Out on the Second Strike: Copyright Tribunal Refuses Order for Payment

Tuesday 10th March 2015
Article written by: Paul Johns

In its most recent decision, the Copyright Tribunal has for the first time declined to make an order for payment under the “Three Strikes” graduated response copyright regime due to misidentification of one of the infringement notices sent to an account holder.

In this case, Recorded Music NZ (RMNZ) acted as agent for Universal Music and Warner Music, two of the ‘big three’ record companies active in New Zealand, over the illegal sharing of recordings by Amy Winehouse, Clean Bandit and Lana Del Rey.  The IP address of a Spark account holder was detected sharing these tracks between February and July of 2014, triggering each of the three infringement notices in turn.

Under the regime, introduced through the Copyright (Infringing File Sharing) Amendment Act 2011, copyright holders (or their agents) who detect that their material is being shared without authorisation can require the relevant Internet Protocol Access Provider (IPAP – usually an ISP) to send notices to the holder of the infringing account. The IPAP formulates and sends these notices based on the statutory requirements and regulations, acting as middleman to prevent disclosure of the account holder’s personal information.

These notices escalate from a Detection Notice, which simply informs the account holder that their account has been detected illegally sharing copyrighted files and the methods of challenging this allegation, to a Warning Notice with effectively the same content. The final strike is an Enforcement Notice, which notifies the account holder that enforcement action may be taken against them.

It was the second of these notices sent by Spark that tripped RMNZ - instead of a Warning Notice, the account holder was informed they had been issued an Enforcement Notice, indicating that they no longer had the opportunity to challenge their position before the Tribunal became involved. A valid Enforcement Notice followed, but in her decision Tribunal Member Jane Glover noted that Section 122O of the Act requires that all 3 notices be issued “in accordance with [the] Act” and said that the non-conformity of this notice was more than minor:

“From the point of view of an account holder, it is highly material to know whether a notice is a warning notice (in which case there is still an opportunity to avoid proceedings by ensuring that no further infringing activities take place), or an enforcement notice (by which time the rights owner has the right to make an application to the Tribunal.)”

Because of this flaw the Tribunal concluded that the warning notice was not issued in accordance with the Act and so made no order for payment. The Tribunal also acknowledged the difficult position rights holders are placed in as they are not responsible for sending infringement notices, but are forced to bear the consequences for any errors in those notices. The Act requires that IPAPs send a copy of the final Enforcement Notice to the rights holder, but does not place the same requirement on the other notices. This meant that RMNZ was unaware of the misidentified Warning Notice until the matter was already before the Tribunal.

RMNZ had also informed the Tribunal that the account holder had contacted it directly and admitted that the infringements were committed by a family member. In response RMNZ had offered to consider withdrawing the case if the account holder agreed to reimburse its costs and ensure that their computers were free of file-sharing software and infringing material, but there was no further communication with the account holder, nor did this affect the outcome of the Tribunal’s decision.

Importantly, this type of procedural failing by an IPAP may lead to it losing its protection from secondary liability for the infringing activities of their users under Section 92B of the Act.  Under subsection (2A), that protection only applies provided that IPAPs comply with the statutory requirements of Sections 122A-U.  In the absence of proper compliance, rights holders may consider an action for secondary copyright infringement against an IPAP which has been put on notice of users’ infringements.  This may particularly be so if there has been a sustained pattern of failures by the IPAP.  Given the likely difficulty in proving a primary infringement, rights holders may also consider whether such an IPAP’s failures also give rise to liability under other heads such as negligence or breach of statutory duty. These issues have yet to be considered by the courts.  The reality is that damages for any single instance of such failure is likely to be very low. Nevertheless, ISPs should take care to uphold their statutory duties to the letter lest rights holders be emboldened to take aim at a target with pockets deeper than those of infringing users.

This situation highlights the complexities and foibles of New Zealand’s file sharing legislation, in particular the difficulties for rights holders in seeking enforcement of their rights through the regime and tribunal process. It also emphasises the importance of the role IPAPs play in the process, as well as the priority that the legislation and Tribunal give to ensuring that account holders are given accurate information.

RMNZ has been the sole party to bring action under the regime to date, aiming to deter infringing use, promote the use of legal services and keep the issue in the public eye. Other copyright holders including the film industry have cited the high costs of sending notices and engaging the tribunal compared to the potential return as making any action, successful or not, a losing proposition.

This article was written by Sue Ironside and Joseph Bracewell.

This article is intended to summarise potentially complicated legal issues, and is not intended to be a substitute for individual legal advice. If you would like further information, please contact a Baldwins representative.

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