Senator MURRAY (7:39 PM) —The Copyright Amendment Bill 1997 addresses a range of issues, but I want to limit my comments tonight to schedule 3. The essence of the schedule 3 amendments will be to allow goods which have copyrighted packages and labels to be imported into Australia without excessive copyright protection. The existing trademarks and contractual law is not changed and so the brand owners' proprietary interest in the brand will be maintained. It is the exclusive or restricted right to import the brand which is being affected by this bill.

Schedule 3 follows the recommendations of the 1988 report of the Copyright Law Review Committee, CLRC. This report recommended packaging and labelling should not be used to control the marketing of imported goods. In that inquiry the CLRC found that distribution of some imported goods was being controlled by relying on the copyright in the packaging and labelling. The New South Wales Supreme Court case of Bailey v. Boccacio is a good example of what this bill is about. In that case a legally purchased and imported bottle of Bailey's Irish Cream was being sold for a lower price by the unauthorised importer than by the Australian distributor who was authorised by the trademark and product owner.

The case turned on the argument that the lower priced import infringed copyright in the artistic work on the bottles labelled. The effect of this case is to say that if you own the copyright in the package or label you can control the import and distribution of whatever that package or label is attached to. In these circumstances, the product becomes secondary to the packaging. For those of us who have sampled Bailey's Irish Cream, I very much doubt that we tasted the label.

This bill will put a stop to that practice. The government's proposed amendments in schedule 3 will allow the importation of what is called a `non-infringing accessory'—in other words, goods which have been legally purchased overseas which have a copyrighted package or label and which may be imported into Australia and sold without infringing the copyright. This is achieved by including new definitions of `infringing copy' of `accessory' and `non-infringing accessory' as well as various technical amendments. It is important to recognise that the copyright regime overall is maintained.

As you would be aware, the Australian Democrats recently set out their reasons for rejecting the government's proposal to remove parallel import restrictions on sound recordings in the Senate Legal and Constitutional Legislation Committee minority report on the Copyright Amendment Bill (No. 2) 1997 . We believe that copyright on packaging and labelling is a different issue. As stated in that report, the Australian Democrats deal with each issue of the parallel importing provisions on their merits, balancing the interests of the copyright holder against the broader public interest.

We say that sound recordings are the product and not the package, and the issues are therefore different. For sound recordings, the evidence before the committee clearly showed that removing parallel import restrictions would severely affect the Australian music industry. This effect, in our opinion, would not have outweighed the potential benefits claimed by the government. For packaging and labelling of products we do not think the same arguments apply. We believe that the benefits in this case outweigh the detriments. But there are detriments, and we must recognise that.

We understand that there will be a need to change business practices. This can be done by the delayed implementation of this bill.

This bill was referred to the Senate Legal and Constitutional Legislation Committee, and the report was produced in October 1997. In my minority report I said that this legislation deals with competitive inadequacies which result from copyright protection. In that report I also said:

The Australian Democrats are opposed to oppressive, unnecessarily restrictive, predatory, monopolistic, oligopolistic or cartel like market behaviour, which can result from abuse of the protection afforded by copyright law.

The committee considered a range of issues. Those economic issues were discussed at some length. Similarly, some of the broader community interests were also canvassed. They included issues such as product quality, free riding, jobs and health and safety issues. They are compelling concerns.

However, the central issue in this matter is the role of copyright in packaging and labelling and the consequent effects on `non-infringing accessories' in our market. Evidence before the Senate committee showed that copyright is being used in some instances to unjustifiably limit imports. This is different from a copyrighted book or sound recording because in that case it is the product itself which is affected by copyright and which the purchaser is consuming. In the instances of a book, the copyright is in fact what you read. Where the product is not the same as the copyright, the copyright should not be used to compensate for contractual inadequacies in the arrangements between the owner, manufacturer, wholesaler and retailer. This bill will not wipe out exclusive dealership arrangements into Australia.

Senator Murphy —It will just almost wipe it out.

Senator MURRAY —It will still be possible for an Australian distributor to enter into arrangements with a brand originator to exclusively distribute in Australia where the originator agrees not to supply its products to any competitor.

Senator Murphy —Not totally, just almost.

Senator MURRAY —This will require the renegotiation of agreements and a shift in the arrangements for distribution. It will also lay more onus on brand originators to properly contract the distributors in all countries. Very frequently it is those brand owner and distributor contracts which are at risk.

Since Senator Murphy has seen fit to interrupt my speech in this second reading debate in a manner that I did not do to him, I would like to quote to him some words.

Importation into, and distribution in, Australia of a variety of goods has been effectively controlled and exclusively licensed by manufacturers by relying on ownership of the copyright in the labelling or packaging of the goods.

The quote goes on:

The CLRC observed that the design of packages and labels to make them subject to copyright is a common practice in many industries such as those relating to liquor, tobacco, perfumes and cosmetic products. It was strongly of the opinion that distributors of imported goods should not be able to control the market in Australia by the simple expedient of enclosing them in a copyright label or package. Usually, buyers of such goods are primarily interested in the goods themselves, and the packaging or labelling is of no interest or only of incidental interest.

The quote says:

The Government believes that the use of a copyright owner's exclusive importation rights over packaging or labelling to protect exclusive distribution arrangements for goods is an unintended use of copyright and is anti-competitive.

Senator Murphy —What are you reading from?

Senator MURRAY —The quote carries on:

A change to the law to end this copyright control has attracted some criticism from those industries which rely on it to control the marketing of their goods in Australia. However, the Government regards it as indefensible to use copyright in this incidental way to deny consumers the possibility of lower prices and better access to goods.

Senator Murphy —What is that?

Senator MURRAY —The government referred to was the Labor government. The quote is from 18 December 1992 from Mr Duncan. They are your words.

To return to my remarks. To counter the government's bill a number of groups formed the Brands Coalition with the aim of collecting enough information to show the destructive effects of this bill. That report has been circulated and it shows a number of businesses will be affected. These are companies which rely on marketing brands and maintaining their exclusivity based on the parallel import restrictions. This report did not examine any of the potential benefits claimed by the government which would result from cheaper imported goods and less restrained trade. The Brands Coalition report was useful only so far as it has shown that there is a need to allow businesses time to renegotiate the commercial agreements. I understand the government will move amendments to this effect and we will support them.

It has been put to me that there has not been adequate consultation on this bill. For the Australian Democrats this is a serious concern. However, I have investigated this as far as I can and note the following. The reference for an inquiry was by the Labor government in 1983. The CLRC accepted submissions on this issue and reported in 1988. Legislative amendments were introduced by the Labor government in 1992 and laid on the table for three months for public comment. Some of their legislative amendments were released as an exposure draft in 1996. This bill was introduced into the House of Representatives on 18 June 1997, over 12 months ago, and the bill has been to the Senate Legal and Constitutional Legislation Committee which received 32 submissions on this issue and invited eight representations to the committee. For an issue before the Senate, this is significant consultation and we are unsure how much more consultation is possible. This has been a live issue for a number of years.

The data supporting each side is relatively sparse, and I have attempted to seek out definitive materials. The contribution of the Brands Coalition has given us all some indication of the possible side effects on a number of businesses. However, this is not decisive data overall and the coalition has cherry-picked businesses and has not quantified the sorts of benefits which are possible. I appreciate that they are trying to defend their position, and they are perfectly entitled to do so, and accordingly have assisted us in the matter and I am grateful for it. But without the concrete evidence to rebut the facts of the Bailey v. Boccacio Pty Ltd case and the recommendations of the CLRC, the overall intention of both the present government and the previous government remain persuasive. Mr Duncan did put a firm and good case.

Once this bill moves to the committee stage we are going to support the overall bill in schedule 3 but we will attend carefully to the arguments to be put to the various amendments. I note that we and the Labor Party have amendments.

In the remaining time available to me, I will refer the Senate to my minority report. In that minority report we did remark that copyright is part of the protection afforded to commercial and creative persons and entities throughout the modern world. It is an essential right as well as an effective regulatory and market device. Copyright is one of a trio of such rights—trademarks, patent and copyright. Copyright is another reminder that markets are not as free as the extreme economic rationalist would say they are or have them be.

Markets are constrained by intervention, controls and limits, and trademark, patent and copyright laws exhibit those characteristics. Competition is affected by those constraints and will continue to be so. Modern market capitalism is characterised by a very high emphasis on branded goods and the rights, protection, values and place accorded to them. The ownership of the brand is usually far more valuable than the right to distribute, market or manufacture the brand and it is copyright, trademark and patent law which protects and preserves the proprietary interest in the brand.

Given our small share of and place in world trade it is not surprising that nearly all the important world brands are owned by foreigners and not by Australians. The exceptional values attached to brands means that the international and domestic campaigns on these matters are characterised by the best political lobbying that money can buy. While it is essential for Australia to be cognisant of and responsive to the practical and moral global issues that arise when considering these matters, its prime concern has to be whether changes proposed to copyright advance our national interest.

The right to use, manufacture, distribute or market a brand is granted by the owner of that brand to various persons or entities in various countries. Parallel importing means imports of a brand into Australia by an entity other than the domestic authorised user, distributor or importer of a brand. Parallel importing does not attack the owner's proprietary interest in a brand; it attacks the exclusive or restricted right to import that brand. That exclusive or restricted right can only be protected by contractual obligations. It is not appropriate to use the customs law to do the job which should have been fulfilled by better contractual arrangements.

The Copyright Act 1968 provides that the importation of, and subsequent dealing with, a label or packaging, and not the ingredients or constituents, without the consent of the holder of copyright in it, infringes copyright. At present, authorised or registered users use Customs to seize goods where a complaint of copyright infringement is made. A procedure is then followed to make such claims stick or to prosecute. There has been criticism of this practice for many years.

In 1988, as I said to you earlier, the Copyright Law Review Committee did object to the anti-competitive way in which copyright provisions were being used. They objected to the restrictive practice of trying to `exclude others from marketing similar goods'. I have had, as no doubt other senators have had, a series of letters, some opposing the government's intention and some supporting it. Those letters are from small businesses on either side of the case.

Senator Murphy —How many letters did you get opposing it versus those which support it?

Senator MURRAY —About the same number. `Similar goods' can mean that goods are poorly differentiated and easily substitutable for other goods. The alternative view to that expressed by the CLRC is that where goods—

Senator Murphy —I got one letter in support and the rest were in opposition.

Senator MURRAY —That is about the most passion I have ever seen you show. Are you sure you have not got a personal interest in this matter? Do you have anything to declare? I have never seen you show any passion about anything, and here you are, suddenly getting passionate.

Senator Faulkner —You should have seen him in his preselection, Andrew.

Senator MURRAY —I think that deep down it has something to do with fishing.

The ACTING DEPUTY PRESIDENT (Senator Crowley) —It is late at night. I have some tolerance, but maybe we could get back to the main game.

Senator MURRAY —My apologies, Madam Acting Deputy President. I am trying to ensure that I use the time appropriately. In 1988, as I mentioned, the Copyright Law Review Committee objected to the anti-competitive way in which copyright provisions were being used. They objected to the restrictive practice of trying to exclude others from marketing similar goods. `Similar goods' can mean that goods are poorly differentiated and easily substitutable for other goods. The alternative view to that expressed by the CLRC is that, where goods are similar to others available in the market and substitution by consumers for other acceptable goods is therefore easy, exclusive exportation of such brands is not a restrictive practice. Where, however, goods are different to others in that class available in the market and substitution is difficult, the exclusive exportation of such a product is a restrictive practice.

It is expected that allowing parallel imports will result in significant price decreases to consumers. I believe the evidence that such a result is likely to be tenuous. It is possible, however. I do note it is the government's main argument. In assessing the merits of arguments concerning parallel importing, we should have regard to the pricing and other market behaviour of the ultimate beneficial owners of copyright in other markets as well as in Australia. If the behaviour is such that it results in Australians paying higher prices or having poorer availability than they otherwise would, then, plainly, that would be a matter for concern.

The government's amendments to the act, through schedule 3 of the bill, seek to prevent importers from blocking parallel imports on the basis of copyright in accessory items which are peripheral to substantive goods. The Attorney-General (Mr Williams) has made it clear that these changes will not relax importation controls where the copyright owner has not consented to the manufacture of those goods.

Arguments offered in favour of the government amendments are: to some extent, they will prevent monopolies from forming and will promote competition; they will free up trade; goods will be cheaper or, alternatively, the market price will be truer; the restriction on parallel imports does not protect and can hinder domestic manufacturing; restricting parallel imports hurt small business; and, health and safety and other standards are not affected.

Arguments offered against the government amendments are: the parallel imported product may not be of the same quality or standard as the authorised imported product; parallel imported products get a free ride on advertising and marketing by the authorised distributor; Australian jobs would be at risk; parallel imports will not necessarily be significantly cheaper; parallel importing will inhibit the development of future markets in Australia; a strong case has not been made for the changes; and, alternative Australian legal remedies for preventing product imports on grounds of misrepresentation, health and safety and differing constituents are slow, costly, ineffective, impractical and inadequate in comparison to copyright law.

Senator Murphy —What about product service?

Senator MURRAY —Senator Murphy seems so ignorant. I was actually reading out a list of the support for your argument, which you failed to outline. These competing arguments are naturally influenced by a healthy dose of self-interest. That self-interest is not relevant. What is relevant are the arguments. With respect to the bill's provisions on parallel importing, apart from the fact that present copyright law does indeed restrain competition, no overwhelming argument prevails. It appears that the bill intends to address this issue without putting copyright holders and users at any substantial risk. Accordingly, as you can gather from Senator Murphy's reaction, the Australian Democrats are going to support the government's bill, but we will attend closely to the amendments to be put.