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Copyright and Fair Use in the Digital Age


Copyright and Fair Use in the Digital Age

(Published in Keeping Good Companies August 2013)

Grant Hansen

The Australian Law Reform Commission (ALRC) recently published a discussion paper1, which recommends the introduction of a US style fair use defence to the existing law of copyright. That defence would replace  the existing highly specific fair dealing defences – for example, for research or study, or, criticism and review -  along with far reaching amendments to deal with uses of copyright material required or facilitated by cloud computing and the digital economy.

In June 2012, the AG issued terms of reference requiring the ALRC to report on whether the existing defences and exceptions in the Copyright Act were ‘adequate and appropriate in the digital economy’. Essentially, the reference was a response to long-term pressure from content users (such as Telcos, search engine providers and ISPs) that copyright law was retarding the development of the ‘digital economy’.

The basic concern is easy enough to grasp. Copyright essentially controls direct and indirect reproductions of copyright material,which is precisely what  the digital economy is predicated on. . Some of the reproduction is substantive, as when a consumer streams a movie at home,and, some is technical, as when a search engine ‘caches’ frequently requested data. And, at the root of these concerns, is a genuine conflict of interest between owners of copyright material - who want to be paid for reproductions of it - and users and providers of content who want that use to be as cheap and effortless as possible. That some of the owners are also providers (such as Optus or Fox) () complicates matters, but does not  alleviate the basic tension.

The reason this matters in the real world is that, increasingly, the link – the channel of distribution -  between users and owners of copyright material, is a digital link to  cloud-based platforms. When  consumers listen to music, they are likely to use a cloud-based service such as Spotify. When they play a game, a cloud based provider such as Valve.   All of which are legitimate services.

Software developersare also moving away from retailing physical products and are concentrating on marketing digital downloads from cloud-based platforms. This relatively new channel of distribution creates new opportunities for infringement as well as  considerable legitimate commercial opportunities.

In particular, the sale of unlicensed access codes or product keys for software   that enable activations of software accessed  in the cloud is increasingly common. Software developers have been searching for a technological fix for piracyfrom the beginning, but the never-ending need for a balance between user experience and copyright protection means that the tech fix is elusive.

And so the ALRC’s response on copyright and the digital economy was always likely to be controversial..

A good example of the sensitivities involved is encapsulated in the 2012 Optus TV case, where Optus's TV Now service allowed its subscribers to record free to air TV programs, which were stored on Optus's  cloud storage platform so that customers could stream the recorded programs to compatible devices. The Full Federal Court found that this offering was not protected by the existing time shifting fair dealing defence.,  because the copy was in fact made not by the consumer but for the consumer by Optus. The decision attracted criticism in certain quarters to the effect that this was another example of the law failing to keep pace with technological change. This criticism ignored the very real anger of the football codes who saw a potential additional revenue stream being appropriated by a commercial actor who had paid nothing for the rights..

Given this background the ALRC’s recommendations at least have the merit of bravery. In the discussion paper Commissioner McKeough states, ‘the reforms proposed include the introduction of a broad, flexible exception for fair use of copyright material and the consequent repeal of many of the current exceptions in the Copyright Act, so that the copyright regime becomes more flexible and adaptable.’2

Such a change will result in a significant shift in the existing balance between copyright owners and users, which, if implemented in legislation, is likely to actually make it more difficult to protect legitimate commercial interest of copyright owners without resolving the concerns in certain quarters at the outcome of the Optus TV Now case.

Fair Use Exemption

Unfortunately, the discussion paper spends a lot of time making the case for a fair use exception in general terms without ever descending into the tedious business of drafting the exception.  What it does say is that there should be “a non-exhaustive list of fairness factors” and proceeds to propose four. There is no guidance as to whether one or all or none of the factors would be definitive.

The first relates to the purpose and character of how the copyright material is used, depending particularly on whether, or not, the use is commercial or ‘transformative’.‘Transformative use’ is a concept of US jurisprudence. Parody may be transformative, as may criticism,but so are Google ‘thumbnails’.

Presumably, what the ALRC has in mind  are reproductions that occur in music production where practitioners use sampling techniques to create ‘mashups’. This exception should also cover the production of home produced YouTube videos, which are often accompanied by copyright music and photography.

The second fairness factor relates to, the nature of the copyright work. Was the work creative or routine? (A novel or a TV guide?).  It is a fact, not well appreciated, that Anglo Australian law places no value on creativity in terms of copyright protection.  What copyright is designed to  protect is the skill and labour invested in the production of a copyright work.  Presumably copying TV guides is more likely to be fair than copying novels. Indeed, the High court in Ice TV has already come to a similar conclusion based on the concept of substantiality.

The third factor is the substantiality (importance) of the portion of copyright work used.

The fourth factor proposed  is the effect of the reproduction upon the value of the copyright work. Ultimately, the value of a copyright work is the present value of all its future sales (less cost of production). Any use that does cause the loss of a sale could be said to have an impact on the value. Presumably if there is an effect on value that is less likely to be fair.

Fair Use

According to the ALRC, fair use is decided on a case by case basis.  It is apparent that the ALRC is not proposing any rigid application of the factors listed above. As they say, ‘It essentially asks of any particular use, ‘is this fair?’ This is determined on a case by case basis’3. And these words, ‘case by case’, are the ones which either scare or delight commercial litigators the world over.

The fact is that a fair use defence has been a recurring objective of what could be described as an anti-copyright lobby, since at least the mid nineteen eighties. However, the great majority of practitioners in the area have always been opposed to the reform, essentially, on the basis that it would generate uncertainty and litigation.

By way of example, under the current fair dealing defences there are specific exceptions for copying material in libraries for research and study. What if, however, a student downloads a copy of a word processing application for the purpose of writing an essay?

The use is not commercial, it may have a minimal impact on the value of the software, it may even, in a loose sense, be transformative. Does this mean that the copyright owner loses the ability to sell to students? The answer may ultimately be no, but the problem is how would anybody know until a body of Australian case law had accumulated around the concept of fair use.

What if a community radio station puts together a program for broadcasts using proprietary audio editing software? Again, the use is not commercial, it may have a minimum impact on the value of the software and may be highly creative. But would a defence be available for such a use?

Consider also a variation on the Optus TV Now case. What if a telco offers a service to consumers permitting or facilitating the recording of broadcast movies to various devices? Why isn’t it a fair use of the free to air broadcasts to offer a service recording such broadcasts and creating their own library of movies in the cloud?

Interestingly, however, In the Optus TV Now case, the existence of a fair use defence as proposed  would have made the outcome less clear than it was but would not necessarily have produced a different result.  The use in question was commercial, the broadcast  copied was copyright, a substantial portion was copied and, arguably, there was an effect on the value of the copyright material.

Somewhat surprisingly, therefore, the fair use defence may not solve the perceived problems with the current law. What it will do is render a presently  reasonably clinical jurisdiction uncertain.  It took a generation for the old section 52 of the Trade Practices Act (now Section 18 of the Australian Consumer Law), which related to misleading ordeceptive conduct, to develop a reasonable mature body of case law that delivers predictable and consistent outcomes and a lot of blood and treasure was expended in the process. The question that should concern copyright owners and users is whether they want to enjoy the same journey in relation to the fair us defence.



1. ALRC: Copyright and the Digital Economy (DP 79 May 2013.

2. Media Release: ALRC releases Discussion Paper on copyright law reform Published on 5 June 2013.


3. ALRC: Copyright and the Digital Economy (DP 79 May 2013 pg 60.

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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