Ernst & Young's Cost/Benefit Analysis of Introducing Fair Use into Australia's Copyright Act

The Department of Communications and the Arts released last week the Cost/Benefit Analysis (CBA) on the possible introduction of Fair Use into our copyright act that it commissioned Ernst & Young Australia (EY) to undertake a year or so ago.

The Australian Law Reform Commission's (ALRC) report Copyright and the Digital Economy was submitted to the government in November 2013, and the Productivity Commission's final report late last year. Both bodies recommended that a US-style open-ended and flexible fair use regime replace our current closed and prescriptive 'fair dealing' provisions.

A fierce debate has been raging in the book industry for the last four years, most of it seriously misinformed.

The EY analysis attempts to grapple with the numbers and bring a measure of sobriety to the various claims and counterclaims. It does that well. It's measured, well researched and persuasive, standing in stark contrast to an earlier, and now widely discredited, PWC report commissioned by industry bodies that argued against fair use. (See an expert demolition here).

Basically the report's assessment is that the costs of introducing fair use are pretty minimal (about $20-30 million annually) but these are greatly outweighed by the benefits to the economy at large. 

Unfortunately the report has a couple of major flaws however. Firstly it doesn't even address, let alone calculate, the effect on industry revenues if multiple copying for classroom use, and coursepack inclusion, of chapters of textbooks and other resources were suddenly deemed fair use. Such copying is now remunerable under the statutory license administered by the Copyright Agency. The industry would lose about $70 million or so a year, a sizeable whack especially considering that more than half of that goes straight to the bottom line).

Secondly, the report barely addresses any issues specifically relating to the higher education sector. Its prime, and in fact sole, focus is the primary and secondary school sector. 

The issue now for the industry is how to respond. If the past few years have been any guide it could get very ugly. The opposition to any reform has been absolute and unrelenting. 

I would urge the industry to seriously reconsider. It should accept changes that make sense in order to gain credibility in arguing against those that don't.

The fair use recommendations that publishers should accept relate to quotations, non-commercial private uses, incidental/technical copying, data and text mining, library and archive needs, and access to orphan works.

The contentious ground will be education. For instance, the EY report calculates that the Copyright Agency currently collects around $9 million per year for classroom usage that the schools argue is manifestly unfair - the display and distribution of otherwise freely available online material being the main one. 

There should be no publisher resistance to allowing these uses to be deemed fair and therefore non-remunerable. 

Publishers should focus their energies on the reproduction of what the report labels 'education-specific' materials - 10% or a chapter of texts produced for curriculum and classroom purposes.

The EY report frequently and favourably refers to Canada which liberalised, via a Supreme Court decision in 2012, the interpretation of their fair dealing provision for education. Multiple copying for classroom distribution became allowable and free, including copying 10% or a chapter of a text for students. But EY refuses to tease out the consequences of similar reforms in Australia. There are stark differences.

The hit to Canadian publishers was about $C10 million, no where near as much as would be the hit to Australian publishers given our different copying history and practices.

The way forward for the industry now is to narrow its focus to this critical issue and lobby accordingly. It will be deemed intelligent and forward-thinking (which would be a refreshing change!) 

It would also be far better placed to forge a united front with the school and university authorities in arguing for sensible and acceptable reform.