Current regulatory models

3.70 Reform should promote the development of a policy and regulatory framework that is adaptive and efficient. The costs and benefits to the community should be taken into account in formulating options for reform. The Australian Government Best Practice Regulation Handbook requires law reform to ‘deliver effective and efficient regulation—regulation that is effective in addressing an identified problem and efficient in terms of maximising the benefits to the community, taking account of the costs’.^[118]

3.71 A number of stakeholders pointed to uncertainty in applying current copyright law, due to the complexity or inadequacy of current legislation that deters innovation and promotes risk-averse behaviour.^[119] For example, State Records NSW advised that it is constrained in ‘exploring new digital means of access to government archives due to uncertainty in how to apply the many exceptions provided in the Copyright Act’.^[120]

3.72 A number of submissions questioned whether the current legal and institutional structures in copyright law offer an effective, efficient and functional model for dealing with digital content copyright issues, and what alternatives might apply. For example, the ACMA pointed to the need for ‘a mix of regulatory strategies’ for dealing with digital content issues in any revised copyright framework. These include: direct regulation with an emphasis on compliance and enforcement of rights and obligations; industry co-regulation and self-regulation; technology applications to assist with content management; and cultural and behavioural changes needed to promote and protect access to content.^[121]

3.73 One theme that emerged from submissions was the desirability of ‘principles- based’ drafting of the Act,^[122] with details and examples supplied by regulations to the Act, supplemented by industry codes, guides to best practice and the like. ^[123]

3.74 An example of a current legislative approach incorporating principles-based drafting can be seen in provisions relating to unconscionability in the Competition and Consumer Legislation Act 2010 (Cth), where there is a list of factors for a court to weigh up.^[124] In the copyright context, the ALRC is proposing a fair use model incorporating a list of the purposes and the fairness factors to be considered in an assessment as to whether any use of copyright material is ‘fair’.^[125]

3.75 With respect to developing an understanding of legislative principles, the Arts Law Centre of Australia points to the usefulness of Fair Use Codes and Codes of Best Practice guidelines developed in the US by Peter Jaszi and Pat Aufderheide, designed to educate users on fulfilling the requirements of copyright legislation.^[126] A number of submissions commented on the possible uses of guidelines agreed between owners and users to find ‘common ground’ in terms of practices relating to copyright material.^[127]

3.76 The Department of Science, Information Technology, Innovation and the Arts (Qld) pointed out the many ‘legally ambiguous’ areas in the Act at present, and stated that ‘the business community would benefit from greater clarity in relation to copyright and acceptable practices, and the formulation of clear guiding principles’.^[128]

3.77 In a similar vein, News Ltd pointed to the undesirability of legislation defining too closely what ‘reporting the news’ is, and also what volume of material should be included in the concept. Rather, negotiations between news organisations and sports organisations, with the ACCC assisting, have led to a code of practice for sports news reporting.^[129]

3.78 Development of an industry code is recommended by the Book Industry Strategy Group Report to be adopted ‘in accordance with the legislative framework’ in order to combat book piracy, with the government acting as an intermediary in negotiations. In responding to the Report the Government noted that a number of meetings had already taken place with the Attorney-General’s Department and industry to find an acceptable way forward.^[130] The ALRC is aware that talks relating to ISP activities have faltered following the iiNet case^[131] but raises the possibility that agreements and industry codes relating to ‘purposes’ in the Copyright Act could be provided for in the legislation.

3.79 Although these ‘inter-industry compacts’ do not always proceed as quickly as some parties would like, ‘privately negotiated arrangements will continue to emerge as new technologies make access, re-use, and distribution of content an inherent part of our culture and economy’.^[132]

3.80 Stakeholders also noted that this Inquiry is not dealing with the whole picture of reform, and piecemeal amendment ‘may not reflect the policy underlying the copyright regime’.^[133] Furthermore, copyright is just one aspect of digital media markets which are themselves ‘a construction of the interplay of media, telecommunications and copyright law’.^[134] In this context and ‘in accordance with historical jurisprudential tradition, the Copyright Act should be confined to expressing legal principles that affect us all, in a manner that assists in generating the required normative framework that allows it to be broadly understood’.^[135] The statute cannot alone achieve clarity and certainty without the capacity to capture relevant policy and context factors.

3.81 The need for an ‘appropriate regulatory model to support copyright businesses’ innovation and sustainable growth’ is referred to in economic research prepared for the Australian Copyright Council.^[136] The point about having an appropriate regulatory environment to encourage innovation in technology start-up companies is also made in another PwC report.^[137]

3.82 Stakeholders in this Inquiry have differing views as to what an ‘appropriate regulatory environment’ is, and many stress the importance of not destabilising ‘current existing legal structures on which copyright holders and their licensees rely as the basis for their business models’.^[138]

3.83 The Australian Copyright Council’s submission discusses the broader debate concerning legal rules and standards in the context of copyright law, specifically in the context of critiquing the problems with a flexible exception such as fair use, which is one specific aspect of this Inquiry. ^[139] The Australian Copyright Council noted that ‘an appropriate regulatory model’ needs to operate in ‘the broader copyright ecosystem’ which includes some matters not within the Terms of Reference and in particular, supports the Copyright Agency/Viscopy observation concerning a regulatory environment which protects ‘the principal incentive to create new content’ and ‘the opportunity to determine how that content will be used by others’.^[140]

3.84 The Australian Copyright Council seemed to cast doubt on a ‘standards’ approach on the basis that a ‘rules’ approach is more appropriate for Australia, given the different constitutional and legal tradition in which Australian and US jurisdictions operate.^[141] Uncertainty of application, lack of precedent and the existence of satisfactory exceptions are also reasons given for not recommending a fair use exception in Australian law, views shared by a number of stakeholders. However, alternative views expressing the desirability of introducing fair use into Australian copyright law have been expressed by a large number of other stakeholders.

3.85 In the educational context, the report commissioned by Screenrights from the Kernochan Center for Law, Media and the Arts of Columbia University^[142] usefully reviews the principal US copyright exceptions relevant to educational uses and comments on the possibility for Australia of such a provision. An important aspect of the fair use environment in the US is the development of guidelines as to how it should operate. Universities Australia submitted that in determining whether a particular use amounts to fair use/fair dealing or requires a licence ‘universities would adopt guidelines or similar instructions to staff that assist in making such decisions’ as in comparable jurisdictions.^[143]

3.86 An important aspect of the discussion in the Kernochan Center report concerns the divergence of views on fair use and the length of time disputes take to resolve, despite the development of various sets of guidelines. However, the Standing Council on School Education and Early Childhood explicitly referred to the time and resources taken up dealing with the inefficiencies of the current educational copyright licensing environment.^[144] The Council also stated that it is not correct to assume that the current environment creates greater certainty than an open-ended flexible exception.^[145]

3.87 The process of developing an understanding about how fair use might operate in response to the ‘changing technological frontier’ is discussed in the Kernochan Center report which refers to the Conference on Fair Use convened under the Clinton Administration,^[146] the ‘best practice’ codes referred to above^[147] and the attempts of various universities and schools to interpret fair use for their institutions.^[148]

3.88 While the process of producing codes and guidelines can be summarised as producing a ‘mixed bag’ of outcomes^[149] the ALRC asks whether the risks of uncertainty documented by stakeholders are outweighed by the advantages of the reforms proposed in this Discussion Paper—albeit that change requires some adaptation:

The broader question implicated by these issues—whether fair use is a sound regulatory tool—is one that should certainly engage local policy makers in their deliberations as to the virtues of fair use.^[150]

3.89 In May 2013, Productivity Commission chair Mr Peter Harris called for a policy-making structure that reinforces the expectation of change:

a mechanism under which continuous reform is invited … An integrated approach, where the voice of any one affected sector or region may not dominate; and where the breadth of necessary changes and the combined potential for economy-wide gains can be clearly set against any costs … a generic way forward. But clearly there is scope in this idea for a regular, wide-ranging review of productivity-oriented reforms … This is not a concept that can be created overnight.^[151]

3.90 The ACCC endorsed a regulatory framework in which negotiating an understanding of acceptable uses of copyright material may be more effective and efficient in reducing inefficiencies than a strict enforcement regime which potentially inhibits innovation:

where the parameters can be set so that the rights of copyright holders are able to be preserved and protected commensurate with the objectives of providing incentives to create copyright material … balanced against the potential for innovative business practices to meet and develop consumer expectations and practices.

3.91 Creation of this understanding can come through industry guidelines matched with consumer expectations. The ACCC also pointed to its role in drafting guidelines to which the Copyright Tribunal is required to have regard in determining licence conditions that are the subject of determinations by the Copyright Tribunal.^[152]

3.92 The ALRC proposes that in the digital environment a standard—a general rule based on principle—provides the flexibility to respond to technological change in a principled manner using criteria worked out between parties or ultimately a court.^[153] This Discussion Paper canvasses views for and against the introduction of ‘fair use’ and proposes a particular model for a fair use exception in Chapter 4.