On 6 December 2023, the High Court of Australia delivered its unanimous judgment in Real Estate Tool Box Pty Ltd v Campaigntrack Pty Ltd [2023] HCA 38, clarifying the limits of liability for authorisation of copyright infringement — particularly where an alleged infringer is said to be ‘indifferent’ to infringement.
Authorisation liability is a key risk in Australia for service providers, intermediaries and platforms. In this case, it gave rise to potential liability for those procuring software design from a third-party.
The High Court held that none of the appellants were liable for copyright infringement by authorising a software developer’s infringement of a cloud-based real estate marketing system. The question of authorisation was the key issue under consideration by the High Court.
In allowing the appeal, the High Court found that the appellants were not ‘sufficiently indifferent’ to the infringing conduct to be liable for ‘authorisation’ under s 36(1) of the Copyright Act 1986 (Cth) (the Act) — that is, to have authorised the acts comprising the infringement of copyright. The High Court’s decision confirms that a person’s “indifference” to a third party’s infringing acts may still lead to authorisation liability. However, more than ‘neutrality or inattention’ is required, there must be ‘sufficient involvement in the infringement’. The High Court found that there needs to be factual findings, supported by evidence, that a person had knowledge of facts, matters and circumstances sufficient to give rise to a duty to take reasonable steps to avoid or prevent the doing of an act by another person..
The decision is a timely reminder to organisations to expressly instruct contractors and other third parties not to infringe copyright and to ensure proper investigation of alleged infringements of third party IP. For practitioners, there are learnings about the evidence required to establish such a claim in future matters ֫— including putting an allegation of indifference directly to a relevant witness.
What is authorisation liability?
Authorisation liability arises when a person or entity, such as a service provider, not directly responsible for committing an act of copyright infringement is held liable by a court for authorising someone else’s infringement of copyright. As was noted by the High Court, it is a fact intensive inquiry and will depend on the proper inference to be drawn from all of the facts of the case[1]. In determining authorisation liability, the court must consider:
The High Court observed that the text of s 36(1A) was derived from the statements of Gibbs J in University of New South Wales v Moorhouse (1975) 133 CLR 1: Roadshow Films Pty Ltd v iiNet Ltd [No 2] (2012) 248 CLR 42 at 63 [51]-[52] per French CJ, Crennan and Kiefel JJ; see also 53-54 [22].
Later cited with approval in Adelaide City Corp v Australasian Performing Right Assn Ltd (1928) 40 CLR 481 and University of NSW v Moorhouse (1975) 133 CLR 1.
Authorisation liability particularly affects intermediaries and platforms that host or provide access to user-generated content, such as social media networks, e-commerce platforms, and search engines. However, as this case demonstrates, authorisation can easily arise when third parties are engaged to write code for software products.
A line of authority in Australia has established that it is possible to authorise copyright infringement by “indifference”.
[A] court may infer an authorization or permission from acts which fall short of being direct and positive; I go so far as to say that indifference, exhibited by acts of commission or omission, may reach a degree from which authorization or permission may be inferred. It is a question of fact in each case what is the true inference to be drawn from the conduct of the person who is said to have authorized the performance …
— Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1[2]
For example:
- In Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd, a managing director engaged a band to perform at a theatre. On two occasions, without the managing director’s knowledge, the band played copyright protected music. This did not amount to authorisation according to Bankes LJ as the managing director ‘took no part’ in the infringement.[3]
- In Adelaide Corporation v Australasian Performing Right Association Ltd, Adelaide Corporation had let its town hall to J C Williamson Ltd for a series of concerts. The Corporation received a notice from the Australasian Performing Right Association which stated it had ‘reason for believing’ that music to be performed by J C Williams Ltd copyright was owned by the Association.[4] However, again this case fell short of authorisation as Higgins J (in majority) held that to show permission it had to be shown that Adelaide Corporation ‘willed’ the relevant music to be performed and that it had ‘communicated that will in some way’.[5] Although, Adelaide Corporation had the power to break the lease, it had no specific power to direct J C Williamson Ltd not to perform any one of the identified copyright protected compositions.
- In University of New South Wales v Moorhouse it was found the university’s indifference to whether copyright infringement might occur when students used the photocopiers in its libraries amounted to authorisation. The court held the measures adopted by the university in an attempt to prevent infringement did not amount to reasonable or effective, as fatally there were no adequate cautions placed on the machines.[6]
- In Roadshow Films Pty Ltd v iiNet Ltd [No 2] it was held that iiNet Ltd did not authorise users to illegally download films, and therefore infringe copyright, accessed through its internet service. Here it was found iiNet had minimal power to prevent the choices of its customers to use torrent software.[7]
History of the litigation
Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1, 11.
Adelaide Corporation v Australasian Performing Right Association Ltd (1928) 40 CLR 481, 484.
As above.
University of New South Wales v Moorhouse (1975) 133 CLR 1, 17 (Gibbs J).
Roadshow Films Pty Ltd v iiNet Ltd [No 2] (2012) 248 CLR 42, 70 [70] (French CJ, Crennan and Kiefel JJ), 88 [137] (Gummow and Hayne JJ).
Mr Semmens (the second respondent) was a software developer who helped create the DreamDesk real estate marketing system. The copyright in DreamDesk was owned by Dream Desk Pty Ltd (DDPL) (the third appellant). In May 2016, Mr Semmens admitted that he had copied a web-based real estate marketing system called ‘Process 55’ when he developed DreamDesk. Following Mr Semmens’ admission, DDPL sold DreamDesk to Campaigntrack Pty Ltd (Campaigntrack) (the first respondent). Campaigntrack was a competitor of DDPL and purchased the rights in both DreamDesk and Process 55 in order to shut down DreamDesk and persuade customers to return to Campaigntrack.
DreamDesk had been used by real estate agency, Biggin & Scott (the second appellant), since 2015. After DreamDesk was shut down, Biggin & Scott did not want to return to Campaigntrack, and so its director, Mr Stoner (the fifth appellant) instructed Mr Semmens to build a software which came to be known as ‘Real Estate Tool Box’ (Toolbox). In his instructions, Mr Stoner made clear that the software was not to ‘breach any other companies IP or ownership’, and continually requested assurances from Mr Semmens in this regard.
Campaigntrack subsequently claimed that Toolbox reproduced the whole, or a substantial part of DreamDesk’s codes and works, thereby instituting proceedings against the DDPL and Biggin & Scott parties (which included Mr Stoner).
Campaigntrack was successful at first instance, but only in part. Whilst the primary judge found that Mr Semmens had directly infringed Campaigntrack’s copyright in DreamDesk, the primary judge was not satisfied that the DDPL and Biggin & Scott parties had authorised that infringement, such that the case against them was not made out.
Campaigntrack appealed the primary judge’s decision to the Full Federal Court, contending that:
- the DDPL and Biggin & Scott parties had authorised Mr Semmens’ copyright infringement for the purposes of s 36(1) of the Act because of their indifference to the development and use of Toolbox
- the primary judge failed to give sufficient weight to a letter sent by Campaigntrack’s solicitor on 29 September 2019, stating that Campaigntrack had ‘become aware of improper access and duplication’ of the DreamDesk code.
The majority of the Full Court, comprising McElwaine and Greenwood JJ, held that after being put on notice of Campaigntrack’s copyright infringement claim by way of the 29 September 2019 letter, the appellants knew, or had reason to suspect, that Mr Semmens either had or would likely copy aspects of the DreamDesk data or source code and that they took no or insufficient steps to prevent the conduct — they had authorised the infringement of copyright from 29 September 2016 until June 2018 because of their indifference to the development of Toolbox following receipt of the letter.
In dissent, Cheeseman J found that the appellants took active steps to co-operate with Campaigntrack by giving the undertakings requested in the 29 September 2019 letter and by granting access to an independent expert (as requested by Campaigntrack) whose preliminary report contained nothing that was capable of displacing the subsisting relationship of trust or that was capable of confirming that the allegations of infringement in the letter were well made.[8]
Cheeseman J also made a number of insightful observations about the evidence, concluding that the more compelling inference was that the primary judge considered the 29 September 2019 letter to be immaterial to his findings on authorisation as demonstrated by (a) the nature and quality of the evidence on the issue, (b) the context of the comprehensive findings of trust by the primary judge, (c) the scant attention given to this evidence by Campaigntrack at trial, and (d) the inadequacy of any cross-examination of relevant witnesses on the evidence
The principal issue was whether the appellants had authorised the doing by another person of any act comprised in copyright owned by the first respondent.
‘Sufficiently indifferent’?
The High Court unanimously held that none of the appellants had authorised the acts comprising the infringement of copyright.
The key findings of the High Court were:
- ‘Mere neutrality or inattention will not suffice.’
- The quality of the indifference, and the nature of the relationship between the infringer and the alleged authoriser, must be such as to justify a conclusion that there was sufficient involvement to constitute authorisation. This is naturally a context-dependent question that requires close analysis of the parties and their relationship.
- The ‘central factors’ are those three set out above in the Copyright Act. The three part test of s 36(1A) necessarily requires consideration of whether a person knows or has reason to anticipate or suspect an infringing act is occurring or is likely to occur.[9]
- It is not a “general inquiry”. Determining liability for authorisation is directed to a particular state of affairs at a particular time or times. That inquiry requires an assessment of the reasonableness, again supported by evidence, of what the person did, and what the person, in that position with that knowledge, at that particular time or times, ought to have done.[10]
See, eg, University of New South Wales v Moorhouse (1975) 133 CLR 1 at 12-13 per Gibbs J.
At [88].
Proof of an allegation of authorisation by indifference requires findings, supported by evidence, that the person was in a position and had knowledge of facts, matters and circumstances sufficient to give rise to a duty to take reasonable steps to avoid or prevent the doing of an act by another person, or else be liable for the act of that person.
— Real Estate Tool Box Pty Ltd v Campaigntrack Pty Ltd [2023] HCA 38 at [88]]
Some of the findings were a consequence of how the trial had been run at first instance and particularly that the authorisation by indifference argument was not put to the relevant witnesses against whom the finding of authorisation was sought. Ultimately, the High Court found that conclusions reached by the majority in the Full Court were not open on the evidence.
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For platforms and commissioning parties, the key take aways are:
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For copyright owners, the judgment underscores the importance of providing clear and detailed written notice of suspected infringement to fix a putative authoriser with knowledge. It will still be necessary to establish that the response to such a complaint was unreasonable but a clear complaint makes it easier to investigate and harder to reasonably ignore. |
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Why is authorisation liability so vexed in Australia?
Authorisation liability has been a vexed policy issue in Australia for many years. Intermediaries, particularly ISPs, have relied on the finding in Roadshow v iiNet [2012] HCA 16 (iiNet) for many years, where the High Court of Australia found that ISPs only had limited and indirect power to prevent infringements, and that in the specific circumstances of BitTorrent infringement, the steps of suspending or terminating accounts were not reasonable steps. In contrast, the Pokémon Company International succeeded in their Federal Court pursuit of copyright infringement claims and breach of consumer protection laws against Redbubble, the operator of an online marketplace for ‘print on demand’ products based on artwork submitted by independent artists or designers. This was in spite of the state of the law post-iiNet, and an arguably robust notice and takedown system.
Why is this issue so complicated?
The absence of DMCA-style safe harbors in Australian copyright law is a significant factor contributing to the complexity and uncertainty surrounding authorization liability. It often shocks clients and colleagues from other jurisdictions! DMCA safe harbors, which are statutory provisions that provide intermediaries with immunity from liability for copyright infringement committed by their users under certain conditions, have proven somewhat effective in fostering innovation and protecting intermediaries in the United States. In contrast, Australian safe harbors are limited in scope, applying primarily to carriage service providers (CSP) and certain cultural institutions — excluding almost all online service providers and platforms.
The scope of authorization liability is not clearly defined in Australian copyright law, leading to uncertainty for both intermediaries and copyright holders. This uncertainty can make it difficult for intermediaries to determine the extent of their liability for user-generated content, while copyright holders may face challenges in establishing that an intermediary has authorized infringement.
Authorization liability seeks to strike a balance between the protection of copyright holders and the promotion of innovation and access to information. However, achieving this balance is challenging, as over-protecting copyright holders can stifle innovation and access to information, while under-protection can leave copyright holders vulnerable to exploitation.
The digital landscape is constantly evolving, with new technologies and platforms emerging at a rapid pace. This makes it difficult to keep the law up-to-date with the latest technological developments and apply authorization liability principles consistently in the face of these changes.
The internet transcends geographical boundaries, making it challenging to apply national copyright laws consistently across different jurisdictions. This can lead to conflicts of law and inconsistencies in the application of authorization liability principles, particularly in cases involving intermediaries with international operations.
Establishing that an intermediary has authorized copyright infringement can be difficult, as it often requires proving that the intermediary had knowledge of the infringing activity, had the ability to control the infringing content, and failed to take reasonable steps to prevent infringement.
The uncertainty surrounding authorization liability can have a chilling effect on innovation, as intermediaries may be hesitant to host or provide access to user-generated content for fear of potential liability. This can hinder the development of new online services and platforms.
Enforcing authorization liability can be resource-intensive for both copyright holders and intermediaries. Copyright holders may need to invest significant resources in identifying and monitoring infringing content, while intermediaries may need to implement complex content moderation systems and procedures to comply with their authorization obligations.
Understanding the legal principles surrounding copyright authorization is crucial for all stakeholders in the Australian digital economy, from creators and intermediaries to users and policymakers. Indeed, as the roll-out of generative AI dramatically increases the volume of user-generated or transformative content online, we should expect to see close attention paid to the principles in this decision.
