Jaclyn Moriarty is part of the Thomson Reuters Media and Internet Law and Practice author team and specialises in the areas of Internet law, copyright, defamation and e-commerce. Here she discusses the recent Federal Court decision in the highly publicised Dallas Buyers case and the rights of copyright holders versus those of Internet users to privacy and protection.
Dallas Buyers Club LLC v iiNet Limited  FCA 317 (7 April 2015)
The applicants were the owners of copyright in the film, The Dallas Buyers Club. They sought preliminary discovery orders, requiring six Internet Service Providers to release the contact details of account holders who, they submitted, had shared that film online in breach of copyright. Although such discovery orders have been made in the online piracy context in the US, UK and Canada, this was a landmark case for an Australian court.
The Internet Service Providers resisted the application, arguing, most notably, that the evidence only established the sharing of a “sliver” of the film, that discovery would reveal only the account holder, not the person who had in fact shared the film, that the privacy of account holders must be protected, and that the applicants were likely to engage in “speculative invoicing” (the practice of demanding large sums of money from account holders, and offering to settle for smaller amounts that still exceeded any likely damages).
In a judgment that attracted considerable media attention, his Honour Justice Perram allowed the application. He indicated that, on 21 April 2015, he will make orders requiring discovery, but that discovery would be conditional on the protection of account holders’ privacy, and on his approval of any letters proposed to be sent to account holders.
The applicants employed ‘Maverik Monitors’ software to identify 4,726 unique IP addresses from which the film, The Dallas Buyers Club, had been shared, using the peer-to-peer file sharing network, BitTorrent. In order to identify the account holders associated with those IP addresses, the applicants sought preliminary discovery orders against iiNet, and five other Internet Service Providers (the “ISPs”) under rule 7.22 of the Federal Court Rules 2011 (Cth) (FCR r 7.22).
FCR r 7.22(1) permits a prospective applicant to apply for a preliminary discovery order if it may have a right to obtain relief against a prospective respondent, it is unable to ascertain the description of that respondent, and another person has a document that would help ascertain the respondent’s description. Under FCR r 7.22(2), the court may then order that other person to give discovery.
The ISPs argued, first, that the preconditions for making a discovery order under FCR r 7.22 had not been met; second, even if they had been met, the court should not exercise its discretion to grant the application; and, finally, should such an order be made, that conditions should be imposed to protect privacy and prevent speculative invoicing. Taking each of these in turn:
1. Preconditions for Discovery Order
The ISPs argued that the preconditions for making a preliminary discovery order had not been met – and hence, that FCR r 7.22 had not been enlivened – on the following grounds:
(a) The evidence identifying the IP addresses was unreliable
The applicants had submitted expert testimony as to the nature of the Maverik Monitors software, and an affidavit by the individual who had used the software to locate the IP addresses. The ISPs attacked the credibility of that individual, to little effect. His Honour was unmoved by the facts that the individual did not understand the intricacies of the software, and had not personally prepared his own affidavit.
(b) The evidence only established the copying of a “sliver” of the film
The Maverik Monitors evidence established only that the IP addresses had shared a “very small sliver” of the film. The ISPs argued that this was not substantial copying and therefore could not establish copyright infringement. His Honour adopted a robust, practical approach to this argument, pointing out that the downloading of a “sliver” of a film provided “strong circumstantial evidence” of actual infringement. For the purposes of a preliminary discovery application, it was only necessary to prove that there was some prospect of succeeding: “I do not regard as fanciful the proposition that end-users sharing movies on-line using BitTorrent are infringing the copyright in those movies. Indeed, if there is anything fanciful about this, it is the proposition that they are not” .
(c) The applicants were not technically the owners of copyright in the film
The ISPs disputed copyright ownership in the film, pointing to certain licensing agreements, but his Honour concluded that the applicants had sufficient claim to copyright ownership to authorise their seeking preliminary discovery.
(d) Discovery would reveal only the account holder
The ISPs argued that discovery would not ascertain a prospective respondent, since it would only identify the account holders, not the person who had, in fact, shared the film. The applicants pointed out that the account holders could assist in identifying the actual copyright infringers, drawing an analogy with two “parking garage” cases. In those cases, parking garages had sought discovery of the registered owners of vehicles that had breached parking regulations. The RTA resisted discovery on the basis that the owner was not necessarily the driver of the vehicle at the time of the parking breach. In both cases, the New South Wales Court of Appeal found in favour of the parking garage: “The possibility that additional evidence may be required to … [identify] the driver does not mean that the information in the register lacks utility or forensic worth … preliminary discovery is not restricted to applicants seeking the last piece of a jigsaw”: Roads and Traffic Authority (NSW) v Australian National Car Parks Pty Ltd  NSWCA 114; (2007) MVR 502 (CA) at , cited at ; see also Roads and Traffic Authority (NSW) v Care Park Pty Ltd  NSWCA 35.
In response, the ISPs argued that the parking garage cases could be distinguished from the current proceedings, since those had applied a different discovery rule: rule 5.2 of the Uniform Civil Procedure Rules 2005 (NSW) (the “UCPR”) is expressed in slightly broader language than FCR r 7.22.
His Honour rejected this argument, first, because it would mean that the scope of FCR r 7.22 was limited to “circumstances in which the discovery process would result in the identification of actual wrongdoers as opposed to persons who may be able to assist in identifying a wrongdoer” which, in principal, was inconsistent with the purpose of preliminary discovery itself; and second, because the legislative history of FCR r 7.22 showed that it was not intended to have a different meaning to the words in the UCPR.
2. Discretion to make Discovery Order
Even if FCR r 7.22 had been enlivened, the ISPs submitted, the court should use its discretion to refuse to make the orders on the following grounds:
(a) Only a sliver of the film had been shared
His Honour dismissed this argument, having already dealt with it.
(b) It was unlikely that any real case would be brought against infringers
His Honour pointed out that an application like this was designed to identify putative respondents rather than working out the value of their claims, “other than in the sense of eliminating plainly frivolous exercises”, and that it was “far from apparent” that the current exercise was frivolous . In any case, his Honour was not persuaded that a suit against individual BitTorrent users would be “economically pointless” . In the case of multiple downloaders, it was plausible that aggravated damages would be available under s 115(4) of the Copyright Act 1968 (Cth): “damages of a sufficient size might be awarded under this provision in an appropriately serious case in a bid to deter people from the file sharing of films.” 
(c) Injunctive relief was not realistic
His Honour disagreed that injunctive relief would be unlikely and, in any case, this was not the appropriate occasion to consider that question.
(d) The applicants had failed to monitor for serious infringers
This was irrelevant given the conclusion in (b) above.
(e) There was a risk that the applicants would engage in “speculative invoicing”
“Speculative invoicing” is the practice of writing to a huge number of account holders demanding a large sum of money, and offering to settle for a smaller sum which still much exceeded what might actually be recovered. Also known as “copyright trolling”, the letters are often intimidatory, and are sent with the purpose of profiting, and with no real intention to pursue proceedings. In the US, the practice has been particularly effective where pornographic films have been downloaded, since people are prompted to settle quickly in order to avoid embarrassment.
His Honour agreed that the applicant, Voltage, had engaged in “speculative invoicing” in the past. He noted that it was “not necessarily an easy matter to assess” whether this practice was lawful in Australia. It could, he noted, be misleading and deceptive conduct (Australian Consumer Law, (ACL) s 18), or unconscionable conduct (Australian Consumer Law, s 21; Australian Securities and Investments Commission Act 2001 (Cth), s 12CB), but the former would require a supply of goods and services, and the latter a financial service.
Under s 18(1) of the ACL, a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. “Trade and commerce” is defined to include “any business or professional activity (whether or not carried on for profit)”. It is likely that a groundless threat of legal proceedings, and inflated damages claims, would be misleading and deceptive conduct.
In any case, his Honour proposed to deal with this risk by imposing conditions designed to prevent speculative invoicing.
(f) The ISPs were subject to privacy obligations which prevented their disclosing the information
Part 13, Division 2 of the Telecommunications Act 1997 (Cth), makes elaborate provision for the privacy protection of individuals’ telecommunications activity (although s 280 of that Act allows disclosure where “required by law”). Protection is also contained within the Australian Privacy Principles (Privacy Act 1988 (Cth)). Accordingly, Perram J agreed with the ISPs’ argument that the privacy of account holders was a significant value that warranted protection. On the other hand, his Honour pointed out, the rights of copyright owners were also of significant value. “In situations where different rights clash it is usual for courts to try and accommodate both rights as best as they can,” he observed  and here, this could be done by requiring the information to be provided at the same time as imposing safeguards to ensure that private information remained private. He proposed to constrain the use to which the information could be put in the form of conditions.
(g) The court should wait until a pending industry code was in place, rather than granting the relief sought
In December 2014, the Communications Minister indicated that, unless ISPs had formulated a code to deal with online piracy by April 2015, he would require ACMA to formulate an industry standard on the issue (under Telecommunications Act 1997 (Cth), s 125AA). On 20 February 2015, the Communications Alliance released a draft industry code, calling for public comment.
His Honour rejected the argument that the court should wait until this code was in place, noting that the code was still an incomplete draft, and that there was no sensible chance of it coming into force in the next few months (at ).
(h) FCR r 7.22 was being used a tool of investigation rather than identification
His Honour also rejected this argument, noting that there is, in a case such as this, an element of investigation involved in identification.
3. Conditions on Discovery Order
Finally, the ISPs submitted that, should the court agree to make the discovery orders, strict conditions should be applied protecting the privacy of account holders and to prevent speculative invoicing.
His Honour agreed. In the result, he determined that specific orders would be made on 21 April 2015, and that he intended to make orders requiring the ISPs to divulge the names and physical addresses (but not the email addresses) of each of the 4,726 IP addresses, with the following conditions:
- that the applicants would only use this information for the purposes of recovering compensation for infringements, and would not otherwise disclose it without leave of the court; and
- that the applicants must submit to his Honour a draft of any letter proposed to be sent to the account holders.
His Honour noted that the requirement to submit a draft letter to the court for prior approval had been employed in the UK case of Golden Eye (International) Ltd v Telefonica UK Ltd  EWHC 723 (Cth), and the Canadian case of Voltage Pictures LLC v John Doe  FC 161b.
The court has here adopted a broad, practical approach to the issue of discovery in online piracy cases, dismissing several technical arguments in favour of allowing copyright holders to pursue those who, in all likelihood, have infringed online copyright. By imposing conditions on the orders, his Honour neatly tackles concerns about privacy and speculative invoicing.
The decision has attracted much public discussion, in part because there is strong public sense of “entitlement” to online films that are not yet available in Australia – or that are more expensive here than overseas. There is also a sense that online behaviour at home is private, and harms nobody, and that efforts like these are examples of cynical corporate “bullying”. However, the result is not surprising, following, as it does, the same pattern as that taken in recent cases in the US, UK and Canadian jurisdictions. Those cases have sought to find a balance between copyright holders and the rights of Internet users to privacy and to protection from speculative invoicing, by granting discovery orders but imposing conditions that enabled the court to supervise the practical effects of those orders.
It is worth noting that, the day after this judgment was handed down, the Copyright Notice Scheme Code 2015 was submitted for registration with the ACMA. If approved, the Code would create a Copyright Notice Scheme under which Internet users who have apparently infringed copyright will receive an escalating series of infringement notice. The scheme would not contain explicit sanctions, but would provide for a “facilitated preliminary discovery” process, through which ISPs could assist right holders who are considering legal action against persistent infringers. Meanwhile, the Copyright Amendment (Online Infringement) Bill 2015, introduced on 26 March 2015, would enable rights holders to apply to the Federal Court for orders requiring ISPs to block overseas websites that have the primary purpose of infringing, or facilitating the infringement, of copyright.
Further discussion of this case will be provided in a forthcoming update to Media and Internet Law and Practice.