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\title{Reconciling AUSFTA 17.4.7 \textcolor{red}{(DRAFT 2005081301)}}


\author{Rusty Russell, Linux Australia IP Policy Adviser}

\maketitle
\tableofcontents{}

\begin{lyxcode}

\end{lyxcode}

\section{About Linux Australia}

Linux Australia is Australia's peak body representing the interests
and concerns of Australian Linux and Open Source Software (OSS) developers,
system administrators and users. Linux Australia is also the organisation
behind linux.conf.au, one of the world's top Linux development conferences. 

Linux{\scriptsize $^{\textrm{TM}}$} is a computer Operating System,
a complete replacement for {}``closed-source'' systems such as Microsoft
Windows{\scriptsize $^{\textrm{TM}}$}. While a major player in large
(server) computers, and tiny (embedded) devices, Linux accounts for
less than 5\% of the desktop market%
\footnote{Linux To Ring Up \$35 Billion By 2008: TechWeb December 16 2004

http://www.techweb.com/wire/showArticle.jhtml?articleID=55800522%
}. 

Open Source Software (including Linux) is developed openly, with users
invited to contribute, enhance and distribute the software. Providing
full access to the {}``source code'' used to develop software is
attractive to many businesses and individuals; it is Open Source's
key competitive advantage over other software.

\pagebreak


\section{Concerns with Current §116(A)}

Linux Australia has made several submissions on the potential effects
of the Digital Agenda modifications to the Copyright Act on software
competition in Australia. Particular concerns have been raised by
overseas actions against some forms of Open Source software, one of
the few software areas where Australia seems to lead%
\footnote{Boston Consulting Group Open Source Technology Group Hacker Survey,
pg 22, indicates disproportionate Australian involvement:

http://www.ostg.com/bcg/BCGHACKERSURVEY-0.73.pdf%
}.

We are particularly concerned that the law allow activities which
are completely legitimate, such as playing legally purchased DVDs
on legally purchased laptops running Open Source DVD playing software.
This is a common activity of our members, who generally prefer Open
Source software.

Under Australian law, this software can be construed to be a {}``circumvention
device.'' Australian law does not currently ban \emph{use} of such
things, but does ban their creation, distribution and import, which
casts a shadow over Open Source deployments, consulting and business
growth. We have long sought a standard in the Copyright Act that ensures
we can create, distribute and maintain competitive software which
Australian consumers and businesses need.

We are still pursuing such a standard. You can buy many shrink-wrapped
boxes of Linux software in Australia, but none include our Open Source
DVD playing software which would be our equivalent of the proprietary
DVD playing software bundled with (the proprietary) Microsoft Windows,
our chief competitor. Distributors, fearing litigation, leave individual
users to download this software themselves, generally from Europe.

\pagebreak


\section{Open Source is Directly Affected}

The problem is a simple one. To be competitive in the desktop market,
computer operating systems must include software able to play copyright
content such as movies and music. Some of these copyrighted works
are protected by some form of technological protection measure (TPM),
such as the {}``Content Scrambling System'' used on DVDs, or the
{}``copy protection'' on some audio CDs. This trend is set to increase:
all mainstream online music is encoded in some way, and both proposed
successors to the DVD format are encrypted and use region encoding. 

An overreach in anti-circumvention law would mean that all players
of such things must come from the copyright holder, under whatever
terms they choose to license. It would be illegal to create, import
or market your own device which does the same thing.

This does particular harm to Open Source Software, as we can see in
the most obvious candidate, our Open Source DVD-playing software.
This is because we are one of the few competitive forces in a computer
software market dominated by two large players (Microsoft and Apple),
and because we seek to create our own (superior!) counterparts to
their offerings, whether it be DVD playing software, music playing
software, or other tools modern computer users expect. Banning competitive
{}``unauthorised'' products bans us from the market.

This harm is accentuated because Open Source companies tend to be
small businesses and consultants; Open Source licensing is more competitive
than the proprietary licenses of Microsoft et. al, but more competitive
licensing means more competition, which means lower profit margins.
This is great for consumers, who gain high-quality IT infrastructure
at lower cost, but it means that few Open Source companies have the
resources for a legal battle. This creates a barrier for Open Source
Software in these areas that no business in Australia seems willing
to cross.

Open Source DVD playing software is widely used, and at the moment,
that use is legal. The FTA requires that use of a circumvention device
be prohibited, and this could capture Open Source DVD software---making
current, widespread activity suddenly illegal. This is not a desirable
outcome, as the government has acknowledged this year. We have just
had an inquiry on whether VCRs and MP3 players should be legal to
use. It would be extremely odd if at the same time we made other widely
used consumer devices illegal!

\pagebreak


\section{US Law Is Being Interpreted Differently}

In drafting our laws under the Free Trade Agreement, Australia can
learn from subsequent developments in the US. Courts of Appeal in
the US have interpreted their anti-circumvention laws (aka. the DMCA)
in ways that ensure it is used for its primary mission: preventing
widespread copyright piracy. US courts have made two explicit rulings
on the scope of these laws, first in \emph{Chamberlain}%
\footnote{\emph{Chamberlain Group, Inc. v. Skylink Technologies, Inc.,} United
States Court of Appeals for the Federal Circuit, August 2004. (\emph{Chamberlain})%
}, and again in \emph{StorageTek}%
\footnote{\emph{Storage Technology Corporation v. Custom Hardware Engineering
\& Consulting, Inc,} United States Court of Appeals for the Federal
Circuit, August 2005 (\emph{StorageTek})%
}, which should be considered for inclusion in our Australian law:

\begin{description}
\item [Irrevocable~authorisation:]circumvention is only illegal where
undertaken without authority, but the court has clarified that authority
can come from the copyright owner \emph{or} copyright law itself.
\item [Related~infringement:]US Courts have ruled that a copyright owner
alleging breach of the anti-circumvention provisions must prove that
such circumvention either infringes, or facilitates, infringing a
right protected by the Copyright Act.
\end{description}
Neither of these qualifications on the scope of US anti-circumvention
law are to be found in the text of their Act. Nonetheless, they represent
the unanimous opinion%
\footnote{\emph{StorageTek} was not unanimous, however Judge Rader's dissent
was not on the question of circumvention, but another aspect of the
case. The dissent does not mention the DMCA at all.%
} of the US Court of Appeals for the Federal circuit; the most senior
court in the United States to hear these issues as of this writing.
They are particularly relevant here, because neither qualification
is found in the text of the Australia-US Free Trade Agreement, nor
the current Australian Copyright Act. These rulings however, are an
appropriate limitation on the scope of these laws and ensure it is
confined to its mission---preventing copyright infringement.

\pagebreak


\subsection{Irrevocable Authorisation}

The DMCA (17 U.S.C. §1201(a)(3)(A)) defines circumvention as an activity
undertaken {}``without the authority of the copyright owner.'' This
mirrors the Australian definition of technological protection measure
which works by requiring {}``authority of the owner or exclusive
licensee of the copyright''.

The Court indicated in \emph{Skylink} that this authorisation is granted
for certain things by the Copyright Act itself, and that withholding
authorisation to access after sale simply isn't a power that the copyright
holder has:

\begin{quotation}
Underlying Chamberlain's argument on appeal that it has not granted
such authorization lies the necessary assumption that Chamberlain
is entitled to prohibit legitimate purchasers of its embedded software
from \char`\"{}accessing\char`\"{} the software by using it. ... It
would therefore allow any copyright owner, through a combination of
contractual terms and technological measures, to repeal the fair use
doctrine with respect to an individual copyrighted work--or even selected
copies of that copyrighted work. ... \textbf{Copyright law itself
authorizes the public to make certain uses of copyrighted materials.}
Consumers who purchase a product containing a copy of embedded software
have the inherent legal right to use that copy of the software. \textbf{What
the law authorizes, Chamberlain cannot revoke.}%
\footnote{\emph{Chamberlain} pg. 40%
}
\end{quotation}
Australia has neither explicit wording in §116(A), nor case law on
this point: do Australians have irrevocable authority to play DVDs
they own? We consider this question redundant: if you don't have the
right to use something, you don't {}``own'' it. Most Australians
would be upset to find that they don't clearly own the DVDs they have
purchased. We believe they do, and should.

\pagebreak


\subsection{Related Infringement}

The second significant interpretation of the US Court of Appeals for
the Federal circuit is stated plainly in \emph{StorageTek:}

\begin{quotation}
A copyright owner alleging a violation of section 1201(a) consequently
must prove that the circumvention of the technological measure either
{}``infringes or facilitates infringing a right protected by the
Copyright Act''%
\footnote{\emph{StorageTek,} pg.19%
}
\end{quotation}
§1201(a) is the trafficking section of the US Copyright Act, similar
to our §116(A). The court here is quoting from its earlier decision
in \emph{Chamberlain,} which lays out under what conditions trafficking
in circumvention devices can be illegal:

\begin{quotation}
A plaintiff alleging a violation of §1201(a)(2) must prove: (1) ownership
of a valid copyright on a work, (2) effectively controlled by a technological
measure, which has been circumvented, (3) that third parties can now
access (4) without authorization, in a manner that \textbf{(5) infringes
or facilitates infringing a right protected by the Copyright Act,}
because of a product that (6) the defendant either (i) designed or
produced primarily for circumvention; (ii) made available despite
only limited commercial significance other than circumvention; or
(iii) marketed for use in circumvention of the controlling technological
measure.%
\footnote{\emph{Chamberlain,} pg. 42%
}
\end{quotation}
At the moment, Australian law requires that a TPM `prevent or inhibit
infringement of copyright', but it does not require that the circumvention
device `infringe or facilitate infringement'. The difference is subtle,
but critical.

A technological protection measure is often created with multiple
roles: as well as preventing or inhibiting copying, it could impose
other restrictions, such as region-encoding. A device (or software)
which overcomes the TPM to overcome the region-coding, but in \emph{no
way infringes or facilitates infringement of copyright}, will nevertheless
fall foul of Australian law.

Linux Australia is particularly concerned that these laws might allow
arbitrary restrictions of who can access legitimately-purchased copyrighted
works. Imagine you purchase some music, only to find that the software
which plays it is only available for Microsoft Windows. You run Linux
on your computer instead, so you would expect to find equivalent Open
Source software to play this music. If anti-circumvention law bans
Open Source developers from creating and distributing our own equivalents
of software which exists for Windows, we cannot help you. If this
happens often enough, you will be forced to abandon Linux, even if
it is superior in all other respects.

Hence we believe that Australian law should be drafted so that a copyright
owner wanting a device banned be required to show that the device
infringe, or facilitate infringement of copyright.

\pagebreak


\section{Australian Law Needs These Qualifications, Too}

Australia is in a similar position to the United States before the
\emph{Chamberlain} decision, in that we do not have these limitations
explicit in our Act. It is not clear whether Australian courts will
reach a similar conclusion to US Courts of Appeal---and there will
be considerable uncertainty until case law emerges (which happens
slowly). Unlike US Courts, Australian courts cannot turn to `First
Amendment' or constitutional limitations on copyright in order to
ground a limited interpretation of provisions, as the US Court of
Appeals for the Federal circuit did. On the contrary, Australian courts
have often taken a broad reading of copyright owners rights.

In \emph{Chamberlain,} the plaintiff argued that US anti-circumvention
law does not contain these qualifications as they did not appear plainly
in the text, and the identical argument could be made in Australia.
So it is worth quoting from the decision, in which the judges rejected
that construction {}``in its entirety'', in large part because of
the terrible implications for competition:

\begin{quotation}
{[}\ldots{}{]}the broad policy implications of considering \char`\"{}access\char`\"{}
in a vacuum devoid of \char`\"{}protection\char`\"{} are both \textbf{absurd
and disastrous.} {[}\ldots{}{]} Chamberlain's proposed construction
would allow any manufacturer of any product to add a single copyrighted
sentence or software fragment to its product, wrap the copyrighted
material in a trivial \char`\"{}encryption\char`\"{} scheme, and thereby
gain the right to \textbf{restrict consumers' rights to use its products
in conjunction with competing products.} In other words, Chamberlain's
construction of the DMCA would allow virtually any company to attempt
to leverage its sales into aftermarket monopolies%
\footnote{\emph{Chamberlain} pg. 37%
}
\end{quotation}
The US case law resulting from these cases helps us to see a way to
draft our own laws in a way which avoids similar litigation. Without
deft drafting, some brave business in Australia will have to gamble
on obtaining a similar result. This risk casts a shadow over competition.

\pagebreak


\section{Region-Free DVD Players Also Under Threat}

The government has stated on several occasions that they have no intention
of banning region-free media players:

\begin{quotation}
In terms of regional coding itself, if a person is playing a legitimate,
non-pirated product, the government's intention would not be for that
to fall foul of the laws in relation to technological protection measures.%
\footnote{Mr. Simon Cordina, Acting General Manager, Intellectual Property Branch,
Department of Communications, Information Technology and the Arts,
before the Senate Select Committee on the Free Trade Agreement Between
Australia and the United States, 18 May 2004%
}
\end{quotation}
If our law does not clearly state limitations equivalent to those
imposed by the US court system, it is difficult to see how this commitment
would be met, unless the government simply relies on copyright holders
not enforcing the rights given to them under the Copyright Act.


\subsection{A DVD Player is a Circumvention Device}

The encryption on a DVD is clearly a technological protection measure.
As previously stated, Australian law does not link the definition
of {}``circumvention device'' to some copyright infringement or
facilitation, as the US case law has done. This makes every DVD player
a {}``circumvention device'', as they have no purpose other than
accessing DVDs:

\begin{quotation}
\emph{circumvention device} means a device (including a computer program)
having only a limited commercially significant purpose or use, or
no such purpose or use, other than the circumvention, or facilitating
the circumvention, of a technological protection measure.%
\footnote{Definition from \emph{Copyright Act, 1968} taking into account amendments
up to Act No. 45 of 2005%
}
\end{quotation}

\subsection{A DVD Player Needs Authorisation}

If a DVD player is a {}``circumvention device'', then it can only
be distributed, sold, advertised and imported with the {}``permission
of the owner or exclusive licensee of the copyright in the work or
other subject matter''%
\footnote{\emph{Copyright Act, 1968} §116A(1)(b)%
}. Again, without a court decision like that in the United States,
declaring that {}``Copyright law itself authorizes the public to
make certain uses of copyrighted materials'', DVD players are only
legal with the explicit approval of media companies.

This permission comes from the DVDCCA, a consortium of media companies
which controls DVD licensing. Linux Australia has not sought such
permission ourselves, but we understand that the contract one has
to sign includes requirements that any DVD players respect such things
as {}``unskippable'' zones on DVDs and region encoding in return
for documentation on the DVD format and method of decoding.

It seems extremely likely that DVD manufacturers have violated the
terms of their contract by supplying {}``region-free'' DVD players.
This in turn implies that they do not have authorisation, and hence
those distributing such DVD players in Australia are violating §116A
(1)(b)(ii) through (1)(b)(v).

Under our AUSFTA §17.4.7(a) obligations, these violations require
criminal penalties, as it is being done {}``for purposes of commercial
advantage or financial gain''. Making region-free DVD players even
more illegal is not the government's stated intention, and thus should
be clearly avoided.

\pagebreak


\section{Tuning our Copyright Legislation}

It is clear that many large copyright holders want region encoding
and other extra-legal protections, even if they choose not to enforce
them for now; they exist in DVDs, computer games and \emph{both} proposed
successors to the DVD format. If evading them is not clearly allowed
(or outright banned), these historically-active litigators can be
expected to apply pressure to suppliers, and even individual users.

Nonetheless, we must ensure that copyright holders can effectively
use these laws against the large-scale copyright infringers who are
its intended targets, while drawing a clear line protecting competition
from spurious lawsuits. The US case law has provided guidance on how
to do this, and clearly Australia would not be violating the Free
Trade Agreement to follow their example.

On the issue of authorisation, §116(A) requires permission of the
copyright holder. Clarifying that this permission is implied, or not
required, for mere access, would assist future judgements. This could
be done as follows:

\begin{quotation}
No permission is required for activities which do not affect the rights
of copyright holders as detailed this Act.
\end{quotation}
On the question of circumvention devices which do not infringe or
create infringement, it would be sufficient to append a qualification
to the definitions of {}``circumvention device'' and {}``circumvention
service'':

\begin{quotation}
\emph{circumvention device} means a device (including a computer program)
having only a limited commercially significant purpose or use, or
no such purpose or use, other than the circumvention, or facilitating
the circumvention, of an technological protection measure \emph{to
violate, or facilitate violation, of a copyright.}

\emph{circumvention service} means a service, the performance of which
has only a limited commercially significant purpose, or no such purpose
or use, other than the circumvention, or facilitating the circumvention,
of an technological protection measure \emph{to violate, or facilitate
violation, of a copyright.}
\end{quotation}
\pagebreak


\section{Conclusion}

The United States, through the painful process of litigation, has
tuned their law to avoid the worst abuses of anti-circumvention laws.
No doubt, this process will continue, but we are cautiously optimistic
that competitive software can exist under these laws.

Australia's laws have yet to go through significant litigation, and
it is unclear that we will end up with the same protections. Australia's
slower rate of litigation means that the issue will be undecided for
years, possibly decades. This risk makes Australia less attractive
to Open Source software deployment and development, for which we currently
enjoy a world-class reputation.

The upcoming changes to this section of the Copyright Act, required
by our FTA obligations, create an opportunity to avoid this messy
and uncertain process by directly aligning our laws with the United
States on this issue. Let us avoid any possibility that our laws be
{}``absurd and disastrous''.

~

Rusty Russell,\\
Linux Australia IP Policy Adviser.
\end{document}
