7.10 The ALRC considers that fair use is a suitable exception to apply to determine whether a third party use of copyright material infringes copyright. These third parties should not be precluded from relying on fair use. Many third party uses of copyright material may be transformative—that is, for a different purpose than that for which the material was created—and fair. Others will not be transformative, and will unfairly compete in the markets of rights holders.
7.11 Some stakeholders submitted that third parties should never be able to rely on fair use, while others submitted that third party uses should necessarily be fair if they merely facilitate another fair use. However, the ALRC agrees with those who said that unlicensed third party uses will sometimes be fair, and other times not, and that the fair use exception is well equipped to settle the question. For example, Telstra submitted that applying fair use in this context is ‘a balanced way to support and encourage the continued development and adoption of content technologies with respect for content ownership and commercial licensing practices’.
7.12 Is a third party use of copyright material more likely to be fair than it otherwise would be, if the use is simply for another person who would be entitled to make the same use? The ALRC considers that it is, but that this factor is not as important as the four fairness factors set out in the fair use exception. As discussed below, it will usually be more instructive to focus on whether the use is transformative, and whether the use harms the rights holder’s market.
7.13 Many stakeholders noted the difficulty of precisely defining the boundaries of what third party uses should be permitted under unremunerated copyright exceptions, and which should not. In the ALRC’s view, this highlights the danger of setting those boundaries in legislation, and the value of enacting a flexible exception.
7.14 Fair use can also be applied to determine whether copyright is infringed by a third party use that facilitates a use permitted under a specific exception. Specific exceptions should not limit the application of fair use.
7.15 The following section highlights why encouraging transformative uses of copyright material is important for stimulating competition and innovation.