Full Federal Court finds Optus TV Now service infringes copyright

Posted by John Fairbairn and Charles Alexander

On 27 April 2012, the Full Court of the Federal Court allowed an appeal concerning the legality of the Optus TV Now service, which enables users to remotely record television broadcasts and watch them on their computer or handheld device. The Full Court held that Optus made the copies of the programs and consequently infringed copyright in the broadcasts. The decision overturns that of Rares J at first instance and has implications for providers of cloud storage services.

The service

In order to use the TV Now service an Optus customer entered into a contractual relationship with Optus and downloaded an App to a device such as a personal computer, mobile phone or iPad. By hitting a 'record button' within the App, the user would cause, via an automated process, a recording of the program to be made on servers controlled by Optus. When the user later decided to play back the recording, it would be streamed from those servers in a format appropriate to the user's device.

Trial Judge's decision

The AFL and NRL alleged that Optus infringed the copyright in broadcasts of their games by operating the TV Now service. In particular, they alleged Optus had infringed their copyright by making copies of the free-to-air television broadcasts of matches and communicating those copies to TV Now subscribers. Optus commenced proceedings against the AFL and NRL alleging wrongful threats of infringement asserting that there was no copyright infringement by reason of section 111 of the Copyright Act, which provided that, amongst other things:

(1) This section applies if a person makes a cinematograph film or sound recording of a broadcast solely for private and domestic use by watching or listening to the material broadcast at a time more convenient than the time when the broadcast is made.

The trial judge, Rares J, analogised the Optus TV Now service to a VCR or DVR. His Honour determined that it was not Optus that had made the infringing copy, but rather the user the TV Now service, and that his or her conduct fell within section 111. Read our TMTBlog post 'Federal Court finds Optus' TV Now service does not infringe copyright' summarising this decision.

Appeal

The Full Court focused on the question of whether it was Optus or the user that made the copy of the program.

In a joint judgment, the Full Court held that Optus was either the maker, or alternatively, that Optus and the subscriber were jointly the makers of the copies.

The court rejected arguments that Optus acting as an agent for the subscriber or that the subscriber was the principal making the copy using a facility provided by Optus. In particular:

• The court considered that the concept of 'making' a cinematograph film of a broadcast (ie. to make a copy of it) requires a physical embodiment of the broadcast in an article or thing. Although the TV Now service only operated when a user hit the recording button, it did not necessarily follow that the subscriber was the, or the only maker of the copy;
• In this case, the physical embodiments were stored on Optus' facilities. The court emphasised that Optus had designed the service, gave it its functionality, owned the IP in it and marketed the service to its customers. Further, as the Court stated:

'[52]Optus at all times retained possession, ownership and control of the physical copies made on the hard disc of its NAS computer ...'

[60] ... [W]e consider that the system itself has been designed in a way that makes Optus the 'main performer of the act of [copying]' (to adopt the language used in a recent Japanese decision involving a service relevantly similar to the present, which has been supplied to the Court in translation): see Rokuraku II, First Petty Bench of the Supreme Court, Japan, 20 January 2011 ...

• The court held that:

[67] ... Optus’ role in the making of a copy – ie in capturing the broadcast and then in embodying its images and sounds in the hard disk – is so pervasive that, even though entirely automated, it cannot be disregarded when the 'person' who does the act of copying is to be identified. The system performs the very functions for which it was created by Optus.

Optus' conduct in capturing, copying, storing and making available for reward, programs for later viewing by its customers meant that it exercised the exclusive rights of the copyright owner to make a copy of a broadcast.

Although it was unnecessary for the court to decide whether Optus was the sole maker of the copy or whether it was made jointly with the user, it indicated its preference for the latter view.

Implications

The judgment contains a number of sweeping statements, including at [64]:

'[64] It equally is not apparent to us why a person who designs and operates a wholly automated copying system ought as of course not be treated as a 'maker' of an infringing copy where the system itself is configured designedly so as to respond to a third party command to make that copy: see generally the criticism of Cartoon Network in Ginsburg, at 15-18.'

that will be of concern for providers of storage services, such as cloud computing. Under this decision, the provider of an automated service that allows a customer to store content on servers or other devices owned and controlled by the service provider, may be directly liable for copyright infringement. Much will depend on the nature of the service and the fact that the TV Now service had the sole purpose of recording free-to-air television broadcasts may distinguish it from other general purpose remote storage services.

Nonetheless, the decision could have a chilling effect on the development of innovative online services.

Next steps

While the Full Court's decision overturns that of the primary judge, their Honours state at [9]:

'We have found the questions raised in the appeals to be of some difficulty and considerable uncertainty'

These comments would indicate that the issues in dispute are ripe for consideration by the High Court.

Managing privacy risks in call centres

Posted by Veronica Scott ● Partner: Charles Alexander

The work of call centres involves collect, processing and disclosing a large range of personal information, including sensitive and financial information. Staff working at the centres have direct access to this information. Organisations that run or use call centres need to identify and manage risks to minimise privacy breaches.

Weaknesses range from high staff turnover and lack of privacy training to human error and lax security processes. Threats include for example third party middlemen who use staff to gain access to data which they then sell to create new false identities. They may for example engage staff in a social setting, find out what they do and who they work for and then offer cash for receiving details about customers' identities.

Robust and regular privacy training and risk management processes, together with good record keeping, are crucial to managing these issues and for enabling potential issues to be identified early and escalated. It is important to conduct regular audits and spot checks to identify and track unusual activity and for early detection of privacy breaches. Conducting regular Privacy Impact Assessments will support these processes.

Obama's move to protect online privacy: a new Consumer Privacy Bill of Rights

Posted by Yan-Li Ho ● Partner: Charles Alexander

The White House has released a paper setting out a framework for the protection of online consumer privacy adapting existing privacy principles

The paper is designed as a guide for the US Administration to work with Congress to eventually introduce legislation. It will not be mandatory. However, private sector companies that are not subject to existing data privacy laws will be encouraged to participate through codes of conduct that, once publicly and affirmatively adopted by companies subject to the jurisdiction of the US Federal Trade Commission (FTC), will be legally enforceable by the FTC.

The Bill of Rights will apply to commercial uses of personal information. This could potentially include any data, including aggregations of data, which is linkable to an individual. It could also potentially include data linked to a specific computer or other device. It gives seven key rights to users:

Individual control: a right to exercise control over what personal data companies collect from them and how they use it;

Transparency: a right to easily understandable and accessible information about privacy and security practices;

Respect for context: a right to expect that companies will collect, use, and disclose personal data in ways that are consistent with the context in which consumers provide the data;

Security: a right to secure and responsible handling of personal data;

Access and accuracy: a right to access and correct personal data in usable formats, in a manner that is appropriate to the sensitivity of the data and the risk of adverse consequences to consumers if the data is inaccurate;

Focused collection: a right to reasonable limits on the personal data that companies collect and retain; and

Accountability: a right to have personal data handled by companies with appropriate measures in place to assure they adhere to the Bill of Rights.

While being a welcome step forward, enforcement by the FTC and a clear complaints process for consumers will be critical to ensuring that companies can be held accountable for adhering to their privacy codes of conduct. We understand the Obama Administration is encouraging the US Congress to provide the FTC with specific authority to enforce the Bill of Rights. In this area, striking the right balance involves sufficiently protecting consumers' privacy expectations while providing companies with the certainty they need to continue to grow online.

It is worth noting that the Bill of Rights does not cover any rights with regards to trans-border data flows. Currently, the US relies primarily on the FTC's case-by-case enforcement of general prohibitions on unfair or deceptive acts and practices. However, the increasing expansion of online businesses across borders arguably makes this approach unsustainable in the long-term. To this end, the White House's paper focuses on principles of enforcement cooperation between countries. It has been suggested the US Administration could jointly develop codes of conduct that support mutual recognition of legal regimes or perhaps adopt a voluntary system of cross border privacy rules, based on the existing APEC Privacy Framework.

In the coming months, we understand the US Administration will consult with various stakeholders, including other countries, to develop enforceable privacy codes of conduct that build on the draft Privacy Bill of Rights. A copy of the White House paper is available here.

Six month jail sentence for posting nude photos on Facebook

Posted by Charles Alexander and Althea Hartley

A 20 year old Sydney man, Rashan Usmanov, was recently sentenced to six months imprisonment by the NSW Local Court for posting nude images of an ex-girlfriend on his Facebook page. The images displayed the ex-girlfriend in certain positions that clearly showed her breasts and genitalia. Usmanov had refused to take down the images at the request of the ex-girlfriend and had reposted them after taking them down at the request of the police.

Usmanov was charged under section 578C of the Crimes Act 1990 (NSW), which makes it an offence to publish indecent articles. The maximum penalty for an individual found guilty of this offence is a $11,000 fine or 12 months imprisonment (or both).

In her judgment, Deputy Chief Magistrate, Jane Mottley, remarked on the importance of deterring both the defender and the community generally from committing similar crimes:

'This is a particularly relevant consideration in a matter such as this where new age technology through Facebook gives instant access to the world. Facebook as a social networking site has limited boundaries. Incalculable damage can be done to a person's reputation by the irresponsible posting of information through that medium. With its popularity and potential for real harm, there is a genuine need to ensure the use of this medium to commit offences of this type is deterred.'

This case illustrates an alternative method for redressing a breach of privacy which was not dependent upon separate privacy legislation. Although, it did not provide a means of obtaining financial compensation for any harm the ex-girlfriend may have suffered.

The full judgment can be viewed here.

iiNet wins High Court copyright battle

Posted by Paul Kallenbach and Nick Liau

 

In a 5-0 decision of the High Court, iiNet has finally won its long running legal battle with copyright holders. The Court held that iiNet was not liable for its users' downloading of copyright material.

Being brave: how suppliers can help themselves in today's procurement landscape

Posted by Quentin Lowcay (Partner, Minter Ellison Rudd Watts, New Zealand)

Image courtesy of lumaxart

We all know business is tough. And that the few procurement opportunities that reach the market are usually leapt on by suppliers as soon as they learn about them.

But are suppliers really making the most out of the these opportunities that arise?

In today’s modern procurement world – especially in the Government sector – suppliers need to be brave to get more work, and to demonstrate more value to customers.

There are four areas we believe suppliers can improve in to get more success in customer procurement situations.

The innovative RFP response

So often the joy and excitement of getting an RFP from a customer or prospect overcomes the obvious point of reflecting on what the customer has said they want, and then asking ourselves “Is this what is really needed ?”

It is a brave supplier that goes back to a customer to ask whether they have got their RFP requirements correct but actually this is exactly what suppliers should be doing.

Most customers have spent considerable time and money reflecting on their needs, analysing the market, producing a business case and issuing an RFP with what they think they need from the market, and what they think the market can deliver to them.

RFPs are typically prescriptive in response format, and will require answers and information around set topics – this obviously allows comparability between potential suppliers and assists in evaluation and selection.

It would not be at all helpful for vendors not to appreciate this when responding as required to an RFP. Making it difficult for a customer to assess your capabilities is a risky strategy for a supplier.

But if there was an alternative approach or in fact a completely different way the customer could solve their underlying needs or problems apart from as set out in the RFP, then the brave supplier should suggest this as well in their RFP response.

No customer would pretend to have the monopoly on good ideas or how to solve complex issues. For a vendor to show interest, and then go the extra mile to look for alternatives for a customer is a clear demonstration of value-add. Maybe there is a cheaper option, a new technology, a staged implementation, a less-risky strategy, or a more adaptable or future proof solution.

Brave suppliers are not afraid to question customer requirements. And to some extent, this even applies in the Government sector.

Apart from being part of normal good procurement practice, the New Zealand Audit-General in their Good Practice Guide deals with these innovative ideas in addition to conforming responses to an RFP, and states that alternatives can either be provided for by the customer in the tender expressly, or they can simply be an 'optional extra' provided by a supplier. In all cases, as long as they are evaluated consistently and equitably between suppliers, and otherwise meet the general procurement principles^[*], these innovative alternatives can be considered.

The only issue in Government procurements is that if the alternative substantially changes the underlying procurement needs of the customer themselves.  In that case, then fairness and transparency would dictate that the tendering process is re-opened to the other suppliers to consider and respond to any redefined or new Government requirements which have been brought to light through an alternative proposal.

Active engagement

So often we hear the complaint from vendors that they have not been allowed to actively engage with the customer or their users during the procurement cycle.

We have heard and seen first-hand vendor demonstrations and product run-throughs where the customer audience has been told not to ask any questions as it may be seen to favour one potential supplier over another – particularly in the Government sector.

Yet there is nothing in the Mandatory Rules for Procurement by Departments, or in the various guidelines for good procurement practice in the public sector^[2], that would support taking this approach.

Yes, a public entity must be seen to act in a fair, open and unbiased manner. Yes, under the Auditor-General’s Good Practice Guide it states that a public entity should ensure all communication between evaluation personnel and potential suppliers is formalised.

But in our view, this does not stop open and honest engagement at presentations and allowing users to interact with potential vendors. As long as all vendors are allowed an equal opportunity to interact, and the questions and answers are noted in some way for a formal record, then the vendors are all being offered the same full and fair opportunity.

The only issue may be with the Auditor General’s Good Practice Guide where it states any additional information provided by a public entity to one supplier must be made available to all potential suppliers.

We would argue that this was not intended to apply to interactive sessions between Government agency users and potential suppliers where it is an actual run-through of that supplier’s solution or product. The relevant principles under the Good Practice Guide are able to be satisfied – ensuring consistent information is given to all suppliers (through using the same user group audience for each presentation) and treating all suppliers fairly and equally (with all suppliers given the same right to present if they wish).

But to lessen the risk in the public sector, suppliers should try and ensure this right is added in the RFP process itself as a separate and confidential part of the overall evaluation process – meaning there is no requirement to share the information gleaned from the session.

For brave suppliers, pushing for this open interactive session with the entity’s users as part of the RFP process is a great idea, as it will mean you get the chance to really showcase the relative strengths of your solution or product, and also demonstrate you are the right party to be working with the customer’s team – showing you listen, care and deliver to your customers.

Discovering the budget

Nothing shocks customers more than being asked by a potential supplier how much they have budgeted for the planned procurement.

Customers seem to think that it is a closely guarded secret. To let a supplier know what your budget is, will mean that that is what they will charge you, and you could potentially pay more than the supplier would otherwise have charged.

But to a supplier, knowing the customer’s requirements and their budget leads to a better response to an RFP.

First, it will actually help the supplier respond appropriately to the stated requirements in the RFP. Most RFPs are not actually that clear as they could be around the scope of goods or services. But coupled with the budget, it will guide the supplier in responding – is this a big job or a small one? Are high-level solutions required or a complete A to Z  How many resources is the customer expecting to be committed to this project? Is this actually a project we should be pitching for ?

Second, competitive pressure will actually work in the customer’s favour. The budget as a single sum, or even expressed in a range of values, becomes the default maximum price. The clever supplier will have to be within this range or less to potentially win the work. Few procurements occur these days without intense completion, and only a foolish supplier would simply assume the maximum price will represent good value for money against other suppliers’ bids.

Lastly, the brave supplier can actually add true value to a customer by looking for real cost savings or offering alternatives to the budgeted level proposed. Can the initial price be smoothed over time? Can some aspects be combined to deliver efficiencies? Can process changes in the customer mean a more efficient and effective alternative could be provided? What is really needed by the customer and what can actually be provided for the budgeted price or less?

Good procurement is all about providing improved value beyond cost, but you need to know first what the baseline costs are in order to achieve this.

The power of the consortia

While many RFPs push suppliers to respond by themselves, actually the power of many may give the customer a better result in some circumstances.

There is nothing wrong in procurement practice in having suppliers form consortia to respond to an RFP or procurement project. Often this can bring a well-rounded, end-to-end and complete skill-set to bear, meaning a better solution, product or service for the customer.

However, many RFPs do not actively promote or encourage consortia. Customers are usually open to the idea, but have not expressly said so or accommodated the possibility in their RFP terms and process. Sometimes consortia need to be formed after the initial supplier responses are received, and it becomes clear to a customer that one supplier cannot provide for all their requirements. These options should be foreshadowed in well-constructed and flexible RFPs.

But really it is the suppliers who must take most of the blame. Forming consortia takes a large degree of trust amongst suppliers. You cannot make this happen overnight, nor does it always work between some organisations and some lead individuals.

Again suppliers need to be brave, by actively looking for situations where they could partner or otherwise involve another supplier. It may take one or two joint approaches to work out where the synergies are between organisations and where the strengths lie in joint bidding.

It will not always be appropriate to join forces with other suppliers, and many times you can still be competitors with them, but a well thought-through consortia bid to a complex RFP is attractive to a customer where you can show the added value of the team, that the consortia approach will work and you can deliver the power of many to solve the customer’s requirements in a far more effective and efficient way.

Conclusion

Bravery is hard. It means doing the uncomfortable.

Yet in the current business climate, suppliers and customers alike are facing difficult times in the procurement landscape and so shaking things up a little might be a first step towards an improved position for both.

--------------------------

[1] These include the principles of best value for money over the whole of life, open and effective completion, full and fair opportunity for domestic suppliers (subject to international obligations) and improving business capabilities.


[2] For example, the Good Practice Guide , and the Ministry of Economic Development's Government Procurement in New Zealand – Policy Guide for Purchasers (amended in February 2010).

Pinterest and copyright: To pin or not to pin? [updated]

Posted by Rachel Cox & Peter Kearney ● Partner: Paul Kallenbach

Image courtesy of erix!

Pinterest is an online platform that allows users to link images to collections or categories and share with other users. A user's collection forms a virtual pinboard of items which they find interesting. Once an image is pinned, it can be 'repinned' by other users.

Pinterest was launched in March 2010. Estimates from AppData indicate that Pinterest now has 11.9 million active users (the majority of whom are female). Pinterest has become a significant driver of online retail traffic and is expected to continue to grow in popularity.

On 24 February 2012, a US lawyer and photographer posted an article on her blog questioning whether users of popular social media site 'Pinterest' were infringing copyright by 'pinning' photographs taken by other people. The post went viral generating 569 comments and 9,000 Facebook shares on her website alone.  So, would an Australian Pinterest user infringe Australian copyright law by pinning another person's photographs without their permission?

Unfortunately, in most circumstances, pinning a photograph without permission will amount to copyright infringement under Australian law.

Under the Copyright Act 1968 (Cth), a photograph is considered to be an artistic work (and this will be the case independent of whether it is of artistic quality or not). The author of a photograph is the person who took the photograph and in most circumstances will also be the owner of copyright in the photograph (subject to any enforceable agreements with other parties).

The owner of a copyright in a photograph has a number of exclusive rights, including the right to publish or reproduce the work or communicate it to the public. A person who does any of these acts without the permission of the owner of copyright will infringe copyright of the photograph - unless an exception applies.

At present, the Copyright Act's fair dealing exceptions are narrowly cast, and include research or study; criticism or review; reporting news; professional advice given by a legal practitioner or patent attorney; and parody or satire. These exceptions are unlikely to provide any basis which would permit the unauthorised use of photographs on sites such as Pinterest. Accordingly, it seems likely that Pinterest users would, in many cases, be infringing Australian copyright by pinning other people's photographs without permission.

Doing so may also constitute a breach of the Pinterest Terms of Use, which provide that:

By making available any Member Content…you hereby grant … a worldwide, irrevocable, perpetual, non-exclusive, transferable, royalty-free license, with the right to sublicense, to use, copy, adapt, modify, distribute, license, sell, transfer, publicly display, publicly perform, transmit, stream, broadcast, access, view, and otherwise exploit such Member Content … you represent and warrant that: (i) you either are the sole and exclusive owner of all Member Content that you make available … or you have all rights, licenses, consents and releases that are necessary … and (ii) neither the Member Content nor your posting, uploading, publication, submission or transmittal of the Member Content … will infringe, misappropriate or violate a third party’s patent, copyright, trademark, trade secret, moral rights or other proprietary or intellectual property rights, or rights of publicity or privacy, or result in the violation of any applicable law or regulation.

Pinterest can be a powerful marketing tool. As the popularity of Pinterest grows, more companies are considering whether Pinterest should be a part of their broader social media strategy. Online brands that encourage the use of Pinterest can apply a 'pin it' button to websites to allow users to pin products. Applying a 'pin it' button to a photograph would (arguably) provide users with implied consent to publish the photograph to Pinterest. This would considerably reduce the risk of copyright infringement for users who pin the photographs, but companies will need to be sure they have ownership (or suitable licence rights) in any photographs to which they apply the 'pin it' button.
Interestingly, Pinterest supplies users with code to enable users to 'pin' images to their pinboards.

In Universal Music Australia v Sharman Licence Holdings [2005] FCA 1242, Sharman supplied software and a website that created a peer-to-peer network used to share pirated music and was held to have infringed copyright, on the basis that Sharman had authorised the infringement of copyright engaged in by users of its software. Similarly, in Universal Music Australia v Cooper (2005) 65 IPR 409, Mr Cooper was held to have infringed copyright by 'making available to the public a technical capacity calculated to lead to the doing of that act'.  By making this code available, could Pinterest be authorising copyright infringement by its users?

In February, Pinterest released a 'no pin' code which website owners can apply to their site to prevent Pinterest users from pinning their photographs (but which does not prevent users saving a photograph and uploading it as their own). However, it is not clear that an Australian court would consider that a website owner was obliged to implement the 'no pin' code to protect their work, or that failure to utilise the 'no pin' code might amount to implied consent to pinning of the image.

Users of Pinterest should therefore be aware that, in the absence of an express consent to 'pin', or the implied consent of a 'pin-it' button on the source website, they may be infringing copyright in the photos that they pin.

[Update 3 April 2012:  On 23 March, Pinterest responded to copyright concerns by announcing a new copyright policy and changes to the Terms of Use.  The updated Terms of Use will take effect on the 6 April 2012 and are designed to simplify the reporting process for infringing posts and clarify that Pinterest does not claim a right to sell content. The onus remains on users to ensure that they comply with the acceptable use policy and do not infringe third party intellectual property rights.]