The risky business of streaming devices: New Zealand Courts find against providers of Kodi boxes

Article written by: Paul JohnsThomas Huthwaite    |    Monday 10th June 2019

New Zealand’s primary subscription television provider, Sky Network Television[1] has successfully prevented, in two separate proceedings, the advertisement and sale in New Zealand of multimedia streaming devices intended to circumvent subscription TV services. This has been achieved without needing to pursue the entities hosting infringing content, or end-users of the devices as primary infringers of copyright, in part by alleging that the sellers’ marketing claims were unlawful under consumer protection legislation.


The devices in question were expressly advertised as alternatives to paid subscription services, allowing their users to search the internet for free streams of various digital media. Such devices are often referred to as “Kodi boxes”, referring to the open-source Kodi software, which is easily customisable with content add-ons. While an official installation of Kodi is completely legal and comes with no video content, there are countless unofficial add-ons which are easily installed and provide access to illegal content.

Until the advent of over-the-top streaming services such as Netflix, Sky was a near-monopoly provider of pay TV services in New Zealand. For the time being, it still remains the local licensee for much of the most popular international and domestic live sport. This provides it with a key competitive advantage in the New Zealand market over streaming services. These services do compete more closely in respect of film and television series content.

The two recent New Zealand cases dealt with similar issues in different ways. They are: Sky Network Television v My Box [2018] NZHC 2768 (“My Box”), and Sky Network Television v Pullan [2018] NZDC 12918 (“Pullan”). Interestingly, My Box was heard first by the High Court[2] but decided second, primarily under the Fair Trading Act 1986.[3] In the meantime, Pullan was heard by the District Court[4] and focussed on first establishing copyright infringement under the Copyright Act 1994, although the claims were again grounded in the Fair Trading Act.

Each judgment refers to European case law, which is briefly summarised below. New Zealand courts traditionally rely more on case law from fellow Common Law jurisdictions, in particular the UK and Australia. 

Background

The rise of streaming devices

Around the world, copyright owners and exclusive licensees (“rightsholders”) of broadcast and film content have been struggling to prevent copyright infringement, particularly with the continual development of digital technologies and methods of distributing digital media.

Previously, rightsholders focussed their attention on websites hosting unauthorised copies of copyright material or links to the same. These sites allowed direct download, peer-to-peer sharing, or streaming. The Courts have had little problem holding such websites liable for copyright infringement. However, the problem has been the ease with which the websites continue to operate by shifting domain or jurisdiction, and otherwise remaining semi-anonymous (for example, The Pirate Bay[5]).

A more recent trend has been for rightsholders to pursue the sale of multimedia streaming devices, pre-installed with software add-ons that link to unauthorised steams of copyright material. Although such devices and their sellers are not usually directly responsible for the existence of the infringing content, they are often promoted as a means for playing ‘any’ digital content that can be found online. In some instances, the devices are even promoted as a specific alternative to paid subscriptions for the same content – for example, “why pay for Netflix when you can watch for free?”

Brief summary of European law

The European courts have dealt with streaming devices by extending liability for unauthorised “communication” of copyright works to the sale of devices which facilitate access to unauthorised streams of copyright material. Primary liability for communication, and secondary liability for accessory infringement have therefore been merged. This indicates a clear willingness on the part of the CJEU to develop the law on “communication” in a way that ensures flexibility for future digital technologies, particularly given the prominent gap in European copyright law for secondary liability. However, while this interpretation may be pragmatic , it perhaps goes beyond the proper meaning under New Zealand law. The need for an extended definition is also not as clear. The New Zealand Copyright Act specifically provides a definition of “communication”,[6] and also specifically provides for secondary infringement – for example, by way of “authorising” copyright infringement.[7]

The European case law has largely focussed on the interpretation of article 3(1) of Directive 2001/29 (the “Copyright Directive”).[8] That article relates to the right of communication:

1. Member States shall provide authors with the exclusive right to authorise or prohibit any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access them from a place and at a time individually chosen by them.

The Copyright Directive further explains that “communication” is to be understood in a broad sense, covering all potential forms of communication to the public, whether by transmission or retransmission by wire or wireless means, including broadcasting.[9] It is therefore not limited to specific technical means or processes. However, the two essential criteria of “an act of communication” and “to the public” are not defined any further, and have accordingly developed through case law. Although the ECJ has not been consistent in its application or weighing of relevant factors, the following test has been accepted:

  1. The user has made an indispensable and deliberate “intervention” (i.e. a deliberate and conscious act);
  2. The work has been “communicated” to a new public; and
  3. The communication has a “profit-making” nature.

In cases such as Svensson v Retriever Sverige AB [10] and GS Media BV v Sanoma Media Netherlands BV[11], which both related to sharing hyperlinks to copyright works, the CJEU attempted to strike a balance between copyright protection and free workings of the internet. More recently, in Stichting Brein v Wullems[12], the CJEU expanded the principles of “communication” to encompass the sale of a physical device which provides access to online streams of copyright works. The CJEU noted that the devices were sold in full knowledge that they facilitated access to infringing material, that such intervention provided end users with the means for infringement, and that there was a profit-making intention.

Rightsholders have been pleased with the decision, which provides a mechanism for taking action against providers of infringing devices, rather than against end users.

The word “communication” is mirrored in the Berne Convention, to which New Zealand is a signatory. Articles 11, 11bis, 11ter, and 14 of the Berne Convention provide authors with exclusive rights to authorise “any communication to the public”. Similarly, the New Zealand Copyright Act 1994 provides that “Communicating a work to the public is a restricted act in relation to every description of copyright work.”[13] However, the CJEU three-part test of intervention, communication, and profit-making is not specifically part of New Zealand law.

With that background in mind, we arrive at two recent New Zealand cases.

The Pullan v Fibre TV case[14]

Sky Network Television (“Sky”) is the largest pay-television broadcaster in New Zealand, providing content sourced locally and from overseas. Its primary service is broadcast by satellite, although it also provides internet-based services. Most of Sky’s services require a monthly subscription. Much of its content is acquired under licences exclusive in New Zealand. However, overseas-sourced content will typically be licensed to third parties in other jurisdictions.

Pullan, trading as “Fibre TV”, started advertising and selling a multimedia streaming device called the “Fibre TV Box”. This device was pre-programmed with Kodi software and addons designed to enable users to find free (including unauthorised or pirated) video streams, and was advertised along the following lines:

  • “All of the content with none of the fees.”;
  • “Streaming Live Sports channels from all the major global networks, subscription free.”;
  • “Including all Sky’s movie channels and all Netflix.”; and
  • “Even better movies on demand (no ads) and the latest releases.”
  • “Once you have Fibre TV you never have to pay for content again.”

In addition, Fibre TV answered user questions on its Facebook page to the effect that:

  • “If Sky Sports NZ becomes available for streaming we will definitely be adding it to the build as soon as we can… some New Zealand content is available, it is just a matter of finding it.”
  • Specific sports games and events were also noted as being available, including All Blacks[15] rugby games and Black Caps[16] cricket games. Sky held the exclusive rights to broadcast some of these sporting events.

Further still, Fibre TV warranted in its purchase agreement that “The Services and the Materials provided… will not infringe or violate any intellectual property rights or other right of any third party.”

Sky sought judgment for breach of the Fair Trading Act 1986, contending that Fibre TV represented its devices to be legal, when in fact the devices, their marketing, and use would infringe the provisions of the Copyright Act 1994. Sky relied heavily on Stichting Brein v Wullems.[17] Although this CJEU case was acknowledged by Judge Macaskill as not formally binding or persuasive,[18] its reasoning and the three-part CJEU test for “communication” was ultimately adopted.[19] The sale of the Fibre TV device was accordingly deemed a “communication to the public” and unlawful under the Copyright Act.[20] While the New Zealand definition of “copying” was acknowledged,[21] there was no mention of the definition of “communication” (which, unlike the Copyright Directive, is expressly provided for in the New Zealand Copyright Act).[22] This is particularly surprising given the breadth and potential helpfulness of the definition, which includes to “transmit or make available by any means”.

Leaving aside the question of whether the copyright laws of Europe and New Zealand are aligned closely enough to justify the application of the CJEU test, the New Zealand judge then took a step further to hold that the Fibre TV service (referring to the features on offer, rather than the Fibre TV device itself) results in copyright works being “copied” without authorisation, and was therefore also unlawful under the Copyright Act.[23]

Judge Macaskill therefore appeared to hold Fibre TV liable for the infringement deemed likely to occur by the “users of the media players”.[24] He considered it irrelevant whether the “streaming” was done by the server or the end user, and irrelevant that the content streamed was only held in the memory of the Fibre TV device temporarily.[25]

In a less contentious section of the judgment, Judge Macaskill held Fibre TV to have “authorised” copyright infringements, also contrary to the Copyright Act.[26]

Although Fibre TV appears to have raised the issue of insufficient evidence of copyright subsistence, and insufficient proof of infringement by way of copying, Judge Macaskill was content to simply assume that at least some of the streamed content would be protected by copyright. He considered it “reasonable to infer” that some users would have streamed copyright content.[27] This is significantly different reasoning to that applied by the US Supreme Court[28] and the UK House of Lords[29] in the days of cassette copying, when it was estimated that only a small minority of recordings using the device in question would be considered copyright infringement. That reasoning was long used as a precedent for the position that companies are not liable for their consumers’ copyright infringement if the technology in question is used substantially for non-infringing purposes. It is of course possible that digital media has significantly changed the landscape, but longstanding and authoritative cases such as these have continued to be cited in respect of digital works.[30] Returning to Fibre TV, Judge Macaskill ultimately found copyright infringement, concluding that the “defendants have breached the plaintiff’s copyright” by way of communication (by selling media players), coping (by enabling users to stream media), and authorisation (for the purpose of streaming copyright content).[31]

It should be kept in mind that all of the above was concluded without engaging in a detailed consideration of the usual copyright considerations well-established in New Zealand jurisprudence, such as: Is there actionable copyright? Does the evidence establish that copyright subsists in a particular work or works? Is there evidence that Sky the owner of that copyright, and/or can Sky enforce copyright here as exclusive licensee? Was there copying, or some other restricted act, and if so, have the usual legal criteria been met (e.g. substantiality, objective similarity, and causal connection)?

The judgment then turns to the Fair Trading Act. Judge Macaskill concludes that Fibre TV and its directors engaged in conduct that is misleading and deceptive or likely to mislead and deceive “by breaching the plaintiff’s copyright”.[32] In particular, Fibre TV represented to purchasers that using media players for the purpose of streaming copyrighted content does not infringe Sky’s copyright when this is not true. Apart from the largely unjustified finding of infringing Sky’s copyright, (as opposed to copyright for which Sky has an exclusive license to broadcast), the Fair Trading Act section of the decision is arguably more orthodox than the copyright section. It is clear from Fibre TV’s Facebook statements and purchase agreement that the Fibre TV device was advertised as being completely legal, while at the same time providing access to almost any copyright broadcast work without payment of a subscription fee.

In conclusion, Sky was entitled to an injunction (the wording of which is still to be determined), as well as damages (also to be determined), and legal costs.

Fortunately, not long after the Pullan judgment issued, the High Court issued its judgment for a case with very similar facts. The reasoning of the High Court is somewhat more orthodox and relies less heavily on any European jurisprudence.

The My Box case[33]

My Box began trading in late 2016, promoting itself online. It supplied its customers with a “My Box” multimedia device for a one-off fee. As with Fibre TV, the My Box devices were preloaded with Kodi software allowing the user to search the internet for video streams of their choosing. Many (although certainly not all) of those streams were for unauthorised or pirated content. 

My Box also advertised itself as an alternative to Sky, comparing the fees payable (“why would you pay $80 per month for Sky?” and “never pay for Sky again”), the content available (“Sky channels available” and “stream all your favourite shows and Sky sporting events for free”), and even saying “My Box is 100% legal” and “is not breaking any laws”. Further, in the lead up to major sporting events, My Box would advertise its services in direct competition to Sky.

Sky sued My Box for misrepresentation under the Fair Trading Act.[34] Sky made no claim of copyright infringement per se, and, if it had, its summary judgment application would likely have failed in that respect due to inadequacies in proving ownership and subsistence of copyright. Instead, Sky’s primary claim was that My Box misrepresented to customers that the content on offer was completely legal, when in fact that content infringed copyright. My Box had not informed its customers of any doubt as to the legality of the system or that the customers might be directly exposed to copyright claims. To the contrary, My Box claimed that use of My Box was “100% legal”. Sky sought an injunction and over $1.5 million in damages as a result of lost subscription charges.

Associate Judge Smith accepted Sky’s argument, saying that there could be no doubt that at least some of the streams advertised as being available on My Box would be original copyright works, communicated without the owner’s consent. In doing so, he relied on the converging findings of the CJEU in Stichting Brein v Wullems and the English High Court in Football Association Premier League Ltd v British Communications Plc,[35] namely that “communication” of a copyright work involves the concept of making the work available when it otherwise would not have been. Here, My Box deliberately, with full knowledge of the consequences of its actions, provided its users access to protected copyright works which they would not otherwise be able to readily access.[36] Its actions accordingly “must have constituted copyright infringement, actionable at the suit of relevant copyright owners or exclusive licensees”.[37]

Turning to the Fair Trading Act, My Box’s representations of lawfulness carried a real risk of misleading or deceiving consumers. My Box’s conduct was accordingly contrary to sections 9 and 10 of the Fair Trading Act. My Box’s business model was dependent on attracting customers from Sky on the assurance that they could access the same content, conveying an implied assurance that no further fees would be required, perhaps most interestingly, “including by way of liability to third party copyright owners for copyright infringement”.

In conclusion, My Box had no reasonably arguable defence, and the Court issued an injunction restraining My Box from representing that use of its equipment is lawful and/or does not breach the Copyright Act. Interestingly, the injunction does not extend so far as to prevent any further sales of the My Box unit. Sky was not awarded any damages, given the questions of causality which could not be answered on this application for summary judgment. This perhaps illustrates the risk of pursuing an action founded under the Fair Trading Act as opposed to the Copyright Act. However, one can only read the result as a positive outcome for Sky, given that it managed to obtain a successful result by summary judgment, without having to answer more difficult copyright questions.

Associate Judge Smith also addressed head-on any potential criticism that Sky has attempted to achieve a claim to copyright infringement “through the back door” by using the Fair Trading Act:[38] “… evidence of wholesale, widespread copyright infringement by the competitor, being an inevitable consequence of the competitor's commercial activities, should not have to be specifically pleaded and proved. The ultimate issue in such a case will be whether the competitor's statements as to the lawfulness of its activities have or have not been misleading or deceptive, and in some cases it will be obvious on the evidence that they have, without the need for pleadings and proof of the kind that would be required for a copyright infringement action. In my view this is such a case.”

Conclusion

It is obviously useful to local licensees to be able to restrict access to devices intended or able to access unauthorised streams of their licensed content. New Zealand’s Fair Trading Act provides an uncontroversial means for them to prevent such devices being promoted as lawful when used in that way.[39] There is, however, a risk that more sophisticated suppliers may be able to promote such devices in a way that does not breach this legislation, or at least does not do so in such a blatant fashion. This is shown by the very limited injunction of the My Box case.

There is also a risk that the broad brush approach taken in consumer protection cases can sit uncomfortably with the more exacting requirements of copyright law. The authors consider that the Courts ought to ensure that proper weight is given to the need for licensees to prove standing to sue for copyright infringement as the owner or exclusive licensee. It is incumbent upon licensees to ensure that their licence terms are fit for this purpose. The Courts should also ensure that there is proper evidence of subsistence and infringement of copyright before findings of infringement are made. To do otherwise risks undermining both the law of copyright and the law of evidence. If licensees find the current law properly applied, (including the prohibitions on “authorising” copyright infringement[40] and providing means for making infringing copies[41]), is insufficient to protect their legitimate commercial interests, then it may be preferable for these issues to be raised in the current Government review of the Copyright Act.


First published in the Intellectual Property Magazine.

[1] Not related to Sky UK Ltd, the British pay TV broadcaster

[2] New Zealand’s superior court of general jurisdiction

[3] Consumer protection legislation prohibiting, inter alia, conduct in trade that is misleading or deceptive or likely to be so, enforceable in civil action by any party

[4] An inferior court of limited jurisdiction, not commonly used for copyright matters

[5] See, for example: baldwins.com/news/the-pirate-bay-takes-to-the-high-seas and baldwins.com/news/isp-liability-for-copyright-infringement-are-dodgy-subscribers-worth-the-ri

[6] See section 2: “communicate means to transmit or make available by means of a communication technology, including by means of a telecommunications system or electronic retrieval system, and communication has a corresponding meaning”

[7] Sections 16(1)(i) and 29

[8] Directive 2001/29 of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society

[9] Objective (23) of the Copyright Directive

[10] C-466/12); [2014] 3 C.M.L.R. 4

[11] C-160/15; [2017] 1 C.M.L.R. 30

[12] C-527/15, 26 April 2017; [2017] 3 C.M.L.R. 30, also cited as “Stichting Brein v Filmspeler”

[13] Section 33; see also section 16(1)(f) (providing owners of copyright works with exclusive rights); section 29 (providing for “infringement” by a person who does any “restricted act”); and section 30 (providing for infringement by “copying of a work”)

[14] Sky Network Television v Pullan [2018] NZDC 12918

[15] New Zealand’s national rugby team

[16] New Zealand’s national cricket team

[17] Incorrectly cited in the judgment as “Stichting Brein v Willems”

[18] See paragraph 2: “it may inform this Court’s reasoning.”

[19] See paragraph 26

[20] Sections 16(1)(f), 29, 33

[21] See paragraph 30; Section 2: “reproducing, recording, or storing the work in any material form (including any digital format), in any medium, and by any means”

[22] Section 2, see footnote 6 above

[23] Sections 16(1)(a), 29; see paragraph 34 of the judgment

[24] Paragraph 35

[25] The issue of temporary reproduction was also considered and dismissed in Stichting Brein v Wullems, referring to article 5(1) of the Copyright Directive

[26] Sections 16(1)(i) and 29; see paragraph 43 of the judgment

[27] For example, paragraphs 62, 73

[28] Sony Corp. of America v Universal City Studios, Inc. (1984) 464 U.S. 417 (known as the “Betamax case”)

[29] CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] UKHL 15; [1988] RPC 567

[30] See, for example, Twentieth Century Fox Film Corporation and others v Newzbin Ltd [2010] EWHC 608 (Ch) in which the Court distinguished CBS v Amstrad on the facts of the case, including there being (in Newzbin) undeniable evidence of unauthorised copying by end users

[31] Paragraph 73 – conclusions as to breach of copyright

[32] Paragraph 74

[33] Sky Network Television v My Box [2018] NZHC 2768

[34]Sky Network Television Limited v My Box NZ Limited & Anor [2018] NZHC 2768

[35] [2017] EWHC 480 (Ch); [2017] ECC 17

[36] Paragraph 180

[37] Paragraph 192

[38] Paragraph 190

[39] The Australian Consumer Law, under the Competition and Consumer Act 2010, is of similar effect

[40] Section 16 Copyright Act 1994

[41] Section 37 Copyright Act 1994

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