The Commerce Committee has examined the Copyright (Infringing File Sharing) Amendment Bill and recommends that it be passed with the amendments shown.

Introduction

The bill seeks to amend Part 6 of the Copyright Act 1994 to provide more effective means for copyright owners to enforce their rights against people involved in unauthorised sharing of copyright material via the Internet (infringing file sharing). It aims to provide copyright owners with a fast-track alternative to existing remedies under the Act. The bill would repeal section 92A of the Act, which was enacted by section 53 of the Copyright (New Technologies) Amendment Act 2008 but not brought into force.

We found that the bill raised complex issues around the challenges faced by rights holders in an environment of rapidly-developing technologies, which are changing consumer expectations and behaviours. We have attempted to strike a balance between the rights of copyright holders to have their intellectual property rights protected, and the reality that the Internet has now allowed far greater access to copyrighted works through file sharing.

Our commentary covers the major amendments we recommend to the bill. Minor and technical amendments are not discussed.

Commencement

We recommend that the date for commencement in clause 2 be changed to 1 July 2011. This would provide 6 months for the bill to be implemented once it was enacted.

Interpretation

Clauses 4, 5, and 7 set out definitions for the purpose of the infringing file sharing regime. We recommend several amendments to the definitions, as outlined below.

Internet service provider

Clause 7 of the bill, inserting new section 122A, would provide a separate definition of “ISP, or Internet service provider” for the purpose of the infringing file sharing regime, with the aim of excluding universities, libraries, and businesses that provide Internet access but are not traditional ISPs. We consider that having two definitions of Internet service provider in the Act could cause confusion. We recommend that the definition in section 122A be replaced with a new term, “IPAP, or Internet protocol address provider”. This would avoid ambiguity and focus on the function of an Internet service provider that is relevant to infringing file sharing, namely the provision of Internet protocol addresses.

We note that if this alternative term were used, it would not be necessary to make any substitutions for existing definitions in the Act. We therefore recommend consequential amendments to clauses 4 and 5 of the bill so that section 92A of the Act could be simply repealed without substitution.

File sharing

We recommend that the definition of file sharing in section 122A(1) be amended by including reference to downloading or uploading material using networks or applications that allow material to be shared among multiple users. This would avoid inadvertently capturing activities such as emailing or downloading that did not involve file sharing; if such activities breached copyright, they would be actionable under existing provisions in the Copyright Act.

Infringement

We recommend that the definition of copyright infringement in section 122A(1) be amended by removing the words “or part of a work”. While we understand that this phrase was included to address the fact that file sharing often involves getting small parts of a work from different sources, we do not believe it was the policy intention of the bill to change the general principle of copyright law, which is that a “substantial part” of a work must be dealt with in order to make a finding of infringement. We consider it appropriate that the bill would leave it to the Copyright Tribunal or District Court to determine whether a substantial part of a work had been copied or otherwise dealt with in ways that infringed the exclusive rights of copyright owners.

On-notice and quarantine periods

To fit with our recommendation in relation to section 122G that the timeframe for a challenge be extended by 7 days, we recommend (section 122A(1)) that the on-notice period be extended from 3 weeks to 28 days, and that the quarantine period be similarly extended from 4 weeks to 35 days.

Rights owner

We recommend that a definition of “rights owner” be included in the bill to encompass both individual copyright owners and groups of copyright owners who wish to designate a representative to take action on their behalf (section 122A(1) and new subsection 122A(1A)). We believe this accords with the policy intent of the bill, and would make it clear that enforcement action could be taken either by individual copyright owners or by an agent representing a group of copyright owners. This change would mean, for example, that enforcement action could be taken against an account holder who had received three notices recording infringements relating to three sound recordings by three different copyright owners, provided that those owners had previously decided to be represented as a group in enforcing their rights.

Infringement notices

We recommend that clause 7, new section 122C, be amended by adding new subsection (1A) to make it clear that each detection, warning, or enforcement notice would relate to a single infringement, although it would list other infringements that had occurred since the previous notice. This would help to ensure that all parties knew that at the end of an on-notice period, the very next infringement would trigger the sending of the next notice.

Timeframes for notices and challenges

We have reviewed the timeframes prescribed in the bill, and recommend several changes in sections 122D to 122G to improve its workability. They entail extending from 1 week to 14 days the time an account holder would have to challenge a notice, and consequential changes to the on-notice and quarantine periods.

Process for challenging infringements

We recommend amendments to the challenge process set out in section 122G. As introduced, the bill would require ISPs (or, if renamed as we recommend, IPAPs) to consider each challenge and decide whether to forward it to a copyright owner for response, or accept or reject it themselves, on the basis of the nature of the challenge. We accept that this is not an appropriate responsibility for ISPs to bear. Accordingly, we recommend that ISPs should be required to send all challenges to the relevant copyright owner, who should respond to the challenges via the ISP. If the matter was a technical one that could only be dealt with by the ISP, then the ISP and copyright owner would be expected to consult accordingly.

Representation at hearings of Copyright Tribunal

We recommend that section 122M(3) be amended to provide that parties may not be represented by a lawyer, except in cases where a party would be substantially prejudiced. We believe this would serve the bill’s purpose of ensuring that parties are fairly matched. For example, a copyright owner representative could well be experienced in copyright law, which could unfairly prejudice an account holder unless legal representation were allowed for the account holder. We note that our proposed amendment would have a similar effect to section 38 of the Disputes Tribunals Act 1988.

Evidence of infringement at the Copyright Tribunal

We recommend the insertion of new section 122MA in recognition of uncertainty about findings of copyright infringement before the Copyright Tribunal, and where the burden of proof lies. This section provides, for the purposes of Copyright Tribunal awards, that an infringement notice establishes a presumption that infringement has occurred, but this would be open to rebuttal where an account holder had valid reasons, in which case a rights holder would have to satisfy the tribunal that the presumption was correct. We consider that such a change would fulfil more effectively the aim of having an efficient “fast-track” system for copyright owners to obtain remedies for infringements.

Copyright Tribunal awards

Section 122N provides for the Copyright Tribunal to order an account holder to pay an award to a rights owner for an infringement, up to a maximum of $15,000. We note that the bill provides for regulations to be made stipulating how the awards should be determined by the tribunal. While we concur with the regulation-making approach, we wish to record our expectation that the awards would include a punitive element and not be simply compensation-based. For the regime to be effective as a deterrent against illegal file sharing, we believe it is essential that awards be designed not merely to recompense rights holders for the value of the song or movie illegally downloaded, but also to include a punitive element.

We recommend amendments to section 122N(1) for purposes of general clarification.

We also recommend the insertion of new section 122N(4A) allowing the tribunal to decline to make an order of payment if it was satisfied that making an order would be “manifestly unjust” to the account holder. We considered carefully whether some account holders—for example, libraries and universities—should have an exemption or defence on the grounds that they did not have control over an infringer. We rejected such an approach as we consider it important that all account holders take measures to ensure that infringing file sharing does not occur on their account. However, we accept that there will be some circumstances in which the order of a payment would be manifestly unjust.

Suspension of an Internet account

Section 122O of the bill provides for a District Court to order an Internet protocol address provider to suspend an account for up to six months if an account holder had continued to infringe copyright after receiving detection and warning notices. We considered at length whether Internet suspension is a proportionate or appropriate remedy for the harm caused by file sharing that infringes copyright, in the light of deeply divided opinion on this hotly contested issue.

Those in favour of Internet suspension (primarily rights holders) have emphasised its importance as a deterrent, and argued that without the ultimate sanction of suspension, the notice process would not be effective in changing the behaviour of people who infringe copyright by file sharing. Others, including Internet users and ISPs, have argued that suspension would be ineffective, and disproportionate to the harm done by copyright infringement. The argument has also been made that Internet access is a human right, or at least an essential utility and communication tool.

The majority of us recommend the new section 122PA, which would effect what we believe a workable compromise on this issue. The bill’s provisions allowing for Internet suspension would be retained, with modifications, but would not be brought into effect immediately. If evidence indicated that notices alone (and the remedy through the Copyright Tribunal) were not having the desired deterrent effect, the suspension provisions could be activated by Order in Council. The majority of us believe this approach would create the right incentives, with the remedy of suspension able to be brought into effect if needed. We would expect an appropriate timetable for monitoring and review to be developed in consultation with rights holders. We note that a similar approach was recently adopted in the United Kingdom.

Exceptions to the remedy of suspension

As discussed in relation to Copyright Tribunal awards, we considered whether an exemption or defence from the remedy of suspension should be available to some account holders, such as libraries and universities, on the grounds that they cannot control all those who use their account. We do not favour exemptions, and consider that the onus should be on all account holders to take measures to ensure that infringing file sharing does not occur on their accounts. To avoid instances of injustice, however, we recommend the insertion of new section 122O(3)(d), to provide for the District Court to consider whether it would be manifestly unjust to suspend an account holder’s account.

Suspension only of Internet aspects of an account

We recommend amendments to clause 7, section 122O, to clarify that suspension would apply only to the Internet aspects of an account. This would allow for the fact that, increasingly, accounts with Internet service providers include voice and television services as well as Internet access. We do not believe it was the policy intention of the bill that non-Internet aspects of an account should be suspended in response to infringing file sharing.

Cellular mobile Internet services

We recommend that the bill be amended, by the insertion of new section 122PB, so the regime would not apply to services provided by cellular mobile networks until 1 August 2013, or another date specified by Order in Council. At present, speed and cost constraints mean there is relatively little copyright infringement via mobile devices and networks, and we are advised that cellular mobile service providers would face significantly higher costs in complying with the proposed regime, and difficulty matching account details for their “pre-pay” customers. At present, therefore, we conclude that the costs of applying the regime to mobile devices would outweigh the benefits. It is likely, however, that this balance will change in the future as technology develops.

Our recommended amendment would exclude services provided via cellular mobile networks for an initial two years, subject to review; we consider that it would be appropriate for the Minister to have discretion to decide when (or whether) to bring the regime into effect for cellular mobile networks, on the basis of the monitoring of infringements reported by copyright owners. We believe this approach is the most appropriate means of allowing for the evolving state of technology as it relates to file sharing via cellular mobile networks and devices.

Cost recovery by Internet protocol address providers

While we do not propose amendments, we consider it important to comment on section 122R, which provides for Internet protocol address providers to charge a copyright owner for performing the functions required of them under sections 122A to 122Q. The fees, or method for calculating the fees, to be charged by IPAPs to copyright owners would be determined by regulation (clause 10, new paragraph (eh) of section 234).

We sought to determine the likely costs entailed in the proposed system, and therefore the likely level of fees to be charged to rights holders, as this would have an important bearing on the bill’s usefulness for copyright owners seeking to enforce their rights. We received costing information from a number of ISPs, with the estimated “notice processing fee” ranging between $14 and $56 per notice; the variation depended on the size of the ISP, and whether their system would be manual or automated. This information would be considered further in the development of regulations.

We consider it important that ISPs should not seek to profit from the proposed regime by adding any form of surcharge to their costs of processing notices; the regime should operate purely on a cost-recovery basis. It may be relevant to note in the development of regulations that the United Kingdom has recently decided on a cost-sharing approach between rights holders and Internet service providers, at a ratio of 75:25 respectively.

Green Party minority view

The Green Party applauded the introduction of this legislation, as it began to address the significant failings of its predecessor.

The Green Party has always opposed, and continues to oppose, termination (account suspension) as a remedy for infringing file sharing. We believe it is disproportionate to the problem and would not solve it. The compromise before the committee isn’t a compromise on this issue at all. It is just a delay in implementation of this ill-considered remedy.

The Green Party asserts that there is a danger in heavy-handed regulation for a problem that may only be a temporary result of new technologies upsetting traditional business models.

The use of fines rather than Internet suspension is a more appropriate sanction for file sharing, and the punishments should be proportionate to the crime.

Citizens are not denied the right to use their telephones because they happened to be used in the commission of a crime, and this legislation should not set any precedent. Access to the Internet has become a necessity in an era when more and more public and private services are only provided online.

While supporting the bill in principle, the Green Party opposes the retention of termination in the legislation.

Appendix

Committee process

The Copyright (Infringing File Sharing) Amendment Bill was referred to the committee on 22 April 2010. The closing date for submissions was 17 June 2010. We received and considered 237 submissions from interested groups and individuals. We heard 28 submissions.

We received advice from the Ministry of Economic Development.

Committee membership

Hon Lianne Dalziel (Chairperson)

John Boscawen (until 8 September 2010)

Hilary Calvert (from 28 October 2010)

Charles Chauvel (until 21 July 2010)

David Clendon

Clare Curran

Hon Sir Roger Douglas (from 8 September until 28 October 2010)

Te Ururoa Flavell

Melissa Lee

Peseta Sam Lotu-Iiga

Hon Nanaia Mahuta (from 21 July 2010)

Katrina Shanks

Jonathan Young

Gareth Hughes replaced David Clendon for this item of business.

Key to symbols used

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Hon Simon Power

Copyright (Infringing File Sharing) Amendment Bill

Government Bill

119—2

1 Title

2 Commencement

3 Principal Act amended

Part 1
Infringing file sharing

~~4 Interpretation~~

~~5 New section 92A substituted~~

~~92A Interpretation for sections 92A to 92E~~

5 Section 92A repealed

6 Internet service provider liability if user infringes copyright

7 New heading and sections 122A to 122R inserted

Infringing file sharing

122A Interpretation for sections 122B to 122R

122B Overview of infringing file sharing regime

122C IPAPs to send infringement notices

122D Detection notices

122E Warning notices

122F Enforcement notices

122G Challenging infringement notices

122H Effect of challenge to, and cancellation of, infringement notice

122I Enforcement action after issue of enforcement notice

122J Application to Tribunal

122K Notice of proceedings

122L Decisions generally made on papers and without hearing

122M If hearing is held

122MA Infringement notice as evidence of copyright infringement

122N Tribunal order requiring payment to rights owner

122O Court order suspending account holder's account

122P Order requiring IPAP to disclose account holder details

122PA Suspension orders and orders under section 122P not available until date set by Order in Council

122PB Application of section 122C to cellular mobile networks

122Q Obligations of IPAPs

122R Fees payable by rights owners to IPAPs

8 Rights and remedies of exclusive licensee

9 Membership of Tribunal

Regulations

10 Regulations

The Parliament of New Zealand enacts as follows: