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Wednesday, April 8, 2015

Dallas Buyers Club v iiNet: a real cliffhanger

By Richard Sawyer, Lawyer

A Federal Court order will require several Australian internet service providers (ISPs) to hand over some of their account holders' details to Dallas Buyers Club LLC (Dallas), the owner of the copyright in the 2013 film Dallas Buyers Club. The details will be used by Dallas to attempt to identify end-users who have illegally downloaded the film. The decision to grant the order has already been described as landmark in the area of online piracy by several media outlets. However, other impending developments in the law may limit the long-term impact of the decision.


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.  iiNet refused to hand over its customers' details unless ordered to do so by a court and opposed the making of the order. For more detail, you can see our two previous blog posts on this matter here and here.

The decision

Federal Court Justice Nye Perram handed down a judgment yesterday indicating that he will grant the order for preliminary discovery. Justice Perram was satisfed that Dallas has a 'real case' against some of the ISPs' customers for copyright infringement. Furthermore, he held that Dallas could not identify those customers independently and that the ISPs could help to identify them.

However, the order will be subject to two important restrictions. First, in a move designed to 'ensure that the [account holders'] private information remains private', the uses to which the information can be put by Dallas will be significantly constrained. Dallas will only be permitted to use the information to seek to identify end-users who actually downloaded the film illegally and to negotiate with and sue those end-users. This constraint reflects the fact that, in the battle between rights holders and ISPs, two sets of rights come into direct conflict: the privacy rights of customers (protected specifically under Part 13 of the Telecommunications Act 1997 (Cth)) and rights holders' exclusive rights under the Copyright Act 1968 (Cth). Justice Perram's approach in requiring the disclosure of customers' personal information while, at the same time, restricting the uses to which it can be put, adopts the approach of the English High Court of Justice in Golden Eye (International) Ltd v Telefonica UK Ltd [2012] EWCA Civ 1740 and attempts to accommodate both set of rights.

Secondly, any letters that Dallas intends to send to account holders will need to be approved by the Federal Court. According to Justice Perram, this condition is necessary to protect account holders from the practice of 'speculative invoicing'. Speculative invoicing is the practice of sending letters of demand to a person threatening to sue them unless a certain settlement figure is paid. Justice Perram said that 'there is no doubt that [Dallas's parent company] has done this in the past, … [sending] very aggressive letters indicating to the identified account holder a liability for substantial damages and offering to settle for a smaller (but still large) sum'. Interestingly, Justice Perram said that whether this practice is lawful in Australia is 'not necessarily an easy matter to assess'. Despite this ambiguity, it was clearly something that, if legal, was undesirable in Justice Perram's opinion: the parties will come back to court for another hearing day on 22 April to debate the appropriate form of letter that Dallas can send to account holders once it has their names and addresses.


With yesterday's judgment as a precedent, rights holders now ostensibly have the missing link in the chain necessary to pursue users who illegally download content: they can trace downloads to an IP address and, now, can find out who is associated with that IP address.

Justice Perram held that an application for preliminary discovery ought not to delve too deeply into the merits of the applicant's substantive infringement case and should only rule out 'plainly frivouolous exercises'. Further, the judge rejected arguments that the application should be refused because the evidence only established a collection of trivial infringement claims, unlikely to be actually brought against infringers. In rejecting these arguments Justice Perram highlighted the possibility of courts awarding aggravated damages to rights holders in order to deter future infringements. The effect of these findings may be that there is a relatively low bar for rights holders to overcome in seeking to obtain the details of account holders associated with IP addresses known to have downloaded illegal content.

Nonetheless, rights holders will be constrained in what they can do with these details and it may be costly to obtain them. Justice Perram held that Dallas will be required to pay the costs not only of the proceedings but also the ISPs' costs associated with complying with the orders.

In addition, the long-term impact of the judgment is unclear. It comes at a particularly dynamic time in the law relating to online piracy. There are at least two major developments currently in progress that could significantly affect both rights holders and ISPs. The first is an industry code on copyright infringement, negotiated and agreed by representatives from ISPs and rights holders and today due to be submitted to ACMA for review. The draft Copyright Notice Scheme provides for a system under which an ISP must issue an account holder three warnings before a rights holder can seek a court order requiring the ISP to disclose the account holder's identity. Justice Perram did not need to consider this code, which he described as 'non-binding soft law', as it has not yet come into effect and will not apply retrospectively. However, it is possible that once the Code is in force courts may decline to grant preliminary discovery unless a rights holder has complied with the Code. This would limit the impact of the current judgment.

The second major development is the Federal Government's proposed website blocking legislation. This legislation, if adopted, will enable rights holders to obtain injunctions requiring ISPs to block their customers from accessing foreign websites that exist primarily to infringe or facilitate the infringement of copyright. This is likely to be a more effective means of stopping the problem of online piracy than taking action against individuals.

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