Movie pirates in clear waters…for now

In what is proving to garner more interest than the latest Hollywood flick, the Federal Court last month handed down the fourth installment in the case brought by Dallas Buyers Club LLC (DBC) and its parent company Voltage Pictures LLC against six Australian ISP’s (including Internode, Adam Internet, Dodo, Wideband and Amnet Broadband) seeking the names and IP addresses of BitTorrent users and alleged copyright infringers of the film “Dallas Buyers Club”. The decision has provided some clarity about what DBC, and by extension other copyright holders, can and cannot do in relation to demanding money from alleged copyright infringers.

Most notably, DBC were told they would have to pay a $600,000 bond before any customer details were released as the Federal Court feared they would not comply with the Court’s directives given that they have no presence in Australia and are therefore out of reach of our Australian legal system. DBC did not immediately accept this bond offer, and the time for filing an application for appeal has now lapsed.  

Let’s recap…

Last year, proceedings were commenced by DBC in the Federal Court in an attempt to obtain the customer details of 4,726 IP addresses which had allegedly downloaded and shared (through uploading), copies of the film through the peer-to-peer file sharing application BitTorrent.

DBC were smart- compared to previous attempts by copyright holders to obtain IP details, they applied for preliminary discovery, which is a procedure which enables a Court to assist in identifying persons which a party may wish to sue. At first instance, the Federal Court held that DBC met the requirements to grant preliminary discovery in that the alleged copyright infringers had a ‘real case’ to answer and DBC therefore had a right to obtain relief against the unidentified users.

The ISPs were therefore ordered to hand over the names and addresses of the users who had downloaded and simultaneously uploaded the film via BitTorrent. However, in exercising the Court’s discretion to ensure that preliminary discovery was only granted in order to recover money that could plausibly be sued for, this order to release the details was stayed until Justice Perram was satisfied that DBC did not intend to engage in speculative invoicing- a practice where copyright holders send letters to alleged infringers, often demanding large sums of money, even in circumstances when the consumer has not committed an infringing act. The matter was therefore brought back before Perram J so he could review the materials and any letters of demand DBC intended to send.

Dallas Buyers Club LLC v iiNet Limited (No 4) [2015] FCA 838- DCB’s claims:

In the latest decision, Perram J reviewed several versions of the correspondence DBC wished to send to alleged infringers. Whilst he noted that the exact monetary figures of the amounts claimed remained confidential, Perram J summarised DBC’s submissions as encompassing four heads of damages they wished to demand from users, being:

1. The cost of purchasing a single copy of the film;
2. A licensing fee charged to each user who had uploaded the film to Bit Torrent (i.e. the fee that DBC would have charged each user to authorise them to legally upload the film);
3. Punitive damages based on how many copies the alleged infringers had downloaded of other copyrighted films;
4. The costs in obtaining the alleged infringers details.

The Decision:

In assessing the proposed demands outlined above, Perram J made it clear that the Federal Court Rules may be used by prospective applicants to discover information about unidentified wrongdoers in order to sue them, but also in order to negotiate with them. However, this power must be within the proper confines of the law and not be used to facilitate court cases lacking legal substance. Therefore, his Honour was necessarily compelled to make findings as to whether the demands above could be plausibly recovered in any Court proceedings brought against the alleged infringing users.

Perram J held that DBC’s 1st and 4th claims were reasonable. Even though the cost to buy a film under claim 1 was higher than the costs to rent the film from iTunes (which some film viewers may have done if they had not have illegally downloaded the film), it was held that the cost of legitimately purchasing the film would be an appropriate remedy to award DBC for the very clear copyright infringement. The Court also noted that DBC had invested a substantial amount of money into identifying the alleged infringers and bringing the Federal Court proceedings, and would not have been out of pocket but for the copyright infringement, so it was appropriate that they claimed the loss in claim 4.

In relation to claim 2, the Court noted that the cost of charging a license fee for each upload of the film the infringer made could potentially be “astronomical” given the millions of users on the BitTorrent site, and the fact that ‘slivers’ of files are uploaded to the site, rather than the whole film in one file. Perram J noted that a Court would award damages to put DBC back into the situation had the infringement not occurred, and it was not plausible that a user would have negotiated a distribution agreement with DBC to upload the film to BitTorrent- the more likely scenario is that a person would have bought or rented the film legally. Therefore, his Honour rejected this claim.

His Honour also concluded that claim 3 would be dismissed by a Court as the Copyright Act 1968 (Cth) does not allow punitive damages to be awarded with reference to the infringement of another party’s copyright. Therefore, the order to release the user’s details was stayed unless DBC undertook to only contact the alleged infringers for claims 1 and 4, secured by the bond.

Since the time for appeal Perram J’s decision has now lapsed, DBC’s lawyers have indicated that they are considering other options, including focusing on finding an avenue to hold infringers liable for any subsequent uploading of the film by other users of the site, which was facilitated by the original upload. Perram J commented that he did not have a problem with this theory, but had not considered it in his judgment as he was not provided with any particulars by DBC. In any event, the content of any letters of demand for these “downstream” infringements would need to be reviewed by a court.

Movie pirates might be breathing a sigh of relief for now, but the implications of the decision is that the Courts will order ISP’s to reveal details of previously unknown alleged copyright infringers in an application for preliminary discovery, so long as any demands by the copyright holders are subject to scrutiny and that any damages sought to be recovered in the letters of demand are equal to what could be plausibly recovered in Court.  Whether DBC’s lawyers will be able to seek damages for further downstream infringements remains to be seen.

The saga continues…