It's the third day in Federal Court for the Australian Federation Against Copyright Theft and ISP iiNet. As they continue to pick over the ruling handed down several months ago by Judge Cowdroy, the Court wonders if the appeal will actually solve the copyright infringement dispute between the sides.

For the third day, AFACT, representing the Village Roadshow and several Hollywood studios, and ISP iiNet were back in Federal Court for the appeal in their long-running copyright infringement dispute. Three judges will be required to decide the outcome – should iiNet be held accountable for copyright infringements carried out by its customers?

Yesterday, lawyers for AFACT argued that iiNet had the power to stop its customers infringing on the rights of the studios represented by the anti-piracy group.

Today, iiNet lawyer Richard Cobden detailed why the ISP had not acted on the copyright infringement notices it received from AFACT. He also questioned whether by receiving infringement notifications but doing nothing with them, the ISP should then be considered as an authorizer of those reported infringements.

Referring back to iiNet’s assertion yesterday that disconnecting customers would not be a “reasonable” response to infringement notices, Cobden said that AFACT never asked for a graduated response, only account terminations on the basis of its evidence – evidence which iiNet says is of questionable reliability.

Justice Arthur Emmett went on to voice concerns that the appeal in this case might never solve the dispute between the parties and that copyright infringement might continue whatever the outcome.

Emmett said that if iiNet’s assertion was accepted – that AFACT had failed to suggest “reasonable steps” the ISP could take in response to infringement notices – the anti-piracy group could simply submit new notices with new terms and then sue iiNet again.

“It just seems to me that out there is a commercial solution and there’s nothing we can do that will ultimately resolve this problem,” said Emmett.

However, as noted here, discussions between AFACT, ISPs and the Internet Industry Association (IIA) on the possible introduction of a code of conduct for dealing with infringement took place in 2007 and 2008. Those discussions effectively ended after AFACT announced action against iiNet.

The appeal continues.