ASX requires listed companies to monitor social media

Posted by Nicole Reid and Alberto Colla

Directors and senior executives of companies listed on the Australian Stock Exchange (ASX) have another reason to play close attention to what is being said about their company on the internet. The ASX's recently released updates to its guidance note 8, which deals with listed entities' continuous disclosure obligations, make it clear that the ASX expects companies to monitor social media for certain content. The updates are expected to come into effect around 1 May 2013.

ASX Listing Rule 3.1 requires a listed entity to immediately notify ASX once it becomes aware of 'any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities'. There are a number of exceptions to this rule, including where the information is (and has not ceased to be) confidential. Listed companies sometimes request trading halts where they are not in a position to 'immediately' disclose market sensitive information, so as to prevent uninformed trading in the market prior to the disclosure being made. This is a practice that the ASX continues to support, where appropriate, to ensure compliance with the spirit of Listing Rule 3.1.

The updated guidance note relating to this Rule 'strongly encourages' an entity that has not yet disclosed existing market sensitive information to monitor 'any investor blogs, chat-sites or other social media it is aware of that regularly include postings about the entity… for signs that the information in the announcement may have leaked'. In the ASX's view, such monitoring should take place both while the company is awaiting board approval for an announcement, and where it is relying on the exception for confidential information. If the monitoring identifies that the market sensitive information has been leaked online, in the ASX's view the company should either immediately request a trading halt or provide the required notification to the ASX.

In the course of the ASX's consultations after the draft updated guidance note 8 was released in October 2012, ASX received a number of comments about this new monitoring requirement. Some respondents were particularly concerned about the breadth of the requirement, and advocated limiting it to 'credible' sites or by taking into account the resources of the listed entity. However, the ASX did not take up these suggestions. In its consultation response, the ASX stated that:

• the requirement to monitor social media is limited to where market sensitive announcements are pending or are being delayed for reasons of confidentiality;
• listed entities would be aware of any 'shareholder action' blogs that exist for that entity which may post content including leaked market sensitive information, and many larger listed entities also monitor certain sites as part of their investor relations activities; and
• accordingly, 'where a market sensitive announcement is pending and where a listed entity is most likely already monitoring the site in question, ASX does not believe it is unreasonable or imposes an undue burden on the entity to expand that monitoring to look for signs that information in the pending announcement may have leaked.'

Although the ASX guidance does not expressly require ongoing monitoring of social media sites, it will be necessary for listed companies to look at their policies and processes before any market sensitive information arises that could be affected by the monitoring requirement. These policies and processes need to be adequate to ensure that appropriate persons are aware of the social media sites on which content about the company may be posted and how those sites may be effectively monitored for relevant information. Even if a company is already carrying out some monitoring of social media for its own purposes, as the ASX suggested, this does not mean that the individuals carrying out that work are best placed to quickly identify information that may indicate early disclosure of market sensitive information. Members of team monitoring social media for reputational and other issues may not even be aware of market sensitive information that has not yet been publicly disclosed, in which case they would not be in a position to identify content that could give rise to a disclosure obligation and accordingly may need to be internally escalated.

Listed entities may also need to ensure that their social media monitoring is sufficient to detect any rumours that may be circulating about the entity and affecting the price of its securities. In such a situation, according to the updated guidance note, the ASX expects that the entity will confirm an accurate rumour or correct a false one, so that the market can trade on an informed basis. As the reach of social media sites expands ever further, rumours circulating on those sites are more likely to be widely disseminated and thereby affect a company's share price if they are perceived to be credible. It will therefore become increasingly important for companies to ensure that social media monitoring is not simply left to marketing personnel but treated with due weight. Failure to comply with continuous disclosure obligations can give rise to penalties, infringement notices and the potential for class actions, so companies need to ensure that their compliance processes are rigorous.

NZ infringer ordered to pay up

Posted by Genevieve Watt and Paul Kallenbach

Image courtesy of renjith krishnan

In late January, in Association of New Zealand Inc v Enforcement Number: Telecom NZ 2592 [2013] NZCOP 1, the New Zealand Copyright Tribunal issued orders against a copyright infringer under New Zealand's "three strikes" anti-piracy legislation for the first time. The respondent had uploaded musical works via peer-to-peer file sharing protocol BitTorrent, in breach of the copyright holder's exclusive right to communicate the works to the public.

Facts

The respondent in this case was an individual owner of an IP address from which the uploading of music had been detected on three occasions. The applicant was the Recording Industry Association of New Zealand (RIANZ), who filed the application to the Tribunal as representative of the two copyright owners, Island Def Jam Music Group (Universal Music Group New Zealand Limited) and RCA Records (Sony Music Entertainment New Zealand Limited).

The respondent first received a Detection Notice in November 2011, alleging that she had infringed copyright in the Rihanna song Man Down by uploading it via BitTorrent, thereby communicating it to the public in breach of section 16(1)(f) of the Copyright Act 1994 (NZ) (Copyright Act), which grants the copyright owner the exclusive right to communicate copyrighted work to the public. A Warning Notice was subsequently issued to the respondent in June 2012 in respect of a further alleged upload of the same song and finally an Enforcement Notice was sent on 30 July 2012 alleging that the respondent had uploaded the song Tonight Tonight.

The legislation

Section 122 of the Copyright Act creates a graduated response regime for taking enforcement action against people who infringe copyright through file sharing. Under the system, infringers receive a series of three infringement notices of increasing seriousness (Detection, Warning and Enforcement notices) if copyright infringement by file sharing is detected, before a Copyright Tribunal hearing can be held. The first two notices are designed as warnings, and the next notice in the series will be issued if a later, separate infringement occurs after the previous notice has been issued.

Notices are issued by an internet protocol address provider (IPAP) at the request of, and at a cost of $25 per notice to, the copyright owner.

If an infringement is found to have occurred, the Tribunal can require the respondent to pay various sums to the applicant under heads of relief including compensatory damages for infringement, a contribution towards the fees paid by the rights owner to the relevant IPAP, reimbursement of the Tribunal application fee paid by the applicant, and a deterrent sum. The total amount the respondent is ordered to pay cannot exceed NZ$15,000.

The decision

While the respondent claimed she had only downloaded, and not uploaded, the music, she had downloaded the file sharing software to her computer and the Copyright Tribunal accepted that uploading and downloading can occur simultaneously. In this case, the Copyright Tribunal accepted that uploading did occur regardless of the respondent's intentions.

In any case, under the legislation it is also possible to issue infringement notices in respect of downloading, although this has yet to occur.

The respondent was ordered to pay a total of NZ$616.57, based on:

• the cost of purchasing the songs (a total of $6.57);
• a contribution of $50 towards the $75 cost of issuing the three notices (calculated as the whole cost of the Enforcement notice, two-thirds of the cost of the Warning Notice, and one-third of the cost of the Detection Notice);
• $200 for the cost of applying to the Copyright Tribunal; and
• $120 for each of the three infringements as a deterrent sum.

The deterrent sum was in this case relatively low as the Copyright Tribunal accepted that the respondent had not intended to break the law and found that the infringing acts were not in this instance flagrant.

Is it logical to pursue individuals who download a small amount of music?

While it may seem somewhat inequitable that this particular individual (who the Tribunal noted had not 'flagrantly' broken the law) was pursued when countless others get away with engaging in copyright infringement by file sharing on a daily basis, the 2012 Australian High Court iiNet decision shows that the idea of pursuing the infringers themselves may be the logical (though perhaps not the most practicable) option.

The iiNet decision, in which the applicant copyright holders unsuccessfully argued that internet service provider (ISP) iiNet was liable for the actions of its customers in unlawfully downloading copyrighted content (on the basis that the ISP had authorised their downloads) highlights the difficulty in seeking to address the issue of piracy by pursuing intermediary entities other than individual infringers (see our summary of this decision here). 

Would this approach work in Australia?

Similar 'three strikes' or graduated response systems are in place in other jurisdictions including France and the USA. While there is currently no graduated response system in Australia, there was some discussion about introducing one following the iiNet decision. At this stage, however, the terms of reference for this year's Australian Law Reform Commission (ALRC) copyright inquiry do not address the issue of piracy and enforcement, although the ALRC states that it is watching for any developments in these areas.

Graduated response systems are of course not without their drawbacks.  Critics point to the high cost involved in pursuing individual infringers, a criticism which may be given some weight by the low deterrent amount levied in the RIANZ case.  In the area of unlawful downloading of copyrighted content, it seems that no enforcement option has yet adequately addressed the problem.

An alternative solution may, of course, lie in giving consumers more options to access and download copyrighted content legally.  In an interesting development (given the continued prevalence of unlawful downloading), the International Federation of the Phonographic Industry (IFPI) announced last month that the music industry experienced growth in 2012 for the first time since 1999, thanks in no small part to digital sales. While the overall industry growth was a modest 0.3%, digital sales recorded stronger growth of 9%.  Some industry commentators have suggested that subscription-based services such as Spotify and Pandora (which allow users to legally stream and listen to music) have contributed to this result.

If the 2012 industry growth can be taken as an indication that the tide is to some degree turning against infringing downloads, it may be that creating new ways for users to quickly and legally access copyrighted content will do more to combat piracy than a program of enforcement action.  Watch this space.

US Supreme Court rejects challenge to warrantless surveillance laws

Posted by Tarryn Ryan and Paul Kallenbach

Last month the United States Supreme Court put a definitive end to a challenge of the constitutionality of laws which allow the US Government to conduct warrantless surveillance of non-US citizens, by finding that the plaintiffs lacked standing to bring the action.[i]  The challenge was brought by human rights groups including Amnesty International, lawyers and journalists, all of whom claimed that their communications were likely to be caught up in surveillance activities carried out under the laws introduced by the FISA Amendment Act.[ii]

What is the FISA Amendment Act?

The FISA Amendment Act was introduced by the Bush administration in 2008.   It expanded the surveillance powers that already existed under the Foreign Intelligence Surveillance Act of 1978 which was designed to facilitate electronic surveillance of foreign powers for foreign intelligence purposes.

The original Act established the Foreign Intelligence Surveillance Court (FISC) which could authorise surveillance where it found there was probable cause to believe that the target was a foreign power or an agent of a foreign power, and that the facilities targeted were being used by that foreign power or an agent of the foreign power.   The Foreign Intelligence Surveillance Court of Review was also established and given jurisdiction to hear appeals of decisions where authorisation had been refused.  Of course all of this went on behind closed doors.

Since 9/11, the US Government has made a series of amendments to the original Act, enabling it to cast a wider net in its surveillance activities.   The FISA Amendment Act is the most recent of those amendments.   It enables the US Government to carry out surveillance of any non-US citizen located outside of the United States for the purpose of acquiring 'foreign intelligence information' - a term that is given an expansive definition, and goes so far as to include information that is 'relevant' to US foreign relations.

Under these amendments, the FISC's powers of oversight have also been whittled down so that the US Government is no longer required to show probable cause or even give the FISC any specific details on who is being targeted or how.   All the US Government need show is that 'a significant purpose of the acquisition is to obtain foreign intelligence information' and that it has targeting and privacy intrusion minimisation procedures in place.   In some circumstances the US Government can proceed with the surveillance without even going before the FISC.

Originally the FISA Amendment Act had a sunset clause of five years.   However, just before Christmas last year, the US Congress, with the support of the Obama administration, extended its operation until 2017.

What happened in the Amnesty International case?

On the day the FISA Amendment Act was passed in 2008, a group of human rights activists, lawyers and journalists launched a challenge to the new laws on the basis that they were unconstitutional. However before the plaintiffs even got to mount their case, the District Court for the Southern District of New York (an original jurisdiction federal court) found that they did not have standing to bring the action.   The United States Court of Appeals for the Second Circuit reversed this decision, which was then appealed to the United States Supreme Court.

In a 5-4 decision, the majority held that the plaintiffs did not have standing to bring their claim because they could not show that their communications had been subject to surveillance.   The plaintiffs' argument was that their lines of work required them to be in communication with individuals that were likely to be targeted under the new laws.   As a result, they said there was 'an objectively reasonable likelihood' that their communications would be intercepted.   In the alternative they argued that the risk of being subject to surveillance required them to take onerous and costly measures to avoid interception.   A number of the plaintiffs were lawyers who represented individuals suspected of terrorism offences.   They submitted that in order to prevent surveillance of their privileged communications with their clients, they had to either not engage in these communications or travel outside of the United States to have them.

Nevertheless the majority held that that the plaintiffs' case was based on a series of assumptions and that they could not show the required likelihood of injury to give them standing.   This decision was staunchly criticised by the minority which said that the Court had often found plaintiffs to have standing where the risk of injury was far less likely than in the present case.

What does this mean?

As the ultimate US appellate court, the US Supreme Court's decision brings an end to the plaintiffs' challenge.  Following the passing of the FISA Amendment Act there were a number of parties who sought to challenge the laws on various grounds.  This was one of the few cases that was still on foot.  Commentators are now pessimistic about whether the laws (which many consider to be unconstitutional) will ever be able to be effectively challenged.   The majority of the Court essentially found that only individuals who could actually show that their communications had been intercepted would be able to make the challenge - which will be difficult seeing as these surveillance activities are, by their very nature, carried out in secrect.

While the existence of these powers is concerning for those in the United States, it is of greater concern to non-US citizens who could potentially be a target of, or even just caught up in, FISA's far reaching surveillance net.

[i] Clapper v Amnesty International USA, No 11-1025, slip op (Sup Ct, Feb 26, 2013)
[ii] The Foreign Intelligence Surveillance Act of 1978, which the FISA Amendment Act amends, is codified at 50 USC ch 36