Simpsons Solicitors

Australian Illegal Downloader’s Club – Dallas Buyers Club LLC v iiNet

January 27th 2015

iiNet again finds itself in the Federal Court, less than three years since it successfully defended long running litigation brought by a number of high profile companies in the film and media industry for authorising copyright infringement, which culminated in a successful appeal to the High Court.

The leading roles

The 2013 Hollywood blockbuster The Dallas Buyers Club needs little introduction. The movie received widespread critical acclaim and numerous accolades, including six Academy Award nominations and winning the much-coveted awards for Best Actor (Matthew McConnaughy) and Best Supporting Actor (Jared Leto).

With its popularity came a sharp rise in the number of people illegally downloading the film. The company that owns the rights to the film – Dallas Buyers Club LLC – is now seeking to pursue Australians who did so. With figures released by the IP Awareness Foundation (which estimate 29 percent of Australians aged 18-64 regularly access pirated content), it is easy to understand why the company has Australian downloaders firmly in its sights.

But they will need a little help before they get to that point. This is where the ISPs, led by iiNet, are implicated.

But how did they get information on Australian consumers?

Dallas Buyers Club used a German Company “Maverick Eye” to trace the internet protocol addresses of people who downloaded the film over systems such as BitTorrent. In theory they have an idea of who the infringers are, but at this point do not have access to customer details. This is information which ISPs may be able to provide. Accordingly, in around May 2014, the company started sending notices to ISP’s such as iiNet requesting customer details.

The targeted ISP’s have so far refused to comply with the company’s requests, so in October 2014 Dallas Buyers Club commenced preliminary discovery proceedings in the Federal Court seeking orders for the disclosure of customer identities from iiNet and four other ISP’s. Interestingly, Dallas Buyers Club didn’t include Australia’s largest ISPs – Telstra and Optus – in its application.

The ISPs are refusing to hand over the personal details on the basis that the disclosure would breach customer privacy, and that Dallas Buyers Club intends to use a practice known as “speculative invoicing”.

Why are the ISP’s so concerned about speculative invoicing?

Speculative invoicing is a practice not yet seen in Australia to any great extent, but has caused significant problems in the US and the UK where the practice has been very popular amongst some copyright owners and their legal representatives.

The way it works is that the copyright owners or their legal representatives engage in a mass distribution of pro-forma style letters of demand on suspected infringers, usually across multi-jurisidictions. From a legal perspective, there is an inherent problem with this, in that often such letters are based on foreign copyright principles (usually the country in which the copyright owner and its legal representative is based) and such letters can mis-state or fail to understand the local laws where the alleged infringement took place.

In the US and UK, various bullish tactics have been used to exert pressure on the suspected infringer to “pay-up or else”. Often, these letters demand payment far in excess of the license fee that otherwise would have been payable for a lawful download – for example, it is reported that some people have received demands of US$7,000.

Given the nature of the threats in the letters, and the fear and shame a recipient might feel on receiving such a letter, many people opt to just pay the amount demanded, without seeking legal advice, fearing that if they don’t they will end up in court or jail.

Any copyright owner intending to send out a letter of demand should keep in mind that, under Australian law, damages are generally compensatory rather than punitive. This means that the correct calculation of damages would be based on the fee the copyright owner would have received if the infringing copy was in fact a legal copy. If we use the example of The Dallas Buyers Club, that movie is currently available on iTunes Australia for $14.99. While aggravated or exemplary damages are available under Australian copyright law, it would be highly unlikely that someone downloading a single copy of the movie for private or domestic viewing only would be the subject of such an award.

Sending out what might be misleading letters of demand can back-fire including (for example) the company sending out such letters being liable for breaching the Australian Consumer Law.

In other jurisdictions, even a solicitor has been burned by the practice.

UK solicitor Andrew Crossley ran the law firm ACS:Law. In 2009, the firm started claims against suspected copyright infringers through P2P file sharing. He sent out around 20,000 letters which threatened court action unless each recipient paid a £500 fee. Crossley was taking about 65% of the amounts recovered, with the copyright owners receiving about 30% on average.

In 2011, ACS:Law attempted to gain judgment against 26 suspected illegal file sharers. The case was summed up by the Judge as “mind boggling” and eventually dismissed through extraordinary means by his Honour. Crossley was the subject of a professional conduct review and was ultimately suspended for a period of 2 years and fined by the UK Solicitor Regulation Authority and Law Society.

Interesting parallels: £700 letters of demand no pot of gold for Golden Eye

There are interesting parallels between the Dallas Buyers Club case and the UK decision in Golden Eye (International) Ltd v Telefonica UK Ltd [2012] EWCH 723 (Ch). In that case, a number of adult film companies (led by Golden Eye) were the copyright owners in various pornographic films. Golden Eye sued ISPs, demanding that personal details of copyright infringers be released to them so they could pursue them for the infringements. As in the present case before the Court’s in Australia, the UK ISPs dug their heels in, refusing to give the details.

Justice Arnold ordered that the ISPs hand over the names of the infringing customers to Golden Eye, and also dealt with the issue of speculative invoicing, noting that copyright owners and/or their legal representatives must properly safeguard the legitimate interests of consumers. If all 9,124 customers issued with the £700 fee paid, that would amount to a £6.3 million dollar recovery – a result hat Justice Arnold indicated would be absurd. Instead Arnold J ordered that any potential settlement sum should be negotiated with each individual recipient.

It will be interesting to see if the Federal Court of Australia follows the UK High Court.

The next steps

This case, which will be heard by Justice Perram in the Federal Court, has some way to go before the Court is ultimately required to decide on whether the ISP’s will be required to disclose their customer information. That hearing is tentatively sent down for 5 and 6 February 2015.

Between now and then, the Court has to determine whether it will require security for costs from Dallas Buyers Club. The respondent ISPs have made an application that the company pay $100,000 security in case it loses its claim to obtain the ISP customer information. The company has indicated it would like to pay no more than $30,000. That application was listed to be before the Court on 17 November 2014, though at the time of writing no judgment on that point had been published.

Dallas Buyers Club has also been ordered to provide iiNet with information on the Maverick Eye technology.

The matter is set down for further directions on 5 December 2014. At that time, the Court will determine whether it will allow iiNet to call Daniel Macek of Maverick Eye to give evidence of how the Maverick Eye technology is used to identify the copyright infringers and determine the authenticity and reliability of the information which the technology provides.

This case will be interesting to watch unfold, as it has the potential to change the way copyright owners access information about illegal downloads so as to enforce their rights. It also has potentially huge commercial ramifications for ISPs, who may lose customers if their personal information is disclosed.