201509.17
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Copyright in Australia: Dallas Buyers Club LLC v iiNet Ltd

Date of Judgement 7 April 2015
Judge Perram J
Applicants Dallas Buyers Club LLC And Voltage Pictures LLC
Respondents iiNet Limited, Internode Pty Ltd, Amnet Broadband Pty Ltd, Dodo Services Pty Ltd, Adam Internet Pty Ltd And Wideband Networks Pty Ltd

Introduction

In line with the increasing ways and possibilities for infringement of copyright and the harm it causes the community, the Federal Court of Australia held that the respondents (‘the Internet Service Providers’) must hand over contact details of the Australians accused of illegally downloading the movie Dallas Buyers Club. Justice Perram imposed the conditions that such information was to be provided to the applicants (‘the Copyrights Owners’) for the purposes of recovering compensation for the infringements. The Court held that any letters to be sent by the applicants to the account holders associated with the infringing IP addresses were to be firstly submitted to the Court (‘the Federal Court of Australia’) in draft form.[1]

Material Facts and Procedural History

An application for preliminary discovery was brought by Dallas Buyers Club LLC (an entity claiming to be the owner of the copyright in the Dallas Buyers Club movie) and its parent Voltage Pictures LLC. The respondents are six Australian internet providers, which provide internet services to members of the public and businesses.[2] Preliminary discovery is a procedure which enables a party to seek the Court’s assistance in identifying individuals which it wishes to sue.[3] The applicants became aware of copyright infringements by illegal downloading of the movie stemming from 4,726 IP addresses operated by the Internet Service Providers and applied for the Court’s assistance in requesting the contact details of the account holders with those IP addresses from the Internet Service Providers.

The respondents (the Internet Service Providers) resisted the application on the bases that:

  • the evidence put forward to identify the infringing IP addresses was not sufficient;
  • the claims against the respondents were speculative and the conditions for seeking preliminary discovery have not been satisfied;
  • the applicants have not proven that either of them was the owner of the copyright in the movie;
  • the monetary claims against each of the account holders were so small that there was no case that made any commercial sense (discussed below); and
  • since there was no case that made commercial sense, the account holders’ details could not be divulged due to privacy reasons (discussed below).[11]

The Court was satisfied that ‘Maverik Monitor’, the system used to identify the infringing IP addresses via BitTorrent, was sufficiently accurate.[4] The Court was also satisfied that downloading a segment of the movie provided circumstantial evidence that the end-user was infringing the copyright of the movie, which provided enough evidence on a preliminary discovery application.[5] It was enough to establish that there was an actual prospect of succeeding rather than a fanciful one.[6]

The Court held that “the contractual arrangements which were entered into in order to bring Dallas Buyers Club into existence were made by Dallas Buyers Club LLC” which ma[de] it the original copyright owner.[7] Voltage was joined to the proceedings as it owned Buyers Club LLC[8] and both entities were authorised to seek preliminary recovery.[9]The respondents sought to exclude Voltage from the proceedings on the basis that the copyright originally owned by Dallas Buyers Club LLC was assigned to Picture Perfect Corporation under a Distribution Licence Agreement dated 18 October 2012. It was held that the Distribution Licence Agreement was a licence rather than an assignment and therefore both Dallas Buyers Club LLC and Voltage were able to commence proceedings.[10]

Reasoning

The Requirements for Preliminary Discovery

Preliminary discovery is governed by rule 7.22 of the Federal Court Rules 2011 (Cth) (‘FCR 7.22’). To meet the requirements of FCR 7.22, the Court must be satisfied that:

  1. the applicants have the right to seek relief from the respondents;
  2. the applicants could not identify the prospective respondents associated with the IP addresses; and
  3. the respondents are likely to have access to the information referred to in paragraph b).[12]

In regards to paragraph a), the respondents stated that each IP address has uploaded only a sliver of the movie via the peer-to-peer sharing program BitTorrent and argued that this action did not constitute copyright infringement due to the small size of the upload. The Court rejected this argument and held that it did constitute an infringement.

In regards to paragraph b), the respondents argued that the applicants were able to access prospective respondents’ (the infringing parties) information through chat rooms monitored by applicants’ personnel, which was rejected by the Court as it was highly unlikely anyone would discuss such information in open forums.

In regards to c), the respondents argued that it was not shown that they held or could obtain information identifying the infringing parties as there could be no certainty whether the account holders were the parties responsible for sharing the movie on BitTorrent. The Court, however considered the authorities[13] concerned with identity discovery and the respondents’ argument that preliminary discovery cannot be sought to reveal the identity of a party who might know the identity of an infringing party. The respondents’ argument was rejected and the Court’s power to order the respondents to give preliminary discovery under FCR 7.22 was enlivened.[14]

The Exercise of the Discretion

The respondents advanced 8 arguments why preliminary discovery should be declined, even if the Court’s power under FCR 7.22 was enlivened:

  1. it was only shown that a single sliver of the film was shared from each IP address which did not constitute copyright infringement – the Court rejected this argument;
  2. the nature of the infringement was trivial and it was unlikely that any case would be brought against the infringing parties due to the low cost of buying a copy of the movie – the Court rejected this argument on the basis that proceeding brought under FCR 7.22 were to identify prospective respondents to claims and not to consider how good the claims were;
  3. there were no real prospects of obtaining injunctive relief because only a sliver of the movie was uploaded and no risk of repetition could be shown – the Court reasoned in similar terms to paragraph 2;
  4. the applicants failed to pursue only persons involved in multiple downloading – the Court reasoned in similar terms to paragraph 2;
  5. there was evidence that the applicants were likely to engage in the practice of speculative invoicing – the Court was aware that Voltage had sent aggressive letters to infringing parties in the United States claiming liability for substantial damages and offering to settle the matter out of court for significantly less. Representing to parties that they have a higher liability than they have is a deceptive conduct within the meaning of s 18 of the Australian Consumer Law and it is arguable it amounts to unconscionable conduct within s 21 of the Australian Consumer Law. The Court followed the reasoning applied in Golden Eye (International) Ltd v Telefonica UK Ltd[15] where preliminary discovery against an Internet Service Provider was granted but the applicant was required to submit letters to the Court for approval prior to sending them to the infringing parties.
  6. the respondents had privacy obligations in respect to their clients’ identities – Part 13 of the Telecommunications Act 1997 (Cth) protects individuals’ privacy, however s 280 of this Act stipulates that disclosure by law is not prevented, thus this argument was rejected by the Court.
  7. an Internet Privacy Code was in the process of being developed and the Court was to await this process to be finalised before granting the relief sought because alternative avenues existed to deal with the issue – the Court did not accept this argument as the code was only in draft form and there was no chance the code would come into force in the next few months.
  8. the process in FCR 7.22 was being used as a process for investigation rather than identification – this argument was rejected as in this case the element of identification was contained within the element of ivestigation.[16]

Adequacy and Appropriateness of the Court’s Reasoning

The reasoning above was based on well-established and long-standing principles relevant to this case, thus the Court’s reference and application of them was a logical means in reaching its decision to allow the applicants to seek preliminary discovery of the account holders with the relevant IP addresses. Equally, the Court’s decision to require the applicants to submit to the Court a draft of the letter they propose to write to the account holders serves to safeguard against the practice of speculative invoicing which is an unconscionable practice and may amount to deceptive conduct.[17]

Reforms

Internet piracy is not an issue susceptible to easy solutions as there is no particular set of measures likely to eliminate online copyright infringement.[18] As a response to the issues arising from online copyright infringement, the Government needs to provide a legal framework that facilitates its elimination, while still providing opportunities to individuals to “take full advantage of the legitimate opportunities to create and enjoy content in a digital environment”.[19]

Even though Australia is part to bilateral free trade agreements with United States and multinational treaties made under the World Intellectual Property Organization and World Trade Organization, there is no streamlined framework for reducing online copyright infringement. Such framework should have the aims to “provide certainty as to legal liability, streamline the process by which rights holders can seek relief from the courts to block access to websites providing infringing material, and provide an incentive for market participants to work together to address copyright infringement”.[20]

Australia is obliged under free trade agreements with the United States, Singapore and Korea to provide legal incentives to Internet Service Providers for their cooperation in the prevention of copyright infringements. However, the liability of the Internet Service Providers is limited by a recent landmark case. In the case of Roadshow Films Pty Ltd & Ors v iiNet Ltd[21] the High Court held that Internet Service Providers could not reasonably take any steps to prevent infringements on systems not owned or operated by them. This decision severely limits the circumstances in which an Internet Service Provider could be found liable for “authorising an act by a subscriber that infringes copyright”[22]. It follows that there is a need for clarification of the application of sections 36 and 101 of the Copyright Act to responsibilities of Internet Service Providers in preventing online copyright infringement.[23]

The questions of “what constitutes reasonable steps for Internet Service Providers to prevent or avoid copyright infringements and how should the costs of “any reasonable steps be shared between industry participants” need to be addressed.[24] These questions are only the first steps to be taken in allowing the industry of Internet Service Providers to develop their own approaches to address the problem of online copyright infringement and significant amount of work needs to be put into identifying how to effectively measure the impact of any strategies against online copyright infringement.[25]

[1] Dallas Buyers Club LLC V iiNet Limited [2015] FCA 317, 5.

[2] Ibid, 1.

[3] Ibid.

[4] Ibid, 26.

[5] Ibid, 30.

[6] Allphones Retail Pty Ltd v Australian Competition and Consumer Commission (2009) 259 ALR 354 at 367 [54].

[7] Ibid, above n 1, 33-34.

[8] Ibid.

[9] Ibid, above n 1, 48.

[10] Ibid.

[11] Ibid, 2.

[12] Ibid, above n 1, 52.

[13] Roads and Traffic Authority (NSW) v Australian National Car Parks Pty Ltd (2007) 47 MVR 502 (CA); Roads and Traffic Authority of New South Wales v Care Park Pty Ltd [2012] NSWCA 35. Both cases concerned carpark operators where persons wishing to park needed to display a valid parking permit or a fine of $88 was imposed. Preliminary discovery for infringing parties was sought by the carpark owners on the basis that they knew the identity of the person in whose name the vehicle was registered and those people were either the person who over parked the vehicle or were likely to know who that person was. The Road and Traffic Authority of NSW argued that it could only be required to give the identity of a prospective defendant and that the above method would only allow for identification of the registered owner of the vehicle and not the actual infringing party. This argument was rejected on the basis that in most cases the owner would be the only driver of the vehicle or know who the driver was on the particular day.

[14] Ibid, above n 1, 72.

[15] [2012] EWHC 723 (Ch).

[16] Ibid, above n 1, 73-91.

[17] Golden Eye (International) Ltd v Telefonica UK Ltd[2012] EWHC 723 (Ch); ss 18 and 21 of the Australian Consumer Law.

[18] Australian Government, Discussion Paper: Online Copyright Infringement (July 2014) Australian Government < https://www.ag.gov.au/Consultations/Documents/OnlineCopyrightInfringement/FINAL%20-%20Online%20copyright%20infringement%20discussion%20paper%20-%20PDF.PDF>

[19] Ibid.

[20] Ibid, 1.

[21] [2012] HCA 16 (20 April 2012).

[22] Ibid, above n 18, 3.

[23] Ibid, above 18, 4.

[24] Ibid.

[25] Ibid, above 18, 8.

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