6. Internet Service Provider Liability
6.1 Telecom broadly supports the Ministry's preferred policy response to exclude ISPs from some liability, but departs significantly from that response in relation to the scope of the liability exclusion for those merely providing access or transmission services.
Definition of "Service Provider" for Purpose of Exclusion
6.2 Telecom agrees with the Ministry's observation that ISPs provide a wide range of services, and that not all of these warrant exclusion from liability. For the purposes of exempting service providers from liability, the touchstone for distinguishing those service providers merely providing access or transmission services (who in providing those functions should be free from liability) from those who provide publishing or content hosting services (who may be subject to liability in some circumstances) is the degree to which control or responsibility for content is exercised.
6.3 Telecom therefore supports the Ministry's proposal to define service provider by reference to the nature of the activity rather than the status of the organisation. Assuming that a single definition will ideally be used for the service provider exclusion as well as the exclusion for the mere provision of access or transmission services, the definition must be broadly stated, so that it will encompass the relevant activities of both telecommunications and information service providers. In this regard, it is noted that a number of overseas jurisdictions have adopted different definitions depending upon whether the statute or regulation is dealing with telecommunications carriers, information service or access providers and so on. An example of a broad definition is contained in Directive 98/34/EC of the European Parliament and of the Council of the European Union (20 July 1998) (see definition of "information society service").
Liability Exception for Mere Provision of Access or Transmission Services
6.4 Consistent with its previous submission, Telecom considers that where a service provider is merely providing facilities for the transmission, routing, or connection for material through a system or network, the service provider should not be liable for copyright infringement in any circumstances, whether for primary or secondary copyright infringement. If the service provider is doing more, for example, hosting, distributing or storing material on its own behalf, then it may be liable as a primary infringer as presently set out in the Act. Similarly if it is undertaking content services such as hosting for a customer, then it may be liable as a secondary infringer, if the ISP knowledge exception does not apply (see below).
6.5 Telecom therefore submits that there should be a positive exclusion from liability where the service provider has merely provided infrastructure, comprising mixed physical and software networks and facilities, for enabling or making a communication. The scope of the exception should encompass both telecommunication carrier and service provider transmissions, including the core activities of connection, call switching, carriage of traffic (ie, voice, data, email and so on).
6.6 The position of the service provider in these circumstances is akin to a postal operator carrying post, who it has never been suggested should carry any liability in relation to the post which is carried.
6.7 This exemption would furthermore be consistent with what currently occurs in practice and would not in any way inhibit the proper exercise of the copyright holder's rights. The copyright holder or enforcement officials are presently able to obtain required evidence or information (including customer names) using existing legal powers, for example, through warrant and discovery processes. The copyright holder would remain free to pursue the primary infringer.
6.8 This exception would also make clear that no steps could be required to interrupt communication signalling or flow to block particular content or website locations, which is technically difficult or in some cases impossible and easily circumvented.
6.9 Again, this exception would not prevent the operation of a knowledge exception in relation to service providers who are doing more than merely providing transmission or access systems.
Liability Exception for Transient Copying and Caching
6.10 Telecom supports the proposed exception for the caching of frequently accessed websites, subject to certain conditions. Telecom notes that other types of online content and traffic are commonly cached, so that the caching exception must be broad enough to include all content that is cached. Subject to comments above on issues concerning requirements for caching to be "automatic" (see para 2.7), an example which may provide guidance is regulation 18 of the UK Regulations:
Where an information society service is provided which consists of the transmission in a communication network of information provided by a recipient of the service, the service provider (if he otherwise would) shall not be liable for damages or for any other pecuniary remedy or for any criminal sanction as a result of that transmission where -
(a) the information is the subject of automatic, intermediate and temporary storage where that storage is for the sole purpose of making more efficient onward transmission of the information to other recipients of the service upon their request, and
(b) the service provider -
(i) does not modify the information;
(ii) complies with conditions on access to the information;
(iii) complies with any rules regarding the updating of the information, specified in a manner widely recognised and used by industry;
(iv) does not interfere with the lawful use of technology, widely recognised and used by industry, to obtain data on the use of the information; and
(v) acts expeditiously to remove or to disable access to the information he has stored upon obtaining actual knowledge of the fact that the information at the initial source of the transmission has been removed from the network, or access to it has been disabled, or that a court or an administrative authority has ordered such removal or disablement.
6.11 As an additional comment on the drafting of this regulation, Telecom notes that the requirement in reg 18(b)(iii) that rules are specified in a manner widely recognised and used by industry should apply also to reg 18(b)(ii) as access conditions must be implemented in a manner accepted by the industry. Telecom notes also that stipulating removal or disablement of access is problematic, as noted in the paper, "Blocking Content on the Internet", prepared for the Australian National Office for the Information Economy by CSIRO, which concluded (at p 39):
Our conclusion is that content blocking implemented purely by technological means will be ineffective…. Work-arounds will quickly be devised for any technologically-based blocking system and distributed over the Internet itself.
Secondary Infringement
6.12 Telecom broadly supports the Ministry's proposed response which would provide for an exception from liability for secondary copyright infringement unless the ISP had obtained a requisite degree of knowledge. Telecom has strong reservations concerning the application of a "constructive knowledge" test, which it believes would place New Zealand out of step with its international competitors. It also considers that any notice regime must be implemented with care, to avoid the imposition of impracticable and costly burdens on the service provider.
Constructive Knowledge Requirement
6.13 The Ministry notes in the position paper that other jurisdictions seeking to limit the liability of ISPs for third party activities have adopted a subjective knowledge test. Although noting this approach in other jurisdictions, the Ministry proposes to adopt a wider constructive knowledge requirement, based on the current secondary infringement provisions in the New Zealand Copyright Act.
6.14 However, overseas jurisdictions which have a similar constructive knowledge test for secondary infringement have adopted a subjective knowledge test for ISP exclusions from liability. The subjective test is adopted for example in the UK (Electronic Commerce (EC Directive) Regulations 2002, regulations 17 to 22), Australia (Copyright Act 1968 (Cth), section 22(6), 36 and 39B) and Ireland (Copyright and Related Rights Act 2000, section 40(4) and (5)), notwithstanding that in each of those jurisdictions the usual test for secondary copyright infringement is a constructive knowledge requirement (see Copyright, Designs and Patents Act 1988, ss22-26 (UK); Copyright Act 1968, ss37-39 (Australia); and Copyright and Related Rights Act 2000, s45, s46 and s48 (Ireland)).
6.15 Overseas jurisdictions have altered the standard of knowledge for ISPs to avoid the imposition of an unreasonable burden on ISPs to monitor and police copyright infringement by their customers. ISPs deal in vast amounts of data (currently, Xtra is dealing with some 500Mb/second) and it is simply unreasonable to impose a similar knowledge test for ISPs as for other potential secondary infringers. Other jurisdictions have recognised this in adopting a subjective knowledge test to strike an appropriate balance between the interests of copyright holders, consumers of services and service providers.
6.16 If a subjective knowledge standard is not adopted, and instead the current constructive knowledge test is used, the proposed exception will not operate as an exception at all but will, with the additional statement of express factors establishing knowledge, in fact increase the burden and risks which ISPs already face under the current provisions. This will in turn lead to lower quality of services and higher costs for consumers and businesses.
6.17 If this issue remains unaddressed, and a constructive knowledge test is applied, the outcome will be a decrease in the competitiveness of the New Zealand e-economy (and the companies in New Zealand) compared to its trading partners, and will also make New Zealand a less attractive location for businesses seeking an offshore base for the data and ecommerce operations.
Determining Knowledge
6.18 Consistently with this, Telecom considers that any provision which details factors relevant to determining whether the ISP has actual notice should identify the receipt of a notice of infringement which:
- is addressed to a notice officer designated as such by the ISP or preferably a designated "clearing house" (see below);
- is in a standardised format;
- is served in accordance with a specified means of communications;
- is signed physically or electronically by a person authorised to act on behalf of the owner of an exclusive right that is allegedly infringed;
- identifies the material that is allegedly infringed or the subject of infringing activity and that is to be removed or access to which is to be disabled, and information sufficient to permit the service provider to locate the material;
- provides contact information;
- certifies or states that it is believed in good faith that the identified use is not authorised and the notice is accurate;
- agrees to pay the reasonable costs of the ISP in complying with the notice (which is for the benefit of the copyright holder); and
- is judged by the "clearing house" to be valid (see below).
In general, the notice requirements detailed in the Digital Millennium Copyright Act (US) are helpful.
6.19 As part of this, Telecom also strongly supports the establishment of an intermediary to clear complaints. As presently proposed, a service provider would have to play "judge and jury" when it receives a notice. The service provider is expected to be sufficiently expert in all relevant areas and to continually make correct determinations. It is unrealistic to expect (especially smaller) service providers to maintain such expertise which is moreover very expensive to outsource. With the interposition of a intermediary or clearing house, the service provider would merely act on instruction, thus absolving itself of making value judgments on content which it merely hosts. Telecom therefore submits that the Ministry in this area should be seeking to provide a framework and procedure for notice and takedown which is workable and fair to all stakeholders, thereby providing legal security for users and ISPs, while providing effective tools for removal of illegal content.
6.20 It is finally essential that a service provider be exempt from liability for actions undertaken in response to a notice, by removing or disabling access to allegedly infringing material. The establishment of a clearing house or other notice and takedown procedure would make this process much more balanced and acceptable from the perspective of all stakeholders.
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