The recommendations

A flexible fair use exception

The ALRC recommends the introduction of fair use. Fair use is a defence to copyright infringement that essentially asks of any particular use: Is this fair? In deciding whether a particular use of copyright material is fair, a number of principles, or ‘fairness factors’, must be considered.

The case for fair use made in the Report is based on several arguments, including:

• Fair use is flexible and technology-neutral.

• Fair use promotes public interest and transformative uses.

• Fair use assists innovation.

• Fair use better aligns with reasonable consumer expectations.

• Fair use helps protect rights holders’ markets.

• Fair use is sufficiently certain and predictable.

• Fair use is compatible with moral rights and international law.

An important feature of fair use is that it explicitly recognises the need to protect rights holders’ markets. The fourth fairness factor in the exception is ‘the effect of the use upon the potential market for, or value of, the copyright material’. Considering this factor will help ensure that the legitimate interests of creators and other rights holders are not harmed by the fair use exception. If a licence can be obtained to use copyright material, then the unlicensed use of that material will often not be fair. This is vital to ensuring copyright law continues to fulfil its primary purpose of providing creators with sufficient incentive to create.

Many have expressed concern that fair use may harm rights holders because it is uncertain. The ALRC recognises the importance of having copyright exceptions that are certain in scope. This is important for rights holders, as confidence in exploiting their rights underlies incentives to creation. It is also important for users, who should also be confident that they can make new and productive use of copyright material without a licence where this is appropriate.

Concern about uncertainty comes from an important and positive feature of fair use—its flexibility. Fair use differs from most current exceptions to copyright in that it is a broad standard that incorporates principles, rather than a detailed prescriptive rule. Law that incorporates principles or standards is generally more flexible than prescriptive rules, and can adapt to new technologies and services. A fair use exception would not need to be amended to account for the fact that consumers now use tablets and store purchased copies of copyright material in personal digital lockers in the cloud.

Although standards are generally less certain in scope than detailed rules, a clear principled standard is more certain than an unclear complex rule. The Report recommends replacing many complex prescriptive exceptions with one clear and more certain standard—fair use.

The standard recommended by the ALRC is not novel or untested. Fair use builds on Australia’s fair dealing exceptions, it has been applied in US courts for decades, and it is built on common law copyright principles that date back to the eighteenth century. If fair use is uncertain, this does not seem to have greatly inhibited the creation of films, music, books and other material in the world’s largest exporter of cultural goods, the United States.

Fair use also facilitates the public interest in accessing material, encouraging new productive uses, and stimulating competition and innovation. Fair use can be applied to a greater range of new technologies and uses than Australia’s existing exceptions. A technology-neutral open standard such as fair use has the agility to respond to future and unanticipated technologies and business and consumer practices. With fair use, businesses and consumers will develop an understanding of what sort of uses are fair and therefore permissible, and will not need to wait for the legislature to determine the appropriate scope of copyright exceptions.

Fair use is technology neutral, and it is not confined to particular types of copyright material, nor to particular rights. However, when it is applied, fair use can discriminate between technologies, types of use, and types of copyright material. Uses with some technologies may be found to be fair, while uses with other technologies—perhaps that unfairly encroach on rights holders’ markets—may not. This is one of the strengths of fairness exceptions. Fair use is a versatile instrument, but it is not blunt.

Fair use promotes what have been called ‘transformative’ uses—using copyright material for a different purpose than the use for which the material was created. This is a powerful and flexible feature of fair use. It can allow the unlicensed use of copyright material for such purposes as criticism and review, parody and satire, reporting the news and quotation. Many of these uses not only have public benefits, but they generally do not harm rights holders’ markets, and sometimes even enlarge them. Fair use is also an appropriate tool to assess whether other transformative uses should be permitted without a licence, such as data mining and text mining, caching, indexing and other technical functions, access for people with disability, and a range of other innovative uses.

In the final days of writing the Report, a US District Court ruled that Google Books was a highly transformative and fair use. There will no doubt be much debate about this landmark decision. But one thing seems clear to the ALRC: with a fair use exception, the right questions could be asked. Is this fair? Does this use unfairly harm the interests of rights holders? Is the use for a public benefit, and is it transformative?

Contrast this with the questions that would now be raised under Australian copyright law. Was Google using this service for its own research or study, criticism or review, parody or satire, or to report the news? Was this private format shifting, and if so, were copies stored on more than one device?

This case highlights two problems with Australian law. First, it does not permit, without possibly unobtainable licences, what many would consider a service of great social and economic value. More importantly, Australian law does not even allow the right questions to be asked to determine whether a service such as this infringes copyright.

Copyright protection is vital in allowing creators and rights holders to exploit the value of their materials, and to increase the incentive to create those materials—but this monopoly need not extend indefinitely or into markets which the creator had no real interest in exploiting. Copyright must leave ‘breathing room’ for new materials and productive uses that make use of other copyright material.

By appropriately limiting the ambit of copyright, exceptions can increase competition and stimulate innovation more generally, including in technologies and services that make productive use of copyright material. The ALRC considers that fair use finds the right balance. It protects the interests of rights holders, so that they are rewarded and motivated to create, in part by discouraging unfair uses that harm their traditional markets. It can also stimulate innovation, particularly in markets that rights holders may not traditionally exploit.

Of course, innovation depends on much more than copyright law, but fair use would make Australia a more attractive market for technology investment and innovation. Increasingly, the introduction of fair use into copyright law is being looked to as something that ‘technologically ambitious small countries’ might adopt. It has been introduced in Israel, Singapore and the Republic of Korea and it is gaining support across Europe.

An Australian copyright law review committee recommended the introduction of fair use in 1998. Would Australia have been better placed to participate in the growth of the nascent digital economy, had this recommendation been implemented at that time?

Fair use also better aligns with reasonable consumer expectations. It will mean that ordinary Australians are not infringing copyright when they use copyright material in ways that do not damage—and may even benefit—rights holders’ markets. The public is also more likely to understand fair use than the existing collection of complex specific exceptions; this may increase respect for and compliance with copyright laws more broadly.

Almost 30 existing exceptions could be repealed, if fair use were enacted. In time, others might also be repealed. Replacing so many exceptions with a single fairness exception will make the Copyright Act considerably more clear, coherent and principled.

Much of the Report discusses the application of fair use to particular types of use. The ALRC recommends that some of these uses be included as ‘illustrative purposes’ in the fair use provision, namely: research or study; criticism or review; parody or satire; reporting news; professional advice; quotation; non-commercial private use; incidental or technical use; library or archive use; education; and access for people with disability.

While these purposes do not create a presumption that a particular type of use will be fair, it will signal that certain uses are somewhat favoured or more likely to be fair. Many private uses, for example, will not be fair, perhaps because licences can be obtained from rights holders—but even so, a purely private non-commercial use is more likely to be fair than a non-private use. Including this list of purposes will provide useful guidance, but the fairness factors must always be considered.

Despite the fact that the US has had a fair use exception for 35 years, it is sometimes argued that fair use does not comply with the three-step test under international copyright law. This argument is discussed and rejected in the Report.

The introduction of fair use to Australia is supported by the internet industry, telecommunications companies, the education sector, cultural institutions and many others. However, it is largely opposed by rights holders. In light of this opposition, the ALRC recommends an alternative, second-best exception.

An alternative: a new fair dealing exception

An alternative exception, should fair use not be enacted, is also recommended: a ‘new fair dealing’ exception that consolidates the existing fair dealing exceptions and provides that fair dealings for certain new purposes do not infringe copyright.

This exception is similar to fair use, but crucially, it is confined to a set of prescribed purposes. The purposes listed in the fair use exception are illustrative—examples of types of use that may be fair. The purposes listed in the new fair dealing exception, on the other hand, confine the exception. This exception would only apply when a given use is made for one of the prescribed purposes.

The purposes in the new fair dealing exception are the same as those the ALRC recommends should be referred to in the fair use exception. Using copyright material for one of these purposes will not necessarily be fair—the fairness factors must be considered—but these uses are favoured.

Many of the benefits of fair use would also flow from this new fair dealing exception. Both exceptions are flexible standards, rather than prescriptive rules. They both call for an assessment of the fairness of particular uses of copyright material. In assessing fairness, they both require the same fairness factors to be considered, and therefore they both ask the same important questions when deciding whether an unlicensed use infringes copyright. Both exceptions encourage the use of copyright material for socially useful purposes, such as criticism and reporting the news; they both promote transformative or productive uses; and both exceptions discourage unlicensed uses that unfairly harm and usurp the markets of rights holders.

Despite the many benefits common to both fair use and fair dealing, a confined fair dealing exception will be less flexible and less suited to the digital age than an open-ended fair use exception. Importantly, with a confined fair dealing exception, many uses that may well be fair will continue to infringe copyright, because the use does not fall into one of the listed categories of use. For such uses, the question of fairness is never asked.

In the ALRC’s view, Australia is ready for, and needs, a fair use exception now. However, if fair use is not enacted, then the new fair dealing exception will be a considerable improvement on the current set of exceptions in the Copyright Act.

Specific exceptions

The Report also recommends retaining and reforming some existing specific exceptions, and introducing certain new specific exceptions. These are exceptions specially crafted for a particular type of use. Although they are less flexible and adaptive than fair use, they can serve a useful function if properly framed.

Specific exceptions are recommended for unlicensed uses for which there is a clear public interest, and for some uses that are highly likely to be fair use anyway, making a case-by-case assessment of fairness unnecessary. Preservation copying by libraries and archives is one example. The ALRC also recommends that specific exceptions for parliamentary libraries and judicial proceedings should be retained. New specific exceptions are recommended for use of copyright material in royal commissions and statutory inquiries, to allow public access to material when required by a statute, and to allow use of correspondence and other material sent to government.

The new exceptions are intended to promote good and transparent government. They will not have a significant impact on the market for material that is commercially available. If the use is essential to the functioning of the executive, the judiciary or the parliament, or to the principle of open government, it is likely that the use would be considered fair.

Reform of statutory licences

The education sector and various governments expressed dissatisfaction with the statutory licensing schemes for education and the Crown. There were strong calls for the licences to be repealed.

The ALRC has concluded that there is, at least for now, a continued role for these statutory licences. The enactment of fair use and new exceptions for government use should address many of the criticisms of the statutory licences. If new exceptions such as these are not enacted, then the case for repealing the statutory licences becomes considerably stronger.

The licensing environment has changed in recent decades, and the statutory licences should be reformed to ensure they fulfil their objectives. They need to be streamlined and made less rigid and prescriptive. The terms of the licence should be agreed on by the parties, not prescribed in legislation.

The Copyright Act should also be clarified to ensure the statutory licences are truly voluntary for users, as they were intended to be. It should also be made clear that educational institutions, institutions assisting people with disability and governments can rely on fair use and the other unremunerated exceptions that everyone else can rely on, to the extent that the exceptions apply.

These reforms of the licences and the enactment of fair use will ensure copyright law does not inhibit education and governments in the digital environment.

Orphan works

A wealth of copyright material is now neglected and wasted because the owners of the relevant rights cannot be found, and therefore permission to use the material cannot be given. To encourage the use of these ‘orphan works’, the ALRC recommends that the remedies available for copyright infringement be limited where a reasonably diligent search for the rights holder has been made and, where possible, the work has been attributed to the author. These reforms will promote the wider use of orphan works, without harming rights holders.

Broadcasting

The ALRC reviewed a range of exceptions that concern free-to-air television and radio broadcasting, including the statutory licensing scheme for retransmission of free-to-air broadcasts and other exceptions that refer to the concept of a ‘broadcast’ and ‘broadcasting’. In a changing media environment, distinctions currently made in copyright law between broadcast and other platforms for communication to the public may require justification.

The ALRC suggests approaches to reform of broadcasting exceptions, including changes to the retransmission scheme and the statutory licensing scheme applying to broadcasting of music; and the extension of some other exceptions to the transmission of linear television or radio programs using the internet. These exceptions raise complex questions at the intersection of copyright and communications policy. The Australian Government needs to give further consideration to these issues in developing media and communications policy, in response to media convergence.

Contracting out

Consideration of limits on the extent to which parties may effectively contract out of existing, and recommended new, exceptions to copyright law raises fundamental questions about the objectives underlying copyright protection. At present, there are few express limitations on contracting out.

The ALRC recommends that the Copyright Act should be amended to provide that contractual terms restricting or preventing the doing of any act which would otherwise be permitted by the libraries and archives exceptions are unenforceable. Further, if the fair use exception is not enacted, limitations on contracting out should apply to the new fair dealing exception. However, broader limitations on contracting out—for example, extending to all exceptions, or to all fair uses—would not be practical or beneficial.

Overall effect of the recommendations

The overall effect of the recommendations in the Report will be a more flexible and adaptive copyright framework. The introduction of fair use will mean Australian copyright law can be applied to new technologies and new commercial and consumer practices, without constant recourse to legislative change. Fair use will promote innovation and enable a market-based response to the demands of the digital age.

The reforms will enhance access to cultural material, without undermining incentives to create. The recommended exceptions are also intended to be more consistent with public standards of fairness.

What do the recommendations have in common? The ALRC considers that exceptions to copyright, whether in the form of a specific rule or a general standard, should only permit the unlicensed use of copyright material where this would be fair. It should therefore not be surprising that fair use and each of its illustrative purposes, and the handful of specific exceptions recommended in the Report, have much in common. Generally, they permit the unlicensed use of copyright material if this would:

• serve an important public purpose;

• stimulate the creation of new works and the use of existing works for new purposes; and

• not harm rights holders’ markets—ensuring exceptions do not undermine the crucial incentive to create and publish copyright material.