Code clarity comes up from down under

March 1, 2000

Perhaps distance gives a better sense of perspective. 

In the Northern Hemisphere the electronic entertainment industries appear intent on attacking and alienating their home customer bases. In particular the Recording Industry Association of America had by the end of September brought almost 15,000 lawsuits against individuals it claims were engaged in illegal file sharing of its members’ music on the Internet.

In addition, it has been sending “cease and desist” letters to operators of peer-to-peer networks used by file-sharers, citing the “victorious” Supreme Court decision earlier this year against one, Grokster. Others, as a result, look like shutting down.

Yet that may all be based on an erroneous reading of that Supreme Court decision. It did not in any way change the much earlier Supreme Court ruling concerning the launch of the Betamax video recorder (yes, that much earlier). That case established that just because some people might use a technology to breach others’ copyright, it did not follow that the technology itself was illegal. What the new ruling said was illegal was to encourage users of a technology – in this case P2P software – to infringe copyright, leaving Grokster to prove that it did not do that.

On the other side of the world, the Australian Federal Court used the same “Betamax” approach to deliver a body blow to the operators behind the former big daddy of P2P file-sharing software, Kazaa. It stated explicitly that P2P was not illegal: it could be used for legal purposes or for file-sharing that did not infringe copyright. Nor did the operators Sharman Networks and Altnet, as was claimed, actually engage in communicating copyright works. However, said the court, they did breach a specific section of the Australian Copyright Act that provides that a person infringes who “authorises another person to do in Australia an infringing act”. They knew Kazaa was widely used for illegally sharing copyright files and “it had long been obvious” that just sticking warnings against this on your Web site and a clause in the end-user licence agreement on not infringing does not stop people doing it.

Secondly, it said, they had made no use of technical measures such as keyword filtering which would have enabled them to curtail – “although probably not totally prevent” – this activity. “It would be against their financial interest to do so.” Finally, far from trying to curtail this, the Kazaa website included “exhortations” to users to share more files, while for example sponsoring a “Kazaa Revolution” campaign against the record companies. While this material didn’t expressly advocate illegal file-sharing, to a young audience the effect would be “to encourage them to think it ‘cool’” to ignore copyright restraints.

The point about technical measures marks a step forward against P2P operators: it suggests the onus on them goes beyond a passive use of the Betamax defence – “we just make the stuff, how people use it is not our fault” – to actively using anything available to try as much as possible to stop users infringing.

The court ordered Sharman to modify the Kazaa code to introduce two forms of filtering, allowing two months for the parties to agree a protocol on this or the court would impose one, and to put maximum pressure on its users to upgrade to this new, disabled version –  though whether they will is another matter.

The victor in the original Betamax case was of course the equipment’s manufacturer, Sony. By coincidence, Sony was also recently in the Australian courts for the final round of its four-year action against retailer Eddy Stevens for supplying and installing modification chips in Playstation consoles. These bypass copying and regional controls so that legitimate copies of games bought, usually more cheaply, in other countries can be played. After the Federal Court found against him, Mr Stevens took an appeal to the High Court, Australia’s principal court.

Sony claimed these mod chips were the sort of devices banned under Australia’s Copyright Act. However, the High Court drew a clear distinction between technological measures aimed at protecting copyright, and others. It decided the regional codes on the games CDs, which the console has to recognise before it will play them, were solely intended to stop people playing games CD-ROMs lawfully acquired in other countries on their lawfully-acquired Playstations back home.

As one judge put it, “in effect, and apparently intentionally, the restrictions reduce global market competition. They inhibit rights ordinarily acquired by Australian owners of chattels to use and adapt the same, once acquired, to their advantage and for their use as they see fit.”

Consequently, the mod chips sold and installed by Mr Stevens – on just a handful of occasions for around £40 a time, mind – were not illegal under the Copyright Act.

Many believe the victory will be short-lived. They point to the Australian federal government’s commitment to amend the Act to outlaw mod chips by January 2007, as part of its free trade agreement with the US. However, the High Court explicitly indicated to the government and Parliament that they might consider whether adopting a measure that would actually restrict free trade and consumer rights was what they really intended, as opposed to just giving more effective mechanisms for owners to use to protect their copyright.

Compare that with the situation in the UK where all mod chips and “modded” consoles are already illegal, after Sony won a similar case two years ago and the UK Government then adopted the European Copyright Directive. Perhaps someone might even now be thinking of contesting this broad-brush law in court using the Australian High Court’s approach.

Of course, if Sony and other games providers removed their regional codes, the only remaining purpose of mod chips would clearly be to infringe copyright. Those supplying and using them would have no defence. The industry would also win a lot of goodwill and popularity among games players who only want to buy legal versions at the best price and to make a back-up copy for their own use.

But then, as the US record industry’s own relentless pursuit of individual file sharers shows, generating goodwill among customers doesn’t seem to be a priority.

David Flint is a partner with MacRoberts, Solicitors, specialising in intellectual property and IT law.