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Julia Windsor Student Murdoch University
Introduction
1. Copyright grants an author an automatic bundle of intellectual property rights, so as to protect the expression of the idea as opposed to the idea itself.[1] There is a trade-off as to whether these rights focus on the moral rights of the author or the economic rights of the consumer. [2] The emphasis that each country places on these two spheres of rights is based on the historic development of copyright. Australia adopted the British view of protecting the publishing industry under the Statute of Anne 1709 where emphasis on the rights of authors’ only came later. [3]
2. Australia has taken a moral view that not only protects the use and production of author’s work, but also its distribution and importation under the Copyright Act 1968 (“Copyright Act”). This provides greater incentives to invest in creative endeavours, due to the assurance of an economic return. [4] However this is at the expense of making the work available to the public at a reasonable price, and goes far beyond merely protecting the author. Due to this trade-off the economic rights of the Australian consumer have suffered with software prices being significantly higher compared to the United States, Britain and New Zealand, and decreased availability of computer software.[5] This has been attributed to parallel importation bans.
3. In 2002 the Copyright Amendment (Parallel Importation) Bill (“Parallel Importation Bill”) was proposed to allow the parallel importation of computer software. Although the Parallel Importation Bill will combat the problems that Australian consumers are facing, the effect it will have in light of Australia’s current legal position and obligations and the changing market place needs to be examined. The experiences of other industries and countries also warrants investigation to provide a comparative basis for the changes proposed by the Parallel Importation Bill.
What is Parallel Importation?
4. Parallel importation refers to a good that has been produced and sold legally but illegally imported into Australia, without the consent of the copyright owner. [6] Thus parallel imported goods are often referred to as ‘grey goods’ because they are produced with the consent of the copyright owner unlike black market goods. This restriction provides that the same material does not compete with itself on price. Consequently geographical product monopolies are set up.[7]
5. Software is a collection of computer programs and so is protected as a work under section 10(1) of the Copyright Act as a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result. Due to the nature of this definition a computer program is usually embodied in an object such as a diskette, CD, DVD or ROM. Thus for an infringement of copyright to occur, a substantial part of the computer program must be embodied on that object.[8] The arguments to be addressed would also apply to patented computer prog rams, however additional factors would have to be addressed, as patenting requires registration and protects the idea over the expression of the idea.
6. Parallel importation of literary works has been legislated against in sections 37 and 38 of the Copyright Act. Section 37 states that infringement occurs when a person, without the licence of the owner of copyright, imports an article into Australia for the purpose of selling, letting or distributing the article for the purpose of trade where the importer ought reasonably to have known that if the article had been made in Australia by the importer, it would have infringed the copyright. Section 38 applies the same provisions to distributors of parallel imported material. Thus an action for either sections can be brought concurrently or in relation to two different people.[9] These sections have been judicially considered in a number of cases.
Bare, Positive and Exclusive Licences
7. The definition of ‘licence’ in section 37 of the Copyright Act was established in Interstates Parcel v Time-Life International10 to mean ‘consent’. Consent can be oral or implied by conduct.[11] Gibbs J illustrated this as when an American copyright owner sells a commercial quantity of books to a buyer in Australia who they know to be a bookseller. [12] However a licence cannot be inferred from the mere fact that the owner has sold the goods without any express restriction on their subsequent disposal. [13]
8. In Computermate v Ozi-Soft[14] Sheppard, Spencer and Gummow JJ differentiated between bare, positive and exclusive licences. A bare licence can be revoked at will and thus is not a sufficient form of licence under section 37. An exclusive licence is defined by section 10 of the Copyright Act as a written licence authorising the licensee, to the exclusion of all other persons, to do an act that the owner of the copyright has the exclusive right to do. A positive licence is given with reference to particular transactions by particular parties, [15] however positive permission or consent can be implied from the conduct of the copyright owner and does not necessarily need to be expressed.[16] Their Honours held that only a positive licence was required under section 37 and not an exclusive licence due to the purpose of the section.[17] It was reiterated that the burden of proof is placed on the copyright owner to prove the absence of such a licence and not on the importer to prove the existence of a licence.[18] Thus the effect of only having a positive licence was not distinguished from an exclusive licence as in Time- Life. This allows for more than one importer and distributor of the copyrighted material who all have the consent of the copyright owner. [19]
Circumvention of the Copyright Act
9. Lotus v Vacolan [20] involved an attempt to circumvent sections 37 and 38. Vacolan was set up as an intermediary agent between Australian consumers and Seltec Computer Products in America. Neither Vacolan nor Seltec Computer Products had a licence to sell software in Australia. [21] Despite there being no conclusive evidence as to who imported Lotus’ software into Australia, Davies J held that as the ultimate purchaser was not the importer, there was an infringement of sections 37 and 38. The fact that Vacolan was a mere agent was immaterial as they distributed the software and thus infringed section 38. [22] Vacolan submitted that the court should not formulate an order that was so broad that it would prevent a legitimate reorganisation of Vacolan’s business. Davies J replied that there were no practical means by which a business such as Vacolan could avoid sections 37 and 38. [23]
10. In Broderbund v Computermate[24] Computermate cross-claimed under Part IV of the Trade Practices Act 1974 (“TPA”) to the action brought under sections 37 and 38 of the Copyright Act. Section 46(1) of the TPA provides that a corporation that has a substantial degree of power in a market shall not take advantage of that power for the purpose of elimination or substantially damaging a competitor, preventing the entry of a person in the market or deterring or preventing a person from engaging in competitive conduct in any market. Section 46(3) states that in determining the degree of power the court should have regard to the conduct of its competitors and persons to or from whom it supplies or acquires goods and services.
11. Beaumont J held in relation to section 46 that the computer program, “Where in the world is Carmen Santiago?”, was classified in the educational game market.[25] Thus even though Broderbund had monopoly rights to produce the computer program, and Dataflow had a monopoly right to import and distribute the game in Australia, this did not amount to a market monopoly of the educational game market. There was no significant barrier to entry of this market as the programs sales where only 10-17% of the total market sales. This did not amount to a near monopoly and thus there was no substantial degree of power in the market.[26]
12. In obiter, Beaumont J examined where a firm could take advantage of their market power for any of the purposes proscribed by section 46(1). This was primarily based on distinguishing the unreported judgment of the Court of the European Communities Independent Television [27] from the facts of Broderbund v Computermate. Beaumont J found that Broderbund did not take advantage of any market power, as they did not prevent the emergence of new products on the markets to secure market monopoly. Neither did Broderbund go beyond what was necessary to fulfil the essential function of the copyright as permitted in common law.[28] Section 45(2) of the TPA states that a corporation shall not make a contract or give effect to a provision if the contract contains an ‘exclusionary’ provision or a provision of the contract has the purpose, or likely effect, of substantially lessening competition. Beaumont J held that Broderbund was an American manufacturer, an international supplier of computer software products who distributed in Australia by appointing exclusive distributors. Thus there is no competition in relation to the supply of the program between the cross- claimants.[29]
13. Beaumont J’s findings limit the application of the TPA to very specific circumstances. A copyright owner must have sufficient market monopoly and take advantage of this market power to lessen competition of new products. This has no application to parallel imports, as by definition these programs are the same as those distributed by the exclusive licensee and not new products. Also due to the nature of supplying copyright goods, all parallel imported goods would come from one original supplier and therefore there is no competition. Thus the TPA has little effect on prohibiting parallel importation under the current framework.
Parallel Importation and the Circuit Layouts Act
14. The Circuit Layouts Act 1989 (“Layouts Act”) states in sections 24(2) and 24(3) that despite sections 37 and 38 of the Copyright Act commercial exploitation of an integrated circuit containing a copy or adaptation of a work is not an infringement of the EL rights in the layout or the copyright of the work, unless the making of the copy was an infringement of that copyright.
15. Section 24 was used as a defence to parallel importation of copyright material in Avel v Wells [30] . In that case, Wells imported and distributed a substantial part of the program stored on ROMs, EPROMs and OTPROMs. ROMs are used to store simple programs, which are to be utilised in mass- produced consumer products. OTPROMs are produced in a blank form but are not designed to enable erasing of a program and so are non re -usable. EPROMS are similar to OTPROMs but the program loaded into them can be erased and so the EPROMs can be used indefinitely. Thus the ROMs were made with the program encoded in them by the chip manufacturer, but the copyright owner encoded the EPROMs and OTPROMs subsequent to production. All the ROMs fell within the Layout Act definition of an eligible circuit layout as they were representations in a material form, integrated circuits and made in an eligible foreign country, Japan.[31] Thus sections 24(2) and 24(3) applied and commercial exploitatio n could not be an infringement of the copyright in the work. This provided a defence to the copyright infringement of parallel importation.
16. Section 24 does not operate as a defence to other copyright infringements such as reproducing the computer program on the ROMs, without the consent of the copyright owner. So although the ROMs can be imported there is a limited market for them.
17. Section24 has also been applied to the importation of cinematographic films on ROMs in Galazy Electronics v Sega.[32] There seems to be no intention to change this legislation in light of the protection of film in the Parallel Importation Bill.
Daily Digitalisation and E-commerce
18. The use of computers and the Internet has rapidly become an integral part of everyday life with most Australians working with computers on a daily basis. Computers allow the accurate, quick copying of copyright material to take place. The Internet allows global transition of copyrighted material almost instantaneously. Software can be purchased, loaded and delivered electronically within an ever-decreasing period of time. [33] The use of the Internet to sell goods and service has led to the emergence of an international market place with direct consumer-distributor dealing. When this is coupled with the high level of information and efficiency available on- line, the most important factor for a cyber-consumer is price.[34] This new technology has drastically reduced the effect of parallel importation bans within Australia, primarily due to the development of e-commerce industry.
19. Section 37 of the Copyright Act emphasises importation for trade, thus an individual can import copies of copyrighted material for personal use without infringing. E-commerce facilitates the importation of copyrighted material for personal use. In 1999 $A920 million was spent on-line primarily on books, CDs, videos and computer products. Two thirds of these sales took place through offshore web sites. Thus Australian retailers not only lost domestic retail and e-commerce sales but also international sales due to higher prices.[35] Current restrictions on parallel importation puts Australian e- commerce at a disadvantage, as retailers cannot purchase their products at the cheapest price and thus are at a disadvantage when trying to compete on price (see Appendix 1). Limitation of distribution also means that products that are available in America are not sold in Australia and thus Australian e-commerce retailers cannot sell these products.[36] Australia needs to be able to capture this market now as e-commerce will continue to grow exponentially for the next few years.[37]
Alternatives to allow Parallel Importation
20. In light of technological changes to the market and the effect on consumers, four options were proposed to deal with the problem of prohibiting parallel importation. Each option was then analysed as to the constraints which would make it non-viable, and the impact it would have on groups directly affected by any changes to the Copyright Act as it stands.
21. Option 1 was to retain the existing restrictions. This was rejected as it would continue to prevent consumers from realising potential benefits from the removal of the ban on parallel imports. Consumers would also continue to bear the costs of restrictions of competition.
22. Option 2 would allow the parallel importation of a narrow range of business and home use ‘standard’ applications such as spreadsheets, word processing, database management and graphics programs. This would directly affect software manufacturers, distributors and retailers as well as consumers of business software.
23. Option 3 would allow the parallel importation of a wider range of products including business, educational and recreational products while still maintaining a status quo to protect the film industry. This is necessary as due to technical convergence as DVDs contain both computer programs and cinematography films.[38]
24. Option 4 would allow parallel importation of all products containing software, which would impact upon other copyright subject matter. [39]
25. Option 3 was supported as the proposed change in the Parallel Importation Bill and prohibits the importation of a feature film longer than 20 minutes as a non-infringing accessory to a computer program. [40] The benefits of removing the parallel importation ban are that it will lead to a reduction in prices and increase in the availability of copyright works. The economy will benefit, as market forces will determine the optimal investment in creativity instead of in distribution.[41]
26. The argument for leaving parallel import requirements in place is that it provides an incentive for investment in local production and promotion of copyright material as well as post-sale support. Parallel importation restrictions also have a secondary effect on piracy and censorship. [42]
Economic Effect of Allowing Parallel Importation
27. Australia is a relatively small and isolated market, which is attractive because it has a high income per capita. It is also a net importer of copyright material.[43] Parallel importers benefit consumers as they increase the availability of genuine articles at a cheaper price. A free competitive market equates the cost of producing goods with the price an individual consumer is prepared to pay. This maximises the society’s use of resources. As intellectual property rights restrict this they cause market failure, the cost of which consumers bear. [44]
28. Price discrimination is the difference in price between the price of a good bought in Australia and the price of the same good bought anywhere else in the world. In 1999 the ACCC found that Australian consumers pay on average 27% more for business software, 33% more for top selling games and individual packages such as Myst were on average 84% more expensive than the same products in the US.[45] Software is a significant cost to both business and government. In 1995 the federal government spent $130 million on package software. This only represented 8.4% of the total market revenue of package software. [46] Thus there is substantial potential for price reductions. However copyright owners use these increased profits to create new knowledge and information, and to serve new markets that would otherwise be unavailable under competitive pricing. [47] So although prices may fall moderately, profits fall substantially.
Developing Countries and Parallel Importation
29. The effect of removing price discrimination also needs to be examined in relation to developing countries. We are heading towards a knowledge society where the capital that most matters is intellectual capital. This shift overcomes the major impediment to development – the shortage of finance. Intellectual capital is also far more widespread in developing countries and thus needs to be nurtured and encompassed. [48] This is why most developing countries do not ban parallel imports and support international exhaustion,[49] particularly as there are no substitute goods available in developing countries. Neither is there an extensive market for goods, such as computer programs, except in the richer income classes.
30. By charging developed countries like Australia a higher price, copyright owners can distribute to developing countries at a lower price. If price discrimination is lifted, copyright owners would not be able to provide the product to both countries at a uniform price and thus the developing country would lose out on vital information.[50] The export of presently lower priced goods by developing countries could not happen, as there would be few countries with considerably lower prices.[51]
31. Australia is not a significant producer of intellectual property and thus there would be a positive effect on the economy by allowing parallel imports. However, this would be at the expense of developing countries and owners of intellectual property rights who have to pay for future development, which Australians enjoy. [52] Thus Australia would become a free-rider of copyright material and development as they would use the knowledge without contributing to the costs. This may result in those who pay for the technology slowing the pace of technology diffusion, leaving Australia behind.[53] It may also force copyright owners to use other more costly methods of price discrimination, dissipating what profits they retain in anti- competitive behaviour. [54]
Software Producers and Parallel Importation
32. Revenue from Australian produced software for 1995-1996 was $821.4 million. However, exports accounted for only 12 per cent of Australian produced software. This shows a strong market for locally produced software in Australia. This is as Australia’s software industry focuses on developing specialist applications.[55] As the Australian industry is cost competitive with overseas producers in specialist products the removal of parallel importation bans will not effect it. Allowing parallel importation will reduce the price of ‘off the shelf’ software and actually have a positive effect on Australian software producers, as this imported software is used to assist development.[56]
33. Although computers have become a part of everyday life, the general population has limited knowledge in relation to computer-related technology based problems. Thus post-sale service and support is often a necessary inclusion with hardware and software sales. Parallel imports would allow cheaper products to be sold without support. IBM’s greatest concern with this is that it will dilute the goodwill associated with developers. Copyright owners would also be unable to enforce contractual agreements as to the profile and representation of itself or control the flow of goods, which may ultimate reduce the copyright owners’ profits.[57] However this argument loses its impact with respect to the growing e-commerce market and consumers choosing lower prices over support.
34. The above argument is very similar to that raised in Levi-Strauss[58] and Davidoff[59] in re lation to the parallel importation of trademarked goods. Here the trademark owners claimed that the prestige of their goods was damaged by selling their respective products in Tesco and Costco and in large quantities at a low price. A trademark identifies a product with its producer and his reputation and thus is distinct in focus from copyright protection.[60] Laddie J in Davidoff stated that prestige was a parasitic right that interfered with the distribution of goods and bears very little or no relationship to the proper function of the trade mark right.[61] Thus, it has even less to do with copyright.
Piracy and Censorship
35. Piracy is an international organised crime and a very lucrative business. The same technology that is impacting on parallel importation also makes piracy easier. Piracy is a major concern for the software industry in Australia. In 1998, losses from software piracy were estimated to amount to 33% of packaged software where sales now exceed $A1 billion.[62] Parallel imports provide an additional hurdle for importers of pirated software as it channels imported software through recognised distribution arrangements, assisting Australian Customs.
36. Section 130B of the Parallel Importation Bill reverses the onus of proof so that now there is a pre sumption that the copy is an infringing copy. Copyright owners are also trying to combat piracy themselves. Microsoft is checking the Internet for illegal computer programs. [63] EMI has release new ‘copy-control’ software to protect the copying of CDs. [64] The software industry is also attempting to develop anti-copying devices.
37. A monopoly over distribution of material allows for the policing of censorship classification, as all software materials are imported by a small group of ‘majors’. [65] Limiting importation also limits censorship discrepancy between two different imports of the same software, particularly in relation to violent games. The incentive to have software classified is undermined by the need to capture the market quickly before someone else does. [66] These laws need to be re-examined in light of market changes due to allowing parallel importation.
38.
Additional key concerns of those opposed to lifting the ban on parallel importation are:
39. Most of these concerns are well founded but their limited impact is a trade- off for the increased benefits to the Australian consumer.
Australia’s International Intellectual Property Obligations
40. Australia has international obligations due to being a signatory of a number of agreements. The World Intellectual Property Organisation (“WIPO”) agreements set minimum standards. These standards are directed toward making the IP system more efficient and international in character.[68] Article 14 of the Berne Convention for the Protection of Literary and Artistic Works grants authors of literary works the exclusive right of authorising the adaptation, reproduction and distribution of the work. [69] Article 6 of the WIPO Copyright Treaty 1996 grants the author exclusive right of authorising the making available to the public the original copies of their work. The WIPO Copyright Treaty also provides that nothing in the treaty shall affect the freedom of contracting parties to determine their rights.
41. The Trade-Related Aspects of Intellectual Property Rights (1994) agreement (“TRIPS”) strengthened the international IP environment by setting minimum standards of protection for domestic enforcement, and by making IP issues a core element of the international trading regime. Adherence to TRIPS is a requirement for membership of the World Trade Organisation (“WTO”). Thus the dispute mechanisms of the WTO can be used to resolve disputes arising under TRIPS. [70]
42. Article 6 of TRIPS states that nothing in the agreement should be used to address the issue of the exhaustion of intellectual property rights. This means that Australia can adopt whichever exhaustion model it feels is in the national interest.[71] A key issue of intellectual property protection is when the rights should be exhausted. The idea behind exhaustion is that once a product has been marketed the owner can no longer exercise the rights of commercial exploitatio n.[72] This can be implemented at a number of levels. National exhaustion rights end upon the first sale within a nation. Thus the copyright owner cannot limit domestic distribution but can prevent parallel trade from other countries. Regional exhaustion permits parallel trade among a group of countries but not from outside. International exhaustion exhausts rights on fist sale anywhere and parallel imports are permitted. [73]
43. The New Zealand Australia Closer Economic Relations Trade Agreement (“CER”) created a WTO free trade area encompassing Australia and New Zealand. Article 5 provides that quantitative import restrictions on all goods originating in the territory shall be progressively liberalised and eliminated. The Steering Committee of Officials in 1990 found that provisions preventing import were potentially a ‘distinct impediment to trans-Tasman trade’ but noted that the laws of both countries were essentially in harmony. [74] However this is no longer the case as New Zealand repealed parallel import restriction in 1998.
44. The explanatory memorandum for the Parallel importation Bill repeatedly mentions the US Government’s consistent argument that Australia should not lift parallel importation restrictions. The Intellectual Property and Competition Review Committee did not independently look at the United States but concludes that any proposed changes are consistent with Australia’s international obligations.[75] Further there has been no challenge to any country that has lifted parallel importation restrictions beyond severe protests. When New Zealand allowed parallel importation the US trade representative and ambassador to New Zealand warned of “severe consequences” and that the move would go “far beyond the New Zealand marker” and have an impact on overall world trade. To which Jenny Shipley, the New Zealand Prime Minister, responded: “We will not be told how to run our country.” Nothing more happened.[76] As Allan Fels points out, the US itself enacted laws in October 2000 enabling the re -importation of brand- name pharmaceuticals as US prices were often 30 to 50% higher than in other nations. However, the American Secretary of Health and Human Services refused to implement the bill in December 2000, effectively cancelling it. However, the Bush Administration has not announced plans to repeal the bill. [77]
The International Experience
45. In 1998, New Zealand removed the prohibition on parallel importing provided that products were manufactured legitimately. This brought it in line with Singapore and Thailand. [78] However, New Zealand is now attempting to reintroduce a ban on the parallel imports of films, videos and DVDs for nine months from a title's first international release. [79] This is due to concerns about the future of regional cinemas but could also be attributed to protecting New Zealand’s growing film industry. A bill has not yet been introduced into parliament, and legislative discussion has been limited to a number of press releases. 46. In 2001, Hong Kong amended the Copyright Ordinance to exclude computer programs from the class of ‘infringing copies’. This includes anything embodied in the same article as the computer program at the time of importation, however, excludes films longer than 20 minutes & sound recordings. This is similar to Japan’s provisions and those proposed by Australia and New Zealand.[80]
47. The European Union (“EU”) implemented a regional exhaustion plan in line with the ‘four freedoms’ of the European Community, the free movement of goods, capital, services and people, but still limiting the parallel importation of goods from outside the EU. For example, section 22 of the British Copyright, Design and Patents Act 1988 still contains limitations similar to section 37 of the Australian Copyright Act.
48. In Davidoff, Laddie J stated that parallel importat ion could not be prevented unless there was full and explicit contractual restrictions on each player in the chain supplying the goods. [81] This sent shockwaves throughout the EU as it effectively allowed parallel importation of trademarked goods. However, when this case was joined with the Levi cases and heard before the European Court of Justice, they stated that for parallel importation to be allowed there must be expressed, positive and unequivocal consent on behalf of the trademark owner. The Japanese Supreme Court, however, adopted a similar approach to Laddie J in BBS Wheels III[82] where the court stressed the importance of unimpeded international trade.[83] Whether this will be expanded to copyrighted works is questionable.
49. Canadian law permits parallel importation in some circumstances. Parallel importation of copies are permitted where the copy was made by the person who licensed the exclusive licensee, or assigned the copyright, for Canada. However, border measures exist to prevent the parallel importation of copies from countries that are not members of the WTO or of the Berne Convention.[84]
50. The US has a national exhaustion policy and is strongly opposed to parallel importation despite the fact that it was one of the countries to benefit from Australia lifting import restrictions of CDs.[85] This is because the US is a large producer of intellectual property and is concerned about the free-rider policy.
Parallel Importation in the Book Industry
51. Copyright Act amendments of 1991 relaxed the restrictions on parallel importation of books to a 30/90-day rule.[86] This was an attempt to address the problem of availability rather than price, as it provides incentives to publish and distribute. It also promotes printing of the works locally to meet the 30-day rule. In substance, the amending Act creates an open market when the book is not first published in Australia or published within 30 days of first publication elsewhere. If this 30 day rule is met a person can import copies of a book with the licence of the copyright. However the order must be for only so many copies as are needed to satisfy that person's reasonable requirements. The copyright owner is required to give written notification to the person placing the order, within 7 days, that the order would be filled within 90 days of that date. If these conditions are not met the person can import the book from anywhere.
52. This system inevitably incorporates certain loopholes. It is permissible for an order to be placed with the copyright owner, the owner’s licensee or the owner's agent. There is also no requirement that the subsequent parallel import is equivalent to the amount initially ordered. Thus, if this order is not responded to in 7 days, or not filled within 90 days, the importer can fulfil the order by importing as many copies as they wish. Additionally, the copyright owner’s right to control imports only exists until another order is placed. Therefore, the copyright owner runs the risk of sacrificing control every time an order is placed, regardless of who places it.[87]
Parallel Importation of Sound Recordings
53. Parallel imports of sound recordings were allowed in 1998. Despite this there is no consensus on how much Australia CD prices have dropped since 1998, but the ACCC puts it at around 20% or $8. [88] One reason for this is that retailers continue to extract a “double reward” by using low price countries of export and high price countries of importation. [89] This is due to the markets relatively high willingness to pay.[90]
54. In August 1999, the ACCC instituted legal proceedings against Universal, Sony and Warner Music and their executives[91] claiming that they had taken unlawful action to discourage or prevent Australian businesses from selling competitively priced parallel imports hence contravening the TPA.[92] The allegation was that even though parallel import restrictions were lifted the industry was still attempting to control distribution. Sony settled out of court but Warner and Universal were found, by Justice Hill of the Federal Court, to have misused their market power and engaged in exclusive dealing to prevent parallel imports of CDs, thus breaching sections 45, 46 and 47 of the TPA.
55. Another reason for prices failing to drop dramatically is that parallel imports are susceptible to changes in exchange rates. Parallel importers will try to gain a double reward by purchasing the product as cheaply as possible and selling it at the highest price. Thus parallel exports are not a reliable source of foreign exchange, particularly for developing countries. [93] Due to a fluctuating Australian dollar, price and availability of parallel imports can change dramatically in a short period of time. The most significant change since parallel importation was allowed is non-specialist retail outlets being able to sell low priced top 40 CDs, for example Woolworth's in the Eastern States.[94] Specialist stores and producers have also targeted this onslaught of cheap CDs by marketing limited ‘enhanced’ CDs which contain special ‘Australia only’ bonus tracks or videos.
Conclusion
56. Although the ‘true’ role of copyright protection is to protect the author from illegitimate use of their work, copyright is a bundle of rights. These rights include protecting the rights of the producer and distributor who ultimately bring the author’s work to the public. Employment in copyright industries is becoming increasingly specialised as authors require outside expertise such as lawyers, accountants, producers, advertisers and marketing specialists. The rights associated with these contributions to the expression of the idea also require protection.
57. The rights of future works and developing countries also need to be protected. The profits from sales of computer software go into redevelopment and new programs. Although it can be argued that Australian consumers are paying too much for computer software price discrimination is still required as part of international trade and to ensure the utilisation of developing nations.
58. The approach adopted by the Parallel Importation Bill is one of international exhaustion. A timed exhaustion policy would diminish the effects on parties affected, due to the trade-off to benefit Australian consumers. The 30/90- day rule used in the book industry would still create price discrimination and increase availability but would offer either too much or too little protection than is necessary due to the nature of the rule.
59. The nine- month period of protection, proposed in relation to the New Zealand film industry, would be a more appropriate form of protection. This allows price discrimination for a set number of months, licensing of distributors, and an additional hurdle to piracy and censorship. This time period would also allow an opportunity for copyright owners to recoup their investment, whereas consumers would benefit from price reductions post the period. Thus, those consumers who wish to purchase the software immediately can do so at a higher price but if consumers would rather wait for a cheaper price they can forego a period of use. This would also allow Australian e-commerce suppliers to capture the secondary wave of purchasers. However, the correct period required would have to be investigated to allow copyright owners to recoup a reasonable profit. This balance ensures that the rights of those associated with helping copyright works reach the public and the Australian consumer are both protected.
Postscript: The Parallel Importation Bill was passed by the Federal Parliament on 27 March 2003.
Appendix 1 Product
(Australian retail store) (Australian on-line) (US on-line) Price
A$ Price A$ Plus freight A$ Price A$ Plus freight A$ Adobe
Photoshop 1100.00 1495.00 1504.00 1014.06 1023.46 Macromedia Dreamweaver 550.00 569.00 578.00 467.19 476.59 Tochiba
Satellite 4100XDVD 57000.00 5730.00 5755.00 4819.00 4939.00 IBM
Thinkpad 600E 6082.00 6922.00 6947.00 6181.65 6301.65 Kodak
DC290 1999.00 1783.00 1792.00 1658.97 1743.97 HP Deskjet
880C 494.00 479.00 498.00 552.97 652.97 Bloomberg by Bloomberg 28.95 34.95 42.45 22.52 31.82 Adida
Strident Crosstrainers 125.00 112.95 118.20 90.61 106.53 Adapted
from: Software Engineering Australia, Further submission to the
Intellectual Property and Competitive Review Committee (December 1999)
Intellectual Property and Competition
Review
<http://www.ipcr.gov.au/SUBMIS/docs/furthersubsea.pdf>
at 24
November
2002.
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