Optus loses the ball but rights row not over

Optus has lost the right for its TV Now users to watch near-live AFL after an appeal to the Federal Court. But there is more to come on this issue – if not in this case in others like it – as the internet and TV converge.

For the moment at least, the AFL, NRL and Telstra have triumphed in their battle to stop Optus from undermining the value of their internet rights. That battle, which may yet go to the High Court, may be just the precursor to a series of collisions between the sporting bodies and technology.

Within the massive $1.25 billion broadcast rights deal the AFL struck with Foxtel, Seven and Telstra last year was a $153 million component Telstra agreed to pay for the internet and mobile telephony rights to AFL games.

Some of the value of that deal was threatened by a very sophisticated service Optus had developed last year, called TV Now, which enabled Optus customers to record free-to-air programs, including AFL and NRL games, and download them to their PCs, smartphones and tablets, in some instances near-live.

After the AFL and NRL claimed the system – under which Optus copies the broadcasts and stores them in the cloud – infringed their copyright, Optus took the matter to the Federal Court, and won. Justice Steven Rares ruled in its favour, fundamentally on the basis that it was the user, not Optus, that initiated the recording and that it was the user, not Optus, that initiated the transmission of the recording.

That enabled TV Now to fall within an exemption in the Copyright Act that allows individuals to ‘’time-shift’’ their viewing using recording devices providing it is for their personal use.

The AFL and NRL appealed that decision and today their appeal was upheld. The Federal Court concluded that it was Optus, or alternatively Optus and the user, who made the recordings rather than the user alone. It also found that Optus couldn’t invoke the ‘’private and domestic use’’ defence within the Act.

The court found that, while the TV Now processes were completely automated, Optus’ role in making a copy of the broadcasts was so pervasive that it was clearly involved directly in the act of copying and there was nothing within the exemption in the Act for personal use that was intended to cover commercial copying on behalf of individuals.

The TV Now service has been likened to recording using VCRs or DVRs but the court’s finding that Optus was the ‘’maker’’ of the recordings for the purposes of the Act undermined that analogy – with a DVR the user ‘’makes’’ the recording.

The judges made it clear that their findings were limited to the particular service provider-subscriber relationships within TV Now and the particular technology used and accepted that different relationships and different technologies might produce different conclusions.

Optus may well appeal the decision to the High Court. In the meantime the value of the AFL/Telstra deal has been preserved and the NRL, and other sporting bodies, can expect to get significant value for similar rights.

The TV Now collision between the sporting bodies and Optus, however, does raise a number of broader issues.

Optus Now isn’t the only existing technology that could be deployed to re-broadcast/stream free-to-air broadcasts. There are devices that can do that and it is only a matter of time before smartphones and tablets will have the capability of tuning into the free-to-air networks.

The non-legal view that Optus Now is merely a cloud-based version of a DVR might well apply to a service configured differently. The sporting codes and other copyright holders may well have to fight very similar battles in future as variations on the Optus Now theme emerge.

The original Optus courtroom victory was heralded as a victory for consumers and their ability to watch free-to-air programs (Optus Now couldn’t offer the games broadcast by Foxtel) when they wanted on the device of their choosing, while the sporting codes were accused of trying to ‘’double dip’’ by effectively getting paid twice for the free-to-air rights.

As the owners of the copyright, of course, how they choose to monetise them – how they divide them up between the various distribution platforms – is their decision to make.

The emergence of technologies that can access the unencrypted free-to-air signals and the roll-out of the national broadband network may, however, force them to eventually re-think the distinction between free-to-air and the internet.

Indeed, in a convergent future, there ought to be a significant incentive for the networks themselves to want to own the internet rights themselves.

Depending on whether or not the issue is taken to the High Court, there may be a role for parliament in updating the Copyright Act to account for the evolution of technologies and to reassess the relationship between the rights of the copyright owners and consumer convenience.

While there was a lot of discussion about the rights of consumers after the original court decision that supported the TV Now service it is worth noting that the exception within the Act for personal recordings was a legislative intrusion into real and very valuable property rights. The sporting codes in particular will resist fiercely and lobby aggressively against any attempt to legislate a broader

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