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Issues in the Cloud


Issues in the cloud

(Published in Lexis Nexis Risk Management 2014 Volume 24 No 6)

Cloud computing is already a big part of our lives; though, often, we don’t realise we are using it. Partly, no doubt, that is the intention. The name itself encourages fuzzy thinking and its users are blissfully unaware of what lies behind the image on the screen.

Cloud computing has been around, as an idea, for decades – since the 1950s, in fact – and has been used widely in practical popular services such as Hotmail, Facebook, YouTube, Gmail and Dropbox for many years now. By definition, a cloud computing service is any service that allows you to load information into a cyber locker that is located elsewhere from the computing hardware you operate.

The new services have brought with them new ways of copying and storing text, photos, films and music. All acts capable of infringing the Copyright Act, if done without permission or authorised without permission. When you load information into a cloud, do you still own the copyright on that material? By loading it, are you already infringing copyright? And, more precisely, can the person who stored it for you make copies of that material? And who is legally responsible for any infringements associated with the upload and sharing of that material?

With a view to dealing with these and other concerns, the Australian Federal Government has asked the Australian Law Reform Commission to undertake an enquiry, which has been titled ‘Copyright and the Digital Economy’. Of considerable relevance to cloud computing, are concerns raised by the enquiry, in one of its issues papers, as to whether the development of cloud computing is hampered by existing copyright protections.

For the creators of copyright material, this is a worry and great care is needed as we sort our way through the legal dilemmas created by cloud computing. The fact is that any proposed exceptions the ALRC may propose will need to be carefully drafted so as not to allow unauthorised files to be stored and downloaded as was allegedly the case with one of the most notorious current examples, the Megaupload site, founded by convicted embezzler, Kim Dotcom, in New Zealand.

At its fastest the Megaupload network, where users could upload large files for storage in the cloud, operated with 1.5 terabits of bandwidth and was capable of processing 800 file transfers every second of every day, seven days a week. After his arrest, Dotcom protested his innocence citing protections he argues he is afforded by the Digital Millennium Copyright Act (DMCA), which was signed into law by President Clinton in 1998. The DMCA was designed to extend the reach of copyright, while limiting the liability of the providers of on-line services for copyright infringement by their users. The appropriate response to Mr Dotcom’s defence is: yeah right. As if many actual authors and producers of copyright material used Megaupload as the first choice of distribution channel.

As things now stand, cloud copyright issues should be adequately dealt with by the licensing arrangement entered into between the user and the cloud provider. In the case of a private cloud provider such as Dropbox, which makes no claim to owning its user’s content, its agreement says: ‘By using our Services you provide us with information, files, and folders that you submit to Dropbox (together, “your stuff”). You retain full ownership to your stuff. We don’t claim any ownership to any of it. These Terms do not grant us any rights to your stuff or intellectual property except for the limited rights that are needed to run the Services.’

Similarly, for the owners of content (such as music or software) who license that copyright material to remote users via the internet there should be no issue; the license agreement will stipulate how many and where those copies can be made. In this case the cloud provider also owns the copyright material so they can authorise as many copies as they like.

In the case of public cloud providers the situation is the opposite. They offer a remote storage service to the owners, or acquirers, of copyright material and the number and location of copies can be authorised by the user who owns the copyright.

Or at least should own the copyright. If the user is seeking to utilise a commercial service to store material illicitly obtained then it is not appropriate that a general exception limit the rights of the true owner. The Act already protects innocent infringers against claims for damages but an owner should retain the right to have illegal copies handed over and have the culprit account for any profit illicitly obtained.

But with Google, who owns the public cloud services, YouTube and Gmail, a different slant appears in its terms and conditions stating that ‘some of our Services allow you to submit content. You retain ownership of any intellectual property rights that you hold in that content. In short, what belongs to you stays yours. When you upload or otherwise submit content to our Services, you give Google (and those we work with) a worldwide license to use, host, store, reproduce, modify, create derivative works’.

One further interesting twist in the legal framework of cloud computing turned up last year in the Federal Court case involving Optus and its product TV Now, which allowed Optus customers to record TV broadcasts to Optus' cloud and watch them on their phones. The cloud that stored the information allowed customers to stream broadcasts that were time shifted with two minutes delay.

As things now stand, existing special purpose exemptions for format and time shifting may not apply if the storage – the cloud – is in a facility neither owned nor controlled by the consumer. In the Optus TV case the Full Federal Court found that because the consumer was paying Optus to manage the storage of free to air broadcasts, it was Optus rather than the consumer who was making the copy and the time shifting exceptions of the Act did not apply. Optus later made an appeal to the High Court, which was not given leave because Optus did not raise any point sufficiently controversial to require adjudication.

The Optus TV case is a good example of competing interests at play. The sporting code involved and Telstra who had paid for the broadcast rights were furious that Optus enhanced the attraction of its Optus TV Now service without paying the AFL. On the other hand, as the judge at first instance found, the whole transaction amounted to a consumer engaging in a spot of time shifting.


The Australian Law Reform Commission is continuing with its enquiry and is due to release its findings toward the end of this year. One very worthy aspect the commission will not be reporting on is the unauthorised distribution of copyright materials using peer to peer networks because its terms of reference supplied by the Attorney General’s department disallow it.

This publication is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. The publication reflects the law at the date the publication was written which may differ at the date the publication is being read. No reader should act on the basis of any matter contained in this publication without first obtaining specific professional advice.
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