You may have been following the saga of the makers of the movie Dallas Buyers Club trying to recover compensation from Australian individuals who had been sharing the movie over the BitTorrent network on the basis that they have been infringing copyright. But if you haven’t, here’s a summary.

The Story So Far

Dallas Buyers Club LLC (DBC) has sued a number of ISP’s (Internet Service Providers such as iiNet and Dodo) for them to provide the names and other details of account holders of the ISP’s who it claims have infringed the copyright in the movie Dallas Buyers Club.  In what was seen as a landmark ruling in Dallas Buyers Club LLC v iiNet Limited [2015] FCA 317, the Federal Court held that the ISP’s were obliged to hand over the details.  However, in Dallas Buyers Club LLC v iiNet Limited (No 3) [2015] FCA 422, Justice Perram, no doubt to the chagrin of DBC, ordered that this order be “stayed” (or delayed) pending DBC providing the Court with a copy of the letter DBC proposed to send to each of the account holders.

The purpose of this stay was to enable Justice Perram to make sure that DBC did not engage in “speculative invoicing” – essentially the practice of sending a letter of demand claiming far in excess of what the claimant could, in reality, recover from a court.

Dallas Buyers Case No 4

In the latest case, Dallas Buyers Club LLC v iiNet Limited (No 4) [2015] FCA 838, decided on 14 August 2015, DBC unsuccessfully tried to lift the stay.  Although DBC had fulfilled all the basic legal requirements to have access to the account details, Justice Perram pointed out that the court’s power to grant access was discretionary.  His Honour considered that he had to be satisfied that DBC would use the information for a legitimate purpose – to sue or negotiate a claim that had legal substance – and not to throw stones at the infringers’ windows or send them a dead cat – not that his Honour thought that DBC was seriously contemplating either of these courses of action.

Damages Sought by DBC

DBC said that it would seek damages from the infringers on four bases:

  • The retail cost of purchasing a copy of the movie;
  • A substantial sum representing the licence fee to enable the infringer to share the movie with others;
  • Punitive damages for copyright infringement based on how many copies of other copyright works the infringer had downloaded;
  • The cost, both technological and legal, in getting access to the infringers’ details.

Perram J found that bases (a) and (d) were permissible.  In relation to (d) Perram J considered that the cost was not substantial when divided over a large number of infringers.

Perram J did, however, reject bases (b) and (c).  He considered it was “surreal” to assume that a person intending to share the movie over the BitTorrent network would have avoided infringement by negotiating a distribution arrangement with DBC.  If the parties would not have entered a licence agreement, it is a general principle of intellectual property law that the rights holder cannot obtain damages based on how much it would have charged the infringer for a licence.

In relation to basis (c ) Perram J pointed out that it was simply not relevant to the calculation of  punitive damages for copyright infringement of one work to determine how many different copyright works the infringer had also copied.

Imposing a bond

In Case No 4 Justice Perram held that, if DBC gave an undertaking only to claim bases (a) and (d) from the infringers – a relatively small sum of money – he would lift the stay and DBC could have access to the infringers’ information.  But – there was a sting in the tail.  Because DBC was an overseas company, if it breached this undertaking and, for example, claimed bases (b) and/or (c ), the Federal Court could not punish it by holding DBC in contempt.  Therefore the Court required DBC to lodge a bond by way of bank guarantee in the sum of $600,000 to guarantee compliance with the undertaking.  The reason the bond was so high was because DBC had confidentially disclosed to the Court the very high sums it wanted to claim under bases (b) and (c ).

Take home message

In Australia, intellectual property litigation is generally not a way to make a profit.  In my experience the main purpose of such litigation is to stop the infringement so as to stop the loss that is being incurred by the rights holder – for example, because of customers confusing a rival product with that of the rights holder because of copying of a trade mark or customers buying an infringing product which competes with the patented product of the rights holder.  Intellectual property rights maintain the exclusivity of a product.  Litigation is costly and may be a last resort if the infringer is not prepared to cease infringing.

Damages are awarded to put the rights holder back into the position it would have been in if the infringement had not occurred.  Alternatively, an account of the infringer’s net profits may be awarded.  Punitive or “additional damages” may be awarded in certain circumstances depending, especially, on the behaviour of the infringer. When negotiating a settlement a payment from the infringer is often required.  But payments are rarely sufficient to put the rights holder in a better position than before the infringement occurred and I would recommend that this not be the endgame.