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Part Five: Internet Service Provider Liability


Internal Working Paper

Regulatory and Competition Policy Branch
[ Last Updated 20 October 2005 ]


A. The Issues

136. A web page can potentially include copyright material in the form of a literary work or compilation, an artistic work, a film and/or possibly a cable programme. ISPs can potentially face both primary and secondary infringement for unauthorised use of such copyright material.

137. Copying is a crucial aspect of Internet services. In terms of primary infringement, it seems clear that ISPs should be liable where they are themselves responsible for breaching copyright by their own actions. There are, however, two main issues that arise in relation to the service they provide to third parties as a result of communications by third parties:

  • Should ISPs be liable in relation to transient copying 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?

138. In terms of secondary infringement, the central question is whether ISPs should be liable for the activities of third party subscribers using the ISPs' services to infringe or facilitate infringement, and if so, in what circumstances?

139. If it were decided that some limitation of liability for ISPs should be provided, consideration would have to be given to a definition of "service provider". ISPs undertake a range of activities, including transmitting material, hosting subscriber web pages, hosting bulletin boards and posting their own material. Not all of these activities would necessarily qualify for any limitation on liability.

B. The New Zealand Situation

140. Under the Act, ISPs face two types of liability:

  • Primary liability, where they engage in infringing activity themselves. As infringement of the reproduction right gives rise to strict liability, the infringer is liable regardless of whether he or she knows that copyright has been breached. For ISPs, liability can arise out of the transient copying that takes place automatically during the operation of its services. ISPs also faces liability for their caching activities, that is the duplication of web pages on its servers in order to provide quicker and more efficient access when the page is requested again by a subscriber ("proxy caching").
  • Secondary liability, where ISPs could be said to be dealing with infringing copies in the course of business or providing the means to engage in infringing activities. Secondary liability requires actual or constructive knowledge on the part of the infringer. This type of liability would not arise where an ISP is a mere conduit for the material, unless, perhaps, that material had been brought to its attention.

141. A large number of submissions on the discussion paper, including those from some copyright holders, suggested that ISPs should not be liable for transient copying and some forms of caching. They also generally agreed that ISPs should face liability in some circumstances where they had knowledge of the infringing material. Some submissions pointed to the "notice and take down" provisions of the US Act as one possible model. For the most part, submissions recognised that it would be impractical and costly for ISPs to monitor all material that they transmit or hold on their servers.

C. The International Situation

WIPO Internet Treaties

142. In the development of the WIPO Internet Treaties , liability of ISPs was considered in the context of the making available right. It was a controversial topic, and no standard was included in either treaty. The Agreed Statement on Article 8 of the WCT , however, records the agreement of the parties to the diplomatic conference:

It is understood that the mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of this Treaty or the Berne Convention....

Australia

143. The CADA inserted section 43A into the Australian Act, which creates an exemption for transient or temporary copying that takes place as part of a "technical process of making or receiving a communication". It is unlikely that this covers "proxy" caching. The CADA also limits direct liability for copyright infringement to the person who determines the content of the communication.

144. ISPs could still be secondarily liable for authorisation but section 36 of the Australian Act, as amended by the CADA, in effect codifies the case law on authorisation. It refers to three non-exhaustive factors for the Court to consider:42

  • The power (if any) of the person (e.g. the ISP) to prevent the doing of the act concerned;
  • The nature of the relationship between the person and the person who did the act concerned (e.g. the subscriber); and
  • Whether the person took any reasonable steps to prevent or avoid the doing of the act, including compliance with any relevant industry codes of practice.

Canada

145. At present the Canadian Act does not clearly identify the conditions for imposing liability for copyright infringement on ISP, nor does it explicitly limit their liability. Questions concerning the scope of ISP liability have not yet arisen in Canada, although infringement of the reproduction right gives rise to strict liability in Canada, as it does in New Zealand. Liability for the mere provision of communication services is, however, exempt from liability for breach of the communication right in relation to unauthorised communications that are initiated by third parties.

146. As noted above at paragraph 41

, Canada is also undertaking a digital technology review of its Act. The digital issues discussion paper put forward a proposal for a notice and take down process, which would include:

  • Exemption from liability for communication and copying (including caching where the original communication was authorised by the rightholder);
  • "Notice and take down" provisions for intermediary functions based on receipt by the ISP of a "proper notice" from the copyright holder; and
  • Limitation of ISP liability for economic harm resulting from compliance with the notice.

United States

147. Section 512 of the US Act, as amended by the DMCA, provides limitations on liability for service providers. The definition of "service provider"43 is quite complex, but would seem to apply to ISPs and web hosting companies. If the activity qualifies for the "safe harbor", there will be no liability for monetary damages and only limited availability of injunctive relief. Limitation on liability arises, subject to certain factors, where the service provider:

  • Is acting merely as a data conduit for communications and where transient copies are made automatically in the operation of the network;
  • Makes intermediate and temporary copies of material through an automatic technical process, which is made available online by a third party and then transmitted to a subscriber on demand;
  • Provides storage on its system for material at the request of a third party subscriber. The service provider must not have actual knowledge or reason to know that the material is infringing and must promptly remove the material on receipt of "proper notice" of potential infringement; and
  • Links or refers a user, through an information location tool, to a site that contains infringing material. Again, the service provider must not have actual knowledge or reason to know that the site to which the link is provided contains infringing material and must promptly remove the material on receipt of "proper notice" of potential infringement.

148. "Proper notice" relates to the so-called "notice and take down" provisions, whereby the rightholder can provide notice to the service provider of the infringing material. The notice must comply with the requirements of the legislation in order to be effective. The service provider must take reasonable steps to notify the subscriber that it has removed or disabled access to the material. The subscriber may issue a counter notice, which the service provider must forward to the person who issued the original notice. The service provider must then restore access to the material in not less than 10 working days.44 Any dispute is then between the purported copyright owner and infringer, and the ISP is free from liability.

149. The US Act explicitly states that the service provider is not required to monitor its service or access material in violation of law (e.g. Electronic Communications Privacy Act) in order to qualify for the liability limitations.45

European Union

150. The Directive on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market46 ("E-commerce Directive") and the Copyright Directive set out certain limitations on the liability of ISPs.

151. The E-commerce Directive provides a definition for "service provider".47 Subject to various conditions, liability of "intermediary service providers" is limited for:

  • Mere conduit activities and consequent "automatic, intermediate and transient storage";48
  • "Automatic, intermediate and temporary" caching of information performed for the sole purpose of making the transmission more efficient;49 and
  • Hosting information posted by a third party, unless the service provider has actual knowledge of illegal content or fails to act expeditiously to remove or disable access upon gaining knowledge or awareness of illegal content.50

152. The E-commerce Directive also provides that Member States cannot impose on service providers an obligation to monitor information which they transmit or store or to actively seek facts or circumstances indicating illegal activity.51

153. The Copyright Directive supplements these provisions in the E-commerce Directive by providing a compulsory exemption from the reproduction right for temporary acts of reproduction.52 The Copyright Directive provides that rightholders should still be able to obtain injunctive relief against intermediaries.53

 

United Kingdom

154. The New Zealand Act is substantially based on the CDPA, and so the situation is, at present, similar under their statutory provisions as under ours. The UK is, however, obliged to implement all provisions of the E-commerce Directive relating to ISP liability.

155. It would seem that most Member States have yet to implement the E-commerce Directive. The UK Department of Trade and Industry launched its consultation on draft regulations implementing the E-commerce Directive in March 2002, with consultation closing in May. The UK government is currently considering those regulations.

D. Options

156. In determining the extent to which ISPs should be liable for copyright infringement there are several factors that need to be considered. First, any provisions dealing with ISP liability should ideally provide users, owners and ISPs with some degree of certainty about their position.

157. Secondly, as New Zealand is a geographically isolated country, the Internet offers significant opportunities for accessing information in a timely and cost efficient manner. Imposing unduly heavy liability on ISPs may affect investment in Internet service provision, and lead to limited services and choice for consumers.

158. Thirdly, while it is important for New Zealanders to have access to these services, it is also important that both domestic and international copyright owners have confidence in the protection afforded them by our copyright regime. They must have some avenues to enforce their rights. To this end, ISPs are often easier to identify than the individual who posts or sends infringing material and they provide a convenient point at which to block that material.

159. In terms of options, the treatment of transient copying, addressed in Part Three , will have an impact on ISP liability issues. Further options for addressing ISP liability include:

  1. No change to the Act, and rely on the doctrine of implied licence in relation to copies made or stored by ISPs in providing services to subscribers.
  2. Impose strict liability on ISPs for all copyright infringement regardless of knowledge.
  3. Exclude ISPs from liability in all circumstances for both their own activity and that of their subscribers.
  4. In terms of primary liability, exclude ISPs from liability in some circumstances, for example: (i) where they act only as a data conduit; (ii) where transient copies are made or temporarily stored through automatic processes of the network; or (iii) where their information location tools provide links to infringing material.
  5. In terms of primary liability, exclude ISPs from liability for proxy caching where this activity improves the efficiency of the network and the service to subscribers. This could be tied to compliance with an industry code of practice.
  6. In terms of secondary liability, formalise the authorisation and knowledge requirements in the manner of the Australian Act.
  7. In terms of secondary liability, provide a detailed "notice and take down" regime in the manner of the US Act.

E. Secondary Infringement Provisions and File Sharing Services

160. A number of submissions referred to the Napster litigation in the US, and to the implications of file sharing services for copyright. In New Zealand, as in other countries, the copyright regime is unlikely to impose liability on file sharing services where they cannot be held to have "authorised" infringing activity, or at least the nature of that liability is uncertain.

161. Section 37(2) of the Act provides:

Copyright in a work is infringed by a person who, other than pursuant to a copyright licence, transmits the work by means of a telecommunications system (otherwise than by broadcasting or inclusion in a cable programme service), knowing or having reason to believe that infringing copies of the work will be made by means of the reception of the transmission in New Zealand or elsewhere.

162. It is unlikely to capture a service such as Napster, or indeed the less centralised services that are now developing. The service is not itself involved in copying infringing material directly and it unlikely that they would be caught by the authorisation factors, like those set out in the Australian Act (see paragraph 144 ).

163. The first question to consider is whether this is, in fact, a copyright issue such that it can be appropriately dealt with within the copyright regime. If it is considered to be an issue within the field of copyright law, the second question is whether it is appropriate to amend the Act to apply to these services. It may be difficult to do so in a way that is not quickly outstripped by technology. Equally, in an attempt to maintain technological neutrality within the provision, there is a risk that it could be drawn so broadly as to have unintended consequences for legitimate services.

164. Further consideration will be given to whether this is a matter to be addressed as part of this review.

42 Copyright Act 1968 (Australia), sections 39B and 112E provide that the provision of facilities for the making or facilitating of a communication does not amount to authorisation.

43 Copyright Act 1976 (US, section 512(k)(1).

44 Ibid, section 512(g).

45 Ibid, section 512(m).

46 2000/31/EC, 8 May 2001.

47 Ibid, Article 2.

48 Ibid, Article 12.

49 Ibid, Article 13.

50 Ibid, Article 14.

51 Ibid, Article 15.

52 Copyright Directive, Article 5.

53Ibid, Recital 59.


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