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Case Alert: Dallas Buyers Club – Shaping the future of Australian copyright law?

by James d'Apice
12 January 2016
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Dallas Buyers Club [2015] FCA 1437 (16 December 2015)

Recently Justice Perram of the Federal Court handed down his judgment on the next phase of the Dallas Buyers Club litigation. In a previous article about this piece of litigation we said, “The outcome of this litigation may contribute to the future shape of the law of copyright in this country.” That remains true.

The proceedings were commenced by owners of the copyrights arising from 2013 film Dallas Buyers Club (DBC) against various internet service providers (ISPs) seeking damages for infringement of their copyrights. DBC complained that their copyrights are being infringed by internet users downloading and sharing their work via torrent websites without paying. Crucially, DBC do not know who those infringing users are. They need discovery of the ISPs’ records to find out the infringers’ identities.

Previous steps in the litigation

Previously the Court granted DBC preliminary discovery against the ISPs for the purpose of identifying individual copyright infringers on certain conditions. The Court required DBC to provide, for the Court’s approval, the draft letter that would be sent to the ISP users that would be disclosed by the ISPs’ material.

DBC was required to lodge with the Court a bond of $600,000.00 to secure its obedience since they have no assets within the Federal Court’s jurisdiction ie Australia.

Issues

In Dallas Buyers Club LLC v iiNet Limited (No 5) [2015] FCA 1437 (16 December 2015) his Honour was required to consider five issues:

  1. Whether matters raised by DBC at an earlier stage of the proceedings could be ventilated again.
  2. Whether DBC’s argument that they were entitled to receive the licence fee that an infringing torrent distributor hypothetically would have paid for a worldwide non-exclusive license to distribute the film was incorrectly rejected and whether the recent decision of Yates J in Winnebago Industries Inc v Knott Investments Pty Ltd (No 4) [2015] FCA 1327 (2 December 2015) materially changed, or ought to change, the Court’s position.
  3. Whether to disturb his Honour’s earlier finding that DBC were not entitled to punitive damages.
  4. Whether to disturb his Honour’s earlier finding that DBC were not entitled to damages based on section 115(5) to (8) of the Copyright Act 1968.
  5. Whether the bond required to be paid by DBC (who have no assets in Australia) ought to be reduced from $600,000.00 to $60,000.00 based on DBC seeking to pursue roughly 10% of the infringers it originally planned to pursue.

Findings

In relation to the five issues his Honour found:

  1. His Honour was not satisfied on the evidence that there had been a material change in circumstances since the previous steps in the litigation. His Honour reviewed the relevant law and found DBC was not permitted to revisit the Court’s earlier findings.
  2. His Honour cited a previous case, Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liq) (2007) 157 FCR 564, as authority for the proposition that a royalty payment/licence fee is not an appropriate means for quantifying damages for copyright infringement in circumstances where there is no evidence the copyright owner would have granted the licence.
    Further, his Honour held that the case of Winnebago Industries did not have a material impact on these proceedings.
    Yet further, and decisively, DBC had put forward any evidence of the licence fee it would have charged in the scenario where each infringer was charged a hypothetical licence fee. As might be expected, this issue caused his Honour some consternation. At paragraph 31 of his judgment he asked rhetorically, “If, as may be possible, DBC has not granted licences on the same terms as the hypothetical… licence… how is the fair rate of that licence fee to be determined?”
    As a result of the above his Honour found that DBC was not entitled to seek payment of a worldwide non-exclusive licence fee from the infringing parties, leaving his earlier decision undisturbed.
  3. His Honour found no reason to disturb his earlier finding regarding punitive damages, notwithstanding DBC had revised their submissions in response to his Honour’s previous criticisms that i) the damages had not been quantified, and ii) DBC had no basis for claiming damages in relation to films other than Dallas Buyers Club. He found that a claim for punitive damages of this kind would be inevitably struck out, if brought.
  4. Notwithstanding DBC’s quantification of their damages claim, his Honour found no reason to disturb his earlier finding.
  5. His Honour held that based on the above there was no reason to adjust the quantum of the bond.

His Honour dismissed DBC’s application and, in attempting to bring finality to the proceedings, set a time at which the entire litigation would be automatically dismissed unless further applications were brought.

Implications

At the conclusion of his judgment his Honour said, “Substantial questions of principle are involved in a number of the decisions which I have made in this case.” Respectfully, we wholeheartedly agree. Almost every Australian is an ISP user. DBC were seeking from the ISPs contact details of ISP users in circumstances where those users could not provide (or withhold) their consent. If DBC had been successful, this would have represented a tectonic shift in Australian copyright law.

Importantly, the proceedings remain on foot. As ISP users we are well advised to “watch this space”.