Telstra v APRA Implications for Internet Service Providers WASCAL/IPSANZ Joint Seminar Paper Presented by Jeremy Malcolm 21 October 1997

Summary A test case contrived by the parties Transmission of telephone hold music High Court decision handed down 14 August 1997 Found Telstra had caused copyright music to be transmitted to subscribers to a diffusion service

The facts Types of transmission –Transmitting music on hold played by third parties (eg. PABX connected to a CD player) –Playing its own music on hold when calls are made to its service centres –Transmitting music on hold to subscribers to its CustomNet service

Types of hold music –Recorded (CD player, DAT) –Radio (licence fee already paid by broadcaster) Persons to whom transmitted –Users of ordinary telephones (over wires) –Users of mobile telephones (wireless broadcast)

The Law Rights 31 (1) For the purposes of this Act, unless the contrary intention appears, copyright, in relation to a work, is the exclusive right: (a) in the case of a literary, dramatic or musical work, to do all or any of the following acts:... (iii) to perform the work in public; (iv) to broadcast the work; (v) to cause the work to be transmitted to subscribers to a diffusion service;...

Diffusion service 26 (1) A reference in this Act to the transmission of a work or other subject-matter to subscribers to a diffusion service shall be read as a reference to the transmission of the work or other subject-matter in the course of a service of distributing broadcast or other matter (whether provided by the person operating the service or by other persons) over wires, or over other paths provided by a material substance, to the premises of subscribers to the service. (2) For the purposes of this Act, where a work or other subject-matter is so transmitted: (a)the person operating the service shall be deemed to be the person causing the work or other subject-matter to be so transmitted; and (b)no person other than the person operating the service shall be deemed to be causing the work or other subject-matter to be so transmitted, whether or not he provides any facilities for the transmission.

(3)... (4) A reference in this section to the person operating a service of distributing broadcast or other matter shall be read as a reference to the person who, in the agreements with subscribers to the service, undertakes to provide them with the service, whether he is the person who transmits the broadcast or other matter or not. (5) Where a service of distributing matter over wires or over other paths provided by a material substance is only incidental to, or part of, a service of transmitting telegraphic or telephonic communications, a subscriber to the last-mentioned service shall be taken, for the purposes of this section, to be a subscriber to the first-mentioned service.

Arguments APRA –Telstra provides a service of distributing music on hold –This is part of its service of distributing telephone communications over wires –A subscriber to the service of distributing telephone communications is by reason of sub- s. 26(5) taken to be a subscriber to the service of distributing music on hold

Telstra –Nobody subscribes to receive music on hold; this cannot be a distinct diffusion service –Sub-s.(5) examines whether the diffusion service is only incidental to a telephone service –This indicates an intention that the diffusion service cannot itself be the telephone service –Therefore there is no relevant diffusion service

Judgments First instance –Gummo J Playing music on hold is not a service of distibuting matter - those who hear it do not ask for or want it In any event there is no agreement or undertaking to provide this service to those who hear it The deeming provision in sub-s.(5) deems a person to be a subscriber to the service but does not deem an agreement with the subscriber as sub-s.(4) requires

Appeal –Black CJ Music on hold is a service that is incidental to the telephone service and thus within s.26(5) –Sheppard J Simply by subscribing to the telecommunications service, telephone users are not deemed to have become subscribers to a diffusion service also –Burchett J Subscribers making calls to numbers provided with music on hold are to be taken to be subscribers to the service of distributing matter over wires

High Court –Dawson and Gaudron JJ A service may be a service even if it is unwanted by those whom it is meant to serve The service of hold music is incidental to the telephone service Under s 26(5), a subscriber to the telephone service is deemed to be a subscriber to the diffusion service

–Toohey J (dissenting) Sub-section (5) contemplates two services which are related but are nevertheless distinct This is not the case with hold music played over the telephone to callers The service of receiving telephonic communication and the service of hearing hold music are the same thing from the caller’s perspective Hold music is therefore not “incidental” to the telephone service for the purposes of sub-s.(5)

–McHugh J (dissenting) s 26(5) merely deems the subscriber to the telephonic service to be a subscriber to the diffusion service also It does not deems the provider of the telephonic service to be the person who agrees to provide the subscriber with the diffusion service for the purposes of s 26(4) –Kirby J s 26(5) removes the need for an agreement by Telstra to provide music on hold. It is enough that music on hold should be “incidental to, or part of” the telecommunications service provided by Telstra.

Problems Imposes “strict liability” Regardless of whether the telecommunication provider –agreed to transmit the hold music; –played the music recording itself; –had any knowledge of the music being transmitted; or –could have prevented the music being transmitted.

Implications for ISPs Kirby J specifically acknowledged Certain limitations –Implied licence –Radio exemption s.199(4) A person who, by the reception of an authorised television broadcast or sound broadcast, causes a literary, dramatic or musical work... to be transmitted to subscribers to a diffusion service shall be treated, in any proceedings for infringement of the copyright, if any, in the work or film, as if he had been the holder of a licence granted by the owner of that copyright

Internet access is a diffusion service (s.26(1)) –Transmission of broadcast or matter over wires ISP causes the work to be transmitted to subscribers (s.31(1)(v)) –The person operating the service is deemed to cause the work to be transmitted (s.26(2)(a)) Double-dipping?

Consequences APRA licence claim –Letters of demand sent to small ISPs on 4 June 1996 for $1 per customer per year –Negotiations with Internet Industry Association of Australia were unsuccessful –Its Web site describes it as a “proposed licence” Oz test case –Infringement proceedings commenced in February 1997 against Oz

Solutions Licence from collecting agency –Music (APRA) –Photographs –Text, video, “look and feel”…? Indemnity from users for their own content Law reform –Copyright Reform and the Digital Agenda –ISPs should only be liable for transmissions that they "authorised"