A stand-alone transformative use exception

10.31 This section considers a possible stand-alone transformative use exception. However, it is concerned only with the first of Samuelson’s three categories of transformative use, set out above. It is not concerned with quotation (discussed separately) or using copyright material in ways different in purpose from the original. Nor is it concerned with other uses, such as displaying ‘thumbnail’ images of copyright photographs in search engine results,^[32] or using digital copies of books to facilitate access for print-disabled persons,^[33] which have been held to be fair use under US law.

10.32 In this Inquiry, a range of reasons have been put forward for introducing a transformative use exception in Australia.^[34] These included that:

• a transformative use exception is needed to encourage cultural production and to legitimise current artistic practices;^[35]

• existing exceptions are not broad enough—for example, because not all transformative use is parodic, satirical or critical;^[36] and

• a transformative use exception, properly framed, would not prejudice the legitimate interests of copyright holders.^[37]

10.33 Stakeholders observed that transformative use is an important part of creative practice, and is likely to become increasingly so in the digital environment.^[38] In the words of one stakeholder, copyright law should:

allow certain fair transformative uses to be freely permitted to encourage creativity and provide Australian artists with the confidence to experiment and engage with different ways of using copyright material that don’t damage the commercial use of the original.^[39]

10.34 The Internet Industry Association observed that, in the ‘world of digital media, there is a wide range of content shared by millions of people, many of whom have the tools to record, edit and manipulate the content being consumed’. It submitted that it would be ‘an ordinary natural development to permit non-commercial transformative uses in order to enrich the way we communicate’.^[40] NSW Young Lawyers considered that a transformative use exception would ‘potentially reflect common consumer expectations and behaviours’ and, if carefully drafted, would ‘not be at odds with similar positions being explored internationally’.^[41]

10.35 Similarly, Google observed that, in an increasingly media-saturated age,

it is more and more natural for individuals to create ‘mashups’ or ‘remixes’ [of] the media around them for expressive purposes. While some of these creative acts would be permitted by existing fair dealing exceptions, many would not. As a result, transformative uses of existing material may be unduly hampered.^[42]

10.36 Those opposing a transformative use exception^[43] did so for a range of reasons, including on the basis that existing exceptions and licensing adequately cover legitimate cultural and artistic practices.^[44] A transformative use exception would, it was suggested:

• create complexity and uncertainty in relation to its coverage;^[45]

• prejudice the legitimate interests of copyright holders and interfere with the existing markets for derivative works;^[46]

• conflict with the three-step test in international law;^[47] and

• legitimise interference with the moral rights of creators;^[48]

10.37 Many stakeholders commented on complexities and uncertainties that would be involved in framing a transformative use exception. These difficulties, and in particular, those concerning distinctions between commercial and non-commercial uses of copyright material, are discussed in detail later in this chapter.

10.38 Some stakeholders questioned whether there are any significant ‘socially beneficial’ transformative uses of works that cannot be enabled by existing exceptions and available licensing solutions.^[49] For example, Copyright Agency/Viscopy observed that the current Australian copyright framework enables transformative uses in a number of ways, including where the use is: of part of the work, but not a substantial part; licensed; for the purposes of parody, satire, criticism, or review; for the purposes of reporting news; allowed by other exceptions or statutory licences.^[50]

10.39 The Arts Law Centre stated that, in its experience, there is no ‘demand within the artistic community for a greater freedom to engage in appropriation techniques’, and artists that use appropriation techniques can operate within existing fair dealing exceptions or get permission from the rights holders.^[51]

10.40 Australian Film and TV Bodies considered that the introduction of a transformative use exception has the capacity to ‘disrupt legitimate markets for “mash-ups”, “collages” and other related products incorporating protected works’.

For instance, Movieclips.com is a legitimate site where consumers can use clips from popular movies free of charge without resorting to movie piracy. In exchange for licensing film content free-of-charge, Movieclips advertises a site where consumers can rent or purchase the full length feature. It is also the case that online providers, such as YouTube, are working with the film industry to allow for authorised streaming and use of copyright material.^[52]

10.41 APRA/AMCOS stated that there is a ‘well established market for licensing transformative uses of musical works’ and that the licensing of sampling is a significant part of music publishers’ and composers’ income. It submitted that allowing transformative uses would compromise ‘existing commercial markets and significantly interfere with the value of copyright rights’.^[53]

10.42 A number of stakeholders^[54] suggested that any transformative use exception would be likely to conflict with the ‘three-step test’ under the Berne Convention and other international copyright conventions.^[55] However, the Australian Copyright Council stated that there may be ‘some scope for certain productive or “transformative” uses of copyright material by individuals to amount to a special case’ under the three-step test, based on the promotion of ‘innovation and social discourse, rather than a practical inability to regulate such activities’.^[56]

10.43 Finally, concerns about the possible adverse effects on the moral rights of creators were raised by some stakeholders.^[57] The Small Press Network, for example, suggested that, if copyright law were amended to allow transformative uses, ‘such uses should be introduced in the context of safe harbour or take down provisions’, so that authors (or copyright holders) would ‘have the option to request the take down of transformed works which breach the author’s right to maintain the integrity of the work’.^[58] APRA/AMCOS anticipated more litigation involving infringement of authors’ moral rights.^[59]

10.44 The Music Council of Australia commented that ‘the potential requirement for a consequential amendment of moral rights highlights the degree to which the existing rights of authors and copyright owners would have to be qualified for there to be an introduction of a general exception for transformative use’.^[60]

Framing a transformative use exception

10.45 A number of law reform and other bodies in Australia and overseas have recommended changes to copyright laws that would provide broader exceptions permitting transformative use of copyright materials. These generally apply only to non-commercial use, however defined.

10.46 In Australia, the Copyright Council Expert Group recommended, in 2011, an exception for transformative use of copyright works. The Group highlighted that this exception is particularly relevant in light of the rise of user-generated content. It suggested that an exception ‘permitting private, non-commercial, transformative uses would preserve the balance in copyright law between interests of creators and users, and preserve public respect for the relevance and integrity of copyright law’.^[61]

10.47 The Group argued that such an exception would legitimise a large number of practices that are already occurring, without harming copyright owner interests^[62]—in particular, creative uses on the internet characterised as being part of a new ‘remix’ culture.^[63]

10.48 The most important existing model of such an exception is in Canada, where the Copyright Modernization Act 2012 (Can) created a new exception for content generated by non-commercial users (the Canadian provision).^[64] The Canadian provision is entitled ‘Non-commercial User-generated Content’ and has also been referred to as the ‘UGC’ (user-generated content) or ‘mashup exception’,^[65] and as the ‘YouTube clause’.^[66]

10.49 The Canadian provision applies to the use, for non-commercial purposes, of a publicly available work in order to create a new work. In full, it states:

(1) It is not an infringement of copyright for an individual to use an existing work or other subject-matter or copy of one, which has been published or otherwise made available to the public, in the creation of a new work or other subject-matter in which copyright subsists and for the individual—or, with the individual’s authorization, a member of their household—to use the new work or other subject-matter or to authorize an intermediary to disseminate it, if

(a) the use of, or the authorization to disseminate, the new work or other subject-matter is done solely for non-commercial purposes;

(b) the source—and, if given in the source, the name of the author, performer, maker or broadcaster—of the existing work or other subject-matter or copy of it are mentioned, if it is reasonable in the circumstances to do so;

(c) the individual had reasonable grounds to believe that the existing work or other subject-matter or copy of it, as the case may be, was not infringing copyright; and

(d) the use of, or the authorization to disseminate, the new work or other subject-matter does not have a substantial adverse effect, financial or otherwise, on the exploitation or potential exploitation of the existing work or other subject-matter—or copy of it—or on an existing or potential market for it, including that the new work or other subject-matter is not a substitute for the existing one.

Defining ‘transformative’

10.50 Stakeholders in this Inquiry were concerned about the possible definition of ‘transformative’ for the purpose of any new exception. Screenrights, for example, stated that the term itself was ‘too broad and vague’, and that such an exception would have ‘a significant impact on the copyright owner’s market for derivative works, such as translations and adaptions (from a film to a game for example)’.^[67] The Law Council of Australia submitted that, by definition, a ‘transformative’ use cannot be an ‘adaptation’ within the present meaning of that term in the Copyright Act and rejected the idea that any use of a publicly available work in the creation of a new work should be considered transformative.^[68]

10.51 The Combined Newspapers and Magazines Copyright Committee observed that transformative uses can ‘potentially cover most of the exclusive rights of a copyright owner’.^[69] The Arts Law Centre noted that uncertainty in determining whether a specific reuse of an existing work is transformative ‘illustrates the difficulty of framing an exception to permit the materials produced by appropriation techniques’ to be more freely used.^[70]

10.52 The Copyright Council Expert Group stated that transformative implies something more than ‘just pasting two things together without any further modification’—for example, using a song as background to a home video posted to a video-sharing website is not ‘transformative’.^[71] Bowrey suggested that a ‘transformative work could be defined as a form of expression that, notwithstanding use of or reference to prior works in its creation, stands alone in terms of exhibiting its own artistic integrity and identity’.^[72] Similarly, the ABC suggested transformative use should cover ‘new works that combine pre-existing works in a way that indicates a level of curatorship or editorial judgement’.^[73]

10.53 To address concerns about uncertainty, NSW Young Lawyers suggested that, in framing an exception, a ‘list of circumstantial uses of a work that would be presumed to be transformative, in conjunction with a list of characteristics which may help identify transformative works’ would be useful.^[74]

10.54 Stakeholders commented on the concept of copyright material that is ‘publicly available’—or ‘available to the public’, in the words used in the Canadian provision. The Australian Football League stated that such a formulation was ‘illogical’ in suggesting, for example, that content available on free-to-air television would be ‘more open for (mis)use than audio-visual content available behind a pay wall’.^[75] Foxtel also submitted that the concept of a ‘publicly available work’ was problematic.

Rights holders rarely make their works freely available for unrestricted use. A concept of this nature may validate (incorrect) consumer perceptions that works accessible via digital technologies are freely available to consumers to use as they see fit, which is rarely the case.^[76]

10.55 There has been no judicial interpretation of the meaning and scope of the Canadian provision. However, it appears to require only that the use of an existing work is in the creation of a ‘new work’. In Australian law, providing a later work is not a ‘mere slavish copy’, it will constitute ‘an original work in its own right if the author has expended sufficient independent skill and labour in bringing it into material form’.^[77]

10.56 Using the concept of an original work in an Australian exception would provide a very low threshold for what amounts to transformative use. Framing any higher threshold, however, would raise the problem of how to distinguish transformative use from the making of an adaptation; and how to define the extent to which a transformative work needs to be original or creative.

10.57 Another related issue concerns subsequent uses of the transformative work. APRA/AMCOS submitted that, even if there were to be a transformative use exception, it could only apply to the original use:

All subsequent uses are, by definition, not themselves transformative. Thus the communication of a work that includes a transformative use of another work is itself not a transformative use and could not be the subject of the exception.^[78]

10.58 That is, a transformative use exception may permit the creation of a new work but not the communication of the work—for example, by making it available on a social networking website. However, it appears that the Canadian provision is intended to facilitate the communication of the new work, as discussed further below.

Commercial and non-commercial uses

10.59 A major complexity in considering a transformative use exception concerns the relevance of distinctions between commercial and non-commercial uses of copyright materials and how any such distinction should be framed. The commercial or non-commercial nature of uses needs to be considered in relation to both the original use and subsequent uses of the new work. A transformative use exception could be restricted to non-commercial uses, or be broader and extend to some commercial uses.

10.60 However, distinguishing between commercial and non-commercial uses of copyright material has become increasingly complex.^[79] Changes in the digital economy have ‘substantially increased the opportunities for the creation of user-generated “non-commercial” copyright materials’.^[80] For example, the Australian Competition and Consumer Commission (ACCC) reflected that ‘technology to splice or intersperse video with other content, such as TV clips, photos, and audio recordings is much more widely and cheaply available, and allows the creation of a wider range of productions by consumers for their private use’.^[81]

10.61 At the same time, however, the sharing and distribution of such material may involve commercial entities. While many users of Facebook communicate copyright material for non-commercial purposes, Facebook, as an advertising-funded business model, is dependent on its members producing these materials.^[82] Further, while some copyright material may be created without an intention to commercialise the work, digital platforms provide an opportunity for creators subsequently to commercialise their work. For example, users who post content on YouTube can apply to partner with YouTube to monetise that content both before and after the video has been posted.^[83]

10.62 John Wiley & Sons Inc observed that social media platforms ‘cannot be accurately described as commercial free zones, with the plethora of advertising and monetisation options available’. Rather, to create a transformative use exception would ‘prejudice copyright holders by withholding their ability to participate in this new area of the digital economy; whilst still allowing online social platforms, software companies and commercial users to benefit without restrictions’.^[84]

10.63 APRA/AMCOS submitted that ‘whatever the intentions of the maker of user generated content, once it is released to the public online it enters the commercial arena’ and strongly opposed the introduction of a new exception on this basis.^[85] Similarly, the Arts Law Centre stated that ‘social networking websites (such as Facebook) and video aggregation sites (such as YouTube) are intrinsically commercial operations’.^[86] Copyright Agency/Viscopy stated that, if a new exception were to be introduced,

it should be confined to private and domestic use, not apply where there is a licensing solution available to the user, be subject to the other fair dealing criteria in section 40(2), and not apply to the uploading to an online platform, or other forms of ‘sharing’.^[87]

10.64 The Australian Copyright Council submitted that, while there may be limited scope for an exception for ‘non-commercial or private and domestic’ transformative uses, ‘a licensing regime would need to apply in relation to commercial entities hosting that material online’.^[88] The Council stated that, alternatively, ‘it may be possible to address this issue through a license it or lose it model whereby uses are allowed unless there is a licence on offer’.^[89]

10.65 APRA/AMCOS opposed the suggestion that a licensing scheme ‘for the communication of copyright material created pursuant to a transformative use exception on a license it or lose it basis’ was necessary or desirable, as this would interfere with existing markets.^[90]

10.66 Other stakeholders considered that any transformative use exception should not be strictly limited to non-commercial use.^[91] For example, Nicolas Suzor stated that the scope of a transformative use exception ‘should be based primarily on demonstrable harm to the direct licensing interests of copyright owners—the core of copyright’. Accordingly, the exception should ‘clearly permit uses which are not substitutes for (or do not directly compete with) the copyright material’.^[92] The Internet Industry Association submitted that commercial transformative use should be permitted, at least where the use does not conflict with normal exploitation or unreasonably prejudice the legitimate interests of the owner of the copyright.^[93]

10.67 Google observed that the ‘Australian fair dealing tradition has long recognised that commercial uses of copyright materials can be fair’ and submitted that there is no ‘public policy justification for limiting an exception for transformative uses by automatically excluding any uses with a commercial purpose’.^[94]

10.68 The Canadian provision limits the scope of the exception to circumstances where the use of, or authorisation to disseminate, the new work is solely for non-commercial purposes; and the use, or authorisation to disseminate, does not have a substantial adverse effect on the exploitation of the existing work.

10.69 It is not entirely clear how this provision is intended to operate. However, it appears that, while the creator of the new work is prohibited from receiving a commercial benefit, an online platform such as YouTube may benefit from disseminating it—without remunerating the owners of copyright in either the original or the new work.

10.70 That is, while the authorisation to disseminate must be done solely for non-commercial purposes, actual dissemination can be for the commercial purposes of, for example, an internet intermediary, provided only that the authorisation itself does not have a substantial adverse effect on the exploitation of the existing work and the new work is not a substitute for the existing one.^[95]

10.71 This may not provide adequate protection for the owner of copyright in the original from the possible effects on that owner’s interests of dissemination of the new work by the internet intermediary. The application of the Canadian provision means that the creation and authorisation to disseminate the new work does not infringe copyright. Removing primary copyright infringement in this manner seems to rule out any possibility of liability on the part of the intermediary to the original copyright owner.

Fair use and transformative use

10.72 Many stakeholders who favoured some additional leeway for transformative use considered that such uses of copyright material should be covered by a fair use exception, rather than under a new specific exception.^[96] A fair use exception would be expected to allow individuals to use copyright materials more freely in transformative uses.

10.73 In some cases, this position was influenced by the problems involved in determining whether a transformative use should be considered commercial or non-commercial. For example, Google acknowledged that ‘a user’s commercial purpose would be relevant to whether a particular use should be permitted’, but considered that it would be more appropriate for the commerciality of the use to be considered ‘as part of a broader assessment of whether that use is fair’.^[97]

10.74 Similarly, the Copyright Advisory Group—Schools stated that fair use is the best model, rather than ‘an exception which arbitrarily excludes all commercial transformative uses of copyright materials from being considered to be fair’.^[98] The Australian Communications Consumer Action Network noted that:

There is little to be gained from having courts applying themselves to assessing ‘mash-ups’ or a ‘re-mix’ to ascertain whether they fall within a tightly-worded exception, when the real issue is whether the use is fair and the extent of the harm to the creator/owner.^[99]

10.75 The Australian Digital Alliance and Australian Libraries Copyright Committee considered that ‘adopting a flexible fair use-style exception, rather than attempting to prescribe the scope of a purpose-based transformative exception’ would better cover the range of current transformative uses.^[100] Robert Xavier submitted:

It would be best to use transformative use in the same way as it is used by US copyright law, where it is a legal concept, with a special meaning, that can form part of the basis for fair use. Repurposing the concept for a separate exception for derivative works would just be confusing.^[101]

Rejecting a stand-alone transformative use exception

10.76 In the ALRC’s view, there is no case for introducing a stand-alone transformative use exception. The reasons for rejecting a transformative use exception are that:

• transformative uses of copyright material would be better considered under a fair use exception where a range of factors can be balanced in determining whether a particular use is permitted; and

• framing such an exception presents numerous problems, notably in how to define transformative use, and in determining the extent to which commercial uses of copyright materials should be covered.

10.77 Transformative uses of copyright material would be better considered under the fair use exception, rather than under a specific exception, in determining whether copyright is infringed.

10.78 As under US fair use doctrine, some concept of transformative use can be expected to emerge from the application of the fairness factors under the ALRC’s proposed fair use exception. However, the issue should be whether a use is fair, given the extent of any interference with the interests of the copyright holder, rather than whether use falls within a narrowly drafted specific exception.

10.79 Under fair use, the extent to which a use is transformative, in view of the purpose and character of the use, and the commercial aspects of a use—that is, the effect of the use upon the potential market for, or value of, the copyright material—can be considered as part of a broader inquiry into fairness.

10.80 The ALRC does not propose that any new specific exception should be introduced, even if a fair use exception is not enacted, or that transformative use be included as an illustrative purpose in the fair use exception.

10.81 There are many difficulties in framing a stand-alone transformative use exception. These problems include how to distinguish transformative use from the making of an adaptation; and the extent to which a transformative work needs to be original or creative.

10.82 Transformative use would need to be distinguished from the making of an adaptation, which is the subject of a specific exclusive right under the Copyright Act, in the case of original literary, dramatic and musical works.^[102] An adaptation is a new and original work in its own right. Some dividing line would need to be drawn between an adaptation, which should be the subject of a licence, and a work that is transformative.

10.83 The Canadian provision requires only the creation of a ‘new work’. Such a low threshold would have a serious impact on the principle of acknowledging and respecting authorship and creation (Principle 1).^[103] On the other hand, drafting some new threshold of originality would be problematic—for example, if two works are simply pasted together without any further modification, this should not constitute a transformative work—but what else should be required? Any new standard of originality would likely be novel, in Australian law and internationally, and produce a level of uncertainty.

10.84 For example, where only part of copyright material is used, as in the case of sampling, the fact that this is incorporated in a new work will not prevent the use from being an infringement because ‘substantial part’ is assessed in relation to the copyright material used, rather than the new work in which the sample has been incorporated. Arguably, it would be a radical step to propose an exception that might mean that the substantial part requirement is to be overridden in the case of transformative use.

10.85 Limiting any transformative use exception to non-commercial purposes is problematic because the boundary between non-commercial and commercial purposes is not clear given ‘a digital environment that monetises social relations, friendships and social interactions’.^[104] In particular, a creator may create a transformative work for a non-commercial purpose, but later opt to receive payments from advertising associated with a website, and many online business models now rely on views of user-generated content to make revenue.

10.86 An exception that allows those who disseminate works created for a non-commercial purpose to profit may, in the words of one stakeholder, ‘prejudice copyright holders by withholding their ability to participate in this new area of the digital economy; whilst still allowing online social platforms, software companies and commercial users to benefit without restrictions’.^[105] Such an exception would also cut across the way rights holders currently work with internet platforms to manage copyright content uploaded by users. For example, in the case of YouTube, rights holders may choose to ‘monetize, block or track’ the use of their content.^[106]