Part Four: Internet Service Provider Liability
A. Issue Summary
74. Copying is central to the function of the Internet. Material may be reproduced at many stages during the course of a transmission and it may be virtually impossible to identify when and where many of these copies are made. Thus, where the material being copied is subject to copyright protection, any Internet service provider ("ISP") involved in storing and transmitting the material could be liable for either primary or secondary infringement of copyright.
75. In terms of primary infringement, submissions on the discussion paper generally agreed that ISPs should be liable where they are themselves responsible for breaching copyright by their own actions. Two issues arise, however, in relation to the service that ISPs provide for third parties, which may warrant an exemption from liability:
- Should ISPs be liable in relation to transient copying of copyright material on their systems?
- Should ISPs be allowed to engage in caching, beyond mere transient caching, in the interests of providing faster and more efficient Internet services?
76. In terms of secondary infringement, ISPs also potentially face liability for the activities of third party subscribers using the ISPs' services to infringe or facilitate infringement.
B. Perspective and Proposed Policy Response
77. The services provided by ISPs, ranging from providing access to the Internet through to actively hosting material, are crucial to the use of Internet technology. The government's Growth and Innovation Framework identifies information and communication technology as central to the growth of New Zealand's economy, 16 and the increased global connectedness provided to New Zealanders by the Internet is an important factor.
78. New Zealanders have been enthusiastic in their use of Internet technology, as demonstrated both by the high number of Internet subscribers per capita and the number of hours spent on-line. 17
Internet usage in New Zealand increased after changes in ISP charges enabled unmetered Internet access. 18
There would, therefore, appear to be a public interest in ensuring cost-effective access to the Internet. In the face of uncertain or increased liability for ISPs for copyright infringement, ISPs may increase charges to cover this risk, be unwilling to provide certain services or place significant conditions on the use of their services. This, in turn, could have a detrimental impact on future use of the Internet by New Zealanders.
79. In addition, given the global and "border-less" nature of the Internet, the Ministry considers that it is important to achieve consistency in approaches between different jurisdictions. ISPs and content owners alike would then have some degree of certainty about how they will be treated both within and outside New Zealand. In the Ministry's opinion the approaches suggested below would also comply with the requirements of the WCT, if New Zealand should choose to accede to that agreement.
80. In making recommendations for excluding ISPs from some liability, the Ministry is mindful of the copyright owners' need to prevent infringement where they are unable to identify the actual infringer. As such, the Ministry considers that the United Kingdom approach is helpful, limiting only liability for damages or any other pecuniary remedies or for any criminal sanction. 19
The Ministry does not recommend preventing copyright owners from seeking injunctive relief in respect of information stored by ISPs.
(i) Definition of "Internet Service Provider"
81. As noted previously, ISPs provide a wide range of services, not all of which warrant exclusion from liability. In line with submissions on the discussion paper, the Ministry recommends that a definition of "service provider", or some similar term, in the Act should be based on the nature of the activity (for example, caching, hosting, providing transmission services) rather than on the nature or status of the organisation itself. 20
82. As such, where an ISP is itself actively involved in posting information on the Internet, the Ministry considers that it should not be excluded from liability. Conversely, where an organisation, not generally considered to be an ISP, is providing those services (for example, an educational institution or a library), it could be covered by the exclusions.
(ii) Transient Copying and Caching
83. Respondents to the discussion paper generally agreed that ISPs should not be liable for transient copying undertaken as part of the operation of their transmission systems. As noted in Part Two of this paper, the Ministry favours providing an exception from liability for copying automatically undertaken as part of a technical process. This would cover transient copying carried out by ISPs in providing services to subscribers.
84. In the interests of clarity, the Ministry suggests the introduction of a section noting that the mere provision of physical facilities for enabling or making a communication does not itself constitute an infringement of copyright, or an authorisation for such infringement. 21
85. There was also quite wide agreement amongst respondents that, given the benefit to the efficient operation of the Internet of caching, ISPs should not face liability arising out of this activity. A transient copying exception may cover caching, or some aspects of it. Equally, as caching is a common practice, it is arguable that, in placing material on the Internet, website owners provide ISPs with an implied licence to cache web pages. Nevertheless, there may still be room for uncertainty if the issue is not expressly addressed.
86. As caching of frequently accessed websites allows for more cost-effective and efficient access to Internet material, the Ministry's preferred approach is to provide an exception for this activity. Regulation 18 of the United Kingdom Electronic Commerce (EC Directive) Regulations 2002 ("the United Kingdom Regulations") provides a useful model for this type of provision. 22
It provides that an "information society service" is not liable where information provided by the recipient of a service is subject to automatic, intermediate and temporary storage by the service, for the sole purpose of more efficient onward transmission to other recipients on request. This exemption from liability is subject to certain conditions, namely that the service:
- Does not modify the information;
- Complies with conditions on access to the information;
- Complies with any rules regarding the updating of the information;
- Does not interfere with the lawful use of technology to obtain data on use of the information; and
- Acts expeditiously to remove or disable access to such information upon obtaining 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.
87. The issue of what standard of knowledge should be required is discussed below under "Secondary infringement provisions".
(iii) Secondary Infringement Provisions
88. As previously noted, the activities of third party subscribers could give rise to copyright infringement liability for ISPs, for example, under sections 36(a) and (d) of the Act. 23
Although a small number of respondents suggested that ISPs could be required to monitor material held on or passing through their systems, a significant majority of submissions on this point emphasised that such monitoring would be unduly burdensome and potentially impossible.
89. Other jurisdictions have sought to limit to some extent the liability of ISPs for third party activities, including the United States, 24 the United Kingdom,25 Australia 26 and Ireland. 27
The Ministry's suggested policy response is to follow the model as set out in regulation 19 of the United Kingdom Regulations. 28
Under these regulations, ISPs are exempt from liability where information is stored on behalf of a third party subscriber, where:
- The service provider does not have actual knowledge of unlawful activity or information; or, where a claim for damages is made, the service provider is not aware of facts or circumstances from which it would have been apparent to the service provider that the activity or information was unlawful;
- Upon obtaining such knowledge or awareness, the service provider acts expeditiously to remove or to disable access to the information; and
- The third party subscriber was not acting under the authority or the control of the service provider.
90. A number of respondents suggested that such a regime should also require the ISP to inform the owner of the website that a notice has been received and that material will be removed from the site or access to it disabled.
91. The knowledge tests in both United Kingdom regulations 18 (caching) and 19 (hosting) are subjective. Case law suggests that an "actual knowledge" requirement would encompass those who deliberately refrain from inquiry or who shut their eyes to that which is obvious. 29
92. The secondary infringement provisions in the New Zealand Act, 30 on the other hand, require that the alleged infringer "knew or had reason to believe" that the act constituted an infringement. This test imports a notion of constructive knowledge into the secondary infringement sections. "Constructive knowledge" involves knowledge of facts or circumstances from which a reasonable person would arrive at the relevant belief. 31
93. In the Ministry's view, it would be more appropriate to apply the New Zealand knowledge requirements to ISPs for two main reasons:
- To ensure that the scope of the immunity of ISPs is not unduly broad, and to allow content owners greater scope to protect their exclusive rights.
- To be consistent with the existing secondary liability provisions.
94. In order to provide some guidance on the issue of knowledge, the Ministry considers that a number of factors should be set out in the legislation to which a court should have regard in determining knowledge for the purposes of the ISP section. This would include receipt of a notice from a content owner. 32
Views are sought on other factors that could be specified.
16 Growing an Innovative New Zealand (February 2002) pp 52 to 54.
17 See both New Zealand Institute for the Study of Competition and Regulation Inc, The State of e-New Zealand: 12 Months On (November 2001) and the Ministry of Economic Development, Statistics on Information Technology in New Zealand (May 2002).
18 New Zealand Institute for the Study of Competition and Regulation Inc, The State of e-New Zealand: 12 Months On (November 2001) p 31.
19 Regulations 17 to 19 of the United Kingdom Electronic Commerce (EC Directive) Regulations 2002, implementing the Directive on Certain Legal Aspects of Information Society Services, in particular Electronic Commerce, in the Internal Market (2000/31/EC, 8 May 2002).
20 For example, see the United Kingdom Electronic Commerce (EC Directive) Regulations 2002, regulation 2 - definition of "information society service".
21 For similar provisions, see WCT, Article 8 Agreed Statement and Copyright Act 1968 (Cth) (Australia), section 39B.
22 Regulations 18 and 19 are subject to regulation 20, which provides that a contrary contractual agreement can be reached and that any party's right to apply to the court for relief is not affected.
23 These sections provide that copyright is infringed by a person who possesses in the course of business or who in the course of business exhibits in public or distributes an infringing copy of a work.
24 Copyright Act 1976 (United States), section 512.
25 Electronic Commerce (EC Directive) Regulations 2002, regulations 17 to 22.
26 Copyright Act 1968 (Cth) (Australia), section 22(6), 36 and 39B.
27 Copyright and Related Rights Act 2000 (Ireland), section 40(4) and (5).
28 See note 22, above.
29 For example, see RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123, Columbia Picture Industries v Robinson [1986] FSR 367, [1987] Ch 38 and Crystal Glass Industries Ltd v Alwinco Products Ltd (unreported, High Court, Hamilton, A236/78, 15 April 1983).
30 Copyright Act 1994, sections 35 to 39. Note that proposed legislative amendments regarding parallel importing will alter the knowledge standard in respect of the importation of infringing copies.
31 LA Gear Inc v Hi-Tech Sports plc [1992] FSR 121, 129. This test was applied in New Zealand in Husqvarna Forest & Garden Ltd v Bridon New Zealand Ltd [1999] 3 NZLR 215.
32For example, Electronic Commerce (EC Directive) Regulations 2002, regulation 22.
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