ava i lab le at www.sc ienced i rec t . com

www.compseconl i ne .com/ publ i ca t ions /prodc law.h tm

c o m p u t e r l a w & s e c u r i t y r e p o r t 2 3 ( 2 0 0 7 ) 2 8 5 – 2 8 9

Case note article

Linking your way to liability? – Cooper v. Universal MusicAustralia Ltd [2006]

David Naylor, Andrew Jaworski

Field Fisher Waterhouse LLP, London, UK

a b s t r a c t

Although the Internet has provided the music industry with a new system for marketing

and delivering its copyrighted material to consumers, it has also created significant new

challenges. As recent case law in the US and Australia demonstrates (e.g. see MGM Studios,

Inc v. Grokster Ltd 125 S Ct 2764 (2005) (hereinafter ‘‘Grokster’’); Universal Music Australia Pty

Ltd v. Sharman License Holdings Ltd [2005] FCA 1242 (hereinafter ‘‘KaZaA’’)) the Internet can

be used to facilitate mass copyright infringement. The Full Federal Court of Australia in

Cooper v. Universal Music Australia Ltd [2006] FCAFC 187 recently upheld a ruling that the op-

erator of a website that contained hyperlinks to unauthorised MP3 music files on third

party websites had authorized the infringement of the copyright in those sound

recordings. The company’s Internet service provider (‘‘ISP’’) and one of its company direc-

tors were also found liable. An employee’s appeal, however, was successful. This article

comments on the decision and looks at the possible implications for website operators

in the UK.

ª 2007 Field Fisher Waterhouse LLP. Published by Elsevier Ltd. All rights reserved.

1. Facts

Mr Stephen Cooper (‘‘Cooper’’) owned the domain name

‘‘mp3s4free.net’’ and operated the ‘‘MP3s4FREE’’ website (the

‘‘Website’’). The Website allowed Internet-users to access

copyright protected sound recordings on third party Websites

via hyperlinks. The Website was highly structured, contained

numerous references to linking and downloading and allowed

users to automatically add hyperlinks. When a user clicked on

a hyperlink, an MP3 file was transmitted directly to that user’s

computer from remote servers. The Website itself did not con-

tain infringing material. Cooper derived income from the

Website through advertising arrangements. The ISP, E-Talk

Communications Pty Ltd (‘‘E-Talk’’) and Com-Cen Pty Limited

(‘‘ComCen’’) hosted the Website largely for free in exchange

for advertising on that site. Mr Liam Bal (‘‘Bal’’) was the direc-

tor and controlling mind of these two small and tightly-knit

companies.

A number of Australian record companies (and other enti-

ties that owned copyright in sound recordings) commenced

proceedings against E-Talk, ComCen, Bal, Cooper and an em-

ployee of the ISP, Mr Chris Takoushis (‘‘Takoushis’’). In 2005

the primary judge, Tamberlaine J, found that Cooper’s hyper-

linking per se did not infringe copyright by ‘‘communicating’’

the works to the public. However, he granted declaratory and

injunctive relief against all the defendants, finding them liable

for authorizing the copyright infringement for those who

uploaded and downloaded the unauthorized MP3 files.1 The

trial judge found that the ISP’s behaviour pre-dated the ‘‘safe

harbour’’ provisions introduced into Australia’s Copyright Act

1 Universal Music Australia Ltd v. Cooper [2005] FCA 972.0267-3649/$ – see front matter ª 2007 Field Fisher Waterhouse LLP. Published by Elsevier Ltd. All rights reserved.doi:10.1016/j.clsr.2007.03.007

c o m p u t e r l a w & s e c u r i t y r e p o r t 2 3 ( 2 0 0 7 ) 2 8 5 – 2 8 9286

1968 (Cth) (‘‘Act’’) by the US Free Trade Agreement Implementa-

tion Act 2004 (Cth)2 but even if those provisions could be ap-

plied retrospectively, the ISP would still have been found

liable. The ISP referred users to an online location using infor-

mation location tools or technology, an activity classified as

‘‘Category D’’ under the Act.3 Broadly speaking, to rely on

the relevant ‘‘safe harbour’’ defence under Australian law,

an ISP:

- must adopt and implement a policy of terminating the

accounts of repeat infringers;

- must not receive a financial benefit from the infringing ac-

tivity if it has the right and ability to control that activity;

- must act expeditiously to remove or disable access to mate-

rial once it has been notified, or has become aware of cir-

cumstances from which it is apparent, that material is

likely to be infringing.4

According to the trial judge, these conditions were not met.

Apart from ComCen, the defendants appealed and on 18 De-

cember 2006, the Full Federal Court upheld the decision that

Cooper, E-Talk and Bal had authorized copyright infringe-

ment. Takoushis’ appeal was successful.

2. Statutory background

Section 85 of Part IV of the Act provides that copyright in

a ‘‘sound recording’’ includes the exclusive right to make

a copy of the sound recording5 and ‘‘communicate’’6 the

recording to the public.7 Users who upload and download

copyright protected material without permission infringe

the owner’s exclusive rights. Section 101(1) of the Act also

provides:

.a copyright.is infringed by a person who, not being the owner

of the copyright, and without the licence of the owner of the copy-

right, does in Australia or authorizes the doing in Australia of,

any act comprised in the copyright.

It was argued that the defendants’ conduct authorized the

infringement of the copyright in the sound recordings. Section

101(1A) of the Act provides that in deciding whether a person

has authorized the doing in Australia of any act comprised in

the copyright, the matters that must be taken into account by

the Court include:

‘‘(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;

2 See Part V, Division 2AA Act.3 s116AF Act.4 Ss 116AG and 116AH Act.5 s85(1)(a) Act.6 A recording is ‘‘communicated’’ if it is made available online

or electronically transmitted; see s10 Act.7 s85(1)(c) Act.

(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.’’

The defendants sought to rely on section 112E of the Act as

a defence, namely that:

.[a] person (including a carrier or carriage service provider) who

provides facilities for making, or facilitating the making of, a com-

munication is not taken to have authorized any infringement of

copyright in an audiovisual item8 merely because another person

uses the facilities so provided to do something the right to do

which is included in the copyright.

3. The decision

3.1. Cooper

Branson J noted that prior to the addition of section 101(1A),

the word ‘authorizes’ in the context of copyright infringement

had been held to mean ‘‘sanctions, approves or counte-

nances’’.9 Branson J went on to say that the legislation that

introduced section 101(1A), the Copyright Amendment (Digital

Agenda) Act 2000, did not intend to alter the meaning of that

word but merely disclosed an intention to guide the process

by which a judgement is reached as to whether a person ‘‘au-

thorized’’ a restricted activity. Kenny J gave detailed consider-

ation to the case law regarding ‘‘authorization’’ prior to the

introduction of section 101(1A) of the Act, rejecting the appel-

lant’s proposition that the concept of ‘‘authorization’’ was to

be understood in a narrow way. Relevant considerations in-

cluded the degree of ‘‘control’’, the nature of the relationship

and the knowledge or reasonable suspicion that the infringing

act would be done. Kenny J stressed that the degree of ‘‘con-

trol’’ required for there to be ‘‘authorization’’ was a question

of fact and degree in each case.

3.1.1. Power to preventCooper argued that he should not be held to have authorized

infringement because:

(a) an MP3 file had been made from a sound recording in

another format (e.g. from a compact disc);

(b) an MP3 file had been made generally accessible over the

Internet; and

(c) a person accessed an MP3 file that another person had

made generally accessible over the Internet.

The Court rejected this argument. Branson J concluded

that:

‘‘a person’s power to prevent the doing of an act comprised in

a copyright includes the person’s power not to facilitate the doing

8 A sound recording is an audiovisual item within s112E; sees100A Act.

9 Australasian Performing Right Association Limited v Jain (1990) 26FCR 53 at 57-60.

c o m p u t e r l a w & s e c u r i t y r e p o r t 2 3 ( 2 0 0 7 ) 2 8 5 – 2 8 9 287

of that act by, for example, making available to the public a tech-

nical capacity calculated to lead to the doing of that act’’.10

The Court found that Cooper had the power to prevent the

copying in Australia of copyright sound recordings via the Web-

site because he was responsible for its creation and mainte-

nance, the principal content of which comprised links to other

Websites and files contained on other servers. Cooper deliber-

ately established the Website so that it allowed the automatic

addition of hyperlinks without the need for his control.

3.1.2. Nature of relationshipThe Court rejected Cooper’s submission that he did not have

the requisite relationships with those who made the MP3 files

accessible or those who downloaded the files. According to

Branson J, there was a relationship between Cooper and the

downloaders because Cooper benefited financially from spon-

sorship and advertisements on the Website. He had a commer-

cial interest in attracting users to the Website for the purpose

of copying digital files. Kenny J also found there was a direct

relationship between Cooper and those that made the digital

files available when he created the facility for them to put

links on the Website.

3.1.3. Other reasonable stepsBranson gave little weight to Cooper’s use of disclaimers on

the Website, suggesting that they were purely cosmetic.

According to Branson J, the disclaimers misstated Australian

copyright law in a material way and their inclusion did not

constitute a reasonable step to prevent or avoid the infringe-

ment of copyright. Kenny J saw the Website as an invitation

to use the hyperlinks provided and its principal purpose was

to enable downloads of infringing sound recordings. A warn-

ing on the Website that some downloading could be illegal

did not lessen the force of the invitation.

The Court found that Cooper could not rely on the defence

set out under section 112E of the Act and had infringed the

record companies’ copyright by authorizing users to make

copies of the sound recordings and communicate those sound

recordings to the public in Australia.

3.2. E-Talk and Bal

In considering the factors under section 101(1A) of the Act,

Branson J concluded that E-talk:

- had power to withdraw its hosting services and therefore

prevent the infringement; and

- could have taken, but did not take reasonable steps to pre-

vent or avoid the doing of the acts of infringement.

Kenny J agreed but placed little weight on the remote rela-

tionships between E-Talk, the users of the Website and

remote providers of music under section 101(1A)(b). Branson

J placed no weight on this consideration.

The Court rejected the attempt by E-talk and Bal (as

E-Talk’s controlling mind) to rely on the defence provided by

10 [2006] FCAF 187 at 41.

section 112E of the Act. Kenny J cited the decision in KaZaA11

where Wilcox J noted that section 112E ‘‘does not preclude

the possibility that a person who falls within the section

may be held, for other reasons, to be an authorizer’’. Kenny J

noted that these ‘‘other reasons’’ depended on the matters

identified in section 101(1A) of the Act and any other relevant

matters.

Branson J agreed with the primary judge’s finding that

E-Talk was aware of the high level of usage of the Website

and the related copyright problems but took no steps to

prevent copyright infringement taking place. Rather than

withdrawing hosting of the Website, or otherwise placing

pressure on Cooper to prevent it from being used for the pre-

dominant purpose of copyright infringement, E-Talk (and Bal

as the controlling mind) sought to achieve a commercial ad-

vantage from advertising on the Website. In these circum-

stances, E-Talk and Bal went further than providing the

facilities that were used to infringe the record companies’

copyright and were found liable for authorizing the copyright

infringements.

3.3. Takoushis

The Court disagreed with the primary judge and found that, in

considering the factors under section 101(1A), the evidence

did not establish that Takoushis:

- had any personal power, as an employee, to prevent the

copyright infringement;

- had any relevant relationship between the users of the

Website or the operators of the remote Websites; or

- could take any reasonable step to personally prevent or

avoid the copyright infringement.

Although it would have been a reasonable step for

Takoushis’ employer to have terminated its hosting of the

Website absolutely or unless he removed the hyperlinks

facilitating copyright infringement, the evidence did not es-

tablish that Takoushis had the necessary authority to do so

himself.

4. Impact for UK

4.1. ISPs

Most ISPs in the UK benefit from protection under the Elec-

tronic Commerce (EC Directive) Regulations 2002. In general

terms, these protect ISPs from any liability that might other-

wise arise for caching, hosting or transmitting illegal third

party content. The caching and hosting safe harbours apply

provided that, if and when the ISP becomes aware of the exis-

tence of the illegal material, the ISP removes or disables access

to it.12 There is no need to actively monitor the site, however.

The ‘‘mere conduit’’ defence provides that where a service

consists of either a transmission in a communication network

of information which has been provided by a recipient of the

11 [2005] FCA 1242 at 399.12 r19 Electronic Commerce (EC Directive) Regulations 2002.

c o m p u t e r l a w & s e c u r i t y r e p o r t 2 3 ( 2 0 0 7 ) 2 8 5 – 2 8 9288

service or where the service consists of the provision to access

to a particular communication network then the service pro-

vider will not be liable if it:

- did not initiate the transmission;

- did not select the receiver of the transmission; and

- did not select or modify the information in the transmission.13

In June 2005 the UK’s Department of Trade and Industry

(‘‘DTI’’) published a consultation document, seeking views as

to whether the UK should limit the liability of providers of hy-

perlinks, location tools and content aggregation services. The

results, published in December 2006, indicate that the UK does

not feel there is substantial evidence to support the case for

such an extension (as has occurred in Austria, Spain, Portugal,

Hungary and Liechtenstein).

As a result, if the same fact situation arose as in Cooper in

the UK, the ISP would still be liable.

4.2. Hyperlinks

Like the Act, the UK’s Copyright, Designs and Patents Act 1988

also prohibits the authorization of copyright infringement.14

Despite cases like KaZaA and Grokster emerging from the US

and Australia, copyright owners in the UK have been unwill-

ing to take their battles to the courts.15 CBS Songs Ltd v.

Amstrad Consumer Electronics Plc,16 remains the current UK

authority on the authorization of copyright infringement,

a case decided in a pre-digital era. The case concerned

twin-deck tape recorders. In that case, Lord Templeman

stated that ‘‘Amstrad did not sanction, approve or counte-

nance an infringing use of their model’’ finding that ‘‘an au-

thorization means a grant or purported grant, which may be

express or implied, of the right to do the act complained of’’.

He found that ‘‘Amstrad conferred on the purchaser the

power to copy but did not grant or purport to grant the right

to copy’’. According to Lord Templeman, the Amstrad situa-

tion was as described in Citing CBS Inc v. Ames Records and

Tapes Ltd,17 namely that:

[a]ny ordinary person would, I think, assume that an authoriza-

tion can only come from somebody having or purporting to have

13 r17 Electronic Commerce (EC Directive) Regulations 2002; Notethat in Sony Music Entertainment (UK) and others v EasyinternetCafeLtd [2003] EWHC 62 (Ch) it was held that the ‘mere conduit’ de-fence set out in the Electronic Commerce (EC Directive) Regula-tions 2002 should exempt an ISP from liability in respect togiving access to a network on which copies are available.14 See s16(2) Copyright, Designs and Patents Act 1988.15 Note that in Nottinghamshire County Council v. Gwatkin, (High

Court of Justice, Chancery Division, June 3, 1997) Boggis QC issueda subpoena to prevent certain journalists publishing a leaked re-port via hyperlinks on websites. The matter was not pursued bythe plaintiff. (see http://www.linksandlaw.com/decisions-86.htm(Accessed 9 February 2007).16 [1987] 2 WLR 1191 (hereinafter ‘‘Amstrad’’).17 [1981] 2 All ER 812, [1982] Ch 91 where a record library that lent

out records and simultaneously offered blank tapes for sale ata discount did not authorize the infringement of copyright inthe records.

authority and that an act is not authorized by somebody who

merely enables or possibly assists or even encourages another

to do that act, but does not purport to have any authority which

he can grant to justify the doing of the act.18

The argument that facilitating copyright infringement

does not amount to authorization is somewhat at odds

with the broader position that has been taken in Australia

and Branson J’s conclusion that ‘‘a person’s power to prevent

the doing of an act comprised in a copyright includes the

person’s power not to facilitate the doing of that act by, for

example, making available to the public a technical capacity

calculated to lead to the doing of that act’’. Although this

Australian decision is only of persuasive authority in the

UK, it is possible that a UK court could, as Australian courts

have done, distinguish Amstrad on its facts. As US and Aus-

tralian case law has shown, even the presence of dis-

claimers, terms of use and warnings on a Website may not

necessarily be enough to avoid liability in those jurisdictions

for authorizing copyright infringement. Given these recent

authorities, it would also be risky behaviour for Website

owners not to remove third party infringing content when

aware of its existence.

4.3. Search engines

Cooper submitted that his Website was, in relevant respects,

no different from other search engines, drawing an analogy

between his Website and Google. He also relied on the deci-

sion in Perfect 10 Inc v. Google Inc,19 a decision from the US.

The Court rejected Cooper’s analogy partly because the US

decision was based on its doctrine of ‘‘fair use’’, a doctrine

particular to US copyright law, and much more permissive

than the ‘‘fair dealing’’ defence that exists in Australia and

the UK. Another distinguishing factor was the fact that Goo-

gle was a general purpose search engine rather than a Web-

site designed to facilitate music downloads. Although

Branson J’s statement that ‘‘the assumption that Google’s

activities in Australia do not result in infringements of the

Act is untested’’ may cause some concern for search engine

operators, the judgment does emphasise that whether one

person has authorized another to commit a copyright

infringement will depend on the circumstances of each par-

ticular case.

5. The way forward?

Although the DTI noted in its report into whether the UK

should limit the liability of providers of hyperlinks, location

18 [1981] 2 All ER 812 at 821, [1982] Ch 91 at 106 per Whitford J.19 416 F.Supp.2d 828 (C.D. Cal 2006). In that case, although Perfect

10 Inc were successful in their request for an injunction toprevent Google from allegedly copying, displaying and distribut-ing Perfect 10 photographs as thumbnail images, the Court alsofound that Google was not liable under the US doctrine of contrib-utory or vicarious infringement; citing Sony Corp of America v.Universal City Studios, Inc. 454 U.S. 417 (1984); Grokster and A&MRecords, Inc. v. Napster, Inc., 239 F.3d 1004, 1013–14 (9th Cir. 2001).

c o m p u t e r l a w & s e c u r i t y r e p o r t 2 3 ( 2 0 0 7 ) 2 8 5 – 2 8 9 289

tools and content aggregation services that there had been

‘‘no significant legal action in the UK’’, it also noted that

there have been a number of contradictory court cases since

July 2002 involving hyperlinks and location tool services pro-

viders in France and Germany. The DTI proposes to await the

view of the EC on this issue when it publishes its second

review paper on the Electronic Commerce Directive in 2007.

It is hoped that this review will result in a uniform approach

amongst the EU and remove some of the uncertainty in this

area. In the meantime, it remains a distinct possibility that,

in some circumstances, hyperlinking may give rise to

liability in the UK.

An application was filed with the High Court of Australia on

23 January 2007 seeking special leave to appeal the Full Federal

Court’s decision.

David Naylor (david.naylor@ffw.com) is a partner and Andrew

Jaworski (andrew.jaworski@ffw.com) is a solicitor (Australian

qualified) in the Technology Law Group at Field Fisher Waterhouse

LLP in London.