Court dismisses Dallas Buyers Club's letters to infringers

The Australian Federal Court has handed down its judgment in the case of Dallas Buyers Club v iiNet, with Justice Perram ruling that the film studio cannot send out the proposed draft letters to alleged infringers, as two of the four heads of damages claimed by the company cannot be recovered.

"The applicant was claiming four heads of damages and was proposing to negotiate with account holders in relation to those four amounts. I've concluded that two of those amounts could never be recovered, and in those circumstances, I've decided that what is presently proposed by Dallas Buyers Club in terms of its correspondence ought not to be permitted," Perram said on Friday morning.

"I therefore make these orders: I dismiss the prospective applicant's application to lift the stay of order one made by me on the 6th of May; and I order the prospective applicants to pay the respondent's costs of that application."

The four heads of damages claimed by Dallas Buyers Club in its draft letter were: The actual cost of legally purchasing the film; the infringer's uploading activity of the film; additional damages for an infringer's other downloading history; and damages covering the cost it took for Dallas Buyers Club to obtain that infringer's details.

While Perram permitted the first and last of these damages, he ruled that the film studio could not collect damages relating to uploading activity and alleged illegal downloads a person had made of other copyrighted works, as they are "untenable claims".

The Federal Court therefore would not allow the company to send the letters to infringers unless it provided a written undertaking, backed up by lodging a AU$600,000 bond with the court, to not recover damages under those two heads.

In April, the Federal Court ordered internet service providers (ISPs) iiNet, Dodo, Internode, Adam, Amnet, and Wideband to disclose the customer details associated with 4,726 IP addresses that had allegedly breached the copyright of Dallas Buyers Club by downloading infringing copies of the film.

However, the court also ordered the film studio to pay the ISPs' court costs and provide draft copies of the phone scripts and letters it intended to send to copyright infringers for court approval before the customer information would be provided.

This decision was aimed at preventing Voltage, Dallas Buyers Club's parent studio, from using "speculative invoicing" through which alleged copyright infringers in the US have been asked to either compensate Voltage by up to $9,000, or potentially have to pay hundreds of thousands of dollars in damages under court order.

In June, ZDNet obtained a copy of the draft telephone script and letter submitted by Dallas Buyers Club to the court that the company said it would use to contact the users who had allegedly illegally downloaded the movie.

While the draft letters did ask for information on each infringer's wage, they did not mention a financial amount for compensation, with Dallas Buyers Club counsel Ian Pike saying that the fines would not be doled out in a "one-size-fits-all" approach.

"We are entitled in the letter to assert in reasonably firm terms why we contend there has been copyright infringement. Nothing in the letter oversteps the mark. They are perfectly proper questions. We would be criticised if we didn't ask them," Pike said in June.

Counsel representing the ISPs, Richard Lancaster, on the other hand, argued that there was no justification for needing this information.

"There is no respondent out there to copyright infringement who is required before the identification for a potential course of action ... to be required to state or provide information about their other activity," he said.

The letters also requested information on each account holder's previous torrenting history, as well as whether they are serving or have served in the military.

The draft phone script, on the other hand, mentioned that the fine will likely be more than the movie costs to purchase, because a digital copy may have been shared between "hundreds, if not thousands" of people using peer-to-peer services, and compensation should be commensurate. It also warned that if an alleged infringer refuses to settle, they will be taken to court, where a damages order may be higher.

Even had the Federal Court approved the phone script and draft letter, and allowed Voltage to send them out, the film studio would still be able to escalate its demands in subsequent letters to users, however.

In April this year, Singapore's third-largest telco M1 revealed that it had handed over customer information to Dallas Buyers Club in response to a High Court order, after it was alleged that these users had illegally downloaded the film. M1 supplied the names, mailing addresses, and NRIC numbers of these customers. The movie had been downloaded unlawfully by over 500 IP addresses from Singtel, StarHub, and M1, according to a report.

Copyright issues have become a consistent issue permeating Australian law and politics, with both houses of parliament passing the piracy site-blocking Bill in mid June. The new Copyright Amendment (Online Infringement) Act 2015 will allow rights holders to obtain a court order block foreign websites that are deemed to contain copyright-infringing material or facilitate user access to copyright-infringement material, such as peer-to-peer torrenting websites including The Pirate Bay.

The government did not order a cost-benefit analysis or detail who would bear the costs of implementing the scheme prior to passing this law, however, but it is projected to cost ISPs more than AU$130,000 per year to implement.

Earlier this week, the Australian Attorney-General's Department commissioned a cost-benefit analysis into the recommendation by the Australian Law Reform Commission (ALRC) to implement a fair use provision in the amendments that the government is proposing to make to the Copyright Act in order to adapt to the digital world.

The economic analysis, announced on Wednesday, will examine the cost effects that fair use would impose on copyright holders along with copyright user groups, with Attorney-General George Brandis having historically taken the perspective of copyright holders to the detriment of all others involved.

"Without strong, robust copyright laws, they are at risk of being cheated of the fair compensation for their creativity which is their due, and the Australian government will continue to protect them," Brandis said in December 2013.

"In considering the recommendations, we will be particularly concerned to ensure and we will approach the consideration of the report with the view that no prejudice be caused to the interests of rights holders and creators," he added in February 2014.

"Australia's creative industries are not only a vital part of our culture; they are a thriving sector of our economy. Just like any other workers in our economy, they are entitled to the fruit of their efforts."

A three-strikes policy for Australians who are caught downloading copyrighted material has also been released in the form of a draft code (PDF) by internet service providers (ISPs) and rights holders, which were asked to collaborate on the code by Brandis and Communications Minister Malcolm Turnbull late last year.

In spite of this, the government released a report last month revealing that users who download copyright-infringing content in addition to consuming paid content actually spend more than those who only consume non-infringing content.