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Dark Shadows of the Australia-United States Free Trade Agreement

"Free trade" sounds like a good thing. Apart from a few farmers, surely nobody could have a problem with it... could they?

A Free Trade Agreement was agreed between the Australian and the United States trade ministers in Washington DC on 8 February 2004. Australia enters into dozens of similar international instruments every year covering a variety of topics. But compared to most of them, this particular instrument has been more keenly awaited by some - and more anxiously feared by others.

On the face of it, one might assume that nothing could be wrong with free trade; at least not in the ICT sector of the Australian economy which has no significant protectionism by way of tariffs, quotas or subsidies. However the scope of the Free Trade Agreement with the United States goes a lot further than its name might suggest, and it is for that reason that the local ICT industry is, or should be, worried.

What is a Free Trade Agreement?

International law is quite different to domestic law. International legal instruments are really nothing more than agreements between countries. The way that those agreements are implemented domestically is generally a matter for the signatory countries to decide for themselves. Typically, a country's legislature will have to ratify the instrument before it takes effect. In Australia, it is necessary for one or more Acts of Parliament to be passed that give effect to the instrument's terms.

In the case of an Australian law - whether it is written down in a statute book or part of the body of judge-made law - there is a system of courts and law enforcement officers readily available to enforce it. In the international arena, this is not case, and so international law instruments typically rely on the good faith of the signatory countries for their enforcement.

When good faith is not enough, the other signatories to the instrument (or in certain cases, the United Nations) may have various carrots or sticks available to them to induce a party who is in breach of the instrument to comply. In the case of the Australia-United States Free Trade Agreement, the carrot that has induced Australia to enter into the agreement takes the form of greater access to United States markets for Australian goods and services through the elimination of protectionist measures. The concessions granted by the United States in the agreement are also considered to be George W Bush's thank-you gift to Australia for its assistance in the Iraq war.

As yet, the Australia-United States Free Trade Agreement does not yet have any force in Australian law. It has not even come before the Australian Parliament, and won't ever do so in its present form. Formally, the agreement will come into effect when the US Congress ratifies it and both countries have passed or amended any domestic legislation necessary to give effect to their obligations under the agreement. This will take at least six months.

What changes have we agreed to?

The most significant changes that the Australia-United States Free Trade Agreement will introduce for the ICT industries in Australia are those relating to the protection of copyright, which covers computer software and also music, literature, movies, and television. Of the changes that the agreement makes to copyright protection, there are three that are most relevant to those in the ICT industries.

The first of these changes is the extension of the term of copyright protection from 50 years from the date of the author's death (or 50 years from the date of first publication in the case of a corporate author), to 70 years, or in the case of a corporate author the shorter of 95 years from the date of first publication or 120 years from the date of creation - more than double the protection currently in place.

The second change of note is the requirement that Australia introduce an equivalent regime to that provided by the United States Digital Millennium Copyright Act for the resolution of disputes between those who are, or claim to be, copyright owners, and Internet service providers who are hosting allegedly infringing content.

The third change is the clamping down on the treatment of circumvention devices, which in simple terms are devices for circumventing copy protection schemes. Under existing Australian law, the ownership of a circumvention device is not prohibited, and the use of such devices for purposes of study and research or reverse engineering is explicitly allowed. The Australia-United States Free Trade Agreement will see these concessions reduced.

What is in this for Australia?

It cannot be denied that the Australia-United States Free Trade Agreement will be beneficial for many sectors of the Australian economy by improving their access to United States markets for our exports. However it could be considered that through the one-sided intellectual property "reforms", Australia's ICT sector has become a sacrificial lamb for the agricultural and manufacturing sectors.

The Government places a positive spin on the changes to intellectual property protection that the agreement will require, in saying that by bringing our intellectual property laws into line with those of the United States, we will in fact be creating a more conducive legal environment for United States investment in Australia.

However, there seems to be little evidence that Australia's existing intellectual property protection regime has hindered the inflow of software and entertainment from the United States into Australia, nor that Australia has been bypassed as a destination for United States investment into our own ICT or entertainment sectors: witness the strength of local subsidiaries of US software giants such as Oracle and Microsoft, and the production of an increasing number of international motion pictures in Australian studios.

To be fair, there are a few intellectual property reforms that may turn out to be positive for Australians. For example, there is likely to be some streamlining of the recognition of Australian patents, trademarks and registered designs in the United States. There are also provisions of the agreement for the promotion of electronic commerce that appear relatively innocuous. It has been agreed, for example, that information exports should be treated in a media-neutral manner - so for example online software delivery will be treated in the same manner as the export of physical boxed software.

In the main, however, the reforms are unilaterally in favour of copyright owners, and are therefore largely to the advantage of the United States as a net exporter of intellectual property to Australia.

Copyright extension

Let's consider the three most important changes to copyright law isolated above in more detail. The first is the extension of the term of copyright, to bring it into line with the Sonny Bono Copyright Term Extension Act of 1998 in which the United States extended its own terms of copyright protection, just in time to prevent some of last century's early copyright works such as Mickey Mouse cartoons from passing into the public domain.

Under international law (the Berne Convention to which Australia is a signatory), the minimum period of protection of a copyright work is generally 50 years from the death of the author, or from the date of first publication in the case of a corporate author, which corresponds to the terms of protection under Australian law as it now stands.

There has been no significant call from within Australia for the extension of these terms, so although the Government now proclaims that Australian creators of original works will also also enjoy the benefit of extended terms of copyright protection, there can be little doubt that the extension would not have been initiated but for the lobbying of America's music and motion picture industry associations.

An increasingly prevalent view seems to be that the pendulum has already swung too far in the copyright owners' favour, and that the public interest in the reuse of material from the public domain has been prejudiced by the extension of the term of protection. In the case of computer software, even more so than literature, music, movies and television, the length of time for which copyright now subsists absurdly exceeds the period for which it is commercially useful.

Safe Harbor

The United States Millennium Copyright Act (also known as the Digital Millennium Copyright Act or DMCA) was passed in 1998 with the intent of updating copyright law for the new digital age. Amongst the reforms it introduced were controls on anticircumvention devices (discussed below) and the introduction of a "Safe Harbor" whereby Internet content hosts are protected from liability for copyright infringement if they quickly remove the allegedly infringing material.

The way in which the Safe Harbor provisions work is to protect the content host if it has no knowledge of and gains no financial benefit from the infringing activity, if it provides proper notification of its policies to its subscribers, and if it has an agent to deal with copyright complaints. In the event that a complaint in the required form is received, the host must in order to avoid liability take down or disable access to the allegedly infringing material and notify the person who put it there. If that person objects to the removal of the material within 14 days and the person who brought the original complaint does not take the complaint to court within a further 14 days, the content host must restore the material.

Although the Safe Harbor provisions may be expeditious for the copyright owner, they are clearly open to abuse because of the incentive that they create for Internet contents hosts to "take down first, ask questions later". The provisions are also costly for content hosts, and these costs are inevitably passed onto consumers.

In comparison, under Australian law, Internet content hosts are not liable for simply providing the network infrastructure over which copyright-infringing material is accessed. Their only liability is in the case where they can be said to have authorised the infringement. Although this is a higher standard of knowledge than that required of content hosts under the DMCA, it is still advisable for them to remove or block access to allegedly infringement material about which a plausible complaint is made, in order to avoid liability for authorising the infringement.

Circumvention devices

Australia's own equivalent to the DMCA, the Copyright Amendment (Digital Agenda) Act 2000, introduced a prohibition on the supply of circumvention devices and services. Certain exceptions to this prohibition were included, such as supply of such devices to libraries for their use in making permitted copies, and the use of such devices for the purposes of reverse-engineering compatible computer software. Also, there are certain gaps in the prohibition on circumvention devices, most notably that the possession or use of such devices is not actually prohibited.

The DMCA's prohibition on circumvention devices, which Australia will have to replicate under the terms of the Australia-United States Free Trade Agreement, is stricter. It prohibits even the possession of a circumvention device, and does not allow the use of such devices even for purposes that would otherwise be permitted under United States copyright law, such as making personal copies of one's own CDs (a right which we don't have in Australia).

The DMCA's prohibition on circumvention devices has drawn criticism for being applied in circumstances that were probably never envisaged by those who drafted the legislation. For example, it has been used to prohibit the distribution of source code to the DeCSS utility that is used for circumventing the DVD encryption scheme, to prevent academics from presenting research papers on circumvention techniques, and to bolster the region-locking scheme employed in Playstation games.

In fairness, the Australia-United States Free Trade Agreement does reserve to Australia the right to introduce public interest exceptions in relation to technological protection measures which may avoid outcomes such as those described above, however this remains somewhat speculative as the precise nature and scope of these exceptions has not been laid out.

Conclusion

The Australian Government's capitulation to the interests of the United States entertainment industries by agreeing to harmonise our copyright legislation with that of the United States should not come as much of a surprise. The political power that those industries wield has already been amply demonstrated by the extension of the minimum term of copyright protection in America from 50 to 70 years, an extension that Australia is now bound to follow.

But those who object to the intellectual property provisions of the Australia-United States Free Trade Agreement do not do so simply as an anti-globalisation exercise, railing against the political and economic imperialism of the world's largest superpower. Rather, they do so because American copyright law has been widely and justly criticised in its home jurisdiction, whereas our own Copyright Act has stood up comparatively well.

Still, all is not lost. The Parliament still has to pass legislation to give effect to the terms of the agreement. It is possible that the necessary legislation might not pass through the Senate if the Australian public makes its views known loudly enough to the minor parties. More likely, while the Senate is unlikely to throw such a spanner in the works as to disrupt the implementation of the agreement altogether, it will be able to review the implementing legislation with a very critical eye, so as to ensure that it respects consumers' freedom to use copyright material to the greatest extent that is consistent with Australia's obligations.

Please Note: The information contained in this article is general in nature and cannot be regarded as anything more than general comment. Readers of this article should not act on the basis of this comment without consulting one of iLaw’s legal practitioners who will consider their particular circumstances