iiNet Limited ("iiNet') is an internet service provider that provides an internet connection to thousands of computer users within Australia. In 2009, 34 major motion picture studios ("Copyright Owners") brought an action against iiNet on the grounds that it had breached copyright by authorizing the illegal downloading of movies by its users. The allegation was that iiNet customers used a 'BitTorrent" program ("BitTorrent') in order to communicate copies of copyrighted films to the public over the internet, and that iiNet authorised these infringements.
BitTorrent is a file-sharing program that allows computer users seeking particular data to participate in the distribution of that data. BitTorrent breaks up large files into small pieces in order to transfer those large files efficiently between computers. Pieces are requested by users and reassembled into a whole file. It was through this program that iiNet users copied, and communicated copies, of films to the public. It was not in dispute in the case that iiNet knew that this form of file sharing was occurring.
From July 2008, the Australian Federation Against Copyright Theft (1) issued weekly notices ("AFACT Notices") to iiNet alleging that infringements had occurred. The AFACT Notices contained details such as the date and time at which infringements took place, and the IP addresses of infringing users. These notices required iiNet to act to prevent its customers from continuing to infringe copyright, iiNet also received hundreds of automatically generated notices from the USA each week, which also alleged infringement ("Robot Notices").
iiNet required each of its customers to enter into a customer relationship agreement. The conditions of this agreement included a clause that stated that any conduct infringing copyright was a breach of the agreement, and could result in the suspension or cancellation of the customer's account. This was also stated on the iiNet website. However, it was alleged that when iiNet was notified of the infringements by the AFACT Notices, it did not take any action to terminate or suspend the accounts of users. It was on this basis that the copyright owners alleged authorisation.
II. THE LEGISLATWE FRAMEWORK
Section 86 of the Copyright Act 1968 (Cth) ("Copyright Act") provides that copyright is the exclusive right to:
* make a copy of a film;
* cause the film to be seen in public; or
* communicate the film to the public
The term 'communicate" is defined in s. 10 of the Copyright Act to include:
* making a film available online; or
* electronically transmitting a film.
This is further qualified by s. 14 of the Copyright Act, which provides that "a reference to the doing of an act in relation to ... other subject-matter shall be read as including a reference to the doing of that act in relation to a substantial part of the ... other subject matter ...".
Sections 101(1) and (1A) of the Copyright Act prescribe the conduct that will infringe copyright. These sections are in the following terms:
(1) Subject to this Act, a copyright subsisting by virtue of this Part is infringed by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorizes the doing in Australia of, any act comprised in the copyright.
(1A) In determining, for the purposes of subsection (1), whether or not a person has authorised the doing in Australia of any act comprised in a copyright subsisting by virtue of this Part without the licence of the owner of the copyright, the matters that must be taken into account include the following:
(a) the extent (if any) of the person's power to prevent the doing of the act concerned;
(b) the nature of any relationship existing between the person and the person who did the act concerned;
(c) whether the person took any other reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice. …