The harbour is not as safe as it looks - iiNet wins but consumers will likely lose

On 24th February the Full Bench of the Federal Court handed down its findings in the AFACT v iiNet appeal, with the appeal ultimately being dismissed. However, although the scorers will record it as a 2-1 win to iiNet, the actual ramifications of the case may mean that the much maligned "3-strikes" rules may become existent in Australia and in the most egregious form - one with no judicial oversight and very limited ways for consumers to defend themselves from allegations of infringement.

The dominant view has been that AFACT will likely appeal their loss to the High Court, however, due to the implicit process by which iiNet could be found liable for infringement found within the judgment, I believe it is unlikely that an appeal is on the cards. It is more likely that AFACT will negotiate with iiNet a notification/termination system which iiNet can live with, and AFACT can afford.

Emmet, J's judgment sets out what could quite possibly become the template for a notification/termination regime in Australia:

• iiNet has been informed in writing of particulars of specific primary acts of infringement of copyright of the Copyright Owners, by use of particular IP Addresses of iiNet customers.
• iiNet has been requested in writing to take specific steps [...] in relation to such primary acts of infringement
• iiNet has been provided with unequivocal and cogent evidence of the alleged primary acts of infringement by use of the iiNet service in question. [...] Information as to the way in which the material supporting the allegations was derived, that was adequate to enable iiNet to verify the accuracy of the allegations, may suffice. Verification on oath as to the precise steps that were adopted in order to obtain or discern the relevant information may suffice but may not be necessary.

Emmet, J at [211] asserts that points one and two have been satisfied in the circumstances of the appeal but point three has not been satisfied. The information provided is not "cogent and unequivocal", but only represents a "mere assertion" by AFACT. Emmett, J also notes that there has been no offer of compensation or indemnity by AFACT.

Although Emmett, J does suggest that the customer ought to have a chance to refute any allegations that are made by AFACT², there is no suggestion as to what would constitute a refutation that would be satisfactory to prevent termination - I would imagine that with such a system in place iiNet would take a somewhat conservative approach to what would constitute an appropriate refutation, probably requiring a very high degree of proof (to avoid any threat of further litigation on this point). This leaves your average consumer without any realistic means of review. So, although the appeal is a win for iiNet, it does not look like an outright win for consumers.

However, there are a few outstanding issues from the case that could make the system proposed by Emmett, J unworkable.

Firstly, at [207] Emmett, J speculates that the cost³ and complexity of such a system may not be feasible:

"It would be necessary to create a system whereby sufficient information concerning the allegations is communicated to the relevant customer, acknowledgment of receipt by the customer was secured and cross checking for earlier notifications in respect of the same customer was undertaken. Choices would need to be made in the design of such a system, as to the number of warnings that should be given, whether there should be a period of grace, whether all alleged infringers should be treated the same or graded according to severity. Each of those choices adds complexity to the design of a system. iiNet would also need to implement and maintain additional customer support capability since the implementation of such a system would lead to queries and complaints from customers. Senior personnel would need to be involved in the handling of such queries and complaints. Even if such a system is feasible, it would be likely to involve significant expense being incurred by iiNet."(emphasis mine)

However, I would suggest that it is likely that AFACT would suggest a bare minimum system and iiNet (in an attempt to avoid litigation) would likely agree - so long as AFACT was paying. So, one would imagine that such a system would be feasible.

Secondly, there is the question of what constitutes "unequivocal and cogent" evidence. Emmett, J suggests that the method of deriving the evidence may suffice for iiNet to then investigate the alleged infringements however, as anyone who understands the technology, unequivocal and cogent evidence is not as easy to come by as deriving an IP address from a torrent - certainly in the criminal sphere, significant computer forensics is required to meet the high burden of proof required. There is even some English Case law that suggests that an IP address is not significant enough per se to identify an infringer⁴ - however this case does suggest that an account holder may have a "duty to assist"⁵ which may still then require the account holder to "give appropriate assurances that there will be no repetition of the acts of infringement"⁶, a breach of which may then render the account holder liable to termination - and I would guess that similar reasoning would hold in Australia.

Ultimately, the AFACT v iiNet case is a prescription for the negotiations between iiNet and AFACT to derive a workable system. Negotiations which will likely give iiNet the certainty that it has asserted that it requires, and AFACT another weapon in its war against its customers.

In the end, it will be the consumers that lose with a system that will likely have no rights of appeal bar through a court process that is too expensive and complex for the average person; A system that requires something that is a little more than a mere assertion by an organisation whose main aim is not to benefit its members (ie. artists) or to provide for its customers, but to force consumers into its outdated business model. A model which consumers have unequivocally rejected.

Let's just hope that the recently announced review of copyright by the Attorney General results in some sane legislation to restore the balance in favour of both consumers and rights holders and not the middle-men like AFACT and its ilk. I'm not holding my breath.



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¹ Emmett, J Roadshow Films Pty Limited v iiNet Limited [2011] FCAFC 23 at 210
² Ibid
³ Emmett, J suggests at [210] that these costs are to be borne by the rights holders
⁴ Media CAT Limited v Adams & Ors [2011] EWPCC 6
⁵ Ibid. at [91]
⁶ Emmett, J Roadshow Films Pty Limited v iiNet Limited [2011] FCAFC 23 at 210