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Digital technology and the Copyright Act 1994. Position paper [2002] NZAHGovDP 4 (1 December 2002)

Last Updated: 12 July 2020

Digital Technology and the Copyright Act 1994

Position Paper

December 2002

ISBN 0-478-26324-4

© Crown copyright

First published in December 2002 by the Regulatory and Competition Policy Branch Ministry of Economic Development

PO Box 1473, Wellington New Zealand http://www.med.govt.nz

Permission to reproduce: The copyright owner authorises reproduction of this work, in whole or in part, so long as no charge is made for the supply of copies, and the integrity and attribution of the work as a publication of the Ministry of Economic Development is not interfered with in any way.

Disclaimer

The opinions contained in this document are those of the Ministry of Economic Development and do not reflect official government policy.

Readers are advised to seek specific legal advice from a qualified professional person before undertaking any action in reliance on the contents of this publication.

While every effort has been made to ensure that the information set out in this document is accurate, the Crown does not accept any responsibility whether in contract, tort, equity or otherwise for any action taken, or reliance placed on, any part, or all, of the information in this document or for any error in or omission from, this document.

Contents

Part One: Introduction

A. The Review Process and Information for Respondents

1. In July 2001, the Ministry of Economic Development (“the Ministry”) released a discussion paper entitled Digital Technology and the Copyright Act 1994 (“the discussion paper”). This discussion paper was the first step in a public consultation process for the Digital Technology Review (“the review”) of the Copyright Act 1994 (“the Act”) currently being undertaken.

2. The Ministry received 74 submissions on the discussion paper and these submissions have been analysed and reported on to Ministers (a summary of the submissions is available on the Ministry’s website: http://www.med.govt.nz/buslt/int_prop/digital/submissions-summary/. The comprehensive and detailed nature of many of the submissions confirmed that further work by the Ministry was required before any changes to the Act could be considered. It was determined that a further round of submissions would be sought, this time on a position paper setting out the Ministry’s preferred policy response to each of the issues initially raised in the discussion paper and commented on in submissions.

3. In preparing this paper, the Ministry also had informal discussions with a range of interested parties. The purpose of these discussions was primarily to test our understanding of the current legal framework before developing a preliminary position on the range of issues previously raised in the discussion paper. An internal working paper, used as a resource for these sessions, can be accessed on the Ministry’s website: http://www.med.govt.nz/buslt/int_prop/digital/working/.

4. Submissions are accordingly invited on each of the preferred policy responses outlined in this paper from a range of interested parties, including users of copyright material, copyright creators and owners, academics, legal practitioners and the general public. Respondents may wish to refer to the Ministry’s 2001 discussion paper for background information on each of the issues addressed in the review (this paper can be found on the Ministry’s website: http://www.med.govt.nz/buslt/int_prop/digital/discussion/).

5. Submissions will be considered in the development of policy recommendations to the government early next year on legislative reform and possible accession to the World Intellectual Property Organisation’s Internet Treaties. The date of introduction of any amending legislation will depend on the government’s legislative programme.

6. The Ministry encourages respondents to provide their submissions electronically. E-mail responses should be addressed to: victoria.pearson@med.govt.nz. Hard copies of submissions supplied by email are not required. Receipt of these submissions will be acknowledged by return email.
   7. Submissions can also be sent to:

Copyright (Digital Technology) Review Submissions Attention: Victoria Pearson
Intellectual Property Policy Group Regulatory and Competition Branch Ministry of Economic Development PO Box 1473
Wellington

8. Further copies of this paper can be downloaded from the Ministry’s website: http://www.med.govt.nz/buslt/int_prop/digital/position/.

9. Please note that submissions may be posted on the Ministry’s website and are subject to disclosure under the Official Information Act 1992. Persons making submissions that include commercially or otherwise sensitive material that they wish the Ministry to withhold under the Official Information Act should clearly identify the relevant information and the applicable grounds under which the Ministry could seek to withhold the information. The contact details of respondents will be recorded and may be used for future consultation processes unless requested otherwise.

10. Respondents are reminded that the review is restricted to issues raised by digital technology, and that it is not the purpose of the review to undertake a comprehensive revision of the Act in its entirety. Submissions are, therefore, sought on the issues raised in this paper only.

11. The closing date for submissions is Friday, 21 February 2003.

B. The Issues

12. The purpose of this limited review of the Act is largely to assess the applicability, adequacy and operation of the Act in the context of the development and adoption of digital technologies, including the Internet. Another reason for the review is consideration of New Zealand’s possible accession to two treaties negotiated by the World Intellectual Property Organisation (“WIPO”) - the WIPO Copyright Treaty (“WCT”) and the WIPO Performers and Phonograms Treaty (“WPPT”), together known as the WIPO Internet Treaties.

13. The first question to be answered, in considering the various issues raised in the review, is whether the Act needs to be amended at all. Enacted in 1994, the Act is comparatively new legislation when compared to our other intellectual property statutes and it provides a relatively modern base for the review. In addition to meeting New Zealand’s TRIPS obligations,¹ the Act was intended to address issues already arising at that time out of new technologies, for example, computer programs and cable television. Therefore, it should not necessarily be assumed that the Act will require substantial alteration.

¹ New Zealand is a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) - Annex 1C to the Agreement Establishing the World Trade Organisation.

14. A second important question is the extent to which “digital is different”. Copyright law first developed before the widespread use of the printing press when the cost and difficulties involved in copying were prohibitive. Since then, copyright has responded to challenges of various new technologies, including the photocopier, film, broadcasting, cable television and music recordings. It is important to consider whether the digital challenge is simply another in a series of technological advances that copyright has had to address or whether it is so inherently different from print and analogue technologies that a different approach to copyright is required.

15. The Ministry’s discussion paper also identified some of the opportunities and threats of digital technology, particularly the Internet, for copyright creators, owners and users. Digital technology allows copyright works to be copied, manipulated and disseminated with minimal effort and cost, and to a standard that cannot be matched using analogue technologies. This is obviously of concern to copyright owners. At the same time, the way that we consume information is changing. Users of new technologies such as the Internet have an interest in ensuring that any changes to the Act do not indirectly restrict or prohibit the ability of the public to access works (for example to read, listen and view), which has so far been permitted in the analogue environment. Access issues are considered further in connection with technological protection measures.

16. It is arguable that the advent of new technologies has, to a large degree, shifted the focus of copyright law from reproduction to communication. Wide spread use of the Internet as a means to distribute and communicate works has necessarily extended the constituency of copyright law, beyond the conventional industry players, to include the general public to a greater degree than before, and raises issues such as the application of copyright to web-browsing. The World Wide Web, initially created to enhance the free flow of information, now plays host to a vast amount of copyright material.

17. It is important to consider that digital technology presents challenges in areas other than copyright, for example to existing business and marketing models and to information policy generally. While some digital issues can be addressed by copyright, it would be inappropriate for the digital copyright agenda to attempt to provide solutions to broader information policy issues. In undertaking the current review, therefore, we must consider whether certain issues, such as technological protection measures and electronic rights management information, should be addressed by copyright law or elsewhere.

18. The nature of digital content also means that a combination of approaches will be used to manage copyright material, including commercial (contract), technological and legal solutions. Businesses can be expected to adapt business models in response to digital technologies to allow them to commercialise content in the digital domain. It is not the role of copyright law to protect existing business models or help develop new ones.

19. An underlying consideration in assessing options is, therefore, the impact of any proposed change to copyright law on New Zealand’s capacity to harness the potential economic benefits of the Internet and e-commerce generally, not solely the risks and benefits to specific constituencies.
20. Further to these broad issues, there are a series of specific copyright issues that arise out of digital technology developments, many of which are quite technical in nature. The main issues to be addressed by the review are:

• The adequacy of the existing reproduction right;

• The adequacy of the existing communication right;

• The proper extent of Internet service provider liability for copyright infringement;

• The need for legal protection for technological protection measures (“TPMs”) and electronic rights management information (“ERMI”);

• The need for additional legal protection for non-original databases; and

• Exceptions and limitations to the rights provided in the Act.

21. This paper sets out what the Ministry sees as the preferred policy responses to the main questions arising under each of these issues. In developing these suggested responses, we have considered a range of options drawn from consideration of both local and international experiences, including the submissions made on the 2001 discussion paper. We have also tested these options against the Ministry’s copyright policy framework (discussed in the next section). In places we seek specific feedback on how best to implement our suggested options.

22. It is important to note that the government has not reached any final conclusions on these matters. The purpose of the submission process is to draw on the knowledge and experiences of those involved in the copyright field in order better to inform the policy-making process.

C. Copyright Policy Considerations

23. The issues involved in the review are multi-faceted and have potentially far- reaching implications. It is, therefore, crucial that the review takes place within a robust analytical framework. This section briefly sets out The Ministry’s copyright policy framework, which has been useful in assessing the implications of digital technology on copyright.

24. The key principle that guides the development of copyright policy is the enhancement of the public interest - copyright laws must benefit New Zealand as a whole. While the term “balance” is frequently used when discussing copyright policy, this balance is about the wider public interest, rather than simply achieving a middle ground between the competing aims of creators, owners and users of copyright works. The Ministry prefers a more principled approach to law reform, based on broad principles, not narrowly defined and negotiated rights and exceptions.

25. In determining what policy approaches are in the public interest there are a number of aspects to consider, including economic, legal, social and cultural objectives. Examples of these often overlapping objectives include:
    • The government’s goal of growing an inclusive, innovative economy for the benefit of all New Zealanders, and the need to support research and development, while minimising regulatory barriers to innovation. New Zealand’s intellectual property laws are an important element of the government’s Growth and Innovation Framework, including creative industry development.

• Wider education and information technology objectives.

• New Zealand’s international obligations under the various treaties to which we are a signatory.

26. Examples of initiatives currently being developed by the government include the ongoing development of a general New Zealand history site² and the development over the next 9 years of a New Zealand Online Encyclopaedia.³ The history website provides a first port of call for New Zealand history information on the Internet. The encyclopaedia will provide a comprehensive guide to the natural environment, history, culture, economics, institutions, people and social development of this country. It will incorporate photographs, sounds, moving images, graphs and maps.

27. In considering this range of objectives, inevitably a balancing exercise must be carried out (and reflected in legislation) that considers:

• The incentives required to ensure creation, production and distribution of creative works that meet society’s needs and demands;

• Minimising the costs to society of copyright protection; and

• Ensuring reasonable access to copyright material, both for creators as an input in cumulative creation, for special needs groups and for consumers in general.

28. An example of this balancing exercise can be seen in the various ways the Act aims to ensure copyright law does not unreasonably restrict access to and use of copyright works. First, it limits the scope and duration of the rights themselves. Secondly, it provides for exceptions to copyright infringement for specific purposes. Such exceptions include the limited use of copyright material by educational institutions, libraries and archives. The question of access to copyright works by these institutions is an important part of the public interest balance that copyright policy seeks to achieve. The implications of digital technology in this area will have to be closely considered against the need to provide incentives for the creation of copyright works.

29. Consideration of international obligations (both current and prospective) is also important.⁴ Without effective copyright protection, at least commensurate with

² Refer www.nzhistory.net.nz.

³ Refer www.mch.govt.nz/ref/enz/index.html.

⁴ New Zealand is a signatory to a number of international treaties, including:

• The Berne Convention for the Protection of Literary and Artistic Works (“the Berne Convention”);
• The Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) - Annex 1C to the Agreement Establishing the World Trade Organisation, which also requires compliance

international standards, foreign copyright owners, exporters and investors may not have the confidence to export copyright products to New Zealand. This has implications both economically, by reducing the amount of material that creators and consumers may have access to, and more generally by limiting access to information and copyright goods. Our policy responses are, therefore, both limited and guided by our international obligations. An important aspect of the review is to consider whether New Zealand should accede to further international conventions and take on new obligations, namely through the WIPO Internet Treaties.

30. In copyright policy, as in any area of regulation, the objective of clear and transparent legislative reform is important, so that the law is more easily accessible and provides greater certainty for stakeholders as to what is restricted or permitted. It seems logical that if people can understand copyright law, they are more likely to follow it. The need for clarity becomes all the more important as digital technology changes the way we access information and extends the constituency for copyright law increasingly to the general public, in addition to the traditional industry players and legal specialists.

31. Technological neutrality is also an objective of this law reform exercise. Copyright law has historically developed incrementally in response to technological changes and approaches from affected stakeholders. Copyright protection for broadcasting and cable programme service transmission is an example of this. The current review considers, for example, whether the narrowly defined communication

right with respect to broadcasting and cable programme services should be extended to other transmission technologies in a technology-neutral fashion. There are, however, risks in pursuing neutrality for its own sake where there are differences that justify separate or distinct approaches.

32. The options recommended in each of the substantive areas of this paper have been considered in the context of the above policy framework. In considering the application of copyright law to new technologies, and claims for additional rights or exceptions, the fundamental purpose of copyright law – the enhancement of the public interest - must be kept in mind. For example, in considering the issue of transient copying we must ask if the public interest is best served in determining that RAM copies, automatically made as part of a technical process, are an infringement of the reproduction right. Is enhanced protection against the circumvention of TPMs an essential incentive for creation of and investment in digital works? Is the cost to society of the potential impact of TPMs on limiting access to works (including those that have moved into the public domain) and preventing the exercise of permitted acts justified? Will creators and owners of copyright works make their works available online or in new digital formats if additional protections against the circumvention of TPMs are not provided?

with the substantive provisions of the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations (“the Rome Convention”). NZ is not directly a party to the Rome Convention.

Part Two: The Reproduction Right

A. Issue Summary

33. The Act provides copyright owners with the exclusive right to copy a work.⁵ “Copying” is defined as including reproducing or recording a work “in any material form” and, in relation to a literary, dramatic, musical, or artistic work, “storing the work in any medium by any means”.⁶
    34. Two issues arise:

35. Whether the existing definition of copying is broad enough to allow copyright owners to prohibit unauthorised copying of material in digital form and the conversion of print or analogue works to digital form (“storage and digitisation”).

36. Whether the definition of copying should be amended to address explicitly incidental and temporary copies that are automatically made by computers and communications networks as a result of technical processes (“transient copying”), for example, caching or the creation of a history file.

B. Perspective and Proposed Policy Response

(i) Storage and digitisation

37. The Ministry considers that the scope of the current reproduction right (and the definition of copying) is sufficient to allow copyright owners to control the digital reproduction of their works. Analysis suggests that digital copying (and first digitisation) is already covered by the existing technology-neutral definition of copying (“reproducing or recording a work in any material form”).⁷

38. On this basis the Ministry’s preferred policy response is to leave the current definition of copying in section 2 of the Act unchanged. We are, however, mindful of suggestions that greater certainty could be provided through a specific reference that “material form” includes digital formats. The Ministry is also concerned to ensure that any specific reference to digital copying does not call into question whether other forms of storage constitute copying and thereby jeopardise the continued technological neutrality of the definition of copying.

39. We, therefore, seek views on how the suggested change in respect of “material form” might be drafted. The Ministry’s preliminary view is that it could be achieved by amending the current definition of copying to state that material form includes digital formats, rather than inserting a separate definition for material form, which is

⁵ Copyright Act 1994, section 16(1)(a).

⁶ Ibid, section 2(1) – definition of “copying”.

⁷ The Electronic Transactions Act 2002, section 34 provides that the copyright in a work is not infringed by the generation of an electronic form of a document or the production of information by means of an electronic communication if these acts are carried out for the purposes of meeting a legal requirement.

currently not defined. We do not favour the seemingly more complicated approach taken in the Australian Copyright Act 1968 (Cth) which contains an extensive definition of “reproduction” and provides explicitly that a work is taken to have been reproduced if “converted into or from a digital or other machine-readable form”.⁸

40. Our analysis of submissions on the 2001 discussion paper also suggests that there is some confusion concerning the relationship between the first two paragraphs of the definition of copying ((a) and (b)) in section 2 of the Act. Subsection (a) widely defines copying in relation to all categories of works. It states that reproducing or recording the work in any material form will constitute copying. Subsection (b) clarifies the extent of the definition in subsection (a) in relation to literary, dramatic, musical and artistic works only. It provides that in relation to these works, storing the work in any medium by any means will constitute copying. This seeks to resolve any question that might arise concerning whether the storage of these types of works is in a material form for the purposes of the definition. For example, a work stored in an electronic form cannot be viewed in a tangible form yet it is considered to be in a material form.

41. Subsection (b) does not need to include other categories of works (sound recordings, films, broadcasts, cable programmes). Frankel and McLay suggest that one way of distinguishing these works is that they all involve some form of technological communication and that the underlying works contained in the communication may also independently attract protection as literary, dramatic, musical or artistic works. As a consequence, copyright in these other categories of works protects the actual communication or representation of the underlying works (for example, as digital code or signals), rather than the content of the communication.⁹

42. The Ministry suggests that any confusion concerning the interpretation of these subsections could be addressed by amending the provision so that paragraph (b) is a subset of (a), thereby making it clear that “material form” may include storage, but does not necessarily have to.

43. Please note that exceptions to the reproduction right are considered separately in the section on permitted acts.

(ii) Transient copying

44. The Act does not expressly address the question of whether the making of temporary or incidental copies, which are often a result of the automatic operation of digital technologies, such as computer and communications systems, infringes the exclusive right of a copyright owner to authorise copying of copyright material.

45. The Ministry considers that the current definition of copying is sufficiently broad to include transient copying. Liability for unauthorised copying could, therefore, arise in relation to transient and incidental copies. For example, copies created in a computer’s random access memory (“RAM”) when a user browses the World Wide

⁸ Copyright Act 1968 (Cth) (Australia), section 21(1A).

⁹ Frankel and McLay, Intellectual Property in New Zealand (LexisNexis Butterworths, 2002) p 169.

Web may give rise to infringement. It has been argued that this is in essence the digital equivalent of the “right to read” in the analogue environment. The argument that RAM copies are transient and, therefore, not reproductions (because they disappear when a computer is switched off) has generally been unsuccessful in the courts. This has implications for individual web users and Internet service providers. It has been suggested, therefore, that the Act should expressly state whether or not transient copying forms part of the copyright owner’s exclusive reproduction right.

46. There was general agreement from respondents to the 2001 discussion paper that liability should not arise for transient copying that is automatic, part of a technical process and is to allow the functioning of an otherwise authorised act. Not all transient copying, however, is automatic and part of a technical process. It is also not clear what uses (perhaps commercial) may be made of transient copies as technology develops. The Ministry considers that whether copying is temporary or permanent is not necessarily a useful yardstick by which to measure whether infringement has occurred. Rather, it is the purpose of the copying that should be considered.

47. Applying the copyright policy framework, the Ministry considers that it is highly doubtful that protecting transient copies that are automatic and part of a technical process would play a significant role in encouraging the creation of new works. The social cost of providing such a right cannot be justified on grounds of economic efficiency, as the cost of protection to society (for example, a disincentive to Internet use) would not be offset by any gains in the value to the public interest.

48. Having concluded that some transient copying should not give rise to liability for copyright infringement (depending on the purpose of the copying), two options arise: amend the definition of copying so that some forms of transient copying are deemed not to be copies, or provide exceptions for some forms of transient copying.

49. The Ministry’s preferred policy response is that transient copying continue to be included within the broad definition of copying, but with a specific purpose-based exception. An exception directed towards copying automatically undertaken as part of a technical process involved in making an authorised use of a work attracted general support from respondents commenting on the 2001 discussion paper. The Ministry proposes that such an exception only apply to transient copies that have no independent economic significance.¹⁰

50. Consideration of the above option would, however, require further work concerning the definition of “technical process”. The Ministry seeks suggestions from respondents on how this issue might be addressed. For example, creating exceptions for:

¹⁰ See Article 5 of the EU Directive on the Harmonisation of Certain Aspects of Copyright and Related Rights in the Information Society (2001/29/EC, 22 May 2001) (“Copyright Directive”). The mandatory exception to the exclusive reproduction right for transient copies will only apply where they form an integral and essential part of a technological process and have no independent economic significance.

• temporary reproductions as part of the technical process of making or receiving a communication (as in Australia¹¹);
• copies that “technically required for the viewing of or listening to a work by a member of the public to whom a copy of the work is lawfully made available” (as in Ireland¹²).

51. A key question to be addressed in this context is the degree to which technical processes should be linked to communication processes, or should apply more generally. The Ministry suggests a wider approach, not limited to communication, for example, so that temporary storage in RAM for the purpose of executing a computer program or game does not constitute infringement.

52. The Ministry does not favour an approach that excludes transient copying from the definition of copying. It is suggested that the “exceptions” rather than the “definition” approach to this issue provides a more technology-neutral solution, which acknowledges that not all transient copying is automatic or for purely technical purposes and should not be exempted from the copyright owners exclusive reproduction right.

53. The issue of Internet service provider liability, and exceptions more generally, are dealt with in Part Four of this paper.

¹¹ Copyright Act 1968 (Cth) (Australia), section 43A.

¹² Copyright and Related Rights Act 2000 (Ireland), section 87(1).

Part Three: Communication to the Public

A. Issue Summary

54. The Act currently provides copyright owners with a technology-specific communication right to broadcast a work or to include a work in a cable programme service.¹³ “Broadcast” is defined to mean a wireless transmission either capable of being lawfully received by the public (in New Zealand or elsewhere) or for presentation to members of the public (in New Zealand or elsewhere).¹⁴ “Cable programme service” is extensively defined in section 4 of the Act, subject to a list of exceptions, as a transmission service by wired telecommunication means to the public or for reception at two or more places, either simultaneously or at different times, in response to requests.

55. The discussion paper compared the existing communication right with the broad “right of communication to the public” provided in the WIPO Internet Treaties.¹⁵ It asked whether the existing technology-specific right was sufficient to allow copyright owners to control the communication to the public of works over the Internet, for example, via webcasting or the making available of works in interactive, on-demand systems (“push” and “pull” technologies respectively). If not, would the creation of a broad technology-neutral right of communication to the public be in the public interest?

B. Perspective and Proposed Policy Response

56. In considering whether the Act provides a right to control the communication to the public over the Internet, by way of active transmission (for example by webcasting) and the making available of works in interactive, on-demand systems, the Ministry has considered the current cable programme service right and the definition of cable programme service.

57. The Ministry considers that the existing cable programme service right may be sufficient to cover webcasting as a form of transmission (as webcasting-type activities are not excluded from the definition of cable programme service in section 4 of the

¹³ Copyright Act 1994, section 16(1)(f).

¹⁴ Ibid, section 2(1) - definition of “broadcast”.

¹⁵ Article 8 of the WCT provides that:

• [A] uthors of literary and artistic works shall enjoy the exclusive right of authorising any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them.

Articles 10 and 14 of the WPPT apply the communication right to performers and producers of phonograms. The WPPT defines these rights as ones of “making available to the public”. Article 10 [and 14] of the WPPT provides:

Performers [producers of phonograms] shall enjoy the exclusive right of authorising the making available to the public of their performances [phonograms], by wire or wireless means, in such a way that members of the public may access them from a place and at a time individually chosen by them.

Act). The application of section 4 to webcasting is, however, dependent on the interpretation of a detailed and technical section of the Act, and the question has not been judicially considered. The issue is further complicated by the fact that the Internet utilises both wired and wireless technologies.

58. Thinking about the issue from the perspective of interactive, on-demand services (“pull” rather than “push” technologies), the right to restrict unauthorised inclusion of a work in a cable programme service may apply. The exclusion, however, of transmission services that are interactive in nature means that it is unclear if the cable programme service right would allow copyright owners to take action against the unauthorised making available of copyright works (for example, music recordings or films) on a server for users to access, select and download at their own convenience.

59. Respondents to the discussion paper (both copyright owners and user groups) generally agreed that the Act requires amendment to provide copyright owners with an explicit right to control the communication of works to the public over the Internet. It was suggested that such an amendment is required to remove ambiguity and provide certainty, assist copyright owners to take action against the unauthorised webcasting of their works and encourage the use of new technologies by copyright owners to transmit copyright material to consumers.

60. The vast majority of submissions favoured replacing the technology-specific broadcasting and cable programme service rights with a broad technology-neutral communication right that would cover broadcasting, inclusion in a cable programme service, webcasting or any future method, including any combination of technologies.

61. The Ministry’s proposed policy response is to establish a technology-neutral right of communication to the public that would cover both transmission and the making available of works. Creation of a specific webcasting right or changes to the cable programme service definition would only provide a temporary solution as new technologies develop and others become obsolete.

62. In making this recommendation, the Ministry is mindful of the growing importance of rights of communication, compared to reproduction, in the digital age. Extension of the communication right to new communication technologies is a necessary incentive to ensure continued supply of and investment in creative works in the digital environment. If works may be freely communicated on the Internet (without permission of the copyright owner) this will inevitably affect the market for legitimate copies by increasing the number of infringing copies in existence.

63. At the same time, the move to a technology-neutral right will not result in a significant shift in the balance between owners and users of copyright works. Rather, it recognises of a change in the way works are consumed and distributed. Any costs to society are outweighed by the necessary incentives, and can be minimised by ensuring continued access to works and exercise of permitted acts (considered later in this paper).

64. If New Zealand copyright law is to be seen as credible internationally, a move to a broad technology-neutral communication right is essential. Creation of the technology-neutral right would make New Zealand’s copyright law consistent with the

WIPO Internet Treaties in this respect, and with the copyright legislation of our major trading partners who have either adopted the WIPO Internet Treaties, or are in the process of doing so.

C. Webcasts as Works

(i) Issue summary

65. The Act provides protection for the signals that carry programme content in both broadcasts and cable programmes. Broadcasters and cable programme service providers, therefore, own separate copyright in their transmissions that is independent of copyright that might exist in the content carried by transmission signals.

66. The issue that arises is whether webcasts, as transmissions to the public via the Internet, should be protected as copyright works in the same way that broadcasts and cable programmes are protected (if they are not already protected as cable programmes via the existing definition of cable programme service in section 4 of the Act). Similarly, should the Act provide this right for any future transmission technologies?

(ii) Perspective and proposed policy response

67. The Ministry considers (on the basis of submissions received) that sufficient reasons do not exist to differentiate between traditional transmission technologies, such as broadcasting and cable programme services, and new technologies, such as the Internet.

68. The Ministry’s preference would be to amend the Act to provide for a new technology-neutral category of “communication works”, that would encompass broadcasts, cable programmes and other transmission technologies including webcasting. This is preferable to the creation of a new category of works to protect webcasts specifically, which would attract problems of technological specificity. We are interested in gathering views on the parameters of a communication works category.

D. Cable Retransmission of Free-to-Air Broadcasts

(i) Issue summary

69. Section 88 of the Act provides that a broadcast made from a place in New Zealand can, by reception and immediate retransmission, be included in a cable programme service, except where a licensing scheme or arrangement is in place. Section 88(2)(b) provides that copyright in any work included in a broadcast is not infringed “if and to the extent that the broadcast is made for reception in the area in which the cable programme service is provided”.

70. The issue is whether the cable retransmission exception in respect of free-to-air broadcasts should be retained, or perhaps extended to give the same opportunity to satellite subscription broadcasters and webcasters.

(ii) Perspective and proposed policy response

71. When section 88 was enacted in 1994, there were two main objectives. First, to encourage greater competition and investment in the cable network and service industry by allowing cable service providers to bundle free-to-air television with telephone and other communications services. Second, to improve the quality of television reception in areas where signal quality was inadequate.

72. The Ministry’s preferred policy response is to repeal section 88 and leave television service providers to rely on commercial arrangements to carry other signals. Measured against the policy framework, no evidence has been presented to suggest that the incentives provided by the cable retransmission exception continue to be required to encourage investment in the cable industry. Cable programme service providers, in particular, are invited to comment on this issue.

73. Alternatively, section 88 could remain unchanged and be re-considered at a later date when the WIPO Standing Committee on Copyright and Related Rights completes the development of new international standards concerning copyright in relation to broadcasting and related transmission issues.

Part Four: Internet Service Provider Liability

A. Issue Summary

74. Copying is central to the function of the Internet. Material may be reproduced at many stages during the course of a transmission and it may be virtually impossible to identify when and where many of these copies are made. Thus, where the material being copied is subject to copyright protection, any Internet service provider (“ISP”) involved in storing and transmitting the material could be liable for either primary or secondary infringement of copyright.

75. In terms of primary infringement, submissions on the discussion paper generally agreed that ISPs should be liable where they are themselves responsible for breaching copyright by their own actions. Two issues arise, however, in relation to the service that ISPs provide for third parties, which may warrant an exemption from liability:

• Should ISPs be liable in relation to transient copying of copyright material on their systems?

• Should ISPs be allowed to engage in caching, beyond mere transient caching, in the interests of providing faster and more efficient Internet services?

76. In terms of secondary infringement, ISPs also potentially face liability for the activities of third party subscribers using the ISPs’ services to infringe or facilitate infringement.

B. Perspective and Proposed Policy Response

77. The services provided by ISPs, ranging from providing access to the Internet through to actively hosting material, are crucial to the use of Internet technology. The government’s Growth and Innovation Framework identifies information and communication technology as central to the growth of New Zealand’s economy,¹⁶ and the increased global connectedness provided to New Zealanders by the Internet is an important factor.

78. New Zealanders have been enthusiastic in their use of Internet technology, as demonstrated both by the high number of Internet subscribers per capita and the number of hours spent on-line.¹⁷ Internet usage in New Zealand increased after changes in ISP charges enabled unmetered Internet access.¹⁸ There would, therefore, appear to be a public interest in ensuring cost-effective access to the Internet. In the face of uncertain or increased liability for ISPs for copyright

¹⁶ Growing an Innovative New Zealand (February 2002) pp 52 to 54.

¹⁷ See both New Zealand Institute for the Study of Competition and Regulation Inc, The State of e- New Zealand: 12 Months On (November 2001) and the Ministry of Economic Development, Statistics on Information Technology in New Zealand (May 2002).

¹⁸ New Zealand Institute for the Study of Competition and Regulation Inc, The State of e-New Zealand: 12 Months On (November 2001) p 31.

infringement, ISPs may increase charges to cover this risk, be unwilling to provide certain services or place significant conditions on the use of their services. This, in turn, could have a detrimental impact on future use of the Internet by New Zealanders.

79. In addition, given the global and “border-less” nature of the Internet, the Ministry considers that it is important to achieve consistency in approaches between different jurisdictions. ISPs and content owners alike would then have some degree of certainty about how they will be treated both within and outside New Zealand. In the Ministry’s opinion the approaches suggested below would also comply with the requirements of the WCT, if New Zealand should choose to accede to that agreement.

80. In making recommendations for excluding ISPs from some liability, the Ministry is mindful of the copyright owners’ need to prevent infringement where they are unable to identify the actual infringer. As such, the Ministry considers that the UK approach is helpful, limiting only liability for damages or any other pecuniary remedies or for any criminal sanction.¹⁹ The Ministry does not recommend preventing copyright owners from seeking injunctive relief in respect of information stored by ISPs.

(i) Definition of “Internet service provider”

81. As noted previously, ISPs provide a wide range of services, not all of which warrant exclusion from liability. In line with submissions on the discussion paper, the Ministry recommends that a definition of “service provider”, or some similar term, in the Act should be based on the nature of the activity (for example, caching, hosting, providing transmission services) rather than on the nature or status of the organisation itself.²⁰

82. As such, where an ISP is itself actively involved in posting information on the Internet, the Ministry considers that it should not be excluded from liability. Conversely, where an organisation, not generally considered to be an ISP, is providing those services (for example, an educational institution or a library), it could be covered by the exclusions.

(ii) Transient copying and caching

83. Respondents to the discussion paper generally agreed that ISPs should not be liable for transient copying undertaken as part of the operation of their transmission systems. As noted in Part Two of this paper, the Ministry favours providing an exception from liability for copying automatically undertaken as part of a technical process. This would cover transient copying carried out by ISPs in providing services to subscribers.

¹⁹ Regulations 17 to 19 of the UK Electronic Commerce (EC Directive) Regulations 2002, implementing the Directive on Certain Legal Aspects of Information Society Services, in particular Electronic Commerce, in the Internal Market (2000/31/EC, 8 May 2002).

²⁰ For example, see the UK Electronic Commerce (EC Directive) Regulations 2002, regulation 2 – definition of “information society service”.

84. In the interests of clarity, the Ministry suggests the introduction of a section noting that the mere provision of physical facilities for enabling or making a communication does not itself constitute an infringement of copyright, or an authorisation for such infringement.²¹

85. There was also quite wide agreement amongst respondents that, given the benefit to the efficient operation of the Internet of caching, ISPs should not face liability arising out of this activity. A transient copying exception may cover caching, or some aspects of it. Equally, as caching is a common practice, it is arguable that, in placing material on the Internet, website owners provide ISPs with an implied licence to cache web pages. Nevertheless, there may still be room for uncertainty if the issue is not expressly addressed.

86. As caching of frequently accessed websites allows for more cost-effective and efficient access to Internet material, the Ministry’s preferred approach is to provide an exception for this activity. Regulation 18 of the UK Electronic Commerce (EC Directive) Regulations 2002 (“the UK Regulations”) provides a useful model for this type of provision.²² It provides that an “information society service” is not liable where information provided by the recipient of a service is subject to automatic, intermediate and temporary storage by the service, for the sole purpose of more efficient onward transmission to other recipients on request. This exemption from liability is subject to certain conditions, namely that the service:

1. Does not modify the information;

2. Complies with conditions on access to the information;

100. Complies with any rules regarding the updating of the information;

4. Does not interfere with the lawful use of technology to obtain data on use of the information; and

5. Acts expeditiously to remove or disable access to such information upon obtaining knowledge of the fact that the information at the initial source of the transmission has been removed from the network, or access to it has been disabled.

87. The issue of what standard of knowledge should be required is discussed below under “Secondary infringement provisions”.

(iii) Secondary infringement provisions

88. As previously noted, the activities of third party subscribers could give rise to copyright infringement liability for ISPs, for example, under sections 36(a) and (d) of

²¹ For similar provisions, see WCT, Article 8 Agreed Statement and Copyright Act 1968 (Cth) (Australia), section 39B.

²² Regulations 18 and 19 are subject to regulation 20, which provides that a contrary contractual agreement can be reached and that any party’s right to apply to the court for relief is not affected.

the Act.²³ Although a small number of respondents suggested that ISPs could be required to monitor material held on or passing through their systems, a significant majority of submissions on this point emphasised that such monitoring would be unduly burdensome and potentially impossible.

89. Other jurisdictions have sought to limit to some extent the liability of ISPs for third party activities, including the US,²⁴ the UK,²⁵ Australia²⁶ and Ireland.²⁷ The Ministry’s suggested policy response is to follow the model as set out in regulation 19 of the UK Regulations.²⁸ Under these regulations, ISPs are exempt from liability where information is stored on behalf of a third party subscriber, where:

1. The service provider does not have actual knowledge of unlawful activity or information; or, where a claim for damages is made, the service provider is not aware of facts or circumstances from which it would have been apparent to the service provider that the activity or information was unlawful;

2. Upon obtaining such knowledge or awareness, the service provider acts expeditiously to remove or to disable access to the information; and

100. The third party subscriber was not acting under the authority or the control of the service provider.

90. A number of respondents suggested that such a regime should also require the ISP to inform the owner of the website that a notice has been received and that material will be removed from the site or access to it disabled.

91. The knowledge tests in both UK regulations 18 (caching) and 19 (hosting) are subjective. Case law suggests that an “actual knowledge” requirement would encompass those who deliberately refrain from inquiry or who shut their eyes to that which is obvious.²⁹

92. The secondary infringement provisions in the New Zealand Act,³⁰ on the other hand, require that the alleged infringer “knew or had reason to believe” that the act constituted an infringement. This test imports a notion of constructive knowledge into the secondary infringement sections. “Constructive knowledge” involves knowledge

²³ These sections provide that copyright is infringed by a person who possesses in the course of business or who in the course of business exhibits in public or distributes an infringing copy of a work.

²⁴ Copyright Act 1976 (US), section 512.

²⁵ Electronic Commerce (EC Directive) Regulations 2002, regulations 17 to 22.

²⁶ Copyright Act 1968 (Cth) (Australia), section 22(6), 36 and 39B.

²⁷ Copyright and Related Rights Act 2000 (Ireland), section 40(4) and (5).

²⁸ See note 22, above.

²⁹ For example, see RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123, Columbia Picture Industries v Robinson [1986] FSR 367, [1987] Ch 38 and Crystal Glass Industries Ltd v Alwinco Products Ltd (unreported, High Court, Hamilton, A236/78, 15 April 1983).

³⁰ Copyright Act 1994, sections 35 to 39. Note that proposed legislative amendments regarding parallel importing will alter the knowledge standard in respect of the importation of infringing copies.

of facts or circumstances from which a reasonable person would arrive at the relevant belief.³¹

93. In the Ministry’s view, it would be more appropriate to apply the New Zealand knowledge requirements to ISPs for two main reasons:

1. To ensure that the scope of the immunity of ISPs is not unduly broad, and to allow content owners greater scope to protect their exclusive rights.

2. To be consistent with the existing secondary liability provisions.

94. In order to provide some guidance on the issue of knowledge, the Ministry considers that a number of factors should be set out in the legislation to which a court should have regard in determining knowledge for the purposes of the ISP section. This would include receipt of a notice from a content owner.³² Views are sought on other factors that could be specified.

³¹ LA Gear Inc v Hi-Tech Sports plc [1992] FSR 121, 129. This test was applied in New Zealand in

Husqvarna Forest & Garden Ltd v Bridon New Zealand Ltd [1999] 3 NZLR 215.

³² For example, Electronic Commerce (EC Directive) Regulations 2002, regulation 22.

Part Five: Technological Protection Measures

A. Issue Summary

95. Technological protection measures (“TPMs”) include devices, mechanisms or systems designed to guard against or restrict the unauthorised use of recordings or information and other material stored in digital format.

96. Technological protection measures provide a means to combat the ease of copying that digital technology provides. There are, however, concerns about “digital lockup” as such measures, by preventing access, cannot distinguish between infringing activities and permitted acts. It has been suggested that in seeking copyright protection for TPMs, copyright owners are attempting to go beyond the traditional scope of copyright protection by attempting to control access to works, rather than use of them.

97. Section 226 of the Act currently includes specific provisions directed against certain types of devices or means designed to circumvent electronic “copy-protection” measures. The section provides copyright owners and other persons who issue electronic “copy-protected” works to the public with rights against persons who make, sell, advertise or publish information concerning “devices” or “means” intended to circumvent copy-protection mechanisms and to make infringing copies of copyright works.

98. The WIPO Internet Treaties require that Member States provide adequate legal protection and effective legal remedies against the circumvention of effective TPMs that are used by copyright authors:

• In connection with the exercise of their rights under those Treaties or under the Berne Convention; and

• That restrict acts, in respect of their works, which are not authorised by the authors or permitted by law.³³

99. These provisions are broadly drafted in recognition of the fact that legal protection of TPMs will vary in different legal systems. The terms “technological protection measure” and “effective” are not defined in the Treaties.

100. The following issues arise in relation to TPMs and section 226:

• Should the scope of section 226 extend to access control as well as copy control technologies?

• Should copyright owners have a right of action against the actual use of a circumvention device or means, or should liability be restricted to provision of the means of circumvention (as section 226 currently provides)?

³³ WCT, Article 11 and WPPT, Article 18.

• What is the impact of TPMs on permitted acts? What exceptions should apply?

• If restricted to the provision of the means to circumvent, should the standard of knowledge required for liability be subjective or objective? Should actual knowledge, or a reason to believe, that a device or means would be used to circumvent a TPM be required? Or is it enough that a device or means be produced or provided (without the knowledge requirement)?

• Are criminal offence provisions required in addition to civil remedies in relation to prohibited activities concerning TPMs?

B. Perspective and Proposed Policy Response

(i) Scope of section 226 (copy and access protection)

101. There has been considerable debate in the literature about TPMs and access to copyright works (both in terms of initial access, and subsequent acts of accessing and consulting material). A range of TPMs exist, only some of which prevent the act of copying. Others indirectly prevent copying by preventing initial access to works. Some TPMs facilitate new means of delivering material (business models) such as pay-per-view, and control each act of accessing or consulting copyright material, even after a copy of the material has been downloaded. For example, TPMs can control ongoing use where copies are automatically deleted after a certain period or when an item has been accessed a fixed number of times.³⁴

102. Some commentators argue that access control is necessary to address large- scale copyright infringement made possible by digital technologies. Others suggest that TPMs provide copyright owners with greater scope to control access to materials than was possible in the analogue world, and that access (along with the ability to read, view or listen), compared to use, has not traditionally been an exclusive right of the copyright owner.

103. These issues have also been raised in the WIPO Standing Committee on Copyright and Related Rights. A number of countries have expressed concerns that uncontrolled use of TPMs together with anti-circumvention legislation and contractual practices would allow rights owners to extend their rights far beyond the bounds of the copyright regime, to the detriment of the public interest.³⁵ Issues such as what kind of activities (i.e. copying, access) should be protected against have been identified for further work, which suggests that a number of countries are currently considering what is required to comply with the TPM provisions of the WIPO Internet Treaties.

104. Section 226 is currently directed towards devices, means or information designed to circumvent electronic “copy-protection” measures. The section does not specifically refer to devices etc. designed to circumvent access protection (such as

³⁴ Copyright Law Review Committee (Australia), Copyright and Contract (2002) p 106.

³⁵ WIPO Standing Committee on Copyright and Related Rights, Short Description of Possible Subjects for Future Review by the Standing Committee (SCCR/8/2, August 2002).

DVD zone formats). Arguably, therefore, to qualify for protection against circumvention, a TPM must have as its function the prevention of copying (not simply access). The United Kingdom equivalent of section 226 has, however, been interpreted to apply to DVD regional zone protection technology.³⁶ It seems, therefore, that section 226 could already apply to access control.

105. The question that arises is whether section 226 should provide specific protection for access protection that does not directly prevent the copying of copyright material?

106. The Ministry’s preferred policy response is that section 226 retain its focus on copy control measures, and not provide legislative protection against the circumvention of TPMs which only control access. That is, for section 226 to apply, the TPM circumvented must prevent copying, and the circumvention must be for the purpose of copying or the infringement of other restricted acts of the copyright owner in the Act (including potentially a new technology-neutral right of communication).

107. In proposing this policy response, the Ministry intends, for example, that the supply and use of devices that allow the circumvention of regional zone access protection (to allow the playing of legitimately purchased DVD movies or games etc. from other zones), would not infringe the TPM provisions. If, however, a circumvention device directly facilitated the infringement of copyright, that would be a breach of section 226. The Ministry also seeks to avoid, in New Zealand, situations where a court may find that devices such as DVD players or PlayStation consoles constitute TPMs (with copy control) by virtue of the fact that a small amount of data may be temporarily stored or reproduced in the device’s RAM (see also Part Two of this paper on transient copying exception).³⁷ It is the Ministry’s view that it is not the role of the Act to protect access control technology, which is used in some cases to price discriminate and control geographical distribution of works, to the detriment of New Zealand users.

108. Copyright owners could continue using TPMs that control access, however, without assistance from the Act. Owners could, for example, continue to rely on other legal measures, such as the law of contract, where an access protection measure is circumvented.

109. To implement the suggested approach outlined in this section the Ministry proposes that definitions be inserted for the terms “TPM” and “circumvention device”, as the Act does not currently contain these definitions. We welcome suggestions on how best to define these terms, consistent with our proposed policy response.

³⁶ Sony Computer Entertainment v Paul Owen and Others [2002] EWHC 45 (CH).

³⁷ Ibid, and note also the decision of the Federal Court of Australia in Kabushiki Kaisha Sony Computer Entertainment v Stevens [2002] FCA 906. In the Australian case the Court found that the regional zoning system of the Sony PlayStation does not constitute a TPM. The Court considered that while the access code and boot ROM of the PlayStation was designed to deter or discourage copyright infringement, it was not enough that a device provided a disincentive to copy through the inability to play games on the console. Instead a protective device must physically prevent or inhibit a person from undertaking acts, which, if carried out, would infringe copyright in a work.

(ii) TPMs – actual use or provision of means of circumvention?

110. Under section 226 of the Act, the right of action provided to copyright owners is in relation to provision of devices or means specifically designed or adapted to circumvent copy-protection, and in relation to the publication of information intended to enable or assist persons to circumvent copy-protection. The act of circumvention is not itself prohibited. The question that arises is whether copyright owners should have a right of action against the actual use of a circumvention device or means, or should liability be restricted to provision of the means of circumvention (as

section 226 currently provides)? The WIPO Internet Treaties are silent on this point.³⁸

111. The Ministry’s proposed policy response is to retain the current focus on the manufacture of devices or means, and publication of information, and not extend liability to the act of circumvention itself. It has been suggested that the extension of liability to actual circumvention would only be beneficial in terms of addressing copyright infringement where circumvention occurs on a commercial scale. Anecdotal evidence suggests that circumvention does not occur on such a scale in New Zealand. Based on the information currently available, the Ministry is not convinced that targeting the act of circumvention would generate additional incentives for the creation of works. We note also that this is the approach taken in Australia.³⁹

112. In making this recommendation, the Ministry is aware of concerns expressed by user groups, suppliers and manufacturers that the focus should not be on all circumvention devices. These groups suggest there may be a number of legitimate uses for such devices, and that manufacturers of general-purpose equipment that can be used for non-infringing purposes should not be held liable for infringing uses. The Ministry considers that the current requirement in section 226, that devices or means must be “specifically designed or adapted” to circumvent copy-protection, is sufficient to address the concerns of the manufacturers of devices with legitimate purposes. Our proposed policy response is that this requirement, or similar, be retained. For example, a reference to devices that have only a limited commercially significant purpose or use other than to circumvent,⁴⁰ may be appropriate.

113. The Ministry also wishes to avoid the apparent anomaly created by copyright legislation in Australia and the United States, and in the EU Copyright Directive. Under these regimes, while the act of circumvention is not expressly prohibited, or is permitted to allow the exercise of permitted acts or specific exceptions, the manufacture or provision of devices or information to facilitate that circumvention is

³⁸ In Australia, liability attaches to the provision of circumvention devices or services, not the act of circumvention itself. In the United States it is both the actual use and the provision of devices and measures. Similarly, in the EU Copyright Directive, both the act of circumvention and the manufacture and distribution of devices that could be used to defeat TPMs are prohibited.

³⁹ Copyright Act 1968 (Cth) (Australia), section 132.

⁴⁰ See Article 6(2) of the EU Copyright Directive. The focus is on devices etc. which are promoted for the purpose of circumvention, have only a limited commercially significant purpose or use other than to circumvent, or are primarily designed or produced for the purpose of enabling or facilitating the circumvention of TPMs.

prohibited.⁴¹ For example, libraries cannot obtain circumvention devices or services to allow them to take advantage of library exemptions.

114. There seem to be two possible solutions to this problem. One option is to provide an exception to section 226 to allow the manufacture of circumvention devices (for example, CD or DVD writers, software, personal video recorders) or the provision of information on circumvention to enable users to carry out permitted acts. In Australia the manufacture or supply of a circumvention device or service is allowed if a declaration is received that it is required for a permitted purpose. There are, however, practical difficulties with the application of this approach.

115. Another approach is to put the onus on copyright owners to take steps to ensure that users of copyright material can exercise permitted acts, as is the approach in the EU, which potentially alleviates the need for an exception in respect of circumvention devices. This might be achieved through applications from users (such as libraries) to the suppliers of digital works.

116. Submissions are invited on how the means of circumvention might be provided to allow the exercise of permitted acts. The issue of exceptions is considered further in the next section.

(iii) TPMs and exceptions

117. There are two aspects to this issue: exceptions to the TPM provisions, and access to enable the practical exercise of permitted acts generally. They are considered here in turn.

118. First, having provided protection against the circumvention of TPMs, it is necessary to consider what exceptions might apply to those provisions. In determining what exceptions may be appropriate, it is material to consider the nature and extent of the protection afforded, for example, where the act of circumvention is not itself prohibited (as is proposed) but the provision of the means of circumvention is prohibited. It is also material whether the TPM provisions apply to TPMs that have copy control or access control as their purpose. If the definition of TPM only includes copy control measures not access control more generally (as is proposed) it would be unnecessary to specify exceptions to allow circumvention of access control TPMs.

119. The Ministry proposes that exceptions apply (in respect of the manufacture or supply of TPMs designed to provide copy-protection) to allow the exercise of the following specific purposes: error correction, interoperability and encryption research. The Ministry also considers that liability should not arise where a TPM is circumvented to the extent necessary to allow a user to exercise a permitted act, or to enable copying when the period of copyright protection has expired.

⁴¹ See for example, the Australian Copyright Act 1968 (Cth), which provides a number of exceptions to the circumvention provisions, including enabling the exercise of activities covered by the libraries and archives exceptions. The manufacture or supply of a circumvention device or service is allowed if a declaration is received that it is required for a permitted purpose. This presents practical difficulties in terms of providing the necessary incentives for the development and investment in circumvention devices, if for example a declaration must first be provided.

120. Views are sought on any additional exceptions that may be necessary.

121. The second issue relates to obtaining access to enable the actual exercise of permitted acts, even where circumvention is not prohibited.

122. Submissions on the 2001 discussion paper pointed to the practical difficulties in gaining access to works protected by TPMs to exercise permitted acts even where copyright law does not prohibit circumvention. Some respondents suggested that the reality of new formats and business models is that some uses will not be able to be exercised if users want to use new formats, and that users can still access old formats and exercise permitted acts.

123. The literature seems to be divided on the extent to which digital lock-up is in fact occurring. Little evidence on this issue has been provided by users, and anecdotal evidence suggests that users have little need to circumvent TPMs to exercise permitted acts, as TPMs are not yet being used to any significant degree.

124. We note that some countries have undertaken to institute some form of review process to determine the effect of TPM provisions on the ability of users to make use of permitted acts (including the United States, the European Union and Australia⁴²). We suggest, therefore, that the Ministry reconsider this issue in three years time, and provide policy advice to government accordingly.

(iv) TPMs – subjective or objective knowledge requirement?

125. Section 226 applies to situations where persons knew or had reason to believe that a device, means or information would be used to make unauthorised copies of copyright works. The question that arises is whether this subjective test should be replaced with an objective one, and apply (for example) where persons ought reasonably to have known.

126. The Ministry’s proposed policy response is to retain the existing subjective test, consistent with other aspects of the Act. We note, however, the suggestion that an objective test would be consistent with proposed amendments in respect of parallel importing, which substitute the current subjective test with a requirement that a defendant “knows or ought reasonably to know” that an imported object is an infringing copy. The parallel importing changes are quite specific, represent the exception rather than the norm and respond to actual difficulties encountered in attempting to prove that importers of goods knew, or had reason to believe, that goods were pirated (or infringing) copies.

⁴² The European Union, under Article 12 of the Copyright Directive, has directed that the European Commission shall every three years submit a report on the implementation of the Directive, examining in particular whether acts which are permitted by law are being adversely affected by the use of TPMs. In the United States, article 1201(a)(1) of the Digital Millennium 1998 Copyright Act provides that every three years the Librarian of Congress must determine if users of a class of works are likely to be prejudiced in their ability to engage in non-infringing uses, by the prohibition on circumvention of access controls. The Australian Government undertook to review the Copyright Amendment (Digital Agenda) Act 2000 amendments after three years.

127. The Ministry is not aware of any litigation on the matter of circumvention of TPMs in New Zealand. Similarly we do not know if there have been practical difficulties in determining, for example, that an importer of a circumvention device knew that it would be used to make infringing copies of copyright works (not just that it would be used to circumvent a TPM). If such a situation were to exist, the Ministry considers there may be grounds to reconsider the matter.

(v) TPMs – offence provisions

128. In proceedings for infringement copyright owners may seek civil remedies (such as damages, injunctions, account of profits) under section 120 of the Act (and rights of delivery up in sections 122 and 132). The offence provisions of the Act only apply where there has been commercial dealing with “infringing objects”, including infringing copies of copyright works and objects used to make infringing copies.

129. The question that arises is whether criminal offence provisions are required in addition to civil remedies in relation to prohibited activities concerning TPMs, and what might be gained from such an approach.

130. The Ministry’s proposed policy response is to retain the status quo. Submissions from legal practitioners and owners suggest that the deterrent effect of offence provisions is minimal in the context of limited resources to take criminal prosecutions. This suggests that the addition of offence provisions would not provide significant incentives for further creativity or investment in copyright works. Based on the information available, and balanced against the risks to “innocent infringers”, the Ministry considers that the inclusion of offence provisions would not serve the public interest.

131. If offence provisions were instituted, the Ministry considers that a subjective knowledge test would be appropriate.

Part Six: Electronic Rights Management Information

A. Issue Summary

132. Electronic rights management information (“ERMI”) identifies content protected by copyright and the terms and conditions of use, and can assist copyright owners in tracking copyright infringement and legitimate use of their works. There are currently no provisions in the Act that apply to the removal of ERMI.

133. The WIPO Internet Treaties⁴³ require Member States to provide “adequate and effective” remedies against the removal or alteration of any ERMI without authority. Remedies are also required against the distribution, importation for distribution, broadcast or communication to the public (without authority) of works or copies of works knowing that ERMI has been removed or altered without authority.

134. The following issues arise:

• Should copyright owners have a right of action for the removal of or tampering with ERMI?

• If so, what limitations or exceptions should apply (if any)?

• Should offence provisions apply? If so, to what activities should they apply?

B. Perspective and Proposed Policy Response

135. In approaching this issue the Ministry is aware that copyright industries tend to approach TPMs and ERMI together, as a package of technological solutions to address the ease of copying and distribution that digital technologies afford. These measures are collectively known as digital rights management.⁴⁴ For practical purposes we have distinguished, in this paper, between digital rights management solutions that control content and those that describe rights to that content. We note also that this distinction is made in the relevant articles of the WIPO Internet Treaties.

136. In approaching the ERMI issue we also make a distinction between those aspects of ERMI that identify content protected by copyright and terms and conditions of use, and ERMI that assists copyright owners to track copyright infringement and legitimate use of their works.

137. In respect of the first aspect, the Ministry considers the identification of content, rights and conditions to be nothing new. This sort of authentication information has traditionally been a feature of print and other traditional media (for example, inside the front cover of a book or on a record sleeve). The question arises, however, as to why the Act should provide additional rights to copyright owners in respect of its removal from digital material?

⁴³ WCT, Article 12 and WPPT, Article 19.

⁴⁴ For a discussion of a comprehensive range of digital rights management solutions, see Rosenblatt, Trippe and Mooney, Digital Rights Management (2002).

138. While rights management is obviously not a new concept, the Ministry considers that managing rights and asserting copyright in respect of content has become more important, as digital network technologies have limited or made obsolete the methods of control that content owners have exercised over analogue media. In this respect, “digital is different” and has shifted the balance. With digital works, authentication information can easily be removed or changed with little or no visible alteration to a work, so that purchasers would not be put on notice that they are dealing with infringing material.

139. The Ministry’s preferred policy response is, therefore, to make provision in the Act to protect against the intentional removal and alteration of ERMI, or the commercial dealing in copyright material where a dealer knows that ERMI has been removed or altered. In making this recommendation, the Ministry notes that submissions on the 2001 discussion paper generally supported maintaining the integrity of ERMI. The Ministry also considers that the cost to the public interest of imposing such a requirement would not be unreasonable. We note that some respondents suggested that there should be some exceptions to allow the alteration of ERMI, but they did not provide evidence as to why such an exception would be needed in practice. Respondents may wish to comment on this issue.

140. If provision against the alteration or removal of ERMI is to be made in the Act, it will be necessary to develop a definition of ERMI. In considering this issue, we turn to the second aspect of ERMI, identified at the beginning of this section, namely tracking.

141. If digital technologies create problems for content owners by providing a range of opportunities to would-be infringers, not previously available in the analogue environment, they also present new opportunities to content owners, for example in terms of new business models and gaining more information about audiences for content.

142. Network digital technology has, for example, facilitated the development of a market for journal articles as single units, not previously feasible in print publishing. It has also made it possible to find out what content is being consumed and when, through identification metadata which enables content owners to track usage remotely. Metadata may be connected to content through digital watermarking, which in addition to authentication and usage metering, may facilitate payment processing systems.⁴⁵

143. The Ministry’s recommendation is that any definition of ERMI included in the Act not encompass the tracking functions of ERMI. We are not convinced that the Act should provide new rights to content owners to assist them to take advantage of these new business opportunities. It seems to us that the tracking functions of ERMI are quite removed from what has traditionally been the scope of copyright law. Many of these features are designed to ensure that the terms and conditions of licence agreements are observed. The law of contract, not copyright therefore applies.

⁴⁵ Ibid, pp 81 and 102.

144. There are also privacy issues where technology allows content owners to determine what information is being accessed by whom. Whether such systems would comply with information privacy principles in the Privacy Act 1993 would depend on the particular circumstances. For example, whether or not the content owner had advised the purchaser of the copyright material about the nature of the information collected, the manner in which it would be collected and the purposes for which it would be used. Labelling of digital works may, therefore, be an important issue for content owners to consider.

145. The Ministry also notes that the inclusion of a provision in the Act providing copyright owners with a right of action against the removal or tampering with ERMI would assist New Zealand to comply with the relevant substantive provisions of the WIPO Internet Treaties, should New Zealand wish to accede to those treaties at a later date.

146. Consistent with our recommendations concerning TPMs, the Ministry does not favour the application of offence provisions to ERMI. Our preferred policy response would be that civil remedies apply. Our initial position is that a subjective knowledge standard should apply. Submissions are invited on this point.

Part Seven: Non-Original Databases

A. Issue Summary

147. The Act provides protection for databases that qualify as sufficiently original “compilations” within the definition of a literary work. A compilation could be considered original for the purposes of copyright where a database producer has contributed sufficient time, skill and effort in selecting and arranging the data or information.

148. The 2001 discussion paper asked whether there is a need to provide additional protection for databases above what is already available under the Act, and if so whether protection should be provided through the Act, or sui generis legislation, or both.

B. Perspective and Proposed Policy Response

149. The Ministry considers that there does not seem to be any need to extend protection for non-original databases beyond protection as compilations. The proposed policy response to this issue is, therefore, to retain the status quo, on the basis that the low threshold test for originality in New Zealand provides adequate protection.

150. There may, however, be a need to reconsider this issue in the future depending on how work on the question of additional protection for databases by the WIPO Standing Committee on Copyright and Related Rights progresses.

Part Eight: Permitted Acts and Exceptions

A. Application of Existing Exceptions to the Digital Environment

(i) Issue summary

151. The discussion paper asked if the existing list of permitted acts should apply to owners’ rights in the digital environment.

152. The permitted acts and exceptions are arguably the most controversial elements of copyright law reform, as they bring into sharp focus the balance between the interests of stakeholders and the general public.

(ii) Perspective and proposed policy response

153. It is important that users of copyright material, as well as owners and creators, are able to take advantage of technological developments. The Ministry agrees with the majority of submissions that the existing exceptions should apply in the digital environment, unless cogent reasons exist to the contrary. For example, the rationale behind an exception may apply only in the print/analogue world and not make sense in the digital environment.

154. Many of the existing permitted acts are probably sufficiently technology-neutral to apply in the digital environment with little or no amendment. Where this is not the case, however, the Ministry considers that amendment or clarification would be desirable.

155. New Zealand’s copyright regime is already compliant with our TRIPS obligations. If New Zealand were to accede to the WIPO Internet Treaties, the Agreed Statement to Article 10 of the WCT, relating to exceptions and limitations, is relevant:

It is understood that the provisions of Article 10 permit Contracting Parties to carry forward and appropriately extend into the digital environment limitations and exceptions in their national laws which have been considered acceptable under the Berne Convention. Similarly, these provisions should be understood to permit Contracting Parties to devise new exceptions and limitations that are appropriate in the digital network environment.

156. It is clear that digital technology provides greater ability to copy and communicate works than was generally the case in the analogue/print environment, a concern expressed by copyright owners. The Ministry does not consider that this increased risk in itself justifies limiting the permitted acts and denying users access. The Ministry is mindful, however, that the digital environment may require limitations or safeguards that were not necessary for print and analogue works.

157. The Ministry notes, in relation to its recommendations, that it would continue to be possible for all users to negotiate licenses with copyright owners allowing them to use copyright material in a manner that falls outside the scope of the permitted acts. Indeed many large institutions, in both the public and private sector, have in place

best practice models for licensing of copyright material and make extensive use of licensing schemes.

158. The Ministry notes the concerns raised by respondents regarding the licensing of digital material. The Ministry is aware of the difficulties that exist for both copyright owners and users in negotiating licences for digital material. Licensing of copyright material is, however, an issue that has ramifications beyond just digital material, and it is beyond the scope of this review.

B. Fair Dealing

(i) Issue summary

159. The fair dealing exceptions in sections 42 and 43 of the Act provide users with fairly broad exceptions to use works for news reporting, criticism or review and research or private study. The discussion paper asked two main questions in relation to the fair dealing exceptions:

• Are any amendments required to the existing fair dealing provisions to ensure reasonable access to copyright works in the digital environment for news reporting, criticism or review and research or private study?

• Are there new fair dealing exceptions that should be added to the Act to deal with aspects of digital technology?

(ii) Perspective and proposed policy response

160. Sections 42 and 43 are already fairly technologically neutral in their wording and the Ministry considers that they already broadly apply in the digital environment. Submissions on the discussion paper generally accepted that the fair dealing provisions should apply in the digital world, although many copyright owners suggested that no further exceptions are needed.

161. The Ministry’s preferred approach is to clarify the application of sections 42

and 43 in the digital environment and to ensure that any necessary changes maintain the existing level of technological neutrality. The Ministry does not consider that any compelling reasons have been presented not to do so.

162. There are two main areas, in particular, which need to be addressed:

1. In the communication section, we considered the issue of webcasts as works, and suggested that sufficient reasons do not exist to differentiate between existing transmission technologies such as broadcasting and cable programme services, and new technologies such as the Internet. Consistent with this approach, the Ministry considers that the rationale behind section 42(2) applies equally to news reporting across the Internet, and that the section should, therefore, apply equally to webcasting and any new transmission technologies.

2. Section 43(4), allowing fair dealing for the purposes of research and private study, requires that no more than one copy may be made of the copyright work. As much digital technology requires the making of transient copies, it is likely

that more than one copy would technically be made of a digital work in the process of using it for research and private study. Although the Ministry suggests that an exception for transient copying be provided, these intermediate copies would still fall within the definition of “copy”. The Ministry, therefore, seeks feedback on whether it should be explicitly stated in the Act that such transient copies should be excluded from the application of
section 43(4) (and any other provisions that specify the number of copies that may be made on a particular occasion).

C. Educational Institutions, Libraries and Archives

(i) Issue summary

163. The educational, library and archive provisions provide these bodies with exemptions from liability for certain specified activities. Owners generally argued that no further exceptions are needed and expressed concerns about some uses of works in digital form, particularly in respect of communication. Educational institutions and libraries favoured extending the exceptions to the digital environment and, in some cases, expanding their scope and application.

164. In particular, the following issues arise:

1. Should libraries and archives be able to digitise material for preservation purposes?

2. Should educational institutions, libraries and archives be able to make available and communicate copyright material in digital format?

100. Should libraries and archives be able to interloan by digital means?

4. Should educational institutions be able to cache web pages for teaching purposes?

(ii) Perspective and proposed policy response

165. The Ministry begins from the basic proposition, stated above, that the permitted acts should extend to the digital environment, unless sound reasons exist to the contrary. The Ministry emphasises that this review is not intended to be a broad revision of the permitted acts and the general balance struck between copyright owners and users. The purpose of the review is to determine how the permitted acts operate in respect of digital copyright material and whether they require amendment.

166. Digital technology presents both copyright owners and users with the challenge of developing new business models to meet the demands of the digital era, a process in which copyright will play a significant role. The Ministry considers, however, that copyright legislation should not pre-empt this process by favouring or hindering particular models. Equally, it is not appropriate to use copyright policy either to drive or to implement policy in other areas, such as education or information technology. Rather, the process of copyright reform should be guided by the policy framework set out at the beginning of this paper, based around the purpose of copyright legislation.
167. The second criterion of the Berne Three-Step Test is also relevant in this context. It states that permitted acts should not conflict with the normal exploitation of a work. The WTO Disputes Panel noted that “normal” refers to both current forms of exploitation and also those forms of exploitation that, with a certain degree of likelihood and plausibility, could acquire considerable economic or practical importance. Markets may develop in the digital era that were not viable in the print/analogue world, and the Act should not impede the development of these markets.

168. We note also that a number of the concerns raised by some respondents, in particular users, related more to the lack of licensing schemes for digital materials and also with the impact of contractual provisions on the ability to exercise the permitted acts, rather than to problems with the existing permitted acts. The Ministry recognises that these issues exist, but reiterates that the scope of this review does not encompass broader licensing or contractual issues.

Archiving and preservation

169. Digital technology offers significant benefits for the preservation of materials held by libraries and archives, in particular because digital works are less susceptible to degradation. Section 55 already provides libraries and archives with fairly broad scope to archive works in their collections. Some respondents considered, however, that the application of the section to preservation by digital means should be clarified. In particular, some respondents considered it was potentially unclear whether libraries and archives could digitise material currently in print or analogue form for the purposes of section 55.

170. The Ministry considers, in light of its conclusion that the term “copying” encompasses digitisation of print or analogue works,⁴⁶ that section 55 is already sufficiently broad and technology-neutral to allow the digitisation of works for the specified purposes. This ability to make a copy would also allow format shifting of material, as this is simply making a copy in another format.

171. The wording of section 55(1)(a), however, suggests that copying can only be undertaken in order to preserve the original work by putting the copy into the library’s collection. A number of submissions from libraries and archives suggested that they would wish to digitise their entire collections for archival purposes, not just works that are currently at risk. Section 55 does not appear to extend this far. The Ministry seeks views from respondents on whether an exception that allowed digital archiving of entire collections would be appropriate, on the condition that those digital copies could not be made available to the public unless the original work is lost, damaged or at risk.

Digitisation and making available

172. Submissions from libraries and archives strongly expressed the desire to digitise collections and make them available, both through on-site terminals and remote Internet access. Several educational institutions also wished to be able to make

⁴⁶ See Part Two.

material available to students in electronic form, for example, through electronic course packs or electronic reserve collections.

173. The ability to make copyright material available in these ways has three main implications for copyright owners:

1. Firstly, the proposal implicates the right of first digitisation comprised in the exclusive reproduction right, discussed in Part Two. Libraries and educational institutions would, in many cases, be digitising works that have not been made available in digital form by the copyright owner.

2. Secondly, communication of digitised works will often mean that more than one viable copy of the work is in circulation, as opposed to the making available of a single copy of a print work. This implicates a copyright owner’s communication right, as discussed in Part Three. There is also the capacity, through electronic retrieval systems, to give multiple users access to one work simultaneously, thereby potentially decreasing the incentive to buy more than one copy of an electronic work.

100. Thirdly, a digital version of a work may have different commercial value from a print copy. For example, a searchable database of journal articles has significant value over a catalogue of print copies. The communication of electronic works may, therefore, have implications for existing or developing markets.

174. Many submissions from libraries and educational institutions on this issue suggest that they wish to digitise material not simply for preservation purposes but also to make it available to patrons, both on-site and remotely. The Ministry appreciates that libraries, archives and educational institutions are eager to make use of developing technologies in providing their services. There is, however, a significant difference between archiving and preservation of information and the dissemination and use of it.

175. On the basis of the concerns set out above, the Ministry’s preferred policy option is to make provision for libraries and archives to provide access through on- site terminals to material that is made available by the copyright owner in digital form, but not permitting them to digitise material only available in hard-copy for this purpose. The Ministry is interested in views on whether this electronic material could also be made available through restricted remote access.

176. One submission on the discussion paper suggested that sections 51 to 57 should apply to museums, as well as libraries and archives. The Ministry notes that museums that hold public archives (within the meaning of section 2 of the Archives Act 1957) can apply for status as a prescribed archive under section 50(1)(b). Sections 51 to 54, however, would apply to an entire collection. The Ministry, therefore, seeks views on whether all the library and archive sections should be extended to include museums, including why section 50(1)(b) may not be sufficient to meet the needs of museums in this area.

Interloan

177. Sections 53 and 54 of the Act allow libraries to make copies of works for the users and collections of other libraries, subject to certain conditions. Many libraries sought clarification of how these provisions apply in the digital environment.

178. As it is likely that the definition of copying covers digital copying,⁴⁷ sections 53 and 54 arguably already apply in the digital environment. It would seem desirable, however, to clarify this. For example, would this allow prescribed libraries to digitise a hard-copy work and communicate that to another library?

179. Digital technology is valuable to libraries in this context. Anecdotal evidence suggests that the digitisation of hard-copy material for interloan purposes is common practice, both in New Zealand and internationally. Such activities, however, clearly implicate the rights of copyright owners to digitise their works and make them available in digital form. Copyright owners have expressed concern that the digital distribution of their works increases the number of viable copies in circulation. The Ministry, therefore, seeks feedback on how the Act could reflect the practical need of libraries to use digital technology in their interloan activities, while at the same time recognising any potential risks of digital distribution. For example, under the

section 50 of the Australian Copyright Act 1968 (Cth), the requesting library is required to make a copyright declaration that meets the requirements of the section.

Caching

180. Some educational institutions made submissions regarding the caching of websites for instructional purposes. As many websites change regularly, the material that is required in the course of instruction may disappear. As such, it was argued that an exception was required to allow educational institutions to cache these web pages so that they would be available as required.

181. Section 44 provides a range of exceptions for copying for educational purposes. The Ministry considers that it would be appropriate to clarify this provision to allow the caching of websites for educational purposes, perhaps for limited periods, for example, up to six months.

Distance Learning

182. A number of educational institutions noted the advantages that digital technology offers for distance learning, and several sought exceptions that would allow material to be made available online for distance learning students.

183. As noted in the copyright framework at the beginning of this paper, copyright policy has to achieve a balance that does not undermine incentives and impinge unduly on the appropriate commercial exploitation of works by the copyright owners. Similarly, it is not the role of copyright law to lead the development of education policy initiatives. The Ministry does not, therefore, recommend the introduction of new exceptions for distance learning as part of this review.

⁴⁷ See Part Two.

D. Time Shifting

(i) Issue summary

184. Section 84 of the Act provides an exception for time shifting, that is the practice of recording a broadcast or cable programme for private and domestic use and solely for the purposes of watching or listening to it at a more convenient time. The discussion paper raised the issue of whether the time shifting exception should be applied to webcasting in a technologically neutral manner.

185. As noted above in Part Three, it is not entirely clear whether webcasting falls within the existing definition in the Act of cable programme service. The Ministry’s preferred approach in respect of the communication right, discussed in Part Three, is to create a technology-neutral right of communication to the public, which would cover both the transmission and making available of works. Associated with this is the proposal to create a technology-neutral category for “communication works”. As section 84 currently refers specifically to broadcasts and cable programmes, it would need to be revised.

(ii) Perspective and proposed policy response

186. The vast majority of submissions on this topic agreed that webcasts should also be covered by section 84. In light of the changes suggested in Part Three, the Ministry’s preferred response would be to amend section 84 so that it applies to all communication works.

187. The Ministry is mindful, however, that the rationale behind section 84 is that users should have the ability to record, for later viewing or listening, one-off broadcasts and cable programmes. A number of respondents noted, and the Ministry agrees, that this rationale does not apply to works that are available through on-demand services that can be accessed at any time on request. The Ministry proposes, therefore, that section 84 should not apply to communication works available on-demand.

E. Format Shifting

(i) Issue summary

188. Format shifting refers to the practice of copying a work from one format to another. Despite the absence of an exception in the Act for format shifting, it appears to be common practice among users of sound recordings. Other jurisdictions cover this through personal copying exceptions.⁴⁸

189. The issues that format shifting raises include:

• Should format shifting of sound recordings for personal use be a permitted act?

⁴⁸ For example, Canada, the US and the EU.

• If so, what limitations should apply?

• Is there any economic loss to copyright owners arising out of format shifting of sound recordings for personal use?

• If so, should a levy scheme apply to remunerate copyright owners for potential lost revenue?

(ii) Perspective and proposed policy response

190. The Ministry considers that the introduction of a limited format shifting exception would provide certainty where the practice is already common and thought by many consumers to be legal. The Ministry proposes an exception that would allow the owner of a legitimately purchased sound recording to make one copy of that sound recording (and the musical work that it contains) in each format for his or her own personal and domestic use. The Ministry seeks submissions on whether a format shifting exception should also extend to works other than sound recordings, along with supporting reasons.

191. The majority of submissions on this issue supported a narrow exception for legitimately purchased sound recordings. Copyright owners, however, have raised concerns about the economic loss that such an exception would cause.

192. The Ministry is not persuaded that this would be the case. It is important to recognise that New Zealand’s copyright regime stems from a common law tradition, unlike the civil law “authors’ rights” tradition of Europe. Our copyright system provides limited monopoly rights to provide incentives for the investment of skill and labour, so that works are created for the benefit of society as a whole. The common law copyright tradition is, therefore, based primarily around economic rationales.

193. Against this background, evidence has not been presented that there would be any significant economic loss to copyright owners and creators. A common sense approach would indicate that a music consumer would be unlikely to purchase the same work in a variety of different formats. Thus, if the user owns a legitimately purchased copy of a sound recording, the ability to format shift would not appear to substitute a legitimate sale from which the copyright owner would receive an economic benefit.

194. New Zealand’s TRIPS obligations require compliance with the Berne Three- Step Test.⁴⁹ The Ministry considers that a narrow format shifting exception like that outlined above would comply with each of the three cumulative steps:

⁴⁹ TRIPS, Article 13 repeats the substantive requirements of the Three-Step Test of Article 9 of the Berne Convention (Stockholm revision). Under TRIPS, the Three-Step Test applies to all exclusive rights, not solely the reproduction right, as under the Berne Convention. Although New Zealand is not a party to the Paris revision of the Berne Convention, we are effectively bound by it through Article 9(1) of TRIPS. A World Trade Organisation Disputes Panel provided guidance on the interpretation of the Three-Step Test in United States – Section 110(5) of the US Copyright Act (WT/DS160/R, 15 June 2000).

1. Confined to certain special cases: This criteria requires that an exception is both well-defined and of limited application. The exception proposed by the Ministry would be clearly defined in the Act. Further, it would only apply to a narrow range of activity; that is, format shifting of legitimately purchased sound recordings for private and domestic use. As such the Ministry considers the exception would comply with this step.

2. Not conflicting with a normal exploitation of the work: Copyright provides exclusive rights to owners so that they may extract economic value from those rights. An exception does not conflict with a normal exploitation of a work if it is confined to a scope or degree that does not enter into economic competition with the ways that right holders normally extract economic value from that right to the work.⁵⁰ Not every use of a work, which in principle is covered by the scope of exclusive rights, necessarily conflicts with a normal exploitation of that work. If this were the case, hardly any exception or limitation could pass the test.⁵¹

A format shifting exemption would implicate the reproduction right. The Ministry considers it relevant that the proposed exception would cover only private and domestic use by one individual and would not allow commercial usage. On the basis that it does not seem likely that music consumers would purchase the same work in a variety of different formats, the Ministry does not consider that such an exception would enter into economic competition with the way a right holder would normally extract economic value from the work.

100. Not unreasonably prejudicing the legitimate interests of the right holder: Given that any exception to exclusive rights may result in some degree of prejudice to the right holder, the key question is whether that prejudice is unreasonable.⁵² Prejudice to the legitimate interests of right holders is unreasonable if an exception or limitation causes (or has the potential to cause) an unreasonable loss of income to the copyright owner.⁵³ In this case, the Ministry does not consider that unreasonable loss is caused, as there does not appear to be any substitution of sale effect.

195. The issue of a levy on blank recording media (for example, cassette tapes and CDs), which would be distributed to copyright owners, has been raised. Similar schemes have been established in a number of other jurisdictions.⁵⁴ Two points are worth noting in this context:

⁵⁰ Ibid, paras 6.206 and 6.208.

⁵¹ Ibid, para 6.207.

⁵² Ibid, para 6.245.

⁵³ Ibid, para 6.254.

⁵⁴ For example, the US, Canada, Germany, France, the Netherlands and Belgium. For a more complete list, see Sterling, World Copyright Law (Sweet & Maxwell, 1998). It should be noted, however, that a recent Industry Canada report suggests that the scheme will be substantially reviewed and possibly narrowed: Industry Canada, Supporting Culture and Innovation: Report on the Provisions and Operation of the Copyright Act (October 2002).

1. Levy schemes generally exist in countries that have a broader private or personal copying section (in particular, the US “fair use provisions”) than the Ministry’s proposed format shifting exception.

2. The European concept of “authors’ rights” is philosophically different from the common law concept of copyright as an economic right. Thus European schemes are not directly relevant to the New Zealand situation.

196. The Ministry has made some preliminary investigations into the applicability of a levy scheme in New Zealand. There would clearly be administrative costs involved in establishing such a system, as well as a cost to consumers who are not purchasing blank media for the purposes of copying copyright works. On the basis of the economic underpinnings of our copyright legislation, it does not appear to the Ministry that a narrow format shifting exception, which arguably does not result in a substitution for a legitimate sale, would justify the establishment of such a scheme. The Ministry would, however, consider evidence to the contrary.

197. Further, TPMs and ERMI arguably lessen the need for such levies, as they provide copyright owners with increasingly stronger methods of restricting copying and collecting royalties for themselves.⁵⁵

F. New Exceptions

198. Proposed exceptions for transient copying and ISPs have already been discussed, in Parts Two and Four respectively.

199. The Ministry notes that any new exceptions would, under New Zealand’s TRIPS obligations, need to comply with Berne Three-Step Test. The Ministry does not, however, recommend that the test should be codified in our Act, as some respondents suggested.

200. There are two possible new exceptions that the Ministry considers may be appropriate and in compliance with the Berne Three-Step Test:

1. Decompilation of software: The Ministry considers that an exception for decompilation of software could be included in the Act, along the lines of regulation 50B of the UK Copyright (Computer Programs) Regulations 1992. This provides for a decompilation exception for the user to obtain information necessary to create an independent program. The information so obtained cannot be used for any other purpose. Various conditions are imposed on the exercise of this exception: for example, it does not apply where the information required is readily available without decompilation or where the information obtained is used to create a programme substantially similar in its expression. Regulation 296A deems void any term or condition in an agreement that purports to prohibit decompilation for these purposes.

2. Error correction in software: The Ministry supports the inclusion of an exception like regulation 50C of the UK Copyright (Computer Programs)

⁵⁵ A similar point is made in Sterling, World Copyright Law (Sweet & Maxwell, 1998).

Regulations 1992. This permits lawful users to copy or adapt a computer program where the activity is necessary for lawful use and not prohibited by a contractual term. Subregulation (2) refers particularly to error correction.
Regulation 296A does not apply to regulation 50C and thus it can be excluded by contract.

Part Nine: WIPO Internet Treaties

A. Issue Summary

201. The WCT and the WPPT came into force on 6 March 2002 and 20 May 2002, respectively.⁵⁶ One of the questions being asked as part of the digital copyright review is whether New Zealand should become a party to these treaties. The Ministry again seeks the views of stakeholders on this question, bearing in mind the analysis in the earlier parts of this paper.

202. It should be noted that the discussion that follows is without prejudice to any decision the government may take in relation to the treaties. As with any multilateral treaty, any decision to accede to the treaties would be subject to a parliamentary process that includes examination by select committee.⁵⁷
203. This discussion examines the issues associated with acceding to the WIPO Internet Treaties by focusing on the WCT and the new rights it provides creators and owners of copyright works,⁵⁸ and those aspects of the WPPT that relate to the rights of producers of phonograms.⁵⁹ Those aspects of the WPPT that relate to the rights of performers of performances fixed in phonograms are subject to a separate review.⁶⁰
204. The WIPO Internet Treaties provide copyright owners and producers of phonograms with new exclusive rights of distribution,⁶¹ communication,⁶² rental⁶³ and making available,⁶⁴ as well as provisions for enforcement,⁶⁵ protection for anti- circumvention measures⁶⁶ and measures to protect electronic rights management

⁵⁶ The WCT is a special agreement within the meaning of Article 20 of the Berne Convention. Similarly, the WPPT extends the provisions of the Rome Convention.

⁵⁷ All “multilateral” treaties (to which three or more countries have agreed) that are subject to the formal steps of ratification, accession, acceptance or approval are to be tabled in the House of Representatives before a final decision is made. The treaty will then be referred to the Foreign Affairs, Defence and Trade Select Committee, which will be able to inquire into the treaty itself or refer it on to another Select Committee.

⁵⁸ These are currently covered by the Copyright Act 1994, sections 14 and 16.

⁵⁹ In New Zealand legislation, sound recordings are protected as copyright works (Copyright Act 1994, section 14(1)(b)) and producers of phonograms are considered to be authors (Copyright Act 1994, section 5(2)(b)). Producers of phonograms are, therefore, treated as copyright owners and not as owners of neighbouring rights as is the case in civil law countries.

⁶⁰ The WPPT provides new exclusive rights for performers’ moral rights, economic rights in unfixed performances (which NZ provides), a reproduction right, a right of distribution, a rental right and a right of making available. The issues associated with these rights were outlined in a Ministry document “Performers’ Rights – A Discussion Paper” issued in July 2001.

⁶¹ WCT, Article 6 and WPPT, Article 12.

⁶² WCT, Article 8 (which also covers making available).

⁶³ WCT, Article 7 and WPPT, Article 13.

⁶⁴ WCT, Article 8 and WPPT, Article 14.

⁶⁵ WCT, Article 14(2) and WPPT, Article 23.

⁶⁶ WCT, Article 11 and WPPT, Article 18.

information.⁶⁷ The WPPT also makes provision for an optional right to equitable remuneration for secondary uses of phonograms.⁶⁸ These new rights extend or clarify the protection provided under the Berne and Rome Conventions⁶⁹ and under TRIPS, specifically in relation to the protection of copyright material in the digital environment.

205. The Ministry’s analysis to date suggests that the provisions of the Act substantially comply with the requirements of the WCT and some of the requirements of the WPPT. The areas where the Act appears to be compliant are: the reproduction right,⁷⁰ treatment of computer programs and compilations of data as literary works,⁷¹ distribution right, rental right, term of protection,⁷² protection of TPMs,⁷³ the principle of national treatment and the provisions on enforcement of rights in the areas where rights are currently provided.⁷⁴
206. The following commentary provides an assessment of where there may be gaps in compliance:

• Communication (and making available)⁷⁵ – New Zealand is partly compliant as it provides an exclusive right to broadcast or include a work in a cable programme service.⁷⁶ The Act does not, however, explicitly cover Internet transmission. This is discussed in detail above in Part Three.

• Making available⁷⁷ – in relation to the exclusive right of producers of phonograms to authorise the making available of works to the public by wired or wireless means, including on-demand interactive systems. New Zealand is unlikely to comply as the digitisation of sound recordings, films and typographical arrangements may not infringe the reproduction right under New Zealand legislation.

⁶⁷ WCT, Article 12 and WPPT, Article 19.

⁶⁸ WPPT, Article 15.

⁶⁹ New Zealand is not a signatory to the Rome Convention. By virtue of TRIPS, however, New Zealand is required to comply with the substantive provisions of that agreement.

⁷⁰ WCT, Article 1 (which requires compliance with Berne Convention, Article 9) and WPPT, 11.

⁷¹ WCT, Articles 4 & 5.

⁷² WCT, Article 1 (which requires compliance with Berne Convention, Articles 7 & 7bis), WCT, Article 9 and WPPT, Article 17.

⁷³ WCT, Article 11 and WPPT, Article 18.

⁷⁴ WCT, Article 14 and WPPT, Article 23.

⁷⁵ WCT, Article 8.

⁷⁶ Copyright Act 1994, section 16(f). Sections 2 and 4 define “broadcast” and “cable service programme” respectively in terms of a wired/wireless distinction.

⁷⁷ WPPT, Article 14. Note that this is a separate right for producers of phonograms from the making available right contained within the communication right provided by Article 8 of the WCT.

• Remuneration right for phonogram producers in respect of secondary uses of phonograms⁷⁸ – the Act has no remuneration regime for producers of phonograms. Implementation of this article is, however, optional.

• ERMI⁷⁹ - there are no specific provisions in relation to ERMI, although causes of action under other legal principles (for example, consumer protection legislation, passing off, contract) may have some application. Protection for ERMI is, however, recommended above in Part Six.

207. The table attached as Appendix A provides a summary of the above information for ease of reference.

B. Perspective and Proposed Policy Response

208. The competitive opportunities offered by digital technology and the global environment in which owners and users of copyright goods operate point to the possible benefits to New Zealand of ensuring that our copyright legislation is consistent with international law and compatible with the legislation of our major trading partners. The United States and Japan, for example, are already parties to the WIPO Internet Treaties, whilst the United Kingdom⁸⁰ and Australia⁸¹ are in the process of adopting measures that would enable them to accede.

209. The Ministry has, in various parts of this paper, pointed to a number of proposed changes to the Act that present advantages to New Zealand copyright owners, creators and users. A natural extension of this has been to give thought towards implementing these changes in a way that would enable New Zealand to consider acceding to the WIPO Internet Treaties at a later date. Many respondents to the Ministry’s discussion paper indicated support for this approach.

210. In proceeding down this path, there is scope within the WCT and the WPPT for countries to implement legislative change in a way that best meets their national interests. This allows us to take into account the domestic factors that are unique to New Zealand whilst moving our legislation towards a position of compliance with the treaties.

211. The following is an analysis, derived in part from the Ministry’s analysis of submissions, of the benefits and costs of implementing legislation in a way that would allow New Zealand to accede to the WCT, should this be considered desirable, and that would enable our compliance with those aspects of the WPPT relating to producers of phonograms.

⁷⁸ WPPT, Article 15.

⁷⁹ WCT, Article 12 and WPPT, Article 19.

⁸⁰ By virtue of the adoption by the European Union of the EU Copyright Directive.

⁸¹ Legislation, which gave effect to the principal provisions of the Internet Treaties, was enacted in the Copyright Amendment (Digital Agenda) Act 2000, with some minor amendments still to come, one being in relation to extending the term of protection for photographs.

(i) Benefits

• Clarifying the application of copyright to the Internet and other digital environments through the use of carefully considered amendments that are consistent with the WIPO Internet Treaties. This would provide greater legal certainty, which could facilitate investment in New Zealand’s copyright industries and investment in new technologies, such as electronic commerce.

• Replacing technology-specific language with technology-neutral terms (as modelled by the treaties), thereby reducing the need to amend legislation as new technologies develop.

• Providing a minimum level of reciprocity of protection for New Zealand copyright creators and owners in other countries and vice versa. This may increase the level of copyright material available in New Zealand by encouraging foreign copyright owners to release more of their work in New Zealand.

• Reducing compliance costs through the use of legislative frameworks that are consistent with our main trading partners, thereby minimising the levels of specialised knowledge required in the area of copyright.

• Signalling to the international community, and our trading partners in particular, the importance New Zealand places on maintaining an up-to-date copyright regime.

(ii) Costs

212. A number of respondents perceive that there are potential costs associated with amending New Zealand legislation in a way that would enable it to become a party to the WIPO Internet Treaties. One of these concerns is the possible increase in the cost of copyright materials as copyright owners pass on the costs associated with adopting TPMs and protection for ERMI. Another is the prospect that an increase in the use of TPMs may limit or prevent access to copyright material. Accession to the WIPO Internet Treaties is not, however, a precursor for these costs to arise. Copyright owners and creators have already begun to adopt TPMs and ERMI and are using contracts or licences as a way of ensuring they receive equitable remuneration for the use made of their works. As indicated in other parts of this paper, these are issues that are not necessarily within the ambit of copyright legislation.

213. The question of whether or not New Zealand should accede to the WIPO Internet Treaties raises a number of issues, most importantly being the extent to which New Zealand would benefit from doing so. The Ministry favours making any changes to legislation as a result of the current review in a way that achieves the balance that has been discussed earlier, whilst enabling our compliance with the relevant aspects of the WIPO Internet Treaties. Our analysis suggests that in doing so the benefits of acceding to the treaties at a later date outweigh the costs. The views of stakeholders on this issue will assist the development of any proposals on the matter.

Appendix A: WCT and WPPT82 – Comparison with Copyright Act 1994

⁸² Consideration of the WPPT relates only to those aspects concerning the rights of producers of phonograms. The rights of performers are to be considered as part of a separate review.

Appendix B: Summary of Proposed Policy Responses

A. Reproduction Right

(i) Storage and digitisation

1. The Ministry considers that the scope of the current reproduction right (and definition of “copying”) is sufficient to allow copyright owners to control the digital reproduction (including first digitisation) of their works. The Ministry’s preferred policy response would, therefore, be to leave the current definition of copying in section 2 unchanged. There may, however, be some benefit in including a specific reference that “material form” includes digital formats. Views are sought on how the suggested change in respect of material form might be drafted.

2. The Ministry also suggests that the apparent confusion concerning the relationship between the first two paragraphs of the definition of copying in section 2 of the Act could be addressed by amending the provision so that paragraph (b) is a subset of (a).

(ii) Transient copying

3. The Ministry’s preferred policy response is that transient copying continues to be included within the broad definition of copying, but with a specific purpose-based exception. Such an exception would be directed towards copying automatically undertaken as part of a technical process involved in making an authorised use of a work and would apply to transient copies that have no independent economic significance.

4. The Ministry seeks suggestions concerning the definition of “technical process”, particularly the degree to which technical processes should be linked to communication processes, or should apply more generally. The Ministry suggests a wider approach, not limited to communication.

B. Communication Right

(i) Technology-neutral right of communication

5. The Ministry proposes that a technology-neutral right of communication to the public be established in place of the existing technology-specific communication right to broadcast a work or to include it in a cable programme service.

6. The Ministry recommends amending the Act to provide protection under a new technology-neutral category of “communication works”, which would include broadcasts, cable programmes and other transmission technologies including webcasting. We are interested in views on the parameters of a communication works category.

(ii) Webcasts as works

7. The Ministry recommends that the Act be amended to provide protection to a new category of “communication works”. This would extend protection from the signals that carry programme content in broadcasts and cable programmes to all forms of transmission signals. Views are sought on the potential parameters of a communication works category.

(iii) Cable retransmission of free-to-air broadcasts

8. The Ministry recommends that section 88 of the Act, which allows retransmission of free-to-air broadcasts by cable programme service providers, be repealed. Alternatively, section 88 could be left unchanged until such time as the WIPO Standing Committee on Copyright and Related Rights completes the development of new international standards concerning copyright in relation to broadcasting and related transmission issues. Comment on this issue is invited, particularly from cable programme service providers.

C. Internet service provider liability

9. The Ministry recommends excluding ISPs from some liability, but does not recommend preventing a content owner from seeking injunctive relief in respect of information stored and transmitted by ISPs.

(i) Definition of “Internet service provider”

10. The Ministry recommends that a definition of “service provider”, or some similar term, be inserted in the Act. The definition should be based on the nature of the activity (for example, caching, hosting, providing transmission services) rather than on the nature or status of the organisation itself.

(ii) Transient copying and caching

11. The Ministry proposes the introduction of a section noting that the mere provision of physical facilities for enabling or making a communication does not itself constitute an infringement of copyright, or an authorisation for such infringement.

12. The Ministry also recommends providing an exception for the caching of frequently accessed websites, which would allow more cost-effective and efficient access to Internet material. This exemption from liability would be subject to certain conditions, namely that the service provider:

1. Does not modify the information;

2. Complies with conditions on access to the information;

100. Complies with any rules regarding the updating of the information;

4. Does not interfere with the lawful use of technology to obtain data on use of the information; and
5. Acts expeditiously to remove or disable access to such information upon obtaining knowledge of the fact that the information at the initial source of the transmission has been removed from the network, or access to it has been disabled.

(iii) Secondary infringement provisions

13. In determining an ISP’s liability under the secondary infringement provisions the Ministry proposes applying a “constructive knowledge” test. This involves knowledge of facts or circumstances from which a reasonable person would arrive at the relevant belief. In order to provide some guidance on the issue of knowledge, the Ministry considers that a number of factors should be set out in the legislation to which a court should have regard in determining knowledge for the purposes of the ISP section. This would include receipt of a notice from a content owner.

D. Technological Protection Measures

(i) Scope of section 226 (copy and access protection)

14. The Ministry proposes that section 226 of the Act retain its focus on copy control measures, and not provide legislative protection against the circumvention of TPMs that only control access. In making this proposal the Ministry intends, for example, that the supply and use of devices that allow the circumvention of regional zone access protection (to allow the playing of legitimately purchased DVD movies or games etc. from other zones) would not infringe the TPM provisions.

15. Copyright owners could continue using TPMs that control access, however, without assistance from the Act. Owners could, for example, continue to rely on other legal measures, such as the law of contract, where an access protection measure is circumvented.

16. To implement the suggested approach outlined in this section the Ministry proposes that definitions be inserted for the terms “TPM” and “circumvention device”, as the Act does not currently contain these definitions. Suggestions are sought on how best to define these terms, consistent with this proposal.

(ii) TPMs – actual use or provision of means of circumvention

17. The Ministry’s proposed response is to retain the current focus on the manufacture of devices or means, and publication of information, and not extend liability to the act of circumvention itself. The Ministry considers that the current requirement in section 226 that devices or means must be “specifically designed or adapted” to circumvent copy-protection, is sufficient to address the concerns of the manufacturers of devices with legitimate purposes. A reference to devices that have only a limited commercially significant purpose or use other than circumvention may, however, be appropriate.

18. Submissions are invited on how means of circumvention might be provided to allow the exercise of permitted acts.

(iii) TPMs and exceptions

19. The Ministry proposes that exceptions apply (in respect of the manufacture or supply of TPMs designed to provide copy-protection) to allow the exercise of the following specific purposes: error correction, interoperability and encryption research. The Ministry also considers that liability should not arise where a TPM is circumvented to the extent necessary to allow a user to exercise a permitted act, or to enable copying when the period of copyright protection has expired.

20. In relation to obtaining access to enable the actual exercise of permitted acts, the Ministry notes that some countries have undertaken to institute some form of review process to determine the effect of TPM provisions on the ability of users to make use of permitted acts. It is suggested, therefore, that the Ministry reconsider this issue in three years time, and provide policy advice to government accordingly.

(iv) TPMs – subjective or objective knowledge requirement

21. The Ministry recommends retaining the existing subjective test, consistent with other aspects of the Act.

(v) TPMs – Offence Provisions

22. The Ministry’s proposed policy response is to retain the status quo. If, however, offence provisions were to be instituted, the Ministry considers that a subjective knowledge test would be appropriate.

E. Electronic Rights Management Information

23. The Ministry’s preferred policy response is to make provision in the Act to protect against the intentional removal and alteration of ERMI, and the commercial dealing in copyright material where a dealer knows that ERMI has been removed or altered. This necessitates the development of a definition of ERMI. The Ministry’s recommendation is that any definition of ERMI included in the Act not encompass the tracking functions of ERMI.

F. Non-original Databases

24. The Ministry recommends retaining the status quo, on the basis that the low threshold test for originality in New Zealand provides adequate protection.

25. There may, however, be a need to reconsider this issue in the future depending on how work on the question of additional protection for databases by the WIPO Standing Committee on Copyright and Related Rights progresses.

G. Permitted Acts and Exceptions

(i) Application of existing exceptions to the digital environment

26. The Ministry considers that the existing exceptions should apply in the digital environment, unless cogent reasons exist to the contrary. There may, however, be a

requirement for limitations and safeguards that are not necessary for print and analogue works.

(ii) Fair dealing

27. The Ministry’s preferred approach is to clarify the application of the fair dealing provisions in sections 42 and 43 in the digital environment and to ensure that any necessary changes maintain the existing level of technological neutrality.

(iii) Educational institutions, libraries and archives

Archiving and preservation

28. The Ministry seeks views on the appropriateness of an exception that would allow the digital archiving of entire collections, on condition that those digital copies not be made available to the public unless the original work is lost, damaged or at risk.

Digitisation and making available

29. The Ministry’s preferred response is to make provision for libraries and archives to provide access to material that they receive in digital form through on-site terminals, but to not permit them to digitise hard-copy material for this purpose. The Ministry is interested in views on whether this material could also be made available through restricted remote access.

Interloan

30. The Ministry, therefore, seeks feedback on how the Act could reflect the practical need of libraries to use digital technology in their interloan activities, while at the same time recognising any potential risks of digital distribution to copyright owners’ rights.

Caching

31. The Ministry considers that it would be appropriate to clarify section 44 to allow the caching of websites for educational purposes, perhaps for limited periods, for example, up to six months.

Distance Learning

32. The Ministry does not recommend the introduction of new exceptions for distance learning.

(iv) Time shifting

33. The Ministry’s preferred approach in respect of the communication right, discussed in Part Three, is to create a technology-neutral right of communication to the public, which would cover both transmission and the making available of works. Associated with this is the proposal to create a technology-neutral category for “communication works”. The Ministry recommends amending section 84 so that it applies to all communication works except for communication works available on- demand.

(iv) Format shifting

34. The Ministry proposes an exception that would allow the owner of a legitimately purchased sound recording to make one copy of that sound recording (and the musical work that it contains) in each format for his or her own personal and domestic use. The Ministry seeks submissions on whether a format shifting exception should also extend to works other than sound recordings, along with supporting reasons.

(v) New exceptions

35. The Ministry notes that any exceptions need to comply with the Berne Three-Step Test but does not recommend that it be codified in our Act. Two possible new exceptions, which may be appropriate and in compliance with the Berne Three-Step Test are: decompilation of software and error correction in software.

H. WIPO Internet Treaties

36. The Ministry recommends making any changes to the Act as a result of the current review in a way that benefits New Zealand, whilst enabling our compliance with relevant aspects of the WIPO Internet Treaties. Views are sought on New Zealand’s possible accession to these treaties.