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Copyright and Contract - Discussion Paper

Paper for Meeting with the Copyright Law Review Committee on 4 October 2001

Overview

1. In June 2001, the Copyright Law Review Committee released an Issues Paper on its current reference on the relationship between copyright and contract law. The Committee received 31 submissions in response to that paper. (A list of those who made submissions, and their respective acronyms, is included at the end of this paper.)
   
   
2. The purpose of this paper is to promote discussion and invite further comments on key matters raised in those submissions, and on some preliminary suggestions of the Committee, for a meeting with particular interests on 4 October 2001. For the purpose of promoting a productive and focussed discussion, the Committee has not sought, at this stage, further comments on all matters raised in submissions.
   
   
3. Those attending this meeting may also wish to refer to the Committee's Issues Paper. This may provide an insight into the Committee's view of the most significant issues arising from the terms of reference. The Issues Paper can be found on the Copyright and Contract homepage.
   
   
4. The venue for the meeting is: the Harbourside Room, Hotel Ibis, Murphy Street, Darling Harbour, Sydney 2000.
   
   
5. The discussion will be facilitated by the Chairman of the CLRC, Professor James Lahore. The Committee is particularly interested to discuss the following issues.

Evidence of contracting out

6. The first step of the Committee's inquiry was to establish the extent to which agreements sought to 'contract out' of the copyright exceptions in practice, and the nature of such agreements. Submissions were sought on these issues.
   
   
7. Responses to these questions were quite polarised. Library and user interests generally identified a problem regarding the use of online licences to modify the exceptions and wanted legislative or other intervention. Owner interests variously asserted that contract law and the market can and should regulate the situation or that although the situation is uncertain, it is too early to take corrective action.
   
   
8. Submissions made by the ABC, ACA, ADA, ALCC, ALIA, AVCC, CASL, CAUL, DCITA, NLA, Deakin University, Monash University and the Law Council of Australia pointed to a variety of problems in relation to current licensing practices. For example, restrictions on printing, downloading and emailing electronic material were said to be common. One good example of these restrictions was submitted by Deakin University:
   
   

   "The Databases are copyright either by [information provider] or its Data Suppliers, and all rights are reserved. Customer shall not duplicate, distribute, sell, commercially exploit, create derivative works from, or otherwise make available the Databases or information contained therein, in any form or medium (electronic, paper, photographic film or otherwise), to any third party."
   
   

9. Concerns regarding prohibitions against reverse engineering and decompilation for interoperability were raised in relation to software agreements. CAUL gave an example of an agreement that stipulates 'The Licensee shall not modify, adapt, translate, reverse engineer, decompile, disassemble or create derivative works based on the software without the prior written consent of the Distributor.'
   
   
10. Some licences submitted sought to expand the scope of copyright by imposing restrictions over the use of insubstantial extracts of material and material that is in the public domain. The ADA gave the example of a vendor of international treaties on CD-ROM who purports to 'restrict reference librarians from copying parts of these treaties to answer enquiries' despite the fact that such treaties are in the public domain. The practice of 'bundling rights' - providing material or access to material only on the condition that other material is licensed - was also a source of anxiety.
    
    
11. Library interests in general were particularly concerned about limitations on interlibrary loans and document supply, restrictions on copying for preservation or other purpose, and 'site clauses'. One example given by ALIA of a 'site clause' follows:
    
    

    'Access is for a single institution or campus... Use by others in geographically distinct or separately administered sites will require further subscriptions. For example universities with separate campuses, or administratively distinct units on the same campus with their own libraries, will need separate subscriptions for each unit where access is required.'

    Concerns were also raised about restrictions on including extracts in course packs.
    
    
12. Libraries also raised concerns about the practice of limiting access to registered or authorised user groups, the extent to which libraries are expected to enforce such limitations, and the fact that such access is often dependent upon ongoing payment. One example of this type of prohibition in a US licence was submitted by Deakin University:
    
    

    "The Database(s) shall be used by the faculty, staff, students, patrons and employees of Subscriber ("Authorized Users"). The Database(s) shall not be made available for any other use..."

    Monash University noted, however, that its staff found it easier to negotiate changes relating to authorised user groups than in the past.
    
    The Committee welcomes information about whether overseas libraries have similar 'authorised user' restrictions placed on them. The Committee would also like to know whether Australian libraries are treated differently in this respect, and what effect such restrictions have in practice.
    
    
13. Monash University noted that their licences for electronic material are generally neither mass-market nor online, but are more commonly offline subscription. Monash University stated that it was their practice to renegotiate any clickwrap licences that they do encounter. A recent review of Monash University's licences for electronic resources also revealed 'no examples of [copyright] exceptions that had been specifically modified' and that '[l]icences are generally satisfactory,' although the submission then mentioned several of the concerns noted above.
    
    The Committee is interested to know to what extent other libraries have had similar or different experiences to Monash University.
    
    
14. The Committee has also been conducting an ongoing survey of local and overseas licences. Problems with contract formation, breaches of consumer-protection standards, onerous and potentially unfair choice-of-law clauses and explicit or implicit modification of exceptions appear to be common.
    
    
15. Most of the agreements that the Committee has examined refer to the copyright laws of the jurisdiction. Some refer to international copyright laws and treaties. Many of these agreements imply that their terms are compliant with the copyright laws to which they have referred, and that an infringement of their terms would be an infringement of copyright law. Some agreements acknowledge the fact that copyright laws allow for certain limitations. Having acknowledged the exceptions, some agreements proceed to explicitly override them.
    
    
16. General uses that are prohibited by the licences examined include reproducing, making derivative works, commercially exploiting the material and communicating, distributing or publishing the material. Exceptions that are explicitly excluded include the computer program exceptions (decompiling, reverse engineering or using any other means to determine the underlying code) and 'exceptions' allowing copying for satire or parody under the fair dealing doctrine.
    
    
17. Although the licences examined commonly purport to modify or exclude exceptions, there is often a provision for obtaining express written permission for uses not otherwise permitted by the agreement. The legal effect of granting users conditional permission to use exceptions, which they would ordinarily be entitled to unconditionally, is not clear.
    
    
18. Many of the agreements examined try to expand the scope of copyright protection by prohibiting the use of insubstantial portions (for example, 'the Content of this site, or any portion of it, is protected') and by claiming rights over material that is in the public domain.
    
    
19. Many of the agreements expressly allowed personal, non-commercial use. There is no general exception in Australian law allowing this type of use, although this exception does exist in other jurisdictions.
    
    
20. Based on this information, the Committee has formed a preliminary view that contracts that try to modify or exclude the copyright exceptions do exist and that they are common enough to warrant further investigation.
    
    The Committee welcomes further data from interests in relation to this issue.

Difference between electronic commerce and other trade in copyright material

21. Generally, library and education interests such as FLIN, Deakin University, the AVCC, the ADA and the NLA noted that few print materials are subject to licence agreements. Notwithstanding this, there are a number of examples of offline agreements that impact on copyright law.
    
    
22. CAUL raised the issue of CD-ROMs that are packaged with books and are subject to shrink-wrap licence agreements that restrict their use. The ACC also referred to the use of CD-ROMs in libraries. In addition, the ACC referred to restrictions on photographing public domain art works in galleries and to the rental of videos and DVDs. The ADA also referred to the warnings on rented videos that conflate civil and criminal laws and seek to impose restrictions beyond those contained in the Act.
    
    
23. The ABC raised concerns about broadcast material obtained contractually from third parties, noting that agreements generally imposed conditions on the use of the material and sometimes tried to modify the fair dealing exceptions. It observed that if bound to such agreements, the ABC would be in a worse position than other broadcasters, who could record material from the ABC broadcast and then make fair dealing uses of it.
    
    
24. The ADA and the ACA also mentioned the copyright notices that appear in the front of hardcopy books. CAUL noted that some publishers seem to be attempting to converge conditions for use of their print and electronic products. The AVCC stated that it was not aware of any attempt to enforce restrictions that modify the exceptions against universities in the offline world. CAL also referred to blackline master agreements that apply to the education sector and give schools the right to copy a greater proportion of a work than is allowed under the Act.
    
    
25. A number of interests such as CAL, APA and ARIA adverted to the fact that online markets were new and it was still unclear how they would develop. CAL made particular mention of how availability would affect demand in online markets.
    
    
26. The Committee received a range of views as to the differences between online and offline trade in copyright material. While some owner interests asserted that there was not nor should there be any difference between trade in the offline and online environments, most submitters accepted that online trade was more likely to occur across national borders and that it could be controlled by technological protection measures.
    
    
27. The Committee has identified four particularly significant differences between online and offline trade. These are:
    
    

    the difference between the ownership of a tangible product and the right to access certain material (highlighted by the AIIA, the AVCC, Deakin University and others);
    
    the possibility of enforcing online contractual terms via technological protection measures (digital 'lock-up') or legal measures;
    
    the incidence of trade across national borders; and
    
    the potential ease of creating high quality infringing copies of digital material.

    Is digital 'lock-up' of concern? Is access the key issue in online trade and is this problematic? What is the role of contract in respect to technological protection measures? The Committee welcomes your views on these issues.

The effect of s. 47H

28. Various opinions were submitted as to whether the express prohibition on contracting out in s. 47H suggests that provisions elsewhere in the Act could be modified by contract. The ACC and Screenrights make the point that the effect of a contract precluding certain acts means that doing those acts will constitute a breach of contract and not a copyright infringement. They contend that, to that extent, such provisions do not "override" the provisions in the Copyright Act. The Committee accepts this argument, but is of the view that this does not obviate the need to examine whether this should be possible in all the circumstances.
    
    
29. IFPI describes the computer program exception as relating to a very specific kind of use, having been formulated to ensure that contracts do not preclude users from doing the most essential things necessary to make sensible use of the software. According to IFPI, s. 47H 'is aimed at dealing with competition law concerns and is therefore not well placed in the Copyright Act neither does it carry much weight in practice.'
    
    
30. The AIIA stated that s. 47H may suggest that provisions elsewhere can be overridden by contract. It also noted that the Trade Practices Act expressly states which provisions can be overridden by contract, as did Screenrights. FACTS submitted that s. 47H has no effect beyond Part III Division 4A.
    
    
31. The Law Council of Australia noted that the Explanatory Memorandum to the Computer Programs Act does not clarify the intended effect of s. 47H, and it is not clear whether Parliament turned its mind to this issue at all. The Law Council also noted that the CLRC report on computer software protection does not address the necessity of such a provision, or its possible impact on other exceptions. It put forward the view that although such a reading of s. 47H would not be consistent with the Act's history or its intention and would be unlikely to be applied by the courts, the lingering uncertainty 'should be eliminated by legislative means.'
    
    
32. Generally speaking, most interests agreed that the situation is unclear and expressed a need for clarity about the effect of s. 47H on other copyright exceptions. The Committee also feels that this issue should be settled.
    
    The Committee welcomes your views on this issue.

Remedies

33. Copyright owner interests were generally in favour of maintaining the status quo. They put forward the view that the ordinary law of contract and consumer protection properly regulated such matters. Some, such as IFPI and the APA, contended that standard form contracts are common in other industries and that the legislation and case law developed to protect consumers in those other situations is adequate.
    
    
34. On the other hand, user interests and the Law Council of Australia submitted that there should be legislative action to prevent contracting out of exceptions to the exclusive rights of owners of copyright and to ensure that this area was regulated by copyright alone (although it was suggested by some that this should not be the case where licences offered greater rights than in the Act).
    
    
35. For example, MCEETYA put the following options forward:
    
    

    A. the CLRC should recommend that the Act be amended to clarify that copyright owners cannot use contractual means to prevent the operation of all exceptions in the Copyright Act, including the statutory licences; or
    
    B. If the CLRC does not accept the view that private arrangements should not be used to displace copyright exceptions, the CLRC should recommend as a 'minimum standard' that contractual means cannot be used to modify or exclude both the exceptions listed as 'permitted purposes', and Part VA of the Copyright Act.

    The Committee is not at this stage convinced that existing remedies are sufficient.
    
    The Committee is interested in your views as to whether existing consumer protection laws are sufficient to deal with any problems related to mass market licences. The Committee is also interested to hear whether present provisions of the law effect a fair balance between the respective rights of copyright owners and users.

'Sliding scale' of exceptions

36. One alternative is to make all exceptions mandatory. Another is to amend the Act in view of a 'sliding scale' of exceptions. Under such a scheme, deviating from some exceptions would be prohibited but deviating from others would be permitted. There may also be other approaches. It may be desirable to allow certain exceptions to be modified only by contracts that are individually negotiated, by contracts that comply with additional consumer protection standards, or by contracts that comply with an industry approved model agreement. Setting a 'sliding scale' is a question of policy rather than of law.
    
    
37. Consistent with this 'sliding scale' option, the ABC suggested amending the Act to include a prohibition against contractual restriction of fair dealing for the purpose of news and/or criticism and review, in similar terms to s. 137 of the Broadcasting Act 1996 (UK). SISA also noted that s. 47H shows that the Government can choose to proscribe contractual attempts to nullify its copyright policies, particularly where there is no public benefit in allowing certain contractual provisions to stand.
    
    
38. Relatively few submitters discussed the different policy bases for the various exceptions. It is important to understand the effects and reasons for each exception before considering whether or not they should be made mandatory. One international commentator draws distinctions between the different copyright exceptions as if they are 'curious animals', arguing that 'for a healthy equilibrium we need not only cows and sheep, but lions, monkees and an occasional wolf.'¹ Some exceptions certainly have a fiercer 'bite' than do others.
    
    
39. Australia's international copyright law obligations stipulate that exceptions to exclusive rights must be confined to 'certain special cases which do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder' (Article 13 of TRIPS). But, within that framework, the conceptual basis of many exceptions is not clear. Do the exceptions in the Act strike an appropriate balance between the rights of owners and the rights of users, and promote the public interest? Do the fair dealing exceptions ensure the 'free flow of knowledge, ideas and information, vital to the political, intellectual, economic and social life, as well as the education, of all Australians?'² Similarly, do the library and archives exceptions promote public access to information? Do the statutory licence exceptions allow for market failure and facilitate remunerated access to and use of copyright material? A fuller discussion of individual exceptions can be found in the Committee's Issues Paper.
    
    The Committee welcomes your views as to whether a sliding scale is appropriate for the exceptions. If so, how would you treat the various exceptions? Should a sliding scale be the sole solution?

Unfair contracts

40. The Committee has observed that existing remedies tend to deal with extreme examples of 'bad' agreements, but do not necessarily encourage 'good' agreements. ALIA has recommended the codification of common law unfair competition rules as they apply to copyright contracts. The Committee notes that while New South Wales has an Unfair Contracts Act, other States do not have similar legislation.
    
    The Committee is interested in exploring whether this type of approach is appropriate for all jurisdictions.

Model licence or code of conduct

41. Some submitters in the library sector (NLA and CAUL) referred to the use of model licences, discussion lists and websites such as 'liblicense' as tools that could be used in negotiating licences. It was suggested that the use of model licences could be officially promoted. For example, a model licence could be drafted with standard acceptable provisions and promoted on government and industry websites.
    
    
42. The Committee is also interested in exploring the idea of a code of conduct. This would be broader than a model licence, outlining acceptable principles of behaviour and general rules that licensors and licensees should observe when drafting agreements.
    
    
43. A model licence or code could be purely voluntary or regulatory. If voluntary, a system could be established enabling compliant licences a certification indicating their compliance. Compliance with a voluntary code or model licence might be encouraged in other ways, such as by making it a requirement in the Act that a licensor wishing to bring a copyright infringement action against a licensee be compliant with industry codes. The Committee notes that ALIA recommended that the ACCC be given an extended jurisdiction to address any problems associated with mass-market licences. The submission made by APRA and AMCOS indicates that a regulatory authority may have a role to play in this regard. That submission referred to the regulatory power of the Copyright Tribunal, stating that the Copyright Tribunal's jurisdiction over APRA and AMCOS licences gave users considerable protection in relation to unreasonable terms.

The Committee is considering:

• whether legislation should be amended in accordance with a sliding scale of exceptions;
• whether legislation should be amended to improve and standardise consumer protection;
• whether legislative amendment is likely to be 'self-enforcing' and have a significant effect on industry practice; and
• whether model licences or codes should be imposed or encouraged.

The Committee seeks your views on how such mechanisms could work in practice.

List of submitters and acronyms

Sub no.
Submitter
Abbreviation / acronym
 
1
Monash University
  
2
Federal Libraries Information Network
FLIN
 
3
MCEETYA Taskforce on Copyright
MCEETYA Taskforce
 
4
Patricia & Tony Barry
  
5
International Intellectual Property Alliance
IIPA
 
6
Deakin University
  
7
Australian Library & Information Association
ALIA
 
8
Supporters of Interoperable Systems in Australia
SISA
 
9
Australian Consumers' Association
ACA
 
10
Council of Australian University Librarians
CAUL
 
11
Australian Record Industry Association
ARIA
 
12
Phonographic Performance Company of Australia Ltd
PPCA
 
13
Australian Vice-Chancellors' Committee
AVCC
 
14
Australian Publishers Association
APA
 
15
Australian Digital Alliance
ADA
 
16
National Library of Australia
NLA
 
17
Australian Information Industry Association Limited
AIIA
 
18
Copyright Agency Limited
CAL
 
19
Department of Defence
Defence
 
20
Department of Communications, Information Technology & the Arts
DCITA
 
21
Australian Copyright Council
ACC
 
22
International Federation of Phonographic Industries
IFPI
 
23
Council of Australian State Libraries
CASL
 
24
Screenrights
  
25
Australian Libraries Copyright Committee
ALCC
 
26
Business Software Association of Australia
BSA
 
27
Australian Broadcasting Corporation
ABC
 
28
Law Council of Australia
  
29
Australian Performing Right Association Limited and Australasian Mechanical Copyright Owners' Society Limited
APRA and AMCOS
 
30
Federation of Australian Commercial Television Stations
FACTS
 
31
Adam Gatt, RMIT Masters of eBusiness

¹ P Bernt Hugenholtz, 'Fierce Creatures' (IFLA/IMPRIMATUR conference 30-31 October 1997, Amsterdam)

² Copyright Law Review Committee 'Simplification of the Copyright Act 1968 Part 1: Exceptions to the Exclusive Rights of Copyright Owners' (Commonwealth of Australia: Canberra, 1998) p57.