299. The digital environment, and the continuing development of e-commerce, facilitates the use of contracts to set terms and conditions on access to and use of copyright materials.
300. A matter closely related to the ALRC’s consideration of existing and possible new exceptions to copyright is the extent to which copyright owners and users should be permitted to contract out of the operation of an exception.
301. For example, agreements with online publishing companies may contain clauses that prevent libraries and archives from reproducing and communicating extracts of works as would otherwise be permitted by the library and archives exceptions. Agreements may exclude or modify the fair dealing exceptions, the statutory licence scheme for educational and other institutions, and the exception for the use of copyright materials for the services of the Crown.
302. The Copyright Act contains no provisions that prevent agreements from excluding or limiting the operation of exceptions providing for access to copyright material, except in relation to the reproduction of computer programs. Therefore, for example:
copyright owners of filmed recordings of sport 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.
303. The Copyright Act statutory licensing provisions establish schemes under which the capacity for copyright rights holders to receive remuneration, and users to obtain licences, for uses of works is enhanced in situations where market failure would otherwise make this difficult. These provisions allow expressly for voluntary licensing.
304. Agreements that exclude or limit the operation of exceptions may be unenforceable due to the operation of common law, equity or legislative provisions outside the Copyright Act. For example, the agreements may be affected by the doctrine of unconscionable conduct, the application of other equitable doctrines or considerations of public policy, and by consumer protection or competition legislation.
Options for reform
305. In 2002, the CLRC released its report Copyright and Contract. Among other things, the report examined ‘the extent to which electronic and other trade in copyright works and other subject matter is subject to agreements which exclude or modify the copyright exceptions and the nature of any differences between online and offline trade’. The CLRC considered whether or not it should be possible to displace the exceptions set out in the Act by contractual means.
306. The CLRC concluded that agreements were being used to exclude or limit copyright exceptions and that this practice ‘undermines the copyright balance established by the Copyright Act’.
307. The CLRC considered a range of options for reform. These included mandating all exceptions (except where there are practical reasons not to do so) to only mandating some of the exceptions, for example, particular instances of fair dealing. The CLRC recommended:
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.
308. The CLRC also considered that ‘exceptions introduced in recent years relating to technological developments should also be made mandatory’—specifically provisions allowing for temporary reproductions.
309. In relation to the remaining exceptions in the Copyright Act, the CLRC recommended encouraging the development of codes of conduct and model licences, where relevant.
310. The conclusions of the CLRC have been criticised. The Australian Copyright Council, for example, has stated that the CLRC’s recommendations were based on a flawed view that ‘a contractual provision is necessarily unfair if it purports to prohibit the doing of something allowed under a copyright exception, irrespective of the context of the provision (including the benefits to the licensee from the contract as a whole) and of the circumstances in which the contract was made’.
311. The justification and rationale for creating separate categories of exceptions—that is, exceptions that may, and may not, be contracted out of—may also be questioned. While the CLRC argued that the fair dealing exceptions should be mandatory as these are ‘an integral component of the copyright interest’, the reasons for including other exceptions is not as clear.
312. Existing provisions of the Competition and Consumer Act 2010 (Cth) may be sufficient to deal with issues arising from contractual terms excluding the operation of exceptions.
313. For example, the Competition and Consumer Act prohibits contracts between competitors which contain exclusionary provisions or provisions which have the purpose or effect of substantially lessening competition; contracts between competitors which contain provisions in relation to prices; and misuse of market power. These provisions are subject to a limited exemption applicable to certain dealing in intellectual property rights, including copyright.
314. The ALRC is interested in information about current practices in the marketplace concerning contracts and licensing, and about relevant changes since the report of the CLRC. In particular, the CLRC report highlighted issues arising in relation to online mass market contracts. These may be seen as unfair or invalid because the drafting party imposes the terms—including in relation to the operation of copyright exceptions.
315. On the other hand, mass market contracts may ‘reduce transaction costs and are a convenient means of doing business for both parties’; and market forces may provide a disincentive to the imposition of one-sided terms. The digital environment also may facilitate ‘micro-licensing’, where conditions of access can be cost-effectively individualised for different users.
Question 3. Should agreements which purport to exclude or limit existing or any proposed new copyright exceptions be enforceable?
Question 4. Should the Copyright Act 1968 (Cth) be amended to prevent contracting out of copyright exceptions, and if so, which exceptions?
 Copyright Law Review Committee, Copyright and Contract (2002), ch 4.
Copyright Act 1968 (Cth) s 47H relating to agreements that exclude or limit the reproduction of computer programs for technical study, back-up, security testing and error correction: Copyright Act 1968 (Cth)ss47B(3), 47C, 47D, 47E, 47F.
 For example, Copyright Act 1968 (Cth) ss 135Z (pt VA); 135ZZF (pt VB); 135ZZZC (pt VC); 135ZZZY (pt VD).
 See Copyright Law Review Committee, Copyright and Contract (2002), ch 5.
 Ibid, 7.
 Ibid, 142.
 Other options considered included deeming certain contracts unconscionable; mandating exceptions only in relation to ‘mass-market licences’: Ibid, 271.
 Ibid, 266. See recommendation at [7.49].
Copyright Act 1968 (Cth) ss 43A, 111A.
 Copyright Law Review Committee, Copyright and Contract (2002), 266. See recommendation at [7.52].
 Copyright Council, Response to report of Copyright Law Review Committee on Copyright and Contracts (2003).
 Ibid, 266.
Competition and Consumer Act 2010 (Cth) pt IV. The Act also contains general protections against misleading or deceptive conduct and unconscionable conduct in trade or commerce, and unfair contract terms: Competition and Consumer Act 2010 (Cth) ch 2. The Australian Competition and Consumer Commission may also have a role in some Copyright Tribunal of Australia proceedings concerning licences: Competition and Consumer Act 2010 (Cth) ss 157A, 157B.
Competition and Consumer Act 2010 (Cth) s 51.
 Copyright Law Review Committee, Copyright and Contract (2002), 109–110. The Australian 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.
 See Copyright Law Review Committee, Copyright and Contract (2002), 110.