Disembodied electrons and incorporeal transmissions: Federal Court finds no copyright in a data signal. 11/02/2015
Seven Network Ltd v Commissioner of Taxation  FCA 1411
This case concerned the subsistence of copyright in a data signal used by Seven in its live coverage of the Olympic games.
The signal was provided to Seven by the IOC pursuant to broadcast rights agreements. The signal comprised live coverage of different fields of play contested at the Games.
The question for the Court was whether the signal could be protected by copyright as a cinematograph film, in so far as it consisted of an ‘aggregate of visual images embodied in an article or thing’: s 10(1). The case turned on the meaning of ‘embodied’.
This question arose in the context of a dispute between Seven and the Commissioner of Taxation in relation to Seven’s liability to deduct royalty withholding tax from payments made to the IOC in relation to Seven’s use of the signal.
Under the relevant double taxation agreement between Australia and Switzerland, liability to deduct withholding tax is imposed upon an Australian resident where they make payments to a Swiss resident in consideration for the use of intellectual property (including copyright) in Australia. The issue was thus whether the fees paid by Seven to the IOC (a Swiss resident) in respect of the signal amounted to a royalty in relation to which withholding tax was required to be deducted.
Seven’s argument was that the relevant payments did not attract royalty withholding tax as the transaction did not involve a dealing with intellectual property. As the signal was not an ‘article or thing’ in which something can be embodied, it was not capable of being protected by copyright as a cinematograph film. It followed that Seven was not acquiring any right to use intellectual property, but merely a right to access a stream of data. Accordingly, the liability to deduct withholding tax did not arise.
The Commissioner of Taxation argued that the visual images and sounds comprising the live coverage of the Games were ‘embodied’ in the signal (and therefore protected by copyright as a cinematograph film) because those sounds and images were capable, with the aid of a receiving device, of being reproduced from the signal. The transaction between the Seven and IOC could therefore be characterised as the payment of consideration for the use of intellectual property, and thus one to which the liability to deduct withholding tax arose.
What is meant by “embodied”?
In order for the data signal to be characterised as a cinematograph film, the Commissioner of Taxation needed to show that the signal was an ‘article or thing’ which ‘embodied’ the Games coverage. The Copyright Act provides that sounds or visual images shall be taken to have been embodied in an article or thing if the article or thing has been so treated in relation to those sounds or visual images that those sounds or visual images are capable, with or without the aid of another device, of being reproduced from the article or thing: s 24.
In Seven’s view, s 24 had no relevance to the case because it is concerned with articles or things in physical format (such as discs and tapes) that have been treated so that they are capable of reproducing sounds or visual images. Further, although the images were ultimately shown on television, this was irrelevant because there was no embodiment of the images and sounds in the signal.
The Commissioner of Taxation argued that “embodiment” does not require that the article or thing must be tangible, and extends to an aggregate of visual sounds and images capable of being shown as a moving picture irrespective of the means of embodiment.
The Court held that, on the facts, there was no embodiment of an aggregate of visual images in the signal since no visual images or sounds in any form were capable of being reproduced from it. The Court drew a distinction between the signal’s capacity to produce sounds and visual images (which was accepted on the facts) versus the signal’s capacity to reproduce sounds and visual images (which was not accepted on the facts). The Court emphasised that what was required by the terms of s 24 was a capacity for reproduction. Although the Court accepted that the signal, upon reception, enabled Seven to produce its own broadcast, it found that since no picture, image or sound was permanently recorded in the signal, it was impossible to reproduce the sounds and images from the signal prior to reception. Accordingly, the signal was incapable of ‘embodying’ the visual images and sounds in the relevant sense. In the words of Bennett J:
The signal is more in the nature of the fleeting use of a medium of communication than an aggregate of sounds and visual images that may convey a cinematograph film of the Olympic event to the viewer.
As the data signal was not protected by copyright as a cinematograph film, the Court found that the amount paid to access the data signal was not a payment which attracted the liability to deduct withholding tax under the relevant double taxation agreement.
In this case, the Court cited with approval previous judgments which emphasise that provisions of the Copyright Act should be interpreted broadly in order to protect technological developments not contemplated or understood at the time the provisions were enacted, provided the relevant new technology satisfies the words of the provision, liberally construed. However, in this instance, the Court appears to have taken a narrow view of “embodiment”, focusing on the means adopted to relay sports coverage, rather than the end product.
2014 In review 17/12/2014
Here is an overview of some of the major developments this year.
Copyright is something close to our hearts, and this year, Valentine’s Day ushered in the release of the Australian Law Reform Commission’s much awaited report on Copyright and the Digital Economy. The centrepiece of the Report was a recommendation to introduce a new, broad “fair use” exception into Australian copyright law.
The Report was the focus our Symposium in March, however, things have gone quiet since, while the Attorney-General considers the Report. We expect to hear (more) about the Government’s response to the Report in 2015.
Online Copyright Infringement
In July the Government released a discussion paper looking at options for addressing online copyright infringement. The discussion paper put forward three proposals: amending the law in relation to authorisation liability; introducing mechanisms for blocking infringing sites; and extending the safe harbour provisions to service providers other than ISPs. The discussion paper attracted a lot of interest, with the Government receiving over 600 submissions from interested parties. The ACC’s submission is available to download from our website.
On 10 December the Government announced its policy on online copyright infringement. In a joint media release, Senator Brandis and Minister Turnbull stated “the Government has sought the least burdensome and most flexible way of responding to concerns about online copyright infringement, while protecting the legitimate interests of the rights holders in the protection of their intellectual property.”
The approach has two elements:
1. The Government will be introducing legislation to enable rights holders to seek a court order to block offshore sites which have the predominant purpose of infringing copyright.
2. The Government has outlined a process which it expects content and communications industries to engage discussions to agree with the elements and implementation of a code which will form the standard by which ISPs behaviour will be judged when placed on notice of infringing activity on their networks.
The Government expects the code to include the following elements:
a) ISPs to take reasonable steps to send education and warning notices when placed on notice of infringing activity on their networks. The ISPs’ notices should be in a manner proportionate to the infringement.
b) Informing customers about the implications of copyright infringement and provide information about affordable and timely access to content.
c) Safeguards for consumers.
d) Fair apportionment of the costs between rights holders and ISPs.
e) Ensure that smaller ISPs are not unfairly or disproportionately affected; and
f) Include a facilitated discovery process so rights holders can take steps to protect their rights by taking civil action.
The code will be registered under Part 6 of the Telecommunications Act (which is the process currently contemplated in the Copyright Act).
The parties have been given until 8 April 2015 to agree on the code. Failure to arrive at agreement will mean the Government will step in and impose a code either through changes to the regulations of the Copyright Act of through the Australian Communications & Media Authority.
The ACC looks forward to making a constructive contribution to this process. You can read more about the proposal on the Minister for Communications website.
Copyright has also come under scrutiny from the Treasurer’s portfolio in 2014. In September, the Harper Panel reviewing competition law and policy identified intellectual property as a priority area for reform. The recommendations in its draft report included abolition of the remaining restrictions on parallel importation, abolition of the exception for intellectual property in s 51(3) of the Competition and Consumer Act and a review of intellectual property by the Productivity Commission or similar body. In our submission we dealt with these issues as well as other issues such as geographic market segmentation and the use of VPNs. For further information download the ACC submission from our website. The Panel is due to report to Government by March 2015 so we can expect to hear more of this in the coming year.
A reform to extend the legal deposit requirements for the National Library of Australia to online material snuck into the Senate as part of Civil Law and Justice Legislation Amendment Bill 2014 at the end of October. The Bill is available here. It is described in the Attorney’s second reeding speech as reducing the regulatory burden on publishers, although this remains to be seen. This follows consultations with stakeholders in 2011 and 2012. The ACC’s 2012 submission is available to download from our website. We look forward to learning more about the proposal.
And over in the industry portfolio, the Advisory Council on Intellectual Property has released an options paper on Review of the Designs Systems. This includes recommendations for addressing the complex issue of copyright/designs/overlap. The options paper is available from the ACIP website and submissions are due by 23 January 2015.
In June the Australian Government signed the Marrakesh Treaty to Facilitate Access to Published Works for Persons who Are Blind, Visually Impared or Otherwise Print Disabled. In November the Attorney-General’s Department published an options paper looking at ways of implementing the treaty. As readers may recall, the Council was the only Australian NGO who attended the diplomatic conference where the treaty was concluded. We have made a submission urging the Government to ratify the treaty quickly. Our submission is available to download from our website.
While Australian Dr Francis Gurry has been reappointed as Director General of the World Intellectual Property Organisation (WIPO), progress on discussions in the Standing Committee on Copyright and Related Rights have been difficult in 2014. There are two main items on the Committee’s agenda: a treaty to protect broadcasting organisations; and discussion about exceptions for libraries, archives, educational and research institutions. The final meeting for the year was held in Geneva on 8 – 12 December. More information is available on the WIPO website.
Free Trade Agreements
2014 has seen the Australian Government conclude free trade deals with. South Korea. Japan and China. Each includes a chapter on intellectual property, although the text of the agreement with China has yet to be made public. The agreement with South Korea came into force on 12 December. The Joint Standing Committees Treaties has recommended that the Government ratify agreement with Japan and it is expected to come into force early in 2015.
Meanwhile, negotiations on the Trans Pacific Partnership Agreement (TPP) continue although we understand that agreement has now been reached on the intellectual property chapter. The TPP is expected to conclude in 2015. And the Government is engaged in negotiation of another multilateral trade agreement, the Regional Comprehensive Economic Partnership (RCEP). RCEP includes ASEAN countries plus China, Japan, India, Korea and New Zealand. There has been little public discussion of RCEP and copyright issues to date. For more information, see the DFAT website.
2014 has been another quiet year for copyright litigation in Australia. However, there have been a number of landmark cases overseas.
ABC v Aereo
In April the ACC was one of a number of parties who filed a ‘friend of the court’ brief in the Supreme Court of the United States in ABC v Aereo. The Court has held, by majority, that the Aereo TV streaming service was a “public performance” within the meaning of US Copyright law and therefore amounted to an infringement of copyright in the underlying broadcasts. Aereo has since gone out of business.
The Aereo business model was controversial, as it was clearly designed to overcome the public performance right in US copyright law. In this way, it was analogous to the Optus TV Now litigation in Australia. Ginsburg and Giblin have recently commented on the undesirability of legal outcomes being so heavily dependent on technological design. They have also written about the litigation in terms of the United States international treaty obligations.  This was the focus of the ACC’s involvement in the litigation. You can read more about the case in our June newsletter.
The United States courts continue to take different approaches to the fair use doctrine.
In June, the United States Court of Appeals for the Second Circuit rejected the appeal in the long-running dispute between the Authors Guild and the Hathitrust Digital Library, holding that the full text search and disability uses of the library amounted to fair use. For more information, see our previous news alert from 11 June.
Meanwhile, in October, the United States Court of Appeals for the Eleventh Circuit overturned a fair use decision by the District Court in favour of Georgia State University. As we have noted previously, the Eleventh Circuit Court of Appeal biased its fair use analysis on equitable principles and the text of the fair use provision in the United States Copyright Act. The Court of Appeal did not stray far from this analytical framework and did not emphasise “transformative use” as the primary consideration and treated all four factors holistically. In this regard, this puts the Eleventh Circuit at odds with more expansive fair use circuits such as the Ninth and the Second Circuits. For more information see our October news alert.
On 3 December, the United States Court of Appeals for the Second Circuit heard an appeal by the Authors Guild from the decision of Judge Chin in the long running dispute over the Google Books project. One of the judges hearing the appeal is Judge Pierre Leval who is commonly cited as the originator of the “transformative use” doctrine. We therefore query the prospects of success of the appeal. A decision is expected early in 2015. You can read more about the case on our website.
What to expect in 2015?
We anticipate copyright decisions from the High Court, the Full Federal Court and the Copyright Tribunal of Australia in 2015. We look forward to bringing you this news in the New Year!
1. See Giblin, Rebecca and Ginsburg, Jane C., We (Still) Need to Talk About Aereo: New Controversies and Unresolved Questions After the Supreme Court's Decision (October 24, 2014). Forthcoming, Vol 38, Columbia Journal of Law & the Arts. Available at SSRN: http://ssrn.com/abstract=2514648