Who owns what?

Why the Internet means our Copyright laws need reform

LAWS 3039 - Law and the culture industries

Aaron Magner

SYNOPSIS
Introduction
Laws that only a handful of people obey and governments don’t enforce are bad laws. In the
long term bad laws are unsustainable. A large contingent of people routinely share copyright
digital media over the Internet without the authorisation of the copyright holders.1 Public
defiance, or at best ignorance, of existing copyright laws, particularly in relation to content
accessible via the Internet, suggests the existing approaches to regulation are no longer
effective.

The Internet has amplified tensions between the rights of copyright owners and those who
want the freedom and right to use these works. The digitisation of literary, artistic and musical
works coinciding with advances in ‘Web 2.0’,2 increasing broadband speeds, growing
numbers of connected devices and improvements in file compression technologies, all mean
copyright works can be and are enthusiastically copied and distributed with greater speed and
in vaster quantities than ever before.3

The Internet is a powerful disruptive technology that provides a platform for new disruptive
innovations, such as peer-to-peer (‘P2P’) file sharing of digital media.4 Digitisation of music,
video and other media became mainstream after the introduction and widespread adoption of
the CD and DVD formats.5 Over time advances in file compression technologies such as the
MP3 format for music and a range of digital video formats including AVI, MPEG4 and
1
A recent survey conducted for the Australian Record Industry Association (ARIA) reported 91 percent
of respondents admitted they had downloaded music illegally via file share or peer-to-peer. See
<http://www.themusic.com.au/survey.php> (22 August 2009). Thirteen percent either exclusively or
frequently downloaded their music this way, 15% did it moderately, 20% rarely, while 13% claimed to
have done it previously but don’t anymore. Only 9% said they had never downloaded content this way.
The Pew Internet survey from the US reported 75% of teen music downloaders ages 12-17 agree that
“file-sharing is so easy to do, it’s unrealistic to expect people not to do it,” Lenhart, Amanda and Mary
Madden, “Teen Content Creators and Consumers,” The Pew Internet & American Life Project,
November 2, 2005, Available at: <http://www.pewinternet.org/~/media/Files/Reports/2005/
PIP_Teens_Content_Creation.pdf.pdf> (22 August 2009).
2
Web 2.0 refers to the second generation of web services available on the Internet that enable users to
collaborate and disseminate information online and contribute to a more interactive and rudimentary
social network. See Tim O’Reilly What is Web 2.0? <http://www.oreillynet.com/pub/a/oreilly/tim/
news/2005/09/30/what-is-web-20.html> (22 August 2009.)
3
According to Internet World Stats as at June 2009 there are more than 1.7 billion people connected to
the Internet. It is humbling for those of us in the developed world to keep in mind that this is still just
24.5% of the world’s population. In Australia as at December 2007 there were 15,300,000 Internet
users making 74.3% of the population. In the US Internet penetration was reported to be at 75% as at
31 March 2009 <http://www.internetworldstats.com/stats.htm> (23 August 2009).
4
Disruptive technology is a term coined by Harvard Business School Professor Clayton M. Christensen
to describe a new technology that unexpectedly displaces an established technology. See “The
Innovator's Dilemma,” Bower, Joseph L. & Christensen, Clayton M. (1995). ‘Disruptive Technologies:
Catching the Wave’, Harvard Business Review, January-February 1995. BitTorrent and Limewire, and
the iTunes Music Store are examples of file distribution and sharing technologies with low end
disruption that has undermined the sales of physical, high-cost CDs. See Knopper, Steve (2009)
Appetite for self-destruction: the spectacular crash of the record industry in the digital age, New York:
Free Press.
5
CD players and discs were first released in the US and Australia in 198. The DVD format was first
introduced in Australia in March 1999. <http://en.wikipedia.org/wiki/Compact_Disc> and
<http://en.wikipedia.org/wiki/DVD> (22 August 2009).
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others, enabled copyright works to be easily and perfectly copied and then shared via the
Internet.6 The ever-widening availability of broadband and continual advances in P2P
technology has made file sharing easier, faster and more prevalent, with increasing download
speeds making the distribution of movies, TV series, albums and other copyright works
increasingly popular.7

The disruptive impact of file sharing digital media has destabilised the business models of the
dominant copyright owners and undermined the efficacy of our existing copyright laws.
While copyright owners have aggressively pursued litigation in an attempt to prevent the
unauthorised distribution of their intellectual property via the Internet, they have had limited
success.8 The Internet has meant it is no longer feasible to control distribution, yet copyright
law is premised on enabling exclusive distribution privileges. Copyright enforcement was
more effective when there were a finite number of publishers, but the Internet has brought
about a paradigm shift whereby every consumer can also be a creator and distributor of digital
media. In this context attempts at enforcement are like shooting fish, unlucky for the fish that
get shot, but the fish population remains unaffected.9 Copyright holders’ attempts to police
the duplication of binary digits in the digital domain has become increasingly nonsensical and
had little effect.10

These failings point to the need for reform of our copyright regime. The global economy
increasingly depends on effective mechanisms for the generation, protection and exploitation
of intellectual property. Inappropriate, defective or dated copyright laws will only stifle
further innovation, productivity, technology, growth and our quality of life. This essay will
consider the case for reform of our copyright laws to better balance the protection of the
legitimate interests of copyright owners vis-à-vis the collective benefits that flow from
collaboration and the free flow of knowledge and expression of ideas with particular
reference to the disruptive impact and potential benefits for society brought about by the
Internet.

Regulatory context
6
MP3 is abbreviation for “Moving Picture Experts Group-1 Audio Layer 3”, AVI is abbreviation for
“Audio Video Interleave” and MPEG4 is abbreviation for Moving Picture Experts Group 4. See
Buskirk, V. (2005) “Top five ways MP3 has changed the world? <http://reviews.cnet.com/4520-
6450_7-6266276-1.html?tag=txt> (22 August 2009).
7
The ARIA Survey (Footnote 1) reported that in Australia the primary software used for file sharing
were Bit Torrent; 37%, Limewire; 33%, Kazaa; 2%, BearShare; 1% and a variety of others; 27%.
8
The significant copyright cases will be examined including Sony Corporation v Universal City Studios
Inc 464 US 417; 104 S Ct 774; 78 L Ed 2d 574 (‘Betamax’), Australian Tape Manufacturers
Association Ltd v Cth (1993) 176 CLR 480, University of New South Wales v Moorhouse [1975] HCA
26, Metro-Goldwyn-Mayer Studios, Inc v Grokster, Ltd (04-480) 545 U.S. 913 (2005) 380 F.3d 1154,
Universal Music Australia Pty Ltd. v Sharman License Holdings Ltd [2005] FCA 1242, Universal
Music Australia Pty Ltd v Cooper [2005] FCA 972, and Roadshow Films & Ors v iiNet (Nov 2008).
Critics largely view the litigation as ineffective. Intellectual property expert Alan J. Hartnick offers one
such negative assessment, stating: “The lawsuits had little effect, as unlawful downloading continues.”
Sarah McBride and Ethan Smith, “Music Industry to Abandon Mass Suits,” The Wall Street Journal,
December 19, 2008. <http://online.wsj.com/article/SB122966038836021137.html.> (23 August 2009).
Also Alan J. Hartnick, “Has the Recording Industry Really Abandoned Unlawful Downloaders?” New
York Law Journal, April 9, 2009.
9
There appears to be an arbitrary element to the prosecutions, for example the case of the Minnesota
32-year-old mother of four ordered to pay $1.92 million to the four major labels after downloading and
sharing 24 songs. See Majors Welcome P2P Win, But $1.92M Award Could Make For Bad PR, Ben
Sheffner, 18 June 2009 <http://www.billboard.biz/bbbiz/content_display/industry/e3i6c3a49109c5609
b6bcd108368c36b406> (23 August 2009).
10
The record industry continues to pursue Digital Rights Management, digital fingerprinting and other
tracking technologies to monitor copyrighted content and is counting on partnerships with ISPs to
monitor file sharing activity and potentially cut off service to offenders. They are also pursuing
partnerships with universities to incorporate music subscription fees (of about $5 per student) into
student tuition bills. If successful, a similar ISP-based fee could be implemented for the general public.
See Eliot Van Buskirk, “Three Major Record Labels Join the ‘Chorus,’” Wired Epicenter.
<http://blog.wired.com/business/2008/12/warner-music-gr.html> (24 August 2009).
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While the Australian parliament, the courts and the bureaucracy all have a central role in how
copyright laws are applied, the framework and a fair amount of the detail in Australia’s
copyright law is determined at the international level. There is a strong propensity towards
globalisation of intellectual property law with Australia having implemented all relevant
international treaties.11 The US is the world’s largest exporter of intellectual property and
copyright works and has had a significant influence on the framework of intellectual property
law and regulation in Australia and internationally.12 Most recently the United States-
Australia Free Trade Agreement included a number of provisions relating to intellectual
property law, all driven by the US, which required a range of amendments to the Australian
Copyright Act. These amendments included changes to the period of copyright protection,
when a technological protection measure may be circumvented, penalties for copyright
infringement and the responsibilities of carriage service providers for infringements by people
using their services.13

While debate over the value of the US Free Trade Agreement to Australia is extraneous, it
remains significant to an examination of Australian copyright law.14 Australia, unlike the US,
does not have a broad constitutional principle to uphold, there is no general fair use
exemption to copyright infringement, and no free speech principles that might function to
ensure important works remain in the public domain.15 In the US fair use exceptions apply to
a broader range of uses than in Australia where the ‘fair dealing’ exemptions that are strictly

11
Australia is a signatory to The Berne Convention for the Protection of Literary and Artistic Works of
1886, (the Berne Convention), the Agreement on Trade Related Aspects of Intellectual Property Rights
(TRIPS Agreement) an international agreement administered by the World Trade Organization that sets
down minimum standards for many forms of intellectual property regulation. The World Intellectual
Property Organization Copyright Treaty (WCT) and the World Intellectual Property Organization
Performances and Phonograms Treaty (WPPT). The treaties allow countries to limit the rights of
copyright owners provided the limitation or exception: applies in special cases; does not conflict with a
normal exploitation of the work; and does not unreasonably prejudice the legitimate interests of the
creator/rights holder.
12
The United States, unlike Australia, is a net exporter of intellectual property, primarily in
manufacturing technology know-how and licensing of computer software, and of course its movie and
music recording industry. US companies received $33 billion in net revenues generated by intellectual
property from affiliated and unaffiliated foreign companies in 2005.
<http://www.nsf.gov/statistics/seind08/c6/c6h.htm>. By contrast Australia Australia is a large net
importer of technology and other intellectual property material (including copyright material). The
Australian Copyright Council Report, “Copyright: an economic perspective” by Hans Hoegh Guldberg,
cites the level of imports for 1992-3 to be four times the level of Australian copyright exports.
13
Chapter 17 of the US Free Trade Agreement dealt with Intellectual Property and the Australian
Parliament implemented its obligations in the US Free Trade Agreement Implementation Act 2004 and
amended the Copyright Act to comply. Amendments included bringing the period of copyright
protection in Australia into line with that provided in the US by the Copyright Term Extension Act of
1998 in general, from author’s life plus 50 years to life plus 70 years. This is pejoratively known as the
Mickey Mouse Protection Act because of extensive lobbying in support of a time extension from the
Walt Disney Limited as well Mary Bono (Sonny Bono's widow and Congressional successor) and the
estate of composer George Gershwin.
14
For an analysis of the US Australia Free Trade Agreement see: Capling, Ann; All the Way with the
USA: Australia, the US and Free Trade, Sydney, University of New South Wales Press, 2004.
15
The constitutional power for the federal Government to legislate in relation to intellectual property
matters lies in s51(xviii) of the Constitution which confers exclusive power on the Commonwealth to
make laws with respect to ‘copyrights, patents of inventions and designs and trade marks”. This power
has been given a wide interpretation by the High Court. See for example Attorney General (NSW) v
Brewery Employees Union of NSW (1908) 6 CLR 469 (the Union Label case). Other aspects of the
Constitution to have an indirect impact on intellectual property law is Section 92 which was considered
in Australian Tape Manufacturers Association Ltd v Commonwealth of Australia (1993) 176 CLR 480
where the High Court struck down legislation providing for the imposition of a levy on blank cassette
tapes, relying on an interpretation of the Commonwealth’s taxation power rather than the intellectual
property power. By contrast, there is, in effect, a statement in the US Constitution of the purpose of
copyright law: “The Congress shall have the Power … To promote the Progress of Science and useful
Arts, by securing, for limited Times to Authors and Inventors the exclusive Right to their respective
Writings and Discoveries.” US Constitution, Article 1, § 8.
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limited.16 As a result there are a range of uses of copyright material likely to fall within the
scope of fair use in US that in Australia require the permission of the copyright owner.17 In
light of this, there are compelling public policy arguments in favour of the fair dealing
provisions in the Copyright Act to be broadened to allow the use of copyright material for
legitimate activities that advance the collective good. In educational contexts, for example,
there should be a presumption that any use of copyright material constitutes fair dealing for
purposes directed at learning and teaching. Similar fair dealing deeming provisions should
apply where use involves criticism and review, research, news reporting, parody and satire,
and other transformative uses.18 There is also enormous potential for growing a repository of
open source digital media for educational and non-commercial purposes. In order to advance
this Australian governments, education providers and the community sector should
enthusiastically embrace and promote the Creative Commons movement.19

Arguments regarding the adequacy of copyright regulation

The free music, movies, software, culture person in all of us wants either no copyright laws
(or at least much broader fair dealing exemptions and a larger amount of open source
content). But the innovator, content provider and aspiring author in all of us wants a strong
copyright regime that protects against intellectual property piracy. There is, of course, a
legitimate place for copyright laws, but we do not want or need laws that predominantly
protect commercial interests at society’s expense. There is a significant imbalance in market
power between content creators, users and re-users on the one hand, and large-scale content
distributors and publishers that constitute the copyright industries on the other. Of course
artists and authors need to be protected from copyright theft of their work by competitors and
from its use for commercial profit without permission. Yet it is undesirable for the laws to
result in people, innocently or otherwise, doing anything remotely related to an existing
copyrighted work being dragged into court.20

The tension between copyright owners and those who want the freedom and legal right to use
those artistic, musical and literary works will always be difficult to resolve. The ideal regime
for intellectual property rights should not resolve this tension by defending the rights of one
side, or the other, but strive to strike a balance; between private incentives for copyright
16
See s 107 of the US Copyright Act 1974 which is the equivalent of s 40(2) of the Copyright Act (Cth).
For example section 40(2)(a)-(e) of the Copyright Act provides a list of factors that should be
considered in determining whether a reproduction of a work or adaptation of a work for the purpose of
research or study is fair. These include: the purpose and character of the dealing, the nature of the
work, the possibility of obtaining the work within a reasonable time at an ordinary commercial price,
the effect of the dealing on the potential market for, or value of, the work, in a case where part only of
the work is copied, the amount and substantiality of the part copied in relation to the whole work. See
also TCN Channel Nine v Network Ten Pty Ltd (2001) 50 IPR 335, per Conti J at para [66]: “[F]air
dealing involves questions of degree and impression; it is to be judged by the question of a fair minded
and honest person, and is an abstract concept. Fairness is to be judged objectively in relation to the
relevant purpose… in short, it must be fair and genuine for the relevant purpose.” Provided that the
criteria in s103C of the US Copyright Act 1974 are met.
17
Such as use of copyright material in the ‘public interest’ where there is no negative effect on the
market/value of the copyright material, library photocopying where the purpose is not related to
research or study but where the circumstances are ‘fair’, dealing with an unpublished work where the
circumstances are ‘fair’, single and multiple copying of books, periodicals and music for use by
teachers/students in certain circumstances. Placing education content online and making it available to
the world at large without fear of a copyright breach.
18
Rimmer, Dr Matthew, 'Digital Copyright and the Consumer Revolution: Hands off my iPod'.
Cheltenham, UK; Northampton, MA: Edward Elgar, 2007.
19
The US White House since the election of Barak Obama now grants a default Creative Commons
licence for content on its web site <http://www.whitehouse.gov/copyright/>. There also calls for
academic copyright to be abolished in favour of ‘open access’. See Steven Shavell, Should Copyright
Of Academic Works Be Abolished? <cyber.law.harvard.edu/sites/.../Copyright%207-17HLS-2009.pdf>
(26 August 2009).
20
One of the recent and more absurd instances of alleged copyright infringement that ought to have
been deemed fair dealing involved Bill Leak, The Australian’s cartoonist, who was threatened with
legal action for breach of copyright unless he stopped depicting Prime Minister Kevin Rudd as Tin Tin,
the comic book character created by Belgian cartoonist Herge in 1929.
Page 4
owners, the authors and artists, and the legitimate public interest in maximising access to the
fruits of innovation and creativity, the free flow of information and transfer of ideas. Australia
needs to more independently engage in thorough debate and inquiries into what copyright
framework services Australia’s interests, to determine the best ways in which to promote and
equitably share the benefits of creativity and innovation for people, communities, nations and
global humanity.

Conclusion
Determining “who owns what?” is emerging as one of the most contentious political and
geopolitical questions in the information economy. In the context of the information economy
the framework of intellectual property laws will have wide ranging socio-economic,
technological and political impacts. Having tight controls over copyright and other forms of
intellectual property may only serve to thwart innovation. Balancing the interests of artists
and authors with those of society in an optimum way is a difficult public policy objective.
Our existing copyright laws impose a strict oppressive system for regulating intellectual
property rights and pose a danger of perpetuating a culture in which creators get to create only
with the permission of the powerful or of the creators of the past.

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