On 7 April 2015, the Federal Court of Australia published its decision in Dallas Buyers Club LLC v iiNet Limited [2015] FCA 317 (DBC v iiNet). This case was the first action in Australia by a copyright owner against internet service providers (“ISPs”) for preliminary discovery to obtain the contact details of internet account holders whose IP addresses had been identified as having been used to infringe copyright. As such, it has attracted substantial media coverage. In this article, we explain the facts, attempt to dispel some of the more controversial claims made and consider what this case may mean for online piracy in Australia going forward.

The decision in Dallas Buyers Club v iiNet

The decision in DBC v iiNet centred on the Court’s power to require a third party to provide information as to the identity of another party who is suspected of infringing the applicant’s legal rights. The Court’s power is not limited to any particular type of legal action, and is flexible in its application, once the stipulated test is met. The policy behind the power is to avoid legal rightsholders (of any kind) being prevented from taking legal action due to an inability to identify the relevant infringer. Preliminary discovery has been granted in a number of other cases, however this was the first pertaining to alleged copyright infringement by file sharing.

The Court in DBC v iiNet granted preliminary discovery of the identity of the suspected copyright infringers, subject to two conditions to protect consumer interests. To obtain preliminary discovery, an applicant is only required to show that it has a reasonable belief that it may have a right to sue and the Court found that this relatively low threshold had been met.

It also found that it was sufficient that the account holders might be able to identify the persons using those IP addresses to infringe copyright in the film, even if they themselves were not the infringers. This was a point of contention given that it was unclear whether the account holders themselves were the persons involved in the suspected copyright infringement. However ultimately the Court found that the wider approach was supported by the existing law.

The Court considered the concerns raised by the ISPs as to the privacy rights of the account holders.  To protect consumer and privacy interests the copyright owner was required to:

  • submit to the Federal Court for approval a draft of the letter it proposes to write to account holders; and
  • limit the use of account holder details for purposes relating only to the recovery of compensation for copyright infringement.

Copyright Notice Scheme Industry Code

The day following the judgment, the Australian telecommunications industry body, Communications Alliance, published the final Copyright Notice Scheme Industry Code (“Code”).

The Code introduces a copyright notice scheme which requires ISPs to send notices to an account holder whose IP address has been identified by copyright owners as being used to infringe copyright.  After three notices, the copyright owner may apply to a court for preliminary discovery to obtain the contact details of the account holder.  The ISP must “act reasonably to facilitate and assist” the copyright owner in any preliminary discovery action.

The Code therefore anticipates that ISPs may ultimately be required to identify recalcitrant copyright infringers by the preliminary discovery process, which could result in further cases like DBC v iiNet. What is not clear is what is meant by the requirement that ISPs facilitate and assist copyright owners in this process. Will this prevent an ISP mounting a defence such as that brought in this case? If so, one might speculate that the defence mounted by iiNet in this case was designed to test every aspect of the preliminary discovery rules prior to such restrictions coming into play, and to obtain maximum safeguards in relation to issues such as privacy.

Speculative invoicing

One issue which has received particular attention since the DBC v iiNet decision is the fear of “speculative invoicing” – demands made to account holders for large sums of money designed to extract offers to settle for smaller sums, but which are still in excess of what might actually be recoverable as damages or profits in any copyright infringement case.

We think it unlikely that either DBC v iiNet or the Code will lead to speculative invoicing in Australia.  In DBC v iiNet, the Court required the copyright owner to submit for approval a draft of the letter it proposes to write to account holders to help prevent abusive practices.  It seems likely that in any further preliminary discovery application, the Court, guided by DBC v iiNet, will also require the submission of a draft letter as a condition to preliminary discovery.

In any event, much of fear surrounding speculative invoicing stems from demands made by copyright owners under US law, where a court can order statutory damages for wilful copyright infringement of up to US$150,000 per copyright work.  While an Australian court does have the power to order additional damages, the AustralianCopyright Act 1968 does not provide for statutory damages of that magnitude.  Compensatory damages by themselves are unlikely to exceed the retail price of an authorised copy of the work.

There also remain questions about the legality of speculative invoicing under Australian law.  In DBC v iiNet, the Court queried whether speculative invoicing may constitute misleading or deceptive conduct or unconscionable conduct. The sending of a “speculative invoice” by a solicitor may also breach relevant professional rules not to make a claim that grossly exceeds the legitimate assertion of the copyright owner’s rights and that misleads or intimidates the addressee of the letter.

Comparison with other countries

The need for a specific scheme (be it industry-led, or stipulated by law) to deal with online copyright infringement has been recognised for some time in a number of other countries. Approaches have varied. In the UK, plans for Ofcom, the communications regulator, to put in place a system similar to the Code here were shelved last year when industry agreed the Creative Content UK alert programme, which will focus on raising awareness, including sending warning letters. Canadian legislation setting up a similar scheme to the new Australian Code also came into effect early this year. The French HADOPI law created a government agency to administer its system, which ultimately allowed for repeat infringers to have their internet connection suspended. This scheme was substantially disbanded in 2013, the large administration cost to the Government apparently a significant factor.

Closer to home, New Zealand instituted its “three strikes” law in 2011, providing for a series of warning letters to be sent by ISPs, followed by possible action by the copyright owner before the Copyright Tribunal, with damages of up to NZ$15,000 available. The Copyright Tribunal was designed to provide a lower cost option to taking action in the Courts, however even the costs which a rightsholder is required to pay to the ISP for issuing the notices have proved a deterrent to action. The Motion Picture Association, for example, has not issued any notices under the scheme, stating such costs as the reason. Combined with this, the compensation orders made by the Copyright Tribunal have typically been in the hundreds of dollars and well below the amount requested by the rightsholder.

The issue of costs remains a live issue in relation to the Australian Code. The Code is subject to finalisation of a funding agreement between ISPs and copyright owners for the sending of 200,000 copyright notices in the first 12 months of operation.  It remains to be seen whether ISPs and copyright owners can come to agreement on such a crucial aspect of the scheme.  Furthermore, the Australian scheme requires copyright owners to commence Court action both to obtain account holder details, and then to take any necessary action against them. The extent to which rightsholders will take legal action remains to be seen, but given the economics, it appears unlikely that the Courts will be flooded with copyright infringement actions as a result of either DBC v iiNet or the Code.

Take away messages for the future

While neither DBC v iiNet nor the Code, on their own are likely to cause every online copyright infringer to face legal action, they are part of a growing program of initiatives by Government and rightsholders to draw attention to, and reduce, the high levels of online copyright infringement in Australia. The recently proposed “Website Blocking Bill” forms another part of this program.

Indeed, the outcome in DBC v iiNet, together with the subsequent press coverage, delivered an anti-piracy message far more powerful than any copyright notice: “You are not anonymous on the internet.  If you infringe copyright, you can be found out and you may be held legally liable.”

The focus is not only on out-and-out “BitTorrent type piracy” either. HBO has recently commenced a highly publicised campaign to prevent Australians using virtual private networks to access its HBO Now streaming service, which it restricts to United States residents. “Geoblocking” of content, that is, restricting access to particular geographical areas, is likely to be a growing issue in the future. Reports suggest that in New Zealand, four major television providers are set to take action any day against ISPs offering a “global mode” feature allowing users to access content from off-shore streaming services.

On the other side of the coin, the availability of copyright content through legitimate means, at a reasonable price, is also key in preventing ongoing infringement. Since the beginning of this year, a number of streaming services have launched in the Australian market, including Netflix last month.  Combined with increasing awareness of copyright issues and the greater prospect of deterrents, the stage looks set for a more balanced position to emerge in the future.