13. Secondly, I find that a scheme for notification, suspension and termination of customer accounts is not, in this instance, a relevant power to prevent copyright infringement pursuant to s 101(1A)(a) of the Copyright Act, nor in the circumstances of this case is it a reasonable step pursuant to s 101(1A)(c) of the Copyright Act.

I find that iiNet did have a repeat infringer policy which was reasonably implemented and that iiNet would therefore have been entitled to take advantage of the safe harbour provisions in Division 2AA of Part V of the Copyright Act if it needed to do so. ... While iiNet did not have a policy of the kind that the applicants believed was required, it does not follow that iiNet did not have a policy which complied with the safe harbour provisions. However, as I have not found that iiNet authorised copyright infringement, there is no need for iiNet to take advantage of the protection provided by such provisions.

20. The law recognises no positive obligation on any person to protect the copyright of another. The law only recognises a prohibition on the doing of copyright acts without the licence of the copyright owner or exclusive licensee, or the authorisation of those acts.

The above taken from the judge's summary of the findings

426. There can be no doubt that the respondent has the contractual right to warn and terminate its subscribers pursuant to its CRA if a breach of its terms occurs. However, that does not, of itself, make termination a reasonable step or a relevant power to prevent infringement in all circumstances. It must be remembered that absent those contractual provisions, the respondent would have had no power to terminate subscribers even if they were found by a Court to have infringed copyright. The CRA constitutes the respondent’s standard contractual terms used by a wide variety of subscribers. Consequently, and unsurprisingly, the CRA seeks to provide sufficient contractual terms to cover all eventualities, both existing at the time of the writing of the CRA and into the future. That does not mean that such terms should or would always be exercised even if a contractual right to exercise them arises. 427. Further, the right to do something does not create an obligation to do something. The doctrine of privity of contract provides that the only two parties relevant to the enforcement of the CRA are the respondent and the subscriber. Should the contract be breached by the subscriber, it is entirely a matter for the respondent to decide whether to act on the contract. Had the respondent taken action against its subscribers based on an AFACT Notice and it was subsequently found that the allegation was unfounded, the respondent would have committed a breach of its contract with the subscriber and been made potentially liable for damages without any indemnity from the applicants or AFACT. In such circumstance it was not unreasonable that the respondent should have sought to be cautious before acting on information provided by a party unrelated to the CRA.

436. The Court does not consider that warning and termination of subscriber accounts on the basis of AFACT Notices is a reasonable step...

The above taken from the full findings available at: http://www.austlii.edu.au/au/cases/cth/FCA/2010/24.html