Relevant laws

Bob, a student and part-time tutor for ABC Pty Ltd, together with their office managers are copying music CDs using the company’s equipment. ABC, located in state A, was founded in 2003 with capital provided by Alphabet Ltd. , located in state B. Although ABC is now self-funding, it still utilizes the services of staff seconded from Alphabet. Big Bucks Pty Ltd. , located in state A, has discovered that this copying of CDs is taking place and has requested that we advise them on possible action in respect of breach of copyright and, if such a breach has occurred, who or what party is responsible.

Relevant laws. In our view, there are three areas law and regulations that applies in this case. The first of these is the Copyright Act (1976), including the addition of the Audio Home Recording Act of 1992. This will be relied upon in determining whether copyright has been breached and to what extent the employer is responsible. Secondly, and linked to the first, is the international legislation, as laid down within the Paris Act (1971). The third aspect is that of successor liability as it relates to corporations.

By examining this area, we will ascertain who can be held responsible and whether Alphabet, as a substantial shareholder of ABS, can be joined in the case in the event of employer liability being proven. Section 1101 (2) of the Copyright Act, prohibits the copying and distribution of recordings without the express permission of the author or their agents. This includes the illegal downloading of music from the Internet, where the copyright owner’s permission, normally granted in exchange for payment, has not been given. Similarly, it includes the copying of purchased CDs.

There are exceptions to this rule, as outlined within a provision called “fair use,” which can include such situations as educational purposes. However, as Jim Burger, former Chair of the Information Technology Industry Council's Proprietary Rights Committee, commented in his interview with the Washington Post (2003), the law is not clear on this particular issue. This “fair use” relates to making copies of originals for private use, such as a copy of a CD for use in the car, where it is clearly for personal use and not sharing.

In addition to the person who directly infringed the copyright, others can also be held responsible for their contribution to the act. There are two forms of liability, known as contributory infringement and vicarious liability (Edward Hernstadt 2003). Contributory infringement occurs where a person, corporation or other entity substantially contribute to the copyright infringement of another party. One of the most notable cases is A&M Records v. Napster Inc . Here it was adjudged that Napster would have been aware that people would use their site for the purpose of downloading music and infringing copyright.

Vicarious liability can be attributed to an employer or person, who may gain from an infringement, and where such person or entity has the capacity and duty to ensure such an infringement, does not occur. The Paris Act (1971), the latest version of the international Berne Convention on Copyright, is overseen by the WIPO . This convention re-enforces copyright protection throughout all of the nations that have ratified the convention, and mirrors the provisions of the Copyright Act 1976, and is therefore binding upon nations signed up to the convention.

The third area for consideration in this case is the question relates to the identity of the employer, in the event of a liability claim. Where a corporation is a subsidiary, wholly owned or otherwise, historically holding corporations have attempted to avoid the penalties of liability by closure of their subsidiaries. Here it is a case of corporate and tort law. In the case of Union Carbide (1984), the courts held that the parent company has responsibility where it is proven that they have, or ought to have knowledge of the actions of their subsidiaries and its employees.