In the wake of last month’s win for ISP iiNet in its legal battle with Hollywood-backed anti-piracy group AFACT, the Internet Industry Association announced today it will begin work immediately on a code of conduct for ISPs and other Internet companies. The aim of the code will be to help clarify the legal rights and responsibilities of a connected range of providers including ISPs, search engines, hosts and social media sites.

In late February, the Full Bench of the Federal Court in Australia dismissed the movie industry’s appeal against last year’s judgment which found that ISP iiNet did not authorize the copyright infringements of its file-sharing customers.

“While I disagree with the primary judge’s reasoning in significant respects, I am nevertheless of the opinion that his Honour’s decision to dismiss the proceeding was correct,” the ruling from Justice Emmett read. “In my opinion the appeal should be dismissed.”

While the decision was a cause for celebration in some quarters, closer analysis of the ruling left significant room for caution, in that it raised the possibility that under certain future circumstances ISPs could be held liable for infringements carried out by their users. In very basic terms, if the movie industry had provided iiNet with better infringement notices and the ISP had still not acted on them, the outcome of the case may have been different.

The ruling therefore provides guidance on how the movie, music and other copyright-related industries should proceed in future in order to more forcefully back ISPs into a corner on subscriber infringements. However, Australia’s Internet Industry Association (IIA) feels that although some outline parameters have been set by the ruling, further detail is required for affected companies to effectively manage their responsibilities.

“Having closely reviewed the recent decision of the Full Federal Court, we’ve concluded it’s both necessary and appropriate to develop a code of practice to give a wider range of internet intermediaries greater certainty around their legal rights and obligations,” said IIA chief executive Peter Coroneos this morning.

“The iiNet case has provided us with welcome guidance on where responsibilities should begin and end, but falls short in defining reasonable steps intermediaries should take in responding to allegations of infringement by their users. The Code will address this gap.”

Although AFACT’s legal action was squarely aimed at iiNet, IIA’s code will be aimed not only at ISPs but other service providers including web hosts, search engines and social media services.

AFACT has insisted all along that piracy is straightforward thievery by Internet users, but iiNet and indeed IIA’s Mr Coroneos firmly believe that infringement is a result of consumers taking steps to fill a gap between supply and demand. While not condoning piracy, both believe that if the entertainment industries provide better services, change can be brought about.

“Market failure remains a core contributor to the infringement problem,” Coroneous said. “If users have access to more and better content, when, where and in the form they choose to consume it, and at a realistic price, we’re quite confident the motivation for infringement will decline.”

In addition to the development of the Code of Practice, the IIA will renew its efforts to have the so-called �?Safe Harbor’ provisions in the Copyright Act extended to cover not only ISPs, but other intermediaries. Coroneos said that protections similar to those available under US law do not exist under Australian legislation.

“This has left search providers, social network media, universities, auction sites, hosting and cloud services, corporate networks and others exposed to potential liability for the infringing acts of their users,” he said.

Quite how AFACT will respond to the creation of the Code of Conduct is unclear. IIA and AFACT had talks on the issue in 2007 but they came to nothing.