In the week before Christmas this year, the Federal Court will hear the case of SingTel Optus Pty Ltd & Another v National Rugby League Investments Pty Limited & Others, which will consider potential copyright infringement by the Optus “TV Now” service (TV Now). The case concerns a TV recording service for which copyright material is stored in the cloud, and is therefore likely to have significant implications for providers and users of cloud computing services.
The TV Now service allows users to request Optus to record a free-to-air TV broadcast (stored in the cloud) which they can then play back within 30 days using a web browser (including on a mobile device).
Two sporting leagues, the National Rugby League (NRL) and the Australian Football League (AFL), which own the copyright in the TV broadcasts of NRL and AFL matches, made demands against Optus that the TV Now service infringes their copyright. Optus then began proceedings in the Federal Court under section 202(1) Copyright Act 1968 (Copyright Act) seeking a declaration that the threats were unjustified. As expected, the NRL and the AFL have brought cross-claims of copyright infringement.
Telstra has subsequently joined the proceedings as a cross-claimant – it has exclusive rights to broadcast AFL matches over the Internet pursuant to a $153 million contract with the AFL, which Telstra executives have been threatening to “tear up” if the TV Now service is allowed to continue.
The NRL, AFL and Telstra all have exclusive rights under the Copyright Act to do the following with respect to a television broadcast of an AFL or NRL match (whichever is relevant):
The NRL, AFL and Telstra allege that Optus has infringed these rights. In its statement of claim, Optus alleges that in relation to the NRL and AFL content, Optus:
Mary-Anne Reid, chief executive of the Australian Copyright Council, identifies the problem for the court:
“[cloud technology] involves a set of laws that probably didn’t contemplate these types of services, and it involves a number of corporations which are looking at ways to make money out of the new online environment”.
This problem has already arisen in relation to internet service provider (ISP) liability, because when third party services are involved, there is always a chance that the third party will infringe copyright.
In the cloud computing environment, the questions of who (for the purposes of section 22 Copyright Act):
are unclear, because there are effectively two ‘actors’ at play: the cloud service provider (Optus) and the end user (individual customer).
In Seven Network v TCN Channel Nine, the Full Federal Court upheld the trial court’s judgment that it was possible for two people to be the ‘maker’ of a copy of a film.  This was also the conclusion in Roadshow Films v iiNet, in relation to an internet service provider. The Optus v NRL case therefore provides an opportunity for the Federal Court to consider this issue (and hopefully resolve it) in the cloud context.
Streaming the content back to the individual customer’s device activates the communication right, which includes making available online or electronically transmitting content (Copyright Act section 10). To avoid liability for communicating the NRL and AFL broadcasts ‘to the public’, Optus is likely to argue that each customer has a separate recording made so that there is a transmission to the individual customer rather than to the ‘public’ at large. If the court finds the individual customer alone (or both the individual customer and Optus) is exercising the communication right, then it is arguable that there is no communication ‘to the public’ at all.
Even if the individual customer alone is found to be the ‘maker’ of the copy (alleviating Optus of responsibility), there would still be a breach of copyright by the individual customer unless the court finds that the “time-shifting” defence of section 111 of the Copyright Act applies.
Section 111 operates as a defence against copyright infringement for a person who makes a copy of a broadcast solely for private and domestic use, by watching or listening to the broadcast at a more convenient time. Optus argues that what it offers is equivalent to customers recording the content on their own hard drives – but the difference is that the content is stored in the cloud.
If the individual customer and Optus are jointly found to be the ‘maker’, then while the time-shifting defence will protect the individual customer, it will not protect Optus.
While this case will be a first for Australian courts in relation to copyright infringement by a cloud service, there have already been some US cases in the area.
Three years ago in the Cablevision case, the United States Court of Appeals for the Second Circuit overturned a district court’s decision (which found for the copyright owner) to find for the cloud service provider (and a subsequent appeal to the Supreme Court was denied). Cablevision operated a service analogous to TV Now and the court held that Cablevision was not liable for copyright infringement because it was not the ‘maker’.
More recently, in EMI Records v MP3Tunes, the United States District Court (Southern District of New York) held that a cloud storage service for mp3 music files was protected by the safe harbour provisions of the Digital Millennium Copyright Act (DMCA).
Like the United States, we have safe harbour provisions in the Australian Copyright Act (Part V Division 2AA). These provisions protect third party intermediaries provided they meet certain conditions. Although Optus has not pleaded these provisions in its statement of claim, it would be eligible for safe harbour protection as it is a ‘carriage service provider’ under the Telecommunications Act 1997 to which the provisions apply (telecommunications and internet service providers). It is possible that Optus will raise the safe harbour provisions as a defence to the NRL’s and AFL’s cross claims, in order to avoid monetary liability if the court finds Optus to be infringing their copyright.
However, not all cloud service providers are ‘carriage service providers’ to which the Australian safe harbour provisions apply. The Commonwealth Attorney-General has raised potential reform of the safe harbour provisions so they extend to all online service providers and, if successful, this would give greater comfort to cloud service providers in relation to copyright infringement.
The outcome of the Optus v NRL case is likely to have significant implications for cloud service providers. While recent US case law suggests a positive outlook for cloud service providers at least in the United States, the Optus v NRL case provides an opportunity for Australian courts to adopt (or reject) that approach. The case also provides an important opportunity for the courts and the legislature to consider whether there are inadequacies in the law that need to be addressed because of the increasing social utility and popularity of cloud based services.
The hearing begins on 19 December 2011 before Rares J at the Federal Court of Australia in Sydney.
 Battersby L “Threat to AFL millions”, The Sydney Morning Herald, 15 September 2011, <http://www.smh.com.au/business/threat-to-afl-millions-20110914-1k9qm.html>.  Edwards M “Cloud hangs over smart device broadcast rights” ABC News, 15 September 2011.  For example, in Roadshow Films Pty Ltd v iiNet Limited  FCAFC 23.  Seven Network (Operations) Limited v TCN Channel Nine Pty
Ltd  FCA 476.  Roadshow Films Pty Ltd v iiNet Limited  FCAFC 23 at  per Jagot J.  Cartoon Network LP v CSC Holdings Inc and Cablevision Systems Corp 536 F.3d 121 (2008)  Capitol Records Inc et al v MP3Tunes LLC and Michael Robertson, United States District Court, Southern District of New York, No. 07-09931 (2011).  Commonwealth Attorney-General’s Department, Revising the Scope of the Copyright ‘Safe Harbour Scheme’, Consultation Paper, October 2011.
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