Some assorted thoughts on the ALRC fair use report

The ALRC Report on Copyright and the Digital Economy was released earlier this month. It’s an extremely thorough and well-reasoned analysis of exceptions in Australian copyright law. The main thrust of the report is to recommend that Australia introduces fair use; in the alternative, the ALRC recommends consolidating the fair dealing defences and expanding the category of uses to which they can apply.

Overall approach

The ALRC adopts a conservative approach here. The suggestions it makes are by no means radical – usually, the ALRC suggests that existing Australian copyright jurisprudence will inform any new law, and the report steers well clear of making any suggestion that fair use would reverse some of the more controversial decisions.

This is the report’s greatest strength. The reasoning is unassailable, and the reforms suggested by the ALRC are mostly in the relatively minor form of clarifications, simplification, and fixes to issues that are commonly understood to be problematic in the current law. The ALRC seeks to build consensus on this limited approach – in such a way that pragmatic law reform might be politically feasible. Where there is real disagreement, the ALRC punts to the courts (in terms of identifying whether existing cases would have different outcomes under fair use) or to future law reform processes.

This careful approach is apparent in navigating a lot of the contentious issues. The ALRC explicitly doesn’t accept the Canadian Supreme Court’s position that exceptions are “user rights”; neither does it buy the argument that the only role of exceptions are to address market failure. Accordingly, it doesn’t follow Hargreaves in recommending a “digital copyright exchange”. It doesn’t take a position on whether Men at Work’s use of Kookaburra, Optus’ TV Now cloud PVR system, or The Panel’s use of Channel Nine’s television clips would have been fair use. It suggests that courts will figure out the intersection between ‘fair use’ in the economic rights and ‘reasonableness’ in the moral right test, whether harm to reputation and brand count as harm in the fair use test, whether music sampling is fair, and whether harm to a potential market should count in the fair use test.

Hedging on these bets is a very smart decision. It was likely necessary in order to craft any sort of acceptable recommendations — explaining that the current law will probably still apply in future defuses a big criticism of fair use as a sweeping change. But the ALRC report has a number of different audiences — the Federal Government is one of them, but the Federal Court is another. By setting out a coherent set of principles, the ALRC report may help increase the coherency of future decisions. Certainly, the continued stress on the role of transformativeness and market harm could inform future decisions based on existing law. This makes the report fascinating – it simultaneously avoids making suggestions that past decisions might be overturned while reprioritising the foundational principles upon which they are based. The ALRC takes the position that explicitly considering fairness will increase the coherency of these positions, and in doing so, probably does in fact set the stage for future principled reform, either by the legislature or the courts.

At first I thought the ALRC had missed an opportunity to engage with these normative debates, but it’s apparent that it has actually chosen to do so at a higher level — in the form of foundational principles — rather than the much messier and more contested level of individual outcomes. This, I think, is what makes this report so important, whether it gets picked up in law reform or not.

Some particular, scattered, and not well-organised observations follow, over the fold.

Preliminary matters

  • Empirical evidence The ALRC notes the lack of reliable evidence in copyright law and argues that a “hypothesis based” approach should be taken to reform. There are, however, some interesting advances in empirical methods in copyright research around the world, which the ALRC supports.

  • Transformativeness is front-and-centre in the ALRC’s report. The ALRC is careful to point out that no one factor should dominate, but the analysis continously stresses the importance of transformativeness. The report’s analysis of caching and indexing, private use, and third-party use, for example, constantly refers back to transformativeness (broadly defined)

  • Transformativeness has been construed broadly throughout the report, to mean more than use for another purpose. The ALRC adopts Judge Leval’s reformulation of Justice Story’s test, which inextricably links the first factor (purpose and character of the use) with the fourth factor (market harm):

Whether a use is ‘transformative’ will be a key question in applying the
Australian fair use exception. This requires an examination of the extent to which a new work merely ‘supersedes’ or ‘supplants’ the original work or whether the new work is ‘for a different expressive purpose from that for which the original was created’.

For example, discussing caching and indexing:

Whether a use is ‘transformative’ will be a key question in applying the
Australian fair use exception. This requires an examination of the extent to which a new work merely ‘supersedes’ or ‘supplants’ the original work or whether the new work is ‘for a different expressive purpose from that for which the original was created’.

  • Harm: The ALRC was equivocal about the weight that should be given to harm to ancillary markets. It refused to accept the market failure argument, noting that some harm would be permissible [[5.88]]. But it also noted that the existence of commercial services would weaken the justifications for fair use (e.g. ABC’s iView potentially undermines the fairness of time-shifting): “If a licence can be obtained for a particular use of copyright material, then the unlicensed use of that material will often not be fair.” [5.81]

  • Primarily, harm is harm that usurps the market.

  • Harm to reputation might be harm to be taken into account: “an assessment of fairness could include consideration of damage to reputation or brand—although this is not traditionally considered when determining whether there has been infringement of copyright.”

  • The ALRC makes the point a few times that Australia may have been “better placed to participate in the growth of the nascent digital economy” if the Federal Government had listened to the CLRC recommendations to introduce fair use in 1998. :)

  • The ALRC noted the importance of Fair Use Codes and Best Practice Guidelines, like those developed by Jaszi and Aufderheide, in providing certainty for fair use in practice.

  • Recommended a specific exception for the GLAM sector.

  • Recommended a limitation of liability for orphan works after a “reasonably diligent search” for rightsholder and, where possible, attribution to original author. Rejected collective licensing as inefficient and more expensive, but suggested that further consultation was required on the exact form of limitation.

  • Recommended broadening ‘research and study’ to ‘education’ as an illustrative purpose.

  • Recommended further consultation on repealing computer exceptions in light of fair use.

  • Rejected ‘tolerated use’ – it is not enough that copyright is not enforced: “it is not sufficient that innovative businesses ‘operate free of active threats of litigation’. They should be able to operate confident in the knowledge that they may use copyright material, if that use is fair.”

  • De-emphasises social use – noting that many social uses might be unfair. ALRC suggests that social uses should be dealt with on a case-by-case basis, but does so against the background that much UGC is transformative and likely fair.

  • Makes the argument that caching and indexing are transformative

  • Cloud backup might be transformative; remote access might not.

  • Does not recommend the repeal of statutory licences, but recommends changes to emphaise their voluntary nature.

  • Calls on collecting societies to offer more flexibility now, without the need for law reform.

Quotation

  • First, overall focus on transformativeness indicates that many forms of quotation would be permissible.

  • But, there are still many messy questions.

  • The dual focus on transformativeness and existing authority leads to some conflict here – there’s no real elucidation of the problem in the US, where after Bridgeport “Get a license or do not sample”, many transformative uses are not actually fair.

  • ALRC takes no view on Larrikin: “It is not possible to say, however, whether or not the Kookaburra case would have been decided differently under a fair use (or fair dealing for quotation) exception. In the ALRC’s view, however, it would have been better for fairness factors to have been available for consideration.”

Third party uses

  • The ALRC takes no strong position on third party uses – recommending that it should all be dependent on the facts, and that transformativeness will often be the most important consideration.

  • Clearly expressed that ‘free riding’ should not be presumptively unfair: “‘free riding’ on the investment and creative effort of others” in a use that is “for a different expressive purpose than the original and does not harm a rights holder’s market … should often be fair, even if it is commercial. Such an approach to copyright exceptions better serves an innovative digital economy.”

  • Hedges on Optus TV Now and De Garis on whose purpose is relevant: “the fair use exception is sufficiently flexible to allow for third party uses to be considered fair in appropriate circumstances

[7.26] It is not clear whether the Optus TV Now service would be found to be fair use or not, particularly without properly considering the potential for harm to rights holders’ markets. The importance of considering market harm is discussed further below, and more generally in Chapter 5. However, introducing a flexible exception to copyright, such as fair use, will allow the right questions to be asked of a third party use, and should make Australia more fit for a digital age in which remote cloud technologies are becoming increasingly common.

Contracting out

  • Contracting out should only be prohibited for GLAM if fair use is introduced (mainly because this seemed to be the biggest evidence base for a problem).

  • Argument on contracting out partially based on the principle that contract could protect ‘legitimate’ but not copyright interests: for example, preventing sound recordings used in situations that are ‘adult or perverse‘ (interesting for its effects on speech)

[20.73] The economic value of freedom of contract is an important factor. Arguably, most contractual restrictions imposed on licensees ‘are designed either to protect the integrity of the work or the owner’s financial interests’. Both these interests are legitimate concerns.

  • Noted the Games industry’s submission about the importance of contract to develop innovative business models

  • The reasoning in this chapter was based, in part, on the assumption that unfair terms legislation likely excludes the worst excesses of imbalanced contracts. ALRC also notes that some contracts may not be enforceable due to competition law (subject to s 51(3), which the ALRC also recommends repealing).

[20.79] many contractual terms that restrict user rights under the Copyright Act are invalid through the application of ‘the public policy rule relating to the ouster of the jurisdiction of the courts’.[92] Therefore, expressly prohibiting contracting out may not be necessary, because ‘the common law already provides for invalidity in cases where the public interest requires it’