The 4726 Australian internet users accused of pirating the film Dallas Buyers Club have been granted a temporary reprieve after a court ruled they could not be billed thousands of dollars in damages.
Although the Federal Court ruling last week caught many legal and industry observers off-guard, it confirmed what many in the legal community suspected: that so-called ‘speculative invoicing’ would not be tolerated in Australia.
Originating in the US, speculative invoicing typically sees rights holders demand “a large sum of money and offer to settle for a smaller sum”, Gilbert + Tobin partner Michael Williams told Information Age back in April.
The owners of Dallas Buyers Club are using a variation of this approach in Asia Pacific.
In Singapore, for example, they avoided asking for a specific amount but instead requested "a written offer of damages and costs” from the alleged pirate – in other words, ‘name your price’.
The approach looked likely to be replicated in Australia, according to the text of letters the rights holder supplied to the Federal Court for approval.
“[The letter] did not make any demand for a sum of money,” Justice Nye Perram said in his judgment.
“Instead, it encouraged recipients to make a telephone call to discuss the matter or to engage in email correspondence with an unidentified representative of DBC [Dallas Buyers Club].”
That approach did not wash with the Federal Court.
Justice Perram raised concerns from the outset about the tactics the film’s owners might seek to use on Australians.
“It would be fair to say that DBC has not rushed to make its position clear,” Justice Perram said.
“The court was not going to open the sluice gates until it saw the proposed correspondence and until DBC satisfied the court that it was … approved correspondence, and not something else, such as a dead cat, that DBC was going to send to account holders” accused of pirating the film."
It was not until July 2 that rights holders finally laid out “in some detail” what they were “going to demand as a matter of money” in confidential submissions.
In addition to charging the accused pirate for the cost of a copy of the film and a share of the cost of the investigation, rights holders wanted to charge a “one-off license fee” for anyone that uploaded the film via BitTorrent, as well as additional punitive damages.
The Federal Court drew a line in the sand.
It ruled that while it is permissible to recoup the cost of renting a copy of the film and a portion of the cost of identifying the alleged pirate, anything more - including punitive damages - is off the table.
The proposition that pirates should retrospectively pay a distribution license fee drew particular ridicule from Justice Perram.
“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,” Justice Perram said.
Justice Perram did not rule out the possibility of the 4726 accused pirates receiving letters from Dallas Buyers Club in the future, but it would require the rights holders to agree to settle for far less than they seek now.
The film's owner would also have to park a $600,000 bond with the court to guarantee that they wouldn’t overstep the mark should they decide to go ahead and recoup the limited costs provided for in Justice Perram's ruling.
However, as they have been seeking punitive and other damages here and elsewhere, that option may simply be unpalatable.
Past unfavourable rulings against rights holders in the Federal Court have been escalated to Full Bench hearings, and then to the High Court. Dallas Buyers Club’s counsel are yet to confirm whether they will press on.
Landmark ruling welcomed
QUT Professor of IP & Innovation Law Matthew Rimmer welcomed the judgment, which he said “shows a deep concern about the relationship between copyright law, consumer rights, and privacy.”
“The judgment was a pithy, and poised response to the problems of copyright infringement and speculative invoicing,” Professor Rimmer told Information Age.
“The ruling will be a suitable disincentive and discouragement to ambit claims being made by copyright owners.
“By the same token, the judgment will still allow copyright owners to pursue proportionate claims in the future.”
While he saw the ruling as an “important precedent”, he noted it could end up being superseded by a new copyright code that the Government and ISPs are currently thrashing out or by the Trans-Pacific Partnership (TPP), should that ever be finalised.
Several QUT law academics, including senior lecturer Nicolas Suzor - a one-time chair of Electronic Frontiers Australia - also welcomed the ruling.
"In this decision, we see internet users being treated as actual people instead of assumed criminals," the academics wrote in The Conversation.
"This is important. So long as users are painted as faceless pirates, it is easy to justify the excessive fees demanded by copyright plaintiffs.
"A more realistic vision of users as ordinary consumers means that copyright payments must be more realistic too."
The US Electronic Frontier Foundation (EFF) used the ruling to call for change to prevent speculative invoicing.
"Excessive penalties are baked into the US system which encourages trolling and abuse," it opined.
"Ultimately, we need fundamental reform of statutory damages to bring fairness to the US copyright system."
Information Age contacted other copyright law experts for comment for this story but did not receive responses by the time of publication.