Arguments against fair use in Australia

4.57 There were four main arguments advanced against fair use in submissions, that it:

• is unnecessary and no case is made out for it;
• would create uncertainty and expense;
• originated in a different legal environment; and
• may not comply with the three-step test.

Fair use is unnecessary and no case is made out for it

4.58 First, a number of rights holder interests submitted that there is no need for a fair use exception to be introduced in Australia because the existing copyright system is effective. This argument was based upon views that: the existing exceptions are adequate and appropriate;^[84] the common law was capable of ‘addressing the needs of promoting innovation’;^[85] and business models, including licensing solutions, have been developed, or are evolving, to meet legitimate consumer expectations.^[86]

4.59 The Combined Newspapers and Magazines Copyright Committee submitted that ‘the current fair dealing exceptions sufficiently protect the public interest’.^[87] The Australian Film and TV Bodies were of the view that:

The existing legislative framework (perhaps with some simplification and modernisation of its terminology) is an adequate and appropriate way forward for Australia in the digital age. … The miscellaneous exceptions reflect the principled and balanced consensus between the various stakeholders, are largely technologically neutral and benefit from being nuanced and tailored to deal with specific situations.^[88]

4.60 Copyright Agency/Viscopy considered that it was also helpful to look at the test for infringement. It considered that some of the situations for which users were wanting a flexible exception may not actually constitute infringement at all because the part used would not constitute a ‘substantial part’.^[89]

4.61 BSA—The Software Alliance (BSA) submitted that it ‘has not been shown that the Australian common law system is incapable of addressing the needs of promoting innovation through case law development’ and gave the example of implied licences.^[90]

4.62 The Interactive Games and Entertainment Association Ltd submitted that the games industry had already developed and introduced innovative business models under the existing regime, which meant that consumers were receiving many of the benefits that might flow from a fair use exception.^[91]

4.63 Secondly, a number of stakeholders asserted that there is no evidence that fair use is necessary and disagreed with other stakeholders arguing in favour of fair use.^[92] For example, ARIA contested the view that ‘a closed list approach restricts new uses and acts as a disincentive for technological development’, and submitted that it misrepresented the situation to speak of a ‘closed’ list, as s 200AB constitutes a flexible exception.^[93] Other stakeholders considered that fair use may not actually benefit users.^[94] For example, Screenrights expressed concern about a ‘chilling effect’ where the need to obtain legal advice, together with fears over the possibility of being subject to expensive litigation, may deter the use of copyright material.^[95]

4.64 The argument that fair use would assist innovation was criticised by stakeholders in a number of submissions,^[96] including on the basis that:

• there was no ‘evidence’ that innovation would be assisted^[97]—rather, the technology sector was operating,^[98] indeed ‘expanding’,^[99] in Australia under the existing regime;

• the Hargreaves Review was said to have rejected the argument, noting that ‘other factors such as attitudes towards business risk and investor culture were more important’;^[100] and

• the introduction of a fair use exception in Australia may actually provide a less helpful environment for business,^[101] including start ups.^[102]

4.65 Foxtel submitted that ‘companies like Google and Facebook have very successfully established their Australian operations within the bounds of the existing regime’.^[103]

4.66 Some stakeholders, who considered that rights holders would be harmed, viewed the balance in the copyright system differently from those stakeholders in favour of fair use.^[104] APRA/AMCOS were concerned that ‘an open-ended exception would result in the balance between the interests of copyright owners and the interests of copyright users being too heavily in favour of users’.^[105] Others wrote of their concern that: fair use could be ‘stretched too far to justify activity that is quite harmful to a robust copyright system’;^[106] the ensuing ‘detriment to the public interest’^[107] (bearing in mind that the public interest includes rights holders’ interests); and the likely creation of ‘a new class of people not satisfied with the state of affairs’.^[108]

4.67 TVB (Australia) described the present system as representing ‘a complete balance of the various stakeholders’ interests’.^[109] In Foxtel’s view, ‘Australian copyright law sets a fair and finely struck balance between the rights holders and those of end users’.^[110]

4.68 The Australian Film and TV Bodies submitted that economic evidence ‘suggests that the introduction of fair use has a harmful impact on content-producing industries’.^[111] Foxtel submitted it was necessary for ‘clear and indisputable evidence’ in order to justify upsetting the existing balance.^[112] Another stakeholder submitted that a fair use exception could not be enacted until there was complete data on the impact on all stakeholders concerned; an exercise described as ‘almost impossible’.^[113]

4.69 Some submissions specifically mentioned the likely detriment to existing licensing arrangements.^[114] The Motion Picture Association of America (MPAA) submitted that:

it is almost inevitable that some licensees would be compelled to re-examine whether they any longer needed to obtain a licence for particular uses, or whether they could instead rely upon the expanded exception resulting from the new fair use provision. The likelihood that this would destabilize settled markets for the licensing of copyrighted material seems high.^[115]

Fair use would create uncertainty and expense

4.70 Many of those opposed to fair use were concerned that a lack of clear and precise rules would result in uncertainty about what the law is,^[116] and possibly misunderstanding and misapplication as well.

4.71 One reason given in some submissions as to why fair use is undesirable is because of the view that the scope of rights should be determined by the legislature. Some stakeholders were concerned that a fair use exception would mean that the judiciary, not the legislature, would be determining the scope of copyright.^[117] Some, like APRA/AMCOS, saw this as ‘an abrogation of parliament’s role in determining important public matters’.^[118] Others were concerned about the judiciary having such a role. The BSA submitted that ‘the Courts are not well equipped for legislating broad economic and policy issues of this type’,^[119] while NSW Young Lawyers was concerned that copyright law would be placed ‘too much in the hands of the judiciary and judges would have an undesirable level of discretion in individual cases, at least in the early years’.^[120]

4.72 A group of US academics characterised US law on fair use as a ‘moving target’ and observed that ‘[i]t can often take a long time to get final fair use determinations, with lower courts being reversed with regularity’.^[121]

4.73 Some submitted that such an environment of legal uncertainty would constitute ‘an obstacle both to use and creation’.^[122]

4.74 There was a view that there would be no precedents, at least for a time after fair use was introduced;^[123] and that it would take many years to develop case law —especially given that Australia is not as populous or litigious a society as the US;^[124] and that all of the existing jurisprudence in respect to fair dealing would be open to re-interpretation.^[125]

4.75 A number of stakeholders were concerned that the ‘uncertainty’ of fair use would be likely to cause higher transaction costs.^[126] There was a view that it would make things harder for both users and rights holders of copyright material^[127] as a result of an increased need for legal advice and litigation.^[128] There were concerns that rights holders would face increased costs in litigation—including recourse to appeal courts^[129]—in order to attain certainty about the scope of the exception^[130] and to enforce their rights.^[131] In ARIA’s view, the uncertainty of the law would encourage users, including defendants, ‘to assert even an implausible fair use defense in the hope of avoiding liability or at least extracting favourable settlement terms’.^[132]

4.76 Tabcorp submitted that the introduction of fair use into Australia would ‘increase operating costs and add more red tape and administrative burden to some of the most innovative and dynamic industries in Australia’.^[133] Similarly, the Association of Learned and Professional Society Publishers was concerned that a fair use exception would have a negative impact on small and medium-sized publishers—who ‘make up the vast majority of companies in the publishing industry’—and, in turn, this ‘could have serious implications for the creative digital economy in Australia’.^[134]

4.77 The need to litigate, to determine what constitutes fair use, was also seen as increasing costs to the judicial system.^[135]

4.78 Particular concerns were expressed with respect to artists,^[136] musicians,^[137] filmmakers,^[138] and literary creators,^[139] some of whom may be affected on both sides of their practice (being both creators and users of copyright material), and in respect of individuals and others who do not have sufficiently ‘deep pockets’ for litigation.^[140]

4.79 The Arts Law Centre of Australia submitted that its clients ‘are usually low income earners who are unlikely to be able to afford to bring or defend a court action to determine if a use is fair or not’.^[141] The Music Council of Australia submitted that most musicians and composers would not be able to afford to litigate matters and so it feared that ‘over time, their interests could be marginalised’.^[142] The Australian Society of Authors stated that copyright litigation ‘is already mostly beyond the resources of literary creators’.^[143]

4.80 AMPAL submitted that a fair use exception is ‘really only feasible for large, well resourced companies’.^[144] Pearson Australia/Penguin made a similar argument, submitting that in the US the average cost for each opposing party in a fair use case is US $1 million, ‘rendering such recourse inaccessible in practice to all but the richest entities’.^[145]

Fair use originated in a different legal environment

4.81 A number of submissions argued that because fair use developed in the US it would be difficult to transplant the concept to Australia as the legal environments are very different.^[146]

4.82 Specific differences identified included that the US has:

• a Bill of Rights which expressly protects freedom of speech;^[147]
• express articulation in the US Constitution of the purpose of copyright;^[148]
• statutory damages for copyright infringement;^[149]
• a higher volume of litigation than Australia generally;^[150] and
• extensive case law on fair use.^[151]

4.83 With respect to the final point, some submissions noted that the fair use exception in the US is based on over 170 years of case law,^[152] with 35 of those years being years when the codified version of the doctrine has been interpreted.^[153] The MPAA noted these precedents provide ‘content to the fair use framework in particular factual settings’ and enable ‘counsel, and the companies and individuals they advise, to rely upon the doctrine’.^[154] Some stakeholders submitted that this canon of case law ‘could not be lifted and dropped wholesale into Australian jurisprudence’,^[155] either because it would be inappropriate^[156] to do so or because ‘[i]t cannot be assumed the Australian Courts will follow US court decisions’,^[157] especially in light of different constitutional guidance.^[158]

Fair use may not comply with the three-step test

4.84 Despite the fact that the US has had a fair use exception for 35 years, an often-repeated argument against the introduction of fair use is that it may,^[159] or would,^[160] not comply with the three-step test under international copyright law.

4.85 Article 9(2) of the Berne Convention, provides:

It shall be a matter for legislation in the countries of the Union to permit the reproduction of such works in certain special cases, provided that such reproduction does not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author.^[161]

4.86 The three-step test has become the international standard for assessing the permissibility of copyright exceptions generally. For example, in 1994 the three-step test was incorporated into the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).^[162] With respect to copyright, it now applies to exceptions to an author’s exclusive right of reproduction and to all economic rights under copyright excluding moral rights and the so-called related or neighbouring rights. Another obligation which should be noted is theAUSFTA, which requires Australia to employ the three-step test for exceptions to all exclusive rights of the copyright owner.^[163]

4.87 As its name suggests, the test consists of three cumulative steps or conditions. Limitations or exceptions to exclusive rights must be confined to

(1) ‘certain special cases’;

(2) which do ‘not conflict with a normal exploitation’ of the copyright material;^[164] and

(3) do ‘not unreasonably prejudice the legitimate interests’ of the rights holder.^[165]

4.88 The precise meaning of each limb or step of the test is far from certain. For example, there has been only one World Trade Organization (WTO) Panel decision on the three-step test as it relates to copyright under TRIPs.^[166] That decision took a limited, ‘dictionary approach’ to the interpretation of the first limb of the three-step test, seeing it as ‘requiring some clear definition of the contours of an exception’.^[167]

4.89 Many of the submissions expounding the view that fair use may not comply with the three-step test specified the first step of the test as being the part that would not be met.^[168] Some submissions also considered that the second^[169] and third steps^[170] may also not be met.

4.90 The first step of the test uses the phrase ‘certain special cases’ and a number of submissions referred to Professor Sam Ricketson’s commentary that this requires an exception to be ‘clearly defined’ and ‘narrow in scope and reach’.^[171] Some submissions argued that a broad, flexible exception such as fair use would not meet these requirements. For example, Australian Film and TV Bodies submitted that ‘[e]xceptions based on notions of “fairness” or “reasonableness”, in the absence of sufficiently interpretative jurisprudence are not sufficiently clear or defined to satisfy that test’.^[172] Similarly, APRA/AMCOS argued that fair use is ‘too broad to be described as being confined to certain special cases—the cases are uncertain by definition’.^[173]

4.91 One submission referred to the ‘considerable body’ of international academic opinion that fair use is inconsistent with the three-step test.^[174] Another commented: ‘although the US fair use regime has never been challenged on the grounds of non-compliance with the three-step test, the issue of its compliance with the test is not without controversy’.^[175]