The makers of Dallas Buyers Club (DBC) have hit another hurdle in their quest to sue ‘mum and dad’ internet subscribers who illegally downloaded the film for copyright infringement. In a victory for subscribers and six Australian Internet Service Providers (ISPs), the Federal Court has maintained the stay on its order requiring the ISPs to release the names and physical addresses of 4,726 individuals or Internet Protocol (IP) address holders.

The story so far

As reported in the last edition of Inspire!, DBC obtained a preliminary discovery order that required the ISPs to release the details  of individuals or Internet Protocol (IP) address holders who it claimed infringed its copyright by sharing the film, Dallas Buyers Club, online using a peer-to-peer file sharing network.1

The order was stayed to allow the Court to approve any letters of demand DBC intended  to send to account holders. This was to prevent the practice of speculative invoicing, where a copyright holder or its legal representatives write to an individual downloader, demanding a large payment to avoid being taken to court for copyright infringement.

A draft demand letter was provided to the Court, but was considered unsatisfactory as it did not provide any information as to the amounts of money DBC would demand fromthe account holders. At a hearing in June 2015, Justice Nye Perram flagged that DBC would need to show the Court what it was intending to demand from the account holders, or at least the methodology underlying its approach to the amount of damages it was going to claim before he would approve the demand letters and allow the release of the subscribers’ personal details.

The present proceedings

In the most recent hearing2, Perram J had  to decide whether to lift the stay on the preliminary discovery order allowing DBC to access the subscribers’ personal details.

Rule 7.22 of the Federal Court Rules 2011 (Cth) allows for an order for preliminary discovery to allow a prospective applicant  to ascertain the description or identity of the respondent(s). There are certain prerequisites that must be satisfied for an order to be made including that “there may be a right for the prospective applicant to obtain relief against a prospect respondent”, and that the applicant is unable to ascertain the identity of the respondent(s). Whilst DBC had satisfied these requirements, as Perram J noted, the power to order preliminary discovery under r. 7.22 is discretionary. In deciding whether to exercise the discretion, Perram J considered whether DBC had any right to obtain the sums of money it was proposing to demand.

What did DBC wish to claim from subscribers?

DBC had intended to claim the following from alleged infringers:

  1. The cost of an actual purchase of a single copy of the film for each copy of the film downloaded,
  2. An amount relating to each infringer’s uploading activities to comprise a one-off licence fee from each uploader on the basis each was engaged in widespread distribution of the film,
  3. Additional damages under s 115(4) of the Copyright Act 1968 (Cth) calculated on the basis of how many copies of other copyright works had been downloaded by each infringer, and
  4. Damages arising from the cost to DBC to obtain each infringer’s name.

What did the Court think DBC could claim?

Perram J was of the view that DBC could plausibly expect to sue infringers for the cost of  the actual purchase of a single copy of the film and also for damages arising from the costs to it to obtain each infringer’s name.

As to a claim for a licence fee, Perram J found  the notion that individuals who were sharing the film peer-to-peer were going to approach DBC to negotiate distribution rights in return for a licence fee “so surreal as not to be taken seriously”. He was equally critical of the claim for additional damages for infringing other copyright works, finding it was inconsistent with the provision in the Copyright Act 1968 (Cth) which is directed to the award of additional damages.

What’s next?

Perram J maintained the stay and it will remain in place until DBC provides undertakings to  the Court to only use the account holders’ information to demand payment as set out at 1 and 4 above. In a further blow for DBC, which has no presence in Australia, it was ordered to pay $600,000 to the Court to secure the undertaking.

Thus, the ISPs and their subscribers have been granted a reprieve, at least while DBC plots their next move.

For litigators, the decision suggests that in future, applicants seeking to obtain preliminary discovery under r.7.22 against a party, such as ISPs, with a view to contacting a large class of potential respondents, will need to put on evidence of the nature of the demands or claims they propose.