contents:

• Introduction
• United States
• Pre- Digital Millennium Copyright Act (DMCA)
• Direct Liability
• Vicarious Liability
• Contributory Liability
• Overview of Pre-DMCA Law
• Digital Millennium Copyright Act
• DMCA "Safe Harbours"
• DMCA Case Law
• Evolution of the DMCA
• Australia
• Pre- Digital Agenda Law
• Telstra v APRA
• APRA v OzEmail
• Authorisation
• Evaluation
• Digital Agenda Act
• Provisions of the Act
• Evaluation of the Act
• Conclusion
• Notes

Introduction

1. Copyright law aims to balance the competing policy goals of encouraging creativity and allowing public access to information.[1] This balance is particularly important and difficult when it concerns the Internet, where meaningful copyright protection must exist in order to promote further intellectual development in the Internet and failing to provide protection would lead to a reduction in the incentive to create and less material available for public use. Therefore, it is important that copyright owners are protected and compensated for infringements occurring over the Internet.

2. The rapid expansion of the Internet, however, greatly expanded the context in which copyright infringement can occur.[2] The Internet, with its inexpensive access, quick downloads and forwarding capabilities allow users to effortlessly bypass copyright laws at a substantial cost to legitimate users.[3] As the Internet expanded, laws remained static and increasingly became incapable of handling such situations. Traditional protections such as cease and desist orders and court action prove ineffective, as letters are ignored and the litigation costs outweigh recovery in most cases. Moreover, as users can easily post information anonymously, even locating the alleged offender proves difficult in many cases. No longer protected, copyright holders attempted to hold Internet service providers (ISPs) liable for subscriber infringements.[4]

3. The United States and Australia have recently enacted legislation relating to the liability of ISPs for the copyright infringements of their subscribers.[5] While American legislators could reflect on ample case precedent in drafting their legislation, Australian legislators had no case law directly on point to aid the drafting process. Perhaps as a result of the two different starting points, the American law is stringent and prescriptive, while the Australian law is more of a general guideline, lacking many of the intricacies of the American law. This article reflects upon the pre-legislation legal environment of both nations and compares the means by which the American and Australian legislation has handled this growing problem.[6] The article concludes by suggesting areas of improvement and issues which may develop as a result of the legislation in each country.

   United States

   Pre- Digital Millennium Copyright Act (DMCA)

4. Pre-DMCA liability for ISPs resulting from subscriber infringement of copyright laws focused on breaches of the Copyright Act.[7] Without clear direction from Congress, parties relied on judge-made law to resolve the dilemma of ISP liability for subscriber infringements. While relatively few cases addressed the issue, the ones that did often reached different conclusions. For instance, some courts held responsibility for the copyright infringements rests solely with the subscriber, while others held ISPs liable on various theories, including direct, enterprise, vicarious or contributory liability.[8]

   Direct Liability

5. Two requirements must be satisfied in order to present a case for direct liability: (1) the plaintiff must show ownership of the allegedly infringing material; and (2) the plaintiff must demonstrate that the alleged infringers violated an exclusive right granted to the copyright holder.[9] A small number of courts have held that the act of providing Internet service attaches liability to an ISP for copyright infringement. These seemingly harsh decisions are due to the fact that in response to subscriber requests, ISPs reproduce and distribute copyrighted material, as every download causes the ISPs computer to copy the material and forward it to the subscriber.

6. In 1993, Playboy Enterprises, Inc. v. Frena[10] was the first case to find liability under this theory. In Playboy, a Bulletin Board System[11] (BBS) operator was held to contravene Playboy's distribution and public display rights when another party posted Playboy photos onto the defendant's BBS, notwithstanding the fact that the defendant was unaware of the infringing material.[12]

7. Several subsequent cases, however, have discredited this theory due to the extreme and unreasonable liability it creates.[13] For instance, just two years after Playboy, the court in Religious Technology Center v. Netcom[14] stated "although copyright is a strict liability statute, there should be some element of volition or causation which is lacking where a defendant's system is merely used to create a copy by a third party."[15] The court continued, "where the infringing subscriber is clearly directly liable for the same act, it does not make sense to adopt a rule that could lead to the liability of countless parties whose role in the infringement is nothing more than setting up and operating a system that is necessary for functioning of the Internet."[16]

8. As Netcom illustrates, the direction of the Internet has expanded since the Playboy decision and courts are well aware of the stifling effect direct liability would cause for the industry. Therefore, it is extremely unlikely another court will hold an ISP directly liable for simply providing the service to infringing subscribers.

   Vicarious Liability

9. Although the Copyright Act does not explicitly recognise vicarious liability, American courts generally impose vicarious liability when the defendant has "the right and ability to supervise" the offender and a "direct financial interest in the exploitation of copyrighted materials."[17] Therefore, ISPs could potentially be vicariously liable since the ISP has a close relationship to the subscriber, owns the equipment that transmits the material, and could financially benefit from the infringement.

10. Courts hesitate to find ISPs vicariously liable, however, due to the fact that ISPs have little control over subscribers and the fact that subscriber actions do not directly affect ISP profitability (provided the ISP gets a flat fee for service).[18]

11. The above does not provide absolute protection for ISPs, however, as the majority of district courts have not ruled on the issue and some may be inclined to find the ISP vicariously liable if it could be construed that they receive benefit from the infringing activity. Moreover, the White Paper,[19] however dated, embraced enterprise liability[20] as desirable and noted that, as between copyright owners and ISPs, the latter should bear the cost of infringement since they are in a commercial relationship with infringers and can pass the liability costs to consumers.[21]

12. The likelihood of a court today finding an ISP vicariously liable for subscriber infringements of copyright is minimal. Instead, most courts are likely to find that the ISP does not possess the needed level of finances or resources to have the "ability" to supervise and control subscriber activity and that, when paid a flat-fee for service, does not have the direct financial interest needed for liability to attach.

    Contributory Liability

13. In addition to granting exclusive rights over creative works, the Copyright Act grants copyright owners with the exclusive right to "authorise" the exercise of those rights.[22] The authorisation right is explicitly mentioned in the Act to avoid any question of contributory infringement for those who do not infringe the copyright themselves, but authorise others to do so.[23] Although the Act does not mention "contributory infringement," courts have read the provision similarly and considered whether an ISP can be liable for providing services and equipment to the infringer.[24]

14. Contributory liability is the most likely way in which courts will continue to find ISPs liable for subscriber infringement. Contributory liability requires the ISP to have actual knowledge or strong evidence of, or materially contribute to, the infringing conduct of another.[25] For contributory negligence to attach, courts have held the ISP must have substantially participated in the infringement, therefore simply selling a service or good that will be used to infringe is insufficient for contributory liability.[26]

15. Courts differ on when an ISP must remove material or face liability, sometimes resulting in cases where ISPs permit actual infringement. For instance, Netcom holds that ISPs are not liable for contributory negligence unless the subscriber has no plausible claim of non-infringement and the ISP "substantially" participates in the infringement.[27] Netcom also recognised that where difficult to verify infringement, the operator would have a defence against contributory infringement.[28] Other courts, however, hold ISPs liable if they fail to act once they receive information sufficient to cause a reasonable person to investigate.[29] This implies that ISPs will become risk averse and needlessly remove non-infringing material, potentially creating 1st Amendment problems as well as increasing litigation costs for the innocent party.

16. Before the DMCA, the law governing contributory liability for ISPs was far from settled. Courts in different jurisdictions differed in their assessment of liability and blame, creating a situation where one ISP could be sued in multiple jurisdictions and be liable in some jurisdictions and held to be completely blameless in others. A situation such as this could not be tolerated.

    Overview of Pre-DMCA Law

17. The American law regarding ISP liability for subscriber infringements developed to provide in effect that if an ISP receives no money from subscriber behaviour, then it avoids having to monitor subscriber activity.[30] However, if the ISP receives knowledge or strong facts indicating an infringement (through compliant or voluntary investigation), then it must investigate and discontinue service if it confirms a strong case for infringement. There is no guarantee, however, that courts will continue this pattern. The uncertainty in the law caused providers to be more risk averse than needed, occasionally suspending service when no copyright infringement occurred.

18. Controversy has typically arisen when a copyright owner informs an ISP of the alleged infringing activity of a subscriber. ISPs are then faced with the dilemma of whether to terminate a customer's service based on what could be erroneous information, which in many cases is lodged in retaliation against a legitimate Web-based competitor, or ignoring the information and exposing itself to contributory liability. ISPs attempted to protect themselves by requiring substantial documentation from the alleged infringement victim. Some also required the victim to directly contact the alleged infringer in an attempt to settle the dispute before contacting the ISP. This proved impossible in some cases, such as when infringing materials are anonymously posted on the Internet. Alternatively, ISPs who terminated service based on a mere claim of infringement found themselves the target of litigation initiated by a customer for breach of contract, interference with contract, and interference with prospective economic advantage. This uncertainty as to ISP liability, and how ISPs should conduct business, prompted Congress to act in an attempt to add clarity and certainty to the law.[31]

    Digital Millennium Copyright Act

    DMCA "Safe Harbours"

19. The DMCA, signed into law on 28 October 1998, amended copyright law to provide limitations for ISP liability, allowing them to now avoid both copyright liability and liability to subscribers by following the specific guidelines set out in the Act.[32] Title II of the DMCA builds on existing case precedent in an attempt to provide greater certainty to ISPs concerned over their liability resulting from subscriber copyright infringements by establishing strong incentives for the ISP and copyright owners to work together in detecting and dealing with online copyright infringements.[33] The DMCA changes judge-made law, but does so by leaving existing laws unchanged while adding new procedures allowing ISPs to escape liability provided they adopt specified policies in the Act.[34]

20. Specifically, Title II limits ISP liability for four general categories of activity: (1) transitory digital network communications;[35] (2) system caching,[36] (3) information residing on systems at the direction of users;[37] and (4) information location tools.[38] In order to qualify for the limitations, or "safe harbours", an ISP's participation in the alleged infringing activity must fall within the categories of the Act.

21. An ISP is not liable for transmitting copyrighted information if:
    (1) the transmission of the infringing material was not initiated by the ISP;
    (2) the transmission is carried out through an automatic technical process without hands-on selection of the material by the ISP;
    (3) the ISP does not personally select the recipients of the material except as an automatic response to the request of another person;
    (4) no copy of the infringing material is made by the ISP in a manner accessible by customers other than the intended recipient; and
    (5) the ISP does not modify the infringing material.[39]

    In other words, an ISP is not liable for the transmission of infringing data through its server as long as the server transmits the information automatically and the ISP does not alter the content (regardless of whether the ISP knew or had reason to know that the information infringed copyright).

22. Moreover, the DMCA relieves ISPs from direct liability for their passive transmission, reception, or temporary storage of material in their networks provided the they adopt policies for terminating subscribers who are repeat offenders and implement industry-developed technical measures used by content providers to protect their work.[40]

23. To escape vicarious and contributory liability, ISPs must adhere to the two requirements listed above,[41] but must also adhere to two additional requirements. The ISP must designate an agent for receipt of statutorily prescribed formal complaints of copyright infringement[42] and follow the prescribed method for handling the complaints.[43]

24. Subscriber infringements resulting in temporary storage on the ISPs network (browsing websites and e-mails not retained) are governed the same way as direct infringements. However, if long-term storage of material occurs, such as hosting a website, chat rooms, or information location tools, such as hypertext linking, then ISP liability is governed by a "red flag" provision that eliminates liability for monetary relief if the ISP meets the following conditions:
    (1) the ISP does not have actual knowledge that the material/activity is infringing,[44]
    (2) in absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent,[45] or
    (3) if upon obtaining such knowledge or awareness, the ISP acts expeditiously to remove or disable access to the material;[46] and
    (4) the ISP does not receive a financial benefit directly attributable to the infringing activity, where the service provider has the right and ability to control such activity,[47] and
    (5) responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity.[48]

25. This provision generally corresponds to the doctrines of contributory and vicarious infringement, as liability is conditioned on "actual knowledge" or "awareness" of facts that make the infringement "apparent." However, ISPs can avoid liability when knowledge or awareness is imparted to them by removing or disabling access to the infringing material. The section also requires the ISP receive no direct financial benefit in cases where the ISP has the "right and ability to control" the subscriber's activity and mandates that ISPs must have a disability provision upon receipt of a statutorily prescribed formal notice by the ISP's designated agent.[49] If the above is followed and the material is removed, the safe harbour is preserved.

26. The DMCA operates to exclude ISPs from monetary liability for disabling or removing material in good faith, even if the material is not violating copyright. If ISPs receive information alerting them to allegedly infringing material and they fail to remove the material, however, the safe harbour provisions are jeopardised and the ISP may be monetarily liable to the copyright holder for the infringement.[50] In practice, this results in the ISP removing material every time a content provider properly complains. There is a risk of the subscriber suing the ISP for wrongfully removing their material, however, the DMCA insulates ISPs from monetary damages as long as they notify the subscriber that the material has been removed.[51]

    DMCA Case Law

27. To date, only a few courts have considered the relevant provisions of the DMCA. The most notable litigation is the series of cases involving Napster, a software program designed to allow users the ability to share music files over the Internet.[52] The Napster litigation began on 6 December 1999, when A&M Records and seventeen other record companies filed a complaint against Napster for contributory and vicarious copyright infringement.[53]

28. The plaintiffs alleged that Napster knew of and failed to prevent its users' unauthorised reproduction and distribution of the plaintiffs' copyrighted music.[54] In July 2000, the district court hearing A & M Records v Napster, Inc,[55] refused to consider Napster a "passive conduit" of information and refused to grant Section 512(a) safe harbour protection.[56] Instead, the court granted the plaintiffs a preliminary injunction[57] prohibiting Napster from "engaging in or facilitating others in copying, downloading, uploading, transmitting, or distributing" the plaintiff's copyrighted works.[58]

29. Even assuming that Napster was a service provider which transmits information without modifying its content,[59] the court refused to consider Napster's conduct "passive" and refused to consider Napster simply a "conduit" for copyright material for two reasons. First, the court held Napster's role in the transmission of MP3 files does not occur through Napster's system, as required in the Act.[60] In other words, Napster allows users to locate and directly exchange MP3 files by routing the request of a user to another user's browser instead of transmitting the files through its system, meaning although the connection could not take place without Napster's services, the transmission over the Internet is directly between the requesting and host users.[61] Therefore, the court found section 512(1) is not applicable, as it only applies to providers "transmitting, routing or providing connections for, material through a system or network controlled or operated by or for the service provider."[62]

30. Second, the judge ruled Napster did not comply with the provisions in Section 512 requiring "service providers" to implement take-down provisions for users who repeatedly violate copyright laws or implement software which would distinguish and block the transmission of the copyright material on the Napster system.[63]

31. In February 2001, the U.S. Circuit Court of Appeals largely affirmed the District Court's findings,[64] specifically holding that Napster had infringed copyright and that neither protection under the DMCA or the "fair use" doctrine could be applied.[65] The Court further ruled that Napster must prevent users from gaining access to copyrighted content available from other users and remanded the case to a lower court for a narrowly crafted injunction.[66] The decision forced Napster to shut down operations and effectively left Napster to die a slow death.[67]

    Evolution of the DMCA

32. ISPs need not comply with the provisions set out in the DMCA. Those ISPs who do not comply with the DMCA are not automatically liable to the copyright owners, but instead are simply subject to existing judge-made law. Adhering to the DMCA provisions, however, provides the ISPs a guarantee of nonliability. Not surprisingly, a majority of ISPs choose to follow the DMCA for that reason, even though it offers little relief from liability that does not already exist.[68] Thus, while the DMCA may not add much to the law, it does strengthen and clarify procedures that assist parties' understanding of the law.

33. To the extent that society wants to protect content providers interests, the DMCA is a success. Content providers can inexpensively and quickly get material they believe is infringing off the Internet. The value of the copyright is preserved and the incentive to create maintained. Moreover, ISPs face no liability for subscriber acts and user access remains plentiful and inexpensive.

34. On the other hand, to the extent society cares about justice and fairness, certain DMCA provisions may be problematic. The Act's effect on free speech is troublesome. Obviously, the existence of a copyright implies a restriction of speech rights, but acknowledgment and protection of the creator's rights easily justifies that restriction. However, in regards to the Act, it is the enforcement of those rights that may be problematic. The Act gives content providers an opportunity to silence communication and remove material which is not infringing copyright. The DMCA exposes ISPs to the risk of losing the safe harbours with but an allegation of infringement. Although the content provider, in its complaint to the ISPs, must be specific and clear about what is being infringed, the statute only requires a "good faith belief" that an infringement exists. A "good faith belief" falls short of solid evidence of infringement, therefore the ISP is forced to remove material whenever they receive a complaint or lose its safe harbours. This scenario potentially creates 1st Amendment problems.[69]

35. In addition, the DMCA requires the material be kept off the server during the review process. This effectively grants ISPs the right to give content providers temporary restraining orders and a preliminary injunction without a hearing. In cases where infringement is unclear, this, coupled with the requirement of a "good faith belief," creates a judgment against speech with non-conclusive evidence and no hearing.

36. Moreover, enforcement of the above provisions may create an unnecessarily high financial burden on the individual or company attempting to enforce or protect its right to free speech. The processes outlined in the Act could be costly for the copyright holder, the ISP, and the subscriber.

37. The delicate act of balancing personal rights and fairness with expediency, protection and clarity is a difficult issue for legislators. The drafters of the DMCA clearly favoured the practicality a of clear, prescriptive Act rather than an Act which provided more recognition of free speech issues, litigation costs, and more general issues of fairness and justice.

38. While case law involving the DMCA is scarce, the law appears to be working as contemplated. The Act is designed to exempt ISP liability for subscriber infringements of copyrighted material where the ISP does not participate in the infringement, have control or knowledge of the infringing activities, and does not financially benefit from the activity. Moreover, the Act is designed to balance the incentive to create with the modern realities of information dissemination over the Internet. To date, the designs and goals of the Act appear to be working as contemplated and it is the author's opinion that the Act should not be modified until the case law is more fully developed.

    Australia

    Pre- Digital Agenda Law

    Telstra v APRA

39. Not surprisingly, the case law and clarity of ISP liability for subscriber copyright infringements is less developed in Australia than in the United States. The lead case, Telstra v Australasian Performing Rights Ass'n (APRA),[70] occurred when Telstra played music (in which APRA owned copyright) to persons on hold on the telephone. The majority of the High Court held Telstra infringed APRA's right to cause the works to be transmitted to the subscribers by a diffusion service (when the caller used a conventional phone).[71] While this case does not involve ISPs, it is the leading authority on the diffusion right. Subsequent to this case, APRA based its claim against ISPs on this right.[72]

40. The three to two majority stated there were three elements of s 31(1)(a)(v) which must be satisfied to prove a diffusion right violation. First, there must be a diffusion service. Section 26(1) provides a diffusion involves "the transmission of the work or other subject matter in the course of a service of distributing broadcast or other matter ... over wires, or other paths provided by a material substance." The majority held that the unwanted music transferred over telephone lines constituted such a service.[73]

41. Second, the work must be transmitted to the subscribers of the service. In Telstra, the music is being transmitted to the people who phoned Telstra, not the company that subscribes to the music on hold service (Telstra). However, since the music "service" is incidental to their purpose of business, s 26(5) deems the subscribers to the telephone service to be subscribers to the diffusion service. Therefore, the music was transmitted to the premises of the (deemed) subscribers of the music service.[74]

42. Third, the alleged infringer must have caused the transmission of allegedly infringing material. Section 26(2) provides the person operating the service is deemed to be the person causing work to be transmitted. In addition, s26(4) states, the "person who undertakes to provide the service to subscribers in agreements with them" is taken to be the "person operating the service." Since the majority deemed the callers to have an agreement with Telstra by which Telstra provides the music on hold service, Telstra is the "person operating the service" and "caused" the transmission.[75]

43. Therefore, Telstra was liable for the playing of music-on-hold, even though it exercised no control in determining the content of the music played.

    APRA v OzEmail

44. While the Telstra litigation was ongoing, APRA notified several ISPs alleging that they were infringing the diffusion right of the musical works which APRA owned.[76] APRA demanded a $1 license fee per subscriber and decided to litigate a test case when ISPs refused to accept liability or pay the fee.[77] On 24 March 1997, APRA filed suit against one ISP, OzEmail.[78] This case would have authoritatively decided the issue of ISP liability in Australia, but was settled before trial.[79]

45. Under the three requirements under s31(1)(a)(v) set out by Telstra, APRA's case against OzEmail probably would have been successful. First, an ISP is unquestionably involved in a diffusion service, as its main purpose is to transfer material from the Internet to subscribers.[80] This transfer typically takes place over telephone lines. Therefore, the transfer would qualify as a "distribution" over "wires" under s26(1).[81] The second requirement, that works must be transmitted to the premises of subscribers, is easily met. Section 26(5) is not needed to deem subscribers, as users enter into a contract with the ISP to provide services to their premises. Third, the ISP has caused a transmission because they are "operating a service." Again, because a contract between the ISP and user exists, s26(4) is satisfied without the need to use s26(5) to deem an agreement.

    Authorisation

46. Some commentators claim that ISPs might have also been liable for authorising copyright infringement.[82] Section 13(2) of the Copyright Act states 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. In this context, to authorise an infringement means to "sanction, approve, [or] countenance" the infringement.[83]

47. Authorisation is similar to American contributory and vicarious liability in that for an ISP to be liable for authorisation, it must know or have reason to suspect that infringements are taking place and have the ability to control the content.[84] Given the widespread publicity of Internet piracy, almost everyone "knows" Internet infringements are commonplace. ISPs, however, do not have "knowledge" as to actual subscriber infringements and liability only attaches to an ISP if they are deemed to have control over content. In other words, they must have the power to prevent the infringement.[85]

48. The term authorisation implies that even passive involvement in the infringing conduct, along with knowledge of the circumstances giving rise to the infringement, qualify as authorising the conduct. Taking UNSW v Moorehouse as an example, UNSW was found to have authorised the reproduction of literary work by placing photocopiers in a library for unrestricted use, even though UNSW did not have actual knowledge that infringements were taking place.[86] The Court held its ability to prevent the infringements and inaction in known circumstances of infringement amounted to authorisation.[87]

49. Even though one is not liable for simply providing equipment to later be used unlawfully, APRA warned the ISPs that inaction may be seen as encouraging misuse.[88] The fact that ISPs provided a service which was used for infringing copyright and the fact that ISPs were aware of the infringements would seem to indicate that APRA would have been successful in its case against OzEmail. The above factors, however, ignore two key points. First, ISPs do not have the financial or technical ability to monitor and control subscriber behaviour. Second, telecommunications legislation prevents ISPs from monitoring or intercepting communications on their networks, thereby possibly denying ISPs the power to prevent infringements.[89] Therefore, ISPs probably would have escaped liability for authorisation under Pre-Digital Agenda law.[90] As this section illustrates, however, the issue was far from settled and open to debate.

    Evaluation

50. While ISPs most likely would have escaped liability using authorisation principles, ISPs would have been liable for infringing behaviour of subscribers under the s31(1)(a)(v) requirements set out by Telstra. The test seems applicable to ISPs and the issue would have been authoritatively settled had OzEmail not settled before trial.

51. It is clear pre-Digital Agenda law would have hampered Internet development and increased the cost of Internet access to users. The government needed to lead on this issue and responded after a long and tortuous legislative process.

    Digital Agenda Act

    Provisions of the Act

52. In August 1994 Australia began one of the most ambitious legislative programs in its history with the release of the Copyright Convergence Group Report, which recommended the abolition of the diffusion right and the introduction of a broad-based, technology-neutral right to authorise transmissions to the public.[91]

53. Later, after WIPO adopted two treaties pertaining to the digital domain, Australia released an Attorney-General Discussion Paper proposing a broad-based technology-neutral transmission right and a right of making available to the public, designed to cover interactive on-demand services.[92] In relation to ISP liability, the Paper proposed the issue be determined by authorisation principles and not by a new provision dealing with liability for the exercise of the transmission or making available right.[93]

54. In April 1998, the government changed its policy and indicated ISPs would not be liable for copyright infringement "simply because the infringement occurs on the facilities of the carrier or ISP."[94]

55. The Copyright Amendment (Digital Agenda) Act 2000 (Digital Copyright Act),[95] reflects the 1998 position and aims to promote certainty for communication providers.[96]

56. The Act is intended to provide greater certainty about ISP responsibilities to copyright owners. Accordingly, the Act includes exceptions for temporary reproduction or copies of subject matter as part of the technical process of making or receiving a communication.[97] Since numerous temporary or incidental copies of copyright material are made in the course of making available and electronically transmitting material, this exception was necessary for the continued growth of the Internet.[98] Moreover, the exception for temporary copies includes the browsing of copyright material online, thus excluding users from liability for browsing.[99] Further, reproductions made in the course of some caching are excluded from liability.[100]

57. The Act also responds to ISP concerns regarding the uncertainty of liability for copyright infringements by customers. The Act limits and clarifies the liability of ISPs in relation to both direct and authorisation liability. In doing so, the Act overcomes the Telstra decision and protects ISPs who do not determine the content of the material on their server.[101]

58. By immunising ISPs against liability for authorising infringement and contributory negligence, ISPs escape liability for merely providing the facilities to enable infringements to occur.[102] Further, the Act provides an inclusive, non-exhaustive list of factors to assist in determining whether the authorisation of an infringement occurred. This codification of authorisation principles from Moorehouse[103] provides greater certainty for all players in the digital environment. The list, contained in subsections 36(1A) and 101(A), include the following:
    (1) the extent (if any) of the person's power to prevent the infringement;
    (2) the nature of the relationship between the person and the infringer, and
    (3) any reasonable steps (including complying with a relevant industry code of practice) that the person took to prevent the infringement.[104]

59. Liability for direct copyright infringement would also be limited to ISPs responsible for "determining the content of the communication."[105] Because ISPs generally allow communications to pass through their servers without "determining" its content, the theory is that ISPs will not violate the provision by providing the network and will only violate the provision if they take some control over allegedly infringing content, such as by editing communications.

60. The Act states the amendments, combined with the Internet Industry Association of Australia's Code of Practice, provides certainty and liability avoidance to ISPs.[106] Interestingly, however, the Act does not exclude rights holders from taking action against ISPs that encourage, facilitate, and provide means for infringement. In failing to insulate ISPs from these actions, the government implicitly allows for authorisation actions against ISPs which facilitate the unauthorised reproduction and communication of copyright services (i.e.- Napster-like software).[107] In addition, the Code of Practice does not even contain the word "copyright." The Code is designed to handle defamation and pornography problems, not copyright infringement. The Act's reference to the Code can only be due to oversight and ignorance.[108]

    Evaluation of the Act

61. The amendments provided by the Act are similar to American, European, and WIPO standards,[109] and even with their problems, should provide sufficient coverage to limit ISP exposure to liability resulting from subscriber copyright infringements. The Act provides that ISPs are not liable for providing the facilities used to commit infringements. In addition, ISPs are not directly liable for communicating infringing material, provided they do not determine the content of that material. Moreover, ISPs face no authorisation liability in certain instances and authorisation liability is avoided in all circumstances providing the ISP has little or no power to prevent the infringement, has no strong relationship with the infringer, and takes reasonable steps to prevent or avoid further infringement.

62. The Act, however, has several substantial shortcomings which may pose problems in the future. The Acts' protections are intentionally not as complex or detailed as the American protections. The government reviewed the highly detailed US provisions and decided the detail would "add an unnecessary level of complexity to the Act."[110] For this reason, the Australian Act uses a combination of authorisation principles and express limitations of liability to regulate the area.

63. This approach allows ISPs to rebut authorisation claims, and as ISPs have little or no ability to monitor subscribers, they should escape liability. However, while the Explanatory Memorandum to the Digital Agenda states that only ISPs which encourage, facilitate and provide the means for copyright infringement will not be protected by the Act, the meaning of such a statement is unclear and can only be determined through judicial interpretation. Additionally, in not providing blanket liability as a starting point, Australian ISPs will be exposed to more litigation, costs, and liability than American ISPs. ISPs will simply pass the increased costs on to the consumer in the form of higher service fees.

64. The definition of "knowledge" and correspondingly, ISPs liability resulting from knowledge, could be another problem. In applying the authorisation principles established in Moorehouse, where an ISP knows or should know that infringing activity is taking place, it must take "reasonable measures" to protect itself. However, what constitutes a "reasonable step" is undefined. Moreover, the Act fails to clarify if an ISP which takes precautionary steps will be found to have control over the content of the communication, thus breaching 22(6) and possibly exposing itself to direct liability for copyright infringements. [111] However likely Australia is to follow the American lead on this issue, the fact still remains that the Australian Act lacks clarity in this respect and allows for a wide range of varying judicial interpretation.

65. Another problem may be its lack of specificity regarding procedures for removing infringing material. While the US Act clearly outlines these procedures, the Australian Act remains silent on the issue, simply stating the ISP must take "reasonable steps" to prevent or avoid the infringement. It would seem this would mean removal of the infringing material, but could it mean simply sending a letter to the subscriber asking for the material to be removed or even investigating and removing the material only when it has been found to be infringing. The failure to define "reasonable" leaves the term vague and open to judicial interpretation.

66. In addition, unlike its American counterpart, the Act is silent on the extent of ISP liability for removing non-infringing material and leaves undefined any recourse resulting from a wrongful takedown. Interestingly, the Broadcast Services Amendment (Online Services) Act 1999, outlines notification and takedown procedures resulting from offensive material being posted on the Internet and levies fines for those refusing to comply with the procedures.[112] The regulation of material in that Act cannot be imparted to copyright infringements, however, as that Act specifically only deals with RC/X rated content.[113] The lack of procedural guidance in the copyright area is problematic and the lack of clarity inevitably invites confusion and litigation.

67. One apparent advantage of the Digital Agenda over the DMCA is the Australian's ability to hold ISPs liable if it becomes legally and technologically feasible for them monitor infringing activity on their servers.[114] Due to the wording of the DMCA, this is not capable in the United States and an amendment will be needed to supplement the Act.[115]

68. Overall, the Digital Agenda is based on a strong foundation but lacks some of the intricacies needed for it to effectively operate against a number of potential challenges. While judges may interpret the Act's less defined sections to operate like that of the United States, until that time comes no one can be certain of the exact meaning of several sections of the Act, therefore leaving the status of ISPs' liability uncertain in several key areas. Nevertheless, the Act improves the situation for ISPs and users and most likely will effectively allow rights holders to enforce their rights. In addition, the Act ensures that an appropriate balance is maintained between the rights of copyright owners and the rights of copyright users. While the end result is likely to mirror that of the American Act, the lack of formality and procedures may cause problems, litigation, and increased costs to the ISPs and the consumer.

    Conclusion

69. The rapid expansion of the Internet, coupled with the law remaining static, created numerous problems for copyright holders attempting to protect their works. Traditional protections proved ineffective against actual infringers and thus, ISPs were forced to defend themselves against claims of copyright infringement. Both the American and Australian governments recognised that copyright owners should be protected and compensated for infringements occurring over the Internet, however, they also recognised that ISPs should not be held liable for their subscribers' copyright infringements where they simply provide a service. Therefore, both governments introduced schemes designed to encourage further development of the Internet whilst maintaining the balance between encouraging creativity and allowing public access to information.

70. The American scheme is a complex and intricate set of rules and procedures that precisely guide ISP action. Their Act starts from the position of immunity for ISPs, provided they have followed procedure, and clarifies and stabilises the law. The DMCA should curb needless litigation and ISPs will not have to figure such expenses into the price of their server. The Act's only flaw may be its treatment of removing allegedly infringing material, which potentially may create 1st Amendment issues. As case precedent develops, legislators may find it necessary to review these provisions in the Act.

71. On the other hand, the Australian scheme is more of a general guideline, lacking many of the nuances of its American counterpart. Certain sections, including its treatment of authorisation liability as well as its lack of guidance regarding the removal of allegedly infringing material, appear troublesome. There presently is no case law on the issue and while the laws will likely develop along lines similar to the United States, no one can authoritatively reach that conclusion. Regardless of how the courts will rule on the issues, the mixture of authorisation principles and express limitations (in certain circumstances, as opposed to the American starting point of immunity for ISPs), leaves the probability of litigation in the Australian context high. Moreover, the Act's vague stance on numerous issues only increases the probability of litigation. Amendments appear necessary to clarify the troubling provisions in the present legislation.