In the recent Australian Federal Court case of Dallas Buyers Club LLC v iiNet Limited1, the Court ordered that iiNet and five other Internet Service Providers (ISPs) provide details of individual customers associated with particular IP addresses said to have been used to downloaded the Dallas Buyer’s Club movie.

This decision signals a shift in tactics by copyright holders in the film and television industry whose previous attempts to curtail online piracy by suing the ISPs themselves for authorising copyright infringement have failed2. For example, in Roadshow Films Pty Ltd v iiNet Ltd, the copyright holders unsuccessfully sued ISPs for infringement on the basis the ISPs had authorised the illegal copying of films by individual subscribers.

The Dallas Buyers Club (DBC) case suggests that copyright holders are now turning their attention to these individual subscribers, the ‘mums and dads’, who download and share films using file sharing software, rather than ISPs. The DBC case has attracted considerable media attention in Australia where according  to figures released in 2014, almost one third of Australians aged 18–64 are downloading film and television content illegally.3

Background

In this case, Dallas Buyers Club LLC (DBC) brought an application for preliminary discovery against six Australian ISPs, including iiNET Limited and Dodo Services Pty Ltd., before Justice Nye Perram. Preliminary discovery is sought in cases where a party is unable to identify the person it wishes to sue and it seeks the Court’s assistance to allow it do so.

DBC sought to identify some 4,726 individuals or Internet Protocol (IP) address holders who  it alleges infringed its copyright by sharing the blockbuster film, Dallas Buyers Club, online using BitTorrent, a peer-to-peer file sharing network.

DBC argued that the ISPs could identify the account holder associated with each IP address from which the film was shared online. DBC intended to use this information to track down the identity of the actual infringers of the copyright, who may or may not be the account holders.

Ultimately, the court ordered the ISPs to release the names and physical addresses of the account holders of the 4,726 IP addresses. However, the court order was only granted subject to conditions including that any letter DBC wished to send to the account holders had to be reviewed by the Court first. This condition was designed to prevent DBC from engaging in a practice known as ‘speculative invoicing’.

Speculative invoicing

Also known as ‘Pay now or else letters’, speculative invoicing is the practice of a copyright holder or its legal representatives writing to an individual downloader, demanding a large payment to avoid being taken to court for copyright infringement. Often, the parties negotiate to settle for a smaller payment which is typically more than would be recovered in infringement  proceedings.

In the DBC case, the ISPs argued against the order of preliminary discovery on the basis there was evidence that DBC were going to engage in speculative invoicing of the Australian account holders if provided with their names and contact details. In particular, the ISPs referred to DBC’s actions in the US where it had sent letters to individual accountholders demanding settlement amounts of around AUD5000.

Whilst speculative invoicing is well-known in the US, it is not common in Australia. This may be due to the different remedies available for copyright infringement in these jurisdictions.

Damages under US copyright law

Under the US Copyright Act4, a copyright infringer is liable for either:

  1. the copyright owner’s actual damages and any additional profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages, or
  2. statutory damages.

In certain specific circumstances, additional damages are also available.

A copyright owner may elect at any time before the final judgement in a lawsuit to recover an award of statutory damages, rather than actual damages and profit, in the amount of between USD750 and USD30,000 for any one work.

If the infringement is found to be wilful, this amount increases to up to USD150,000.

As a result, US individuals who have used peer- to-peer file sharing to share copyright songs have been stung by hefty statutory damages awards. For example, in Capitol Records, Inc v Thomas-Rasset5, a home internet subscriber was ordered to pay USD222,000 for sharing 24 songs using the file sharing software Kazaa.

It is against this legal backdrop that the practice of speculative invoicing, regarded by many as a bullying tactic, has developed. Media reports suggest that in some cases recipients of the threatening letters will simply pay up regardless of whether a copyright infringement has occurred, resulting in windfalls for the copyright holder.

Damages under Australian copyright law

Under the Copyright Act 1968 (Cth), no statutory damages are awarded for copyright infringement. Damages are compensatory. As the ISPs argued in the DBC case, this means that the amounts to be awarded in any case against the infringers were so trivial that it was unlikely that litigation would be pursued. In each case, the value of each copy of the film was estimated at less than $10.

However, Justice Perram did not consider  that a suit by the copyright owner naming individuals would be economically pointless, as the ISPs contended. In the case of multiple downloaders, he said it was plausible that a copyright owner could obtain additional (non- compensatory) damages under the s.115(4) of the Copyright Act 1968 (Cth).

This section requires the court in assessing whether it is appropriate to award additional damages to consider factors including:

  1. the flagrancy of the infringement
  2. the need to deter similar infringements, and
  3. all relevant matters.

Perram J noted that it was a possibility that damages of a sufficient size to warrant launching proceedings, might be awarded in an appropriately serious case to deter people from the file sharing of films. He did not speculate what amount these damages might be. However, his comments suggest there may be some cases where it is worthwhile pursuing individuals. As has occurred in the US, speculative invoicing might be the tactic adopted in such cases.

Is it legal to send a speculative invoice in Australia?

Parties sending speculative invoices may face some challenges under Australian law. As Perram J noted in his decision, ‘pay now or else’ letters may result in the sender being found to have engaged in misleading and deceptive conduct under section 18 of the Australian Consumer Law as a result of making a misrepresentation to a consumer that he/  she has liability for copyright infringement or that the liability is higher than is realistic. He also suggested that the conduct may amount to unconscionable conduct under s.21 of the Australian Consumer Law or s.12CB of the Australian Securities and Investments Commission Act 2001 (Cth).

Lawyers’ professional conduct rules may also prevent the practice. For example, in the state of Victoria, a lawyer must not in any communication with a third person on behalf of a client:

… make any statement that is calculated to mislead or intimidate the other person and which grossly exceeds the legitimate asserts of the rights or entitlement of the practitioner’s client.6

Despite the media attention focused on this case and the scaremongering by certain stakeholders, as the Court must review any letter sent by DBC, it is unlikely that ‘mum and dad’ copyright infringers will be required to pay large sums. However, it will be interesting to see if other copyright holders follow DBC’s lead and start targeting individual infringers.

Watch this space.