Australian Digital Alliance/Australian Libraries Copyright Committee Submission to the Copyright Law Review Committee on Copyright and Contract

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Summary

The copyright law should prevail over contracts which purport to exclude its provisions. Contracts should be unenforceable to the extent that they are inconsistent with copyright exceptions.
Exceptions within the copyright law must be preserved as a set of democratically-accountable minimum standards governing access to, and the use of, copyright material.
Copyright material in electronic form is typically accompanied by a licence agreement, setting conditions for its use. Computer programs, almost without exception, are accompanied by such agreements.
A very large proportion of licence agreements purport to override copyright exceptions or otherwise allow control of information that is contrary to public policy (such as controlling access to public domain material or inhibiting freedom or expression).
Some licence agreements provide for usage conditions that are superior to those offered by the Copyright Act. These agreements are typically a function of the superior bargaining position of a particular agency or consortium and are not normally available to smaller institutions or consumers. The capacity of vendors and licenses to make these kinds of agreements should not be affected.
Most electronic licence agreements feature terms unilaterally dictated by the vendor, where the licensee has no opportunity to negotiate.
There is increasing vertical and horizontal integration of 'information providers'. This increasing lack of competition in important copyright markets means that market forces do not constrain unreasonable licensing practices.
Far fewer print materials are subject to licence agreements and their contractual status is frequently uncertain.
Licence agreements for electronic material are of much greater significance because:

They are more prevalent and, indeed, are becoming the standard means to control access to and use of electronic material;

They are increasingly backed by technology which (i) directly enforces terms of agreements; and/or (ii) communicates with the vendor with respect to compliance status.
Licence agreements (especially those backed by technology) are increasingly supplanting the Government?s role in deciding information policy. They threaten to make the public benefit aspects of the Copyright Act redundant. If the legal primacy of licence is confirmed, vendors of copyright material will have no disincentive to insist upon ever greater control of access to and use of information.
Special protection for consumers of mass-market products may be warranted but there must be a more general response from Government to preserve the role of the Copyright Act as the prime instrument of Australia's information policy.
Current legal protection against 'unfair contracts' is not sufficient. It only serves to protect against highly unreasonable contracts rather than, for example, countering a general contractual practice which runs counter to public policy.
The most obvious solution to unfair copyright contracts is to make them invalid to the extent that are inconsistent with the copyright law. Further thought also needs to be given as to how such a policy would interact with the use of technological protection measures.
Another means to combat unfair contracts is to promote the development of industry accepted model licence agreements.
With respect to jurisdiction, no Australian individual or organization should be forced to comply with the laws of a foreign jurisdiction unless they are operating outside Australia's jurisdiction. A vendor operating in overseas markets is in a much better position to understand the legal position with respect to their good or service and thus should be forced to bear the burden of complying with foreign jurisdictions.

[A note on language: the terms 'agreement', 'licence agreement' and 'contract' are typically used interchangeably in this submission.]

Issue 1: The Committee seeks your views as to the extent that electronic trade in copyright material is subject to agreements that try to exclude or modify limitations to the exclusive rights of copyright owners provided in the Act. Can you provide the Committee with examples of any such agreements?

The control of copyright material with licence agreements began in the 70's and 80's with respect to computer programs. Computer programs were generally the first electronic copyright material made available to businesses and consumers.

Unsuccessful attempts have been made in the past to control print materials through contract (defeated in the US in the case of Bobbs-Merrill v Strauss, leading to the codification of the Doctrine of First Sale (Section 109, Title 17)). However, computer programs were accompanied by license agreements for several reasons:

They were legally necessary. Since a computer program, unlike a book, needs to be reproduced on a user?s hard drive. Although a customer is impliedly licensed to install a computer program they have legitimately purchased, a licence makes this explicit;
Being digital, copyright owners of computer programs feared their works would be more vulnerable to piracy than print works

Although legally uncertain for a number of years, 'shrinkwrap' licenses grew to govern purchases of packaged software. As software transactions increasingly moved online, they have been accompanied by click-wrap licences which have the added benefit of a greater appearance of legitimacy (due to the fact that the licensee has an opportunity to read the terms of the contract before purchase). Online software transactions have the further advantage (as far as vendors are concerned) that the customer does not acquire any physical article, allowing for the claim that there has been no sale, only the grant of a licence to access.

Use of licence agreements has since spread to content-based software. Today, such agreements have become common. According to the Yale University Library licensing site: 'Unlike paper materials, digital information generally is not purchased by the library; rather it is licensed by the library from information providers.'

The issue of licensing has a special impact for libraries because libraries were the first and remain the most significant customers for non-computer program licensed products. However, licence agreements covering all types of copyright materials have already spread well beyond libraries and into consumer markets. Consumer use is increasingly being determined by click-through licences.

An indication of how common restrictive licenses are becoming can be seen in a National Library of Australia audit of electronic resources in its collection. It revealed that a majority have licence agreements in some form [Attachment A]. (Note that this audit is not definitive as it was done with internal administrative purposes in mind. Please note that this Attachment is CONFIDENTIAL and not to be published with the rest of the submission).

A very substantial number of licence agreements contain terms or conditions which purport to override or modify copyright exceptions. These include:

restrictions on users printing or downloading or emailing copies of (parts of) the resource - overriding s. 40 (fair dealing for research or study);
restrictions on libraries performing Inter-Library Loan/Document Supply - overriding ss 49 and 50 (reproducing and communicating works by libraries and archives for users & reproducing and communicating works by libraries or archives for other libraries or archives);
restrictions on libraries copying the work for preservation purposes under section 51A.
restrictions on libraries networking the resource across the premises of the library subject to certain conditions - overriding s. 49(5A);

Furthermore, the licence agreements impose 'copyright restrictions' on material which is not subject to the vendors' copyright:

The vendors of 'International trade and environment agreements on CD-ROM' (RMIT and International Trade Strategies) do not own copyright in the contents of their CD-ROM (being multi-lateral trade agreements) and yet purport to restrict reference librarians from copying parts of these treaties to answer enquiries; and
MacquarieNet also purports to restrict reference librarians from answering queries using their product (by refusing to allow the reproduction of an 'extract', however small); given that the amount used by a librarian to answer a query might be as little as a paragraph or even a sentence, this represents the extension of copyright protection to insubstantial portions.
Further examples of licence agreements that override copyright exceptions are attached at [Attachment B].

A particularly interesting example of the future of 'information licensing' can be seen in 'Kerberos: A Case Study' at [Attachment C]

Issue 2: The Committee seeks your views as to whether the situation is any different in relation to trade in copyright material that occurs offline. Can you provide the Committee with examples of any such agreements?

Many non-digital materials come with 'licence agreements'. All commercially rented videos contain a warning which threatens anyone viewing the tape that 'unauthorised copying can result in jail terms and fines of up to $50 000.' These warnings (which vary) conflate civil and criminal copyright infringement (a difference few video watchers would understand) and frequently seek to impose restrictions beyond those contained in the Copyright Act.

A further example of a videotape subject to conditions is worth considering. This video product was produced for the educational rather than home market. This 'set of restrictions' on the actual tape itself says:

"RESTRICTED USE

THIS VIDEO IS PROTECTED UNDER THE COPYRIGHT ACT (1968)

IT MUST NOT BE:

Copied or reproduced in whole or in part in any format including digital;
Rehired or let to another institution or organization;
Used for commercial purposes: ie admission may not be charged to any screening of this program;
Copied, cut, marked or otherwise mutilated;
Broadcast in any form;

UNLESS WRITTEN PERMISSION IS OBTAINED from [the Vendor].

DUPLICATION WITHOUT PERMISSION IS ILLEGAL OFFENDORS WILL BE PROSECUTED"

A further example can be found in the case of print books. Sets of conditions on the title page of (especially British books) are not uncommon.

For example, from the title page of British edition of The Intuitionist a novel by Colson Whitehead (which was purchased in Australia):

"All rights reserved. No reproduction of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright Act 1956 (as amended). Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages."

The contractual status of such 'licence conditions' is unknown. Certainly, there is apparently little attempt to enforce them. If vendors wished to make such articles more firmly subject to licence agreements then they would 'shrink-wrap' them. There is no real reason why a novel cannot be subject to the same contractual regime as packaged software.

Perhaps the foremost reason why this is not done is that consumers would not accept it. The book, for example, is a long traded commodity; to suddenly begin shrink wrapping it would attract consumer ire.

There is also little chance of enforcing such a ?contract?. Any breaches are likely to be small-scale and off-line; flagrant violations such as selling copies in direct competition with the publisher could be dealt with under the copyright law.

In contrast to this stands the position of contracts for digital material. Such material is much more easily the subject of digital piracy and hence more vulnerable. Such material is backed by technology which not only, in and of itself, enforces the conditions of the contract (by disenabling printing for example) but also enables contractual compliance by ?reporting? back to the vendor on the licensee?s activities (cf, Microsoft XP, MS?s planned new operating system which apparently reports to MS each time it boots up).

Issue 3: The Committee seeks your views as to the nature of any such difference.

Few hard copy publications are subject to licence agreements in the same way that electronic resources are. The ADA contends that this is for the following reasons:

The uncertain status of a contract covering print materials. For a valid contract, a licensor must (typically) have some opportunity to read the terms of the agreement before assent. Few print material transactions allow for such an opportunity. Books could be shrink-wrapped and come with licence agreements but any publisher introducing such an ?innovation? is likely to find itself doing so alone.
The fear of digital piracy vs the fear of print piracy. Publishers feel that there is a greater likelihood of piracy in the digital environment and thus greater protection is required.
The seizing of the opportunity of new markets to engineer more ?publisher-friendly? business models. Existing markets for copyright material (such as the book market) are subject to deeply-ingrained conventions. Publishers hope to turn the novelty of new market models to their advantage. For example, there has been a more or less conscious move to eliminate both legal and illegal secondary markets for copyright works. (A number of publishers are aware of the effect that second hand book shops have on their sales. However, such shops are an entrenched part of the book trade. It is unlikely that they will have a digital equivalent.)
The different nature of the medium. Print materials are sold to customers; many electronic resource products are mere licences to access. The Doctrine of First Sale prevents such licences in the print world. (While the Doctrine of First Sale is not law in Australia, it is a deeply entrenched convention within most copyright markets). There may be no such limitation in the digital world, especially when nothing is actually ?sold?.

Issue 4: The Committee seeks your views as to whether the express prohibition on contracting out in s. 47H suggests that provisions elsewhere in the Act can be overridden by contract. Should it be possible to achieve this result by contract? In this regard, should all exceptions be treated alike?

[Breaking the question into constituent parts:]

'(1) The Committee seeks your views as to whether the express prohibition on contracting out in s. 47H suggests that provisions elsewhere in the Act can be overridden by contract.'

The question of whether the copyright law may be overridden by contract is an uncertain one. It has been suggested that the express prohibition against contracting out contained in s. 47H tends to imply that all other exceptions may be overridden This implication flows from the principle of expressio unius est exclusio alterius: an express reference to one matter indicates that other matters are excluded.

However, this in not certain in the case of the Copyright Act 1968. Pearce & Geddes (Statutory Interpretation in Australia, D.C. Pearce & R.S Geddes; Sydney, Butterworths, 1996) contend that:

'Because of these problems with respect to its use [illustrated in Heatley v Tasmanian Racing and Gaming Commission and DFCT v Lincoln Industrial Cleaners Pty Ltd)] the expressio unius est exclusio alterius is applied by the courts with extreme caution. When it is followed, it is used more often as a bolster to a predetermined interpretation than as a result in itself.' [p. 106]

Further, they suggest that:

'The relevant legislation [in which an expresio unius inference may be drawn] might be complex and the similarity between the provisions could have been overlooked. In short, factors other than a deliberate intention to make different provision could explain the variations. Much will depend upon the view that is taken of the particularity with which the legislature has addressed its mind to the subject matter of the legislation.' [p. 105]

The Copyright Act 1968 is a relatively long and complex piece of legislation (such that the Government gave the CLRC a reference to simplify it) which has been amended many times. The section which may by implication give rise to the view that all other exceptions may be overridden, s. 47H, was introduced by the Copyright Amendment (Computer Programs) Act 1999.

The second reading speech (HoR, 11 August 1999) by the Attorney-General, Mr Daryl Williams, states that:

'This bill makes a number of changes to the Copyright Act 1968 which are of great importance to the development of the information economy in Australia. The changes will promote open systems, or "interoperability" of computer programs and products, and facilitate error correction and more effective security of computer systems.'

Section 47H and its effects on contracts that purport to exclude the decompilation of computer programs are barely mentioned:

'One other important provision in the bill will nullify any agreement that purports to exclude the right to run a program in order to study it, the right to make backup copies or the right to decompile a program for interoperability, for error correction and for security testing.'

The bill's potential effect upon all other contracts that might purport to exclude other non-computer program related exception is not considered at all in this industry-specific piece of legislation.

Furthermore, Parliament's concern that exceptions to the rights of copyright owners might be excluded by the actions of vendors is manifested in the exceptions to the technological protection measure provisions in the Copyright Amendment (Digital Agenda) Act 2000. These civil and criminal provisions, in ss. 166A and 132 respectively, provide for a number of 'permitted purposes' for which it is lawful to manufacture, import or supply circumvention devices.

These permitted purposes are sections 47D, 47E, 47F, 48A, 49, 50, 51A or 183 or Part VB. From Parliament?s refusal to see these exceptions made redundant by the use of technology, it may be reasonably inferred that it did not intend to see their redundancy achieved through contractual means.

In summary, there is no clear position in the Copyright Act as to whether exceptions may be overridden by contract.

This uncertainty has led those who use copyright material and are subject to licence conditions to obey such conditions even when they override existing rights. This uncertainty should be remedied with a clear statement that, as is the case with the recent computer program exceptions, no exception may be overridden by contract. (In any case, the CLRC should not entertain making any changes to the computer program exceptions which would enhance the capacity of copyright owners to exclude these provisions by contractual means.)

Contracts contrary to public policy

Under Common Law, a contract may be illegal if it offends public policy. There are a number of ?heads of public policy? which define the type of activity that will lead to an unenforceable contract. These are (according to Cheshire & Fifoot's Law of Contract; N.C. Seddon & M. P. Ellinghaus; Sydney, Butterworths, 1997):

contracts involving unlawful conduct;
contracts prejudicial to the status of marriage;
contracts involving sexual immorality;
contracts defrauding the revenue;
contracts prejudicing the impartiality of public officials;
contracts fettering the ambit of statutory duties or powers;
contracts prejudicial to national or international security;
contracts prejudicial to the administration of justice;
contracts excluding the jurisdiction of the courts;
contracts in restraint of trade. [p. 682]

None of these heads of policy would enable a court to find a contract governing access to and use of electronic materials contrary to public policy.

The law relating to contracts contrary to public policy is not fixed; in In re Morris (1943 43 SR NSW 352), Jordan CJ said:

'From generation to generation ideas change as to what is necessary or injurious, so that 'public policy' is a variable thing... New heads of public policy come into being and old heads undergo modification.'

It is not impossible that a (superior) court could extend the existing heads of public policy to cover uses of information otherwise permitted by law. However, this is a tremendously uncertain question and a somewhat remote hope for the millions of Australians who rely on and value the copyright exceptions recognised by their Parliament.

In summary, the existing legal remedies against unreasonable contracts will not be effective against click-through contracts that purport to over-ride copyright exceptions.

(2) Should it be possible to achieve this result by contract?

Licence Agreements: Private Legislation?

This is the central issue at question. In a conflict between the copyright law and the dictates of a contract, which should prevail?

The law of contract is one of the oldest aspects of the common law. Freedom of contract is a concept held almost sacred by some commentators. But the development of the law, particularly in the Twentieth Century has seen numerous inroads by the State into 'freedom of contract'. These include contracts rendered invalid because of fraud, misrepresentation, unconscionability, incapacity, illegality or because they are contrary to policy. Other laws have implied term or warranties into contracts for the special protection of consumers particularly.

One reason for this increasing intervention in contracts has been a move away from contracts which reflect the traditional contractual model of a negotiated agreement between two equal parties. Form contracts in which all terms are unilaterally dictated by one party and where the second party is not expected to and does not actually read the contract are viewed as a significant departure from received notions of contract law.

This has been exacerbated by the rise of click-through contracts which are both more prevalent than paper form contracts (having the potential to govern almost all online exchanges of information or other products) and possess potentially greater legal validity ('licensees' are required to indicate their agreement prior to the transaction rather than, for example, merely having the opportunity to read the terms on the back of a dry cleaning ticket after the transaction is complete).

As shown by the examples of some licence agreements attached to this submission at Attachments A, B and C and by agreements theoretically permitted under UCITA [see issue 8], current licence agreements not only purport to modify copyright exceptions but also purport to:

control public domain or otherwise freely available material;
control material otherwise outside the control of copyright such as facts or insubstantial portions;
restrict further legitimate distribution and thereby destroy secondary markets;
restrict freedom of expression (by directly restricting discussion of the product [see 'Kerberos: A Case Study' at Attachment C] or by restricting the operation of fair dealing for criticism or review).

Copyright exceptions have been added to the Copyright Act 1968 in a careful and consistent fashion. Their extension to the digital environment in the Copyright Amendment (Digital Agenda) Act was subject to difficult and prolonged consideration by the Executive and Legislative branches of the Federal Government. The ADA cannot understand why the Government would consider allowing commercial copyright vendors to circumvent these provisions.

The Copyright Law Review Committee Report on Computer Software Protection

Section 47H of the Copyright Act prohibits contractual exclusion of the 'decompilation exceptions' chiefly because this was a recommendation of the CLRC Report entitled Computer Software Protection; this in turn was following the provisions of the EC Directive on Computer Programs.

In its report, the CLRC said:

'10.106 The Committee notes its recommendations in this chapter regarding interoperability, back-up copying and decompilation of locked programs would be of little practical effect if parties could rely on contractual provisions to prevent these acts.'

With no further discussion, other than to note the European position, the CLRC makes the recommendation that resulted in section 47H. As far as the CLRC was concerned, the need for protection from contracting out was an obvious and non-controversial point.

It stands to reason, therefore, that if users of the 'decompilation exceptions', who are typically sizable software firms, need such protection in their dealings with competitors, then obviously far less powerful market players such as consumers need similar protection. It may appear peculiar for Parliament to offer protection to the 'fair use rights' of corporations but not individuals.

Freedom of Contract?

It will doubtless be argued by copyright owner interests who are in favor of 'absolute freedom of contract' (something which does not exist in any case) that the market will constrain vendors from offering contractual terms that are unreasonable. There are several reasons why the market alone will not sufficiently restrain such activity:

inequality of bargaining power: large vendors are easily able to impose such terms on small businesses, small libraries or individuals;
gradual change: terms and conditions that strike consumers as manifestly unreasonable become tolerated after years of gradual erosion of their expectations;
new markets: many markets for digital copyright material are new and thus customers do not readily translate their existing expectations from the off-line world to the digital world;
ubiquity of such licensing: licensing agreements that exclude copyright exceptions or other information rights are becoming (have become) widely adopted.
We are living in the 'Age of Information' when the transfer of information is becoming more (economically) important than the transfer of physical commodities. If contracts governing the transfer of information are enforceable this effectively ends Parliament's role in setting Australia's information policy. As technological solutions (backed by contract) become more secure and more widely available, they will be favoured by copyright vendors because they potentially allow for perfect control of all aspects of customer use. This represents a fundamental transfer of power over information from publicly accountable Government to private hands.

Problems with Information Usage Being Governed By Licence Agreements

The following is a list of problems that users face in having to comply with a multiplicity of (not particularly clear) licence agreements rather than with a single (not particularly clear) law:

The inability of small parties to negotiate on equal terms with the vendors especially considering the increased concentration of the 'copyright industries'.
The difficulty of retaining and understanding what may be several hundred licence agreements. While a specialist librarian may be across all licence agreements that a library is party to, there is great difficult in conveying these licence conditions to all staff and users. This difficulty is exacerbated in the situation of multi-campus or multi-institution licences.
The rise in reference to 'authorised users', with the result that library electronic resources may not be available to the public. This changes libraries from open, public resources to inwardly-focussed closed resources. Note that the library provisions in the US Copyright Act require libraries to be open to the public in recognition of their value to all Americans.
The difficulty in knowing exactly what constitutes the contract. A licence agreement may be subsequently altered (sometimes without the licensee's knowledge). There may be further communication between the parties (such as letters or phone-calls); what is their contractual status?
The difficulty in determining how access is to be monitored, maintained and controlled. This is an issue for both vendor and licensee. The licensee must ensure that the product is accessible and available according to the licence conditions while the vendor must ensure that the product is being used in accordance with the contract. Such compliance monitoring is increasingly done by electronic means which may have implications for privacy; this may also allow for remote electronic termination of the contract (and the locking up of the product).
The use of the licence agreement to set the jurisdiction for disputes [see Issue 7]
The trend towards the 'licensing of access to' rather than the sale of information which leaves no lasting archive after the contractual period has finished. This does not just apply to online electronic resources but also CD-ROM materials; a technological measure will lock up the CD-ROM after the expiry date of the contract. (eg, see Attachment B).

To view Part 2 of this document: Issue 5 onwards

To view Part 3 of this document: Attachment B and C