Approach to reform

20.70 Contracting out raises fundamental questions about the objectives of copyright law; the nature of copyright owners’ exclusive rights and the exceptions to those rights; and the respective roles of the Copyright Act, contract and competition law and policy in governing licensing practices.

20.71 The issue has been characterised as involving a collision between two important legal principles: statutory rights reflecting public policy on the one hand; and freedom of contract on the other[87]—or public versus private ordering of rights.

20.72 Copyright owners generally oppose limitations on contracting out because this challenges freedom of contract, with possible unintended consequences. Contractual terms are said to provide clarity and certainty for copyright users about how they may deal with copyright materials.

20.73 The economic value of freedom of contract is an important factor. Arguably, most contractual restrictions imposed on licensees ‘are designed either to protect the integrity of the work or the owner’s financial interests’. Both these interests are legitimate concerns.[88]

20.74 From this perspective, copyright users should be able to effectively agree that they will pay for uses covered by unremunerated exceptions in the Copyright Act, for example, under the libraries and archives exceptions. Any restrictions on permissible uses should, in theory, be reflected in the price paid to the copyright owner.

20.75 At the same time, copyright users may gain benefits under the contract that they might otherwise not have, for example, access to the whole of the work for the making of copies or for the purposes of communication or adaptation. A contractual term is not ‘necessarily unfair’ if it prohibits something allowed under a copyright exception when the context in which the term is used is fully considered, including the benefit to the user of the contract as a whole.[89]

20.76 However, contracting out has the potential to render exceptions under the Copyright Act inoperative. Contractual terms excluding or limiting copyright exceptions are commonly used. While contracts may create clarity and provide copyright users with permission to use materials in ways that would otherwise be an infringement, some contractual terms can also erode ‘socially and economically important uses of copyright works’.[90] Further, copyright users are often unable to negotiate the terms on which copyright materials are licensed, particularly where contracts are entered into online.

20.77 Where copyright owners are in a strong bargaining position, they may overreach and circumvent the provisions of the Act, so that ‘private ordering’ leads to a different balancing of parties’ rights than is contemplated in the many complex and carefully structured statutory provisions of the Copyright Act.[91]

20.78 There are differing views on the extent to which the general law and legislation outside the Copyright Act are adequate to constrain contracting out, at least where agreements are governed by Australian law.

20.79 In particular, as discussed above, it has been argued that many contractual terms that restrict user rights under the Copyright Act are invalid through the application of ‘the public policy rule relating to the ouster of the jurisdiction of the courts’.[92] Therefore, expressly prohibiting contracting out may not be necessary, because ‘the common law already provides for invalidity in cases where the public interest requires it’.[93] Other commentators, however, observe that there is nothing in the Copyright Act to suggest that copyright exceptions cannot be pre-empted contractually.[94]

20.80 The ALRC has concluded that contracting out puts at risk the public benefit that copyright exceptions are intended to provide and, therefore, some express limitations should be considered. This conclusion is consistent with 2002 recommendations of the CLRC,[95] and with proposed reforms in the UK and Ireland.

20.81 In its 2012 response to the Hargreaves Review,[96] the UK Government announced that it would legislate to ensure that new copyright exceptions ‘cannot be undermined or waived by contract’.[97] In June 2013, the UK Intellectual Property Office released draft legislation to modernise copyright exceptions, including new exceptions for private copying, parody, quotation and public administration, which include limitations on contracting out.[98]

20.82 In Ireland, the Copyright Review Committee recommended in 2013, just before completion of this Report, that any contract term which unfairly purports to restrict an exception permitted by Irish copyright law should be void.[99] Whether a term is unfair would, under the Committee’s recommendation, depend on all the circumstances of the case and, in particular, where a contract ‘has not been individually negotiated, a term shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the party who had not drafted the term in question’.[100]