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Three Strikes and You’re Out – Copyright Amendment Act and Your Business

Controlling unauthorised internet use in the workplace is an ongoing battle for many businesses. However the controversial new Copyright (Infringing File Sharing) Amendment Act 2011 may provide new incentive to continue the fight.

The Act came into force on 1 September 2011 and provides a three-strike regime to prevent unauthorised file sharing on the net.

On the first strike a rights holder can require an Internet Service Provider (“ISP”) to send the internet account holder a detection notice. If there is a second infringement of the same rights holder’s copyright, the ISP must send a warning notice. On a third infringement, the ISP must send an enforcement notice to the account holder. After the third strike, the rights holder can apply to the Copyright Tribunal for damages of up to $15,000.

So what’s the problem for businesses? Businesses will be liable for unauthorised file sharing by employees if the file sharing occurs through the business internet account. Liability rests with the account holder even if someone else, for example your employee or business partner, was responsible for the file sharing.

File sharing covers both unauthorised uploading and downloading of files. So whether your employee is downloading the latest Britney Spears track or uploading it to share online doesn’t matter, the Act still applies.

It is open for businesses to argue that they should not be liable to pay the fine, but it is difficult to say whether such an argument will be accepted. Businesses will be in a better position to argue as such if they can show they have taken steps to prevent file sharing by employees. One cost-efficient step would be to ensure your business updates its internet use policy that addresses file sharing and ensures all employees are familiar with the policy.

Software which restricts file-sharing may also be an option. However, this software can be expensive and is not 100% effective. Removing unused peer-to peer-software from the network may help.

Depending on individual circumstances, the Act also brings new risks for some businesses offering free WIFI to customers and clients. For example, a small coffee shop which offers free WIFI to its coffee-drinking patrons is likely to be viewed as an ‘account holder’ under the Act. That means the coffee shop is potentially liable for file sharing by its patrons. These businesses will need to consider what steps they can take to protect themselves under the Act. If your business provides internet access to clients or customers, it may be worthwhile talking to us about your potential liability and the steps your business can take to protect itself.

Take steps so that you can identify who was responsible for the file sharing if an infringement notice is received. If file-sharing is detected, depending on the circumstances, the fine may be recoverable from an employee. Where the employee’s employment agreement and workplace policy permits, disciplinary steps can also be taken against the employee.

If you’re wondering whether the new legislation applies to downloading files onto your mobile, the answer is ‘not yet’. Infringements on mobile networks will become law on 1 October 2013.

For more information and advice on how the legislation could affect you and your business, check out http://3strikes.net.nz/ or speak to our lawyers.