Sony brings landmark modchips lawsuit in Australia

Sony is bringing a potentially landmark lawsuit against a PS3 modchip seller over the legality of modchips in Australia. Most recently, Sony secured a temporary injunction against the seller, Ozmodchips.com, banning them from selling any modchips while the lawsuit proceeds. In this guest post, Melchor Raval comments on the lawsuit and what it could mean for modchips Down Under…

Once upon a time, Australian gamers could brag to US and UK gamers that they had the right to modify their consoles using a modification chip (mod chip) [Jas: you can read more on modchips here and here]. At the moment, Australian gamers can basically install these chips into their consoles to circumvent the system’s capabilities of regional coding, digital rights management (DRM), and install an alternative operating system to completely re-purpose the console. However, recent amendments in the Australian Copyright Act 1968 introduced a stricter regime which could potentially ban mod chips (more on this below). Yet despite some recent fines obtained by Nintendo to manufacturers and distributors of the R4 modchip device – no actual case has actually confirmed that the changes ban modchip. In effect, as far all Australian gamers are concerned, the mod chip is still legal because the amendments are yet to be interpreted by a judge.

But this may not last for long since Sony is now bringing a test case against modchip distributor, OzModChips, to the Australian Federal Court in which it argues that the distribution of mod chips are illegal under the Australian law and therefore OzModChips must cease its modchip distribution. Before we get into the legal details, let’s backtrack for a bit.

On August 25, OzModChips.com uploaded three Youtube videos online which proved that the first ever claimed working PS3 ‘mod chip’, called PS Jailbreak, actually worked. The mod chip is not actually a ‘chip’ like ye olde PS2 mod chips but is actually a simple USB stick that can simply be plugged into the PS3 USB ports. The device hacks the PS3 console and (for now) only allows the backing up of games into the PS3 hard drive, but the developers claim that it will open up the possibility of running homebrew software on the PS3 as well (such as emulators). The device was initially planned to be sold by the end of September 2010 by OzModChips with the hefty price of $170 Australian dollars.

Fearing that the PS Jailbreak could mean a repeat of the PS2 mod chip and piracy debacle, Sony succeeded on in obtaining a temporary injunction through the Federal Court of Australia on August 27 2010, to block the importation and sale of the device. In order to keep the ban permanent, Sony will have until September 3 2010 to convince the Court of the illegality of the mod chip. In a nutshell, Sony needs to prove to the Court that the device will be solely used to infringe Sony’s copyright works. OzModChips on the other hand argues that the device can be used for legally backing up games and homebrew applications (as they all do).


The Legal Rules


Sony’s and OzModChip’s totally different perspectives are not surprising since similar cases in the past, regardless of jurisdiction, have presented the same arguments. Australia gamers however have had the advantage because of the 2006 High Court decision in Sony v Stevens, which legalised the mod chip on the grounds that Sony’s technological measures did not prevent or inhibit infringement because the infringing activity (such as copying the game using your PC) precluded the use of the mod chip anyway. The mod chip only allowed access to the infringing game, but was not actually the cause of the infringement, which Sony’s technical measures needed to prevent. (See more on that here  – which explains it all in layman terms).


In spite of this short-lived victory for Australian gamers, Australia amended the Copyright Act 1968 in 2006 which obligated Australia to align their copyright rules with the far stricter American DMCA through the Australian-US Free Trade Agreement. The changes are very long and complex, but it can be summarised in this nifty comparative table:

The Arguments


(1) SONY


Though very simplistic, the table illustrates that Australian gamers might not be lucky this time for a number of reasons:


I. Sony can claim that the PSJailbreaker device is a circumvention device that circumvents the technological measures of the PS3 to allow the unauthorised backing up of games, which infringes s.10 (1) of the Act because access to these backed up games are not “in the normal course” of the PS3’s operation. Note the emphasis on the term effective because if reading literally from the actual provision, there is actually no requirement that the TPM needs to be effective in controlling access of work.


II. Sony can also bring a claim that the sale, manufacture and marketing of such devices are illegal because the device has no purpose other than to enable or facilitate the circumvention of the PS3’s TPM. Also note that emphasis is added on the lack of an effective technicality.


III. Any arguments contrary to the above two regarding the mod chips ability to allow the backing up of games can be nullified because of the explicit limitation brought about by s.110AA.


The third argument is perhaps the most disturbing because there is a lack of awareness in part by Australian gamers that backing up of games is NOT actually allowed since S. 110AA ONLY allows an individual to copy a videotape into electronic form for personal and domestic use. In fact, the Attorney-General’s Copyright Department (which can be read here) recently announced that no amendments will be made to the private copying exceptions for computer games!! So tough luck Oz gamers – backing up isn’t actually allowed at all, but could potentially tantamount to an illegal reproduction.


(2) OzModChips.com


On the other hand, OzModChip could argue for the interoperability exception under s 116AN. This exception basically allows users to circumvent technological measures to install independent programs (i.e. homebrew) to devices without the authorisation of the owner.


The interoperability exception is quite a tricky legal technicality because it has not been tested in Australia. On the other hand, American case law (including Sony v Gamemasters and Sony v Divineo) have ruled out the application of their version of the interoperability exception as a defense for mod chips because the courts literally interpreted that the mod chip “bypassed, removed, deactivated or impaired a technological measure in the console without the authority of the copyright owner”. Moreover, interoperability must also be necessary under the DMCA and this becomes doubtful when console manufacturers have released official interoperable programs which can legally access the console without illegal circumvention (see here).


Under Australian copyright law however, there is a distinct lack of requirement that interoperability must be necessary. As such, OzModChips may argue that the development of independent homebrew applications interoperable with the PS3 is not totally dependent on whether it is actually necessary in the first place. Hence developers can develop independent apps interoperable with the PS3, such as an emulator, which can be useful but otherwise ‘unnecessary’. And if Sony argues that interoperability should only be allowed when it is necessary, well they pretty much proved that the using the PSJailbreak is necessary to create interoperable application since Sony removed the Linux compatibility option.


However, the ability of the dongle to play “infringing” games could weigh more than its non-infringing applications. This is to be decided by the court if they do a proportionality test –that is – whether the proportion of users who will use it for homebrew will actually be significant enough to warrant its legitimacy. Otherwise, if more gamers use it to pirate games then the defense will be useless.


So who will win?


Since this is the first time the amendments will be tested, the case will be decided on how the court interprets the provisions in question. My bet is that Sony will probably win this time because any backing up arguments will be rejected by the court, and it seems that the defendant will solely rely on this argument for the legitimacy of the device. The homebrew argument could also come off too weak since the court could potentially question whether the proportion of users who will use the device for legitimate home brewing might (and will) be outnumbered by eager pirates.


It is certain that the gaming industry have stepped up their battle against the mod chip manufacturers (as witnessed from the recent Playables case in the UK) and Sony has a lot riding in this case because the potential of piracy with their flagship console already spell big problems with their software sales, evident from the lack of developer support for the PSP. This is the one case for the industry and gamers to watch closely.


Melchor Raval is a current PhD Candidate at Monash University of Australia, writing his dissertation about the persistence of modification devices in the new generation of gaming consoles and the legislations that affects the legitimacy of the device. His previous article, which is a comparative analysis of the Australian amended Copyright Act 1968 and the DMCA regarding the mod chip, is pending for publication with a number of academic journals.





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