ISP cooperative proposes scheme to combat online copyright infringement

Posted by Kate Vaughan

Late last month, the Communications Alliance (CommsAlliance) and five large Australian internet service providers (ISPs), including iiNet, announced plans to assist copyright holders in combatting internet piracy.  This announcement conveniently preceded an appeal before the High Court last week - the iiNet case - concerning precisely this issue.

Image courtesy of renjith krishnan

In iiNet, the High Court is considering the Full Federal Court's decision from earlier this year that ISP iiNet cannot be held liable for copyright infringement for the downloading of films and TV shows by its subscribers.  The Full Federal Court had held that, despite iiNet's failure to send warnings to suspected infringing subscribers (as requested by the consortium of film and television studios), that failure was not unreasonable in light of evidentiary deficiencies in the notices received from the studios requesting that action be taken against them.

New Zealand and France have recently introduced 'three strike' policies targeting individuals who infringe copyright in the manner at issue in the iiNet proceedings.  In New Zealand, once an ISP has issued three notices to an individual user alleging that the user may be infringing copyright (and if the individual continues to infringe), the copyright owner is entitled to take action in the New Zealand Copyright Tribunal (see our previous blog post discussing the New Zealand scheme).

The CommsAlliance and the five ISPs have proposed a similar scheme for Australia.

The three notice scheme

Under the proposed scheme (Scheme), copyright owners will be able to assert their rights directly against alleged infringers through a copyright infringement action.  The action would become available following three stages of warnings to infringing users by the ISP.

Where a copyright owner detects a suspected infringement of its copyright occurring via an ISP, the copyright owner is expected to notify the ISP.  If the ISP is able to identify the suspected infringing user, it will then be obliged to issue infringement warning notices in three stages to that user (for as long as the infringement persists), namely:

• an Education Notice, setting out that the user may have infringed copyright and that failure to act on the Notice may result in further action;
• up to three Warning Notices over a 12 month period; and
• finally, a Discovery Notice, informing the user that they have failed to address the matters set out in the previous notices.

Unlike the French scheme, ISPs will not be obliged to terminate a user's internet account or impose any punitive sanctions at any time during the three warning stages.  This part of the proposal is consistent with iiNet arguments about reasonableness asserted last week in the High Court.  More specifically, on day two of the High Court appeal last week, iiNet maintained that terminating user accounts was (and is) not commercially reasonable.

However, following issue of the final Discovery Notice by the ISP to a user, the copyright owner may apply for a court order to obtain the user's contact details.  If the ISP is served with a preliminary discovery order or subpoena, they will be required to disclose the user's contact details to the copyright owner, and the copyright owner will itself be able to commence proceedings.

Users will be able to appeal any notices they receive (and an independent 'Copyright Industry Panel' will be established to give effect to the appeals process).

It is proposed that the Scheme will be trialled on residential landline customers for 18 months.  After the 18 month trial, an independent evaluation of results will be conducted to determine the Scheme's effectiveness in significantly changing user behaviour.

User education and awareness are key themes under the proposal.  In particular, the Scheme will aim to stop infringements after the issue of the initial 'Education Notice'.

The role of ISPs in addressing infringement

ISPs will not be required to monitor user connections or activities under the proposal.  Instead, the onus will continue to rest on copyright owners to detect infringement and assert their rights (by notifying the ISPs of suspected infringement).  However, where an ISP is able to identify a suspected copyright infringer, it will be required to assist a copyright owner by issuing up to the three stages of infringement notices (as outlined above).

There are two other key components to the Scheme:

(a) copyright owners will be required to indemnify the ISPs for actions they take in operating the Scheme if the ISPs act in accordance with the Scheme rules (which are yet to be settled); and

(b) unless the notifications of suspected infringement by copyright holders comply with an agreed format, there will be no obligation for ISPs to send infringement notices to users.

The format of notification by copyright owners is yet to be finalised.  However, a notification will at least need to include an outline of the works protected by copyright; details of the alleged infringement(s); and the suspected infringer's IP address.  Each notification will also need to contain sufficient detail about the copyright owner to enable the ISP to audit the validity of the copyright claimed and its ownership.

Interestingly, under the Scheme, ISPs will not be obliged to process or audit more than 100 copyright infringement notifications in any calendar month during the 18 month trial period.

Fair enough?

The Scheme has been criticised by content groups.  More specifically, the Australian Content Industry Group (ACIG)[1] has asserted that a continued onus on copyright holders to identify and prosecute infringement fails to strike an appropriate balance between ISPs and copyright owners in addressing internet piracy.  (Conversely, iiNet argued in the High Court last week that it is unable to proactively monitor its customers' internet activities for infringement due to the privacy-related provisions under the Telecommunications Act 1997.)

Similarly, the Australian Federation Against Copyright Theft (AFACT) has raised doubts about the effectiveness of the Scheme, on the basis that it will rely on notices rather than sanctioning users (although research out of France and Canada suggests the majority of infringers change their behaviour after receiving notices under the regimes operating in those jurisdictions).

The imminent iiNet decision ...

It's perhaps unsurprising that CommsAlliance and the ISPs chose to go public with the Scheme in the week before iiNet was heard in the High Court.  If the High Court finds that iiNet should have done (and must in the future do) more to assist copyright owners in protecting their IP, the proposal may be moot.  Through the Scheme, CommsAlliance and the ISPs are sending a clear message about what they considers the role of ISPs to be in combatting piracy in the digital age.

The High Court is expected to hand down its decision in mid-2012.

Partner: Paul Kallenbach

[1] Representing organisations including the Australian Record Industry Association (ARIA), Microsoft, the Business Software Alliance (BSA), Music Industry Piracy Investigations (MIPI) and the Interactive Games and Entertainment Association (IGEA).

The Royal Children's Hospital [2011] APO 94 - a lighter shade of Gray?

Posted by Sarah Doyle

Following the much debated Federal Court decision in University of Western Australia v Gray (No 20) [2008] FCA 498, the ownership of inventions in the context of the employer-employee relationship was considered again earlier this month. This time the Australian Patent Office considered an application filed by the Royal Children's Hospital (RCH) for a direction under section 32 of the Patent Act 1900 (Cth) concerning two patent applications filed by one of its employees, Dr Alexander.

Dr Alexander was Head of Virology at RCH when he developed two inventions the subject of the patent applications. The first invention related to improvements in the medium used to inoculate and grow viruses in culture. The second invention related to improvements in the design of a microtitre tray (a standard tool used in clinical diagnostic testing).

RCH accepted that Dr Alexander was not employed in a sufficiently senior management position to attract a fiduciary duty to forward the interests of RCH, which might otherwise have enabled RCH to argue that, in applying for the patent applications in his own name, Dr Alexander was forwarding his own interests ahead of RCH's interests in breach of that fiduciary duty.

RCH therefore relied on the common law principle that inventions developed by employees 'in the course of their employment' belong to their employer as an implied term of their employment contract, to assert rightful ownership of any patents granted in respect of Dr Alexander's inventions.

UWA v Gray confirmed that, in employment categories where the implied term applies, whether an invention is developed in the course of an employee's employment depends on whether the employee has a 'duty to invent', in the sense that it is part of the employee's engagement to 'utilise his or her inventive faculty in an agreed way or for an agreed purpose, and for the benefit of, or to further the purposes of, the employer'. Put another way, the invention would need to be 'the product of work which the employee was paid to perform'.

As Head of Virology at RCH, Dr Alexander was responsible for the quality and efficiency of the viral diagnostic work performed at RCH. He did not have any express duty to invent under his employment contract and his day to day duties did not involve any pure research. However, Dr Alexander's duty statement specifically highlighted a job requirement of 'identifying potential areas for improvement in the diagnostic service', and he accepted that he had a role in improving the clinical testing procedures at RCH.

The APO considered that this prima facie provided both a duty to invent and an agreed purpose as required by Gray.

The APO then went on to consider whether, as the Federal Court decided in relation to Dr Gray in UWA v Gray, there were sufficient negating factors which were inconsistent with, and went against, the implication of employer ownership of employee inventions that were developed in the course of, and as a product of, what the employee was actually employed to do.

One of the negating factors emphasised by the Federal Court in UWA v Gray was that Dr Gray was not bound by confidentiality obligations preventing him from freely publishing the results of his experiments, even though this would have had the potential to destroy patentability.

Dr Alexander sought to rely on the fact that RCH had similarly failed to impose on him a duty of confidentiality which would ordinarily be required in an industrial setting. However, the APO did not consider this to be determinative in a public hospital environment. This was because hospitals do not need to commercialise an invention to benefit from it. Conversely, hospitals have a large public interest role which is served by disclosing and sharing new methods and techniques including, in the present case, to ensure the proper diagnosis of viral pathogens for the treatment and management of diseases.

The APO also pointed out that in UWA v Gray, Dr Gray's lack of confidentiality obligations was merely one of a number of negating factors. Also critical to the decision in that case were that:

(i) Dr Gray was free to select what lines of research he would undertake and in what fields, without regard to furthering any commercial interest or other benefit of UWA; and

(ii) Dr Gray was expected to solicit funding for his research from sources outside of UWA.

In contrast, the APO found that while Dr Alexander had limited discretion with his lines of research, his research as a whole was confined to, and focused on, improving the viral diagnostic techniques used at the hospital. Such research was directly related to the purposes of, and directly benefited, RCH. Dr Alexander was also not expected to (and did not) obtain any external funding for his research.

Therefore, the APO held there were insufficient factors to negate Dr Alexander's prima facie duty to invent. However, the APO found that the agreed purposes of this duty were limited both by Dr Alexander's specific job requirement to identify 'potential areas of improvement' and by the limited support provided by RCH for Dr Alexander's research (including RCH's refusal of funding requests for laboratory equipment where benefits were untested). This meant that Dr Alexander only had a duty to invent in circumstances where there was a clear motivation arising in the course of his employment, which were found to be broadly limited to situations:

(i) where there was a recognised problem which he would have been reasonably expected to resolve; and

(ii) where he was otherwise motivated to pursue a particular avenue of research in the reasonable expectation of identifying potential improvements (and not just where an invention might possibly result).

Turning to whether the two inventions the subject of the patent applications challenged by RCH were developed within the ambit of this limited duty, the APO held that:

(i) the first invention relating to improvements in the medium used to inoculate and grow viruses was an avenue of research which Dr Alexander would be expected to investigate further in the reasonable expectation of identifying potential improvements in the course of his role as Head Virologist;

but that

(ii) the second invention relating to improvements to an existing device which was already effective in design and not in need of any trouble-shooting was outside the scope of research avenues that Dr Alexander would reasonably be expected to pursue in the reasonable expectation of identifying improvements.

This is a victory of sorts for both RCH and Dr Alexander and demonstrates that while the legal principles may be clear, the application of those principles may lead to very different conclusions depending on the particular facts of the case.

For employers, this reinforces the need to include clear IP assignment provisions in all employment contracts which are more prescriptive than a restatement of the common law principle – 'that the employer will own all IP developed by an employee in the course of his or her employment' - which are still common place in employment contracts.

Partner: Kylie Diwell