271. The Terms of Reference specifically direct the ALRC to consider whether existing exceptions are appropriate and whether further exceptions should recognise ‘fair use’ of copyright material. Australian legislation has long provided for exceptions to copyright based on what is understood now to be a closed list of permitted purposes for ‘fair dealing’. By contrast, since 1976, the United States legislation has provided for a broad exception to copyright based on an open list of permitted purposes for ‘fair use’.
272. The legislative provisions for ‘fair dealing’ that are found in countries such as the UK and Australia, and for the US-style ‘fair use’ share the same common law source: early English cases that were often concerned with an exception for abridgments.
273. Robert Burrell has argued that Australia’s Copyright Act 1905 (Cth) ‘provided for a fair use defence in unambiguous terms’—despite the provision using the expression ‘fairly dealing’. Burrell has argued that the historical evidence suggests that the introduction of the ‘fair dealing’ provisions in the Copyright Act 1911 (Imp) and the Copyright Act 1912 (Cth) was not intended to result in less flexibility. Rather, he argues that the evidence suggests that the fair dealing provisions were intended to codify the existing common law—that is, ‘a general fair use defence’. His thesis is that
subsequent cases and the commentaries invariably emphasised the restrictive parts of earlier judgments or chose to read ambiguous judgments in a restrictive way, leaving ways of expanding protection for users unexplored.
274. Regardless of any early history of ‘fair use’ in Australia, it is clear that Australia’s current Copyright Act provides for specific fair dealing exceptions to copyright that are based on a closed list of permitted purposes.
Fair use internationally
275. A number of countries now provide for ‘fair use’ or interpret ‘fair dealing’ broadly.
276. For example s 107 of the US Copyright Act provides:
Notwithstanding the provisions of sections 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include—
(1) The purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes;
(2) The nature of the copyrighted work;
(3) The amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) The effect of the use upon the potential market for or value of the copyrighted work.
The fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.
277. Like Australia, the US provides for other exceptions to copyright as well.
278. Some points to note:
The US Act does not define ‘fair use’. As is the case in Australia with respect to ‘fair dealing’, it is a matter for the courts to determine.
The preamble lists some—not all—of the purposes that may be permitted. For this reason, the provision is sometimes described as ‘open-ended’.
Just because a purpose is listed in the preamble does not mean that such a use will be a fair use—rather, all uses must be analysed according to the four factors and any additional factors that are relevant.
The listed purposes are relevant in court decisions on fair use. Pamela Samuelson has argued that the six purposes listed in the preamble are based upon three main policies: ‘promoting free speech and expression, interests of subsequent authors and the public, the ongoing progress of authorship, and learning’.
The four enumerated factors in the US provision are similar to four of the five matters to which regard is to be had in determining the fairness of a dealing for the purpose of research or study in the Copyright Act.
279. The four factor test requires consideration of the following matters.346]
First factor—‘the purpose and character of the use’. This factor encompasses two issues. First, was the defendant’s use commercial? Secondly, was the use ‘transformative’?
Second factor—‘the nature of the copyrighted work’. Again there are two separate matters to be considered. First, was the plaintiff’s work creative? Secondly, was that work published?
Third factor—‘the amount and substantiality of the portion used in relation to the copyrighted work as a whole’. This consists of an evaluation of two matters. First, how much is the defendant alleged to have taken? Secondly, how important was that taking in the context of the plaintiff’s work?
Fourth factor—‘effect upon the market for or value of the copyrighted work’. What is the market effect of the defendant’s conduct?
280. Fair use doctrine has continued to evolve. For example, it has been argued that ‘in fundamental ways, fair use is a different doctrine today than it was ten or twenty years ago’.
281. Other countries whose legislatures have adopted an open list of permitted purposes under the rubric of ‘fair use’ include Israel and the Philippines.
282. Canada and India retain the expression ‘fair dealing’ in their legislation but have arguably moved toward a fair use approach, largely because the judiciary in these countries have interpreted the ‘fair dealing’ exceptions broadly.
283. For example, on 12 July 2012, the Supreme Court of Canada handed down five copyright decisions. In one of the two cases concerning fair dealing, Abella J explained the interaction of an assessment of ‘fairness’ once use of copyright material is classified as within an ‘allowable purpose’. The Court held that online music service providers who gave customers the ability to listen to free previews of musical works prior to the purchase of those works came within the exception for ‘fair dealing’ for the purpose of ‘research’—a broad interpretation of this particular purpose.
284. There have been some recent legislative developments in these two jurisdictions. In the case of India, the Copyright (Amendment) Act 2012 (India), which came into force on 21 June 2012, has been said to introduce ‘an expanded fair dealing exception that goes a very long way down the road to a fair use doctrine’. In the case of Canada, the Copyright Modernization Act 2012 (Can) will expand fair dealing for the purposes of education, parody and satire. In the Australian Copyright Council’s view, these new exceptions will have an even ‘greater’ impact following the broad interpretation of fair dealing in two of the decisions handed down on 12 July.
Reviews that have considered fair use
Key reviews in the UK and Ireland
285. The Hargreaves Review was specifically asked to investigate the benefits of ‘fair use’ exceptions and how these might be achieved in the UK. The review was advised that there would be ‘significant difficulties’ in attempting to transpose US-style ‘fair use’ into European law.
286. The Hargreaves review did not recommend that the UK promote a fair use exception to the EU. Rather, partly in view of the perceived limitations of the EU context, it made other recommendations which it believed would be more likely to deliver practical economic benefits.
287. At the time of this Inquiry there is also a review of Irish copyright law taking place, to examine the ‘optimum’ copyright law for Ireland, including consideration of whether a ‘fair use’ doctrine would be appropriate in the Irish/EU context.
288. This Inquiry is not the first Australian review to consider whether the Copyright Act should recognise the fair use of copyright material. The most recent reviews are the CLRC’s simplification review in 1996–98 and the Australian Government’s Fair Use Review which commenced with the release of an issues paper in May 2005 and concluded with the passage of certain legislative reforms in December 2006.
The CLRC simplification review
289. In 1998 the CLRC recommended the expansion of fair dealing so that there would be an open list of permitted purposes. The CLRC explained that it ‘had adopted a model that is concise, sufficiently flexible to accommodate new uses that may emerge with future technological developments, but also contains enough detail to provide valuable guidance to both copyright owners and users’.
290. The CLRC was concerned that fair dealing be adaptable to changing technology and comprise ‘a more precise and recognisable concept than US-style ‘fair use’ so as to build upon existing jurisprudence concerning fair dealing.
Intellectual Property and Competition Review Committee
291. In September 2000 the Ergas Committee considered the CLRC’s recommendation for expansion of the fair dealing purposes. It reported that it did ‘not believe there is a case for removing the elements of the current Copyright Act, which define certain types of conduct as coming within the definition of fair dealing’. In the context of reviewing copyright in terms of competition policy, the Ergas Committee did not believe that there was sufficient benefit identified to justify bearing the costs and uncertainties that changing the Copyright Act would entail. The Committee stated, ‘we believe that the current arrangements reduce the transaction costs involved in operating the copyright system, and make for enhanced efficiencies’.
The Attorney-General’s Department’s Fair Use Review
292. The Attorney-General’s Department’s Fair Use Review considered both the CLRC’s open-ended fair dealing model, as well as a recommendation that had been made by the Joint Standing Committee on Treaties (JSCOT). JSCOT had recommended replacing fair dealing with ‘a doctrine that resembles the United States’ open-ended defence of fair use’ so as ‘to counter the effects of the extension of copyright protection and to correct the legal anomaly of time shifting and space shifting’. Accordingly, the Issues Paper for the Fair Use Review asked:
should the Copyright Act be amended to consolidate the fair dealing exceptions on the model recommended by the CLRC? and
should the Copyright Act be amended to replace the present fair dealing exceptions with a model that resembles the open-ended fair use exception in US copyright law?
293. The submissions contain a number of arguments for and against Australia adopting an open-ended model for US-style fair use. As the Fair Use Review noted, the main difference between a provision which is open-ended compared with one that comprises a closed list is that the former is more likely to provide flexibility and the latter certainty. Views differed as to which was preferable.
Arguments in favour of an open-ended model
Provides flexibility. An open-ended model would be more responsive to rapid technological change.
Assists innovation. The closed list approach automatically ‘outlaws’ new uses and acts as a disincentive for technological development in Australia, especially when compared to the US.
The current system is far from certain. Current exceptions are being under-utilised due to uncertainty and risk aversion.
Fair use is not too uncertain. As the US fair use provision does contain certain determinative criteria, the argument was made that owners, users and courts do have something to work with.
Arguments against an open-ended model
Uncertainty of application. A lack of clear and precise rules would result in misunderstanding and misapplication. Uncertainty was also seen as the root cause for many of the other problems noted below.
Likelihood of higher transaction costs. Some of those who were opposed to uncertainty considered that it would make things harder for users as it would increase the costs of compliance as they would need to seek legal advice. However, others considered that uncertainty would increase owners’ costs of enforcement (as infringing conduct would be encouraged) and would create new licensing difficulties.
The need for litigation to determine the scope of permitted uses. This was seen as undesirable from a policy perspective, and because of the increase in costs to the judicial system and parties to litigation.
Potential access to justice problems. Particular concerns were expressed with respect to artists, musicians and other creators who may be affected on both sides of their practice (being both creators and users of copyright material), and in respect of individuals and others who do not have sufficiently ‘deep pockets’ for litigation.
Possible over-claiming by owners and/or an overly cautious response by users. There was concern about a possible ‘chilling effect’ in respect to the use of copyright material.
Lack of jurisprudence. There would be no precedents (at least at the beginning); that it would take many years to develop jurisprudence (especially given that Australia is not as populous or litigious a society as the US); and that all of the existing jurisprudence in respect to fair dealing would be open to re-interpretation.
The problem of transposing a doctrine from a different legal system. Some concerns were expressed about Australian courts being more restrained and concerned with statutory interpretation than US courts, and less likely to find a broad purpose behind a ‘fair use’ provision without the sort of guidance that, for example, the US Bill of Rights provides.
May not comply with Australia’s international obligations with respect to the three-step test. There was concern that an open-ended exception would not meet the first limb of the test.
Outcome of the Fair Use Review
294. While the Government enacted a number of reforms in response to the Fair Use Review, it did not enact an open-ended, fair use exception. This appears to have been for two reasons. First, the Government stated that in the public consultation phase of the Fair Use Review, ‘no significant interest supported fully adopting the US approach’. Secondly, it appears that the Australian Government may have been concerned about compliance with the three-step test.
Options for reform
295. There has been a noticeable degree of change with respect to technology and social uses of it, even since the Fair Use Review. In its preliminary discussions with some stakeholders and others with an interest in copyright, the ALRC heard that there may now be more of an appetite for a broad, flexible exception to copyright—perhaps based on US-style fair use—than in late 2006.
296. In January 2008, Barton Beebe’s empirical study of US fair use case law through to the year 2005 was published. He argued that the results ‘show that much of our conventional wisdom about that case law is mistaken’. In 2009, Samuelson published her ‘qualitative assessment’ of the fair use case law, which was built upon Beebe’s study. Samuelson has argued that ‘fair use is both more coherent and more predictable than many commentators have perceived once one recognizes that fair use cases tend to fall into common patterns’. Earlier in 2012, Matthew Sag published his work that built upon these two studies. He went further than Samuelson and ‘assesse[d] the predictability of fair use in terms of case facts which exist prior to any judicial determination’. He argued that his work
demonstrates that the uncertainty critique is somewhat overblown: an empirical analysis of the case law shows that, while there are many shades of gray in fair use litigation, there are also consistent patterns that can assist individuals, businesses, and lawyers in assessing the merits of particular claims to fair use protection.
297. The ALRC is interested in hearing views on whether the Copyright Act should be amended to include a broad, flexible exception and whether such an exception should be based on ‘fairness’, ‘reasonableness’ or something else. The ALRC is also interested in comments on what assistance may be gained from the US’s experience of fair use.
298. One critical issue that would need to be determined if Australia were to amend the Copyright Act to provide for a broad, flexible exception, is whether such an exception should replace all or some of the existing exceptions or whether it should be in addition to existing exceptions. It might be said that the issue of how fair use would fit with the existing exceptions and statutory licences was considered ‘very little’ during the earlier debates.
Question 1. Should the Copyright Act 1968 (Cth) be amended to include a broad, flexible exception? If so, how should this exception be framed? For example, should such an exception be based on ‘fairness’, ‘reasonableness’ or something else?
Question 2. Should such a new exception replace all or some existing exceptions or should it be in addition to existing exceptions?
 For example, see W Patry, Patry on Fair Use (2012), 9–10; M Sag, ‘The Prehistory of Fair Use’ (2011) 76 Brooklyn Law Review 1371; A Sims, ‘Appellations of Piracy: Fair Dealing’s Prehistory ’ (2011) Intellectual Property Quarterly 3; M Richardson and J Bosland, ‘Copyright and the New Street Literature’ in C Arup (ed) Intellectual Property Policy Reform: Fostering Innovation and Development (2009) 199, 199; R Burrell and A Coleman, Copyright Exceptions: The Digital Impact (2005), 253–264; Copyright Law Review Committee, Copyright and Contract (2002), 25.
 R Burrell and A Coleman, Copyright Exceptions: The Digital Impact (2005), 257.
 As previously noted, the Copyright Act 1912 (Cth) declared the provisions of this Imperial Act to be in force in Australia.
 R Burrell and A Coleman, Copyright Exceptions: The Digital Impact (2005), 257–8.
 Ibid, 257–9.
 Ibid, 260.
 See also K Bowery, On Clarifying the Role of Originality and Fair Use in 19th Century UK Jurisprudence: Appreciating ‘The Humble Grey which Emerges as the Result of Controversy’, UNSW Law Research Paper No 58 (2008).
 For example, see Copyright Act 1976 (US), 17 USC, s 108(a)–(i).
 See further W Patry, Patry on Fair Use (2012), 79–80.
 Ibid, 83–4. Matthew Sag has observed that the ‘four factors were not intended to be exclusive, nor were they intended to be so specific as to freeze judicial development of the doctrine’: M Sag, ‘Predicting Fair Use’ (2012) 73 Ohio State Law Journal 47, 54.
 P Samuelson, ‘Unbundling Fair Uses’ (2009) 77 Fordham Law Review 2537, 2544.
Copyright Act 1968 (Cth) ss 40(2), 103C(2) and 248A(1A).
 See M Sag, ‘Predicting Fair Use’ (2012) 73 Ohio State Law Journal 47, 54–5.
 See earlier section, ‘Transformative use’.
 N Weinstock Netanel, ‘Making Sense of Fair Use’ (2011) 15 Lewis and Clark Law Review 715, 719.
Copyright Act 2007 (Israel) s 19. See G Pessach, ‘The New Israeli Copyright Act: A Case-Study in Reverse Comparative Law’ (2010) 41 International Review of Intellectual Property and Competition Law 187.
Intellectual Property Code of the Philippines Republic Act No 8293 (the Philippines) s 185.
 India has ‘a seemingly closed list of exceptions but interpreted by courts in ways very similar to fair use’: W Patry, Patry on Fair Use (2012), 544.
Re:Sound v Motion Picture Theatre Associations of Canada (2012) 38 SCC (Canada); Alberta (Education) v Canadian Copyright Licensing Agency (Access Copyright) (2012) 37 SCC (Canada); Society of Composers, Authors and Music Publishers of Canada v Bell Canada (2012) 36 SCC (Canada); Rogers Communications Inc v Society of Composers, Authors and Music Publishers of Canada (2012) 35 SCC (Canada); Entertainment Software Association v Society of Composers, Authors and Music Publishers of Canada (2012) 34 SCC (Canada). The Alberta v Access Copyright case and the Bell Canada case are the two concerning fair dealing.
Society of Composers, Authors and Music Publishers of Canada v Bell Canada (2012) 36 SCC (Canada) –.
 See in particular Ibid, .
 Copyright Review Committee (Ireland), Copyright and Innovation: A Consultation Paper (2012), 114. Note that the committee made this comment with respect to the Bill.
 Australian Copyright Council, Implications for Fair Dealing in the Supreme Court of Canada (2012) <www.copyright.org.au/news-and-policy/details/id/2133/> at 18 July 2012.
 I Hargreaves, Digital Opportunity: A Review of Intellectual Property and Growth (2011), 101.
 Ibid, 46.
 Ibid, 52.
 Some scholars have challenged the view that a Member State of the EU cannot introduce flexible copyright norms. For example, see B Hugenholtz and M Senftleben, Fair Use in Europe: In Search of Flexibilities (2011).
 I Hargreaves, Digital Opportunity: A Review of Intellectual Property and Growth (2011), 52.
 Copyright Review Committee (Ireland), Copyright and Innovation: A Consultation Paper (2012).
 For an overview of the history see M Wyburn, ‘Higher Education and Fair Use: A Wider Copyright Defence in the Face of the Australia-United States Free Trade Agreement Changes’ (2006) 17 Australian Intellectual Property Journal 181.
 Copyright Law Review Committee, Simplification of the Copyright Act 1968: Part 1: Exceptions to the Exclusive Rights of Copyright Owners (1998), [6.10], [6.29].
[365 Ibid, [6.08].
 Ibid, [6.12]–[6.13].
 Intellectual Property and Competition Review Committee, Review of Intellectual Property Legislation under the Competition Principles Agreement (2000), 15.
 Ibid, 129.
 The Joint Standing Committee on Treaties—Parliament of Australia, Report 61: The Australia-United States Free Trade Agreement (2004), Rec 17.
 Australian Government Attorney-General’s Department, Fair Use and Other Copyright Exceptions: An examination of fair use, fair dealing and other exceptions in the digital age, Issues Paper (2005), [6.8].
 Ibid, [7.12].
 Ibid, [1.5].
 Explanatory Memorandum, Copyright Amendment Bill 2006 (Cth), 10. However, it should be noted that a number of submissions—presumably defined as coming before ‘the public consultation phase’—did argue in favour of a broad, flexible exception. Further, ‘personal consumers’ had supported an open-ended exception: Explanatory Memorandum, Copyright Amendment Bill 2006 (Cth), 12.
 B Beebe, ‘An Empirical Study of US Copyright Fair Use Opinions, 1978–2005’ (2008) 156 University of Pennsylvania Law Review 549. Note that Beebe has updated the results ‘through 2011’ but this work has not yet been published. B Beebe, ‘An Empirical Study of US Copyright Fair Use Cases, 1978–2011’ (Paper presented at Fordham Intellectual Property Law Institute and Emily C and John E Hansen Intellectual Property Institute 20th Annual Intellectual Property Law and Policy Conference, New York, 12–13 April 2012).
 B Beebe, ‘An Empirical Study of US Copyright Fair Use Opinions, 1978–2005’ (2008) 156 University of Pennsylvania Law Review 549, 550.
 P Samuelson, ‘Unbundling Fair Uses’ (2009) 77 Fordham Law Review 2537, 2542–43.
 Ibid, 2541.
 M Sag, ‘Predicting Fair Use’ (2012) 73 Ohio State Law Journal 47.
 Ibid, 51.
 Ibid, 49.
 M Wyburn, ‘Higher Education and Fair Use: A Wider Copyright Defence in the Face of the Australia-United States Free Trade Agreement Changes’ (2006) 17 Australian Intellectual Property Journal 181, 208.