Graham Phillips and Brigid Dixon

The Dallas Buyers Club Case – the Court sets out a roadmap

Graham Phillips and Brigid Dixon

14 August 2015

Copyright

The latest decision from Justice Perram in the Australian Federal Court proceedings of Dallas Buyers Club LLC & Anor v iiNet Limited & Others has been handed down and provides a roadmap for this and future similar preliminary discovery applications. Thomson Geer’s Melbourne IP lawyers are acting for the ISPs in this case.

 

In October last year Dallas Buyers Club LLC (DBC) had applied to the Court for a “preliminary discovery” order to force iiNet, Dodo, Amnet and a number of other internet service providers (ISPs) to disclose a total of 4,726 names and contact details of account holders whose internet accounts DBC alleges have been used to infringe the copyright in the film Dallas Buyers Club (Film). The order was granted, but stayed until the letter that DBC proposed to send to account holders was reviewed and approved by the Court.  The reason for this was that Perram J wanted to prevent DBC from engaging the practice of “speculative invoicing”, where individual downloaders are faced with arguably unreasonable demands from the rights holder to pay significant amounts of money or face legal action in relation to the alleged infringement. Until the letter is approved by the Court the ISPs are not required to hand over account holder details. Justice Perram’s latest decision has significantly curtailed DBCs proposed demands for damages from account holders and has provided guidance and placed safeguards against DBC acting outside of the boundaries of the order.

 

DBC had outlined four heads of damages it proposed to make claims under in its letters and other dealings with account holders.

 

  1. Damages equal to the amount that should have been paid to purchase a copy of the Film;
  2. A licence fee (the amount proposed by DBC was not disclosed but was described by Perram J as “substantial”) for the uploading and distribution of the Film through the peer-to-peer network;
  3. Additional (punitive) damages for flagrant infringement; and
  4. Pro rata damages to recover the costs incurred by DBC for investigation and the preliminary discovery application.

 

The preliminary discovery application is made under r 7.22 of the Federal Court Rules.  Within the discretion allowed by the rule Justice Perram decided which of these heads of damages he is prepared to permit DBC to claim.

 

Permissible demands

 

DBC’s proposal that it would claim for damages as to the cost of purchase of the film (downloading) and out of pocket costs (investigation and preliminary discovery application) have been accepted. Justice Perram accepted “the idea that DBC’s damages should equal the value of what was taken from it without its permission is not, self-evidently, a ridiculous claim and, indeed, has a certain biblical charm“. In relation to the costs of investigation and discovery, he commented that “this sum is likely to be quite large in absolute terms it becomes much less significant when distributed over a large number of infringers.”

 

Impermissible demands

 

The proposal that DBC would claim a licence fee for uploading and distributing the film were rejected by Justice Perram, who described the proposal as based on an idea that is “so surreal as not to be taken seriously“.

 

So too the proposal that DBC would claim additional punitive damages was rejected, with Perram J commenting that “DBC has made no submission to me about how these damages might be calculated or what they will seek“.

 

Justice Perram found that the evidence presented to him on behalf of DBC did not establish that the alleged infringers had shared whole copies of the Film. This does not preclude the possibility of these heads of damages being claimed in future preliminary discovery applications by rights holders.

 

The exclusion of these heads of damage significantly limits the actual sums that DBC would be able to claim from alleged infringers.

 

Lifting of the stay

 

Justice Perram declined to lift the stay at this stage, but said that he would do so if the Court received a written undertaking from DBC that it would only use the account holder details provided to it to make the permissible demands described above. As DBC has no presence in Australia, the Court would have no power to punish DBC for contempt of court if it breached that undertaking.  Therefore, Justice Perram ruled that the account holder details will only be provided to DBC if DBC provides the Court with a bank guarantee for $600,000

 

A Roadmap for Future Cases

 

The judgment by Justice Perram also seeks to set out a path for future preliminary discovery applications of this kind. Justice Perram is reluctant to create a situation such as we have seen in the United Kingdom and Canada where the Court positions itself as a superintendent power overseeing the correspondence between the copyright holder and the account holders. He pointed out that decisions to that effect in those jurisdictions were influenced by human rights instruments guaranteeing privacy that apply there and which have no counterpart in Australia.  He stated that in future cases in Australia where preliminary discovery is sought against persons such as ISPs with a view to contacting a large class of potential defendants, it will be essential for the applicant to prove that it intends to use the discovered material for a purpose countenanced by Rule 7.22 and that, in particular, that it put on evidence of the nature of the demands or claims it proposes to make against the potential defendants.