The ongoing dispute between Dallas Buyers Club LLC (DBC), rights holder of the film of the same name, and the internet service providers (ISPs) who hold the key to the identities of alleged copyright infringers, has taken another turn.

In Dallas Buyers Club LLC v iiNet Limited (No 4) [2015] FCA 838, the Federal Court has prevented DBC from sending out proposed letters of demand to alleged infringers because, in Justice Perram's view, they overreach in relation to the heads of damage being sought for alleged copyright infringement.  The decision gives effect to Justice Perram's earlier ruling, discussed here, in which the Court granted DBC's preliminary discovery application but ordered that production of information be stayed to enable the Court to ensure that DBC would not engage in 'speculative invoicing'.

The decision may be seen as an interim victory for internet users in DBC's firing line.  The judgment has two key takeaway points:

  • First, although rights holders who have seen their business model undermined by widespread downloading and peer-to-peer sharing at first cheered when the Court granted DBC preliminary discovery against the ISPs to obtain the names of the account holders of alleged infringements, it is now clear the extent to which the Court will, in this case at least, scrutinise the precise use to which the rights holder is going to put the information obtained.
  • Secondly, the Court has made very clear to rights holders that it will not entertain unreasonable demands for compensation, in cases where it is concerned to prevent speculative invoicing.  Justice Perram's views as to each of the claimed heads of damage give a strong indication of what would likely be recoverable in any substantive proceeding against an infringer.  Damages for each infringement may be limited to the costs of obtaining the details of alleged infringers and an amount of damages equal to the amount for renting or purchasing the movie.

Background

In 2014, DBC commenced a preliminary discovery action against a group of ISPs seeking an order requiring them to hand over the identities of particular account holders identified as potential infringers, based on their IP address being linked to BitTorrent file sharing of the film.  Earlier this year the Federal Court determined that DBC was entitled to that information pursuant to rule 7.22 of the Federal Court Rules, which allows a potential litigant to discover the identity of one or more potential respondents.

However, orders requiring the actual production of information were stayed pending approval of the letter of demand that DBC would send to account holders.  At this latest hearing, DBC sought to have the stay removed on the basis of draft letters reviewed by the Court.  In seeking to establish that the letters were appropriate, DBC filed confidential material setting out the basis for calculating the damages they would be seeking.

In effect, the Court has adopted a supervisory role over DBC's planned actions, refusing to require production of the account holder's identities until satisfied DBC would act reasonably.  Justice Perram nevertheless sought to distinguish the position he was adopting from the approach courts have adopted in the UK and Canada, suggesting that the Court's role here is more limited (bearing in mind those jurisdictions have human rights instruments which specifically bring right to privacy considerations to the fore).

DBC's proposed heads of damage

While not disclosing precise figures, the Court broadly described DBC's proposed heads of damage as follows:

  1. an amount equal to the cost of purchasing a copy of the film;
  2. an amount equal to the loss suffered by each uploading activity over peer-to-peer networks;
  3. additional damages under s 115(4) of the Copyright Act, based on each infringer's other downloading activities; and
  4. damages relating to the costs incurred by DBC in obtaining the infringer's name.

Justice Perram considered that categories (a) and (d) were acceptable — while they will no doubt be debated further in any subsequent substantive proceedings, for present purposes it was sufficient that they were prima facie arguable.  For example, the Court noted that for damages under category (a), the proper quantification of damages may in some cases be a rental price rather than a purchase price, based on what the infringer would likely have paid had they not downloaded the film.

But the Court made clear that a claim for damages in categories (b) and (c) were impermissible as, in his view, they would be susceptible to summary judgment if pleaded in a substantive proceeding for copyright infringement. DBC argued that category (b) would be equal to the amount paid by an infringer to obtain a licence from DBC to distribute the film via BitTorrent.  However, Justice Perram considered this to be just one of many counterfactual scenarios explaining what the infringermay have done instead of illegally downloading the film: for example they could also have seen the film at the movies; rented the film legitimately from iTunes or not seen it at all.  The counterfactual preferred by DBC was dismissed as unbelievable, with the Court stating (at [23]) that

the idea that any court would assess DBC's damages on the basis that BitTorrent users who were going to share the [f]ilm over the BitTorrent network would have avoided infringement by approaching DBC to negotiate a distribution arrangement in return for a licence fee is so surreal as not to be taken seriously.

The Court also did not accept category (c).  Justice Perram held that section 115(4) of the Copyright Act, simply does not allow for additional punitive damages to be based on 'infringements other than the one the downloader is being sued for'.

What does DBC need to do for the Court to order that the information be disclosed?

Because claims (b) and (c) were unreasonable, the Court refused to require production of the account holder's identities.  However, Justice Perram indicated that the stay will be lifted if DBC gave an undertaking to only use discovered information to pursue damages under categories (a) and (d).  In addition, the Court would require a $600,000 bond to be lodged to secure compliance with the undertaking, because DBC does not have a physical or corporate presence in Australia.