While the Bill is being passed under urgency  – with the reason for the indecent haste unexplained and unjustified – it will have an easy ride through, with 111 of 122 MPs voting for it. Only the Greens, Chris Carter and Hone Harawira opposed passing the Bill under urgency. The move was supported by National, ACT, the Maori Party, United Future, Labour and Progressives.

So the substance of the Bill was uncontroversial for most MPs, despite some semantic gymnastics from Labour MPs attempting to explain why they originally supported it in harsher form than present, then opposed a more reasonable version, and are now supporting it again.

There is no question that the use of urgency for this Bill is an abuse of process. The file sharing reforms have kicked around for several years, since controversy erupted after first being introduced (in more draconian form) by the previous Labour Government. There is no explanation for the sudden need to race it through now.

It is also clear that some MPs still have a poor understanding of the issues. For example, in the House last night National MP Katrina Shanks made bizzare comments suggesting that any file sharing was illegal, and that people who choose to install file-sharing software on their computers must be doing so to infringe copyright. I just so happened to be downloading the latest version of LibreOffice using µTorrent when she said that…

On the substance of the bill, there is no question that it is a substantial improvement over the original proposal. In particular, the original draconian termination provision is now only available to a Court, and only if the judge considers:

“suspension of the account holder’s account is justified and appropriate in the circumstances, given the seriousness of the infringing”

This and other changes mitigate much of the “guilt on accusation” stance of the original Bill (and I do wonder whether many of the Twitterati realise this, given some of the incorrect and alarmist comments flying around), although it remains less than ideal.

While this case turned on a contractual clause expressly prohibiting EMI from selling Pink Floyd’s songs “out of context”, New Zealand’s copyright law can give musicians (and other copyright holders) limited protection against “derogatory treatment” of their musical works outside of a contract (part of the “moral rights” of authors long recognised in civil law jurisdictions, but only since 1994 in New Zealand).

Under section 98 of the Copyright Act 1994, an author of music has the right (with various complex requirements and exceptions)  “not to have his or her work subjected to a derogatory treatment”. It is important to note that, where this section applies, it gives the right to the author, not the copyright owner who usually has all the rights under copyright law.

Derogatory treatment includes doing something “prejudicial to the honour or reputation of the author”.  What this actually means in practice is not always clear. In the case of a band, whose reputation might include concept albums portraying a high level of “interconnectedness” of songs, an argument could be made that breaking up the album, or rearranging it, or reducing a song to ring tone without permission, is a derogatory treatment. Similarly, using a musical work to accompany or promote a highly offensive movie could be derogatory treatment (one quirk is that moral rights extend to the “musical work” but not necessarily to an actual recording of it). In either case, the person using the work may be licensed to use it, but the author may still have a remedy for derogatory treatment. It would very much depend on the facts, taking into account the complex and incomplete coverage of moral rights.

One of the few New Zealand cases involving derogatory treatment is Radford v Hallensteins ([2009] DCR 907 and others). It involves a clothing chain that printed t-shirts showing an image of sculptor John Radford’s Western Park installation in Auckland. Radford has brought a claim against the clothing chain for copyright infringement, including derogatory treatment of his work. The case is yet to be heard, but the District Court refused to strike out the claim last year.

• Article: Computerworld > Read up before you backup (3 December 2009)

Making a backup copy of software is expressly permitted under section 80 of the Copyright Act 1994. However, a backup copy can only be “used” if the original is lost or destroyed (or it can be used in lieu of the original copy). One of the issues the case clarified is that the occasional testing of a backup – which is of course sensible – does not breach that restriction.

However, if the purchaser was given an express direction that a backup cannot be made, then section 80 does not apply (i.e. a backup cannot be made). It is important to note that the direction not to make backups is only effective if given before or at the time the software was acquired. If the direction/prohibition was given in a click-through licence, but the software was “acquired” before that licence was accepted, section 80 will apply (i.e. a backup can be made). However, the licence agreement could still impose various other conditions about how the backup can be used/tested.

When the Copyright Act backup provisions were drafted, most backup scenarios would have involved physical media, not a failover system (hot/cold) backup. The court decision confirms that in the absence of any pre-purchase direction (which could be a simple notice on the package or on the website the software is downloaded from), a cold server backup can be made, and (subject to the licence terms) occasionally tested. A user could not, however, rely on section 80 to set up a hot server, as this would involve “use” of the copied software beyond the extent permitted.

It was good to see the court make a well-researched and practical judgment, following a hearing that involved a number of IT experts, including disaster recovery specialists. By the way, if this all sounds like much ado about not very much, it is worth noting the software in question was very expensive main-frame based software ($1m plus per licence) which, presumably, justified the cost of going to court. It is highly unlikely that Microsoft or Apple would have a major battle over a user making a simple backup of their software! Indeed, many software houses expressly permit it.

Read my full article here:

Computer program backups and the Copyright Act (Clendons Barristers & Solicitors)

The judgments:

Primary – Racing & Wagering Western Australia v Software AG (Australia) Pty Ltd [2008] FCA 1332
On appeal – Racing & Wagering Western Australia v Software AG (Australia) Pty Ltd [2008] FCA 1526

The proposed reformulation of s 92A of the Copyright Act, which gives the Copyright Tribunal the responsibility for deciding if users should have their internet access terminated, is a much improved proposal over the original. The key problem with the original, poorly drafted and poorly thought-out proposal was that it put the responsibility of whether or not to terminate, on the ISP. This would have been unfair to every ISP caught in the middle of a dispute between their customer and any number of third parties (who, in the case of international copyright holders, would most likely be legally represented).

The new proposal removes that responsibility from ISPs. It gives the responsibility to the Copyright Tribunal, which has (or will have) the necessary expertise and resources to deal with complaints. As a state agency, it is bound by the Bill of Rights Act 1990, which guarantees natural justice (s 27(1)). Its decisions are subject to judicial review (s 27(2)). The proposal to allow the Tribunal impose fines (quite different from “damages” that a Court could award) means that a person who is fined (even for a modest amount) could not be sued in Court for the same infringement (in addition the proposal is that the Tribunal have exclusive jurisdiction of s 92A matters) . Tribunal members are, to some extent at least, accountable to the democratically elected Government. It has statutory reporting obligations.

This not only solves the primary complaint about the original proposal, it should (subject to some changes – see below) also provide strong procedural safeguards for the web-surfing public.

So why is there still fuss about the new proposal?

A central complaint of the original proposal – the unfair burden it put on ISPs, and the real potential for “guilt by accusation” that followed – has now been resolved. The focus of critics has now shifted to the purportedly “disproportionate punishment” of terminating an internet account and the assault on “human rights” that entails.

The Creative Freedom Foundation’s position remains that termination is “disproportionate punishment“. Similarly, Keith Davidson of InternetNZ is reported as saying of the new proposal: “the termination of a household or business internet account is simply out of proportion to the alleged offence”.

How can termination be “out of proportion” to an offence that hasn’t happened yet? How can termination be “out of proportion” given the 3 stage, 3 month process, the first step of which requires notification and a right of reply and the right to mediation? How can termination be “out of proportion” when an ISP would be within its contractual rights to terminate a user’s account without notice for any number of reasons, which may or may not be less serious than copyright infringement?

The “human rights” line of argument also misses the point. Internet access through a particular ISP is not a human right. Every ISP in New Zealand provides their service subject to terms and conditions, including prohibiting copyright infringement. If you breach those terms and conditions (or your ISP believes you have), they may terminate your account. ISPs can impose whatever (lawful) terms and conditions they like. Most ISPs even reserve the right to change those terms and conditions at any time without your knowledge.

The revised proposal does not stop a terminated user from immediately signing up with another ISP. In fact it does not even stop a terminated user from opening a new account with the same ISP. It does not ban a person from the internet. The human rights argument falls flat.

Don’t get me wrong – there is a global war being fought by the major IP rights holders over the future of intellectual property and human rights are certainly one of the many factors at stake. The issue of software patents in this country (which should be banned) is one small battlefront in that war.

The difficulty, as I see it, is that some critics of s 92A (and critics of copyright/IP in general) only see the issue in terms of the big, wealthy, multinational companies suing mothers of young children for millions of dollars for sharing US$24 worth of music. Through my work as a lawyer, I have recently witnessed a situation where a semi-retired New Zealand man had spent many years painstakingly creating certain written works. For the past couple of years he had managed to make a reasonable amount of money selling these works to hobbyists in his particular field – not enough to live on, but enough to pay for his hobby and help him in his pending retirement. All that changed when one particular individual – lets call him Mr X – publicly (and illegally) republished all of those works online for free. Mr X admitted doing so, but refused to take the works down, claiming that in his view authors didn’t deserve copyright in these sorts of works, and they should be freely shared with everyone. Obviously, this was devastating to the New Zealand man. While in this particular situation Mr X’s website was hosted overseas, a s 92A-style notice-and-takedown procedure would have provided a reasonably efficient first-step remedy against this blatant theft and destruction of one man’s years of hard work and creative effort by someone ideologically opposed to the idea of copyright.

There is no doubt that heavy-handed, excessive enforcement has backfired and been a PR disaster for major rights holders. It is precisely that “overkill” that the ISP account termination approach seeks to alleviate, and that the revised s 92A proposal provides a reasonable balance against. Whether this is the “thin end of the wedge” remains to be seen – no doubt for some it is the first step in a larger strategy – but misrepresenting the current situation as a human rights issue is (at best) jumping at shadows.

The new proposal is obviously not yet complete. Whether or not the final proposal does turn out to be “fair, efficient and workable” as Policy Proposal Document promises remains to be seen. Some specific areas that need to be addressed are:

1. Protection against the making of frivolous, vexatious or bad-faith (e.g. abuse of process) complaints (this sort of protection is a good way of dealing with the false complaint issue).
2. Onus and standards of proof (the Policy Proposal Document talks about the balance of probability – which is usual for civil actions – but more detail on the types of permissible evidence will be important).
3. Clarification over who a “subscriber” is in a shared-access environment.
4. Requiring the Tribunal to take into account the rights of other users of the particular internet account in question.
5. Clarification over the status of non-ISP organisations caught by the Copyright Act’s very wide definition of “ISP” under the new proposal.
6. Clarification of jurisdiction (territorial limits, maximum fines, matters that may be taken into account, etc).

In a case that will possibly influence New Zealand law, the High Court of Australia (their highest court) last week handed down a major decision that makes it harder for companies to claim copyright over compilations and databases such as television schedule listings.

After a hearing involving no less than six QC’s (or Senior Counsels as they are now known in New Zealand and most Australian states), the High Court unanimously ruled in IceTV Pty Limited v Nine Network Australia Pty Limited that IceTV, which provides electronic programme guides, did not infringe the Nine Network’s copyright by partially reproducing its television schedule listings.

TV networks have long regarded their schedule listings as copyright material. In fact, it is common for networks to generate revenue by selling the rights to publish the listings in newspapers, magazines, etc, as seen here. As the network owns copyright in their TV listings, no one else is allowed to copy or display them without the network’s permission. There have been a number of cases on this issue over the years, and similar issues such as copying parts of telephone directories, with varying decisions (e.g. the well-known US Feist Publications case).

IceTV uses the time and tile information from the schedule listings of Australian TV networks (via publications such as the TV Guide) and combines them with its own research to produce its electronic programme guides. This seems innocuous enough – after all, why would the TV networks complain about a service that makes it easier for viewers to watch their television shows?

The first answer is that it is standard commercial practice for corporations to protect their intellectual property. The second and more cutting answer is: because the IceTV guides can be loaded into Personal Video Recorders which can be programmed to skip the advertisements. Some networks do provide “official” online schedules that can be used with PVRs, but these can only be used with “approved” devices which prevent ad-skipping, whereas IceTV’s schedules will work with “unofficial”, third-party devices that enable ad-skipping.

So Nine Network sought to prevent IceTV from using its TV listings by claiming that IceTV infringed copyright in those listings. If Nine Network was successful, then IceTV would have needed to obtain a licence from the network in order to incorporate the material into its personal guides, which (it was said) would effectively have shut down IceTV’s business.

It is important to note that Nine Network does own the copyright in its TV listings – that was conceded by IceTV, and it has long been recognised by the law that copyright does exist in such compilations of facts (in this case, the times and titles of upcoming TV shows). If IceTV copied Nine’s listing in their entirety – including the time, title, episode summary, rating, etc – then that would certainly breach copyright.

However, a key fact in the case was that IceTV did not copy Nine’s listings in their entirety. Instead they used only the title and time information to correct and fill in gaps in schedules that they largely produced themselves by watching TV and “reverse engineering” a basic schedule. Nine argued that this still amounted to the copying of a substantial part of their listings, and therefore infringed their copyright.

Under New Zealand and Australian copyright law, copyright is only infringed when a work is copied (or otherwise improperly dealt with) in its entirety or in “substantial part” – section 29 of the Copyright Act 1994. In other words, copying a “non-substantial” part of the work does not infringe copyright. Of course, the trick is determining what “substantial” means. As this case and others have shown, different judges can come to different conclusions on the same facts.

In the IceTV case, the central question was essentially whether the time and title information that was copied from Nine’s listings was a “substantial part” of the work (the listings as a whole).

The High Court said no, overturning the opposite finding of a full bench of the court below. The High Court cited the following principle:

“[T]he more simple or lacking in substantial originality the copyright work, the greater the degree of taking will be needed before the substantial part test is satisfied.”

While acknowledging that the programming schedule was developed through a creative process, the court found there was very little “originality” in the actual TV listings stating the titles and times of upcoming programs. The ideas behind the programming schedule may have been highly original, but the expression of the schedule in the form of the published TV listings was not – as the court said, there is very little choice in how to express a time and title for a TV show. Therefore, the originality of the TV listings was very low, and the amount of copying that would amount to a “substantial part” was high. On that basis, applying the principle stated above the court decided that the amount of copying by IceTV was not substantial and therefore did not infringe copyright.

Importantly, the court downplayed arguments relating to the need to protect Nine’s “investment of skill and labour” which had found favour in the court below. The High Court said that while the skill and labour that has gone into producing a work is still a relevant issue, that issue should not distract from the main inquiry, which is whether a substantial part of the actual work (and not the ideas behind the work) was copied.

A large part of the argument in the court below was whether or not IceTV had “misappropriated” Nine’s work. The court below found that it had, and this was a major reason for that court ruling that IceTV had infringed Nine’s copyright. The High Court disagreed with the relevance of this argument and noted:

“A finding that one party has “appropriated” skill and labour, of itself, is not determinative of the issue of infringement of a copyright work. The [Copyright Act] does not provide for any general doctrine of “misappropriation” and does not afford protection to skill and labour alone… [The] statutory requirement that the part of a work taken must be substantial assumes there may be some measure of legitimate appropriation of that investment.”

The court also engaged in a limited economic analysis that will be of great interest to those who believe that copyright law has become too restrictive in modern society:

“Rewarding skill and labour in respect of compilations without any real consideration of the productive effort directed to coming up with a particular form of expression of information can lead to error. The error is of a kind which might enable copyright law to be employed to achieve anti-competitive behaviour of a sort not contemplated by the balance struck in the [Copyright Act] between the rights of authors and the entitlements of the reading public.”

While the carefully worded and nuanced judgment is bound to be the subject of much debate, it does open the door for the increased legitimate (i.e. “fair dealing”) use of copyright material from compilations and databases such as TV listings, for personal and commercial purposes.

So much attention has been on the infamous (now indefinitely suspended) section 92A of the Copyright Act 1994, that another quirk introduced by the same batch of amendments has largely gone unnoticed.

According to section 2(1) of the recently-amended Copyright Act 1994, an Internet Service Provider is defined as including anyone who “hosts material on websites or other electronic retrieval systems that can be accessed by a user“.

This is a very broad definition. It is unclear what the final words “accessed by a user” add, as it is very difficult to conceive of any computer system that cannot be “accessed by a user”. Assuming that every website will accessible by a user, either on an intranet or publicly, the definition of Internet Service Provider is therefore anyone who hosts material on a website.

Clearly, this will include all website operators – “hosting material” is not exactly a novel use for a website.

While it does seem somewhat strange that Parliament chose to give a commonly understood term such a different meaning, this particular definition of ISP applies only to the provisions of the Copyright Act 1994. As a later post will cover, this is actually of benefit to NZ website operators.

Note: the Government is proposing to repeal this rule. As of April 2009, the amending Bill (carried over from the previous Labour-led Government)  sits at number 18 on the Government’s Order Paper (right after the Dog Control Amendment Bill), so the rule may not be repealed for some time.

The commissioning rule – who owns 1^st copyright in code?

If a software developer is hired (i.e. “commissioned”) by a customer to develop some code, an important question is who owns the copyright in the resulting code – the customer or the developer? The rule that governs who owns commissioned works is known as the commissioning rule, which in New Zealand is contained in section 21 of the Copyright Act 1994. Under that rule, the answer will typically be one of the following scenarios:

1. If the software developer is a person (as opposed to a company) who was hired as an employee (part time or full time) by the customer, then the customer (i.e. employer) will own the copyright in any original code produced by the developer.
2. If the software developer (either a person or a company) is contracted by the customer to produce some code, and is to be paid for it, then the “default rule” is that, again, the customer will own the copyright in any original code produced by the developer. Importantly, the customer will have ownership of the software whether or not they have actually paid the developer for it.
3. If the software developer (either a person or a company) is contracted by the customer to produce some code, and both agree that the developer will own the copyright, then the developer will own the copyright in the code they develop for that customer. The agreement would usually be in writing (though it need not be a formal, or even signed, contract). A verbal agreement will suffice, though without any written evidence, it may be difficult to prove what was agreed.

The simple rule is that if the software developer and the customer agree in advance as to who will own the copyright, then that agreement will prevail.

However, in reality as many will know, the contracting/paperwork side of software development can be a bit of a mess. Projects are started without contracts being place, undocuments variations and “sub-projects” may emerge, “interim” off-contract solutions are implemented, and final agreements may never be signed.

In particular, with the increasing use of agile development methodologies, the emphasis is even more on delivering working code than negotiating contractual terms – though as always, getting a contract in place before starting is highly recommended.

When the parties have not agreed (usually in writing) who will own the copyright, then the “default rule” is that the customer will own the copyright (scenario 2 above).

Copyright ownership and code reuse

Copyright ownership is of particular importance to software developers who reuse code – which means virtually all developers. Simply, unless a developer owns copyright in some particular code (or obtains an appropriate licence), they are not entitled to reuse that code anywhere else. This applies even if the developer wrote the code themselves – no copyright ownership, no reuse. If the developer does not own the copyright, then the copyright owner’s approval (or their authorised licensee) must be obtained.

This is the basis on which open source software works. Under the GPL version 3, for example, a developer is licensed to reuse the code as they see fit (subject to some conditions). The developer does not actually own the copyright of the open source code they are reusing, but they are licensed by the copyright owner(s) to reuse the software in their projects.

For in-house code libraries, it is essential that the developer retains copyright in the relevant code they develop. Often, this code will not be of particular commercial value to any one else but the developer who wrote it, but it is very valuable to the developer to be able to reuse it in other projects. It should be noted that if a developer already owns copyright in code that is used in a customer project, then the developer will not be at risk of losing that existing copyright. But if the code library is modified, then the copyright in those modifications may be be deemed to be owned by the customer. It is easy to imagine how this could potentially result in complex, tangled situations.

Unfortunately, it is not possible to retrospectively “claw back” ownership of code that has been developed for and owned by another customer. In this situation, the developer would need to get the customer to assign (e.g. transfer ownership of) the copyright to them. If the customer wants to own the copyright of code they have paid for – which is perfectly reasonable – then the developer may want to either separate out and retain ownership of common, generic code that they intend to reuse on other projects, or license back such code.

In any case, it is much easier to deal with these issues at the outset of the project, in the form of a clear, easily understood contract.