August 25, 2011

Introduction

Much has been made by the news media of the recent amendment to the Copyright Act 1994 ("Copyright Act”) implementing a three-notice regime to deter illegal file sharing. For those of us with teenagers, there may have been some banter around the dinner table about whether it might impact on the habits of a generation. However, it is also useful to explore what it might mean in a business context.

By way of background, the Copyright (Infringing File Sharing) Amendment Act 2011 ("File Sharing Amendment”) was passed to address the problem of online copyright infringement that has been shown to be damaging to the creative industry, which has experienced significant declines in revenue as file sharing has become more prevalent.

File Sharing Amendment

Briefly, the File Sharing Amendment comes into force on 1 September 2011. The File Sharing Amendment repeals (the controversial) section 92A of the Copyright Act and replaces it with a new process to deal with online copyright infringements. The old section 92A, which was never brought into force, required internet service providers ("ISPs”) to police copyright infringements and, ultimately, terminate the account of repeat infringers.

By contrast, the new regime introduced by the File Sharing Amendment implements a three-notice regime under which ISPs send notices to their customers informing them that they may have infringed copyright. That is, a copyright owner or an agent acting for one or more copyright owners ("Rights Owner") can request ISPs to issue infringement notices to people who infringe copyright through (illegal) file sharing. The three kinds of infringement notices are:

a) a detection notice;

b) a warning notice; and

c) an enforcement notice.

Detection notice

A detection notice is to be given the first time the ISP matches the account holder with an IP address at which an infringement is alleged by the Rights Owner to have occurred (as a result of file sharing). A detection notice is also the first step following the end of a quarantine period (the 35 days beginning on the date of the enforcement notice), at which point the notice process may start again for further infringements.

A detection notice must meet a number of requirements including the identification of the alleged infringement that has triggered the issue of the notice and the ISP ensuring that the notice is issued no later than 7 days after the Rights Owner has provided the information to the ISP.

Warning notice

The next stage is a warning notice, issued for any further infringement that occurs at least 28 days after the issue of a detection notice.

Enforcement notice

The third notice is an enforcement notice, issued for an infringement at least 28 days after the date of a warning notice.

After an enforcement notice is sent, the Rights Owner may seek orders from the Copyright Tribunal for a sum of up to $15,000 and from the District Court requiring the ISP to suspend the account holder's internet account for up to 6 months.

However, when the File Sharing Amendment was passed, Commerce Minister Simon Power announced that the mechanism to implement this latter step will not be brought into force unless the notice process and the remedies sought by the Copyright Tribunal are shown to be ineffective. He said that this will enable the Government to work with stakeholders to monitor and review the situation and determine when a further deterrent may be needed.

Another key provision is that the notice regime will not apply to cellular mobile networks until October 2013.

Concluding comments

The new regime is confined to a subset of ISPs called "IPAPs" (internet protocol address providers), being ISPs that offer transmission, routing and connection services (including allocating IP addresses), other than as an incidental feature of their main business activities, if that ISP charges for those services and the services are not primarily operated to cater for transient users.

New Zealand is one of a number of countries taking legislative action to address infringing file-sharing and the objective of the File Sharing Amendment is to use the warning system to persuade infringers to legally source downloads. It is also likely that the costs associated with monitoring downloads and passing the relevant details to an ISP are such that it will be those at the larger end of the creative sector representing filmmakers and the music and software industries that will be seeking to use the new three-notice regime when it comes into force in September. Despite this, the volume of business expected by the industry once the File Sharing Amendment becomes law is high – with some estimates suggesting ISPs may be required to send as many as 5,000 notices a month.

For employers

Employers will be liable for infringements by employees on their work computer. Whilst it is possible to challenge an infringement notice, the practical reality is that most employers will not want to devote the time and energy (and cost) to do so.

From an employer perspective, the timelines involved mean that they will have an opportunity to address file sharing problems once a notice has been received. However, risk management will also be an important issue in terms of staff education and policies about internet use, penalties (including claiming reimbursement of fines) and practical measures such as appropriate protective software and monitoring of employee internet use.

Making employees aware of their obligations is key. Policies should cover that the work computer is a work tool not a personal medium for surfing the internet and that file sharing, no doubt along with a number of other activities, will not be tolerated.

Further information

For further information, please contact any member of Hesketh Henry’s Corporate & Commercial or Employment law teams.