The Australian Law Reform Commission (ALRC) has proposed replacing specific exemptions in the Copyright Act with a broader fair use section, which would be flexible enough to allow for technology advances and an increased use of cloud services.

The proposal came in a discussion paper released on Wednesday by the ALRC as part of its review of the Copyright Act .

Google, eBay, and Optus had argued in submissions to the review that the current law is so restrictive that the act of caching, which internet service providers (ISPs) and search engines rely on, is not technically legal in Australia. But several organisations, including copyright groups such as the Australian Federation Against Copyright Theft (AFACT), argued in their submissions that the existing exceptions in the Act would cover activities such as caching, and that tech companies in Australia have not been stifled by the existing law.

But the most recent test of copyright law in relation to technology was in the Optus TV Now case, where the Full Federal Court ruled that Optus' TV recording app that stores TV broadcasts in the cloud for customers to watch at a later time was in breach of the Copyright Act. The court ruled that Optus could not rely on the section of the Act that allows users to record broadcasts to watch at a later time, because Optus was involved in the recording of the program on a commercial basis.

The ALRC said in its discussion paper that the exceptions in the Act, such as the one that Optus had sought to rely on, were over-proscriptive, and suggested that it might fall under fair use, should the Act be overhauled.

"Sometimes a third party's use may seem merely to amount to facilitating another person's fair use; they will have no ulterior purpose themselves," the ALRC said.

"Applying fair use, the question then might be, is a third-party use of copyright material more likely to be fair than it otherwise would, if the use is simply for another person who would be entitled to make the same use?"

The ALRC said it would be marginally covered by fair use, but said that finding a commercial purpose in a particular use would tend not to be covered under fair use.

The commission said that above all else, the proposed changes would allow the test of such technologies in a more flexible environment.

"To say that these uses should at least be considered under the fair use exception is not to say the uses would be fair. But copyright law that is conducive to new and innovative services and technologies should at least allow for the question of fairness to be asked."

The proposed fairness factors that the ALRC has suggested should be included in the changed Act would be: Purpose and character of use; the nature of the copyright material used; the amount of the copyright material used; and the effect that the use would have on the material's value.

A proposed list of purposes under the Act that would fall under fair use would be: Research or study; criticism or review; parody or satire; reporting news; non-consumptive (such as caching); private and domestic; quotation; education; and public administration. The ALRC has also questioned whether more needs to be added to this list.

The ALRC said that overhauling fair use would provide flexibility to respond to changing conditions and assist innovation.

"In the ALRC's view, a fair use regime will: Employ technology-neutral legislative drafting; assist predictability in application; minimise unnecessary obstacles to an efficient market; and reduce transaction costs," the ALRC said.

"The ALRC considers that the enactment of fair use would foster an entrepreneurial culture which contributes to productivity. The ALRC considers that introducing fair use into Australian copyright law would contribute to such an environment, and will constitute a measure that will assist in making Australia a more attractive market for technology investment and innovation."

The ALRC is accepting submissions on the discussion paper until July 31, 2013.

The commission is due to release its report to the government after the next federal election.