Fair Use or Fair Dealing? The Debate Continues “Down Under”

The ongoing debate as to which system of copyright exceptions works better, US style “fair use” or the “fair dealing” (specified exceptions) approach common to most countries–and particularly to those whose copyright laws are based on the UK Copyright Act of 1911–continues “Down Under”. Both Australia and New Zealand have the issue currently under review. Proponents of fair use in Australia have been provided with ammunition from two government reports, the Report of the Australian Law Reform Commission in 2014 and the Report of the Productivity Commission in 2016. Both recommended that Australia move to a fair use system based on the argument that it is more suitable for the digital economy and will support greater innovation. This argument is based on the premise that technology moves fast and specified fair dealing exceptions cannot adapt quickly enough to technological change. In other words, fair use is more flexible, or so the argument goes, because a fair use approach could be applied to new situations not foreseen by legislators at the time that fair dealing exceptions are enacted or updated.

As a quick refresher, fair use is a defence against copyright infringement and is determined by the courts on a case by case basis, judged against several fairness factors (purpose and character of the use, the nature of the work copied, the amount and substantiality of the amount of the work used, and the effect of the use on the value of the original work). It is the system in use in the United States and three of four other countries. Fair use is not defined by law. Some examples are given in US law of areas where the use is likely to be fair (criticism, comment, news reporting, teaching, scholarship, research) but these are illustrative and not exhaustive. In short, it is the courts that decide.

Fair dealing is a specified exception to copyright infringement established by statute. The list of exceptions varies by country although most have a number of exceptions in common such as criticism, research, private study, review or news reporting and sometimes, in addition, parody, satire and education. Provisions are normally made for technical issues such as format-shifting, etc., through periodic updates. Even if a dealing (unlicensed use) falls within the listed exceptions, it still must be fair according to a number of factors, such as the amount and nature of the use, the alternatives to the dealing and the effect of the dealing on the original work. In other words, you can’t copy willy-nilly just because your use falls within the fair dealing exceptions. But while the courts can add interpretation, they don’t determine the definition of a fair dealing. That is the responsibility of elected legislators.

Both clearly have some common features yet they are not the same. In reviewing the submissions on fair use submitted to the Australian Law Reform Commission, I note that virtually all copyright industries lined up against fair use whereas the tech companies, Yahoo, Google etc. urged its adoption. Google went so far as to commission a study from Deloitte arguing for adoption of fair use. It commissioned a similar study for New Zealand, both of which have been rebutted by studies (here and here) authored by Prof. George Barker of the Australian National University. In essence, and at the risk of oversimplifying, the Google argument is that digital activities are “more likely” to develop in countries with fair use provisions as compared to countries using a fair dealing approach, on the basis that copyright stands in the way of “cumulative innovation”. Barker’s rebuttal is detailed, questioning both the methodology and assumptions of the Deloitte paper, but in essence his fundamental argument is that rather than being an impediment to innovation, copyright enables it. Again, at the risk of oversimplifying, this is because copyright creates the market that permits and enables cumulative innovation. As Barker puts it;

“The (Deloitte) paper claims that US-style fair use will lead to more creative output on the assumption that regulators are better judges of creative opportunities than markets, while ignoring the cost to creators of free exceptions”.

What explains the wide gap in the approach to fair use between the tech and the creative sectors, and where is this debate likely to go? Clearly if the tech industry giants, who are heavy users of unlicensed copyrighted materials (e.g. Google Books) are in favour of fair use, they must have concluded that it favours them (at the expense of rights-holders). In fact, the Google Books case demonstrates that they may well be right. In this case, the US courts ultimately ruled that Google’s unilateral and unlicensed digitization of the copyrighted works of others was a fair use because it was “transformational”.

Does this mean that all similar “transformational” digital uses of analog materials will be a fair use? On the contrary. Each case has to be decided by the courts and the US courts have a mixed record. If Australian or New Zealand courts were to apply US precedents in fair use judgements, as Prof. Graeme Austin of the Victoria University of Wellington has pointed out, where would one start given the doctrinal uncertainty in US jurisprudence? Different US courts have given contradictory rulings at different times, and this will no doubt continue to be the case. Which case forms the baseline?

This uncertainty is one of the main criticisms of fair use. You have to go to court to determine if a use is fair, even if there are apparent legal precedents. This adds greatly to the cost of litigation. In Australia a 2016 report by PwC estimated that adoption of fair use would cost upwards of $1.3 billion with litigation costs alone rising from $26 million per year to $133 million annually. This may help explain why, despite the recommendation for adoption of fair use by two high profile commissions (ALRC and Productivity), the Australian government has reacted cautiously, stating only that it would “study” the issue. It appears that there is no great appetite on the part of the government to rush to adopt fair use in Australia and current efforts under the copyright modernization process have instead involved updating fair dealing exceptions, such as making greater provision for people with disabilities.

While the tech industry favours fair use, copyright industries outside the US generally oppose it not only because of the uncertainty and excessive litigation it will introduce, but also because it encourages users to test the limit of what is fair instead of pursuing licensing arrangements. The easy alternative to testing the parameters of whether a non-authorized use is legal is to secure a license from the rights-holder. Except in rare cases of orphan works, normally this is not difficult and a market solution can be found. If a licensing agreement cannot be reached there is always an alternative because copyright protects the expression of ideas, not the ideas themselves. If one author’s expression of an idea is not available, another’s will be.

While fair use doesn’t seem to be getting much traction these days in Australia, it is still a live issue in New Zealand, with InternetNZ along with Google arguing for the introduction of fair use in that country. To counter the argument that introduction of fair use will lead to legal uncertainty, the proponents point to US precedents but as we have noted based on Prof. Austin’s analysis, the US courts are not consistent over time (even within the same circuit). Moreover, in a small jurisdiction like New Zealand, where the judiciary is necessarily smaller and less exposed to intellectual property cases, it would be difficult to find the necessary expertise to adequately adjudicate such cases, at least initially.

A more fundamental criticism of fair use is that it is judge-made law, rather than law enacted by elected legislators. A parliamentary process allows for broad public input and review of the evidence in committee by legislators from all parties, leading to a decision in the public interest as to which unlicensed uses will be permitted. This list is modified on a regular basis, perhaps not as frequently as some would like, but certainly frequently enough to smooth out the bumps and stay abreast of technology.

There is another factor–an economic one–in determining whether a smaller market economy, like Canada, Australia or New Zealand, would derive any benefit from fair use. In a 2016 study on “Fair Use in the Digital Age”, researchers at the Phoenix Center for Advanced Legal & Economic Public Policy Studies in Arizona analyzed optimal fair use from various perspectives. The study concluded that fair use settings can be more relaxed in larger markets because the original work will find it “easier to secure the revenues sufficient to cover the opportunity costs of creation”. The reverse is also true. Optimal fair use needs to be stricter when the size of market for the original work is small.

Being a pro-copyright blogger you may not be surprised where I come down on this debate. With its long history in the United States (since the 1830’s although only codified in the Copyright Act of 1976), fair use seems to work satisfactorily for Americans, although it is not without its critics. It has been tried in only in three or four other jurisdictions (South Korea, Israel, the Philippines and Singapore) with mixed results. It would not work, in my opinion, in Australia, Canada, New Zealand or the UK for the reasons given above. Indeed after being studied, it was rejected in the UK (Hargreaves Report). It is worth quoting from Professor Hargreaves’ landmark report;

“The economic benefits imputed to the availability of Fair Use in the US have sometimes been overstated…Does this (Google’s success) mean, as is sometimes implied, that if only the UK could adopt Fair Use, East London would quickly become a rival to Silicon Valley. The answer to this is: certainly not”.

Where will Australia and New Zealand end up on this issue? We will have to await the outcome of the copyright review in both countries. The Australian process is further advanced and it appears that the focus of government efforts at the current time is, sensibly, more on the updating of current fair dealing exceptions. In New Zealand stakeholders are waiting for the government to release an Issues Paper for discussion, laying out the issues from the government’s perspective. Whether or how fair use will figure in that discussion remains to be seen.

While some updates to fair dealing exceptions are to be expected from any periodic copyright review, I would hope that neither Australia nor New Zealand will upend a system that seems to be working pretty well for both their tech industry as well as their creative sectors. Fair use is no silver bullet.

© Hugh Stephens 2018. All Rights Reserved.

Author: hughstephensblog

I am a former Canadian foreign service officer and a retired executive with Time Warner. In both capacities I worked for many years in Asia. I have been writing this copyright blog since 2016, and recently published a book "In Defence of Copyright" to raise awareness of the importance of good copyright protection in Canada and globally. It is written from and for the layman's perspective (not a legal text or scholarly work), illustrated with some of the unusual copyright stories drawn from the blog. Available on Amazon and local book stores. View all posts by hughstephensblog