20.83 Reform in this area should address public policy problems caused by contracting out, without unnecessarily restricting innovation and flexibility in licensing practices.
20.84 New limitations on contracting out might apply to all exceptions, or only some exceptions—for example, those that serve certain important public interests, or which are fundamental to the copyright balance. In this context, the CLRC recommended that the ‘traditional fair dealing defences and the provisions relating to libraries and archives which permit uncompensated copying and communication to the public within specified limits, and which embody the public interest in education, the free flow of information and freedom of expression, should be made mandatory’.
20.85 The CLRC’s recommendations were based on a view that contracting out may upset the copyright ‘balance’. The CLRC considered that the fair dealing exceptions are ‘an integral component of the copyright interest’.
20.86 The idea of balance is an underlying theme of those seeking to defend the operation of copyright exceptions from contractual arrangements. The concern is that ‘privately enforced arrangements have the potential to upset important public policies embodied in copyright law, which are premised on establishing a balance of interests’.
20.87 However, recourse to the idea of a copyright ‘balance’ that must be maintained in the face of freedom of contract may be criticised. The ALRC is not convinced that limitations on contracting out can be justified by recourse to arguments based on a need to maintain a copyright balance. The idea of balance is constantly contested, as legislators and policy makers seek to determine how rights should be reformulated or modified—a process illustrated by this Inquiry.
20.88 Other arguments for and against limitations on contracting out derive from different conceptual understandings of copyright exceptions—on whether exceptions are considered to define the scope of the copyright owner’s exclusive rights (that is, are integral to those rights), or are simply defences to claims of infringement of those exclusive rights.
20.89 If the former view is taken, it may be easier to justify limiting contracting out—on the basis that the copyright owner is seeking to extend its exclusive rights beyond their statutory limits. Again, however, the ALRC is not convinced that such an analysis is the most useful prism through which to view the issue, especially because it raises conceptual arguments on which stakeholders have long disagreed.
20.90 A better criterion for identifying exceptions that should be subject to statutory protection from contracting out is the extent to which exceptions serve defined public purposes that warrant protection. Limitations on contracting out of exceptions that serve public purposes may promote fair access to content, consistently with the framing principles for this Inquiry.
20.91 A 2010 paper for the UK Strategic Advisory Board for Intellectual Property Policy examined how the rationales for different copyright exceptions may dictate whether or not contractual overriding should be permitted. The paper notes distinctions between exceptions that safeguard ‘fundamental freedoms’ or ‘reflect public policy norms’ (such as criticism or review; and news reporting); and those that affect ‘less fundamental principles’. While there is a case for protecting the former category of exceptions, exceptions that simply address market failure (such as statutory licences), do not justify such protection.
Contracting out and fair use
20.92 The nature of an open-ended fair use exception means that limitations on contracting out may have unintended consequences for business models for the distribution of copyright materials. One reason policy makers have been reluctant to be prescriptive about limitations on contracting out is the difficulty of predicting future developments in emerging markets and technologies. Unnecessary limitations on freedom to contract may reduce the flexibility and adaptiveness to new technologies of the copyright regime.
20.93 It is significant that, in the US, there are no statutory restrictions on contracting out of fair use. Arguably, freedom to contract becomes more important in a fair use environment:
As the copyright statute becomes less specific and certain in outlining the parameters and boundaries of free-use exceptions, the value of contractual provisions that can translate general statutory ‘principles’ into specific licensing ‘rules’ to which the parties to the contract agree to be bound increases proportionally.
20.94 The fair use exception covers an open-ended category of uses, only some of which serve important public interests. However, as discussed above, distinguishing between different categories of fair use for the purpose of limitations on contracting out is problematic and may have flow-on effects for the interpretation of fair use.
20.95 For these reasons, the ALRC does not consider that the Copyright Act should provide statutory limitations on contracting out of the fair use exception. In some circumstances, as discussed above, other laws may operate to render contractual terms unenforceable where they are against public policy or unfair.
20.96 The ALRC expects that the contractual background to any dispute over copyright infringement would nevertheless be able to be taken into account in determining whether fair use exists—in particular, as part of the assessment of the ‘purpose and character of the use’ under the first fairness factor. That is, whether a particular use was in breach of contract may be relevant to a fairness determination. It may also be possible to take into account the effect that a finding of fair use would have on a copyright owner’s ability to use contracts to control the market for its works, under the fourth (‘potential market’) factor.
Contracting out and fair dealing
20.97 In the Australian context, the existing fair dealing exceptions protect important public interests in education, the free flow of information and freedom of expression, which the CLRC recommended should be protected. Consistently, the ALRC recommends that, if fair use is not enacted, limitations on contracting out should apply to these fair dealing exceptions. These exceptions are long-established and their scope is well understood, so limitations on contracting out should not cause disruption to existing business models.
20.98 The new fair dealing exception incorporates the existing fair dealing provisions and, in addition, provides for fair dealing covering quotation, non-commercial private use, incidental or technical use, educational use, library or archive use, and access for people with disability.
20.99 In the ALRC’s view, these should also be covered by limitations on contracting out. In part, this is a pragmatic recommendation, avoiding the need to distinguish between different categories of fair dealing for the purposes of contracting out. In part, it reflects a balancing of interests. That is, if users of copyright materials continue to be restricted to a closed category of fair uses, these rights should be protected from contracting out. In the less confined, more market-oriented environment of an open-ended fair use exception, limitations on contracting out are harder to justify and more likely to have unintended effects.
20.100 Whether or not fair use is implemented, statutory limitations on contracting out should apply to the library and archives exceptions. These are clearly for public rather than private purposes. The beneficiaries of the rights are users of the libraries. For example, under s 48A of the Copyright Act, the copyright in a work is not infringed by anything done by a parliamentary library for the sole purpose of assisting a person who is a member of parliament in the performance of the member’s duties. The designated beneficiary is the member of parliament, on whose behalf the act is done.
20.101 The fact that users of libraries and archives benefit from these exceptions, but are not parties to the licensing arrangements entered into by libraries and archives, makes it easier to argue that these exceptions should not be able to be removed by contract. An express limitation on contracting out from these exceptions may help remedy problems being experienced by libraries, in particular. Such an approach would be consistent with the principle of promoting fair access to, and wide dissemination of, content.
20.102 Arguably, the judicial proceedings exceptions and government use exceptions should also be subject to express limitations on contracting out. The rationale for these exceptions is to protect the public interest in the efficient functioning of the justice system and public administration more generally. The new exceptions cover use of copyright material for public inquiries; where a statute requires public access; and where copyright material is sent to governments in the course of public business.
20.103 However, a contractual term that sought to prevent copyright material being used in judicial proceedings or a public inquiry would be among those most likely to be found contrary to public policy and, therefore, void or unenforceable under the common law doctrine discussed above. In any case, the copyright material used under the recommended new exceptions will not often have been acquired under a contract.
Framing the limitations
20.104 The wording of the ALRC’s Discussion Paper proposal on contracting out was based on the language used in s 47H, the only existing limitation on contracting out contained in the Copyright Act. This section states that:
an agreement, or a provision of an agreement, that excludes or limits, or has the effect of excluding or limiting, the operation of [the computer program exceptions], has no effect.
20.105 The Law Council submitted that any new limitation on contracting out should not follow this model because s 47H purports to invalidate agreements that exclude or limit exceptions, whether or not a particular act infringes copyright. A contracting out provision should focus on the acts contemplated by the exception.
20.106 While the exact wording of an Australian provision is best left to specialist parliamentary drafters, the proposed UK provisions appear to avoid this particular problem in providing that:
To the extent that the term of any contract purports to restrict or prevent the doing of any act which would otherwise be permitted by [an exception], that term is unenforceable.
20.107 The ALRC recognises that the recommendation, if implemented, will not affect contracts governed by foreign law. Licensing agreements may specify that the law of another country will apply in determining the rights of the parties, or that a foreign court has exclusive jurisdiction over disputes. Parties to a contract can choose the proper law by an express provision in their agreement. Where the parties have not chosen the proper law, the contract is, in general, governed by the system of law with which the transaction has its closest and most real connection.
20.108 While Australian statutory limitations on contracting out would not affect contracts governed by foreign law, it is also possible to enact accompanying provisions that override the parties’ ability to choose foreign law, or will apply despite the parties’ express choice of law. The Australian Government may wish to consider whether to recommend such a provision, limiting parties’ ability contractually to choose a foreign system of law, where the contract would otherwise governed by Australian law.
20.109 Finally, in recommending limitations on contracting out that are only applicable to some exceptions, the ALRC is not indicating that contractual terms excluding other exceptions should necessarily be enforceable. Rather, this is a matter that should be left to be resolved under the general law or other legislation, including the Competition and Consumer Act.
20.110 If the ALRC’s recommendation is implemented, explanatory materials should record that Parliament does not intend the existence of an express provision against contracting out of some exceptions to imply that exceptions elsewhere in the Copyright Act can necessarily be overridden by contract, but that this would need to be determined on a case by case basis.
Recommendation 20–1 The Copyright Act should provide that any term of an agreement that restricts or prevents the doing of an act, which would otherwise be permitted by specific libraries and archives exceptions, is unenforceable.
Recommendation 20–2 The Copyright Act should not provide statutory limitations on contracting out of the fair use exception. However, if fair use is not enacted, limitations on contracting out should apply to the new fair dealing exception.