Allens

Intellectual Property

Client Update: Time shift exception to copyright overturned

1 May 2012

In brief: The Full Court of the Federal Court unanimously overturned the original decision in the Optus TV Now case that had given a very generous interpretation of 'private and personal use' and who 'made' the copies in question. Partner Andrew Wiseman (view CV) and Paralegal Ashleigh Shand report on the appeal decision that will protect significant revenues for the copyright holders of television broadcasts.

Background

In 2011, Optus developed a service called 'TV Now,' which allows its users to record certain television programs and view them later on one of four devices (PCs, Apple devices, Android devices and 3G devices). Optus stores the recordings at its data centre, and streams the recordings to the user's device upon request. Optus retains possession, ownership and control of the recordings at all times, and deletes them after 30 days.

In September 2011, several Australian Football League (AFL) and National Rugby League (NRL) games broadcast on television were recorded and viewed by subscribers to the TV Now service. The AFL and NRL own the copyright in television broadcasts of its games, and have granted an exclusive licence to Telstra to broadcast this footage via its Internet and mobile technologies.

In 2011, the AFL, NRL and Telstra began proceedings alleging that the TV Now service infringed their copyright in the television broadcasts.1

At first instance, Justice Rares held that the TV Now service did not infringe the copyright in the television program. His Honour found that the copies of the television program were made by the service subscriber, not Optus, and that their use of the service fell within the 'time-shift exception' in section 111 of the Copyright Act 1968 (Cth) (the Act).

Return to top

The appeal finding

The Full Court of the Federal Court has unanimously upheld an appeal concerning Optus's TV Now online service. The court held that the TV Now service infringes Telstra's copyright in those television programs that it previously recorded and made available to its subscribers. The court found that the copies of the cinematograph films and sound recordings were made jointly by Optus and their subscribers, and that the 'time-shift exception' in s111 of the Act was not available on the facts.

Return to top

Issues the court considered

Who 'made' the copies?

The first issue on appeal concerned who the maker of the cinematograph film and sound recording copies was for the purposes of ss86(a) and 87(a) of the Act. The court's preferred view was that the copies were made jointly by Optus and the subscriber.

In considering this issue, the Full Court recognised that the subscriber was responsible for selecting the program to be recorded and thus initiating the recording of the program by the TV Now service. The court, however, found that the term 'to make' involves the creation of a physical article or thing, rather than just the initiation of the process that creates it, and concluded that Justice Rares's characterisation of the subscriber as the sole maker of the recordings was therefore too simplistic.

The court noted that:

  • it was Optus's system that captured the broadcasts and embodied the images and sounds in physical form;
  • Optus retained possession, ownership and control of the copies of the broadcasts at all times;
  • the joint contractual arrangement between Optus and its subscribers indicated that Optus was providing more than a system that subscribers could use to copy broadcasts. Rather, Optus was providing a service by which it assisted subscribers in the copying of broadcasts;
  • no copy was ever stored on a subscriber's device. This all happened in the Optus cloud; and
  • each use of the TV Now service involved the creation of four copies of the broadcast (one for each of the four different devices supported by the system). As some of these copies would not have been useful to a subscriber, it was unlikely that subscribers were even aware that all four copies were made.

In these circumstances it was difficult to characterise the subscriber as having made each of the copies. Despite being almost completely automated, Optus's role in making the copy was so 'pervasive' that it could not be disregarded.2

The court concluded that while the subscriber, by selecting the program to be recorded, initiates the copying of the program, it is Optus which completes the process as it captures, copies, stores and streams the program for its users. Accordingly, Optus and the subscriber were jointly and severally liable for the copying of the programs.

Did the 'time-shift exception' apply?

The second issue considered by the court was whether Optus, having been found to be a 'maker' of the films and sound recordings, could rely on the 'time-shift exception' in s111 of the Act. Section 111(1) is intended to provide protection for individuals who make a copy or recording of a broadcast for viewing at a more convenient time, if for private and domestic use.

The court concluded that s111 does not cover commercial copying carried out for the benefit of others. Optus never intended to use the copies itself. Its purpose in making the copies was commercial. The court therefore held that Optus could not avail itself of the exception in s111.

Return to top

Implications

For now, the owners of copyright in television broadcasts will be able to continue generating significant fees through exclusive licensing arrangements in the online space. That said, the Full Court expressly acknowledged that the decision is limited to the specific relationship between Optus and its subscribers, and emphasised that a consideration of different online recording technologies may result in a different answer to the question of who 'makes' the copy.

The Full Court was also at pains to acknowledge that there were conflicting interests and values involved and there were consequential considerations to be taken into account. Any decision to extend or modify the current defences under the Copyright Act must be a legislative choice, not a judicial one. Given the high commercial stakes in markets worth hundreds of millions of dollars, this is not surprising. With legislative amendment, a consultative process can be undertaken through which all interests, values and consequences can be considered and assessed.

We noted in our Client Update on the first instance decision that Justice Rares, through his generous approach to the time-shifting defence, had been willing to make the leap from the living room to the cloud. An experienced Full Court was not willing to make that leap. As a consequence, a free leap to the cloud has been seriously questioned – and one gets the strong sense, as the electronic equipment and entertainment industries continue to test and mark their respective patches, that there is plenty more to come.

The Full Court's decision will inevitably be the subject of a leave application to the High Court. Only after the final appeal process is exhausted will legislative pens think about hitting the paper in earnest.

Footnotes
  1. National Rugby League Investments Pty Limited v Singtel Optus Pty Ltd [2012] FCAFC 59.
  2. Further, the court reasoned that if volitional conduct in relation to the copying was required, the fact that Optus had designed and maintained the service would suffice.

For further information, please contact:

Return to top

Share or Save for later

What are these?
 

To save this publication on your smartphone or
tablet for off-line reading (eg on a plane flight),
we recommend Pocket.