INFORMATION SHEET G 136v02
May 2016
Fair Use and the Productivity Commission
In August 2015, the Australian Government requested the Productivity Commission to
undertake an inquiry into Australia’s Intellectual Property (IP) arrangements. In its Draft
Report published on 29 April 2016, the Commission made a series of recommendations on
copyright and put the case for ‘fair use’ in Australian copyright law. The Commission
reflected on and added to, the recommendations previously made by the Australian Law
Reform Commission (ALRC) in its 2014 report Copyright and the Digital Economy.
The purpose of this information sheet is to give general introductory information
about copyright in Australia. If you need to know how the law applies in a particular
situation, please get advice from a lawyer.
Key points

The Australian Government asked the Productivity Commission to undertake an
inquiry into Australia’s intellectual property arrangements.

In its Draft Report, the Commission argued that Copyright Act is weighted too heavily
in favour of copyright owners, to the detriment of the long-term interests of users.

To address this alleged imbalance the Commission recommended among other
things, that the Government should replace current fair dealing exceptions with a
broader ‘fair use’ exception.
Background
Australia’s copyright law provides provisions that allow the use of copyright material without
permission for certain public policy purposes. These provisions are known as exceptions.
There are many exceptions in the Copyright Act.1 Exceptions of general application (that is,
they are available to everyone) are the fair dealing exceptions. These fair dealing exceptions
are for certain purposes such as research or study, criticism or review, reporting news and
parody or satire. The exceptions serve as a defence for acts that would otherwise be an
infringement of a copyright owner’s rights.
In considering whether the defence applies, the court must be satisfied of two things; firstly,
that the dealing must be for one of the prescribed purposes, and secondly, that the dealing
must be ‘fair’. If a use does not fall under one of the categories, the use cannot be found to
be fair. If a use does fall within one of the categories, whether or not the use is ‘fair’ may
1
See our information sheet Exceptions to Copyright for a full list of the exceptions in the Copyright
Act.
PO Box 1986, Strawberry Hills NSW 2012
ABN: 63 001 228 780
info@copyright.org.au
www.copyright.org.au
T +61 2 8815 9777
F +61 2 8815 9799
2
Australian Copyright Council Information Sheet G136v02 Fair Use and the Productivity Commission
then be considered on a case-by-case basis. See our information sheet, Fair Dealing: What
can I use without permission? for more information.
International context
Fair use is a defence to infringement in the United States copyright law. Under the United
States’ fair use regime, United States courts are guided by four fairness factors to determine
if a use of copyright material is fair. The fair use exception has been in operation in the
common law of the United States for many decades and was codified into the present US
copyright legislation in 1976. Over this time, the United States courts have developed
substantial case law and other tools to help copyright owners and users understand what
uses of copyright-protected material may be considered fair. Since the 1990s, United States
courts have focused on whether the use of the material is ‘transformative’ in that it involves a
new creative expression. The more transformative (new, different and creative) a use is, the
more likely it is to be found fair.2 However most recent fair use decisions in the US has
expanded the fair use consideration from a “transformative use” test to a “transformative
purpose” test. See the 2015 decision in Authors Guild v Google.3
Many countries (mostly countries that have inherited British law such as New Zealand, India
and Canada) have fair dealing exceptions. When Australia’s fair dealing provisions are
compared with fair use in the United States, some have criticised Australia’s copyright
exceptions as being too ‘static’ and hindering on commercial and technological
developments now and into the future.4
Increasingly, countries around the world are considering whether to introduce fair use. While
many countries have chosen to keep fair dealing in place, some countries (such as Israel
and Singapore) have decided to introduce fair use or a similarly structured exception. Other
countries, such as the United Kingdom, have considered whether to introduce fair use and
decided against doing so. In 2005, Australia looked at introducing a fair use style exception
and decided instead to introduce an open-ended exception for certain beneficiaries; section
200AB was introduced in 2006. Reasons provided against introducing fair use include
unnecessary legal uncertainty, different cultures of risk appetite, different legal frameworks,
and an American-style profusion of high-cost litigation that would disadvantage owners and
users of copyright.5
Canadian copyright law has fair dealing provisions and introduced fair dealing for education
in 2012. As a result of the new fair dealing exception and a broad interpretation of this new
provision by the education sector, together with a series of decisions by the Canadian
Supreme Court, Canadian fair dealing provisions in an educational context are
comparatively far broader than that of Australia. Following these changes, Canadian authors
and publishers have reported that they have received a 98% reduction in copyright fees,
resulting in the closure, sale and bankruptcy of publishers and relocation of distribution
activities to the United States.6 Several publishers and other representative bodies point to
Canada as a case study on the potentially harmful impacts of adopting fair use in Australia.
Oxford University Press (OUP) provided the Commission with an example from its
experience in Canada as a result of the 2012 decisions. OUP noted that introducing fair use
2
The Australian Government Productivity Commission, Intellectual Property Arrangements
Productivity Commission Draft Report, April 2016, p 143.
http://www.pc.gov.au/inquiries/current/intellectual-property/draft/intellectual-property-draft.pdf
3 http://www.copyright.org.au/acc_prod/ACC/News_items/Authors_Guild_v_Google.aspx
4 ALRC, Copyright and the Digital Economy Discussion Paper (DP 79).
http://www.alrc.gov.au/sites/default/files/pdfs/publications/dp79_whole_pdf_.pdf
5 Above n 2, p 149.
6 Above n 2, p 151.
PO Box 1986, Strawberry Hills NSW 2012
ABN: 63 001 228 780
info@copyright.org.au
www.copyright.org.au
T +61 2 8815 9777
F +61 2 8815 9799
3
Australian Copyright Council Information Sheet G136v02 Fair Use and the Productivity Commission
in Australia may result in a reduction in licence fees for the education publishing sector,
exposure to huge financial risk, with significant impacts on authors and creators.7
The ALRC’s recommendation on fair use
In 2012, the ALRC was asked to review Australia’s copyright exceptions and limitations and
make recommendations to ensure Australian copyright law remained adaptable and in-line
with societal values.
The key recommendation was that Australia’s current fair dealing provisions be repealed and
replaced with fair use.8 The ALRC model provided a list of illustrative purposes together with
a list of non-exhaustive of fairness factors that would considered when deciding whether or
not a use is ‘fair’.
The main arguments in favour of the introduction of the fair use exception was that fair use
provides flexibility to be able to respond to changing conditions, facilitates innovation,
restores balance to the copyright system between owners and users of copyright material
and that it assists with meeting societal expectations.9
Arguments submitted against the adoption of a wider exception included that it was
unnecessary, would increase uncertainty and expense, originated in a legal environment
markedly different from that of Australia and that it may not comply with the three-step test in
the Berne Convention and TRIPs.10
For more information about fair use and the ALRC inquiry, see our information sheet, Fair
Use & the ALRC Inquiry.
The Productivity Commission’s draft recommendation of fair use
The Commission’s view was that the Copyright Act is too heavily in favour of copyright
owners, to the detriment of the long-term interests of users. To remedy this situation, the
Productivity Commission recommended that the Copyright Act should be amended by
replacing Australia’s current fair dealing exceptions with a fair use exception. The
Commission’s proposed fair use exception has a broader application than the ALRC
proposal. The Commission’s proposal for fair use includes provisions for orphan and out-ofcommerce works. The Commission argued that this would maintain the balance between the
interests of rights holders and users.
Commission argued the that objective of its fair use exception would be to ensure Australia’s
copyright system targets only circumstances where infringement would undermine the
ordinary exploitation of a work at the time of the infringement.
The fair use exception is to be open-ended and take into account factors including:

The effect of the use on the market for the copyright protected work at the time of the
use

The amount, substantiality or proportion of the work used, and the degree of
transformation applied to the work

The commercial availability of the work at the time of the infringement
7
Above n 2, p 150.
ALRC, Copyright and the Digital Economy Final Report (ALRC Report 122) p 13.
http://www.alrc.gov.au/sites/default/files/pdfs/publications/final_report_alrc_122_2nd_december_2013
_.pdf
9 Above n 4, p 71.
10 Above n 9.
8
PO Box 1986, Strawberry Hills NSW 2012
ABN: 63 001 228 780
info@copyright.org.au
www.copyright.org.au
T +61 2 8815 9777
F +61 2 8815 9799
4
Australian Copyright Council Information Sheet G136v02 Fair Use and the Productivity Commission

The purpose and character of the use, including whether the use is commercial or
private use.11
The Commission’s fair use proposal extends far beyond the ALRC’s model of fair use in four
main ways.
Third parties
The Commission proposes to extend the defence of fair use to third parties that make use of
the material on behalf of the users. This would mean that third parties that would ordinarily
licence material would have the coverage of fair use and may not be required to
independently licence the material or take “reasonable steps” to avoid authorisation liability.
Time specific
The Commission’s proposal allows use of copyright material where the consideration of the
effect of the market for the material is limited to the market at the time of the infringement.
This consideration of the market for the work does not require any assessment of the
potential or future market for the work and how the use might interfere with that market.
Copyright owners may withhold their material from the market for many legitimate reasons,
including the potential for future returns in different market conditions. By requiring a court to
apply a fair use evaluation to the commercial exploitation at a specific moment in time, this
has the potential to undermine any potential or future exploitation of the work by the
copyright owner.
Commercial availability
The Commission proposes that fair use will apply where the work is not commercially
available at the time of the infringement. The Commission proposes that where a work is not
being actively commercially exploited at a particular point in time a user should be free to
use that work. The Commission argued that efficiency of the Australian copyright scheme is
reduced because of the lack of requirement for rights holders to actively supply the
Australian market.
While the current fair dealing exception for research or study requires a consideration of
commercial availability, this consideration is limited to the possibility of obtaining the work in
a reasonable time at an ordinary commercial price. This assessment of commercial
availability is mediated by a consideration of the potential or future market for the work. This
is not part of the Commission’s proposal (see Time Specific above).
The nature of the work
The Commission’s proposal is centred on the exploitation of the work and does not require a
court to consider the nature of the work. Many works protected by copyright are highly
creative and take many years to create. Many other works protected by copyright are not
highly creative and take minutes to create. Copyright protects these works equally but they
have different natures, different values. The ALRC, influenced by the United States
application of fair use, proposed that a fair use evaluation by a court would consider the
nature of the work. This would involve asking questions such as: is the work creative? Is the
work published? The Commission’s proposal does not require consideration of these issues.
Impact of introducing the Productivity Commission’s proposal
Moving from a fair dealing exception to a fair use exception will impose costs. These costs
will be borne by creators and copyright owners and may include:
11
Above n 2, p 162.
PO Box 1986, Strawberry Hills NSW 2012
ABN: 63 001 228 780
info@copyright.org.au
www.copyright.org.au
T +61 2 8815 9777
F +61 2 8815 9799
5
Australian Copyright Council Information Sheet G136v02 Fair Use and the Productivity Commission

reduced opportunities for copyright owners to license their works;

reduced capacity for copyright towners to control how their work is used; and

increased uncertainty for business and both owners and users of copyright material.
The Commission did not address these costs in its Draft Report.
The ALRC considered at length the relationship between its fair use proposal and the
international stand for national exceptions, the three step test. The ALRC concluded that its
proposal was consistent with the three step test. The Commission’s fair use proposal goes
far beyond the ALRC’s proposal. However, the Commission does not provide any analysis of
the relationship between its proposal and the three step test. The Commission did say that
the ALRC looked at the issue and considered fair use was consistent with Australia’s
international obligations.12 However, in noting the ALRC’s view, the Commission did not
reflect on the nature of its own proposal for fair use, which has a far broader application and
consequently, a higher likelihood of inconsistency with Australia’s international obligations.
Next steps
Submissions on the Draft Report are due to the Commission by 3 June. The Commission will
then hold a series of public hearings. The Commission is due to deliver its final report to the
government in August.
The Australian Copyright Council has been assisted by the
Australian Government through the Australia Council, its
arts funding and advisory body.
© Australian Copyright Council 2016
12
Above n 2, p 518.
PO Box 1986, Strawberry Hills NSW 2012
ABN: 63 001 228 780
info@copyright.org.au
www.copyright.org.au
T +61 2 8815 9777
F +61 2 8815 9799