Section 92A of the Copyright Act will come into force on February 28 and requires internet service providers to cut off internet accounts on the basis of copyright holders' allegations of infringement.
Business New Zealand chief executive Phil O'Reilly said internet companies had every reason to be concerned about this "pernicious" law.
But also of concern was that thousands of businesses outside the internet sector don't have a clue about the new law and how they could be impacted by it.
Any business which provides internet access for its staff would be regarded as an internet service provider under the new law. This means that rights holder groups including giant media companies would send infringement notices directly to businesses, requiring them to deal with accusations of breach of copyright.
Internet NZ executive director Keith Davidson said this could mean a business would have to find the staff member who was illegally downloading material, which would be "extraordinarily difficult", and cut off their internet access.
Copyright holders would issue infringement notices to businesses at least a month after the actual infringement, by which time it might be hard to trace to a computer. Also, it's relatively easy to fake an Internet Protocol (IP) address, said Davidson. IP addresses identify computers on a network.
Most businesses were probably unaware they need a termination policy in place before the changes come into force on February 28, Davidson said.
National communications minister Stephen Joyce said Section 92A of the Copyright Act was enacted by the Labour government. "We will keep a close eye on how the new law works in practice. We are prepared to look at further changes if they prove necessary."
O'Reilly said the minister should immediately review Section 92A and get opinions from actors, the entertainment industry, internet sector and businesses.
"The whole idea of copyright law is that you have an equitable balance between the rights of the copyright holder and users. To then say we are going to start forcing people other than judicial authorities to start policing the laws on the face of it that is pernicious."
Davidson said internet firms would have to divert scarce resources into policing customers who were accused of illegally downloading movies or music.
"We'd prefer those internet companies to be continuing with their plans to deploy fast broadband everywhere. That is much more pressing."
Better education would be a more useful way of combating the issue, he said. "Termination of accounts won't inspire young people to stop downloading illegally. Not many of the rights holders groups seem to be intent on education, except Microsoft."
The New Zealand internet industry was closely watching a legal test case against copyright infringement in Australia.
Eight big media players have formed the Australian Federation Against Copyright Theft and have launched court action against internet company iiNet, claiming the company has ignored infringement notices sent to it.
The federation includes Village Roadshow, Universal Pictures, Warner Bros, Paramount Pictures, Twentieth Century Fox and Disney.
The internet company, iiNet, argues there was no proof that any offence had taken place.
The New Zealand law opens up the possibility of a court battle of the same magnitude happening here, said Davidson.
- © Fairfax NZ News