Judge says no to Dallas Buyers Club's 'surreal' overreach on piracy claims

In a surprising turn of events in the Federal Court case between rights holder Dallas Buyers Club LLC and ISP iiNet, Justice Nye Perram has rejected all draft letters put forward by Dallas Buyers Club, and will require the company to pay a AU$600,000 bond before allowing the release of details of alleged pirates.

In April this year, Dallas Buyers Club was granted the right to preliminary discovery in the copyright case, meaning it would be able to contact individual pirates and seek damages for copyright infringement from the 4,726 iiNet account holders targeted under the legal action.

The draft letter was seen in June and contained questions such as "how much do you earn and how many films have you torrented?" At the time counsel for iiNet, Richard Lancaster SC, said that the letter and telephone script "clearly [came] on too strong in terms of damages."

The fear was that Dallas Buyers Club could use the practice of so-called " speculative invoicing," where individuals accused of copyright infringement could be sent letters by rights holders seeking significant damages for financial losses caused by piracy, or the option to pay a fee to settle out of court.

Justice Perram had put a stay on the preliminary discovery order, pending the court's approval of the letters the company intended to send to alleged copyright infringers.

In June, Justice Perram noted that the proposed letters and subsequent telephone and email scripts did not contain enough information about the monetary demands that Dallas Buyers Club were intending to make. Justice Perram refused to approve any further action until details were made available to him.

Proposed Claims

Under a confidentiality order, DBC detailed the specific monetary demands. While the actual figures are still confidential, today's court ruling shows that the company was seeking four heads of damages:

• A claim for the cost of purchasing the film;
• A claim for damages relating to how often the film had been uploaded by a user. Given the nature of Bittorrent this could be extensive and the amount was described by Justice Perram as "substantial";
• A claim for punitive damages relating to how many other copyrighted works had been downloaded and;
• A claim for damage related to the cost to DBC for obtaining the alleged infringers details.

While Justice Perram allowed that the first and last claims seemed quite reasonable, he had severe reservations about the other two, calling them "untenable" and "outside the proper ambit of the power." In one element of his judgement, Justice Perram addressed the DBC claims that BitTorrent formed some sort of formal distribution and could be claimed against as such:

[...]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.

Bond amount

Justice Perram said he would lift the stay and allow the letters to be sent if DBC gave written confirmation that it would only seek damages related to the cost of purchasing the film and recouping the cost of the discovery.

However, he noted that as the company has no presence in Australia, the court would be "unable to punish it for contempt if it fails to honour that undertaking." To provide an incentive to adhere to undertaking the judge has asked that Dallas Buyers Club LLC to provide a AU$600,000 bond. Justice Perram said the bond was set at "a level which will ensure that it will not be profitable for it to do so."

The ruling was greeted with surprise across the industry, with legal pundits regarding Justice Perram's decision as big win for both ISPs and customers.