Australian Federal Court Rules Kazaa Infringes Copyright
The Australian Federal Court ruled on 5th Septmber 2005 that the popular file-sharing network Kazaa violated Australian music copyrights and ordered the company to modify its software to help prevent it.
Justice Murray R. Wilcox in his judgment ruled that "The respondents have long known that the Kazaa system is widely used for the sharing of copyright files."
He said that "... there are technical measures ... that would enable the respondents to curtail ? although probably not totally to prevent ? the sharing of copyright files. The respondents have not taken any action to implement those measures."
However the judge accepted that "even with the best will in the world, the respondents probably cannot totally prevent copyright infringement by users. ... There needs to be an opportunity for the relevant respondents to modify the Kazaa system in a targeted way, so as to protect the applicants? copyright interests (as far as possible) but without unnecessarily intruding on others? freedom of speech and communication."
The judgment summary is as follows:-
FEDERAL COURT OF AUSTRALIA
Universal Music Australia Pty Ltd v Sharman License Holdings Ltd
[2005] FCA 1242
I am about to deliver judgment in a case that has attracted widespread interest. Extensive evidence was presented at the trial. Much of it was of a technical nature. The facts of the case and the relevant law are both complex. My reasons for judgment are, therefore, necessarily lengthy. Because of those factors, I have prepared this statement in which I will attempt briefly to explain the nature of the case and my major conclusions. This statement is not intended comprehensively to set out my findings of fact, conclusions about the law or reasons for making the orders I will shortly announce. Those interested in obtaining full information about those matters should refer to the Court?s website ( www.fedcourt.gov.au ), upon which my full Reasons for Decision will shortly be published.
The case concerns the operation of the Kazaa Internet peer-to-peer file-sharing system. This system operates world wide. Since early 2002, it has been controlled by Sharman Networks Ltd, one of the present respondents, out of premises in Sydney. Four of the other respondents are directly associated with Sharman Networks.
The Kazaa system is available to users free of charge. It enables one user to share with other users any material the first user wishes to share, whether or not that material is subject to copyright, simply by placing that material in a file called ?My Shared Folder?. A user who is interested in obtaining a copy of a particular work, such as a musical item, can instantaneously search the ?My Shared Folder? files of other users, worldwide. If the file is located, the title will be displayed against a blue icon on the first user?s computer as a ?blue file?. The work can then be downloaded onto the first user?s computer. The technology used to carry out those operations is called FastTrack.
Shortly after Sharman Networks took control of Kazaa, the system was expanded so as to add a second type of search. This was done by arrangement with Altnet Inc, a United States company which is also a respondent in this case. Four other respondents are associated with Altnet.
Altnet controlled technology called TopSearch, which enables the provision to Kazaa users of licensed works; that is, works made available to users pursuant to arrangements made with the owners of the copyright in those works. Search results for these works are displayed on a user?s computer against a gold icon; they have been called ?gold files?.
There are 30 applicants in this case. They include companies associated with the world?s major distributors of sound recordings, mostly in the form of compact discs. The applicants claim the sharing of blue files between users constitutes an infringement of their copyright. They do not contend the sharing of gold files directly infringes their copyright. However, they have joined the Altnet parties because, they say, the arrangements made between the Sharman parties and the Altnet parties constitute a joint enterprise; so all the respondents are involved in the relevant infringements of copyright. Also, they say, Altnet personnel assisted Sharman personnel in constructing the Kazaa website, which contains material encouraging users to infringe copyright in blue file works.
The Kazaa system is extremely popular. Documents produced by the respondents contain claims that, at any particular time, several million people are using the system to share files. At the beginning of 2004, the Kazaa website said over 317 million people, worldwide, had downloaded Kazaa onto their computers, thereby enabling them to share files. A banner on the Kazaa website, at the time of the commencement of this proceeding, claimed Kazaa was ?[t]he world?s most downloaded software application?. A document produced by the respondents stated that Kazaa was used for 79% of worldwide peer-to-peer file-sharing activities.
It is clear that a major proportion of Kazaa?s shared blue files are works (mostly musical works) that are subject to copyright. The files are shared without the approval of the relevant copyright owner. It follows that both the user who makes the file available and the user who downloads a copy infringes the owner?s copyright.
In this case, the applicants made claims of copyright infringement, contravention of the Trade Practices Act and conspiracy. It is convenient to say immediately that the evidence does not support either the Trade Practices Act or conspiracy claims. Those claims will be rejected. The more arguable claim is infringement of the applicants? copyright.
Before I indicate my conclusions about that claim, I wish to identify two matters that this case is not about.
First, many people (including the respondents) argue that the Internet is here to stay, it is being used by an ever increasing number of people and peer-to-peer file-sharing is one of its most valuable potential uses. They say that copyright owners, such as the present applicants, could eliminate (or at least substantially reduce) infringement of their copyrights if they were willing to make copyright works available on a licensed basis for a fee, in the way in which Altnet offers gold files. Second, it was suggested at one stage of this case that it would have been possible for the applicants to have made their compact discs less vulnerable to being ?ripped? into a computer program by issuing them in a digital rights managed, rather than open, format.
Neither of these matters fall for decision in this case. I understand the argument in favour of more widespread licensing of copyright works. No doubt that course would have commercial implications for sound recording distributors. Whether or not they should take it is a matter to be determined by them. Unless and until they do decide to take that course, they are entitled to invoke such protective rights as the law affords them. Similarly in regard to making compact discs less susceptible to ripping; although, in regard to that matter, I add the evidence is insufficient for me to reach any conclusion about the feasibility of doing this.
I return to the true issue in the case: the applicants? copyright claim. Here again, the applicants overstated their case. It cannot be concluded, as the applicants claimed in their pleadings, that the respondents themselves engaged in communicating the applicants? copyright works. They did not do so. The more realistic claim is that the respondents authorised users to infringe the applicants? copyright in their sound recordings. Section 101 of the Australian Copyright Act provides that copyright is infringed by a person who, not being the owner of the copyright and without the licence of the copyright owner, authorises another person to do in Australia an infringing act.
I have concluded that this more limited claim is established against six of the ten respondents. My reasons may be summarised in this way:
(i) despite the fact that the Kazaa website contains warnings against the sharing of copyright files, and an end user licence agreement under which users are made to agree not to infringe copyright, it has long been obvious that those measures are ineffective to prevent, or even substantially to curtail, copyright infringements by users. The respondents have long known that the Kazaa system is widely used for the sharing of copyright files;
(ii) there are technical measures (keyword filtering and gold file flood filtering) that would enable the respondents to curtail ? although probably not totally to prevent ? the sharing of copyright files. The respondents have not taken any action to implement those measures. It would be against their financial interest to do so. It is in the respondents? financial interest to maximise, not to minimise, music file-sharing. Advertising provides the bulk of the revenue earned by the Kazaa system, which revenue is shared between Sharman Networks and Altnet.
(iii) far from taking steps that are likely effectively to curtail copyright file-sharing, Sharman Networks and Altnet have included on the Kazaa website exhortations to users to increase their file-sharing and a webpage headed ?Join the Revolution? that criticises record companies for opposing peer-to-peer file-sharing. They also sponsored a ?Kazaa Revolution? campaign attacking the record companies. The revolutionary material does not expressly advocate the sharing of copyright files. However, to a young audience, and it seems that Kazaa users are predominantly young people, the effect of this webpage would be to encourage visitors to think it ?cool? to defy the record companies by ignoring copyright constraints.
A question arose as to the form of relief that might be made against the six respondents that I hold to have authorised infringement of the applicants? copyright. The applicants are entitled to declarations as to past violations of their rights and the threat of future violations. They are also entitled to an order restraining future violations. However, I have had to bear in mind the possibility that, even with the best will in the world, the respondents probably cannot totally prevent copyright infringement by users. I am anxious not to make an order which the respondents are not able to obey, except at the unacceptable cost of preventing the sharing even of files which do not infringe the applicants? copyright. There needs to be an opportunity for the relevant respondents to modify the Kazaa system in a targeted way, so as to protect the applicants? copyright interests (as far as possible) but without unnecessarily intruding on others? freedom of speech and communication. The evidence about keyword filtering and gold file flood filtering, indicates how this might be done. It should be provided that the injunctive order will be satisfied if the respondents take either of these steps. The steps, in my judgment, are available to the respondents and likely significantly, though perhaps not totally, to protect the applicants? copyrights.
The formal orders that I make are as follows:
1. Leave be granted to Australian Consumers? Association Pty Ltd, Electronic Frontiers Australia Inc and New South Wales Council for Civil Liberties Inc to intervene in this proceeding to the extent necessary for them to put submissions that do not depend on material not already in evidence.
2. It be declared that each of the six respondents named below (?the infringing respondents?) have infringed the copyright in each of the sound recordings whose title appears in column 2 of the attached Schedule, being a copyright of the applicant (?the relevant applicant?) whose name is set out opposite the title of that sound recording in column 4 of that Schedule by:
(i) authorising the doing in Australia by Kazaa users of the following acts (?the infringing acts?) in relation to the said sound recording:
(a) making a copy of the sound recording;
(b) communicating the recording to the public;
in each case, without the licence of the relevant applicant; and
(ii) entering into a common design, with each of the other infringing respondents, to carry out, procure or direct the said authorisation;
The infringing respondents are Sharman Networks Ltd, LEF Interactive Pty Ltd, Nicola Anne Hemming, Altnet Inc, Brilliant Digital Entertainment Inc and Kevin Glen Bermeister.
3. It be declared that each of the infringing respondents threatens to infringe the copyright of the applicants in other sound recordings by:
(i) authorising the doing in Australia by Kazaa users of the infringing acts; in each case, without the licence of the applicant who is the relevant copyright owner; and
(ii) entering into a common design with each of the other infringing respondents, to carry out, procure or direct the said authorisation.
4. The infringing respondents be restrained, by themselves, their servants or agents, from authorising Kazaa users to do in Australia any of the infringing acts, in relation to any sound recording of which any of the applicants is the copyright owner, without the licence of the relevant copyright owner.
5. Continuation of the Kazaa Internet file-sharing system (including the provision of software programs to new users) shall not be regarded as a contravention of order 4 if that system is first modified pursuant to a protocol, to be agreed between the infringing respondents and the applicants or to be approved by the Court, that ensures either of the following situations:
(i) that:
(a) the software program received by all new users of the Kazaa file-sharing system contains non-optional key-word filter technology that excludes from the displayed blue file search results all works identified (by titles, composers? or performers? names or otherwise) in such lists of their copyright works as may be provided, and periodically updated, by any of the applicants; and
(b) all future versions of the Kazaa file-sharing system contain the said non-optional key-word filter technology; and
(c) maximum pressure is placed on existing users, by the use of dialogue boxes on the Kazaa website, to upgrade their existing Kazaa software program to a new version of the program containing the said non-optional key-word filter technology; or
(ii) that the TopSearch component of the Kazaa system will provide, in answer to a request for a work identified in any such list, search results that are limited to licensed works and warnings against copyright infringement and that will exclude provision of a copy of any such identified work.
6. The operation of order 4 be stayed for a period of two months from today?s date, or for such extended period as a judge may, on application, allow.
7. The applicants? claims for pecuniary relief against the infringing respondents be reserved for determination at a hearing to be fixed on application for that purpose.
8. There be liberty to all parties to apply, on seven days notice:
(a) within a period of one month from today?s date, in respect of the form of order 4 or 5;
(b) generally, in respect of any Court approval required for the purposes of order 5, or any order required for purposes related to order 6 or order 7.
9. The applicants? claims under the Trade Practices Act 1974 (Cth), the Fair Trading Act 1987 (NSW) and in respect of the tort of conspiracy all be dismissed.
10. The infringing respondents pay 90% of the costs incurred by the applicants to date in relation to this proceeding.
11. The proceeding be wholly dismissed as against the following four respondents (?the dismissed respondents?): Sharman License Holdings Ltd, Philip Morle, Brilliant Digital Entertainment Pty Ltd and Anthony Rose.
12. The applicants pay the costs incurred in relation to this proceeding by each of the dismissed respondents, provided that, in the case of those dismissed respondents who were represented at the trial jointly with infringing respondents, such costs shall be limited to costs other than those that would have been incurred, in any event, in connection with representation of the relevant infringing respondents.
Wilcox J
Sydney
5 September 2005
Justice Murray R. Wilcox in his judgment ruled that "The respondents have long known that the Kazaa system is widely used for the sharing of copyright files."
He said that "... there are technical measures ... that would enable the respondents to curtail ? although probably not totally to prevent ? the sharing of copyright files. The respondents have not taken any action to implement those measures."
However the judge accepted that "even with the best will in the world, the respondents probably cannot totally prevent copyright infringement by users. ... There needs to be an opportunity for the relevant respondents to modify the Kazaa system in a targeted way, so as to protect the applicants? copyright interests (as far as possible) but without unnecessarily intruding on others? freedom of speech and communication."
The judgment summary is as follows:-
FEDERAL COURT OF AUSTRALIA
Universal Music Australia Pty Ltd v Sharman License Holdings Ltd
[2005] FCA 1242
I am about to deliver judgment in a case that has attracted widespread interest. Extensive evidence was presented at the trial. Much of it was of a technical nature. The facts of the case and the relevant law are both complex. My reasons for judgment are, therefore, necessarily lengthy. Because of those factors, I have prepared this statement in which I will attempt briefly to explain the nature of the case and my major conclusions. This statement is not intended comprehensively to set out my findings of fact, conclusions about the law or reasons for making the orders I will shortly announce. Those interested in obtaining full information about those matters should refer to the Court?s website ( www.fedcourt.gov.au ), upon which my full Reasons for Decision will shortly be published.
The case concerns the operation of the Kazaa Internet peer-to-peer file-sharing system. This system operates world wide. Since early 2002, it has been controlled by Sharman Networks Ltd, one of the present respondents, out of premises in Sydney. Four of the other respondents are directly associated with Sharman Networks.
The Kazaa system is available to users free of charge. It enables one user to share with other users any material the first user wishes to share, whether or not that material is subject to copyright, simply by placing that material in a file called ?My Shared Folder?. A user who is interested in obtaining a copy of a particular work, such as a musical item, can instantaneously search the ?My Shared Folder? files of other users, worldwide. If the file is located, the title will be displayed against a blue icon on the first user?s computer as a ?blue file?. The work can then be downloaded onto the first user?s computer. The technology used to carry out those operations is called FastTrack.
Shortly after Sharman Networks took control of Kazaa, the system was expanded so as to add a second type of search. This was done by arrangement with Altnet Inc, a United States company which is also a respondent in this case. Four other respondents are associated with Altnet.
Altnet controlled technology called TopSearch, which enables the provision to Kazaa users of licensed works; that is, works made available to users pursuant to arrangements made with the owners of the copyright in those works. Search results for these works are displayed on a user?s computer against a gold icon; they have been called ?gold files?.
There are 30 applicants in this case. They include companies associated with the world?s major distributors of sound recordings, mostly in the form of compact discs. The applicants claim the sharing of blue files between users constitutes an infringement of their copyright. They do not contend the sharing of gold files directly infringes their copyright. However, they have joined the Altnet parties because, they say, the arrangements made between the Sharman parties and the Altnet parties constitute a joint enterprise; so all the respondents are involved in the relevant infringements of copyright. Also, they say, Altnet personnel assisted Sharman personnel in constructing the Kazaa website, which contains material encouraging users to infringe copyright in blue file works.
The Kazaa system is extremely popular. Documents produced by the respondents contain claims that, at any particular time, several million people are using the system to share files. At the beginning of 2004, the Kazaa website said over 317 million people, worldwide, had downloaded Kazaa onto their computers, thereby enabling them to share files. A banner on the Kazaa website, at the time of the commencement of this proceeding, claimed Kazaa was ?[t]he world?s most downloaded software application?. A document produced by the respondents stated that Kazaa was used for 79% of worldwide peer-to-peer file-sharing activities.
It is clear that a major proportion of Kazaa?s shared blue files are works (mostly musical works) that are subject to copyright. The files are shared without the approval of the relevant copyright owner. It follows that both the user who makes the file available and the user who downloads a copy infringes the owner?s copyright.
In this case, the applicants made claims of copyright infringement, contravention of the Trade Practices Act and conspiracy. It is convenient to say immediately that the evidence does not support either the Trade Practices Act or conspiracy claims. Those claims will be rejected. The more arguable claim is infringement of the applicants? copyright.
Before I indicate my conclusions about that claim, I wish to identify two matters that this case is not about.
First, many people (including the respondents) argue that the Internet is here to stay, it is being used by an ever increasing number of people and peer-to-peer file-sharing is one of its most valuable potential uses. They say that copyright owners, such as the present applicants, could eliminate (or at least substantially reduce) infringement of their copyrights if they were willing to make copyright works available on a licensed basis for a fee, in the way in which Altnet offers gold files. Second, it was suggested at one stage of this case that it would have been possible for the applicants to have made their compact discs less vulnerable to being ?ripped? into a computer program by issuing them in a digital rights managed, rather than open, format.
Neither of these matters fall for decision in this case. I understand the argument in favour of more widespread licensing of copyright works. No doubt that course would have commercial implications for sound recording distributors. Whether or not they should take it is a matter to be determined by them. Unless and until they do decide to take that course, they are entitled to invoke such protective rights as the law affords them. Similarly in regard to making compact discs less susceptible to ripping; although, in regard to that matter, I add the evidence is insufficient for me to reach any conclusion about the feasibility of doing this.
I return to the true issue in the case: the applicants? copyright claim. Here again, the applicants overstated their case. It cannot be concluded, as the applicants claimed in their pleadings, that the respondents themselves engaged in communicating the applicants? copyright works. They did not do so. The more realistic claim is that the respondents authorised users to infringe the applicants? copyright in their sound recordings. Section 101 of the Australian Copyright Act provides that copyright is infringed by a person who, not being the owner of the copyright and without the licence of the copyright owner, authorises another person to do in Australia an infringing act.
I have concluded that this more limited claim is established against six of the ten respondents. My reasons may be summarised in this way:
(i) despite the fact that the Kazaa website contains warnings against the sharing of copyright files, and an end user licence agreement under which users are made to agree not to infringe copyright, it has long been obvious that those measures are ineffective to prevent, or even substantially to curtail, copyright infringements by users. The respondents have long known that the Kazaa system is widely used for the sharing of copyright files;
(ii) there are technical measures (keyword filtering and gold file flood filtering) that would enable the respondents to curtail ? although probably not totally to prevent ? the sharing of copyright files. The respondents have not taken any action to implement those measures. It would be against their financial interest to do so. It is in the respondents? financial interest to maximise, not to minimise, music file-sharing. Advertising provides the bulk of the revenue earned by the Kazaa system, which revenue is shared between Sharman Networks and Altnet.
(iii) far from taking steps that are likely effectively to curtail copyright file-sharing, Sharman Networks and Altnet have included on the Kazaa website exhortations to users to increase their file-sharing and a webpage headed ?Join the Revolution? that criticises record companies for opposing peer-to-peer file-sharing. They also sponsored a ?Kazaa Revolution? campaign attacking the record companies. The revolutionary material does not expressly advocate the sharing of copyright files. However, to a young audience, and it seems that Kazaa users are predominantly young people, the effect of this webpage would be to encourage visitors to think it ?cool? to defy the record companies by ignoring copyright constraints.
A question arose as to the form of relief that might be made against the six respondents that I hold to have authorised infringement of the applicants? copyright. The applicants are entitled to declarations as to past violations of their rights and the threat of future violations. They are also entitled to an order restraining future violations. However, I have had to bear in mind the possibility that, even with the best will in the world, the respondents probably cannot totally prevent copyright infringement by users. I am anxious not to make an order which the respondents are not able to obey, except at the unacceptable cost of preventing the sharing even of files which do not infringe the applicants? copyright. There needs to be an opportunity for the relevant respondents to modify the Kazaa system in a targeted way, so as to protect the applicants? copyright interests (as far as possible) but without unnecessarily intruding on others? freedom of speech and communication. The evidence about keyword filtering and gold file flood filtering, indicates how this might be done. It should be provided that the injunctive order will be satisfied if the respondents take either of these steps. The steps, in my judgment, are available to the respondents and likely significantly, though perhaps not totally, to protect the applicants? copyrights.
The formal orders that I make are as follows:
1. Leave be granted to Australian Consumers? Association Pty Ltd, Electronic Frontiers Australia Inc and New South Wales Council for Civil Liberties Inc to intervene in this proceeding to the extent necessary for them to put submissions that do not depend on material not already in evidence.
2. It be declared that each of the six respondents named below (?the infringing respondents?) have infringed the copyright in each of the sound recordings whose title appears in column 2 of the attached Schedule, being a copyright of the applicant (?the relevant applicant?) whose name is set out opposite the title of that sound recording in column 4 of that Schedule by:
(i) authorising the doing in Australia by Kazaa users of the following acts (?the infringing acts?) in relation to the said sound recording:
(a) making a copy of the sound recording;
(b) communicating the recording to the public;
in each case, without the licence of the relevant applicant; and
(ii) entering into a common design, with each of the other infringing respondents, to carry out, procure or direct the said authorisation;
The infringing respondents are Sharman Networks Ltd, LEF Interactive Pty Ltd, Nicola Anne Hemming, Altnet Inc, Brilliant Digital Entertainment Inc and Kevin Glen Bermeister.
3. It be declared that each of the infringing respondents threatens to infringe the copyright of the applicants in other sound recordings by:
(i) authorising the doing in Australia by Kazaa users of the infringing acts; in each case, without the licence of the applicant who is the relevant copyright owner; and
(ii) entering into a common design with each of the other infringing respondents, to carry out, procure or direct the said authorisation.
4. The infringing respondents be restrained, by themselves, their servants or agents, from authorising Kazaa users to do in Australia any of the infringing acts, in relation to any sound recording of which any of the applicants is the copyright owner, without the licence of the relevant copyright owner.
5. Continuation of the Kazaa Internet file-sharing system (including the provision of software programs to new users) shall not be regarded as a contravention of order 4 if that system is first modified pursuant to a protocol, to be agreed between the infringing respondents and the applicants or to be approved by the Court, that ensures either of the following situations:
(i) that:
(a) the software program received by all new users of the Kazaa file-sharing system contains non-optional key-word filter technology that excludes from the displayed blue file search results all works identified (by titles, composers? or performers? names or otherwise) in such lists of their copyright works as may be provided, and periodically updated, by any of the applicants; and
(b) all future versions of the Kazaa file-sharing system contain the said non-optional key-word filter technology; and
(c) maximum pressure is placed on existing users, by the use of dialogue boxes on the Kazaa website, to upgrade their existing Kazaa software program to a new version of the program containing the said non-optional key-word filter technology; or
(ii) that the TopSearch component of the Kazaa system will provide, in answer to a request for a work identified in any such list, search results that are limited to licensed works and warnings against copyright infringement and that will exclude provision of a copy of any such identified work.
6. The operation of order 4 be stayed for a period of two months from today?s date, or for such extended period as a judge may, on application, allow.
7. The applicants? claims for pecuniary relief against the infringing respondents be reserved for determination at a hearing to be fixed on application for that purpose.
8. There be liberty to all parties to apply, on seven days notice:
(a) within a period of one month from today?s date, in respect of the form of order 4 or 5;
(b) generally, in respect of any Court approval required for the purposes of order 5, or any order required for purposes related to order 6 or order 7.
9. The applicants? claims under the Trade Practices Act 1974 (Cth), the Fair Trading Act 1987 (NSW) and in respect of the tort of conspiracy all be dismissed.
10. The infringing respondents pay 90% of the costs incurred by the applicants to date in relation to this proceeding.
11. The proceeding be wholly dismissed as against the following four respondents (?the dismissed respondents?): Sharman License Holdings Ltd, Philip Morle, Brilliant Digital Entertainment Pty Ltd and Anthony Rose.
12. The applicants pay the costs incurred in relation to this proceeding by each of the dismissed respondents, provided that, in the case of those dismissed respondents who were represented at the trial jointly with infringing respondents, such costs shall be limited to costs other than those that would have been incurred, in any event, in connection with representation of the relevant infringing respondents.
Wilcox J
Sydney
5 September 2005
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