Development: EU reaches political consensus on an AI Act

Artificial intelligence
The AI regulatory framework will guarantee safety, legality, trustworthiness, and respect for fundamental rights in AI systems.

In 2023, the widespread adoption of Artificial Intelligence (AI) accelerated thanks to models such as ChatGPT and the recent debut of ‘Gemini’ by Google. As AI models continue to become more capable, the legal services sector faces yet another disruptive technological frontier, demanding vigilant oversight and management.

World’s first AI regulatory regime

Pioneering the oversight of AI application, the European Council and Parliament have successfully negotiated a provisional agreement to draft an EU AI Act. Delegates have emphasised that the key tenants guiding AI regulation will prioritise: ethics, safety and trustworthiness. The AI Act will become the first global standard for governing AI models, marking a historical step towards responsible innovation and supporting the development of human-centric AI.

The EU’s AI Act is poised to mirror the influential impact of the General Data Protection Regulation (GDPR). Much like the GDPR, the EU aims to provide an overarching framework that promotes accountability and consistent standards for the development and application of AI systems.

How will it work?

The EU AI Act will focus regulation on identifiable risks, categorising them into four levels: (1) minimal or no risks, (2) limited risks, (3) high risks and (4) unacceptable risks. The Act will also contain rules to encourage a unified market for AI programs, in line with the EU’s organised strategy on artificial intelligence, aiming to speed up AI investment throughout Europe.

Regulation will also extend to banning certain applications of AI that pose a threat on the rights and democracy of EU citizens. It was agreed that the AI Act should prohibit the following:

  • Systems which categorise individuals based on political, religious, philosophical beliefs, sexual orientation and race;
  • Gathering facial images from the internet or CCTV without specific targets in mind to build databases for facial recognition;
  • Models that identify and interpret emotions in professional settings;
  • Social scoring based on behaviour or personal characteristics;
  • AI models designed to influence or manipulate human behaviour in a way that undermines freedom of choice.
  • AI used to exploit the vulnerabilities of people based on age, disability, social or economic situation.

However, negotiators have agreed that certain exceptions to these bans will require judicial approval for law enforcement purposes and strictly defined criminal activities.

Addressing recent innovations in AI

One area of AI that has not been fully addressed by this resolution is how generative AI systems and foundation models are to be governed within this framework. Due to the agreement concentrating on proposals from 2021 and 2022, the proposals drafted do not incorporate these recent innovations of AI. The agreement has not yet articulated essential definitions to clarify and precisely categorise generative AI systems for providing clarity and precision. Although they may fall within scope of ‘general-purpose’ AI, proper discussions may have to wait until the adoption process.

What next?

The regime will establish new accountability measures for entities involved in AI. These include providers, deployers, importers, distributors and product manufacturers. Entities should proactively prepare for upcoming regulations by conducting risk assessments on their in-house AI systems, raising awareness, developing ethical frameworks, assigning responsibility, and establishing formal governance structures.

Author: Zaki Zeini, paralegal.

Hobbit Havoc: Fan-fiction Faces the Copyright Eye of Sauron

Background

In 2022, Demetrious Polychron, a US author, created and released his own continuation of the beloved ‘The Lord of the Rings’ series by J.R.R. Tolkien. Following the debut of Amazon’s prequel series ‘The Rings of Power’, Polychron took legal action in April 2023 against both Tolkien’s estate and Amazon. Polychron alleged that their series had used elements from his work, constituting copyright infringement. However, the case brought by Polychron was dismissed after a Californian judge concluded that the author himself had infringed copyright by profiting from a work that directly utilised characters and storylines owned by the Tolkien estate and Amazon.

Pixabay
The presiding judge remarked that Polychron’s request for copyright protection was “unreasonable” and “frivolous” because his work was completely based on characters from The Lord of the Rings.

In a subsequent turn of events in June 2023, Tolkien’s estate initiated a separate lawsuit against Polychron. Their claim centred on the fact that the author had published a derivative work without the necessary authorisation from the owners of ‘The Lord of the Rings’ intellectual property. The lawsuit against Polychron proved successful, resulting in the presiding judge issuing a permanent injunction against the author.

This injunction prohibits Polychron from publishing or selling his derivative work and mandates the destruction of all existing copies of the author’s work.

Authorship protection in Australia

In Australia, the Copyright Act 1968 (Cth) safeguards published and unpublished books as ‘literary works’. When someone creates a literary work, like a book, they become the owner for a duration of time. This ownership grants them the sole right to copy, publish, modify, or share their work with the public. There is no need for authors to officially register their work to secure copyright protection for it.

For a literary work to gain copyright protection in Australia, a few criteria must be met:

  • the author should be an Australian citizen,
  • the work must have been initially published in Australia, and
  • it needs to be an original creation.

If someone carries out actions that fall within the exclusive rights granted to the copyright owner without their permission, they could be infringing upon the copyright of the original creator. This means reproducing, publishing, adapting, or sharing it with the public can lead to a copyright infringement claim.

If you would like guidance regarding potential copyright infringement or the scope of your copyright protection, please contact us.

Author: Zaki Zeini, paralegal.

Remember to express your IP licences clearly!

The recent decision in Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39 overturned a significant copyright ruling and has potential for significant flow-on effects for photographers and other content creators.

Background

House for sale
Real estate photographers will need to adjust how they do business after this decision.

Hardingham, an independent real estate photographer, took photos of properties for real estate agents under oral contracts. The agents uploaded the photos to realestate.com.au (REA). REA then provided the photos to RP Data, a service that allows real estate agencies to use photos for property marketing campaigns.

When agents uploaded the photos to REA, they accepted clickwrap terms which gave REA “an irrevocble and perpetual licence to use the content … for any purpose related to our business”. RP Data argued that this licence meant it was able to use the photos once permitted to do so by REA. Hardingham contended that the licence had to be subject to a limitation so that it ended once the property was sold or leased.

At first instance Thawley J found that the sub-licence from REA to RP Data should be permitted because it was inferred from the parties’ conduct and should be implied to give business efficacy to the arrangements. It was not subject to any time limit.

On appeal to the Federal Court, the Full Court found that they were not satisfied that the terms should be implied or inferred, and that any implied licence did not extend beyond the property marketing campaign.

High Court

In December, the High Court overturned the Federal Court’s decision. The question, in this case, was what a reasonable person would consider, based on the parties’ words and conduct.

The Court found that there was nothing in the oral contracts, between Hardingham and the original real estate agencies, to suggest that the photos could not be used after the campaign. They all knew that the photos uploaded to REA and RP Data remained there after the completion of the campaign and on a history tab for the property. That had been the case for a number of years.

So, the real estate agencies were capable of licensing the photos to REA on its standard terms, and REA was capable of licensing them to RP Data. Accordingly, RP Data did not infringe Hardingham’s copyright.

Action

This case has important implications for photographers and other content creators, and is an important reminder to put clear, written agreements in place when licensing copyright and other IP. You can exclude implied terms and make sure that the parties’ expectations match. If you would like assistance with documenting your copyright agreements, contact us.

Author: Ashna Govil, paralegal.

Beware of new unfair contract rules and higher penalties!

Businesses need to take another look at their standard contracts, now that the Treasury Laws Amendment (More Competition, Better Prices) Act 2022 has expanded the unfair contract terms laws and introduced higher penalties for breaches of the Act.

Unfair contract terms status

Until these amendments, unfair contract terms in standard contracts with small businesses and consumers were void, but not illegal. The first key amendment is that unfair contract terms have become illegal and are now subject to significant financial penalties. The ACCC has welcomed this change due to the “adverse consequences of unfair contract terms on consumers and small businesses.”

Extended definition of small business contract

The second key change expands the scope of “small business” contracts to which the regime will apply. Now, a small business contract is a contract where one party to the contract is a business that employs fewer than 100 persons (previously 20 persons) or has a turnover for the last year of less than $10 million.

Unbalanced scales and book
Check whether your standard contracts are balanced. Image by Freepik

Another key point in this change is that where a party permits minor amendments to a standard form contract, it will still be considered as a standard form contract. Previously, it was considered that any negotiated change would be sufficient to avoid the effect of the unfair contracts rules.

The party which drafted the contract is required to prove that it is not a standard form. Remember as well that the rules apply even where the party which drafted the contract is also a small business.

With the extended definition of a small business contract, the new laws empower courts to rewrite commercial standard form contracts, including the power to void, vary, or refuse to enforce unfair contract terms.

Increased penalties for breaches of the Act

The third key change is the very significant increase of the maximum penalties under the Act for engaging in anti-competitive conduct and breaches of the ACL:
• $50 million (currently $10 million)
• Three times the value of the reasonably attributable benefit obtained from the conduct or
• If the courts cannot determine the value of the benefit, 30% of the body corporate’s turnover during the period it engaged in the conduct.

The ACCC hopes these penalties will serve as a “strong deterrent message to companies…to not mislead or act unconscionably towards consumers.” These amendments took effect on 10 November 2023.

Businesses should review their standard form contracts for terms that provide a significant advantage but go beyond what is needed to protect their legitimate interests. If you would like assistance to review your standard contracts, contact us.

Author: Ashna Govil, paralegal.

War of the Titans: Epic Games v Apple

On 10 September 2021, the United States District Court of the Northern District of California handed down its judgement in the widely publicised case between two technology powerhouses: Epic Games and Apple.

While the outcome of the case could be construed as somewhat of a loss to both sides, Judge Rogers’ judgement deals with interesting issues concerning how the operation of digital storefronts intersects with competition law.

Background

Game play screen on mobile phone
The Epic ruling has affected Apple’s no-steering rules for the App Store

For years, Epic Games’ CEO Tim Sweeney has been a vocal sceptic when it comes to the commission digital platforms charge software developers for transacting through their storefronts, questioning the standard 30% rate charged by companies like Apple.

Before commencing litigation in August 2020, Epic Games knowingly contravened its contractual agreements with Apple and implemented a feature within Fortnite that enabled users to make in-game purchases directly from Epic Games, bypassing Apple’s commission.

In response to this, Apple pulled Fortnite from the iOS App Store and as a result Epic Games sued Apple.

The claims

Epic Games made a total of 10 claims against Apple, most alleging that Apple’s practices regarding the iOS App Store were in contravention of US competition law. Apple made counter claims against Epic Games, including breach of contract for the Fortnite bypass feature.

The ruling

Judge Rogers ruled against Epic Games for 9 out of the 10 claims, and ordered them to pay Apple US$3.6 million for bypassing Apple’s payment systems.

However, Judge Rogers did offer some criticism when examining Apple’s practices. Although Apple’s degree of success in the mobile gaming transaction market did not alone constitute monopoly status, she observed that the company is nearing ‘the precipice of substantial market power’. Additionally, the fact that Apple only ever seems to revise its App Store terms in light of legal action did not go unnoticed. Judge Rogers noted that there is little impetus for Apple to innovate its services in the absence of third-party digital storefronts on the iPhone platform.

The claim where Apple was held to be in contravention of competition law concerned its ‘anti-steering’ rules, which prohibit app developers from directing users to payment methods external to the App Store.

Apple’s 30% commission was considered legitimate; but preventing developers from informing consumers of their choices when making in-app purchases was found to be anti-competitive. The court issued a permanent injunction blocking Apple from enforcing these rules.

Implications

While Epic Games ultimately lost most of their claims, the ruling on Apple’s anti-steering rules is significant. Apple earns billions from in-app purchases, a revenue stream which is potentially undermined if developers can link to commission-free transactions.

Author: Andrew Geraghty, paralegal.

Are you up to date with the latest franchising disclosure requirements?

From November 2021, franchisors must include new information in their disclosure documents for prospective franchisees.

Summary of new disclosure document requirements

Franchisors need to be aware of important changes to the pre-entry disclosure obligations of franchisors. Your disclosure documents must now include additional information on:

  • lease arrangements,
  • franchisee goodwill rights,
  • capital expenditure, and
  • instances of dispute resolution or arbitration that have occurred within the previous financial year.
Fast food
Are you up to date with the 2021 franchising code changes?

Additionally, you need to provide prospective franchisees with a Key Facts Sheet highlighting the most important information in the disclosure document.

Other Franchising Code amendments

Earlier amendments came into effect last July. The amendments were implemented in response to the Fairness in Franchising report handed down on 14 March 2019. As well as the more onerous disclosure obligations, some of the key recommendations from this report that have now been implemented are:

  • extending the cooling off period in franchise agreements, and
  • enhancing the collective powers of franchisee groups in dispute resolution.

Stemming from these recommendations, the amendments are intended to provide better protections to franchisees, improve fairness and transparency in franchising, and ultimately promote enhanced competition and fair trading within the sector.

Dispute resolution and termination changes

Options for alternative dispute resolution have been expanded and now include conciliation, mediation and arbitration.

By agreement with the franchisor or through the Australian Small Business and Family Ombudsman, multiple franchisees with similar disputes can now collectively participate in arbitration. Franchisees with similar disputes are permitted to discuss the nature of their disputes with one another when determining whether to act collectively, even if this would otherwise breach confidentiality clauses within their franchise agreements.

The cooling off period after a franchise agreement has been entered into has been extended from 7 days to 14 days. A franchisee now also has 14 days to terminate their franchise agreement after being provided with a proposed lease by the franchisor. Additional changes to termination requirements enable franchisees to dispute ‘special circumstances terminations’, of which they must be given 7 days’ notice by the franchisor.

Capex, marketing funds and legal costs

The prohibition on significant capex for franchisees has been extended from the auto industry to the rest of the market.

Franchisors should familiarise themselves with the changes for administering marketing funds, in addition to the new disclosure requirements and increased penalties for marketing fund non-compliance.

There is also a limitation on passing legal costs through to franchisees.

Restraint of trade clauses

Franchisors are now more limited in their ability to enforce restraint of trade clauses. A restraint will only have effect during the franchise term, and not after termination, unless the franchisee was in serious breach of the agreement immediately before termination.

Moving forward

These amendments cover many areas and place a number of more onerous obligations on franchisors when entering into agreements with franchisees. The ACCC has made a useful summary of the key provisions of the Franchise Code. In light of these changes, it is important for franchisors to ensure their franchise agreements and disclosure documents comply with these requirements.

Author: Andrew Geraghty, paralegal.

Privacy please! – the review of the Privacy Act

Daily, we are handing over and using our personal information to do simple tasks such as online shopping, using apps, signing up to services and in the current COVID-19 climate, when signing in at restaurants and venues. Though how is our personal information protected, and how can it be used? In turn, what obligations do agencies and organisations have concerning personal information? The Privacy Act 1988 (Cth) promotes the protection of individuals’ privacy and personal information.

After the ACCC’s Digital Platforms Inquiry – final report (2019), the Australian Government committed to review the Act. In October 2020, the Attorney-General’s Department released a Privacy Act Review – Issues Paper which detailed areas of review and invited submissions, which can now be reviewed on the A-G’s website. The issues paper looks at the adequacy and effectiveness of the Privacy Act, particularly in a time where we rely on technology, and some people are increasingly concerned about their privacy rights.

Personal Information – obligations, breaches and definition 

influence legal privacy
The review will include the promotion of good privacy practices and the potential for an independent certification scheme.

The Act has thirteen Australian Privacy Principles that set out how an entity or organisation can use, collect, manage and store personal information; it also sets out other obligations and enforcement mechanisms. In particular, the Act includes a notifiable data breach scheme which states when an organisation must notify the Office of the Australian Information Commissioner and affected individuals of a breach of personal information. As part of the review, the AG’s Department will be looking at the scheme and how it is currently working.

The definition of personal information will also form part of the review. Currently, the Act sets out a broad definition of personal information; personal information can range from an individual’s name, phone number and date of birth to their health information and religious views. Opinions also fall under personal information, irrespective of whether they are “true or not”. Definitions of personal information in overseas jurisdictions vary.

Other areas of review

The AG’s Department has also stated that the review will consider:

  • the scope and application of the Act – including any current exemptions;
  • if the Act adequately protects personal information and has a practical and proportionate framework to promote good privacy practices – including erasing data, consent to default privacy settings and overseas data flows;
  • the introduction of a statutory tort for serious invasions of privacy;
  • if individuals should be entitled to direct rights of action for the enforcement of privacy obligations;
  • the standard of enforcement and the interaction of the Act with other regulatory frameworks; and
  • the viability of an independent certification scheme.

 Following the Issues Paper, the AG’s Department has indicated the release of a discussion paper this year. The discussion paper will ask for further feedback about any preliminary outcomes and proposed reforms. The review will be an area to watch to see what reforms will be presented and potentially introduced under the Privacy Act.

Author: Sharna White, Graduate Lawyer. Sharna has recently finished her time with us to take up a great position – we wish her all the best!

NAIDOC Week and the recognition of Indigenous Cultural & Intellectual Property (ICIP)

This year we are celebrating NAIDOC Week from 8 – 15 November 2020. NAIDOC Week was once a day celebrated by Aboriginal and Torres Strait Islander peoples but has now become an important week for all Australians to celebrate and appreciate Aboriginal and Torres Strait Islander people, history and culture.

2020 National NAIDOC logo
2020 National NAIDOC logo

The NAIDOC Week theme for this year is ‘Always Was, Always Will Be’ which focuses on Aboriginal and Torres Strait Islander peoples’ continuous connection to country and culture. The richness and survival of Aboriginal and Torres Strait Islander culture is essential. However, Australian law fails to recognise properly the importance of Aboriginal and Torres Strait Islander culture and Aboriginal and Torres Strait Islander peoples’ rights to protect their intellectual property, which is also known as Indigenous Cultural and Intellectual Property (ICIP).

ICIP encompasses different aspects of Indigenous culture, including, stories, symbols, sacred sites, dances, ceremonies etc. While you could write a story and it would fall under copyright, if it meets the specific requirements under the Copyright Act 1968 (Cth), there are roadblocks which prohibit ICIP from being protected by copyright. In particular, the requirements of ‘material form’ (e.g. written down or recorded) and there being an ‘author’ poses problems as Aboriginal and Torres Strait Islander stories are told orally, and a community may be the owner of a story rather than a person. The duration of copyright which can last for 25, 50 or 70 years after the creator’s death, the first year of publication/broadcast, since being made or made public, depending on the work is also problematic for ICIP. We know that Aboriginal and Torres Strait Islander people and culture have been around for more than 65,000 years, which means that particular ICIP may be older than the current duration period of copyright.

Aboriginal and Torres Strait Islander people and various organisations have advocated for the recognition of ICIP in Australia. Dr Terri Janke and Company have done great work to educate people about the importance of recognising and respecting ICIP as well as protocols to follow regarding the use of ICIP. Also, in 2016, the Arts Law Centre of Australia, Indigenous Art Code and Copyright Agency started the ‘Fake Arts Harms Culture campaign’, which highlighted issues with fake Aboriginal and Torres Strait Islander art and the lack of protection of ICIP. In September 2020, the ‘Australian Government response to the House of Representatives Standing Committee on Indigenous Affairs—Report on the impact of inauthentic art and craft in the style of First Nations peoples’ recognised the problems with current intellectual property laws and the need start looking into the development of ICIP legislation. While the Government has said this will be a long process, hopefully, we will see the introduction of ICIP laws sooner rather than later.

Author: Sharna White, Graduate Lawyer

influence legal acknowledges the Traditional Custodians of Country across Australia. We recognise the strength, resilience and capacity of Aboriginal and Torres Strait Islander Peoples and pay respect to Elders past and present.

When the copyright owner can’t be found

Whether it is a photograph you would like to use on your website, or an artwork you wish to print onto merchandise, it’s always best practice to seek permission from the copyright owner to use their work. What happens when you want to use a work protected by copyright and cannot find the copyright owner, even after making every effort to find them? These are known as orphan works.

Orphan works and how the Copyright Act deals with them

influence legal book search
What happens when you can’t find the copyright owner?

Currently, the Copyright Act does not provide any specific protection for those using orphan works. If a copyright owner turns up even after the user has made reasonable efforts to find them, then the user is at risk of an infringement claim.

This issue has been reviewed in several enquiries, including the Australian Law Reform Commission Inquiry into Copyright and the Digital Economy and Productivity Commission Inquiry into Intellectual Property Arrangements.

The Federal Government’s Copyright Access Reforms – what does this mean?

On 13 August 2020, the Federal Government announced that one of their five reforms to the Copyright Act is the establishment of “a limited liability scheme for use of orphan works”.

The Government indicated that the scheme will benefit the copyright owner and the person using an orphan work. The proposed amendment will allow orphan works to be used without the risk of copyright infringement provided that the person intending to use the work conducts “a reasonably diligent search” and attributes the creator “as far as reasonably possible”.

If the copyright owner does appear then the person using the orphan work will be entitled to use the work, if both parties can agree on “reasonable terms”. If this cannot be achieved, the copyright owner can apply for an injunction to prevent future use of the work.

These reforms will be an area to watch this year, as the Government anticipates the release of an exposure draft bill later this year. It will be interesting to see if and how “a reasonably diligent search” is defined, as they have suggested that specific sectors and industries develop policies about a “diligent search”.

Author: Sharna White, Graduate Lawyer

Update – control of online content

Our last article looked at the issue of control of copyright on social media platforms following the recent case, Sinclair v Mashable.

Only 2 months after the Sinclair decision, the U.S. District Court for the Southern District of New York has revised its position in a new case, McGucken v Newsweek.

A tale of two cases

In very similar conditions to Sinclair, Newsweek had published an article featuring an embedded Instagram post of photographer, Elliot McGucken, without his permission.

Instagram embed
Instagram has released a statement on its embeds API

Relying on the ruling in Sinclair, Newsweek argued that because the image was posted to McGucken’s ‘public’ profile, it could rely upon Instagram’s terms of service.

However, despite the Sinclair decision, the court refused to dismiss McGucken’s case. While the court did accept that Instagram has the right to sublicense publicly posted photographs to other users, it concluded that there was insufficient evidence to prove that Instagram had sub-licensed the photo to Newsweek.

Instagram weighs in

Instagram has released a statement clarifying its position on the issue, stating:

“While our terms allow us to grant a sub-license, we do not grant one for our embeds API… Our platform policies require third parties to have the necessary rights from applicable rights holders. This includes ensuring they have a license to share this content, if a license is required by law.”

So, the court’s decision combined with Instagram’s statement on the issue has now emphatically altered the legal position set out in Sinclair.

What does this mean for you?

Photographers and other creators wishing to have stronger control over their copyright when sharing their photographs online will welcome this development.

However, this decision also serves as a strong warning to businesses (especially digital media outlets) to ensure they obtain the correct permissions before using or embedding a photographer’s work onto their website.