Incidental or technical use

11.4 Copyright owners have an exclusive right to reproduce and communicate their work to the public.^[1] Without a licence or an exception, reproduction and communication to the public of copyright material constitute infringement.

11.5 This can be problematic in a digital environment where material ‘cannot be handled without copying it’.^[2] Reproduction and communication of copyright material has not only become ubiquitous, but necessary for the effective and efficient functioning of the internet, networks, and technological processes that facilitate lawful consumption of copyright material. For example, a reproduction and communication is required every time a person watches a DVD, reads a webpage,^[3] or streams a video from the internet.^[4] In contrast, no such reproduction or communication is required in a non-digital context when a person reads a book or a magazine.

11.6 One example of incidental or technical use discussed in this Inquiry related to caching and indexing by search engines. For example, Google’s search engine works by using automated ‘web crawlers’ that find and make copies of websites on the internet. These copies are then indexed and stored on its cache. When a user enters a search query, Google uses the cached version to judge if the page is a good match for the query, and displays a link to the cached site.^[5]

11.7 Caching improves the internet’s performance by allowing search engines to quickly retrieve cached copies on its server, rather than having to repeatedly retrieve copies from other servers. It is also helpful when the original page is not available due to internet traffic congestion, an overloaded site, or if the owner has recently removed the page from the web.^[6]

11.8 Search engines, web hosts and other internet intermediaries rely on indexing and caching for their efficient operation.^[7] Other parties also rely on caching and indexing to facilitate streaming services and to improve the speed of database searches.^[8]

11.9 Stakeholders also emphasised the importance of the cloud computing sector to the future of Australia’s digital economy.^[9] Innovative cloud-based services rely heavily on technological processes that involve incidental or technical reproduction and communication of copyright material.^[10]

11.10 Ericsson argued that the extra copying required in the digital environment results in businesses requiring more ‘time and money to acquire necessary permissions’, which are not required in relation to analog works.^[11] The impact of such concerns was highlighted by the experience of Pandora, an internet streaming radio service that struggled to negotiate licences it needed to operate in Australia. Pandora argued that it needs to make permanent copies to deliver its services to the Australian public, and that it should not be required

to separately negotiate licences to make copies of recordings where it secures a licence to communicate the recordings and the copies are made purely for the purposes of exercising that licence.^[12]

11.11 The policy question for this Inquiry was whether unlicensed incidental or technical uses should infringe copyright and, if so, under what circumstances. Can the copyright system facilitate the efficient operation of digital technologies to promote innovation and ensure wide access to copyright material, while acknowledging and respecting authorship and creation?

11.12 There has been growing international consensus that certain unlicensed incidental or technical reproduction should not be viewed as infringing. For example, Maria Pallante, Director of the US Copyright Office, has observed that

new technologies have made it increasingly apparent that not all reproductions are the same. Some copies are merely incidental to an intended primary use of a work, including where primary uses are licensed, and these incidental copies should not be treated as infringing.^[13]

11.13 This sentiment was echoed by a number of stakeholders in this Inquiry, including the ACCC:

In the digital environment there has been an increase in the use and copying of copyright material, in ways that appear to be quite incidental to the production of the primary good or service being produced. For example, copyright material copied by internet intermediaries for caching purposes. Similarly, some use and copying of copyright material may currently be ‘unauthorised’ in circumstances where this use has little, if any, detrimental impact on incentives for copyright creation.^[14]

11.14 The Hargreaves Review also recommended that the UK Government push to build into the EU framework an exception allowing uses of a work enabled by technology which do not trade on the underlying and expressive purpose of the work:

The idea is to encompass the uses of copyright works where copying is really only carried out as part of the way a technology works … This is not about overriding the aim of copyright—these uses do not compete with the normal exploitation of the work itself—indeed, they may facilitate it.^[15]

Current exceptions

11.15 The Copyright Act contains a number of exceptions that deal with temporary reproductions. These include:

• ss 43A and 111A—allowing for the temporary reproduction of a work and an adaptation of a work or an audiovisual item as part of the ‘technical process of making or receiving a communication’;^[16]

• ss 43B and 111B—providing that copyright is not infringed by a temporary reproduction ‘incidentally made as a necessary part of a technical process’ of using a copy of the work or subject matter;^[17]

• s 116AB—allowing for the reproduction of copyright material on a system or network controlled or operated by, or for, a ‘carriage service provider’ in response to an action by a user to facilitate efficient access to that material by that user or other users;^[18]

• s 200AAA—allowing automated caching by computers operated by or on behalf of an educational institution;^[19] and

• ss 47, 70 and 107, allowing copying to make broadcasts technically easier and to enable the making of repeat or subsequent broadcasts.^[20]

11.16 Stakeholders suggested that these exceptions were not adequate to deal with caching and indexing and other technical or incidental uses in the digital environment. For example, ss 43A and 111A only permit a ‘temporary’ reproduction, but copyright material may need to be stored in a cache for long periods of time.^[21] Similarly, it was submitted that the exceptions allow only a single reproduction, whereas the digital environment demands and that multiple reproductions are necessary.^[22]

11.17 Stakeholders also submitted that exceptions do not adequately protect certain technical or incidental communications of copyright material, such as when a search engine communicates search results to a user.^[23] The Copyright Advisory Group—Schools observed that there was merit in considering whether exceptions for ‘temporary communications’ are required in the same way as for ‘temporary reproductions’:

For example, the upload of a work to a Learning Management System would involve a reproduction of that work, but the display of that work in class (via connection to a laptop and/or interactive whiteboard) or accessing the content by a student or staff from the cloud or a centralised content repository, may also result in one or more electronic transmissions comprised in the right of communication to the public when the content is transmitted from the Learning Management System (LMS) to a laptop, monitor or electronic whiteboard.^[24]

11.18 Optus argued that s 43A only allows copies to be made after the user requests a download of the material and that this was not consistent with what happens on a practical level, where ‘a copy is created in a cache in anticipation of download by other users’.^[25] Similarly, it was suggested that it is unclear whether s 200AAA could facilitate ‘active’ forms of caching, whereby a school selects what material needs to be cached.^[26]

11.19 Burrell and others suggested that the limitation in ss 43A(2) and 111A(2), that the copy not be an infringing copy, makes the exception unworkable for caching of any significance:

Any entity that sets up their system to cache all (or all popular) communications is likely, at some point, to capture copies from both infringing and non-infringing communications without any knowledge on their part.^[27]

11.20 The concerns from stakeholders were summed up by the Law Council of Australia, which stated that the legal position in relation to caching in Australia is ‘confusing, overlapping, incoherent and in some cases redundant’ and that ‘it is undesirable to have several overlapping, but distinct provisions aimed at the same basic phenomenon and offering only partial and uncertain protection’.^[28]

Assisting innovation and lawful consumption

11.21 Stakeholders submitted that the uncertainty around caching and indexing inhibits, or has the potential to inhibit, innovation and investment in cloud computing and other products and services that rely on such incidental or technical uses.^[29] While copyright holders suggested that nothing in the Copyright Act has impeded search engines from providing services to Australians, it remains the case that the ‘servers that these services run on are all located overseas, and mostly in the US, because they simply can’t operate in Australia’.^[30]

11.22 Some stakeholders were concerned to ensure that Australia’s regulatory framework puts it on the same footing as other jurisdictions.^[31] For example, the Australian Industry Group emphasised the need for Australia’s regulatory framework to be consistent and competitive with other jurisdictions:

A copyright framework that prohibits critical or routine activities related to the digital economy that are permitted in other markets may discourage domestic innovation or lead to commercial or research activities staying or moving offshore.^[32]

11.23 Burrell and others argued that, on principle, incidental or technical uses should be excluded from infringement. They suggested that rights holders should not be able to ‘double dip’ or otherwise expand the reproduction and communication rights to demand licence fees for each individual copy made to facilitate lawful uses of copyright material.^[33] If reproductions that are necessary and ubiquitous risk infringement, this may have the effect of increasing transaction costs (as more licences are required) and stifling the creation of innovative services in the digital economy.^[34] The ACCC said that

Transaction costs can also arise as a result of uncertainty regarding whether certain incidental uses currently breach the Copyright Act, as resolving uncertainties can be expensive and in some instances, require litigation. These uncertainties could cause third parties to avoid developing products that involve beneficial incidental copying, which can in turn limit product innovation and competition.^[35]

Fair use

11.24 A number of stakeholders—including technology companies that rely heavily on caching and indexing—suggested that uncertainty could be removed by replacing the current exceptions with fair use.^[36] Some compared the uncertain situation in Australia to the US, where caching and indexing is done in reliance on a ‘well established fair use doctrine that permits this activity’.^[37]

11.25 Stakeholders also suggested that fair use is more suitable than specific exceptions, because it can accommodate uses that ‘don’t exist yet, or haven’t yet been foreseen’.^[38] For example, Google submitted that closed exceptions

are antithetical to how the internet works and the dynamic nature of the creativity enabled by the internet. Australia’s system of closed-purpose, prescriptively described exceptions means that new and innovative uses of copyright materials that do not fall within the technical confines of an existing exception are not capable of being permitted by exceptions, no matter how creative the new use, or how strong the public interest in enabling that new use may be.^[39]

11.26 Others suggested that it would be difficult to draft purpose-based exceptions for caching, indexing and other internet functions without ‘some technology specificity’.^[40] Telstra argued that redrafting ‘based on today’s technical knowledge and standards is likely to render the exception obsolete in the context of future innovations’.^[41]

11.27 In Chapter 4, the ALRC makes the case that fair use is flexible, and can accommodate for technological change in ways that specific exceptions cannot. Australian copyright law should recognise that the reproduction and communication of copyright material is a necessary part of the effective functioning of technology in the digital environment. The fact that copyright material has been reproduced or communicated—for example by a search engine—should not, of itself, infringe copyright. The question should be answered by an analysis of whether such uses are fair.

11.28 New and unforeseen technical or incidental uses—beyond caching and indexing—will arise in the digital environment. The ALRC considers that fair use is sufficiently flexible to determine whether such uses should be permitted, based on an assessment of fairness. Importantly, fair use requires market considerations to be taken into account and this should protect the interests of copyright owners. A specific or blanket exception may not adequately provide for such protection.

11.29 In the ALRC’s view, caching and indexing that are uncertain under the current exceptions would likely be fair, under the fair use exception recommended in this Report. However, whether a use is fair, must in each instance, be assessed after considering the following fairness factors.

The purpose and character of the use

11.30 Whether a use is ‘transformative’ will be a key question in applying the Australian fair use exception.^[42] This requires an examination of the extent to which a new work merely ‘supersedes’ or ‘supplants’ the original work or whether the new work is ‘for a different expressive purpose from that for which the original was created’.^[43] A number of US court decisions have held caching and indexing to be transformative.

11.31 In Field v Google, a US court found that copies held in Google’s cache were ‘transformative’ because they allowed users to:

• access content when the page was inaccessible;

• detect changes made to a page;

• understand why the page was responsive to their original query.^[44]

11.32 Similarly, in Perfect 10, Inc v Amazon.com, Inc, thumbnails of artistic works that were communicated by Google’s cache were considered to be ‘highly transformative’, because a search engine provides an entirely new use for the original work, turning the image from a use of artistic expression into an ‘electronic reference tool’.^[45]

11.33 The ALRC considers that caching and indexing are transformative and that this would weigh heavily in favour of fair use. Other incidental or technical uses may not be transformative, but may nevertheless be fair for other reasons.

11.34 Whether an incidental or technical use is commercial will also be relevant. A commercial purpose will tend to weigh against a finding of fair use,^[46] but this will not always be the case.^[47] For example, the US Copyright Office suggests that buffer copies made in the course of internet music streaming is fair use, despite being done for a commercial activity. Buffer copies are not a ‘superseding use that supplants the original’. Rather, they are necessary and ‘non-exploitative’ and the purpose ‘is to enable a use that has been authorised by the copyright owner and for which the copyright owner typically has been compensated’.^[48] It considered that the commercial aspect in such cases ‘can best be described as of minimal significance’.^[49]

The nature of the copyright material used

11.35 The nature of the copyright material will be a relevant consideration. For example, reproduction of published material is more likely to be fair use than in the case of unpublished material.^[50]

The amount and substantiality of the part used

11.36 This factor considers how much of work is taken, and how important was that taking in the context of the plaintiff’s work. One question is whether the incidental or technical use takes only what is ‘reasonably necessary’ for a particular technical function.^[51]

11.37 In some instances, they may require a small portion of the work to be reproduced, while in others, a whole of a work may need to be produced. For example, in Kelly v Arriba Soft Corporation, the court recognised that an internet search engine needs to engage in wholesale copying in order to provide any meaningful responses to search queries.^[52] While holding that Arriba’s use of thumbnail images to be fair use, it held the search engine’s display of full size images was not fair use because this was not transformative and resulted in ‘substantial adverse effects to the potential market for Kelly’s original works’.^[53]

Effect of the use upon the market

11.38 The effect of the use on the market will be a significant factor, and may often depend on how transformative a use is. A use that is transformative is less likely to substitute for the original work, and therefore less likely to cause harm to the market.

11.39 For the market harm factor to dictate against fair use, the harm to the market should be substantial, rather than minor or remote. Findings about whether incidental or technical uses have ‘independent economic significance’ may be relevant in determining whether such uses affect the market of the original work. For example, the US Copyright Office suggests that buffer copies made in the course of streaming have no ‘economic value independent of the performance it enables’ which can harm the market. Rather, such copying merely ‘facilitates an already existing market for the authorised and lawful streaming of works’.^[54]

An illustrative purpose

11.40 Incidental or technical uses appear to be a good example of fair use in the digital environment. In particular, the first and fourth factors, when applied to technical and incidental uses—such as caching and indexing or network functions—that facilitate lawful access to copyright material will tend to weigh heavily in favour of fair use.

11.41 The ALRC recommends that the fair use exception include an illustrative purpose for ‘incidental or technical use’. This does not mean that all incidental or technical uses are fair, but it will signal that such uses are more likely to be fair than non-technical or non-incidental uses. However, when determining whether a particular technical or incidental use is fair, the fairness factors should all be considered.

11.42 In the Discussion Paper, the ALRC proposed that ‘non-consumptive use’—being use of copyright material that does not trade on the underlying and expressive purpose of the copyright material—be an illustrative purpose in the fair use provision.^[55] The ALRC considered that this purpose could cover technical or incidental uses as well as non-expressive uses, such as data and text mining (discussed below).

11.43 Stakeholders submitted that ‘non-consumptive’ as an illustrative purpose was vague and uncertain, and required further elaboration.^[56] It was submitted that:

• it is difficult to ascertain what ‘trade on’ or ‘underlying expressive purpose’ means;^[57]

• the term may rule out completely any use that is in some way ‘consumptive’ or commercial;^[58]

• the term does not exist in any other international legislation;^[59] and

• there is no ‘bright line’ as to when, how or to what extent, infringing use will not trade on the underlying or expressive purpose.^[60]

11.44 Some stakeholders were not convinced that the phrase ‘non-consumptive’ could neatly cover both technical and incidental uses and those that are not merely facilitative but are non-expressive in nature. They suggested that the conflation of the two uses under the umbrella term ‘non-consumptive use’ may cause difficulties in the application of fair use.^[61]

11.45 After further consideration, the ALRC has decided to recommend the narrower and precise ‘incidental or technical use’ as an illustrative purpose.

Fair dealing for incidental or technical use

11.46 The ALRC also recommends that, if fair use is not enacted, a new fair dealing exception should be introduced.^[62] This new fair dealing exception should include ‘incidental or technical use’ as a prescribed purpose.

11.47 The fair dealing exception would require consideration of whether the use is fair, having regard to the same fairness factors that would be considered under the fair use exception. Applying the fair use or fair dealing exceptions to incidental or technical uses should produce the same result.

Specific exception for incidental or technical use

11.48 If neither fair use nor the new fair dealing exception is enacted, the ALRC suggests that the existing exceptions for temporary reproductions could be repealed in any event, and replaced with a new specific exception for incidental or technical use.

11.49 In the ALRC’s view, this is a less flexible solution to fair use or new fair dealing. Nonetheless, a new specific exception may be warranted to alleviate uncertainty surrounding the current exceptions.

11.50 If a new specific exception is introduced, it should be technology neutral and should fill in the gaps that exist under the current exceptions. This includes recognition that incidental or technical uses require both reproduction and communication of copyright material. The references to ‘temporary’ should be removed. It should also be made clear that copyright is not infringed by using copyright material for caching and indexing by search engines, where that facilitates a lawful use.

11.51 This specific exception could also be confined to incidental or technical uses that facilitate lawful use of copyright material. This would prevent the use of the exception to aid infringing practices. Such reform would provide greater clarity and certainty to innovators that services or products relying on technical or reproduction to facilitate the lawful use of copyright material, will not infringe copyright.

11.52 In considering such a new specific exception, the Australian Government may wish to consider specific exceptions found in other jurisdictions. For example, in Canada, the Copyright Act 1985 (Can) provides that it is not infringement to make a reproduction of a work that forms part of an essential process, for the purpose of facilitating a use that is not an infringement to copyright, and the reproduction exists only for the duration of the technical process.^[63]

11.53 Canada also has an exception for ‘network services’. A person who provides services related to the internet or another digital network do not, solely by providing those means, infringe copyright in the telecommunication or reproduction of a work or other subject matter.^[64]

11.54 The Copyright Review Committee (Ireland) has recommended an exception that would allow reproductions which are temporary, transient or incidental and that have no independent economic significance. The reproduction must be an essential and integral part of a technological process with the sole purpose of enabling either a transmission in a network between third parties by an intermediary or a lawful use.^[65] This mirrors a European Union Information Society Directive, which provides that states should include a mandatory exception to the right of reproduction in respect of certain temporary acts of reproduction.^[66] The Directive also leaves open to member states to provide for other non-mandatory exceptions to the right of communication.^[67]

Safe harbour scheme

11.55 The exceptions discussed in this chapter do not remove the need for a safe harbour scheme. Australia’s safe harbour scheme limits the remedies available against ‘carriage service providers’ for copyright infringement that takes place on their systems, which they do not control, initiate or direct. The scheme is now being reviewed, and is outside the ALRC’s Terms of Reference.^[68]

11.56 However, it should be noted that even if fair use or the new fair dealing exception for incidental or technical use were enacted, internet intermediaries and others may still need to rely on a safe harbour scheme in other circumstances.