iiNet's copyright crucible heats up

commentary The Australian Federation Against Copyright Theft's (AFACT) hunt for Australia's third largest internet service provider iiNet is set to resume on Monday, with all eyes on its managing director Michael Malone as he takes the stand.

iiNet chief Michael Malone (Credit: iiNet)

Eight days of the hearing in a Sydney Federal Court have now passed with both sides remaining "confident" of victory in a battle over whether iiNet had "authorised" its customers' alleged copyright infringements. From Monday, the hearing will have two more weeks to be contested before Justice Dennis Cowdroy digests the details and delivers his judgement in about six months time.

To those following the case it may have seemed that iiNet has had the upper hand. This would be because, so far, only AFACT's key witnesses — its chief, Neil Gane, several Hollywood executives, and forensic investigator, Nigel Carson — have taken the stand to be cross-examined by iiNet's legal counsel, Richard Cobden and Richard Lancaster.

Over the coming fortnight, Malone, iiNet's regulatory affairs executive, Steve Dalby, and its chief financial officer, David Buckingham, are expected to be cross-examined with the same voracity that Lancaster pursued AFACT's solicitor, Gilbert & Tobin partner, Michael Williams on the stand.

Cobden and Lancaster had saved their toughest questions for Williams who was painted as out of his depth on technical issues with the aim of casting doubt on his credibility as a witness, and therefore the number of infringements he had claimed in his affidavit.

The hearing will now focus not on AFACT's evidence, but iiNet's alleged authorisation of copyright infringement. Although a customer's file-sharing habits and iiNet's "authorisation" of those deeds may seem like a leap in logic, AFACT's argument has solid footings: it was a key ruling in the 2005 decision against Sharman Networks and file-sharing client Kazaa.

Justice Murray Wilcox, presiding over that case, noted in 2005 that "the internet is here to stay". The observation was correct, only it graduated from music to movies. Wilcox found that the 30 applicants "overstated" their claim that Sharman had infringed their copyright. "The more realistic claim is that the respondents authorised users to infringe the applicants' copyright in their sound recordings," he wrote.

In many ways, the case against iiNet picks up from where Sharman Networks/Kazaa left in terms of the Copyright Act and it's being fought amongst many of the same characters, in particular Cobden and Bannon. Cobden was Bannon's underling when the two led Universal Music Australia's 2005 victory over Sharman/Kazaa.

But today, the question of authorisation has now taken on extra meaning. Damages the ISP may be up for depend on AFACT proving that iiNet's refusal to send its customers breach notifications leaves it unprotected under the Safe Harbour scheme, which was introduced to Australia in 2004 as part of the Australia-United States Free Trade Agreement.

Safe Harbour provisions generally require ISPs to terminate the accounts of repeat infringers, but they do not require an ISP to do so merely on the basis of an assertion by a rights holder that a breach has occurred.

In the absence of such a requirement, head of ISP Exetel, John Linton, reckons this was the minimum he could do to protect Exetel from iiNet's fate. "If someone comes to us and says [some customers] are [infringing copyright]," said Linton, "we pass that on, and say: 'Hey, someone says you're using our service illegally. Tell us you're not, or go somewhere else.' Then the whole point then becomes moot. You have one person saying one thing and another saying another. Then the proper course of action is going to court."

Of course, Malone and iiNet, like Telstra and Optus, opted not to do this. Expect AFACT to harp on this point when Malone takes the stand. And if Williams' treatment on the stand is anything to go by, Malone should expect one heck of a gruelling week. iiNet's legal counsel Lancaster grilled Williams, leaving the otherwise steely solicitor visibly shaken.

Bannon is set to raise evidence that Malone went out of his way to hinder AFACT's attempts to enforce its rights under copyright law. Not only had he declined to forward its notifications to customers, instead sending them to the Western Australian (WA) Police, but AFACT claims that following iiNet's acquisition of fellow WA ISP, Westnet, Malone himself ordered its policy of forwarding AFACT's notifications to be canned. AFACT alleges Malone said it was "bad for business".

Whether this was Malone's worst decision to date remains to be seen.