Dallas Buyers Club LLC v iiNet Limited (No 4) [2015] FCA 838

We have previously reported on the piracy case1 brought by Dallas Buyers Club LLC (makers of the film Dallas Buyers Club (DBCL)) and Voltage Pictures LLC against iiNet and other internet service providers (ISPs) for copyright infringement.

The detailed facts of the case can be found in our previous focus papers (Australian Solution to Piracy - Industry Code for Internet Service Providers  and Landmark Piracy Case - ISPs to Hand Over Customer Details).  Briefly summarising, DBCL sought a preliminary discovery order pursuant to regulation 7.22 of the Federal Court Rules 2011 (Cth) (FCR) against various ISPs for the release of the personal details of account holders who illegally downloaded the film using BitTorrent technology. This would allow DBCL to bring an action against, or seek compensation from, those users. This order was granted.  However, Perram J in his judgment stayed the order and required DBCL to provide the Court with a copy of the proposed correspondence to be sent to account holders believed to have downloaded the film.

The reason given for this requirement was that in giving an order for preliminary discovery, the Court must be satisfied that the applicant’s proposed action is within a permitted purpose – namely, "to vindicate a right to obtain relief" under regulation 7.22 of the FCR.  Particularly to ensure that any correspondence sent to the relevant account holders did not amount to "speculative invoicing". Speculative invoicing is a practice whereby rights holders will send alleged downloaders legal demands requesting large amounts of money to resolve, in the hope that they will settle. These sums are generally well in excess of what might actually be recovered through the courts.

In this case2, DBCL sought to lift the stay on the order, having provided copies of the proposed letters of demand it sought to send to the ISP account holders. DBCL’s application was dismissed with costs.3

The correspondence DBCL proposed to send to alleged copyright infringers included four demands:

  1. Payment for the cost of purchasing a copy of the film (Payment Cost);
  2. Payment of a licence fee by each uploader (Licence Fee);
  3. Additional, punitive damages depending on any other copyrighted works that person had downloaded (Additional Damages); and
  4. The cost of DBCL’s expenditure in obtaining the details of each infringer (Expenditure Fee).

The Decision

Perram J found that had the demands by DBCL been restricted to the Payment Cost and Expenditure Fee (Permissible Heads of Damage), the stay would likely have been lifted.  In that regard, his Honour found that the Permissible Heads of Damages were within the purposes for which the Court's discretionary power under regulation 7.22 of the FCR could be used.4

However, his Honour found that DBCL's remaining demands were "untenable claims"and as such the proposed letter of demand to the ISPs could not be sent.  Perram J rejected the claim for the Licence Fee describing the concept of a peer-to-peer file sharing user negotiating a licence with DBCL as "so surreal as not to be taken seriously".5  He considered that the Court could not grant this claim, as to do so would not be placing DBCL back into the position it was in before the illegal downloading took place. In relation to the Additional Damages, Perram J remarked that DBLC had not made any submission as to how the Additional Damages would be calculated, as such the claim simply could not be permitted.

Outcome

Whilst no appeal was sought by DBCL in relation to Perram J's decision, all is not lost.  DBCL still has the opportunity to lift the stay on the order for discovery by providing an undertaking to the Court that it will only use the details of the account holders to seek recovery of the Permissible Heads of Damage.  As DBCL has no presence in Australia, and as such cannot be punished by the Court for contempt if it fails to honour that undertaking, Perram J ordered that DBCL would need to secure the undertaking by lodging a bond in the amount of $600,000.

Conclusion

This decision is indicative of a different and more conservative approach than is adopted in some overseas jurisdictions, including the USA, where speculative invoicing occurs.  The Court whilst allowing access to information as to the identity of those who may have allegedly illegally downloaded content, will not permit use of that information in connection with overstated demands made by copyright owners in relation to infringement actions. It also indicates that the Court will carefully consider future claims made by copyright owners who seek to uncover any user details associated with infringing downloaded material.