Fair use or fair dealing? Where are we now?

The Australian debate

In recent years Australia has found itself in a dilemma over how best to amend the Copyright Act¹ – should the “fair dealing” exceptions be retained or replaced by a “fair use” regime?

The debate is best illustrated by the following recent key events:

• In 2012 the Australian Law Reform Commission (ALRC) was asked to conduct an inquiry into whether the exceptions and statutory licences in the Copyright Act were adequate and appropriate in the digital environment. In 2013 the ALRC released Copyright and the Digital Economy² in which it recommended the implementation of a US-style fair use regime, but comprising more illustrative purposes. In the alternative, it recommended that the existing fair dealing exceptions be expanded.
• In 2015 the Productivity Commission was asked to undertake a 12 month public inquiry into Australia’s intellectual property system. In 2016 the Productivity Commission released its report Intellectual Property Arrangements³ in which it also recommended that fair dealing be replaced with fair use. The government’s response was to state that it “will publicly consult on more flexible copyright exceptions”.⁴
• In 2018 the Department of Communications and the Arts began a consultation process and invited the public to make submissions in response to its Copyright Modernisation Consultation Paper.⁵ Of the 89 submissions received, 39 were in favour of fair use; 39 were against fair use; and 11 did not take a position. A final report has yet to be released.

As can be seen, neither regime emerges as the clear ‘winner’, and the government appears to be undecided.

The current law

Australia is one of several countries that have a “fair dealing” exception in which prescribed uses of material are deemed not to infringe copyright. For example, under the Copyright Act it is not an infringement of copyright if the use of the original material is a fair dealing for the purpose of:

• news reporting;
• criticism or review;
• parody or satire;
• personal research or study;
• judicial proceedings or professional advice;
• access by a person with a disability.⁶

The Copyright Act does not define what constitutes “fair dealing”. The ‘research or study’ and ‘access by a person with a disability’ exceptions are the only provisions to benefit from the guidance of mandatory considerations to which the court must have regard when determining whether the dealing or use is fair. Whether a particular use is ‘fair’ will depend on the circumstances.

Fair use

The fair use defence originates from the United States. Unlike the fair dealing exception, there are no prescribed categories of use that are presumed to be fair. Rather, use of copyright material is assessed against four statutory considerations known as the ‘fairness factors’, being:

1. the purpose and character of the use;
2. the nature of the copyright material;
3. the amount and substantiality of the part used; and
4. the effect of the use upon the potential market for, or value of, the copyright material.⁷

These factors must be balanced in the context of the case in order to determine if use of the copyright material is fair.

Fairness factor 1: the purpose and character of the use

This essentially comes down to whether the use is ‘transformative’ – that is, whether the secondary work adds something new with a further purpose or different character by way of a new expression, meaning or message. The transformation can be physical, purposive, or both.

Fairness factor 2: the nature of the copyright material

Relevant to this inquiry is whether the original work was unpublished, as authors have a right of confidentiality and to first publication, including the timing and form of publication. Reproduction of works of a factual nature may be more easily justified under this limb.

Fairness factor 3: the amount and substantiality of the part used

As a general principle, the more that is copied, or the more of the important part that is copied, the greater the likelihood that the secondary work will become a substitute for the original and reproduction will be harder to justify.

Fairness factor 4: the effect of the use upon the potential market for, or value of, the copyright material

Here, the copyright holder’s right to licence their work and create derivative works is relevant. A secondary work that usurps either the market of the original work or a derivative market tends to cause greater harm to the copyright holder, in which case reproduction becomes more difficult to rationalise.

Fair dealing vs fair use: the arguments

The government’s prolonged response and the clear divide in opinion amongst stakeholders demonstrate the difficulty in choosing one regime over the other. Arguments raised for and against each regime include the following:

Flexibility vs uncertainty

One of the main advantages of fair use is that it is open-ended and capable of adapting to change. This is especially significant against the backdrop of fast technological development. The rise of social media platforms and instant mass ‘sharing’ of content has already drastically changed the copyright landscape.

The flipside to flexibility is uncertainty. Most artists and creators of content want to know in advance of the risk of their work infringing someone else’s copyright, especially in light of the high costs associated with defending a copyright infringement action and potential reputational harm. The benefit of prescribed exceptions is that it is easier for creators to identify the circumstances in which they can legitimately use copyright material.

In response to the flexibility/uncertainty debate, it has been argued that the fair dealing exceptions are themselves subject to legal uncertainty. ‘Fair dealing’ and other key terms, such as ‘parody’ and ‘satire’ are not defined in the Copyright Act and there is little to no existing case law on many of the exceptions. As mentioned above, mandatory considerations exist for only two of the exceptions. The court’s approach to determining the scope of the prescribed purposes and whether there has been a fair dealing is, on this view, still rather unclear.

It has also been argued that fair use is not as uncertain as it may seem. A study of US copyright cases found that where the court identified a parody, there was a 100% finding of transformative use; and for the last few years a finding of transformative use has consistently resulted in a finding of fair use for approximately 94% of cases.⁸

However, the US has the benefit of hundreds of years of case law and precedent on fair use which enables US courts to better grapple with uncertainty. If Australia were to adopt a fair use defence the relevance of US jurisprudence – which has developed in a different environment with unique considerations, such as a constitutional right to free speech – would be questionable.

Rights of creators vs. technological development

It is generally accepted that it is beneficial to society and the economy to permit some degree of copyright infringement. However, stakeholders cannot agree on the extent to which the rights of creators ought to be sacrificed in the interests of technological development. On one view, creators are entitled to benefit from the exploitation of their material. Collective licensing bodies enable easier access to copyright material and relevant fees ought to be considered a normal expense of doing business. According to general economic principles, copyright owners will act rationally and sell their rights for an appropriate fee. If they choose not to do so, buyers will simply look elsewhere and pay what they can afford. In digital environments where free access to content has become somewhat expected; piracy has increased; and copyright infringement is easier, perhaps creators‘ rights require greater protection to enable them to participate in new markets. On this view, fair use has a tendency to diminish creators’ rights in favour of technological development. It also takes away creators’ control over their works as, in some people’s view, the fair use regime operates on the premise that it is easier to ask for forgiveness than to beg for permission.

What next?

Copyright legislation interferes with market forces and so naturally there are competing interests, especially in the digital environment where copyright is affected in ways that could not have previously been foreseen. The government has been provided with a plethora of submissions for and against reform and Addisons will be keeping an eye on what is ultimately decided and how that will affect the interests of copyright owners and users.

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1. 1968 (Cth) (“Copyright Act”).
2. ALRC, Copyright and the Digital Economy, Report No 122 (2013).
3. Productivity Commission, Intellectual Property Arrangements, Report No 78 (2016).
4. Commonwealth, Australian Government Response to the Productivity Commission Inquiry into Intellectual Property Arrangements (August 2017) 7.
5. Department of Communications and the Arts, Copyright Modernisation Consultation Paper (2018).
6. This is not an exhaustive list of the fair dealing exceptions contained in the Copyright Act.
7. Copyright Act of 1976, 17 USC § 107.
8. Jiarui Liu, ‘An Empirical Study of Transformative Use in Copyright Law’ (2019) 22 Stanford Technology Law Review 163.

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