Contracting out and the Copyright Act
17.23 The Copyright Act generally contains no provisions that prevent agreements from excluding or limiting the operation of exceptions, except in relation to the reproduction of computer programs. Therefore, for example:
copyright owners of filmed recordings of sporting events may make it a condition that their customers do not provide the film to others who might exercise a fair dealing exception (for example, news reporting) or make use of the film other than as specified by contract; but
software licensees cannot contract out of provisions allowing reverse engineering to make interoperable products or back-ups, and licensors, therefore, make these uses an exception to the restrictions in licences.
17.24 In relation to computer programs, s 47H of the Copyright Act expressly provides that ‘an agreement, or a provision of an agreement, that excludes or limits, or has the effect of excluding or limiting’ the operation of certain exceptions permitting the reproduction of computer programs for technical study, back-up, security testing and error correction ‘has no effect’.
17.25 These limitations on contracting out were inserted by the Copyright Amendment (Computer Programs) Act 1999 (Cth), which resulted from the Government’s consideration of a CLRC report on computer software protection. In that report, the CLRC stated that provisions regarding interoperability, back-up copying and de-compilation of locked programs would have little practical effect if parties could rely on contractual provisions to prevent these acts. It recommended that the Copyright Act be amended to ensure that these exceptions could not be avoided by contractual means.
17.26 The existence of an express provision against contracting out in s 47H arguably helps to confirm that exceptions elsewhere in the Copyright Act can be overridden by contract. After considering the legislative history, however, the CLRC concluded that the effect of s 47H on agreements which exclude or limit other exceptions is ‘ultimately unclear’.
17.27 The CLRC and other legal commentators have, however, identified several reasons why Parliament enacted an express provision only in relation to computer programs. These include that:
s 47H applies expressly to specific exceptions implemented by the same amending legislation, so it is not possible to imply an intention on the part of Parliament that all pre-existing exceptions be subject to contract, no matter when they became part of the Act; and
Enforceability of contracts
17.28 Leaving aside provisions of the Copyright Act itself, the CLRC Copyright and Contract report observed that the enforceability of contractual terms excluding or limiting exceptions may also be affected by:
consumer protection legislation—for example, provisions of the ACL, which proscribe misleading or deceptive conduct and unconscionable conduct in trade or commerce, and unfair contract terms in consumer contracts;
competition legislation—notably provisions of the Competition and Consumer Act 2010 (Cth), which prohibit misuse of market power;
the ordinary principles of contract law concerning the formation of contracts— for example, where there is insufficient notice of, and assent to, the terms of online licences;
the equitable doctrine of unconscionable conduct—for example, where one party is known by the other to be at a special disadvantage and unfair or unconscientious advantage is taken;
the law relating to contracts that are contrary to public policy—where a contract term defeats or circumvents a statutory public purpose or policy.
17.29 As discussed below, there are differing views on whether, and in what circumstances, contractual terms excluding or limiting exceptions to copyright may be unenforceable. Depending on the circumstances, and where agreements are governed by Australian law, contractual terms that exclude or limit the operation of exceptions may be unenforceable due to legislative provisions outside the Copyright Act or the operation of the general law (common law and equity).
Competition and consumer law
17.30 The ACL provides that a court may determine that a term of a standard form consumer contract is unfair and therefore void, including in response to proceedings taken by the Australian Competition and Consumer Commission (ACCC).
17.31 Under the ACL, a ‘consumer contract’ includes a contract for the supply of goods and services to an individual who acquires them wholly or predominantly for personal, domestic or household use or consumption. The ACL outlines a number of factors that the court must take into account in determining whether a contract is a ‘standard form contract’. Such contracts will typically be those that have been prepared by one party to the contract and are not subject to negotiation between the parties—that is, offered on a ‘take it, or leave it’ basis, as is typically the case with consumer contracts involving copyright.
17.32 The ACL provides that a contractual term is unfair if it:
would cause a significant imbalance in the parties’ rights and obligations under the contract;
is not reasonably necessary to protect the legitimate interest of a party to the contract; and
would cause detriment to a party to the contract if it were to be applied or relied upon.
17.33 In relation to competition law, there are questions about the operation of s 51(3) of the Competition and Consumer Act. This section provides a limited exemption from some prohibitions on restrictive trade practices for contraventions resulting from copyright licensing. Depending on how the scope of the exemption is interpreted, the exemption may, for example, permit conditions in copyright licences providing that the licensee must not acquire similar rights from any other copyright owner. This constitutes exclusive dealing and would otherwise contravene s 47 of the Competition and Consumer Act (provided it had the purpose or effect of substantially lessening competition in a market).
17.34 The ACCC submitted that, while the extent of the s 51(3) exception is ‘unclear’, it ‘potentially excludes significant anti-competitive conduct, with substantial detrimental effects on efficiency and welfare’ from the application of the Competition and Consumer Act.
Contract and public policy
17.35 It has been argued that many contractual provisions purporting to exclude or limit a licensee’s rights under the Copyright Act are ineffective to do so, as such terms are void or unenforceable on public policy grounds. This view is based on the general principle of contract law that, except where permitted by legislation, ‘a contract which purports to oust the jurisdiction of the courts is contrary to public policy and therefore void or unenforceable, but probably not an illegal contract’.
17.36 In relation to the Copyright Act, it may be sufficient that a court has jurisdiction to make orders in respect of rights conferred by the Act and that the rights conferred are of a public, rather than private, nature. The rights conferred by the Copyright Act may be characterised as public rights, because ‘at least some of the relevant provisions confer positive rights, in effect as statutory licences, which may be enforced by action against an owner’; and exceptions may be relied on as a defence in proceedings for infringement.
17.37 The case law on contracting out of legislative rights establishes that, ‘if the operation of a contractual provision defeats or circumvents the statutory purpose or policy, then the provision is inconsistent in the relevant sense and falls within the injunction against contracting out’.
17.38 Applying the above legal principles to contracting out under the Copyright Act, Professor J W Carter, Professor Elisabeth Peden and Kristin Stammer have argued that:
Contractual terms that purport to exclude or limit the fair dealing exceptions are unenforceable, because to ‘permit an owner to sue for breach of contract in relation to conduct amounting to a fair dealing would circumvent the scheme of the Act under which fair dealing is permitted’.
Contractual terms that purport to exclude or limit the exceptions that provide for the copying of copyright materials in libraries or archives are unenforceable. These exceptions are based on, and give effect to, important policy concerns and the ‘real beneficiaries’ of the exceptions are the users of libraries and archives.
17.39 Some stakeholders expressed views on the extent to which current law permits contracting out. The Australasian Performing Right Association and the Australasian Mechanical Copyright Owners Society (APRA/AMCOS) submitted that ‘as a matter of law it is not possible to contract out of the existing fair dealing exceptions or statutory licences in the Act’, because ‘licences derogate at source from the rights of the copyright owner’. Therefore, the copyright owner is not in a position to ‘limit rights that it does not control’.
17.40 Another stakeholder observed that it would be ‘wrong to generalise what exceptions are really over-ridden by licensing terms and/or relevant to users’, because contract terms differ greatly, depending on the form of copyright material and the applicable law. Copyright Agency/Viscopy submitted that the extent to which contracting out provisions are ‘problematic in practice’ is unclear, and noted arguments that, in at least some cases, ‘contracts can be interpreted to allow for the operation of copyright exceptions’.
US copyright pre-emption and misuse doctrines
17.41 Some comparison with United States law may be useful, given the existence in the US of a general fair use exception. US law has developed copyright-specific constraints on the freedom of parties to contract out of copyright exceptions, based on doctrines of copyright pre-emption and copyright misuse. There remains, however, considerable uncertainty and academic debate about the application of these doctrines.
17.42 Section 301(a) of the US Copyright Act provides that ‘all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright … are governed exclusively by this title’. This provision can be interpreted as meaning that, where a contract entered into under state contract law is inconsistent with federal copyright law, the contract may be found to be ‘pre-empted’.
17.43 However, the practical effect of this aspect of the copyright pre-emption doctrine has been limited, because courts have generally held that rights created by contract are not ‘equivalent’ to exclusive rights—that is, a copyright is a right against the world, while contracts, by contrast, ‘generally affect only their parties’. Courts have generally held that the US Copyright Act does not pre-empt contractual terms, including those that exclude fair use.
17.44 A contract may also be ‘constitutionally’ pre-empted if there is a conflict between state enforcement of a contract and federal copyright law or policy. The US courts, however, have failed to develop consistent criteria for determining whether contract terms are pre-empted in this way.
17.45 In addition, under the doctrine of copyright misuse, US courts may refuse to enforce agreements that attempt to extend protection of copyright material beyond the limits set by copyright law, including limits on the duration of copyright protection. In Lasercomb America v Reynolds, a licensee had agreed not to develop a competitive computer-aided design program for 99 years—beyond the period of protection by copyright laws. The Court found that the copyright owner was trying to effectively extend the term and scope of its copyright beyond the permitted limits of copyright law, and that would prevent people from legitimately developing competitive software.
17.46 The underlying policy rationale for the copyright misuse doctrine is the copyright and patent clause of the US Constitution, which states an intention ‘to promote the Progress of Science and useful Arts’. The application of the doctrine depends on ‘whether the copyright is being used in a manner violative of the public policy embodied in the grant of a copyright’. Courts have suggested that anti-competitive licensing agreements and agreements that exclude fair use may conflict with the public purposes of copyright.
17.47 However, there seem to be no clear instances of the copyright pre-emption or misuse doctrines having been applied, for example, to the multitude of online contracts that exclude otherwise fair use of copyright materials. Rather, courts have ‘toed the “freedom of contract” line’.
Copyright Act 1968 (Cth) s 47H relating to agreements that exclude or limit exceptions provided under ss47B(3), 47C–47F.
 Copyright Law Review Committee, Computer Software Protection (1995), [10.106].
 Thomson Reuters, The Law of Intellectual Property: Copyright, Designs and Confidential Information, [11.640].
 Copyright Law Review Committee, Copyright and Contract (2002), 179.
 Council of the European Communities, Council Directive on the Legal Protection of Computer Programs (1991).
 See Copyright Law Review Committee, Copyright and Contract (2002), 174–179; J Carter, E Peden, K Stammer, ‘Contractual Restrictions and Rights Under Copyright Legislation’ (2007) 23 Journal of Contract Law 32, 45.
 See Copyright Law Review Committee, Copyright and Contract (2002), ch 5.
Competition and Consumer Act 2010 (Cth) sch 2, ch 2, pts 2–2, 2–3.
 Ibid s 46.
 The Australian Government Attorney-General’s Department is currently conducting a review of Australian contract law, which includes consideration of ‘challenges relating to internet contracting’: Australian Government Attorney-General’s Department, Improving Australia’s Law and Justice Framework: A Discussion Paper to Explore the Scope for Reforming Australian Contract Law (2012), 9.
 The CLRC concluded that this doctrine was unlikely to apply to most contracts the subject of its review: Copyright Law Review Committee, Copyright and Contract (2002), 151.
Competition and Consumer Act 2010 (Cth) sch 2. The ACCC has been active in reviewing standard form consumer contracts in a number of industries, including in the airline, telecommunications, fitness and vehicle rental industries but has not, to date, focused on copyright licensing agreements. See Australian Competition and Consumer Commission, Unfair Contract Terms: Industry Review Outcomes (2013).
 Australian Consumer Law s 23(3).
 Ibid s 24(1).
 ACCC, Submission 165.
 J Carter, E Peden, K Stammer, ‘Contractual Restrictions and Rights Under Copyright Legislation’ (2007) 23 Journal of Contract Law 32, 41, citing J Carter, Carter on Contract.
 Ibid, 41–42.
 Ibid, 42, citing Caltex Oil (Aust) Pty Ltd v Best (1990) 170 CLR 516, 522.
 That is, a contractual provision cannot convert fair dealing into an infringement of copyright and the Act ‘also impliedly prohibits a contractual claim in relation to conduct amounting to a fair dealing’: J Carter, E Peden, K Stammer, ‘Contractual Restrictions and Rights Under Copyright Legislation’ (2007) 23 Journal of Contract Law 32, 46.
 Ibid, 47.
 APRA/AMCOS, Submission 247.
 IASTMP, Submission 200.
 Copyright Agency/Viscopy, Submission 249.
 See, eg, V Moffat, ‘Super-Copyright: Contracts, Preemption, and the Structure of Copyright Policymaking’ (2007) 14(1) University of California Davis Law Review 45.
Copyright Act 1976 (US) s 301(a).
ProCD Inc v Zeidenberg, 86 F 3d 1447 (7th Cir, 2006), 1454.
 See, V Moffat, ‘Super-Copyright: Contracts, Preemption, and the Structure of Copyright Policymaking’ (2007) 14(1) University of California Davis Law Review 45, 74–75.
 See, D Lindsay, The Law and Economics of Copyright, Contract and Mass Market Licences (2002), Research Paper prepared for the Centre for Copyright Studies Ltd. While the possibility of copyright pre-emption remains, ‘the extent to which this is likely is quite uncertain’: 42.
Lasercomb America v Reynolds, 911 F 2d 970 (4th Cir, 1990).
 Ibid, 978.
Video Pipeline Inc v Buena Vista Home Entertainment Inc, 342 F 3d 191 (3rd Cir, 2003), 204–205.
 V Moffat, ‘Super-Copyright: Contracts, Preemption, and the Structure of Copyright Policymaking’ (2007) 14(1) University of California Davis Law Review 45, 50.