17.48 One rationale for placing statutory limitations on contracting out is that it changes the copyright ‘balance’:
As the copyright interest is constituted by the exclusive rights of copyright, as defined within the framework of the exceptions to the rights set out in the Copyright Act, then any attempt to exclude or modify the exceptions by contract brings about a fundamental imbalance of these rights. It follows that it should not be possible to alter that balance by means of contract.
17.49 This perspective was echoed in many submissions to the Inquiry. Google, for example, stated that copyright laws ‘contain a complex balance between the rights of copyright owners to protect their works and the public interest in ensuring access to knowledge and the creation of new works’. This balance, being ‘sensitively and carefully constructed’, should not be able to be ‘altered or replaced by private arrangements’.
17.50 The public interest is also be invoked in arguing against contracting out. That is, the public interest in the preservation of the copyright balance should take precedence over the public interest in freedom of contract. In reaching its recommendations, the CLRC specifically referred to exceptions that ‘embody the public interest in education, the free flow of information and freedom of expression’. Stakeholders in this Inquiry also referred specifically to the public interest in access to information and freedom of expression.
17.51 In contrast, other stakeholders suggested that the idea of the Copyright Act representing a balance that must be preserved, whatever the contractual relationship of parties, is erroneous. The Australian Publishers Association (APA), for example, stated that arguments in favour of limitations on contracting out assume that the Act ‘captures an optimal balance’ between user and owners of copyright material that is ‘inviolable and must be preserved at all costs and in all situations’; and that exceptions operate as limitations on copyright defining the scope of a copyright owner’s rights, rather than as defences.
17.52 The APA observed that the legislative history of any specific copyright exception shows how the exceptions are ‘shaped by circumstances applying at a particular point in time’, and the way in which exceptions ‘may well remain in the Act even though the circumstances that led to their introduction have changed’.
17.53 The structure and language of the Copyright Act were said to clearly indicate that exceptions are, in almost all cases, defences—for example, the Act provides that ‘it is not an infringement’ to do certain things, even though those things are within the scope of the copyright owner’s exclusive rights—and the exceptions are, in many cases, ‘highly conditional and highly fact-specific’.
17.54 Stakeholders also emphasised the important role that freedom of contract plays in facilitating the efficient use of copyright materials, and supporting competition, especially in relation to licensing. For example, Australian Film and TV Bodies stated that, in ‘guaranteeing freedom of contract, the Copyright Act promotes distribution and use of copyright material particularly in online and multi-jurisdictional environments’. The Australian Recording Industry Association (ARIA) observed that, in the digital environment, music services use licences to ‘set the boundaries for the use of content by consumers’. Consumers typically pay higher prices for greater access so that different delivery models ‘provide varied consumer offerings and services which benefit both consumers and creators’ and are also ‘the business models of third party suppliers’.
17.55 Contracting out was seen as important in allowing copyright owners to design licence terms that are appropriate to the material being licensed and are able to be ‘reviewed by businesses on an ongoing basis to respond to changing business and client needs’.
17.56 Contract was seen as having an important role in protecting the legitimate interests of copyright holders. For example, an artist who releases music for children may not wish to see their sound recordings used in contexts which, although they may be considered as a ‘fair dealing’, are ‘distinctly adult or perverse’, and should be able to contract out.
17.57 It was also suggested that there may be problems in relation to international competitiveness, if contracting out were to be further restricted. A possible consequence of limitations on contracting out in Australian law may be to make Australia ‘less attractive as a hub for business’. The Interactive Games and Entertainment Association stated that
it is critical that international creators or owners, which includes Australian creators, are able to develop new and innovative business models without the risk of such business models being undermined by local copyright exceptions.
17.58 Possible legal uncertainty in contracts and business models was a particular concern of stakeholders—in particular, due to uncertainty about the scope and reach of exceptions. That is, if contractual terms limiting exceptions were to be made unenforceable, ‘some users may feel that a contractual provision limits an exception, when the rights holder believes the use does not fall within the scope of an exception’.
17.59 ARIA suggested that, rather than overriding competitive market offerings, it would be more appropriate to ‘respect and uphold agreed licence terms and leave exceptions to work as a reasonable default when usage terms have not been defined in contract’. John Wiley & Sons submitted that
Commercial licensing, by its nature, generally grants greater rights to users than those already granted under statute. In cases, fortunately rare, when parties may disagree on the scope and reach of a copyright exception, then agreeing the scope of a use under licence can provide a pragmatic business solution satisfactory to both parties and thus increase legal certainty and mitigate risk, both essential elements of a robust policy for innovation.
17.60 Existing contractual terms may, however, also prejudice the competitive position of copyright users who are subject to them, if others are not. SBS referred to the need to create ‘certainty and a level playing field in relation to use of copyright material in the public interest’.
 Copyright Law Review Committee, Copyright and Contract (2002), 262.
 For example, SBS, Submission 237; Copyright Advisory Group—Schools, Submission 231; Google, Submission 217; ADA and ALCC, Submission 213; Ericsson, Submission 151; K Bowrey, Submission 94.
 Google, Submission 217.
 Copyright Advisory Group—Schools, Submission 231; National Library of Australia, Submission 218; R Wright, Submission 167; K Bowrey, Submission 94.
 Copyright Law Review Committee, Copyright and Contract (2002), 263.
 Ibid, 266.
 Arts Law Centre of Australia, Submission 171; R Xavier, Submission 146.
 Australian Publishers Association, Submission 225; ALPSP, Submission 199.
 Australian Publishers Association, Submission 225.
 See, eg, Department of Defence, Submission 267; ARIA, Submission 241; News Limited, Submission 224; Australian Film/TV Bodies, Submission 205; ACCC, Submission 165.
 For example, ARIA, Submission 241; Australian Film/TV Bodies, Submission 205; IASTMP, Submission 200; ACCC, Submission 165.
 Australian Film/TV Bodies, Submission 205.
 ARIA, Submission 241.
 AAP, Submission 206.
 CSIRO, Submission 242; ARIA, Submission 241.
 ARIA, Submission 241.
 Ibid; IASTMP, Submission 200; iGEA, Submission 192; Thomson Reuters, Submission 187.
 IASTMP, Submission 200.
 iGEA, Submission 192.
 For example, APRA/AMCOS, Submission 247; Foxtel, Submission 245; ARIA, Submission 241; John Wiley & Sons, Submission 239; AAP, Submission 206; IASTMP, Submission 200.
 IASTMP, Submission 200.
 ARIA, Submission 241.
 John Wiley & Sons, Submission 239.
 Australian Broadcasting Corporation, Submission 210.
 SBS, Submission 237.