5 min read

A recent YouTube spat over an AI created cover of Britney Spears’ 2004 song “Toxic” demonstrates that AI has now made it possible for one artist to sing a cover of another artist, no human required! In this case, a group called DADABOTS, which describes itself as “a cross between a band, a hackathon team and an ephemeral research lab”, created the rendition using software enabling generation of audio content in the voice of a particular artist, in a particular genre or as a novel fusion. The end result was a Frank Sinatra cover of the Britney Spears song.

Whilst this is a prospect that is bound to be exciting to some, from the perspective of conventional copyright law (and perhaps defamation law), the path to creating such a custom cover track using AI is fraught with complexity and uncertainty.

Yet that didn’t stop DADABOTS rendition being met with something a little more conventional, a copyright takedown notice and subsequent removal from YouTube, as Futurism’s Dan Robitzski recently reported. Futurism noted that GreyZone Inc., a company which offers copyright infringement identification and reporting services, was responsible for the complaint but wasn’t able to identify on whose behalf.

Appeal of YouTube take down

The basis for the original takedown notice is unclear – presumably representatives of either Frank Sinatra or Britney Spears’ respective record labels took the view that their copyright was infringed in some form. In Australia, their songs are likely to be covered by a suite of copyright and related rights, potentially including copyright in the lyrics, the musical work, performance rights and recording rights.

In this case, DADABOTS appealed YouTube’s decision to remove the rendition, calling in aid the US copyright doctrine of fair use. This doctrine is codified in the US Copyright Act and allows “fair use” of copyright works without infringing copyright. Unlike in Australia where the equivalent “fair dealing” is limited to quite specific circumstances, the US Courts have a broad discretion to determine what use is “fair”, depending on factors such as the nature of the copyright work, the purpose of the use and the effect of the use on the potential market for the copyright work. YouTube accepted the appeal and DADABOTS upload was reinstated, albeit with YouTube flagging it as a cover of “Toxic”. YouTube offers a service which allows eligible copyright holders to set up rules dealing with any third party copies of their exclusive copyright content uploaded on YouTube. This might include blocking the uploaded media, taking ad revenue from it or tracking the viewership information. YouTube’s flag of the DADABOTS version presumably makes it subject to any such controls in place in respect of “Toxic”.

Use of copyright works during development of AI powered applications

To make the rendition, DADABOTS used an AI software tool developed by California based OpenAI. Known as “Jukebox”, the software utilises neural networks, a form of machine learning. To become competent, Jukebox was trained by processing various datasets, which in turn allowed it to create the rendition on the basis of what it learnt from that data processing. In this case Jukebox then performed lyrics (of “Toxic”) in the voice and/or genre of the artist on which the software had been trained (Frank Sinatra). According to Open AI’s website, Jukebox was trained on 1.2 million songs, corresponding lyrics and metadata, including artist, genre, year and associated keywords.

Interestingly, Futurism’s article suggests the YouTube appeal arguments were crafted without reference to the use of AI to create the DADABOTS rendition. The fair use arguments were focussed on the end result (i.e. the new rendition) as a fair use in itself, rather than by reference to the method used to create it. Separate to issues around copyright ownership of works created wholly or substantially by AI technologies, the use of copyright works for AI related functions, such as machine learning and datamining is very much a live issue globally. The extent to which such uses are thought to be “fair uses”, is likely to influence the development of the fair use doctrine in copyright, the bounds of which already vary considerably from country to country, if not lead to specific copyright provisions. One notable mover in this space is Japan, which from 1 January 2019 enacted various provisions in its Copyright Act aimed at exempting computer data processing and analysis of copyright works from infringement in certain circumstances. The way in which the law on this topic develops globally may well be a factor which influences where companies with a focus on developing AI powered applications choose to base themselves (if it is not already). Differences in the law on this topic around the globe may also lead to potentially complicated questions of jurisdiction where AI generated material is exported from one country to another.

In Australia, the current law is likely to be less friendly to machine learning and AI powered applications, as a result of the stricter confines on fair dealing, and other limited exceptions to copyright infringement. Certainly where AI applications are used for development which is commercial in nature, it is unlikely that Australian copyright exemptions would apply. While section 40 of the Copyright Act 1968 (Cth) does provide an exemption for fair dealing for research purposes, it has generally been given a narrow reach.

Indeed, extension of the fair dealing provisions in Australia was a topic considered extensively by the Productivity Commission in its review of intellectual property laws in Australia and consequent report issued in 2016. Submissions made on this issue included those from tech companies supporting a broader fair use exception and specifically referring to machine learning in this context. The Productivity Commission ultimately recommended significant reforms in this area paving the way for a US-style fair use exception. However following two years of further consultation, the Government announced in August 2020 only a limited extension of the fair dealing exceptions for non-commercial quotation.

As a consequence, use of datasets to train AI systems in Australia appears likely to carry with it a significant risk of copyright infringement for the foreseeable future, in the absence of an appropriate licence. As the law in this area continues to develop worldwide, this is clearly a space to watch for both copyright owners and anyone using databases of copyright material to power or utilise AI technologies.

Authored by Onur Saygin and Katrina Crooks

6 min read

The recent case of Hardingham v RP Data Pty Ltd [2019] FCA 2075 provides a good reminder of potential pitfalls for content creators who do not have express copyright licence arrangements in place, especially where the content is to be uploaded to third party websites by the party transacting with the creator or its sub-licensees.

Background

Hardingham involved a claim for copyright infringement against the operator of online real estate analysis and information provider Core Logic (RP Data Pty Ltd) (RP Data) by a professional photographer, Mr Hardingham, and his company, Real Estate Marketing Australia Pty Ltd (REMA).

REMA, of which Mr Hardingham was the sole director, carried on the business of taking photographs, and creating floor plans, of properties at the request of real estate agencies for the purpose of those agencies advertising the properties for lease or sale.

Invoices were paid by agencies to REMA. There was no evidence of express copyright ownership or licensing provisions in place between REMA and the agencies. A key use of this content by agencies was to upload it to a widely used online property listing platform, realestate.com.au (operated by realestate.com.au Pty Ltd (REA)). Mr Hardingham and REMA were aware that this was one use for which their photography and associated services had been commissioned.

Amongst other things, the terms and conditions of REA’s realestate.com.au included an expansive express licence to REA over content uploaded by agencies, including a right to sub-license which also survived any termination of the user agreement between agencies and REA.

RP Data had a contract with REA. RP Data reproduced content generated by Mr Hardingham and uploaded by agencies to realestate.com.au on its own website corelogic.com.au.

The central question was whether RP Data had a licence to reproduce REMA’s content.

In 2014, the applicants’ solicitors initially wrote to RP Data alleging copyright infringement. RP Data’s solicitors disputed there was any infringement, citing the terms and conditions on realestate.com.au (in particular the copyright licence provisions which agencies uploading material had to agree to). The applicants next wrote to RP Data’s solicitors in 2018 (4 years later), recasting assertions of copyright infringement and making demands. The applicants commenced proceedings shortly afterwards.

The parties agreed that there would be an initial hearing and decision on a separate question, to be determined before all other issues in the proceeding. This separate question was whether copyright infringement could be established with respect to photographs and floorplans for 20 representative properties created by the applicants and supplied to agents, which in turn were supplied through to REA and then RP Data. The determination of the question of infringement regarding other properties, any pecuniary relief (damages or account of profits), and a cross-claim by RP Data against REA for contractual indemnification, was deferred.

Arguments

Whilst the applicants accepted that the content Mr Hardingham generated was impliedly licensed to agencies for the purpose of marketing (with a right to sub-license), they argued that this licence was limited only “to use the photographs and floor plans for the limited purpose of marketing for sale or lease”. In particular, the applicants  contended the implied licence did not extend to use once the sale or lease of a property was completed. RP Data continued to reproduce the relevant content on its website after this time.

RP Data ran two alternative arguments:

  1. The agreement between REMA and the agencies contained an implied term that copyright would be assigned to the agencies when required by the agencies, and that as a result of this “equitable ownership”, “the agencies were entitled to and did grant a licence to REA… and to grant a sub-licence.”
  2. An express or implied licence had been granted by the applicants to the agencies, which in turn they had passed on to REA when agreeing to REA’s express terms and conditions for uploading content to realestate.com.au, and which REA had effectively then passed on to RP Data.

REA submitted that a basis for inferring or implying the necessary licence terms was “the way in which real estate properties were and are marketed to the public, including the internet by way of real estate agents’ websites, residential property portals (such as realestate.com.au) and social media platforms, where that marketing comprises current and historical listings in respect of the properties”.

Findings

In the absence of evidence indicating any formal written contract between the applicants and agencies, the Court noted that:

“it is important to understand the context in which the parties dealt with each other in order to form a view as to both: (a) what the terms of the contract were, including any terms inferred from conduct… and (b) what terms might be implied into that contract.”

Considering the evidence before it, the Court accepted that the evidence demonstrated that:

  • “the overwhelming majority of Australian real estate agencies use the realestate.com.au platform and, as a matter of practical commercial reality, would use the platform in marketing properties for sale or lease;
  • the prospect of selling or leasing a property is enhanced by using the realestate.com.au platform and the consequent exposure that provides;
  • one of the principal purposes for which the agencies commissioned photographs and floor plans from the applicants was to obtain works to upload to the realestate.com.au platform; and
  • whilst theoretically possible, at a practical level agencies are not able to negotiate out of the usual terms and conditions required by REA in order for the agencies to upload content to the realestate.com.au platform.”

The Court also observed that the applicants continued to work with agencies, despite at least since early 2014 having been on notice of the fact that agencies were uploading content to realestate.com.au and of the specific copyright licensing terms set out in REA’s terms and conditions on that website. Secondly, the applicants as well as agencies, knew photographs persisted on realestate.com.au even after a sale or lease was completed and also that within a few days of upload to REA’s website, these works would also appear on RP Data’s website pursuant to an agreement between REA and RP Data. Finally, the applicants set their fees for each of the properties for which they had generated content since 2014 in full knowledge of these facts and the applicants did not suggest that any of their content had ever been removed after upload from REA or RP Data’s websites.

Despite the absence of evidence as to whether the agencies had actually read the realestate.com.au terms and conditions, the Court observed that the applicants  “must have known that the works they had been commissioned to prepare had been and were being uploaded in accordance with terms and conditions imposed by REAThese were freely available on the realestate.com.au website”. The Court concluded that either as a result of the conduct and interactions between the applicants and the agencies, or due to a term implied in the agreement between the applicants and the agencies necessary for business efficacy:

“the applicants agreed that the agencies were authorised, by way of licence from the applicants, to upload the photographs and floor plans to the realestate.com.au platform and grant to REA a licence in the form required by REA and contained in REA’s usual terms and conditions.”

The Court concluded that equitable ownership of copyright by agencies which had commissioned the content from the applicants had not been established. A right for the agencies to call for an assignment was not necessary, because an implied licence would achieve business efficacy in the circumstances.

Implications

This case illustrates the determinative role frequently played by the prevailing commercial facts and arrangements in determining the scope of an implied copyright licence. Interestingly, ongoing publication of photographs and floor plans on realestate.com.au and corelogic.com.au was found to be so commonplace that the Court was prepared to find that the photographer always knew full well of the uses that would be made by the real estate agents, their sub-licensees (REA) and further sub-licensees (RP Data). This set of circumstances was fatal to the copyright owners’ claims, as they could not establish that their initial licence to the agents was limited to use during a sales campaign, when they knew such content remained on the realestate.com.au and corelogic.com.au platforms as part of historical sales data (e.g., in the “Sold” section).

In other cases, circumstances may be different such that a copyright owner may able to establish that the terms of an initial licence are more limited because the copyright owner had no actual or constructive knowledge of uses intended by its licensee.

Given the strong dependency of an implied licence on the surrounding factual matrix, and the consequent potential lack of certainty in its scope, this case serves as a reminder to copyright owners that clear express licence terms are preferable.

Authored by Onur Saygin and Duncan Longstaff

The long running litigation in New Zealand between Oraka Technologies and Geostel/Napier Tool & Die over copyright in an asparagus grading machine hit the Court of Appeal again late last year on the question of whether a $4.1 million damages award should be set aside, because the company which suffered the damage was not the owner or exclusive licensee of the copyright. The Court of Appeal has set aside the award on this basis (Napier Tool & Die Ltd v Oraka Technologies Ltd [2016] NZCA 554), but remitted the case back to the High Court for quantum of damages to be determined on the basis of a notional licence fee payable for the infringing use. While the majority of the Court felt it appropriate to allow the Oraka parties the opportunity to essentially re-claim damages on a different basis, the case is a salutary reminder of the need to align IP ownership, or at least written licensing arrangements, with the commercial relevance of the intellectual property, and consideration of all possible heads of damage where that is not possible.

Key points

  • A fundamental principle in the law of damages is that compensation for loss can only be awarded to those who suffered the loss. This principle is to be departed from only in exceptional circumstances.
  • In this case, the copyright owner (Oraka Technologies) had not suffered any loss as it was not selling the copyrighted machinery. The loss of the opportunity to cause another company (Oraka Graders) to enter into contracts that would have generated income was not a loss which could give rise to a damages claim. Oraka Graders could not claim such loss because it was not the copyright owner or an exclusive licensee.
  • However it was undisputed that damages on the basis of a notional licence fee under the user principle could be available. A majority of the Court held that in the circumstances it was appropriate to remit the matter back to the High Court to determine damages on that basis.

Background

During the 1980s Mr Michael Schwarz developed a machine for the automatic grading of asparagus spears, which included a cup assembly (the Schwarz cup assembly) in which individual asparagus spears were held as they were graded. Napier Tool assisted in preparing drawings and tooling for the cup assembly and subsequently manufactured the cup assembly for Mr Schwarz, who commercialized this machine through a group of companies including Oraka Technologies Ltd and subsequently Oraka Holdings Ltd, and then Oraka Graders Ltd, the latter owned by his adult children.

In around 2001 Napier Tool worked with a Mr Armstrong, and subsequently a company called Geostel, to develop a competing cup assembly which could be used with the Oraka grader (the Geostel cup assembly). Geostel was formed by a former consultant to the Oraka group. It was clear that the Geostel cup assembly had been based on the Schwarz cup assembly with modifications, although Napier Tool had received advice that the two assemblies were sufficiently different to avoid copyright infringement.

In 2008, Oraka Technologies, Oraka Graders and Mr Schwarz sued Napier Tool and Geostel for copyright infringement.

The appropriate parties and damages claims

The case was plagued from near the outset with questions over the appropriate parties to the proceeding and their ability to claim losses. Geostel and Napier Tool initially argued that copyright in the Schwarz cup assembly had passed to Oraka Holdings, which was not a party to the proceeding. That argument was finally determined in the Court of Appeal, and Oraka Technologies was found to indeed own the relevant copyright.

Following a finding of infringement (also necessitating a trip to the Court of Appeal), the matter returned to the High Court for an inquiry into damages. As that proceeding transpired, it became apparent that the plaintiffs sought to adopt a “loss of business” as opposed to a “loss of sales” approach to damages. The loss of business was characterised as the loss of Oraka Technologies’ ability to cause the creation of a business (of Oraka Graders) having the value it would have had if the infringement had not taken place. The High Court accepted this approach as an exception to the general rule that compensation for loss can only be awarded to those who suffered the loss, largely applying the Australian Full Federal Court case of Insight SRC IP Holdings Pty Ltd v Australian Council for Education Research Ltd [2013] FCAFC 62.

In Insight, the developer of a questionnaire (Dr Hart) informally licensed it to a company of which he was the major shareholder (Insight). The Full Court held that Mr Hart could recover damages arising from an infringement of copyright in the questionnaire on the basis that Dr Hart had lost the ability to cause Insight to generate a profit based on the copyright work. In a similar vein, the High Court in Oraka accepted that Oraka Technologies was effectively exploiting its copyright through Oraka Graders and had therefore lost an opportunity to cause Oraka Graders to make a profit. The loss to Oraka Technologies was accepted to be the loss of profit of Oraka Graders. Judgment for $4.1 million was therefore entered.

The Court of Appeal judgment

The Court of Appeal disagreed and set aside the judgment. In dealing with the Insight case, the Court of Appeal considered there were a number of aspects which rendered it of “little persuasive authority” in the case. It considered that the only principled basis on which Dr Hart would have been entitled to damages in his personal capacity was on the basis that his shareholding in Insight had reduced in value. However this was not the basis for the damages calculation in that case, or by the High Court in the present case. Further, since Oraka Technologies was not a shareholder of Oraka Graders, that approach could not be applied here. Whilst the Court of Appeal was sympathetic to the trial judge’s concern to provide a remedy, the Court considered that the judgment in this case was a step too far and created an illogical and unprincipled exception to the general prohibition of recovery of third party losses.

Interestingly, however the Court could not agree on whether that should be an end to the matter. In particular the Court went on to consider whether the matter should be remitted back to the High Court again to consider damages on the basis of the ‘user principle’, that is a notional licence fee for the use made by the defendants of the copyright work. Harrison J considered that Oraka Technologies should not be afforded such opportunity given that it made a conscious election not to seek this head of damages originally.  However the majority, whilst recognizing that it was a discretion to be exercised very sparingly, considered that the circumstances of the case justified such a remittal. Instrumental in this decision appeared to be the fact that there was a plain infringement of the copyright which deserved “not only denunciation but also a remedy”. This was apparently a reference to the fact that the defendants had taken the Schwarz cup assembly as a starting point for their design, and should bear the consequences of that.

Comment

In an interesting twist on the contrast between the Australian and New Zealand positions, the Insight case can be seen in the context of the earlier Full Federal Court decision in Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564; [2007] FCAFC 40. In that case the Full Court refused to apply the user principle to allow recovery of damages in a copyright case where it was clear that the copyright owner would not have been prepared to grant a licence to the infringer. It may be that in the absence of ability to draw on the user principle, the Full Court was more sympathetic to the damages claim as framed in lnsight. In Oraka the defendants apparently have acknowledged that Oraka Technologies would be entitled to a licence fee under the user principle under New Zealand law, indicating a potential disparity in Australian and New Zealand law in this respect also (although Yates J declined to apply the Aristocrat limitation to the application of the user principle in a passing off case in the more recent Winnebago Industries Inc v Knott Investments Pty Ltd (No. 4) [2015] FCA 1327). Of course in Australia, the Oraka copyright case would likely in any event have never got off the ground due to the “copyright/design overlap” limitation, which essentially prevents the bringing of a copyright claim in respect of an industrial product design.

In any event, it is clear from both the Insight and Oraka cases that the locus of intellectual property ownership, particularly within a closely held corporate group, can be critical to the ability to obtain a financial remedy in the event of infringement. In such circumstances, copyright is commonly not transferred from its human author to the corporate group and licensing arrangements exist only at an informal, and often implied, level. These cases show the potential value in dollar terms of structuring IP ownership appropriately at the outset, with an eye to an future infringement claim.

Authored by Katrina Crooks