Illegal File-Sharing Club: The Implications of the iiNet Ruling

Have you ever illegally downloaded a movie, music file or software?

If you’re among the estimated 29% of Australians who answered ‘yes’, you may be getting a nasty letter in the mail threatening legal action unless you pay the owners of that content money.

Earlier this week, the Federal Court made a landmark ruling that could effectively see Internet Service Providers (ISPs) handing over details of customers who are alleged to have illegally shared content to the owners of that content eg stake holders in the movies, music or software.

But while the outcome has been welcomed by movie, music and software companies around the world, it has left many individuals exposed to the prospect of being made to pay settlement claims – even if they were not directly responsible for sharing the files in question.

So what does the ruling mean for ordinary Australians?

Let’s take a closer look.

A Bit of Background

Several of our blogs covered the iiNet case as it progressed through the Federal Court.

Action was brought against iiNet late last year on behalf of the owners of the Hollywood movie ‘Dallas Buyers Club’. The owners sought a ‘preliminary discovery’ order from the Federal Court which would compel ISPs including iiNet to hand over details of customers who are alleged to have illegally shared the film online.

Preliminary discovery enable parties who are unable to identify those who they wish to sue to compel third parties to release information which might assist them in identifying and contacting those people.

Dallas Buyers Club LLC is representing the owners of the rights to the film. They had previously engaged ‘pirate hunting firms’ such as German-based ‘Maverick Eye’ to track the IP addresses of users who had shared the movie online. Through that process, they identified 4,726 IP addresses from which the movie was allegedly illegally shared.

Dallas Buyers Club LLC then approached ISPs including iiNet for the contact and personal details of account holders linked to the offending IP addresses, but the ISPs refused to release them in an effort to protect their customers’ privacy.

That refusal effectively made the task of Dallas Buyers Club LLC extremely difficult, if not impossible.

So in October 2014, Dallas Buyers Club LLC commenced action in the Federal Court seeking a preliminary discovery order against ISPs including iiNet, Dodo, Internode, Amnet Broadband, Adam Internet and Wideband Networks.

Just a few days ago, Federal Court Justice Nye Perram granted that order – compelling the ISPs to hand over the names and physical addresses of customers who are alleged to have illegally shared the film online.

Potential Consequences

So what does all this mean for the 4,726 people alleged to have illegally shared ‘Dallas Buyers Club’ online?

It essentially means that they could soon receive a letter in the mail from the lawyers of Dallas Buyers Club LLC threatening legal action if a sum of money is not paid within a certain period of time.

Such letters are commonly known as ‘speculative invoices’, and have already been issued to account holders in the United States. The US letters are drafted in a ‘very aggressive’ manner, and some threaten legal action for up to $150,000 USD if the account holders do not pay settlement fees of up to $7,000 USD.

However, lawyers for iiNet and other ISPs have already raised concerns about the legality of these letters under Australian law.

The Federal Court did not go into detail as to whether or not speculative invoices from Dallas Buyers Club LLC would be legal per se, but Justice Perram hinted that it may amount to misleading and deceptive conduct, or alternatively unconscionable conduct under the Australian Consumer Law.

This is because advising another person that they have a liability which they do not have – or that their potential liability for damages is much higher than it really is – may amount to misleading, deceptive or unfair conduct.

It has been pointed out that a demand for an exorbitant amount of money may amount to what is known as a ‘penalty’ – which is illegal – rather than a fair estimate of the damages sustained – also known as ‘liquidated damages’, which is legal.

While Justice Perram did not prohibit lawyers from issuing threatening letters, he did state that there would need to be restrictions on the contents of the letters.

This would likely follow legal procedures commonly used in the United Kingdom requiring lawyers to submit letters to the court for approval before sending them out to alleged offenders.

So, while the letters may threaten legal action, they are not likely request outrageous amounts like in the US.

The Problems With the iiNet Ruling

The iiNet ruling could open the floodgates for illegal sharers to be prosecuted under Australian law.

While this may be a source of comfort for rights owners, there are concerns that it could unfairly target people who have done nothing wrong. This is because any information provided by the ISPs will only relate to the holder of the account from which the files were illegally shared. There is no way, however, to identify the specific person who shared the material online; ie the person sitting behind the computer. In situations where a number of people use the network – as is often the case in a family home, shared residence, workplace or internet cafe – the account holder could face legal proceedings for the actions of others that actually used the computer to share the files.

That said, there is a strong argument that stake holders will find it very difficult to prove that any particular person is directly responsible for sharing the files, and would therefore be unlikely to secure a judgement in court against any particular person.

ISPs have also raised concerns that the ruling could be used to target and bully disadvantaged persons such as welfare recipients, those suffering from mental health conditions and school children, who are said to constitute a large portion of illegal sharers.

Yet Voyager Pictures, who is the parent company of Dallas Buyers Club LLC, has vowed not to take legal action against those who are vulnerable.

Federal Government Cracks Down on Piracy

The controversial iiNet ruling comes in the wake of a government crackdown against internet piracy.

A few weeks ago, the government introduced the Copyright (Online Infringement) Bill 2015, which, if passed, would allow rights holders to request court orders to block overseas websites who have a ‘primary purpose’ of facilitating illegal file sharing, such as The Pirate Bay.

The Bill does not contain specific method for how these sites should be blocked – but, rather, leave it up to the judge’s discretion. If the judge does not specify a method, the ISP can determine how it wishes to block the sites. The scheme is estimated to cost ISPs up to $130,000 a year to implement.

Some have raised concerns that the Bill may unintentionally target legitimate websites, including those of Virtual Private Networks (VPNs). It is still uncertain as to whether the Bill will be adopted, as it is currently being scrutinised by a Parliamentary Committee. If so, it could pose yet another roadblock for illegal downloaders.

Meanwhile, iiNet has not advised as to whether it will be appealing against the Federal Court ruling. It has 28 days from the date of the judgment to do so.