The digital economy—the policy challenge
1. For some time the Australian economy has been recognised as increasingly relying on moving from low-efficiency, labour-intensive industries to high-efficiency knowledge-intensive industries involving cultural goods and services. Opportunities for innovation leading to national economic development are created by the emergence of new digital technologies.
2. On 29 June 2012 the Attorney-General of Australia, the Hon Nicola Roxon MP, asked the Australian Law Reform Commission (ALRC) to inquire into and report on current and further desirable uses of copyright material in the digital economy. The final Report is to be delivered by 30 November 2013.
3. This Inquiry takes place in the context of the importance of the emerging digital economy and the Government’s objective of ensuring that copyright law provides incentives for investment in innovation and content while also allowing appropriate access to that content so that Australia’s needs in the internet age are met, both domestically and internationally. Significant investment is being made in the infrastructure to attain high speed broadband, with a view to securing ‘Australia’s economic growth and social wellbeing’.
4. The ‘digital economy’ has been defined by the Australian Government as ‘the global network of economic and social activities that are enabled by information and communications technologies, such as the internet, mobile and sensor networks’. This includes conducting communications, financial transactions, education, entertainment and business using computer, phones and other devices. Australia has competitors in the digital economy—comparable countries that have also adopted a focus on promoting a local digital economy. Copyright law is an important part of Australia’s digital infrastructure and is relevant to commercial, creative and cultural policy.
5. The National Cultural Policy Discussion Paper, launched by the Minister for the Arts, the Hon Simon Crean MP, in August 2011, noted: ‘a creative nation is a more productive nation’. The 2012 review of the Australia Council indicated that the Australian Government has committed to developing a National Cultural Policy that ‘aims to place the arts front and centre in the national psyche’. The objective of the policy currently under development is to increase the social and economic dividend from the arts, culture and the creative industries.
Purpose of copyright law
6. The purpose of copyright law has been the subject of debate in recent times although historically it may be summarised as included among laws which ‘granted property rights in mental labour’. In this tradition, copyright law has been regarded primarily as conferring economic rights in Australia, focusing on the protection of commercial activities designed to exploit material for profit. The introduction of moral rights for authors and creators in pt IX of the Copyright Act 1968 (Cth) (the Copyright Act) in December 2000 was largely to conform to the requirements of the Berne Convention and had been recommended against by a majority of the Copyright Law Review Committee (CLRC) in 1988. Any current consideration of copyright law must acknowledge the moral rights of creators. It is also important to consider issues relating to Indigenous culture and cultural practices in the context of digitisation of individual, family and community material.
7. Property rights in the creative effort of ‘mental labour’ are protected as a result of—among other things—the Copyright Act and as recognised in the Universal Declaration of Human Rights (art 27(2)). At the same time, the legal tradition of the common law has, since the Statute of Anne (1710) recognised the public interest in ‘the encouragement of learning and dissemination and knowledge as a means to enhance the general welfare (…) behind the grant of exclusive rights to authors’. Technology has brought new means of copying; digitisation reduces the costs of copying and raises the costs of enforcement. In addition, changes or developments in the attitude of consumers and users of copyright material has led to reduced recognition that copyright is a form of property, that is it owned by a creator (or more usually, the assignee of a creator) and that moral rights and issues of attribution and integrity of works may be significantly compromised in a ‘freed up’ copyright environment. Copyright law may not always influence individual or private behaviour, and there is constant debate about whether it acts as an incentive to production of new material. Even where copyright is recognised, infringement may be seen as a form of ‘cultural heroism’ or regarded as an appropriate consumer response to a large, powerful and greedy multinational company.
8. Some would argue that copyright is no longer about property rights, and the concomitant capacity to charge for use of copyright material, but rather about access to material:
we must focus on the rules for access as well as on the social, interactive way people now relate to each other and to copyrighted works … Laws and business models rooted in the early eighteenth century cannot be effective in the twenty-first century.
9. Others would claim that neither an ‘expansionist’ view of copyright nor a ‘minimalist’ view is correct in that ‘copyright’s primary goal is not allocative efficiency, but the support of a democratic culture’ that will enhance an independent and pluralist civil society. In the emerging technological environment, law should direct copyright ‘toward its core understanding of public benefit, that of fortifying our democratic institutions by promoting public education, self-reliant authorship, and robust debate.’
10. In 2011 a Copyright Council Expert Group produced a statement of fundamental principles of Australian copyright law which recognises ‘the importance of encouraging the endeavours of authors, performers and creators by recognising economic rights’ (and also moral rights) ‘subject to limitations’ and in a manner which ‘takes account of evolving technologies, social norms and cultural values’.
11. In this Inquiry it may be appropriate to reconsider the desirable ends of copyright law and whether the function of copyright in a digital environment is as traditionally understood. For example, William Patry has stated:
The erroneous belief that copyright laws are the engine of culture and creativity (in the popular sense) is based on a misperception of the role of copyright in the marketplace.
John Perry Barlow argues that copyright cannot be patched or retrofitted to the digital environment and an entirely new way of thinking is required. He describes the United States Digital Millenium Copyright Act, for example, as ‘ludicrously misguided’. A major review of intellectual property laws and economic development in the United Kingdom (the Hargreaves Report) has noted that it is possible that laws designed ‘with the express purpose of creating economic incentives for innovation by protecting creator’s rights’ may today be ‘obstructing innovation and economic growth’.
Background to the Inquiry
12. The Inquiry is part of ensuring that the Australian environment is able to encourage new opportunities within the digital economy ahead of the National Broadband Network rollout. The Terms of Reference require consideration of how copyright could be assisting where possible in the development of opportunities for Australian creators and not unduly hindering the development of new business models. This to allow the development of a digital environment which supports creation of copyright material so that ‘rights holders benefit from having a population and economy capable of making productive use of ideas and information, thereby generating the income needed to cover the costs of developing new ideas’. 
13. The Terms of Reference ask whether amendments to copyright law are required in order to create greater availability of copyright material in ways that will be socially and economically beneficial. Part of the Inquiry is about the most efficient way to achieve this, either through exceptions to copyright—without cost to the user—or through statutory licences. The context and political economy of copyright law is changing as copyright has a more direct impact on disparate users and producers, extending beyond rights holders and institutional rights users.
14. Part of the challenge for copyright law is how it might become better understood and more effectively communicated so as to enable Australians to be lawful digital citizens.
Law is not everything. But lawyers tend to consider that it is rather important that it should be obeyed and respected. Otherwise, if it is ignored or defied, that fact might bring down the whole edifice of the rule of law.
Irrelevant laws, which do not fit with community practice and seem incapable of change, are not suitable for assisting in the development of an innovation-based economy. Another challenge therefore is the tension between certainty, predictability of outcomes for established practice and understanding and the costs of building new understanding in the light of changes to the law.
15. The division of the Copyright Act into ‘works’ and ‘subject-matter other than works’ makes the Act segmented and many would say, unnecessarily complex. In addition, some of the Copyright Act is untested, under-utilised and in places ineffective in achieving the aims set out. Some of the issues here may include lack of technology neutrality in the language of the Act, and what amounts to prohibitions on activities which limit technical operations in the online environment, without necessarily affecting copyright owners.
16. There is a direct link between international trade and intellectual property law. This link was the explicit basis for the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement). Alongside—and perhaps supplanting—multilateral harmonisation is an emerging environment of bilateral trade negotiations. Australia has entered into or is negotiating free trade agreements, notably with the US, a major exporter of copyright material which will have to be taken into account in any amendments to copyright law. Having said that, the possibility of interpreting international constraints in a way that allows country-specific guidelines to develop within existing concepts is a matter of live debate. It has been suggested that European Union (EU) copyright, constrained as it is by international treaties, nevertheless leaves ‘considerably more room for flexibilities than its closed list of permitted limitations and exceptions suggests’. One of the possibilities for this Inquiry is to consider what flexibility can be found within international constraints and what advice can be provided for future negotiations on international treaties and trade agreements.
Focus of the Inquiry
Exceptions to copyright
17. The history of copyright reform has largely been about carving out ‘exceptions’ and grafting on new rights, including ‘neighbouring rights’ and the like. The Copyright Act allows for certain uses of copyright material without the need for permission or payment. It has been pointed out that ‘even in those countries where there is the most vigorous commitment to the advancement of author’s rights, it is recognised that there is a need for restrictions or limitations upon these rights in particular cases’. In Australia these exceptions, or defences to infringement, are for socially useful purposes including the four long-established exceptions of advancing knowledge through research, commentary by way of criticism or review, reporting news and the administration of justice. In 2006 fair dealing for the purpose of parody or satire and time and format shifting were introduced. There are existing exceptions in the Copyright Act that deal with educational use of copyright material, but some concerns exist as to whether these are adequate or appropriate in the digital environment.
18. In addition to the ‘free-use exceptions’ certain use of copyright material is allowed in return for payment of a fee to the owner, or more usually to a collecting society acting on their behalf. Copyright law provides a basis for the development of industries delivering copyright material and statutory licences provide a model for supporting such industries by allowing access to material in return for centralised administration of fee collection and distribution. The digital environment may be introducing further possibilities where copyright acts as the basis of a distribution model of material in return for suitable payment. At the same time there are concerns that parts of the current system—that allow teachers and educational institutions to copy material under licences and exceptions—are not adequate, and may not accommodate the current digital environment.
Matters not included in the Inquiry
19. The ALRC has been asked not to duplicate work relating to certain existing discussions at international level. Reviews currently being undertaken by the Australian Government Attorney-General’s Department also deal with exceptions in the Copyright Act: the extension of the definition of ‘carriage service provider’ as it applies to the ‘safe harbour’ scheme and the extension of the legal deposit scheme in s 201. In addition work is being undertaken by the World Intellectual Property Organization in relation to exceptions for persons with print disabilities. Currently there are international treaty discussions on exceptions in relation to technological protection measures (TPMs) and this Inquiry is not to duplicate such work.
20. Assistance in defining policy settings may be gained from previous international and domestic inquiries. Internationally, there are several recent and concurrent reviews covering matters related to this Inquiry. These include the UK Hargreaves Report and the current review of Irish copyright legislation.
21. Relevant Australian reviews notably include previous work by the CLRC, including Simplification of the Copyright Act and Copyright and Contract. Other relevant reviews include the Ergas Report, the Cutler Review and the 2011 Book Industry Strategy Group Report. In its 2005 Fair Use Review, the Attorney-General’s Department looked at whether it was appropriate to introduce a general fair use exception into the Copyright Act. This resulted in the time shifting, format shifting, parody and satire and flexible fair dealing exceptions being introduced into the Act in 2006.
22. The interaction of copyright and contract is a relevant aspect of the current Inquiry, as the real value of copyright to many comes from arrangements that build on, but are only partly related to, property rights in copyright. One concern is that contractual provisions may unjustifiably restrict practices of users which are otherwise allowed. On the other hand, contractual arrangements may have the capacity to render nugatory the rights of creators.
23. The interaction between copyright and contracts is important in finding the balance between private arrangements and proprietary rights. As the Ergas Report notes, non-legislative alternatives to property rights (such as contractual mechanisms) may be effective but they run the risk of not being efficient in that social costs ‘would almost certainly be higher under such arrangements, than they are under the current panel of protective instruments’. At the same time as this Inquiry the Government is undertaking a review of contract law to increase efficiencies and boost productivity, with a view to improving the attractiveness of Australia as a business and investment destination. It is likely that the ‘costs, difficulties, inefficiencies or lost opportunities for business’, which that review will look at, will also be relevant to this Inquiry.
24. The Convergence Review examined Australia’s communications and media legislation and advised the Government on potential amendments to ensure this regulatory framework is effective and appropriate in the emerging communications environment. The Convergence Review Committee was established to examine the operation of media and communications regulation in Australia and assess its effectiveness in view of the convergence of media content and communications technologies. Although copyright law and media regulation involve different regulatory environments and different industry players and conditions these intersect and are therefore integrally related.
25. The Convergence Review noted that copyright-related issues in general may have implications for investment in the content services market. Advances in technology and evolving business models are providing new ways of accessing and distributing content, which are likely to have implications for content rights holders, and for users, in the converged environment. These changes have been highlighted in recent developments, such as the ruling of the Federal Court on Optus’s cloud-based TV Now service. The Convergence Review proposed that the issue of copyright and the retransmission of free-to-air broadcasts be examined as part of this Inquiry and that, in investigating content-related competition issues, the proposed new communications regulator should have regard to copyright implications and be able to refer any resulting copyright issues to the relevant minister for further consideration by the Government.
Question 1. The ALRC is interested in evidence of how Australia’s copyright law is affecting participation in the digital economy. For example, is there evidence about how copyright law:
(a) affects the ability of creators to earn a living, including through access to new revenue streams and new digital goods and services;
(b) affects the introduction of new or innovative business models;
(c) imposes unnecessary costs or inefficiencies on creators or those wanting to access or make use of copyright material; or
(d) places Australia at a competitive disadvantage internationally.
 Department of Broadband, Communications and the Digital Economy, Australia’s Digital Economy: Future Directions (2009).
 G Trainor and A James, Review of the Australia Council (2012), 9.
 Ibid, 9.
 B Sherman and L Bently, The Making of Modern Intellectual Property Law: The British Experience 1760–1911 (1999), 2.
Berne Convention for the Protection of Literary and Artistic Works (Paris Act), 24 July 1971,  ATS 5 (entered into force on 15 December 1972).
 Copyright Law Review Committee, Report on Moral Rights (1998).
 K Bowrey, ‘Indigenous Culture, Knowledge and Intellectual Property: The Need for a New Category of Rights?’ in K Bowrey, M Handler and D Nicol (eds), Emerging Challenges in Intellectual Property (2011).
 P Hugenholtz and R Okediji, Conceiving an International Instrument on Limitations and Exceptions to Copyright, Final Report (2008).
 W Patry, How to Fix Copyright Law (2011), 12.
 N Weinstock Netanel, ‘Copyright and Democratic Civil Society’ (1996) 106 Yale Law Journal 283, 288.
 Ibid, 291.
 Copyright Council Expert Group, Directions in Copyright Reform in Australia (2011).
 W Patry, How to Fix Copyright Law (2011), 29.
 JP Barlow, The Next Economy of Ideas: Will Copyright Survive the Napster Bomb (2000) <www.wired.com/wired/archive/8.10/download.html> at 12 August 2012
 I Hargreaves, Digital Opportunity: A Review of Intellectual Property and Growth (2011), 1.
 Intellectual Property and Competition Review Committee, Review of Intellectual Property Legislation under the Competition Principles Agreement (2000), 96.
 M Kirby foreword to B Fitzgerald and B Atkinson (eds), Copyright Future, Copyright Freedom (2011), 5.
 S Ricketson and J Ginsburg, International Copyright and Neighbouring Rights: The Berne Convention and Beyond (2nd ed, 2006) Vol I.
 B Hugenholtz and M Senftleben, Fair Use in Europe: In Search of Flexibilities (2011), 2.
S Ricketson and J Ginsburg, International Copyright and Neighbouring Rights: The Berne Convention and Beyond (2nd ed, 2006) Vol I, 756.
Copyright Amendment Act 2006 (Cth).
 The ‘safe harbour’ scheme refers to the provisions of the Copyright Act limiting remedies available against carriage service providers for infringements of copyright relating to carrying out of on-line activities: Copyright Act 1968 (Cth) pt V, div 2AA.
 World Intellectual Property Organisation, Standing Committee on Copyright and Related Rights: Twenty-Fourth Session (2012).
 The use of circumvention technology to gain unauthorised access to electronic copyright works led to the amendments contained in the Copyright Amendment (Digital Agenda) Act 2000 (Cth). See further Australian Government Attorney-General’s Department, Review of Technological Protection Measure exceptions made under the Copyright Act 1968 (2012) <www.ag.gov.au> at 7 August 2012.
 I Hargreaves, Digital Opportunity: A Review of Intellectual Property and Growth (2011).
 Copyright Review Committee (Ireland), Copyright and Innovation: A Consultation Paper (2012).
 Copyright Law Review Committee, Simplification of the Copyright Act 1968: Part 1: Exceptions to the Exclusive Rights of Copyright Owners (1998).
 Copyright Law Review Committee, Copyright and Contract (2002).
 Intellectual Property and Competition Review Committee, Review of Intellectual Property Legislation under the Competition Principles Agreement (2000).
 Department of Innovation, Industry, Science and Research, Powering Ideas: An Innovation Agenda for the 21st Century (2009).
 Book Industry Strategy Group, Final Report (2011). See also Australian Government, Government Response to Book Industry Strategy Group Report (2012).
 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).
Copyright Amendment (Digital Agenda) Act 2000 (Cth).
 Intellectual Property and Competition Review Committee, Review of Intellectual Property Legislation under the Competition Principles Agreement (2000), 25.
 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).
 Submissions for the contract law review were due on 20 July 2012, http://www.ag.gov.au/
Consultationsreformsandreviews/Pages/Review-of-Australian-Contract-Law.aspx at 15 August 2012.
 Australian Government Convergence Review, Convergence Review Final Report (2012).
 The Federal Court at first instance ruled that this service does not infringe any rights conferred by the Copyright Act 1968 (Cth) but was a form of ‘time shifting’ allowed by s 111 of the Act. On appeal, the Full Federal Court overturned this decision: National Rugby League Investments Pty Ltd v Singtel Optus (2012) 201 FCR 147. See below in the section ‘Private copying’.