Roadshow Films Pty Ltd & Ors v iiNet Limited

[2011] HCATrans 210

[2011] HCATrans 210

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S115 of 2011

B e t w e e n -

ROADSHOW FILMS PTY LTD (ACN 100 746 870)

First Applicant

UNIVERSAL CITY STUDIOS LLLP

Second Applicant

PARAMOUNT PICTURES CORPORATION

Third Applicant

WARNER BROS ENTERTAINMENT INC

Fourth Applicant

INC DISNEY ENTERPRISES

Fifth Applicant

INC COLUMBIA PICTURES INDUSTRIES

Sixth Applicant

TWENTIETH CENTURY FOX FILM CORPORATION

Seventh Applicant

PARAMOUNT HOME ENTERTAINMENT (AUSTRALASIA) PTY LTD ACN 003 914 609

Eighth Applicant

BUENA VISTA HOME ENTERTAINMENT

Ninth Applicant

TWENTIETH CENTURY FOX FILM CORP (AUSTRALIA) PTY LTD ACN 000 007 036

Tenth Applicant

UNIVERSAL PICTURES (AUSTRALASIA) PTY LTD ACN 087 513 620

Eleventh Applicant

VILLAGE ROADSHOW FILMS (BVI) LTD

Twelfth Applicant

UNIVERSAL PICTURES INTERNATIONAL

Thirteenth Applicant

UNIVERSAL CITY STUDIOS PRODUCTIONS LLLP

Fourteenth Applicant

RINGERIKE GMBH & CO KG

Fifteenth Applicant

INTERNATIONAL FILMPRODUKTION BLACKBIRD VIERTE GMBH & CO KG

Sixteenth Applicant

MDBF ZWEITE FILMGESELLSCHATT MBH & CO KG

Seventeenth Applicant

INTERNATIONALE FILMPRODUKTION RICHTER GMBH & CO KG

Eighteenth Applicant

INC NBC STUDIOS

Nineteenth Applicant

DREAMWORKS FILMS LLC

Twentieth Applicant

WARNER BROS INTERNATIONAL TELEVISION DISTRIBUTION INC

Twenty First Applicant

%TWENTIETH CENTURY FOX HOME ENTERTAINMENT INTERNATIONAL CORPORATION%

Twenty Second Applicant

WARNER HOME VIDEO PTY LTD% ACN 002 939 808

Twenty Third Applicant

PATALEX III PRODUCTIONS LTD

Twenty Fourth Applicant

LONELY FILM PRODUCTIONS GMBH & CO KG%

Twenty Fifth Applicant

SONY PICTURES ANIMATION INC%

Twenty Sixth Applicant

UNIVERSAL STUDIOS INTERNATIONAL B.V.

Twenty Seventh Applicant

SONY PICTURES HOME ENTERTAINMENT PTY LTD ACN 002 489 554

Twenty Eighth Applicant

GH ONE LLC

Twenty Ninth Applicant

GH THREE LLC

Thirtieth Applicant

BEVERLY BLVD LLC

Thirty First Applicant

WARNER BROS ENTERTAINMENT AUSTRALIA PTY LTD ACN 003 773 411

Thirty Second Applicant

TWENTIETH CENTURY FOX HOME ENTERTAINMENT LLC

Thirty Third Applicant

SEVEN NETWORK (OPERATIONS) LTD ACN 052 845 262

Thirty Fourth Applicant

and

IINET LIMITED (ACN 068 628 937)

Respondent

Application for special leave to appeal

FRENCH CJ
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 AUGUST 2011, AT 9.31 AM

Copyright in the High Court of Australia

____________________

MR D.K. CATTERNS, QC:   May it please the Court, I appear for the applicants with my learned friends, MR J.M. HENNESSY and MR C. DIMITRIADIS.  (instructed by Gilbert + Tobin Lawyers)

MR R. COBDEN, SC:   May it please the Court, I appear for the respondent with my learned friends, MR R.P.L. LANCASTER, SC, MR N.R. MURRAY and MS P.M. BLACKADDER.  (instructed by Herbert Geer Lawyers)

FRENCH CJ:   Yes, Mr Catterns.

MR CATTERNS:   May it please the Court.  Your Honours, if I may, just a brief word on the role of the law of authorisation before I get to the errors of the majority in the Full Court that we submit occurred.  As your Honours know, there were multiple repeat infringements by iiNet users who made the films available to the public online thereby infringing the communication right in the films and, your Honours, the law of authorisation has developed since the Moorhouse Case 35 or 36 years ago as a practical way of dealing with the problem that many modern technologies pose.

CRENNAN J:   Is it possible to summarise the evidence in relation to the server’s ability to track the user’s activities in relation to alleged breaches of copyright?

MR CATTERNS:   Your Honour, they had to get the information from us.

CRENNAN J:   You put them on notice?

MR CATTERNS:   We put them on notice, yes, your Honour, and we cannot know who the person is.  We only know the person with IP number such and such, so they can then link it up to an individual person and, as your Honour knows, we propounded a system of warning, suspension, et cetera, a graduated response to deal with the infringements.  But perhaps behind your Honour’s question is the heart of where we say where their Honours went wrong, which is where one puts the standard knowledge in a case like this.

CRENNAN J:   What the Americans call “the red flag”.

MR CATTERNS:   Yes, your Honour, and central to our case is the fact that his Honour made a finding, we say, his Honour the trial judge, Justice Cowdroy, at least as at April 2009 of sufficient knowledge and we would have won there below but for other errors in his Honour’s reasoning which were correct or overturned by all of the members of the Full Court, in particular, his Honour’s insistence – which I will not take time with today – about the means of infringement.  Your Honour, of course we accept that iiNet does not know in the first place except at a general level that infringements are taking place, although we submit that even by the time the proceedings were commenced, it clearly had reason to suspect, which was Justice Gibbs’ phrase in the Moorhouse Case.

CRENNAN J:   That is your complaint, is it not, about the way in which members of the Full Court have phrased the test?

MR CATTERNS:   Yes, your Honour.  They go much higher than that, we submit.  Your Honour knows that his Honour Justice Emmett imposes a system of verification and even indemnification, and his Honour Justice Nicholas has an approach which our friends seem to call “legitimate indifference” by which you can close your mind forever, it seems, to the mounting evidence of infringement as long as your attitude was that you do not approve of infringement.  That must be wrong, with great respect.

CRENNAN J:   I think there is a dicta, is there not, in Moorhouse that indifference might meet a level which suggest acquiescence, if I can put it that way?

MR CATTERNS:   Yes, your Honour.  Justice Jacobs says that at page 21 and, your Honour, that idea goes back via the Adelaide Corporation Case, which Justice Gibbs also picked up, back to Performing Right Society v Ciryl Theatrical Syndicate.  I think, in fact, Justice Emmett quotes it earlier in his Honour’s reasons.  I think it is at paragraph 33, your Honour.  Pardon me, your Honours, I have written it down here somewhere.  May I go back to that?  Your Honours, at page 12.  That is the link back to PRS v Ciryl, and in a moment I will quote exactly what his Honour Justice Jacobs says, if I may.

Your Honours, we submit that authorisation is a practical test by which you can attempt to enforce or protect their rights with someone who it is practical to deal with, namely, someone higher up the chain, such as the university as opposed to the individual student, or here, the ISP as opposed to the individual infringer at their computer.  It is clear that our law of authorisation has developed perhaps more expansively than the UK and the US and it has gone long past the ideas of contributory infringement or purporting to grant the right, as Justice Gummow explains in the WEA v Hanimex Case.  As we have submitted, the legislature has continued to amend the Copyright Act, as it were, on the faith of the Moorhouse Case and, in particular, the subparagraphs of section 101(1A), which is what we are talking about, power to prevent, relationship and reasonable steps all come from Justice Gibbs’ judgment. There is a fourth element, as your Honours know, not expressly stated in 101(1A) which we agree is of course not exhaustive, and that is knowledge.

FRENCH CJ:   In relation to the matters of, as it were, principle you would rely upon to support for the grant of special leave, are they adequately exposed by grounds 1, 2, 4, 5 and 6?  I am just wondering what role ground 3 would have to play, at page 519.

MR CATTERNS:   Did your Honour say 1, 2, 4, 5 and 6?

FRENCH CJ:   Yes.  I am looking at 519.

MR CATTERNS:   Yes, your Honour, thank you.  Yes, they are, your Honour.  I suppose ground 3 descends to the ‑ ‑ ‑

FRENCH CJ:   So you would not need 3?

MR CATTERNS:   No, your Honour.

FRENCH CJ:   We might just stop you there for a moment, Mr Catterns, and hear from Mr Cobden.

MR CATTERNS:   May it please the Court.

MR COBDEN:   May it please the Court.  Your Honours, of course, what our learned friends have to do is to identify to your Honours the special leave questions, that is to say, the basis upon which special leave should be granted in this case, and they have sought to do so in their opening outline, which is at page 524 of the second volume of the application book in applicants’ summary of argument.  With respect, a close examination of the applicants’ stated special leave questions and a draft notice of appeal, to which I can come, demonstrate that this case is not a suitable proceeding for the grant of special leave.  I hope your Honours will not think it impertinent ‑ ‑ ‑

CRENNAN J:   Does that mean that you do accept that it is a question of general public importance the issue of what responsibility internet service providers should bear in relation to copyright infringement, noting that it is a recurring issue in the new environment?

MR COBDEN:   I was about to say, with no impertinence, I hope, that it is not to the point that the internet is a modern and interesting topic, no question, that technology presents challenges to the law, again no question, or, indeed, that the problem of downloading that our learned friend’s clients effectively have identified is serious ‑ ‑ ‑

CRENNAN J:   So why is it not a suitable vehicle, Mr Cobden?

MR COBDEN:   Because the case as presented to this Court, your Honour, is not an appropriate case for special leave, and that can be identified by looking at the way in which our learned friends frame their special leave questions, because when one gets down to them, one finds that they do not carry with them an appropriate framework for special leave.

CRENNAN J:   They seem to raise matters of principle.

MR COBDEN:   Can I seek to indicate why, in our respectful submission, they do not, because at least the second and third turn so much on the particular facts of this case and, indeed, on particular facts that at least one or two of which are so unsafe that they would not present an appropriate vehicle for the determination of the questions that are put up.

The first question, and this perhaps answers a little of what your Honour Justice Crennan was asking of my learned friend Mr Catterns, which is what is the proper approach to the question of authorisation, that is the general question, is, with respect, no more than a general question.  There was in the Full Court, we would submit, no disagreement between the parties as to matters of principle, the matters of principle being that Moorhouse was the leading High Court authority and must be followed and, secondly, that section 101(1A) of the Copyright Act prescribes factors that must be taken into account in reaching a view of that authorisation. 

Where there was disagreement between us and our learned friends, but, in particular, between the majority and Justice Jagot, or Justice Jagot and the trial judge, was really the application of those principles to complex facts and the complex facts that arose here arose by reason of the scheme that the applicants devised.  It was entirely of their devising in order to bring about the instances for authorisation infringement complained of.  They devised an elaborate scheme for capturing and placing before the respondent instances of activities on IP addresses allocated by the respondent. 

They were captured by technicians operating partly in Australia and partly in Denmark and the Baltic States running 24 hours a day.  That generated thousands of items of captured information.  That information was then supplied in the form of weekly letters, spreadsheets and thousands of zip files, compressed files on DVDs, and all of that has to be seen, as each of the judges who found in our favour did see, against the background of the respondent receiving other automatically generated notices by email, mainly from the United States, making similar allegations in relation to some 5000 IP addresses a week, or some, I think, 350 emails a day.

FRENCH CJ:   These are the so-called robotic notices?

MR COBDEN:   So-called robotic notices.  Indeed, although we accept that these notices arrived under a signed letter and did follow some general discussion between AFACT, the industry body, and iiNet and other ISPs and on and off in a slightly.....fashion over 2007 and 2008, as at the commencement of the proceeding, the scheme and its ultimately accepted accuracy, how you dealt with this welter of material against the background of being bombarded with all the other material, was simply not explained.  That was not a factor that bore heavily on Justice Cowdroy and Justice Emmett and Justice Nicholas, particularly Justice Nicholas, that the only way of understanding this material, the only proper fashion, was to be apprised of the contents of something called the DtecNet report. 

The email notices from AFACT started in mid-2008, and lasted all through that year and into the next year.  The proceeding was commenced on November 2008.  The DtecNet report which explained this method was served in February 2009 but under a claim for confidentiality.  It was gradually released so that executives of iiNet eventually were permitted to see them in the context of the proceeding, but no other release was given to them by, I think, April/May 2009, and ultimately a claim for confidentiality on it was lifted when it was presented in evidence in November 2010.  Justices Nicholas and Emmett, and Justice Cowdroy, who focused their attention on the state of mind of iiNet as at the commencement of the proceeding – which we say appropriately, and I will indicate why in a moment – held that they did not have the quality of the knowledge that is at the heart of the authorisation case that is put by the film studios.

CRENNAN J:   But that brings us, does it not, to the question of principle and that is, what is the requisite mental element and the distinction between Justice Emmett on the one hand, take 330 at paragraph 257 of his Honour’s judgment, and the expression of the test on page 13 of Moorhouse by his Honour Justice Gibbs as he then was?

MR COBDEN:   I am sorry, your Honour’s reference to paragraph 357?

CRENNAN J:   Paragraph 257.

MR COBDEN:   I am sorry, your Honour. 

CRENNAN J:   I mean, is that not a higher test in respect of the mental element than the test in Moorhouse or not?  Or a different test?

MR COBDEN:   No, with respect, because his Honour is reaching a view there about the level of knowledge that iiNet has.

CRENNAN J:   Well, his Honour speaks in terms of:

the Copyright Owners would be required to show that at least the following circumstances exist –

so his Honour seems to be expressing a test.

MR COBDEN:   In the circumstances ‑ ‑ ‑

CRENNAN J:   In all the circumstances of the case, of course.

MR COBDEN:   Yes, not a test of general application, but an approach that given that his Honour has also taken into account not only Moorhouse, of course, but, as he must now, the three statutory factors in section 101(1A) which include 101(1A)(c):

whether the person took any other reasonable steps to prevent or avoid the doing of the act –

and remembering that his Honour has actually given careful attention to the proper construction of that and identified what the reasonable steps are set against the background of the extent of the power and the nature of the relationship and in the factual circumstance, as one can do no more, and deal with the factual circumstance before one.  As Moorhouse says on a couple of occasions, it is all going to depend upon the factual circumstances in which one finds oneself.  His Honour says, taking into account the robot notices, the way in which the notices arrived, the way in which the material was unexplained and the way in which it is not only dealing with these notices that would ultimately bear upon the ISP but the dealing with many other notices, no doubt, if their form was inconformity, that reasonable steps – his Honour is looking at reasonable steps against the background of that knowledge, and against all that factual background. 

So his Honour is not stepping apart, in our respectful submission, from the requirements of Moorhouse that when there is sufficient indifference, it all might add up to authorisation.  His Honour’s finding, after a careful review of the evidence, and despite a regrettable attitude that he refers to, using his words, dismissive and contumelious attitude for iiNet, nevertheless, there was no authorisation of the primary acts of infringement because of the complex background but because of the very way in which it was set up and the very way in which the information was – at the date his Honour is considering, the commencement of the proceeding – simply was not available to make a decision and to take a reasonable step, reasonable steps being either termination, warning, suspension or something else.

It is in that context, your Honour, that we submit that the applicants chose to run the case in that way.  They certainly, as they have said in submissions and as they reserve in ground 6 of their draft notice of appeal, we say they never specified a time that this knowledge matured appropriately, although everyone seems to have accepted that they make a claim at the beginning of the proceeding, but they say that, well, if it was not at the beginning of the proceeding, it should be through some knowledge gauged, learned, acquired during the course of the trial.  But the vice with that is that they never specified at what time either during the course of the trial this knowledge might have been achieved.

My learned friend even this morning before your Honours used the expression “at least as early as April 2009”.  He fixes on that date, we apprehend, because that is when some confidentiality restriction was lifted off the DtecNet report, but a shifting case of that kind was, we would submit, never pleaded or particularised properly, for example, the DtecNet report was never particularised as an element of knowledge that would have led to a different state of knowledge and the only sensible way to approach the case was to approach it, as their Honours did, what was the position when the proceeding was launched.

If I could return to see if I can persuade your Honours that the special leave questions do not themselves present any question of general importance or a question appropriate for special leave in this case.  Setting aside question 1 which really does ask your Honours to do no more than, as it were, drop in on authorisation, but against the background where all parties are agreed that Moorhouse is the binding authority, all parties are agreed that section 101(1A) adds factors certainly drawn from Moorhouse that must be applied as part of the process of an overall assessment of authorisation.  My learned friends say in their submissions in reply, yes, but Moorhouse was way back when the photocopier was in its infancy, and there has been so much technology ever since. 

In that circumstance, it is important to remind your Honours that section 101(1A) was brought in in avowedly technologically neutral terms and is there to deal with all technology. The courts have dealt repeatedly with technology and the intersection of that, and authorisation this Court looked at it in relation to Blank Tapes, certainly in a bleak way in Australian Tape Manufacturers.  The Federal Courts looked at it in relation to file downloading, both in this case and in Kazaa, Sharman v Universal Case, and in relation to website listings, which is the Cooper Case. 

Our learned friends say how this case demonstrates that the law has failed to keep up with technology.  The fact that the rights owner did not win on this occasion does not mean that the law has failed to keep up with technology.  It just means that the case presented itself in such a way that on this occasion, there was no authorisation.  Indeed, if one looks at special leave question 2, your Honours see, first of all, it and 3 are very tightly and, in a somewhat convoluted fashion, tailored to the very facts of this case, although couched in the terms of general principle.  We would say that that is itself an indicator that what their Honours are being asked about is to revisit the result in this case rather than a matter of general principle.  In particular, at the heart of special leave question 2 your Honours see it has broken out, effectively, if ones breaks it out, it effectively sets up this proposition.  Can an ISP:

which has the power to prevent acts of infringement and knows or has reason to suspect that such acts are likely to occur –

that is knowledge or suspicion –

but which determines not to take steps to prevent or avoid such acts regard of the information available –

that is no reasonable steps, and this is the position that our learned friends put –

communicates that position to persons engaged in those acts, nevertheless be held not to have the requisite knowledge or mental element?

Or one might accept perhaps that if that was the fact position, that might present the case of interest to your Honours, but the fact is that the essential element of special leave question 2, which is that the ISP, here iiNet, communicated its position that it would determine to take no steps to prevent the infringements to those engaged in the acts, that is to say, to its customers, is on such a flimsy basis, your Honour, as is revealed by the emanation of our learned friend’s submissions and ours in reply and theirs in reply, as to make the appeal have any prospects of success.  As long as the question of “communicates a position of encouragement to the people engaged in the acts”, it remains in the case, special leave question 2 could have no prospects of success.

The only serious piece of evidence that the applicants refer to in relation to this communication to the subscribers is one press release issued on the day it was sued in which it said that it viewed that the AFACT notices were not sufficient to require to disconnect its users’ services and went on to say it does not in any way support or encourage breaches of the law including copyright infringement and it had repeatedly passed on copyright holders’ complaints to law enforcement for investigation.  This was dealt with by Justice Cowdroy particularly at paragraph 478 when he pointed that to announce, and indeed a market listed company, to announce that it proposed to defend the proceedings, but it did not encourage copyright infringement, could not – for that to amount to an encouragement between infringement would be absurd.

Justice Nicolas thought that it could not possibly amount to encouraging copyright infringement.  Justice Jagot held it to the contrary, but her Honour, with respect, seems to have been under the impression that there was some evidence that that press release had actually found its way to the public’s attention.  There was no evidence at all that it had been published in any newspaper, there was no evidence at all that it had been picked up by an publication and so one pronouncement on the day of stating to the market, to the world, “We had been sued, but we are going to defend the case,” is the totality, in effect, of the evidence that we set about encouraging our subscribers to engage in the primary acts.

CRENNAN J:   But what do you say about paragraph 3 of the applicants’ reply to be found at page 550 of the application book?

MR COBDEN: Your Honours, section 101(1A) does, of course, as your Honour knows, involve the question of reasonable steps. That is what it says. Justice Emmett, in his paragraph 178 and following, looks closely at some matters of construction in relation to 101 which have not been considered before, indeed, as your Honours will see, he there looks at the curiosity, this is in 101(1A)(c), of referring to other reasonable steps when there are no previous reasonable steps referred to in the section, deals with that issue sensibly and, we would respectfully submit, I think we might have submitted something to the contrary, that his Honour sorts this out quite properly here, comes up with a proper construction, and then at paragraph 180 he reaches the construction:

The language of s 101(1A)(c) assumes that an alleged infringer might be in a position to take steps to prevent a relevant act, by reason of the matters referred to in s 101(1A)(a) and s 101(1A)(b). That is to say, the language assumes that an alleged infringer might exercise a power to prevent the doing of the act concerned and might exercise or enforce rights that exist by reason of a relationship existing between the alleged infringer and the person who does the act concerned.

Here is his Honour’s finding effectively –

The purpose of the inquiry called for by s 101(1A)(c) is to determine whether there are any steps, being reasonable steps, beyond exercising such a power or enforcing or exercising any rights arising from such a relationship.

Then his Honour, at paragraph 195, page 310 proceeds to echo his Honour’s own inquiry and identify steps that have been suggested either that should not be taken or that should be taken by iiNet on one side and copyright owners on the other and identifies whether, in accordance with his Honour’s test, if they are reasonable or unreasonable.  His Honour has not erected any kind of minimum circumstances test.  His Honour has taken statutory language, parsed it appropriately and applied it to the questions before him, in my respectful submission.

FRENCH CJ:   Yes, thank you, Mr Cobden.

MR COBDEN:   Thank you, your Honour.

FRENCH CJ:   We will not need to hear from you, Mr Catterns.  There will be a grant of special leave in this matter.  At this stage, Mr Catterns, I do not see that it is necessary to extend that grant to ground 3.  We want to ensure that the presentation, of course, brings out adequately the issues of principle.  There is, of course, a lot of factual matters surrounding all this.  That leads me to make a comment about the appeal books that will prepared.  I imagine there was a mass of documentation at first instance, so we would want specimens rather than everything reproduced, but that is no doubt something that, with common sense, can be sorted when the appeal book indexes are sorted.  I imagine this would be, what, a day to a day and a half?

MR CATTERNS:   Yes, your Honour, that is the authorisation case.  Our friends had a number of defences that they may wish to raise by way of contention, but that might make it two days plus, I fear.

FRENCH CJ:   Yes.  Justice Crennan suggests to me that you might consider looking again at ground 2 to raise the principle more clearly.

MR CATTERNS:   Thank you, your Honour.

FRENCH CJ:   Mr Cobden, you think two days might be a safer estimate?

MR COBDEN:   Yes, your Honour, I think so.

FRENCH CJ:   Yes, all right.  There will be a grant of special leave on that basis.  Thank you.

AT 10.02 AM THE MATTER WAS CONCLUDED