Dallas Buyers Club Decision – What does it mean for ISPs

By Alan Arnott and Michael Langenheim

Alan Arnott is a Technology Lawyer with Arnotts Technology Lawyers and Michael Langenheim is a Barrister at 4th Floor Selborne Chambers.

Perram J of the Federal Court has handed down his decision in the preliminary discovery application made by the owners of copyright in the film the Dallas Buyers Club against six ISPs (the biggest being iiNet): Dallas Buyers Club v iiNet [2015] FCA 317.

The case was hard fought and in the end it was a victory for the copyright owners, although some commentators (including iiNet’s CEO) have noted that the decision does contain some good news in the form of Court oversight of the letters to be sent to ISP customers.

The ISPs have 28 days from the day of the judgment (7 April 2015) to appeal but there has been no public announcement of any intention to do so at this point.

The decision

The applicants claimed that they had identified 4,726 IP addresses that shared their film using BitTorrent, they had evidence that the IP addresses were supplied by each of the ISPs and they believed the ISPs could identify the relevant account holders.

The ISPs attempted to resist the application on many different bases. One argument made was that the evidence put forward to identify the infringing IP addresses was insufficient.

The ISPs also argued that, as a matter of discretion, the Court should not order preliminary discovery because, among other things, there was evidence which suggested that the applicants were going to engage in the practice of ‘speculative invoicing’, the ISPs were subject to privacy obligations with respect to their customers which should be respected and the Federal government had required the industry to formulate an industry code dealing with the issue of internet piracy and the Court should wait until that code was in place.

The Federal Court Rules 2011 (Federal Court Rules) provide that the Federal Court has the discretion to order a third party to give discovery to a prospective applicant of documents in their control relating to a prospective respondent’s description (i.e. name and address). To enliven the discretion, the prospective applicant must satisfy the Court that it may have a right to obtain relief against a prospective respondent, it is unable to ascertain the description of the prospective respondent and the third party knows (or is likely to know) the prospective respondent’s description, or the third party has, or is likely to have, or has had, or is likely to have had, control of a document that would help ascertain the prospective respondent’s description. In this case, the prospective respondents are the ISP customers who have allegedly infringed copyright in the Dallas Buyers Club.

Based on the evidence provided by the copyright owners, Perram J concluded that the pre-conditions for an order for preliminary discovery had been met. He also rejected each of the arguments put forward by the ISPs against the Court exercising its discretion to order preliminary discovery.

However, the Court accepted that the applicants had used ‘speculative invoicing’ in the past in the United States and noted that the practise could be potentially unlawful in Australia as misleading and deceptive conduct or unconscionable conduct. To address these concerns, Perram J decided to impose conditions on the applicants in order to prevent ‘speculative invoicing’.

His Honour also noted that while the law protects the privacy of individuals it also protects the rights of copyright owners and that in situations where different rights clash it is usual for courts to try and accommodate both rights as best they can. As a result, Perram J imposed constraints on the way the disclosed information can be used, i.e only for the purposes of identifying end-users using BitTorrent to download the film, suing end-users for infringement and negotiating with end-uses regarding their liability for infringement.

The Court noted that industry codes have no effect until registered and even when registered they would have no direct effect until the Australian Communications and Media Authority (ACMA) was satisfied it had been breached and issued a direction to comply. In addition, the Communications Alliance Code C653:2015 Copyright Notice Scheme (Code) was at the time the judgement was handed down only in draft form with no real chance of it coming into force in the next few months. In these circumstances, Perram J concluded that the Code provided no reason to decline the relief sought by the applicants.

The impact on ISPs

There has been a lot of press about the decision and its impact on the customers of ISPs and the workarounds available including the use of VPNs and P2P software other than BitTorrent.

Any impact on the customers of ISPs will of course have a related impact on ISPs themselves.

ISPs are still bound by the requirements set out in the Telecommunications Act 1997 (Telco Act) and the Privacy Act 1988 (Privacy Act) not to disclose the personal information of their customers, the contents of communications and certain other information.

If a copyright owner approaches an ISP requesting customer details the ISP should obtain legal advice before agreeing to make any disclosure. In the absence of a Court order, disclosure could place an ISP in breach of the Telco Act and/or the Privacy Act.

The Code (submitted to the ACMA on 8 April 2015 and likely to be registered by the ACMA within the next few months) creates a copyright notice scheme where certain residential fixed internet users who are alleged to have infringed copyright online will receive a series of infringement notices designed to curb their behaviour and steer them towards lawful sources of content. Importantly, the Code does not apply to all ISPs.

ISPs who receive requests from copyright owners under the Code should seek legal advice in order to ensure that they comply with their legal obligations under the Code, and of course, their legal obligations owed in favour of customers.