Optus v NRL - A silver lining for cloud-based services?

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6 February 2012
Helen Clarke

Summary

  • In Singtel Optus v National Rugby League Investments (No 2), the Federal Court found that Optus, the provider of a cloud-based TV recording service, did not infringe the copyright in the broadcasts recorded on the service.
  • The Court held that it was the customer who made the recording and communicated it to their electronic device. Further, this conduct was protected by the “time-shifting” exception in the Copyright Act and was not a “communication to the public” within the scope of the copyright owners’ rights.
  • For cloud-based service providers, the decision is an opportunity to expand their service offerings in relation to television and radio content.
  • For television and radio content owners, the decision significantly diminishes the value of their internet licensing rights.
  • The Court’s reasoning is not without difficulty and is likely to be appealed.

Background

The Federal Court of Australia, sitting as a single judge (Rares J), recently delivered its decision in Singtel Optus v National Rugby League Investments (No 2). This is the first occasion an Australian court has considered copyright issues arising in cloud-based services.

In July 2011, Optus launched a cloud-based TV recording service, marketed as “TV Now”, which enables its customers to record free-to-air television on Optus’ servers and watch those recordings at a later time on their PC or mobile device through an internet connection.

The copyright owners in broadcasts of football matches, the National Rugby League (NRL) and the Australian Football League (AFL), together with their exclusive licensee, Telstra, claimed Optus infringed their copyright by providing the TV Now service.

The Optus TV Now service

An Optus customer can access the TV Now service through the Optus website or mobile application. There, the customer can select free-to-air television programs to record. The Court commented that the TV Now service is “apparently easier for a [customer] to employ than some of the [existing] technologies … such as a DVD recorder, DVR or VCR”.

Upon receiving the customer’s direction to record a desired program, Optus’ servers record and create copies of the program, in several formats to suit different devices. Those copies are stored on Optus’ servers for that particular customer exclusively for 30 days, after which they are deleted.

When the customer wants to watch the recording, one of the copies is “streamed” over the internet to the customer’s device. In this way, the customer can watch the recording, but no permanent copy is kept on the customer’s device.

Copyright issues in cloud-based services

The Court was asked by the parties to determine three key issues in dispute between them, namely:

  1. Who makes a recording on the TV Now service?
  2. Does the “time-shifting” exception in section 111 of the Copyright Act apply?
  3. When the recording is “streamed” to the customer’s device, is there a “communication to the public” and, if so, who makes the communication?

Optus customers make the recording

The first key issue related to the identity of the person who makes the recording of television broadcast on the TV Now service.

In determining the identity of the maker, Justices Rares took into account the objectives of the “time-shifting” exception in section 111 of the Copyright Act. That provision, introduced in late 2006, excludes from infringement liability a person who makes a recording of a broadcast “solely for private and domestic use” by watching the recording at a more convenient time. Examining the reasons behind its introduction, the Court found the exception was “intended to provide greater flexibility in the conditions that apply to time-shifting, allowing recording of films by individuals inside or outside of their homes”.

Justice Rares reasoned, therefore, the only person who made the recording was the Optus customer, “there [being] no real or sufficient distinction between the characterisation of a user of a service, like TV Now, to record a film of a broadcast and a person who uses a VCR (or DVR) to do so”.

Optus customers do not infringe copyright because the “time-shifting” exception applies

The second key issue was whether the “time-shifting” exception applies so that Optus customers do not infringe copyright by making recordings on the TV Now service. The question for the Court was whether such conduct fell within the required purpose of “private and domestic use”.

Based on customer records in evidence, Optus’ terms and conditions (which limited usage to private and domestic use) and the “ordinary experience of life”, Justice Rares held that customers made the recordings on the TV Now service “solely for private and domestic use”.

Thus, the “time-shifting” exception applied to exclude Optus customers from infringement liability.

Optus customers “communicate” the recording, but not “to the public”

The third key issue was whether there is a “communication to the public” of the recording – which falls within the scope of the copyright owners’ exclusive rights – and, if so, identifying the person who made the communication.

It did not appear to be in dispute that “streaming” a recording over the internet was a “communication” within the meaning of the Copyright Act. Applying the presumption in section 22(6) of the Copyright Act that the maker of a communication was “the person responsible for determining the content of the communication”, Justice Rares found it was the Optus customer who made the communication. This was because the content of the communication was the program recorded, and the program recorded was recorded at the customer’s instruction.

As to whether the communication had been “to the public”, the Court again drew on the “time-shifting” exception. Among other reasons, Justice Rares noted that “it would be anomalous if the communication to [the customer] for the protected purpose [of “time-shifting”] for which he or she made [the recording] was an infringement of copyright.”

His Honour therefore concluded that the communication by the customer to their electronic device was not a “communication to the public”.

Optus was not liable for copyright infringement

With the exception of a temporary storage issue yet to be determined, it follows from the Court’s decision that Optus does not infringe NRL’s and AFL’s copyright in broadcasts of football matches by providing the TV Now service.

Is there a silver lining for cloud-based services?

While cloud-based service providers have welcomed the Court’s decision as an opportunity to expand their service offerings in relation to television and radio content, content owners have denounced the decision as significantly expanding the “time-shifting” exception and substantially diminishing the value of the internet licensing rights.  

It also seems likely that the legislature will, when any appeals are heard and finalised, consider whether the relevant provisions of the Copyright Act are inadequate and require amendment to address evolving technologies and the increasing utility and popularity of cloud-based services in particular. The Communications Minister, Senator Stephen Conroy, has since indicated that, pending any further legal challenge to the decision, his preference would be to “redress the imbalance” between the rights of copyright owners and those of cloud-based service providers such as Optus and its TV Now service.

In addition, the Court’s reasoning is not without difficulty. It leads to a conclusion that, in providing a cloud-based TV recording service like TV Now, the cloud service provider does nothing for the purposes of copyright law. If that reasoning is taken its logical extreme, it would suggest that internet content hosts do not participate directly, at least for the purposes of copyright law, when any content is uploaded or downloaded by users.

Given the value of internet licensing rights at stake and the increasing popularity of cloud-based services, the rights holders in this case are very likely to appeal, with leave already given for them to do so. Until an appellate court finally settles the matter, the copyright fog has not yet lifted for cloud-based service providers.

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