The Australian Copyright Act's strict exceptions framework is stifling productivity gains that could be worth AU$600 million per year, according to analyst firm Lateral Economics.

Exceptions detail very specific situations where restrictions on using copyright material do not apply. Any copying of copyright material that falls outside of those set exceptions is considered an infringement.

According to Lateral Economics, industries that are dependent on copyright exceptions, including telecommunications, education, and data-hosting companies, contributed AU$182 billion to the Australian economy in 2010. That equated to around 14 percent of the nation's GDP.

It should be noted that this amount accounts for the industries' overall economic contributions, and is not specific to their copyright exception activities. Australia's net export of services depending on copyright exceptions was AU$14 billion in 2010.

In contrast, Australia paid roughly AU$3.8 billion to other countries for use of intellectual property, while only receiving AU$929 million in 2011.

Lateral Economics calculated that if the current copyright exceptions regime were to be overhauled and replaced with a more flexible arrangement, it could yield AU$600 million in productivity gains after 10 years.

The analyst firm looked at legitimate industries, and did not delve into illegal activities such as movie piracy. It claimed that inflexible copyright exceptions not only stymie potential productivity profits, but innovation, as well.

Current exceptions don't factor in new technology, which has changed the way that information, including copyright material, is transferred and stored digitally. This leaves many industries open to legal action from content rights holders.

"In the digital world, it's impossible to handle anything digitally without making a copy of it," Lateral Economics CEO Nicholas Gruen told ZDNet. "We have a very severe case of legal obsolescence we need to clean up in our Copyright Act."

Technology developments such as cloud computing and social media have changed the way that information is stored and shared. Optus was recently embroiled in a copyright case over its Optus TV Now service , which allowed customers to store free-to-air content in the cloud for later viewing.

The Australian government recognises that the Copyright Act, with its rigid exceptions framework, is outdated in an increasingly digital world. The Australian Law Reform Commission (ALRC) has initiated an inquiry to look at exceptions in the Copyright Act and how they can be changed to accommodate the growing digital economy.

A report of the inquiry is not due out until 2013.

Gruen said that the US model for copyright exception, which allows copyright work to be used without permission in situations where it is deemed "fair" to do so, is far better than current arrangements in Australia. Fair use can be determined by a simple list of criteria.

"The US method of a flexible exception is vastly superior," Gruen said. "It has underwritten the development of some of its incredible digital assets.

"If you're an ISP providing internet infrastructure to Australia, and we have a fair use of copyright arrangement, you were less likely to be sued for inadvertent infringement."

Making copyright exceptions more flexible will not be detrimental to rights holders, either, Gruen said.

"We're not talking about piracy here," he said. "Part of the test of fair use is to ensure the act of copying copyright material would not harm the market [that] rights holders are trying to sell in anyway."