P2P file-sharing a question of copyright
Universal Music Australia Pty Ltd & Ors v Sharman License Holdings Ltd & Ors [2005] FCA 1242
Recently, the Federal Court of Australia examined the popular peer-to-peer file-sharing software, KaZaA, to determine whether its developers should be liable for the copyright infringements of its users. KaZaA’s internet peer-to-peer (P2P) file-sharing system operates globally and attracts millions of users worldwide. The system is free of charge and enables users to exchange material (usually music) by creating shared folders from which items can be easily downloaded.
The landmark case involved 30 applicants representing major distribution companies in the music industry. The ten respondents were all associated with the P2P file-sharing system controlled and operated through Sharman Networks Ltd. Claims of breached copyright laws and the Trade Practices Act 1975 (Cth) were made alongside allegations of conspiracy against the applicants. Justice Wilcox rejected the claims based on the Trade Practices Act and conspiracy, but examined at length the alleged breach of copyright under section 101 of the Copyright Act 1968 (Cth)(‘the Act’). The Act states that a person who is not the owner of copyright, but who ‘authorizes’ a breach of the copyright, may be liable for copyright infringement committed by a third party.
The respondents argued that because the KaZaA software had plenty of legal uses, they could not be held responsible for copyright breaches by the software users. They claimed that their product was no different to a photocopier, video recorder or DVD burner, whereby legitimate uses exist for each. They believed that while the product manufacturers may be aware of some customers using their product to infringe copyright, the overriding legitimacy of the product protects them from liability for such acts.
Rejecting the respondents’ arguments, Justice Wilcox found Sharman liable under the Act for the breaches of copyright by its program users. While the Judge accepted that the KaZaA licence agreement required users to agree not to infringe copyright, and that the web site contained warnings against sharing copyright files, he found that these measures were ineffective in curtailing copyright infringements. Justice Wilcox noted that KaZaA could have taken technical measures to restrict (but probably not totally prevent) sharing of copyright material, but had not done so. Furthermore, with file-sharing driving advertising revenue, it appeared to be against KaZaA’s interests to proactively discourage this activity.
Justice Wilcox ordered that Sharman redesign its software program for new users, with stronger filters to protect copyright works. He also ordered that ‘maximum pressure’ be placed on existing users to upgrade their software to include the filter technology.
Sharman were ordered to pay costs and the applicants were awarded damages, the amount of which is expected to be substantial. They will be determined at a later date, by which time Sharman plans to appeal the decision.
The case represents a landmark victory for the entertainment industry as it strives to contain lost revenue caused by piracy. While many doubt that the decision will have much impact in stopping internet piracy, it does send a warning to software developers to make more of an effort to address the copyright issue.
Disclaimer:The information in this article is not intended to be a complete statement of the law relating to the issues raised. Accordingly, no person should rely on this information without first obtaining specific advice from Brendan Kelly or Sam Marash of our office.
More information
LIV Bookshop: Annotated Copyright Act, By Sainsbury
The Pocket Idiot’s Guide to Copyrights, Frohwein | 
