"Optus cannot... bring itself within the scope of the Section 111 exceptions" that permit individuals to record TV broadcasts, the Court ruled.
The key point appears to be that the Federal Court disagreed with the idea that TV Now allows an individual to record a TV program using Optus's equipment, even though the service is set up in such a way that separate recordings are made for each user.
Instead, the Federal Court found that the recordings are being made jointly by the user and Optus, and that Optus's involvement takes the activity outside the Copyright Act's provision for the private recording of free to air broadcasts.
It seems likely that Optus will appeal to the High Court.
Page 2: Implications
The Telstra camp may be happy with the outcome, but there could be a sting in the tail of the Federal Court ruling. If the involvement of a third party in the process takes the recording outside the Section 111 exemption, what is the situation where an individual uses a smartphone app to instruct a Foxtel IQ or a Telstra T-Box to record a free to air program?
What's actually happening is that the user is telling Foxtel or Telstra to tell the equipment to make the recording. So unless the details of the Federal Court judgement hinge on the physical location of the equipment (since IQ set top boxes are the property of Foxtel, not the customer), these services could be threatened by the Court's decision.
The ruling would appear to prevent the legal use of any cloud-based TV recording service, and perhaps even the use of cloud storage to hold private recordings that would otherwise have been permitted under copyright law.
The OzHub industry coalition has expressed its concern about the ruling. "The decision by the appeal court overturns the principle from the first court decision that the law applies to what consumers are entitled to do, and should not try to dictate different rules for different technologies," said OzHub chairman Matt Healy.
"Putting aside all the excitement and hyperbole that this case has caused in recent weeks, there is a very simple principle that has been lost today; that in a time of media convergence the law should be technology neutral where possible," he added.
"This approach to regulation is crucial to Australia's ability to continue to be an innovative and creativity economy. The migration of computing activities from individual devices into shared infrastructure in the 'cloud' is one of the most important trends of the past decade, and the Optus TV Now case represents a milestone moment."