iiNet wins landmark copyright case against AFACT in High Court

The High Court ruled in iiNet’s favour this morning after years of court battles between the ISP and media corporations, saying it was not responsible for the actions of its users who downloaded copyrighted material illegally.

The ruling brings an end to the case, which has already been through two separate trials in the Federal Court, and quashes a move by the industry to attach the copyright violations of internet users onto those companies which provide them internet access.

The judgment – which was unanimous – said that iiNet had no direct technical power to prevent its customers from using the BitTorrent system to infringe copyright in the appellants’ films.

“Rather, the extent of iiNet’s power to prevent its customers from infringing the appellants’ copyright was limited to an indirect power to terminate its contractual relationship with its customers,” the summary read.

The Australian Federation Against Copyright Theft has responded, saying that because the court ruled in iiNet’s favour, it’s up to the Government to legislate against illegal downloads.

“Both judgements in this case recognise that copyright law is no longer equipped to deal with the rate of technological change we have seen since the law of authorisation was last tested,” director Neil Gane said.

“They both point to the need for legislation to protect copyright owners against P2P infringements.”

Clayton Utz intellectual property expert and senior associate Timothy Webb told SmartCompany this morning the decision has ramifications for the entire industry.

“For the broader ISP industry, my view is that as long an ISP does not have the technical power to prevent the use of BitTorrent technology, and as long as it does not encourage it, even if the rights holders improve their notices the industry has a blanket defence.”

The appellants included some of the world’s largest media and entertainment companies, including Paramount, Roadshow Films, Warner Brothers and 20th Century Fox, along with a suite of Australian media companies.

The companies tracked users who were downloading copyrighted material on iiNet networks, and then created infringement notices, which were then sent to iiNet.

But the court also found the information contained in infringement notices did not provide iiNet with a reasonable basis for sending warning notices to individual customers – a key argument of the entertainment industry.

iiNet managing director Michael Malone said in a statement the judgement validates the company’s position – which it has held for the past three years.

“Today’s High Court five-nil ruling confirms that iiNet is not liable for ‘authorising’ the conduct of its customers who engaged in online copyright infringement.

The Australian Federation Against Copyright Theft – a group of 34 international and Australian companies – first attacked iiNet three years ago. The group argued iiNet had the ability and responsibility to prevent its customers from downloading copyrighted material.

In the original case, the Federal Court ruled in iiNet’s favour saying the company was not responsible for the actions of its users.

An appeal was launched to the full bench of the Federal Court. The telco won again, although AFACT pointed out a dissenting judgement that backed a number of AFACT’s arguments.

Justice Emmett, who found that iiNet was not responsible, said he was not satisfied by the company’s “contumelious” demeanour.

“While the evidence supports a conclusion that iiNet demonstrated a dismissive and indeed contumelious attitude to the complaints of infringement by the use of its services its conduct did not amount to authorisation of the primary acts of infringement on the part of iiNet users,” he said.

The dissenting judgement formed a large basis for AFACT’s appeal to the High Court.

However, the summary judgement now suggests that because iiNet had no power to stop users infringing copyright – and that it only had an indirect power to halt their internet access – the company was not responsible.

The impact of the case has rippled through the media and entertainment industries through the past three years, sparking debate over how media needs to adjust its business models for the 21st century.

Malone has pointed out repeatedly consumers are watching content in nontraditional formats, such as through DVRs and on computers, and that if the film industry does not adapt to a consumer base that wants content immediately and without fuss, it will die.

“Increasing the availability of licensed digital content is the best, most practical approach to meet consumer demand and protect copyright,” Malone said.

“We have consistently said we are eager to work with the studios to make their very desirable material legitimately available to a waiting customer base – and that offer remains the same today.”

These comments come as the television industry in the United States is continuing to transform. Just this week streaming video site Hulu announced it would start showing off the first batch of its original content to advertisers, in a sign digitally produced and distributed content is now being taken much more seriously.

iiNet said in a statement its legal costs have totalled $9 million so far – a portion of those will be recovered.

This story first appeared on SmartCompany.