On 14 August the Federal Court gave the best indication yet of what compensation copyright owners might expect to receive, and illegal downloaders should expect to pay, in future copyright piracy cases.

The decision was the latest in a number of Court dates between the owners of the Dallas Buyers Club movie (DBC), and a group of internet service providers, including IINet, Internode and Dodo.

Using a digital investigator, DBC identified 4,726 IP addresses from which the DBC movie was illegally downloaded and shared on BitTorrent.  It then sought a Court order requiring the relevant ISPs to provide details of the owners of those IP addresses.

To make such an order, the Court must be satisfied that the applicant has a right “to obtain relief” against the potential defendant (here the ISP account holders).  In his April decision, Justice Perram ordered the ISPs to provide this information, but not until the DBC had provided the Court with a copy of the correspondence which it proposed to send to the account holders. Justice Perram was particularly concerned to avoid what is known as “speculative invoicing”, a practice better known in the United States. Speculative invoicing essentially involves a rightsholder demanding an unreasonable amount of damages from an individual for an alleged breach of rights, such as the alleged copyright infringements in this case.

Today’s judgment concerns the content of the correspondence which the DBC proposed to send to rightsholders.

Monetary Claims

Justice Perram noted that DBC had been reluctant to confirm what monetary demands it would make of downloaders, but that it was likely to be as aggressive to downloaders as the law would permit.  Eventually, DBC outlined to the Court the claims it would make against downloaders.  While the specifics have been kept confidential, DBC proposed to make four general claims for damages against the downloaders, being:

  1. A claim relating to the cost of downloading the film.
  2. A claim relating to the uploading or sharing of the film on BitTorrent.
  3. A claim relating to additional damages due to repeat infringements.
  4. A claim relating to the costs of the proceedings.

Damages are generally calculated so as to put a plaintiff in the same position it would have been in, had the infringement not occurred, or the act not been done without authorisation.

Justice Perram firstly found that the damages in the first class and fourth classes were permissible.  These kinds of claims have never been particularly contentious.  Claims two and three, however, are different.

The claims in the second class result from the way in which most people use BitTorrent.  A user generally downloads slivers of a movie file from numerous other users, which slivers are then put together to form the full movie.  When doing this, BitTorrent also automatically shares and uploads the slivers of the file to other downloaders.   DBC alleged that they are entitled to damages which “correspond to the licence fee each uploader would need to have paid DBC in order for it to have authorised their sharing of the Film via BitTorrent”.   That is, the amount which DBC would have charged a user to allow that user to share the film on the internet.  This amount could be the same as the amount DBC charges, for example, Netflix to share the movie.  The Court, while not disclosing the amount DBC sought to claim, described the proposed licence amount as “substantial”.  The Court found that this claim was impermissible, and stated that the prospect of a user seeking such a licence was “so surreal as not to be taken seriously”.

The claims in the third class relate to “additional” damages.  Additional damages can go beyond compensating the rightsholder, but are only awarded in particularly deserving cases.  The Court must have regard to a number of factors including the flagrancy of the infringement, and “all other relevant matters”.  DBC claimed that additional damages should be awarded, having regard to each downloader’s history of downloading movies on BitTorrent.  The more a user has downloaded, the higher the additional damages should be.  The Court rejected this approach and found that additional damages should only be considered in light of the specific infringement in that case, and not other potential infringements.  There was nothing to justify additional damages against downloaders of the Dallas Buyers Club movie, and so this claim was also impermissible.

Requirements on DBC

On the basis of its findings, the Court ruled that it would only allow access to the identities of the downloaders if DBC gave an undertaking to the Court to only make demands for claims 1 and 4, being damages relating to the cost of downloading a copy of the film and a reasonable amount for costs.

Further, as the DBC was not a company based in Australia, the Court noted that it had no way of punishing DBC if it failed to honour the undertakings.  To ensure compliance, the Court ordered that DBC could only obtain the names of the downloaders if it paid a bond of $600,000 to the Court, which would be lost if DBC failed to honour the undertakings.

Conclusion

The potential ramifications of Justice Perram’s judgment in relation to illegal downloading in Australia are highly significant.  While his judgment is not binding in future infringement cases, it suggests that the Court will only allow reasonable and modest damages to copyright owners.

Copyright owners are now faced with the question of whether a Court considering an infringement claim will follow Justice Perram’s judgment in the future.  If so, they may only be able to recover the approximate cost of downloading the movie legally from each downloader for each infringement, plus an amount for costs.  Having regard to the time and effort required to pursue downloaders, and the proportion of costs which might not be recoverable, will it be worth it for copyright owners to take action at all?

On the flip side, has the deterrent effect of the previous Dallas Buyers Club judgment been destroyed?  Can downloaders now log back onto BitTorrent, happy in the knowledge that if they get caught, they will have to pay only slightly more than what they would have to pay if they downloaded the movie on iTunes?

In the immediate future, we will wait to see whether DBC pays the bond and makes contact with the downloaders, or whether they will simply cut their losses and walk away.

In any event, in the ongoing war over illegal downloads, today’s judgment is a big win for the downloaders and a huge setback for copyright owners.