Early Lessons from the Copyright Tribunal

19 Feb 2013

The local copyright enforcement arm for the “Big Three” record labels (Sony, Universal and Warner*) has won two cases at the Copyright Tribunal. One account holder was a Telecom customer, the other with TelstraClear, and now they owe the Big Three $616.57 and $557.17, respectively. 

Both were caught illegally uploading songs. The specific “wrong” here according to the Copyright Act is that only the copyright owner can “communicate the work to the public”. The law appears to presume that when your BitTorrent client allows other P2P users to download from you, then you are communicating that work to the public, even though that “public” could in fact be one person -- more on that one later.

The Copyright Tribunal’s written decisions (1st one, 2nd one) reveal a number of important things about how the Skynet law is playing out for copyright owners, account holders and the Tribunal. 

Rights owners

What some people may not realise is that the “rights owner” under the Skynet law can be one person representing a number of different copyright owners. In each of the two cases, the Recording Industry Association of New Zealand (RIANZ) cobbled together the infringement claims of two of the Big Three labels, over two songs. If that sounds confusing, that’s because it is. This table might help:

 

Account Holder

Infringements (3 strikes)

Copyright Owner

“Rights Owner”

Telecom customer

1. “Man Down” (Rhianna)

2. “Man Down” (Rhianna)

3. “Tonight Tonight (Hot Chelle Rae)

1. Universal

2. Universal

3. Sony

 

RIANZ

Telstra customer

1. “We R Who We R” (Ke$ha)

2. “We R Who We R” (Ke$ha)

3. “Paradise” (Coldplay)

1. Sony

2. Sony

3. EMI

 

RIANZ

The law is designed so that each of the Big Three can, together, act like one giant, worldwide sound recording copyright owner. Together the labels can bring more cases to the Tribunal than they would apart. The three infringements that bring an account holder before the Tribunal could be the same song three times, hence one record label, or three different songs from the only three record labels that matter under this law.

Account holders

The written decisions showed that the account holders had a limited understanding of the technology they had been punished for using. Neither account holder seems to have understood that when you download a file, the client will automatically start uploading it to peers who request it. This goes to suggest that the account holders didn’t know what their computer was doing was wrong (though they may have understood that downloading was wrong). 

Most importantly, however, neither account holder knew how to properly defend themselves under the law.

The law inverts the age-old principle (you know, that one that’s essential to due process and a democratic society) that a person is “innocent until proven guilty”.  In a normal copyright infringement case that occurs in a court of law, the burden is on the copyright owner to prove that the alleged infringer infringed. 

Under Skynet, the burden is on the alleged infringer/account holder to prove that they did not infringe. Specifically, they have to contest each of the three infringements listed on the notices.

Because the Tribunal has not yet built up precedent in this area, we don’t know exactly how detailed this contest must be. For example, it could be as simple as the account holder stating at least: “I did not infringe songs 1, 2 and 3 on these dates”, or it could be that further detail is required. The account holder has to do this to put the ball back in the rights owner's court, and the rights owner has to come back again and explain that what the account holder is saying is not true.

The law operates this way because surveillance technology (in the case of RIANZ, they employ MarkMonitor) has developed to a point that it is more likely than not that the infringement happened at that IP address, but it isn’t perfect. Sometimes even robots make mistakes.

Nonetheless, the most important thing is that Internet users know their rights under the law as well as the recording industry does theirs. Without understanding how to challenge the allegations against them, the account holder will pretty much be on the hook for a financial penalty.

Tribunal

The Tribunal decisions show improvisatory flair – to be expected under this completely novel system of dealing with copyright infringement. Where this is most obvious is in the area of damages, or the financial penalties that the Tribunal orders the account holder to pay RIANZ.

There are four “flavours”, if you will, of damages:

  1. The reasonable cost of the song,
  2. A contribution to the fees paid by the copyright owner to the ISP to send infringement notices to the account holder, which is a total of $75 -- $25 for each of the three strikes (in Telstra’s case, $86.25, because they charge GST on processing the notices),
  3. The $200 Tribunal application fee
  4. A sum to deter further infringing behaviour.

Number three is straightforward – each of the decisions awarded the $200 application fee to RIANZ. The first, second and fourth categories are more interesting.

In terms of the first category - the reasonable cost of the song - both decisions put that at the actual retail price of the songs. That amounts to around six to seven dollars. RIANZ attempted in both cases to get the Tribunal to speculate as to how many times one upload leads to a download. Citing a 2008 UK study done by a hired gun for the industry, RIANZ says that there will probably be 90 downloads of the song based on one upload. It also admitted it has no idea what the damage really is because there is no way to determine that. Thankfully, the Tribunal agreed not to speculate.

The improv comes with categories two and four. As for number two – the contribution to the ISP fees – the Tribunal reasoned that RIANZ deserves 100% of the fee for the third strike ($25), and 66% for the second and 33% for the third, totalling $50. The policy rationale behind this is RIANZ is less deserving of recouping the cost for notices that serve an educational purpose, in other words, those notices that would actually put people on notice that what they are doing is wrong. Once you get to the third strike though, you’re no longer being educated, you’re being put on notice that you’re about to be taken to the Tribunal.

Determining a fee to deter future file-sharing is the last step for the Tribunal. Under this category, the Tribunal has to take three factors into consideration:

  1. the “flagrancy” of the account holder’s behaviour,
  2. the effect on the industry’s market for the song, and
  3. whether all the monies already awarded serve as a deterrent

What is interesting about the second decision is that under consideration number one, the Tribunal found that the account holder's behaviour was not flagrant, stating amongst other factors that "the Respondent does not appear to have derived any financial or other benefit from the infringing file sharing: he says that he does not know either of the two songs". This this interesting because the recording industry has been fighting long and hard to change the meaning of “commercial” when it comes to file-sharing (and is attempting to do so under the Trans Pacific Partnership, in a provision that basically says that if you could have bought the song and you did not, you are a commercial infringer) because commercial infringerment carries with it more severe penalties. But the Tribunal's point here implies that if you’re not trying to earn a profit off of the torrented file, then you are not infringing to a commercial degree. 

As for consideration number two, RIANZ again encouraged the Tribunal to speculate on the number downloads that inure from an upload. In both cases, the Tribunal recognised the principle, but sensibly refused to wade into a debate on the subject.

The sting for both account holders came with the third and final consideration under the fourth category of damages – whether the amount already awarded against them was enough to deter them from "doing it again". In both cases, it was decided, no, so a random number was picked. One-hundred and twenty dollars per song in the first case, and one-hundred for the second.

In sum, the basic process the Tribunal follows in these cases is the following:

  1. Was there infringement? If so, did the infringement occur at the account holder’s IP address? As explained above, unless the account holder specifically challenges each infringement, then the Tribunal has to assume that there was infringement as RIANZ says.
  2. If it wouldn’t be “manifestly unjust” to make the account holder pay, how much does he or she owe? In determining that sum, the Tribunal considers the following:
    1. What is the reasonable cost of the song?
    2. What contribution should be made towards the fees paid to ISPs?
    3. The cost of applying to the Tribunal, and
    4. What is the appropriate sum to deter future infringing file-sharing, if all of the above isn’t enough?
      1. What is the flagrancy of the infringement?
      2. What is the possible effect of the infringement on the market for the song?
      3. Is the sum already arrived at enough to deter future infringing behaviour?

Going forward

What have we learned from the two Tribunal cases? We’ve learned that the Tribunal will pick an arbitrary number for an infringement of one song, which so far is $100 to $120. (Compare this with the States, where an infringement can cost you $750 to....wait for it....$150,000). We’ve also learned that account holders generally do not have a handle on how to defend themselves. So if you get a notice, it’s best that you take time out to understand how to respond or find someone to help you. Finally, we’ve seen that the recording industry will take no pity on you - it is nothing personal. They will go hard, so expect a fight.

Lastly, it is important to note that InternetNZ's main reason for following this law is to understand how it impacts Internet users and how it is changing legal traditions. Changing the burden of proof from innocent until proven guilty to guilty until proven innocent is a big step. We have to be immensely careful that in developing novel legal standards and processes to protect copyright owners in the online environment, we do not gloss over the basic safeguards that should be provided to people under a fair legal system.

 *Correction on 20 Feb, replacing "EMI" with "Warner". The "Big Four" became the "Big Three" in 2011 when EMI was purchased by Vivendi, which owns Universal. Thanks to the reader who brought this to my attention.