Dallas Buyers Club LLC v iiNet Limited [2015] FCA 317

We previously reported on the landmark piracy case filed by Dallas Buyers Club LLC (DBCL) (the company that owns the rights to the 2013 film, Dallas Buyers Club (Film)).1 The Federal Court of Australia has now ordered iiNet Limited (iiNet) and other internet service providers (ISPs) named in the proceedings to provide to DBCL personal information of Australian customers suspected of illegally downloading the Film.2

This decision, together with the proposed industry code3 (also dealt with in our previous Focus Paper) establishing a copyright notice scheme (Proposed Industry Code), will bring about major changes to the manner in which online piracy is addressed in the future in Australia.

The Decision

The factual background to the DBCL Case is set out in detail in our earlier Focus Paper.  DBCL claimed that it had identified 4,726 Australian IP addresses associated with the illegal downloading of the Film and sought preliminary discovery of personal information relating to those IP addresses from iiNet and other ISPs.

His honour Justice Perram upheld DBCL's application and has now ordered iiNet and the ISPs to divulge the names and physical addresses of the customers associated in their records with each of the 4,726 IP addresses. However, in granting DBCL's application, Justice Perram imposed the following conditions to address concerns about privacy and speculative invoicing:

  1. The personal information to be provided by iiNet and the ISPs will only be used for the purposes of recovering compensation for the infringements and will not otherwise be disclosed without the leave of the Federal Court; and
  2. DBCL will submit to Justice Perram a draft of any letter it proposes to send to account holders associated with the IP addresses which have been identified.

Concerns have been raised by iiNet about the practice of speculative invoicing (which occurs widely in the United States).  In an article appearing on the iiNet website on 22 October 2014, it stated:

"In this case, we have serious concerns about Dallas Buyers Club's intentions.  We are concerned that our customers will be unfairly targeted to settle claims out of Court using a practice called "speculative invoicing".4

As regards speculative invoicing, iiNet described the practice as one which "commonly involves sending intimidating letters of demand to subscribers seeking significant sums for an alleged infringement.  These letters often threaten Court action and point to high monetary penalties if sums are not paid".

Judgment

In granting DBCL's application, Justice Perram emphasised the "need to provide deterrence" against online piracy5 and made the following key observations in respect of file-sharing and online piracy:

  1. His Honour rejected the ISPs' contention that DBCL had failed to show that the end-users were involved in copyright infringement. Although the nature of file-sharing on Bit-Torrent platforms means that individual end-users only trade in small slivers of the complete Film (i.e. the Film is distributed by an individual computer downloading slivers of a film from other multiple computers), this would still provide strong circumstantial evidence that the end-users were infringing the Film's copyright. Justice Perram clarified that it is not necessary to establish a prima facie case of infringement. It is sufficient if there is a real case which is not fanciful; and
  2. In order to satisfy the requirements for preliminary discovery under the Federal Court Rules 2011 (Cth), DBCL was required to show that it may have a right to obtain relief against a prospective respondent, that it cannot identify the prospective respondent and that the ISPs know or are likely to know the identity of that person. The ISPs submitted that providing information about the account-holder would not necessarily identify the end-user who was illegally downloading the Film. However, Justice Perram rejected this argument on the basis that it was possible that the account holders might have some insight into who the end-user might have been, especially in the case of residential dwellings.

As for speculative invoicing, Justice Perram approached the issue cautiously and stated that it was unclear whether speculative invoicing is a lawful practice in Australia. His Honour considered that it may be misleading and deceptive conduct within the meaning of the Australian Consumer Law to represent to account-holders that they have a liability which they do not have, or that potential liability is much higher than it could be realistically. It remains to be seen how Justice Perram will deal with conditions he has imposed and what form of letter will be approved for sending to any relevant person in Australia now identified through the information to be provided by iiNet and the other ISPs.

Conclusion

In our previous Focus Paper, we also outlined steps being taken to formulate an appropriate industry code to deal with illegal downloads and related issues.  The telecommunications industry has now finalised the Proposed Industry Code and lodged the document with the Australian Communications and Media Authority.  The Proposed Industry Code puts forward a "three strikes" policy.6  If the Code had been in place, the DBCL would have been required to work through this process rather than taking the preliminary discovery route.  Whatever happens in respect of the Code, the DBCL Case remains important, particularly in relation to the preliminary discovery process.  Justice Perram's judgment will likely guide future decisions in preliminary discovery applications relating to online piracy and other online intellectual property infringement issues.

The parties in the DBCL Case are due back in the Federal Court for a further directions hearing on 22 April 2015. It is unknown at this stage whether the ISPs will appeal Justice Perram's decision. We will continue to monitor the DBCL Case and Proposed Industry Code.