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19 Dec 2011

Storm Brewing over Cloud TV

Technology is influencing people's lives. Advances such as the advent of cloud services, faster broadband, and increased data caps are changing the way people consume content and other media. This extends to some of the more simple pleasures (or necessities) in life, like watching TV. Thanks to these advances, you can now decide when, where, and how you watch your favourite television programmes.

Digital Video Recording (DVR) set top boxes in New Zealand, such as "MySky", "TiVo" and "MyFreeview" allow users to record, pause, rewind, or skip the ads while watching TV, and websites like "TVNZ On Demand" or "Hulu" allow you to catch up on any television you may have missed. In Australia, Optus has released a new service called "TV Now" that allows its customers to record free-to-air programmes on Optus' computer servers ('cloud' servers), which can then be streamed on a mobile phone, tablet, or computer during the programme, or shortly after it is broadcast. Some smart phone users are able to watch the programmes on only a two minute delay, while others must wait until the broadcast has finished before accessing and streaming the recording.

This new service has caused a backlash in Australia from the National Rugby League (NRL), the Australian Football League (AFL), and Telstra. Telstra recently agreed to pay over A$150 million to the AFL, and was negotiating with the NRL, for exclusive rights to stream games on the internet between 2012-2016. They are all concerned that Optus' service will undermine the exclusive rights, and that the service could be used to record sports games that may infringe their copyright.

Optus went on the offensive and filed proceedings seeking judgment that its service does not infringe the NRL's, AFL's, or Telstra's copyright. Cross-claims seeking an injunction and unspecified damages were filed against Optus. The case is scheduled to be heard on 19 December 2011.

The Key Issues

Optus is relying on an amendment in the Australian Copyright Act that allows users to record programmes to watch at a later time if it is for personal use. Arguably, Optus is acting like a DVR and the user is doing the significant act of choosing what to record, and watching this at a later time. Such an argument was successful in a US case from 2008 involving a similar service called "Cablevision". There, the court found that Cablevision should be seen as identical to a DVR, where the set top box manufacturer is not directly liable for how recordings are used by the end user.

The issue that the Australian court will need to clarify is whether Optus' activities of recording television programmes is equivalent to that of a simple DVR set top box, and falls within the exception. Does the Australian copyright provision confine the defence of personal use to physical devices only (as would have originally been contemplated when drafting the provision), or will it apply to cloud-based remote services?

The court will need to take into account the fact that Optus' service requires an active role by the company to set up the systems that allow recording and time-shifting of programmes and also to provide these on-going services to users. If Optus is found to play a significant role in the recording of programmes, that role will not itself be personal use, and Optus will not qualify for the defence of recording for personal use.

Application to New Zealand

The New Zealand Copyright Act has largely the same provisions in this field as the Australian Act.

As an aside, one unique quirk in the New Zealand Act relates to 'format shifting' of video, which is often cited as an example of how the Act is outdated and has failed to keep up with technology. The Act currently provides for format shifting of audio, such as from CD to mp3, but it does not contain an equivalent provision for video (such as from DVD to computer, or television to smartphone). This could have been a deliberate attempt by Parliament to limit the conversion of audio-visual works (such as film/television) to time-shifting purposes, but may simply have been due to video-conversion technology not being commonly used at the time of drafting.

However, the time-shifting provisions for video in the Act may be broad enough to allow a similar cloud TV service to operate in New Zealand.

The time-shifting provision (section 84 of the Act) states that it is not an infringement of copyright in a "communication work" if the user has lawful access to the work, that the user records the work for personal use, and it is for the purpose of viewing the recording at a more convenient time. "Communication works" include broadcast television programmes. The section does not refer to how the recording can be made, or what format it is to be made in. It could be argued that a service such as Optus' TV Now is designed to allow users to record a television programme or sporting event for use on devices such as their mobile phones for watching 'on the go', thus being more convenient for the user. Whether or not a slight delay of only two minutes would meet the criteria for "a more convenient time" is an interesting question that is likely to be answered in the Optus case in Australia.

Conclusion

The key issues in this case appear to be who is actually doing the recording, and whether the personal use defence is confined to physical devices, or is broad enough to cover cloud-based services. Depending on the outcome, this case may highlight another instance of copyright legislation failing to keep up with technological advances. De-centralised cloud-based data services are likely to continue to provide unique alternatives to existing technology. The challenge is for the law (and commercial agreements) to keep up with these changes. The outcome in this Australian case is likely to have a significant bearing on whether, or the extent to which, similar cloud TV services will become available in New Zealand in the future.

Key Contacts

Earl Gray

Phil Thomson

Other articles this month

The Law Commission's Report on the Privacy Act - a new Act?

Internet and the Law: Cloud Code of Practice - Work in Progress

IT Projects - Risk Assessment and Mitigation

Author

Earl Gray

Partner - Intellectual Property

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