14 August, 2015
In brief
The latest decision in Dallas Buyers’ Club’s (DBC) application for details of account holders whose IP addresses were allegedly used to download its movie using the BitTorrent system was handed down today.1 His Honour was singularly unimpressed with DBC’s proposed methodology for calculating the damages it would seek from account holders.
Background
His Honour Justice Perram had previously ruled that DBC had established a right to preliminary discovery2 and that the ISPs opposing the application should pay DBC’s costs.
However, Justice Perram stayed the orders requiring disclosure of account holder details until DBC provided his Honour with details of the communications they were proposing to send to account holders. In particular, Justice Perram was concerned to avoid the practice known as ‘speculative invoicing’, where the rights holder makes a demand of an alleged infringer for an amount substantially higher than it could reasonably expect to receive in an action for copyright infringement.
Today’s judgment
It is clear from today’s judgment that Justice Perram was not satisfied with DBC’s proposed communications or its methodology for calculating damages.
Justice Perram accepted that DBC was entitled to seek an amount equivalent to the cost of ‘buying’ the movie on iTunes as well as a contribution towards DBC’s costs incurred in obtaining preliminary discovery. Although DBC had received a costs award against the ISPs his Honour acknowledged that this was unlikely to cover their full legal costs and the costs of identifying the account holders’ IP addresses.
DBC was proposing also to seek a ‘distribution licence fee’ and an amount of additional damages on the basis of how many other films the user has downloaded (films to which DBC is not the owner of copyright). This was rejected.
In relation to the distribution licence fee his Honour noted that DBC wants to claim ‘an entitlement to damages which correspond[s] to the licence fee each uploader would need to have paid DBC in order for it to have authorised their sharing of the Film via BitTorrent’ [22]. This idea was rejected in no uncertain terms: ‘the idea that any court would assess DBC’s damages on the basis that BitTorrent users who were going to share the Film 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’ [23].
In relation to seeking additional damages his Honour noted that the wording of the section allowing the Court to award additional damages ‘is inconsistent with it being used to calculate damages on the basis of infringements other than the one the downloader is being sued for. It does not permit recourse to other acts of infringement of other people’s copyright. Such a claim would be summarily dismissed’ [25].
What now?
The stay on the order for disclosure of account holder details remains. His Honour has indicated that he will lift the stay only if he receives an undertaking from DBC that they will not use the names and addresses to seek the types of damages he has rejected, and if DBC pays a bond of $600,000 to ensure compliance with this restriction. His Honour noted that as DBC is a foreign entity, in the absence of a bond, if it failed to comply with the undertaking, it would be difficult for the Court to impose a suitable sanction.
Lessons learned?
The key take home from today’s ruling is that, where a plaintiff seeks disclosure of the identity of a third party, the Court may refuse disclosure even though the plaintiff has established a probable cause of action, if the Court is not satisfied that the plaintiff will only pursue a remedy that it would reasonably be entitled to seek in legal proceedings.
Although the Court did not reveal exactly how much DBC was planning to seek from account holders, it is clear that the amount the Court has in mind is far less than DBC had planned, and may discourage future actions against individual users.
Endnotes
1. Dallas Buyers Club LLC v iiNet Limited (No 4) [2015] FCA 838.
2. Dallas Buyers Club LLC v iiNet Limited (2015) 112 IPR 1, [2015] FCA 317.
3. Dallas Buyers Club LLC v iiNet Limited (No 3) [2015] FCA 422.
For further information, please contact:
Rebekah Gay, Partner, Herbert Smith Freehills
rebekah.gay@hsf.com
