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Friday, March 6, 2015

Have we reached the final reel in Dallas Buyers Club, LLC v iiNet?

By Richard Sawyer, Lawyer

Anxious iiNet customers are likely to have to wait until late March to find out if their personal details will be given to a company that claims to own the copyright in the 2013 film Dallas Buyers Club.

Arguments before Justice Nye Perram in the Federal Court wrapped up last week in relation to the application for preliminary discovery made by Dallas Buyers Club, LLC (Dallas) against iiNet and a few other internet service providers (ISPs), with his Honour indicating that a written judgment was likely to take three weeks.

Arguments in the hearing centred around what iiNet considered to be weaknesses in Dallas's prospective case against its customers. However, other critical issues debated by the parties included the significance of ISPs' privacy obligations under the Telecommunications Act 1997 and the soon to be agreed industry code of practice in relation to online piracy.

The judgment will be significant for ISPs, their customers and those seeking to enforce their rights against Australians who download and share content online.


In October 2014, Dallas applied to the Federal Court for an order requiring iiNet (and some other Australian ISPs) to disclose the identities of some of their customers. Dallas filed evidence that it claimed proves that it had identified the IP addresses of people who illegally shared the film in 2014.  As we discussed previously, iiNet refused to hand over its customers' details unless ordered to do so by a court and opposed the making of the order.

1. Who owns Dallas Buyers Club?

iiNet challenged the reliability of the software used by Dallas to compile its evidence. In cross-examining Daniel Macek, a representative of the company used by Dallas to track illegal downloaders, iiNet's senior counsel suggested Macek did not understand how the software worked and forced him to concede that he could not speak to technical aspects of its operation.  

The degree to which the grilling will advantage iiNet is unclear, though, given Justice Perram's remarks that he felt that the cross-examination was 'unfair' in the sense that iiNet was asking technically difficult questions of the wrong person.

iiNet may have had more success in muddying the waters in relation to whether Dallas did in fact own the rights to the film at all, with Justice Perram describing himself as 'presently flummoxed' as to who owned the rights by the final day of the hearing.

These two issues are critical to Dallas's prospects of success in taking action against iiNet customers once they are identified and therefore goes to whether the order should be made. Justice Perram can only make the order for preliminary discovery if he is satisfied that Dallas may have a right to obtain relief against downloaders.

2. Privacy tensions

iiNet argued that privacy obligations imposed on ISPs meant that Justice Perram ought to be particularly cautious in making any order for discovery. In addition to contractual and general law obligations, ISPs are required under section s 276 of the Telecommunications Act not to disclose information relating to the substance of a communication that has been carried by a carriage service provider. This would include information about a customer that is linked to an IP address.

In response, Dallas countered that these statutory obligations operate subject to any court order and that they ought not to be used to stifle a rights holder from legitimately enforcing its rights.

3. Three strikes – you're out

The parties differed greatly in their estimation of the significance of a new industry code in relation to online privacy, released as a draft on 20 February 2015 by a joint body that includes both rights holders and ISPs. Under the draft of that code, ISPs would issue three warnings to their customers before a rights holder could apply for discovery of the customer's details.

Both parties accepted that, even if the code is adopted by the Australian Communications and Media Authority in April, it will not apply retrospectively to illegal downloads. However, iiNet argued that it may be appropriate to refuse the current application on the basis that Dallas has not complied with the process set out in a code that 'informs the court as to what is currently regarded by numerous industry participants as a reasonable and proportionate response to online copyright infringement'.


While we await a judgment it is worth noting that both parties agreed that an order for preliminary discovery can be subject to conditions imposed by the court. Accordingly, it may be that iiNet is ordered to disclose its customers details, but that Dallas is only permitted to use that information to send letters that are in a form approved by the court or that the court specifies that the letters are not to contain certain things, in an attempt to avoid the practice of 'speculative invoicing', namely, sending letters to account holders threatening legal action unless compensation is paid immediately, which iiNet has accused Dallas of engaging in in other countries.

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