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Environment and Communications Legislation Committee
06/03/2018

COATES, Ms Jessica, Executive Officer, Australian Digital Alliance

CHAIR: We'll reconvene, and I now welcome the Australian Digital Alliance. I understand, Ms Coates, that you've received information on parliamentary privilege and the protection of witnesses.

Ms Coates : We are a non-profit organisation that represents education and the cultural, disability and related sectors in. Members include schools, universities, libraries, galleries, archives, disability groups and private individuals—massive numbers of people.

CHAIR: Did you want to make an opening statement before we head off to questions?

Ms Coates : Yes, please.

CHAIR: Fire away.

Ms Coates : The ADA, of course, welcomes the expansion of safe harbours to education and the cultural and disability sectors. Along with everybody else, I believe, you've heard from today, we all recognise that these groups provide very valuable services to our communities, that they are put at legal risk by this and that the amendments being put forward will give them far more confidence and security to take full advantage of new technologies and continue to provide these services in a better and improved way. Our members in those sectors very much appreciate the legislation as has been put forward. However, as put forward, we, as a collective group, as the Australian Digital Alliance, do not believe it presents a working safe harbour system for Australia. Essentially, we're moving from a system that is very undersupplied and very restricted to a slightly less restricted system, but a system that still does not cover the field. Until we extend the safe harbours to cover all entities who are providing the same services and undertaking the same functions for the Australian community, then a safe harbour system just won't work in an effective manner.

The four main points that I want to get across today about the problems with not providing a broader safe harbour are that the system, as proposed, will mean that we don't have an effective system for take-down of material. Our system will be complex. It will be uncertain and inefficient. We will have difficulty applying the compromise, as has been proposed in practice, as the lines are fairly arbitrary, and it's quite difficult to draw a line between one organisation and another, and one type of entity and another, in an area where people are partnering and working collaboratively all the time. As a result of having an incomplete system, individual creators, consumers and small platforms, in particular—those who don't have the resources to negotiate licence deals or take legal action on their own—will be being denied a simple, straightforward, non-litigious system for resolving problems with online infringing content. Australia will remain an outlier—the only country among its peers that doesn't provide a complete working system and support user-generated content sites on our shores. As a result, this will leave our creators, our consumers, our tech companies and our innovators at a disadvantage. Those are the four points—I will expand on those a little. You're running in front, so you've just given me a licence to talk for longer.

CHAIR: Yes. Are you happy for questions now?

Ms Coates : No, no, I'm happy to talk a bit more. I'll flesh out those main points and the argument that our system for take-down won't be efficient. As you know, one of the main purposes of safe harbours is to include a system for the take-down of copyright material that is potentially infringing—that's what it's used primarily for, although there are other elements, of course. The majority of that material that is infringing does not appear on university websites and it does not appear on websites hosted by individual ISPs; it appears on free online platforms. By leaving out these groups, you are saying, 'The vast majority of material that is infringing, or potentially infringing, in Australia, whether by accident or deliberately, is not going to be covered by this system'. So Australia will not have a system for the removal of the vast majority of the material that is online infringing on Australian shores.

In a similar vein, you are creating an unnecessarily complicated system because you are asking creators, consumers, everybody who is wanting to see this material removed, to know the difference between a website that is hosted by an ISP and an online platform, to know that when the material is on Redbubble, they have to hire a lawyer, send a letter whereas when it is on a Telstra website, they can just use this automatic form. In reverse, are the people who will find that complex our start-ups? If we do have an extended system, are they then given basically a nice clear system of steps they should be taking to ensure that they are complying with the law and being best practice actors in the space to help prevent copyright infringement? Without the safe harbour system, they don't have any instructions at all and you are asking them to basically develop their own system.

I'm not sure if this is already been drawn to your attention but in the Redbubble case, one of the matters of most contention was whether or not the steps that Redbubble took were sufficient, were reasonable steps to prevent infringement. If we had a safe harbour, that would be spelled out much more clearly what are the reasonable steps. Our small start-ups are people who have no idea about copyright law. I can tell you that because it is my job to talk to them and try to help them with that. You are asking them to understand and know exactly what they are supposed to do without any instructions from the government whatsoever.

It is also important to remember that it is not just the creators and the start-ups that would be disadvantaged by a partial system; it is also Australian consumers. The safe harbour system specifically includes consumer protection mechanisms—internet users, let's say—because the line between consumers and creators is very vague nowadays. But those people who are uploading this content, often in good faith, are very frequently remixing stuff or material that might not even have any infringing content in it whatsoever so there is a lot of error in these forms. Those people who are uploading it, under the system, have an automatic right of reply. It is a legally guaranteed right of reply. The platforms do not receive the legal protection that they would under the system if they do not recognise and follow the consumer protection element, so it is very strong.

If you don't have the safe harbour provisions applying to platforms then they are at far greater risk from being sued by a creator than by being sued by an internet user. They will be risk averse and material will be taken down and left out. Even where it is fair dealing, even where there are free speech issues, even if it is not infringing, there is a much higher chance that platforms will, to ensure that their risk is minimised, just take material down and leave it down and give consumers no right of reply. This is the point of the safe harbour. It is intended to be a solid system that provides protection for all three parties—creators, platforms and consumers. There is a nice little triangle there and you need all three of those to have legal rights in order for it to function effectively.

The last problem with the system is it will be unclear how the distinction between the groups who are protected and who are not protected will work in practice. I believe you've already heard from Redbubble about the joint project they did with the State Library Victoria last year. Unfortunately, I was on a plane so I didn't get to hear the testimony but—spelling out exactly what it was—basically the state library put up public domain material in conjunction with Redbubble. They encouraged consumers to make their own works based on that and print them out create their own products. There is a very high chance, as with all user-generated things, that there was some infringing content included in the remixes. Consumers just don't know. None of us know. I as a copyright lawyer barely know when I can and can't include material. There is a very strong question whether or not this project would have received any protection under the safe harbours, whether the library would have been exposed. It is not just those kinds of joint projects; libraries and universities in particular, those two groups, are the largest homes to innovation hubs, incubators in Australia. That's where the start-ups go. That is where the cutting edge work is being done by those two groups. Those activities often have very strong commercial implications. They are often actually start-ups based within the university. It is very hard to know where the line falls between a totally university-based non-profit thing and a commercial company. So, again, there is complexity in the system the moment you start trying to draw arbitrary lines between people who are all doing the same things and providing the same services.

It's very important to note that the way the safe harbour rules are written in the US, in Australia and around the world—the basic model—focuses very much on the activities that are being undertaken, not the entity. Specifically because of that, this argument that there's passive versus active or commercial versus non-commercial, is actually explicitly excluded in, for example, the US free trade agreement, which is the mechanism that we did. There is a mechanism in the safe harbours rules that specifically says if you are deriving a direct financial profit, then you are excluded. That is the mechanism that is supposed to deal with excluding any commercial entities. Right from the start, it has applied to CSPs—commercial entities. You know, this idea that it shouldn't be commercial is a furphy; it is not an accurate representation of how the model has ever worked. The idea that passive versus active should be the line, you can see, is also inaccurate, based on the idea that universities, for example, are extremely, as are schools. They have a far more active and close relationship to the people who are uploading material on their sites than these online platforms. So the idea that passive actors are okay but active are not, again, is a bit of a furphy because we're planning on protecting the most active ones, to a certain degree.

So those are the flaws with the system. What is this going to lead to? Basically, you've heard very strongly from people who are opposed to further expansion of the safe harbour that it is all about maintaining their ability to licence and maintaining their commercial advantage. We strongly support licensors. As you know, our members include Google and Facebook, both of which have licences with these entities. But those licences have to apply on top of, and in addition to, a general legal safe harbour. The most simple response to that is I'm pretty sure that neither Pokemon nor Hells Angels, are subject to the APRA licence and have joined on. A licensing system can never cover the field. You will always have huge amounts of content out there being shared on these platforms that will fall outside the licensing system, and these platforms will be liable to legal action by those people, no matter what their activities. This is a lesson we've learnt from the Redbubble case. Redbubble was a good actor—the court explicitly said that—they were still liable anyway under the Australian system because there as no legislative safe harbour.

So basically a licensing system is great, but, as you've heard, in the US licences exist. Facebook and YouTube are covered by the safe harbours, but there are also licences on top of them. So the argument that a safe harbour will preclude licensing is obviously not correct and not borne out by the facts. The argument that licensing can replace safe harbour is also clearly not correct, because—even ignoring large groups like Pokemon and Hells Angels—what about the individual creators who aren't covered by these things? How are they supposed to be able to get access to have material taken down?

So licences are excellent, but they don't apply to small creators—they won't be covered by them. The consumer protection mechanisms are not in there under licences. APRA might have a licence that applies to small platforms, but I'm willing to bet many other large entities in this space have no interest in dealing with a very small start up. They don't have the legal obligation APRA does to provide licence to everybody. So the very people who have the fewest resources to actually understand how they can combat piracy and take legal action under a judicial system will be losing out on a nice simple administrative system intended specifically for them, for the sake of large entities, who have the ability to negotiate licences and take legal action themselves. The whole point of a cover-the-field safe harbour system is to ensure that everybody is encompassed within the same system, not to pick and choose those few big people who can afford it and can work in the system and leave a system that excludes everybody else. This is why licensing is great, but it doesn't replace a proper legislative system.

The last point, of course, is an outcome that you have heard about a lot from our side, the fact that Australia will be an outlier internationally if we do not extend the safe harbours. For the last decade, pretty much all of our main peers in the world, as you can see from the table in front of you. There's a report from Professor Kimberlee Weatherall. You received a copy of the full report, but this is the nicest summary of it.

Senator URQUHART: This is an extract out of that report—is that correct?

Ms Coates : Yes, you can see the reference at the bottom, but you also have the report in your materials. That chart demonstrates the legal liability for intermediaries in the Australian system compared to intermediaries in other systems. You can see that in almost all other systems they have at least partial cover if not entire cover of our peers. Obviously, it's a select group—you can't do the entire world—but it's a very strong example of comparative nations. Australia is out of line with them and will remain out of line with them. That creates a disincentive for people to set up in Australia. As you know, we've had a decade of the safe harbour in its current form, and in that time we've had one strong user-generated-content site arise in Australia, Redbubble. There are a few other contenders, but it's the only one that has a really strong international thing, and they've been sued twice now because of the lack of a safe harbour. The message that sends to the rest of our innovation system and to our technology companies is to go to another country.

Senator URQUHART: Sorry to jump in, but I feel like you're answering a lot of the questions that I have, so I want to jump in while I'm thinking.

Ms Coates : I'd prefer a conversation.

Senator URQUHART: Talk me through what the proposed legislation will mean in terms of the table that you've provided.

Ms Coates : The proposed legislation is on the third line of that table. You can see that public sector organisations in Australia will now have green. That will be good, but it won't affect that top line, where all the red is. That top line stays exactly the same.

Senator URQUHART: Okay. So, what you're arguing is that it should apply to all, therefore that would change the top line?

Ms Coates : You're right. I should have given you an example of what would happen.

Senator URQUHART: No, that's fine. I get it now.

Ms Coates : We can turn that top line green, or at least green and a bit of orange.

Senator URQUHART: Okay. From your point of view, the proposed legislation doesn't actually do that?

Ms Coates : It does not. What you have is what the situation will be under the proposed legislation. This is why, even though we support the expansion that is being proposed, we don't quite support the legislation. We support that the legislation be further amended.

Senator URQUHART: So, you effectively support the legislation but you think it needs to be a reach further into—

Ms Coates : To have a full, complete, working safe harbour system, not just another—

Senator URQUHART: Following on from that, you've talked about the costs and you mentioned the cost of getting a lawyer versus having it covered. What are the costs that you say would be there if these are not expanded to basically everyone?

Ms Coates : There are two main categories that I can see. One is a story told by an Australian start-up—who isn't appearing before the committee, so I won't name them specifically, but I think has been named in previous studies—of receiving a notice under the US DMCA system for material that somebody believed was infringing on their system. They saw that notice and they took the material down, I think, within 24 or 48 hours. A few days later, they received a letter from an Australian lawyer representing the Australian copyright owners, rather than the American ones who'd sent the DMCA notice. They wrote back to say that the material had been taken down; it was all sorted. That lawyer wrote back to them saying, 'We are concerned; we want some conversations.' They wrote back to them. About three weeks later, they finished writing letters back and forth and came to the conclusion that everything was okay. You can see the very vast difference in the two systems, between having a simple administrative system that everybody can access and happens automatically and a very expensive system—imagine the hours and the money spent by the creator in that circumstance.

The other cost, a major cost that is easy to quantify and is obvious, is the cost that Redbubble has just borne defending themselves in an extremely expensive legal case, and they're currently bearing the second case. Redbubble is a big, successful company. They're lucky that they've been able to defend that. The fact that they were such good actors has meant that the damages are very small that have been awarded against them, but they have been found liable and they have spent hundreds of thousands of dollars trying to defend themselves and to make sure that they weren't found grossly liable.

Senator URQUHART: I think you were in the room when the previous witnesses were here, who said that they were happy with the legislation as it's proposed. We're sort of having to weigh up from witnesses and submissions about the position of some groups who deal with digital provisions who are saying to us that the proposed legislation will deal with all the issues—you're saying it won't?

Ms Coates : I would say that this is not a working compromise. It seems like an okay compromise to many a person. I've had members of parliament say to me: 'I see this is as an okay compromise. Nobody is happy, so therefore it's okay.'

Senator URQUHART: I think you were in the room when I sort of asked the question about—because I always thought that compromise was where two parties come together and aren't actually happy with the outcome. What I got from the previous witness was that, yes, they were happy with the outcome, even though they used the word 'compromise'. Do you see that—

Ms Coates : Basically, I agree. At the moment, one party is far happier than the other, so you can draw what conclusions you like on that compromise. More importantly, from our point of view, it's not a working system that has been put in place. It's a compromise where—'Okay, you've only got one wheel for your car. We're going to give you another wheel but we're not going to give you the other two.' So, you know, you've got two wheels for your car. 'You've got to be happy now; you've got more than you had before.' But that isn't what we're getting here. The safe harbour system is intended to apply to all service providers and all creators, and what we're getting is a system that will apply to only a few service providers and will leave out a whole bunch of creators and most consumers. We don't see this as a working compromise. I think we've almost covered all the things I wanted to say.

In response to a statement from the last representatives, where they were talking about the studies going on internationally, the other groups that are looking at reviewing their systems, it's very important to note that all the materials and all the discussion that has been made public for these reviews are all about what mechanisms should be in place for you to have to jump over to access a safe harbour. Basically, what steps do ISPs, service providers—that's my Australian copyright lawyer coming up—have to take to ensure that they can enter the safe harbour? None of the discussion that I have been able to find by the governments themselves is about removing this from the commercials or the service providers. You wouldn't do that, because they are the bread and butter of this system. I don't have the stat, so I am making one up: online platforms probably receive 80-plus per cent of the notice and takedown things under these systems. If you take it back from online platforms in, say, the US or EU, you are essentially taking away the safe harbour, because that's what the safe harbour is all about.

CHAIR: What are the reviews reviewing? What caused the review? Obviously something is happening; something is being caught that shouldn't be caught.

Ms Coates : It's exactly what you've heard from the previous witnesses. They are concerned about the effect on licenses that they are entering into with these entities, and would like the balance of the safe harbour shifted. But what it is focused on is, what is your policy for repeat infringers? How do you treat takedown? How quick does that have to be? These are the issues being discussed. Whether or not you have some kind of content filtering—though we are not supportive of that necessarily, either. It is about what requirements are placed upon these entities to enter the safe harbour, not whether or not an online platform should have it.

CHAIR: That goes to scope though, doesn't it, about what threshold they meet?

Ms Coates : Yes.

CHAIR: What I'm getting at is this: what went wrong with the scope that they had in place—in the US, for instance?

Ms Coates : I don't have a prepared answer for this—

CHAIR: If you need to take it on notice, that's fine.

Ms Coates : I was going to say that on this I'm not talking so much on behalf of my members, but for myself as a copyright expert who's been in the field. Everything has moved forward. This is a decade later in the internet age. Technologies are very different and business models are very different. I'm not happy to necessarily say that something has gone wrong. I think this has been very successful in the way that it has allowed very large and successful companies to grow up in the US and the EU, whilst at the same time ensuring that there is compensation through things like licences for rights holders, and that material does get taken down. I think we are in a much better situation now in terms of online infringement than we were a decade ago. But that isn't necessarily because of stricter mechanisms being applied to platforms et cetera—it's because of more legitimate ways to get hold of content, it's because of more education of the public, and it's because of ease of access through technology. Those are the things that have changed in the last decade. It's not that the safe harbour isn't suited to the current environment; it's that the safe harbour needs to ensure that it keeps up with the current environment. This is why there has been discussion of things like codes that can be adapted more readily at the round table that others talked about.

Senator STEELE-JOHN: Just to clarify, it sounds like they are updating the way in which the current framework is being implemented—or reviewing the way it is being implemented—rather than questioning the nature of the fundamentals of the framework?

Ms Coates : Thank you, that is exactly the point I was trying to get across. Essentially, the reviews are supporting the usefulness and the importance of the safe harbours; they are just looking at whether or not they need adjusting for the new age, because so much has changed.

Senator STEELE-JOHN: Earlier in your opening statement you talked about the fact—it's quite a shocking statistic—that in the last decade we've seen one user generated content platform really come to success in Australia, that being Redbubble. Off the top of your head, can you inform the committee how many similar platforms have been successful within the US and the EU, where these harbours apply, in that same period of time?

Ms Coates : I will have to take that question on notice, but I can certainly say that, as we all know, in the US it would have to be dozens if not hundreds of platforms that have been successful to the level of Redbubble.

Senator STEELE-JOHN: Even a rough estimate would be useful, if you could take that on notice. We were talking with Redbubble earlier about trying to ascertain the opportunity cost of the absence of this regulatory framework to the Australian economy. We are all talking about innovation and life beyond the minerals extraction industries, and this would seem, to a lay person, to be key to that.

Ms Coates : That's excellent.

Senator STEELE-JOHN: For my benefit, but I think also the committee's, would you be able to go back to what you said about the way in which a framework that relied on licensing leaves out a massive proportion of people who are affected by this, particularly the areas that are dealing with this content infringement issue. The impression that we may have been left with from earlier contributions was that this is a superfluous addition, and that if licensing frameworks were put in place then you wouldn't really need something like this.

Ms Coates : You have one or two big licensing entities in Australia—you have APRA AMCOS and you have the Copyright Agency—that deal with certain materials in certain uses. However, they get nowhere near crossing the field in terms of applying to individual creators like photographers, artists and designers. One of our large platforms, 99designs, is all about design work. Who is going to run the licence for them?

Of course, all of these individual creators cannot enter into their own licences with a platform. The idea of each individual creator going to 99designs or Redbubble and saying, 'Actually, we want you to pay this amount of money in case our material appears on your platform accidentally,' and negotiating a licence like that is literally impossible. We're all creators every time we tweet something at the moment. So the idea that a licensing scheme could cover across the board for everybody is just impossible.

This is why it's far better to still have licensing such as the APRA licence. I think that every single start-up in Australia would probably be very grateful to sign on to that. It makes their system even more risk-proof than it would be under a safe-harbour system if they enter into that licence. Because this is a licence being provided by APRA, I don't see the cost of it necessarily being affected too greatly by whether or not a safe harbour exists. Those entities will enter into that licence, but there are all the other materials that they won't have any protection for. As I said, Hells Angels and Pokemon—it just shows you the vast range of people who are using these platforms. Every single individual in Australia is not going to be part of a licensing scheme.

Senator STEELE-JOHN: There was also some concern around the negative effects of these frameworks upon the music industry in Europe and the US. To my mind, Europe and the United States seem to have quite a successfully functioning music scene and also a successfully functioning tech sector. In a way you've kind of just answered this question, but if I am somebody getting started in the content creation scene at the moment in Australia and I look to the next 10 years and the framework remains the same, what incentive really exists for me to stay in Australia versus going overseas?

Ms Coates : In our submission, you'll see that there was a study conducted—I've forgotten by exactly who, but it's in our submission—where they basically looked at venture capitalists, talked to them and got them to say what they were most influenced by. They reached the conclusion that they would prefer to invest in a company in a weak economic country with strong safe-harbour protection than a company in a strong economy with weak safe-harbour protection. From their point of view, the safe harbours are that important. Essentially, if you are a creator wanting to enter the field on your own in Australia, then you very strongly want companies like Redbubble and 99designs to exist. They are providing marketplaces and revenue streams for huge numbers of creators—far more creators than ever have had revenue streams before. This should always be in addition to the traditional models. Not all these creators will be earning a living, but they're getting something in a way that they never have. They can reach their consumer; they can find their market in a way they never have because there are free online platforms via which they can reach their audience. Without safe harbours, these platforms wouldn't exist, and, at the moment, they primarily exist in other countries because of the risk inherent in the Australian system. If we adjusted the Australian system, then maybe we'd have more local companies who can serve local Australian creators in a better way.

Senator STEELE-JOHN: I'd like to take you to the other side of the process, which is the consumer protection aspect of this expanded framework. You mentioned that quite often, because of this appeals process, there is the likelihood that a take-down notice has been issued that is actually wrong and that this allows some kind of appeals process. Is there any data from the EU or the US on the percentage of appeals that are not upheld but right to be lodged?

Ms Coates : Yes, there is quite a bit of data, but I'll have to take it on notice. I can give some anecdotal evidence. For example, Warner Bros. quite famously asked for their own website to be taken down, and the Amazon distribution sites for their own legitimate materials. This shows the difficulty with identifying infringing material in these online environments and why it is that you can't just say, well, the platform should just work it out for themselves. They should just look at something and say: 'Well, that's infringing. We better take it down.' This is why they need the copyright owners to step in and say: 'This is infringing. Please take it down', because they have no idea what licenses are out there and what's legitimate and what's not on their system. So, when Warner Bros. is asking for their own material to be taken down, it shows you how difficult this can be and how important it is to have a nice simple system in place and a right of reply. I think actually, in that case, they probably caught it. The platform probably caught it.

Senator STEELE-JOHN: Thank you very much.

CHAIR: Thank you very much for your submission, your opening statement and answering the questions. You did take a couple of questions on notice.

Ms Coates : Yes.

CHAIR: We were hoping to have responses by this Friday at the latest, if possible.

Ms Coates : That won't be a problem.

CHAIR: That would be great. Thank you very much.

Ms Coates : I am travelling for the next two days, but after that—

CHAIR: Now we have sorted out what you will be doing on the plane.

Ms Coates : Yes. Thank you very much for hearing me.

CHAIR: We will now move to our representatives from DIGI and Google Australia.