Analysis: Five ways AFACT lost the iiNet case

The film industry has until 4.30pm today to consider whether to appeal Justice Dennis Cowdroy's historic decision in the Federal Court earlier this month to absolve ISP iiNet of the illegal file-sharing occurring among users of its network.

No doubt, the Australian Federation Against Copyright Theft's (AFACT) legal counsel would be poring over the judgement for potential loopholes.

But they'll also need to consider some of their mistakes in the trial.

"Strategically, the film industry failed because it tried to argue emotive grounds and use litigation as the answer to a complex problem," said Matt Dawes, copyright advisor for the Australian Digital Alliance.

iTnews has gathered up the thoughts of a panel of lawyers that watched the case to determine the five biggest mistakes the film industry made.

1. 'Casting a pall' over internet use

Of all of Justice Cowdroy's findings, one rendered all others irrelevant. The court found that iiNet did not "authorise" the infringement of its users.

During the trial, AFACT had assumed Justice Cowdroy would see the internet through the prism of the film industry - as primarily a tool for the disruption of copyright and for little other purpose. AFACT was attempting to prove that the provision of internet access was the means of copyright infringement, working off the back of recent cases such as Moorhouse and Cooper to expand the concept of authorisation and protect content owners.

Cowdroy, however, found that the internet was a precondition to infringement, but not the means. The real means of infringement was BitTorrent, a software program the ISP is not connected with and does not control.

"The Court finds the applicants' attempt to cast a pall over internet usage, such that it is assumed to be infringing, unless otherwise shown, is unjustified," reads Cowdroy's judgement.

"The Court does not find that there is any evidence that the majority or even a substantial usage of the bandwidth allocated by the respondent to its subscribers relates to the infringement of the applicants' copyright."

While he stopped short of declaring internet access a universal human right, the judgement acknowledged that the internet plays a "central role in almost all aspects of human life."

QUT Law Professor Brian Fitzgerald believes that in this respect, the judgement was a "remarkable piece of work", in which Justice Cowdroy "exhibited a very strong understanding of the key issues."

"This has been missing from the cases so far in the digital era," Fitzgerald said. "It recognises that there is a need to balance the value of internet access to modern life, to innovation, to the modern economy."

2. The time didn't fit the crime

AFACT put forward an argument that because iiNet had failed to stop users infringing copyright on its network, it had "failed to take reasonable steps" to gain protection under safe harbour provisions of the Copyright Act.

But as John Fairbairn, partner at Clayton Utz points out, AFACT "held out" on defining what reasonable steps would have been beyond disconnection of a customer.

As such, there were "no other reasonable steps" the judge could focus on.

The Court found that iiNet's only power to prevent infringement -  to terminate users -  was not a relevant power under the Copyright Act.

 Justice Cowdroy then found that cutting off access was not a reasonable step.

"The Court does not consider that warning and termination of subscriber accounts on the basis of AFACT Notices is a reasonable step," Cowdroy's judgement said, as it would "also prevent that person or persons from using the internet for all the non-infringing uses."

In doing so, Cowdroy gave full appreciation to the significance of internet access and what it means to Australians, and the role of the courts in determining infringement.

"AFACT's entire case fell down on that," Dawes said.

3. AFACT kept its trap methodology secret

For those unfamiliar with the details of the trial, AFACT had attempted to prove primary infringement on iiNet's network by setting up "trap purchases." 

During the trial, Justice Cowdroy was told that two employees of AFACT became subscribers of iiNet and downloaded copyright protected films. The employees also limited the IP address fields from which they downloaded parts of films, to ensure they were exclusively from the iiNet range.

AFACT also hired DtecNet, a Danish technology company, which used software to monitor the activities of iiNet users. DtecNet investigated the networks of Optus, Internode, Exetel and iiNet.  Based on this information, AFACT served copyright infringement notices.

But most of the nitty gritty of this investigative work was kept secret from iiNet - a secrecy that did not impress Justice Cowdroy.

Without knowing how its network was being monitored, Cowdroy found that iiNet could not "test" the film industry's claims that infringement was occurring on the network.

"AFACT's notices were found to be defective because they did not establish copyright infringement as AFACT kept its methodology secret, they did not have any assurance of their veracity or indemnify iiNet for reliance, and they did not make clear AFACT's right to give them on behalf of copyright owners," said Australian Digital Alliance's Dawes.

"Thus, iiNet was entitled to be sceptical about the claims being made. Therefore it had no 'knowledge' of the alleged infringements by its users."

Determinations of infringement are complex, Cowdroy's judgement said, and should only be made by a court. To do otherwise, he said, would be "highly problematic."

"If the film industry had made it easier to demonstrate that iiNet users were abusing copyright, iiNet would have had greater responsibility to pass these notices on," Dawes said.

Dawes assumed the film industry refused to pass on the details of its investigations for one of two reasons.

First, the techniques may have been proven to impede on the privacy rights of iiNet customers, landing AFACT in hot water.

Second, going into the details of this investigation may have forced DtecNet to divulge enough information for the pirate community - be it BitTorrent or some other party - to close the loopholes in its software that allowed infringement to be detected.

4. Attacks on Michael Malone's credibility

During the trial, iiNet CEO Michael Malone was subjected to three days of grilling cross-examination in the witness box, during which time the film industry's lead barrister Tony Bannon described Malone as "incredible", "evasive" and unreliable."

"It is not too disingenuous to suggest that the film industry's entire case painted any dissent on their views as extreme," said Dawes. "They demanded a finding of infringement as necessary to protect copyright owners and the Australian film industry."

This aggression did not sit well with Justice Cowdroy.

"The applicants [AFACT] have mounted a vigorous challenge to the credibility of Mr Malone, asserting that he was neither a truthful nor reliable witness," Cowdroy's judgement said.

"The Court rejects the attack on the credit of Mr Malone. Mr Malone was an impressive witness who remained consistent (for the most part) in the evidence he gave during three days of gruelling and unnecessarily hostile cross-examination.

"The Court rejected the submission that Mr Malone 'like iiNet itself, has been compromised by his extreme views on the role and responsibilities of an ISP'. Merely because the views expressed by Mr Malone did not accord with the interests of the applicants does not render those views 'extreme'."

Dawes asserted that once again, Justice Cowdroy "was not responsive to emotive arguments."

The attack on Malone's credibility also did nothing to help AFACT's chances of appeal, as Justice Cowdroy found Malone a credible witness "as a finding of fact."

"The findings of fact mean that an appeals court has to pay some deference to this," Fitzgerald said.

5. Senator Conroy's sideline commentary

It could also be argued that comments from Communications Minister Stephen Conroy in the lead up to the trial, which ridiculed the iiNet defence, actually ended up aiding the ISP's case.

Clayton Utz senior associate Tim Webb believed that the film industry became sidetracked with a peripheral issue to the outcome of the case - the scale of the infringement.

AFACT alleged that it had discovered close to 100,000 acts of infringement by iiNet subscribers, but iiNet's analysis discovered less than 100.

"iiNet conceded that the film industry would establish infringement on the part of its users, but strongly disagreed with the alleged number of infringements," said Dawes.

"The film industry argued - again emotively - that infringement was occurring on such a crushing scale that the Court must make a finding of infringement."

However, the Court found the film industry's method of calculating infringements to be technically wrong, which exaggerated the actual number of infringements.

In his judgement, Justice Cowdroy counted infringements according to the "substantive acts of persons".  In his view, films were "communicated" only once.

In other words, the point about the volume of infringement was moot. So why did iiNet spend so much energy arguing this point?

In the case of iiNet, it was an attempt to show the courts that proving anything conclusive about the legality of their user's downloading habits is a difficult process.

"I believe it had something to do with Senator Conroy saying that he found iiNet's defence 'stunning' and something out of an episode of 'Yes, Minister'," Webb said.

"Senator Conroy was referring to iiNet's defence around primary infringement."

 Perhaps the real reason iiNet laboured the point about the scale of infringement, Webb noted, "was to show the complexities of proving primary infringement."

iiNet told the court that it dealt with thousands of automated notices every day in the course of being an ISP.

That complexity could only "underscore the reasonableness of iiNet's approach" in arguing that it "couldn't conclusively decide that infringement had occurred."

"The complexity of proving primary infringement by iiNet users demonstrates the nature of iiNet as a mere conduit for information," Webb said.

The wrong target

The last word should perhaps be left to Justice Cowdroy, who sympathised with the content industry for their battle with online piracy in his judgement, but pointed to their greatest flaw.

"It is unfortunate that the outcome of the Court's finding is that the applicants will continue to have their copyright infringed," he said.

"However, the fault lies with the applicants for choosing the wrong respondent."