A draft report by the Australian Productivity Commission (APC) concludes that the current copyright law fails to properly balance the interests of copyright holders and users. It warns that “Australia’s copyright arrangements are weighed too heavily in favour of copyright owners, to the detriment of the long-term interests of both consumers and intermediate users.” The APC makes recommends changes to the law to address the imbalance, including “the introduction of a broad, principles-based fair use exception.” This follows the 2013 Australian Law Reform Commission report on Copyright in the Digital Economy, which also recommended that Australia amend its copyright law to include fair use.
The formal recommendation for fair use in the APC is:
DRAFT RECOMMENDATION 5.3
The Australian Government should amend the Copyright Act 1968 (Cth) (Copyright Act) to replace the current fair dealing exceptions with a broad exception for fair use.
The new exception should contain a clause outlining that the objective of the exception is to ensure Australia’s copyright system targets only those circumstances where infringement would undermine the ordinary exploitation of a work at the time of the infringement. The Copyright Act should also make clear that the exception does not preclude use of copyright material by third parties on behalf of users.
The exception should be open ended, and assessment of whether a use of copyright material is fair should be based on a list of factors, including:
the effect of the use on the market for the copyright protected work at the time of the use
the amount, substantiality or proportion of the work used, and the degree of transformation applied to the work
the commercial availability of the work at the time of the infringement
the purpose and character of the use, including whether the use is commercial or private use.
The Copyright Act should also specify a non–exhaustive list of illustrative exceptions, drawing on those proposed by the Australian Law Reform Commission.
The accompanying Explanatory Memorandum should provide guidance on the application of the above factors.
Currently, Australia’s Copyright Act includes fair dealing provisions that allow unauthorized use of copyrighted materials for research or study, criticism or review, parody or satire, reporting the news, and for giving legal advice. The Commission warns that “these exceptions are too narrow and prescriptive, do not reflect the way people actually consume and use content in the digital world, and are insufficiently flexible to account for new legitimate uses of copyright material.” Furthermore, the only way to expand the categories of uses considered “fair” under the law is through legislative change.
Under fair use, courts determine whether an unauthorized use is fair based on a well-known factor test, regardless of whether a nation’s copyright law has listed the use as explicitly permitted. (The factors are the purpose and character of the use, the nature of the copyrighted work, the amount and substantial of the portion used, and the effect of the use upon the potential market for the work. (35 USC 107))
The APC report presents a number of ways that fair use can benefit the Australian economy:
Greater economic efficiency
Landes and Posner (2003) note that the presence of high transaction costs will, in many cases, be a barrier to users efficiently bargaining with rights holders. In cases where the use of copyright material is relatively minor or trivial, the willingness of consumers to pay for small amounts of content will likely be low. If there are many users, the transaction costs of bargaining will be high, and as a result, many transactions that might otherwise be profitable do not occur, reducing the wellbeing of both rights holders and consumers.
Efficiency is also reduced in cases where a rights holder refuses to licence a work at any price. This can be the case with parodies and satires that draw on previous works. Both Yen (1991) and Landes and Posner (2003) note that while society as a whole values the production of new satires and parodies based on existing works, given a parody makes fun of an original work, it is unlikely many rights holders would licence their works for such a purpose. An exception overcomes this ‘hold up’ problem, with the benefits from allowing parodies and satires likely to exceed the costs to rights holders. [p.143-144]
Removing impediments to industry development
One key difference between fair dealing and fair use is the flexibility the latter offers new and innovative copyright-dependent industries, provided those uses meet the fairness factors. Courts can determine if new uses of copyright-protected material are fair, avoiding the need for industries to wait for legislative change. The United States, where fair use has operated for decades, has long been recognised as a significant global innovator, and many innovations Australians use and rely on today, such as Internet search engines, were developed under a fair use exception. Google Australia highlighted the role copyright now plays in the Internet era:
“Innovation is dynamic, not static. In contrast, Australia’s copyright exceptions are ‘static’ confined to specific purposes and technologies, and not capable of adapting to changes in technologies, consumer uses or business practices. Australia’s copyright system arguably prohibits critical technologies and innovative activities from being conducted in Australia, such as: basic Internet functions such as system level caching to provide a search engine; cloud computing; creative and transformative works, such as mashups; medical and scientific research, such as text and data mining; various common consumer uses of copyright materials.” [p.145-146]
The APC also responded to some of the warnings offered by opponents of the move to introduce fair use in Australia. Many were offered in a report for copyright industry associations prepared by PricewaterhouseCooper which purported to measure the costs and benefits of a switch to fair use in Australia, and suggested that the policy change could cost the country $1.3 billion a year. However, the report based its assumptions of large costs on unsupported assumptions of what would happen under fair use (i.e.- the disappearance of collecting societies, which has not happened in countries that have fair use) and case studies not necessarily applicable to Australia (i.e.- the education sector in Canada, where a dispute over licensing fees lowered publishers’ incomes). On the benefits side of its cost-benefit analysis, it made a half-hearted-at-best attempt to find any benefits, ignoring a large body of academic literature on the subject. For more on the PWC report, see the full academic response by Profs. Peter Jaszi, Michael Carroll, Sean Flynn, Kimberlee Weatherall, and Arial Katz, available here.
The criticisms addressed by APC are that fair use would be too uncertain, that the current law is flexible enough, that other countries have rejected fair use, and that ‘the Canadian case’ demonstrates the harm of fair use. Below are excerpts from APC’s response to each.
Response to concerns that fair use is inherently uncertain
In the Commission’s view, legal uncertainty is not a compelling reason to eschew a fair use exception in Australia, nor is legal certainty desirable in and of itself. Courts interpret the application of legislative principles to new cases all the time, updating case law when the circumstances warrant it. To say otherwise would be to argue that all laws should be prescriptive — a doctrine that is inconsistent with many laws across all social and economic arenas, and completely inimical to the common law. In addition, even under a fair use regime it is possible to specify a non-exhaustive list of illustrative purposes which provides strong guidance to parties.
Weatherall, Alexander and Handler (sub. 99) note that the drafting in Australia’s current Copyright Act is already far from certain, and highlighted a range of inconsistencies giving rise to legal uncertainty including differences in the way works and subject matter other than works are treated, issues with moral rights, needlessly complicated parallel importation restrictions and a lack of clarity around protection for performers.Moreover, it is unclear that fair use, as applied in the United States, is as uncertain as claimed. In its submission, the National Copyright Unit, COAG Education Council highlighted the similarities between the US’ fair use ‘fairness factors’ and the fairness factors contained within Australia’s exception for fair dealing for research or study (sub. 97. pp. 43–45), suggesting
Australian courts already apply principles to those contained within fair use. And in their submission to the ALRC inquiry, Hinze, Jaszi and Sag (ALRC 2014, sub. 483) noted the application of fair use in the United States was less uncertain than other participants had alleged. [p.147-148]
Response to statements that current law is sufficiently flexible
Others argued that Australia’s copyright regime is already flexible, pointing to the previous amendments to introduce new exceptions. For example, the Australian Screen Association, commenting on previous changes to Australia’s copyright system noted: “The changes have enhanced the protections for copyright owners and introduced a range of new exceptions to balance the interests with those of copyright users (sub. 43, p. 13).”
However, previous amendments to the Copyright Act to introduce new amendments have largely sought to codify existing practices (such as ‘allowing’ the existing widespread practices of private time- and format-shifting), or to remove unintended overreach from the copyright system (such as allowing temporary copies and website caching). To the Commission’s knowledge, copyright exceptions have never been expanded to counterbalance the increase in the scope or duration of protection for rights holders — changes themselves that were never subject to rigorous cost-benefit analysis.
Indeed, the Joint Standing Committee on Treaties report into the Australia-US Free Trade Agreement specifically recommended the adoption of a US-style fair use exception because of concerns about adopting the US’ level of copyright protection without the US’ counterbalances.
Response to the fact that other countries have rejected fair use
Notwithstanding the position taken by the Hargreaves Review, countries other than just the UK have also considered or adopted fair use. For example, the Philippines adopted a US-style exception in 1998, Singapore in 2006 and the Republic of Korea in 2012. And in 2007, Israel introduced a new Copyright Act, replacing its previous exception for fair dealing with a broader fair use exception. While the new Copyright Act gives examples of some permitted fair use purposes, the Israeli approach is more permissive again, allowing the Minister of Justice to prescribe additional fair uses in regulation.
Response to arguments that the Canadian case demonstrates the dangers of fair use
The Australian Digital Alliance responded to the [PWC report] outlining a number of concerns with the findings, including … reliance on Canada as the base case for expected changes.
Indeed, other participants argued the Canadian case was not applicable to Australia, and the Canadian educational books sector was already struggling by 2012, and a range of other factors have contributed to the decline in revenue for the sector, limiting the lessons that can be drawn from the Canadian experience.
In its submission, the National Copyright Unit, COAG Education Council (sub. 97, pp. 41-42) addressed the points made by OUP [Ottawa University Press] in its submission, and claimed a range of alternative factors explained the changing fortunes of the Canadian education book sector. Specifically, it highlighted: In OUP’s 2013-14 Annual Report, copyright reform is not mentioned, but states the decision to wind back its schools division in Canada followed ‘a decade-long decline in the Canadian market for educational resources during which purchases of materials have fallen by nearly 50 per cent.’ OUP added that the decision to wind back in the schools market does not affect the company’s other activities in Canada ‘including our market-leading Higher Education and ELT programmes.’; OUP also asserts that the 2012 copyright reforms were the reason that Canadian educational publisher Nelson Education Ltd failed. And yet, an affidavit filed by Nelson’s chief executive officer in what were effectively bankruptcy proceedings, the company lists reduced spending on new curriculum by Canadian schools, increasing use of open education resources, the use of used textbooks, and the transition from traditional print books to digital products (which is said to be ‘having a transformative effect on the business’) as matters that adversely affected the company’s profitability.
