MOTION PICTURE ASSOCIATION OF AMERICA, INC.
1600 I Street NW
Washington, D.C.  20006
202.378.9107
gfrazier@mpaa.org

Monday, December 03, 2012

Greg Frazier
Executive Vice President

Dear Madam Executive Director:
The Motion Picture Association (MPA) appreciates this opportunity to comment on the Issues Paper on “Copyright and the Digital Economy,” published by the Australian Law Reform Commission (ALRC).  
In general, MPA endorses the submission of the Australian Film Bodies on the Issues Paper.  This separate submission is not intended as a comprehensive statement of MPA views, but to offer some general comments on an analytic approach for this inquiry, and to offer the perspectives of the leading U.S.-based film industry group on a few aspects of the Issues Paper where a close analysis of the relevant provisions of the Australia-U.S. Free Trade Agreement, or of U.S. copyright law, may be useful to the ALRC.  
1.  Guiding principles/overarching themes
MPA shares the skepticism of the Australian Film Bodies that all of the “Guiding Principles for Reform” listed in paragraphs 26-45 of the Issues Paper are either appropriate or consistent with the Terms of Reference for this inquiry.  Rather than repeat the concerns expressed in that submission, however, MPA will take up the invitation in the Issues Paper to make “suggestions for other principles to guide the Inquiry.”  We respectfully submit that if the ALRC’s inquiry is thoroughly informed by the following key themes, it is more likely to result in recommendations that are realistic, practical, and consistent with its terms of reference.
A.  Australia’s international obligations 
While both the Terms of Reference and the “Guiding Principles” make reference to Australia’s copyright law obligations with respect to copyright, it is important to recognize that these are not simply random or uncoordinated requirements with which Australia has agreed to comply. Australia is an active participant in an evolving international dialogue that articulates comprehensive norms and minimum standards for participation in an dynamic global marketplace in works of authorship and other copyright materials.  Building on the long-standing framework of the Berne Convention, this network of evolving norms now embraces the WTO TRIPS Agreement, the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, and other important multilateral agreements.  In addition, the copyright and enforcement provisions of the Australia-United States Free Trade Agreement (AUSFTA) are of particular significance, not only because AUSFTA was, at the time of its adoption, a state-of-the-art pact between Australia and one of its most important trading partners, but also because it has contributed significantly to the template for the Trans-Pacific Partnership (TPP) Agreement negotiations, in which Australia is now actively engaged along with ten other trading partners around the Pacific Rim. 
A common thread among the copyright provisions of all these agreements to which Australia is a party is the concept that limitations and exceptions to copyright protection must be confined to those which are consistent with the “3-step test.”   This touchstone of global copyright norms is analyzed in great detail in the Australian Film Bodies submission.  The overarching principle that should guide the ALRC in its inquiry is that all proposed new exceptions to copyright under Australian law must be carefully measured against this gold standard.  MPA agrees with its Australia film industry colleagues that when this test is applied, a number of the proposals for broad, blanket exceptions for activities such as “social, private or domestic purposes,” or “private and domestic use,” or for making back-up copies, will fall well short of compliance with global norms.  
B.  The importance of voluntary licensing  
Members of the public in Australia – as in many other advanced national markets – are able to enjoy a broad and fast-expanding spectrum of creative works – including, but by no means limited to, the filmed entertainment produced and distributed by MPA member companies.  In the main, this has been achieved through voluntary licensing arrangements entered into among creators, publishers, distributors, and consumers of these works.  No other mechanism comes close in terms of the flexibility, breadth and power of licensing to deliver the widest possible range of copyright materials to the broadest public, while accommodating the maximum range of choice of media, formats, devices and price points for consumers.  Licensing also enables the market mechanisms through which creators, distributors, and others who have invested in producing and disseminating creative works can receive an adequate return on their investment, and thus produces the incentives for more investment in production and dissemination of these works.  Technological changes are only accelerating these trends, as reflected in the growing diversity of license-based means for accessing movies, TV programming, and other forms of copyright works.  
It is critical to bear this context in mind in evaluating proposals to displace the voluntary licensing model in favor of other mechanisms, most notably statutory licensing or “free use” exceptions.  While statutory licensing has a role to play, MPA strongly believes that such schemes should be restricted to circumstances in which the voluntary licensing market is unable to perform its normal role.  Technological advances may be rapidly eroding many of the factors – for instance, high transaction costs, or difficulties in identifying or locating copyright owners – which in the past have contributed to market failure in particular sectors.  Modernization of Australian copyright law might well call for eliminating some existing statutory licenses, rather than creating new ones.  
Similarly, when evaluating any proposal for creating new exceptions to copyright protection, the ALRC should inquire diligently into whether the use sought to be advanced by the exceptions is already, or can reasonably be expected to come soon, within the scope of uses covered by a voluntary license.  (For instance, innovative licensing terms are increasingly empowering consumers to enjoy movies on multiple devices, thus undercutting any need for expansion of format shifting exceptions.)  Removal of any impediments to more expansive licensing terms could ultimately be a more productive and pro-consumer strategy than circumventing the marketplace altogether through the imposition of new mandatory free-use exceptions. 
C.  The impact of widespread infringement 
MPA shares the concerns expressed by the Australian Film Bodies regarding proposed Guiding Principle 6, at least to the extent it implies that the prevalence of an activity that constitutes copyright infringement would be a persuasive argument in favor of changing copyright law to make that activity non-infringing.  Of course consumer attitudes and behavior must be taken into account.  MPA member companies must be sensitive to what their customers want; if they fail to make reasonable accommodations to these desires, the companies risk severe punishment in the marketplace. But the balance that the law must strike must also take into account the need for protection of the property rights of copyright owners and for preserving strong economic incentives for investment in creative activity.
Where infringing activities occur to such an extent that they may be said to be approaching “the norm,” suggestions that focus on redefining the definition of infringement are a blunt instrument for addressing complex copyright policy challenges.  Even in situations in which an infringement lawsuit would be wholly inappropriate, there may be strong public interest incentives for discouraging infringement through other means, such as education and best practices.  Making the conduct non-infringing would render such efforts pointless.  It would also encourage the formation of businesses, including organized criminal enterprises, dedicated to providing the means for individuals to engage in the once-infringing activities, while misappropriating the revenues which, in a lawful environment, should flow to creators, producers and authorized distributors.  Illicit filesharing activities provide a case in point. 
Finally, the digital networked environment remains a marketplace compromised by very high levels of clearly infringing activity.  Incentives to invest in creating and disseminating new works are already being undercut by the appearance of high levels of tolerance for law-breaking. Thus, every proposal to create new copyright exceptions, or to substantially expand existing ones, ought to be evaluated, in part, by its knock-on effect on enforcement of the exclusive rights guaranteed to copyright owners.  
MPA encourages the ALRC to incorporate these themes systematically into its analysis as its inquiry proceeds.  
2.  Retransmission of free-to-air broadcasts (Questions 35-39) 
MPA strongly urges that Australia maintain the current stance – embodied in Section 135ZZJA – that excludes from the statutory licensing scheme the retransmission of free-to-air broadcasts over the Internet.  This provision, which reflects an important obligation under the AUSFTA, is needed to draw a clear line against unauthorized activities that could deprive copyright owners in movies and TV programming of one of their most important revenue sources today and into the future.  
The Issues Paper quotes the assertion that “Australian law makes retransmission of television broadcasts over the internet ‘legally impossible.’”  From the perspective of the owners of copyright in the content of these broadcasts, this assertion is wholly fallacious.  Internet retransmission of TV shows and broadcast movies is entirely legal, so long as the authorization of the copyright owner of those shows and movies has been obtained.  
In the past few years, authorized and licensed Internet streaming of broadcast material has become one of the fastest growing and dynamic means of disseminating that material to the public.  In the U.S. market, a plethora of services deliver to consumers HD movies and TV shows through Internet streaming, not only to conventional televisions, but also to an ever-expanding range of devices including computers, tablets and mobile phones.  The emerging digital services cataloged in the appendix to the Australian Film Bodies submission indicate that the same trends are in play in Australia as well.  
While Internet delivery of film and TV programming with the authorization of copyright owners through voluntary licensing is a burgeoning success, which more and more consumers are eager to enjoy, allowing Internet retransmission without such voluntary licenses would be a recipe for serious harm to copyright owners.  The main problem, of course, is that Internet retransmission, unlike the other forms of retransmission that are subject to statutory licensing, is inherently global in nature.  Licensing of shows and movies for free-to-air TV broadcast is generally carried out on a territorial basis, with the broadcaster enjoying an exclusive copyright license within the geographic area served by its signal.  Traditional forms of retransmission of TV broadcasts, such as via cable systems, also serve a delineated franchise area.  This maintains the principle of exclusivity, even under a statutory licensing regime.  But this is far more difficult to achieve when retransmission is carried out over the Internet, which involves a virtually unlimited and instantaneous reach throughout the world.  The resulting demise of the system of territorial exclusivity would decimate the value of broadcast programming and create chaos in the marketplace.  The ripple effects on broadcast advertising rates, on the license fees paid by authorized retransmitters, and on other settled business arrangements would disrupt the expectations of all legitimate participants in creating and distributing programming.  This includes both the “upstream” participants, such as actors, directors and screenwriters, and parties involved in exploitation of the same programming “downstream,” following over-the-air broadcast, such as through video sales or rentals, authorized online downloading or streaming, or subscription video on demand services.  
Nor is geoblocking a solution to this problem.  When copyright owners license their works for Internet retransmission today, they almost invariably require the use of stringent access controls to ensure that the content is delivered only to licensed subscribers.  While these access controls may include a geographic component, there is a world of difference between requiring geoblocking in the context of comprehensive access control obligations that the licensor can require its contract partner to enforce, and reliance upon geoblocking alone as carried out by a statutory licensee over which the copyright owner has, as a practical matter, far more limited leverage.   
There is little question that depriving copyright owners of their exclusive right to control communication of their work to the public via Internet retransmission of free-to-air TV broadcasting cannot pass muster under the three-step test.  Its interference with a mode of exploitation of these works that can already be considered normal, and that soon will be defined as central, is blatant and unjustified.  But just as importantly, imposition of a statutory license in this scenario is totally unnecessary.  Voluntary licensing is already beginning to achieve the same objective, and its potential for growth in the future is dramatic.  Under these circumstances, there is no market failure to justify displacing the voluntary licensing system that is beginning to take hold. 
It may be instructive to compare the situation under U.S. copyright law.  In the U.S., copyright owners have the exclusive right to control (i.e., to do or to authorize) public retransmissions of their works.  The right is referred to as the public performance right.  It is clear that this right extends to all forms of public retransmission, including over the Internet.  In fact, in the Internet context, there is no compulsory licensing of retransmissions. 
The Issues Paper also raises the question of whether section 135ZZJA applies to IPTV services.  MPA agrees that not every service that employs the Internet Protocol to retransmit TV programming is necessarily a “retransmission over the Internet.”  IP technology could be employed in closed, secure distribution systems that offer complete protection against copying and redistribution of programming over the Internet, and that respect the principle of territorial exclusivity.  It is thus conceivable that such systems could require a different analysis under the 3-step test than a system in which retransmitted programming is streamed over the Internet.  We reserve any further comment until a specific proposal is presented, clearly setting forth the specific conditions under which an IPTV service could be eligible for statutory licensing.  Of course, in that context, a critical consideration will be whether the same objective could be achieved through voluntary licensing, thus rendering a statutory license approach unnecessary, inappropriate, and potentially contrary to Australia’s international obligations. 
3.  Fair use (Questions 52-53)  
Finally, MPA offers some brief comments on whether Australia should adopt a “fair use” approach to copyright limitations and exceptions.  We understand that this issue was thoroughly examined in the Fair Use Review of 2005-06, as well as previously, and that the conclusion was drawn that Australian copyright law should not adopt this approach.  MPA is not aware of compelling arguments for altering that conclusion.  
As U.S.–based companies, MPA members are of course quite familiar with fair use jurisprudence, and quite comfortable operating in the fair use environment.  Fair use plays an important role in the U.S. copyright system, and MPA members, who, after all, are users as well as creators of copyrighted works, depend upon it in their business and creative operations.  We also recognize, however, that very few countries other than the United States have adopted fair use provisions in their copyright laws.  The laws of many of these other countries also feature a balanced, workable, and practical approach to the issue of exceptions and limitations to copyright, and provide supportive environments both for creators and for legitimate users of copyright material.  
Fair use works well in the United States largely because our common-law system is built on precedent.  Lawyers can confidently advise clients about the legality of their conduct based on what courts have decided in the case in similar circumstances.  We find it significant, however, that many other common-law jurisdictions, including Canada, the United Kingdom, and (up to now) Australia, have reached the decision not to adopt a fair use doctrine as part of their copyright laws.   
The main problem relates not so much to the concept of a general defense to infringement that is applied on a case-by-case basis to specific facts, but with the role of the specific U.S. judicial precedents that have developed within and provided content to the fair use framework in particular factual settings.  As noted above, the U.S. fair use doctrine is based on an analysis of these U.S. judicial precedents.  It is only on this basis that the fair use doctrine can be said have any real impact, positive or negative, on the development of copyright-based businesses, or upon businesses that depend upon the mass exploitation of copyrighted works owned by third parties. If, as is sometimes asserted, fair use provides “breathing space” for innovative new businesses, that can only be because counsel to those businesses have analyzed the applicable fair use precedents and have advised that the uses that these companies wish to make of copyrighted materials, without authorization from the copyright owner, and without the shelter of specific exceptions to copyright law, are likely to be considered fair if and when they are presented to a court for resolution.  This case law has shaped the fair use doctrine and in many cases constrained its application.  The enactment as part of Australian law of a new system based on the fair use doctrine would not bring with it this century and a half of judicial precedent that allows counsel, and the companies and individuals they advise, to rely upon the doctrine.  Indeed, at its introduction, the new system would be unsupported by any binding precedent at all.
The presence of the well-established Australian jurisprudence of fair dealing would not significantly ameliorate this problem.  There may be considerable overlap between the factors that Australian courts consider in deciding fair dealing cases, and those that U.S. courts consider in fair use cases (either because they are directed by the statute to do so, or because additional factors are identified in particular cases).  But the two lines of precedent are certainly far from uniform.  To the extent that U.S. courts provide a different weight or a different interpretation to a particular fair use factor than do the Australian courts in fair dealing cases, the inescapable question would be whether, and to what extent, the Australian courts, in applying a new “fair use-like” provision, should be guided by U.S. precedent.  The same question would arise in applying fair use to activities that fall outside the list of purposes for which fair dealing can now be applicable, and for which therefore there is likely to be no precedent on point in Australian jurisprudence. 
Since it is inconceivable that, as part of any new system of copyright exceptions in Australia, its courts would be directed to slavishly follow U.S. precedent, it is inescapable that there would be considerable uncertainty about the resolution of claims based on the new system in Australian courts.  This is likely to create a deleterious level of unpredictability for copyright owners, copyright users, and the public.  Whatever social benefits might fairly be attributed to the fair use doctrine under U.S. law would be unlikely to survive the passage across the Pacific to Australia.  If the Australian courts were invited to write upon a blank slate in developing fair use jurisprudence, the beneficial balance between predictability and risk that the fair use doctrine seems to provide in the U.S. marketplace could tilt too far away from predictability.  It thus would be unlikely to achieve any positive results. 
An additional uncertainty involves the impact of a change in Australian law on existing licensing agreements. Since the likely purpose, and even more likely a result, of borrowing from fair use to amend Australian law would be to expand, at least to some degree, the scope and applicability of exceptions to copyright protection, it is almost inevitable that some licensees would be compelled to re-examine whether they any longer needed to obtain a license for particular uses, or whether they could instead rely upon the expanded exception resulting from the new fair use provision.  The likelihood that this would destabilize settled markets for the licensing of copyrighted materials seems high.  This factor should also be taken into account in any deliberation about changes to the Australian statute.   
Thank you for this opportunity to offer the views of the MPA on some of the important questions addressed by the Issues Paper.  If you need further information regarding this submission, please do not hesitate to contact me.  
With best personal regards, I am
Sincerely,

Greg Frazier

Greg Frazier

The Executive Director
Australian Law Reform Commission
GPO Box 3708
Sydney NSW 2001
Email: copyright@alrc.gov.au
Facsimile: +61 2 8238 6363