A small Australian ISP has received a demand that it block access to an overseas website or face legal action in the Federal Court.

If the case goes ahead, it would be the first time Australia's site-blocking laws would be used and tested in court.

Law firm Moray and Agnew, acting for construction firm Simonds Homes, sent the legal demand last week, giving the ISP seven days to block the website.

The website is CHM Constructions (chmconstructions.com), which Moray and Agnew said was "infringing on Simonds' rights".

"We consider it to be incumbent upon you, as an internet service provider, to cease providing access to an online location outside Australia, the primary purpose of which is to facilitate the infringement of copyright," the letter demands.

It is understood that the ISP in question, which has only few thousand customers, has not blocked access to the website.

Moray and Agnew said failure to restrict access could result in a legal escalation.

"In the event that you fail to do so [block access to chmconstructions.com] ... Simonds is left with no option but to apply to the Federal Court pursuant to section 115A of the Copyright Act 1968."

It was widely assumed in the telecommunications industry that the first test of the laws would come from a major content rights holder like Foxtel.

The pay TV company said in August a site blocking case was likely "in the coming months".

To block or not to block, that is the question

Australia's site blocking laws came into effect in June.

They give rights holders the power to apply to the Federal Court to have foreign-based websites blocked, if the "primary purpose" of that website is to infringe copyright.

Before an injunction to block a website is granted, the Federal Court has to take into consideration a number of factors.

One condition is that the website is based overseas, which Moray and Agnew say chmconstructions.com is.

But the legislation also says the court must be satisfied that "the primary purpose of the online location is to infringe, or to facilitate the infringement of, copyright".

While the legislation does not define what constitutes a "primary purpose", the legislation's revised explanatory memorandum does explain it in more depth.

"The provision would only capture online locations that have the primary purpose of infringing copyright or facilitating the infringement of copyright," it said.

"This excludes online locations that are mainly operated for a legitimate purpose, but may contain a small percentage of infringing content."

Doesn't appear to be copyright related: Copyright Council

While the case has caused some concern in ISP circles, Fiona Phillips, the executive director of the Australian Copyright Council, said at first glance the case was not related to copyright.

"This case seems to be about trade marks or misleading and deceptive conduct, not about copyright," she said.

The CHM Construction website contains a Simonds Homes logo, and a link to its website, but Ms Phillips said that was probably not enough.

"This is a different issue that the Section 115A [legislation] was trying to address."

"To my knowledge there hasn't yet been any litigation around Section 115A, but once there is I assume ISPs, rights holders and the courts will have a better idea of how the legislation is supposed to work."

Letter shows possible 'unintended consequences' of site blocking laws

Internet Australia, the peak organisation representing internet users — many of whom run small ISPs — said the legal demand was an example of the unintended consequences warned about prior to the introduction of the law.

"Section 115 was introduced, with great fanfare, by the Abbott government as a means of dealing with so-called audio-visual 'piracy'," said Internet Australia's CEO Laurie Patton.

"The lawyers involved here appear to be using the provisions of 115 for a purpose for which it was not primarily designed, however lawful their actions may be.

"Ultimately an ISP will only be bound to act if a court orders it to do so.

"The problem for smaller ISPs is the potential costs involved in defending a matter like this and so they simply may not bother.

"The risk is that sites will be blocked without having been tested at law.

"So innocent sites could be victims of malicious actions, say, by competitors or aggrieved customers."

No one from Moray and Agnew, CHM Construction or Simonds Homes has responded to requests for comment.