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Part Eight: Permitted Acts and Exceptions


Digital Technology and the Copyright Act 1994 - Position Paper

Regulatory and Competition Branch
[ Last Updated 19 October 2005 ]


A. Application of Existing Exceptions to the Digital Environment

(i) Issue Summary

151. The discussion paper asked if the existing list of permitted acts should apply to owners' rights in the digital environment.

152. The permitted acts and exceptions are arguably the most controversial elements of copyright law reform, as they bring into sharp focus the balance between the interests of stakeholders and the general public.

(ii) Perspective and Proposed Policy Response

153. It is important that users of copyright material, as well as owners and creators, are able to take advantage of technological developments. The Ministry agrees with the majority of submissions that the existing exceptions should apply in the digital environment, unless cogent reasons exist to the contrary. For example, the rationale behind an exception may apply only in the print/analogue world and not make sense in the digital environment.

154. Many of the existing permitted acts are probably sufficiently technology-neutral to apply in the digital environment with little or no amendment. Where this is not the case, however, the Ministry considers that amendment or clarification would be desirable.

155. New Zealand's copyright regime is already compliant with our TRIPS obligations. If New Zealand were to accede to the WIPO Internet Treaties, the Agreed Statement to Article 10 of the WCT, relating to exceptions and limitations, is relevant:

It is understood that the provisions of Article 10 permit Contracting Parties to carry forward and appropriately extend into the digital environment limitations and exceptions in their national laws which have been considered acceptable under the Berne Convention. Similarly, these provisions should be understood to permit Contracting Parties to devise new exceptions and limitations that are appropriate in the digital network environment.

156. It is clear that digital technology provides greater ability to copy and communicate works than was generally the case in the analogue/print environment, a concern expressed by copyright owners. The Ministry does not consider that this increased risk in itself justifies limiting the permitted acts and denying users access. The Ministry is mindful, however, that the digital environment may require limitations or safeguards that were not necessary for print and analogue works.

157. The Ministry notes, in relation to its recommendations, that it would continue to be possible for all users to negotiate licenses with copyright owners allowing them to use copyright material in a manner that falls outside the scope of the permitted acts. Indeed many large institutions, in both the public and private sector, have in place best practice models for licensing of copyright material and make extensive use of licensing schemes.

158. The Ministry notes the concerns raised by respondents regarding the licensing of digital material. The Ministry is aware of the difficulties that exist for both copyright owners and users in negotiating licences for digital material. Licensing of copyright material is, however, an issue that has ramifications beyond just digital material, and it is beyond the scope of this review.

B. Fair Dealing

(i) Issue Summary

159. The fair dealing exceptions in sections 42 and 43 of the Act provide users with fairly broad exceptions to use works for news reporting, criticism or review and research or private study. The discussion paper asked two main questions in relation to the fair dealing exceptions:

  • Are any amendments required to the existing fair dealing provisions to ensure reasonable access to copyright works in the digital environment for news reporting, criticism or review and research or private study?
  • Are there new fair dealing exceptions that should be added to the Act to deal with aspects of digital technology?

(ii) Perspective and Proposed Policy Response

160. Sections 42 and 43 are already fairly technologically neutral in their wording and the Ministry considers that they already broadly apply in the digital environment. Submissions on the discussion paper generally accepted that the fair dealing provisions should apply in the digital world, although many copyright owners suggested that no further exceptions are needed.

161. The Ministry's preferred approach is to clarify the application of sections 42 and 43 in the digital environment and to ensure that any necessary changes maintain the existing level of technological neutrality. The Ministry does not consider that any compelling reasons have been presented not to do so.

162. There are two main areas, in particular, which need to be addressed:

  1. In the communication section, we considered the issue of webcasts as works, and suggested that sufficient reasons do not exist to differentiate between existing transmission technologies such as broadcasting and cable programme services, and new technologies such as the Internet. Consistent with this approach, the Ministry considers that the rationale behind section 42(2) applies equally to news reporting across the Internet, and that the section should, therefore, apply equally to webcasting and any new transmission technologies.
  2. Section 43(4), allowing fair dealing for the purposes of research and private study, requires that no more than one copy may be made of the copyright work. As much digital technology requires the making of transient copies, it is likely that more than one copy would technically be made of a digital work in the process of using it for research and private study. Although the Ministry suggests that an exception for transient copying be provided, these intermediate copies would still fall within the definition of "copy". The Ministry, therefore, seeks feedback on whether it should be explicitly stated in the Act that such transient copies should be excluded from the application of section 43(4) (and any other provisions that specify the number of copies that may be made on a particular occasion).

C. Educational Institutions, Libraries and Archives

(i) Issue Summary

163. The educational, library and archive provisions provide these bodies with exemptions from liability for certain specified activities. Owners generally argued that no further exceptions are needed and expressed concerns about some uses of works in digital form, particularly in respect of communication. Educational institutions and libraries favoured extending the exceptions to the digital environment and, in some cases, expanding their scope and application.

164. In particular, the following issues arise:

  1. Should libraries and archives be able to digitise material for preservation purposes?
  2. Should educational institutions, libraries and archives be able to make available and communicate copyright material in digital format?
  3. Should libraries and archives be able to interloan by digital means?
  4. Should educational institutions be able to cache web pages for teaching purposes?

(ii) Perspective and Proposed Policy Response

165. The Ministry begins from the basic proposition, stated above, that the permitted acts should extend to the digital environment, unless sound reasons exist to the contrary. The Ministry emphasises that this review is not intended to be a broad revision of the permitted acts and the general balance struck between copyright owners and users. The purpose of the review is to determine how the permitted acts operate in respect of digital copyright material and whether they require amendment.

166. Digital technology presents both copyright owners and users with the challenge of developing new business models to meet the demands of the digital era, a process in which copyright will play a significant role. The Ministry considers, however, that copyright legislation should not pre-empt this process by favouring or hindering particular models. Equally, it is not appropriate to use copyright policy either to drive or to implement policy in other areas, such as education or information technology. Rather, the process of copyright reform should be guided by the policy framework set out at the beginning of this paper, based around the purpose of copyright legislation.

167. The second criterion of the Berne Three-Step Test is also relevant in this context. It states that permitted acts should not conflict with the normal exploitation of a work. The WTO Disputes Panel noted that "normal" refers to both current forms of exploitation and also those forms of exploitation that, with a certain degree of likelihood and plausibility, could acquire considerable economic or practical importance. Markets may develop in the digital era that were not viable in the print/analogue world, and the Act should not impede the development of these markets.

168. We note also that a number of the concerns raised by some respondents, in particular users, related more to the lack of licensing schemes for digital materials and also with the impact of contractual provisions on the ability to exercise the permitted acts, rather than to problems with the existing permitted acts. The Ministry recognises that these issues exist, but reiterates that the scope of this review does not encompass broader licensing or contractual issues.

Archiving and Preservation

169. Digital technology offers significant benefits for the preservation of materials held by libraries and archives, in particular because digital works are less susceptible to degradation. Section 55 already provides libraries and archives with fairly broad scope to archive works in their collections. Some respondents considered, however, that the application of the section to preservation by digital means should be clarified. In particular, some respondents considered it was potentially unclear whether libraries and archives could digitise material currently in print or analogue form for the purposes of section 55.

170. The Ministry considers, in light of its conclusion that the term "copying" encompasses digitisation of print or analogue works, 46  that section 55 is already sufficiently broad and technology-neutral to allow the digitisation of works for the specified purposes. This ability to make a copy would also allow format shifting of material, as this is simply making a copy in another format.

171. The wording of section 55(1)(a), however, suggests that copying can only be undertaken in order to preserve the original work by putting the copy into the library's collection. A number of submissions from libraries and archives suggested that they would wish to digitise their entire collections for archival purposes, not just works that are currently at risk. Section 55 does not appear to extend this far. The Ministry seeks views from respondents on whether an exception that allowed digital archiving of entire collections would be appropriate, on the condition that those digital copies could not be made available to the public unless the original work is lost, damaged or at risk.

Digitisation and Making Available

172. Submissions from libraries and archives strongly expressed the desire to digitise collections and make them available, both through on-site terminals and remote Internet access. Several educational institutions also wished to be able to make material available to students in electronic form, for example, through electronic course packs or electronic reserve collections.

173. The ability to make copyright material available in these ways has three main implications for copyright owners:

  1. Firstly, the proposal implicates the right of first digitisation comprised in the exclusive reproduction right, discussed in Part Two. Libraries and educational institutions would, in many cases, be digitising works that have not been made available in digital form by the copyright owner.
  2. Secondly, communication of digitised works will often mean that more than one viable copy of the work is in circulation, as opposed to the making available of a single copy of a print work. This implicates a copyright owner's communication right, as discussed in Part Three. There is also the capacity, through electronic retrieval systems, to give multiple users access to one work simultaneously, thereby potentially decreasing the incentive to buy more than one copy of an electronic work.
  3. Thirdly, a digital version of a work may have different commercial value from a print copy. For example, a searchable database of journal articles has significant value over a catalogue of print copies. The communication of electronic works may, therefore, have implications for existing or developing markets.

174. Many submissions from libraries and educational institutions on this issue suggest that they wish to digitise material not simply for preservation purposes but also to make it available to patrons, both on-site and remotely. The Ministry appreciates that libraries, archives and educational institutions are eager to make use of developing technologies in providing their services. There is, however, a significant difference between archiving and preservation of information and the dissemination and use of it.

175. On the basis of the concerns set out above, the Ministry's preferred policy option is to make provision for libraries and archives to provide access through on-site terminals to material that is made available by the copyright owner in digital form, but not permitting them to digitise material only available in hard-copy for this purpose. The Ministry is interested in views on whether this electronic material could also be made available through restricted remote access.

176. One submission on the discussion paper suggested that sections 51 to 57 should apply to museums, as well as libraries and archives. The Ministry notes that museums that hold public archives (within the meaning of section 2 of the Archives Act 1957) can apply for status as a prescribed archive under section 50(1)(b). Sections 51 to 54, however, would apply to an entire collection. The Ministry, therefore, seeks views on whether all the library and archive sections should be extended to include museums, including why section 50(1)(b) may not be sufficient to meet the needs of museums in this area.

Interloan

177. Sections 53 and 54 of the Act allow libraries to make copies of works for the users and collections of other libraries, subject to certain conditions. Many libraries sought clarification of how these provisions apply in the digital environment.

178. As it is likely that the definition of copying covers digital copying,47 sections 53 and 54 arguably already apply in the digital environment. It would seem desirable, however, to clarify this. For example, would this allow prescribed libraries to digitise a hard-copy work and communicate that to another library?

179. Digital technology is valuable to libraries in this context. Anecdotal evidence suggests that the digitisation of hard-copy material for interloan purposes is common practice, both in New Zealand and internationally. Such activities, however, clearly implicate the rights of copyright owners to digitise their works and make them available in digital form. Copyright owners have expressed concern that the digital distribution of their works increases the number of viable copies in circulation. The Ministry, therefore, seeks feedback on how the Act could reflect the practical need of libraries to use digital technology in their interloan activities, while at the same time recognising any potential risks of digital distribution. For example, under the section 50 of the Australian Copyright Act 1968 (Cth), the requesting library is required to make a copyright declaration that meets the requirements of the section.

Caching

180. Some educational institutions made submissions regarding the caching of websites for instructional purposes. As many websites change regularly, the material that is required in the course of instruction may disappear. As such, it was argued that an exception was required to allow educational institutions to cache these web pages so that they would be available as required.

181. Section 44 provides a range of exceptions for copying for educational purposes. The Ministry considers that it would be appropriate to clarify this provision to allow the caching of websites for educational purposes, perhaps for limited periods, for example, up to six months.

Distance Learning

182. A number of educational institutions noted the advantages that digital technology offers for distance learning, and several sought exceptions that would allow material to be made available online for distance learning students.

183. As noted in the copyright framework at the beginning of this paper, copyright policy has to achieve a balance that does not undermine incentives and impinge unduly on the appropriate commercial exploitation of works by the copyright owners. Similarly, it is not the role of copyright law to lead the development of education policy initiatives. The Ministry does not, therefore, recommend the introduction of new exceptions for distance learning as part of this review.

D. Time Shifting

(i) Issue Summary

184. Section 84 of the Act provides an exception for time shifting, that is the practice of recording a broadcast or cable programme for private and domestic use and solely for the purposes of watching or listening to it at a more convenient time. The discussion paper raised the issue of whether the time shifting exception should be applied to webcasting in a technologically neutral manner.

185. As noted above in Part Three , it is not entirely clear whether webcasting falls within the existing definition in the Act of cable programme service. The Ministry's preferred approach in respect of the communication right, discussed in Part Three, is to create a technology-neutral right of communication to the public, which would cover both the transmission and making available of works. Associated with this is the proposal to create a technology-neutral category for "communication works". As section 84 currently refers specifically to broadcasts and cable programmes, it would need to be revised.

(ii) Perspective and Proposed Policy Response

186. The vast majority of submissions on this topic agreed that webcasts should also be covered by section 84. In light of the changes suggested in Part Three , the Ministry's preferred response would be to amend section 84 so that it applies to all communication works.

187. The Ministry is mindful, however, that the rationale behind section 84 is that users should have the ability to record, for later viewing or listening, one-off broadcasts and cable programmes. A number of respondents noted, and the Ministry agrees, that this rationale does not apply to works that are available through on-demand services that can be accessed at any time on request. The Ministry proposes, therefore, that section 84 should not apply to communication works available on-demand.

E. Format Shifting

(i) Issue Summary

188. Format shifting refers to the practice of copying a work from one format to another. Despite the absence of an exception in the Act for format shifting, it appears to be common practice among users of sound recordings. Other jurisdictions cover this through personal copying exceptions. 48

189. The issues that format shifting raises include:

  • Should format shifting of sound recordings for personal use be a permitted act?
  • If so, what limitations should apply?
  • Is there any economic loss to copyright owners arising out of format shifting of sound recordings for personal use?
  • If so, should a levy scheme apply to remunerate copyright owners for potential lost revenue?

(ii) Perspective and Proposed Policy Response

190. The Ministry considers that the introduction of a limited format shifting exception would provide certainty where the practice is already common and thought by many consumers to be legal. The Ministry proposes an exception that would allow the owner of a legitimately purchased sound recording to make one copy of that sound recording (and the musical work that it contains) in each format for his or her own personal and domestic use. The Ministry seeks submissions on whether a format shifting exception should also extend to works other than sound recordings, along with supporting reasons.

191. The majority of submissions on this issue supported a narrow exception for legitimately purchased sound recordings. Copyright owners, however, have raised concerns about the economic loss that such an exception would cause.

192. The Ministry is not persuaded that this would be the case. It is important to recognise that New Zealand's copyright regime stems from a common law tradition, unlike the civil law "authors' rights" tradition of Europe. Our copyright system provides limited monopoly rights to provide incentives for the investment of skill and labour, so that works are created for the benefit of society as a whole. The common law copyright tradition is, therefore, based primarily around economic rationales.

193. Against this background, evidence has not been presented that there would be any significant economic loss to copyright owners and creators. A common sense approach would indicate that a music consumer would be unlikely to purchase the same work in a variety of different formats. Thus, if the user owns a legitimately purchased copy of a sound recording, the ability to format shift would not appear to substitute a legitimate sale from which the copyright owner would receive an economic benefit.

194. New Zealand's TRIPS obligations require compliance with the Berne Three-Step Test. 49

The Ministry considers that a narrow format shifting exception like that outlined above would comply with each of the three cumulative steps:

  1. Confined to certain special cases: This criteria requires that an exception is both well-defined and of limited application. The exception proposed by the Ministry would be clearly defined in the Act. Further, it would only apply to a narrow range of activity; that is, format shifting of legitimately purchased sound recordings for private and domestic use. As such the Ministry considers the exception would comply with this step.
  2. Not conflicting with a normal exploitation of the work: Copyright provides exclusive rights to owners so that they may extract economic value from those rights. An exception does not conflict with a normal exploitation of a work if it is confined to a scope or degree that does not enter into economic competition with the ways that right holders normally extract economic value from that right to the work.50 Not every use of a work, which in principle is covered by the scope of exclusive rights, necessarily conflicts with a normal exploitation of that work. If this were the case, hardly any exception or limitation could pass the test.51
    A format shifting exemption would implicate the reproduction right. The Ministry considers it relevant that the proposed exception would cover only private and domestic use by one individual and would not allow commercial usage. On the basis that it does not seem likely that music consumers would purchase the same work in a variety of different formats, the Ministry does not consider that such an exception would enter into economic competition with the way a right holder would normally extract economic value from the work.
  3. Not unreasonably prejudicing the legitimate interests of the right holder: Given that any exception to exclusive rights may result in some degree of prejudice to the right holder, the key question is whether that prejudice is unreasonable.52Prejudice to the legitimate interests of right holders is unreasonable if an exception or limitation causes (or has the potential to cause) an unreasonable loss of income to the copyright owner.53 In this case, the Ministry does not consider that unreasonable loss is caused, as there does not appear to be any substitution of sale effect.

195. The issue of a levy on blank recording media (for example, cassette tapes and CDs), which would be distributed to copyright owners, has been raised. Similar schemes have been established in a number of other jurisdictions. 54

Two points are worth noting in this context:

  1. Levy schemes generally exist in countries that have a broader private or personal copying section (in particular, the United States "fair use provisions") than the Ministry's proposed format shifting exception.
  2. The European concept of "authors' rights" is philosophically different from the common law concept of copyright as an economic right. Thus European schemes are not directly relevant to the New Zealand situation.

196. The Ministry has made some preliminary investigations into the applicability of a levy scheme in New Zealand. There would clearly be administrative costs involved in establishing such a system, as well as a cost to consumers who are not purchasing blank media for the purposes of copying copyright works. On the basis of the economic underpinnings of our copyright legislation, it does not appear to the Ministry that a narrow format shifting exception, which arguably does not result in a substitution for a legitimate sale, would justify the establishment of such a scheme. The Ministry would, however, consider evidence to the contrary.

197. Further, TPMs and ERMI arguably lessen the need for such levies, as they provide copyright owners with increasingly stronger methods of restricting copying and collecting royalties for themselves. 55

F. New Exceptions

198. Proposed exceptions for transient copying and ISPs have already been discussed, in Parts Two and Four respectively.

199. The Ministry notes that any new exceptions would, under New Zealand's TRIPS obligations, need to comply with Berne Three-Step Test. The Ministry does not, however, recommend that the test should be codified in our Act, as some respondents suggested.

200. There are two possible new exceptions that the Ministry considers may be appropriate and in compliance with the Berne Three-Step Test:

  1. Decompilation of software: The Ministry considers that an exception for decompilation of software could be included in the Act, along the lines of regulation 50B of the United Kingdom Copyright (Computer Programs) Regulations 1992. This provides for a decompilation exception for the user to obtain information necessary to create an independent program. The information so obtained cannot be used for any other purpose. Various conditions are imposed on the exercise of this exception: for example, it does not apply where the information required is readily available without decompilation or where the information obtained is used to create a programme substantially similar in its expression. Regulation 296A deems void any term or condition in an agreement that purports to prohibit decompilation for these purposes.
  2. Error correction in software: The Ministry supports the inclusion of an exception like regulation 50C of the United Kingdom Copyright (Computer Programs) Regulations 1992. This permits lawful users to copy or adapt a computer program where the activity is necessary for lawful use and not prohibited by a contractual term. Subregulation (2) refers particularly to error correction. Regulation 296A does not apply to regulation 50C and thus it can be excluded by contract.

46  See Part Two.

47  See Part Two.

48  For example, Canada, the United States and the European Union.

49  TRIPS, Article 13 repeats the substantive requirements of the Three-Step Test of Article 9 of the Berne Convention (Stockholm revision). Under TRIPS, the Three-Step Test applies to all exclusive rights, not solely the reproduction right, as under the Berne Convention. Although New Zealand is not a party to the Paris revision of the Berne Convention, we are effectively bound by it through Article 9(1) of TRIPS. A World Trade Organisation Disputes Panel provided guidance on the interpretation of the Three-Step Test in United States - Section 110(5) of the United States Copyright Act (WT/DS160/R, 15 June 2000).

50  Ibid, paras 6.206 and 6.208.

51  Ibid, para 6.207.

52  Ibid, para 6.245.

53  Ibid, para 6.254.

54  For example, the United States, Canada, Germany, France, the Netherlands and Belgium. For a more complete list, see Sterling, World Copyright Law (Sweet & Maxwell, 1998). It should be noted, however, that a recent Industry Canada report suggests that the scheme will be substantially reviewed and possibly narrowed: Industry Canada, Supporting Culture and Innovation: Report on the Provisions and Operation of the Copyright Act (October 2002).

55   A similar point is made in Sterling, World Copyright Law (Sweet & Maxwell, 1998).


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