Downloaded Dallas Buyers Club? The Bill is in the Mail

The film Dallas Buyers Club won critical acclaim and earned Matthew McConaughey and Jared Leto Academy Awards for Best Actor and Best Supporting Actor respectively. Now the rights holder of the film, Dallas Buyers Club LLC, is looking to pursue Australians who it believes have illegally downloaded the film.

The company has issued proceedings in the Federal Court of Australia against iiNet Limited and four other internet service providers, seeking orders to have them disclose the identities of the alleged pirates. iiNet has indicated that it will defend the action.

This is not the first time iiNet, Australia’s second largest ISP, has found itself in a dispute with the film industry. In long running litigation that was ultimately appealed to the High Court of Australia, iiNet successfully defended allegations that it had authorised copyright infringement by failing to take reasonable steps to prevent its users from downloading and sharing infringing copies via peer-to-peer networks. 

It is not unusual for internet service providers to resist handing over sensitive customer information to copyright owners.  What is interesting about the present case, is the grounds upon which iiNet is refusing to do so.  The Chief Regulatory Officer of iiNet has expressed concern that Dallas Buyers Club LLC intends to target alleged pirates using a practice known as ‘speculative invoicing’.

Speculative invoicing, also known by the less euphemistic term ‘copyright trolling’, refers to copyright owners, or their lawyers, engaging in mass distribution of letters to suspected infringers for the purposes of profiting from settlement payments, typically in an unduly intimidatory manner and in circumstances where there was never any real intention to issue proceedings.

While speculative invoicing or ‘pay-now-or-else’ letters are common in the United States, it has rarely been seen in Australia.

Such letters are often pro forma documents that rely on foreign copyright principles and possibly mischaracterise rights and remedies available under Australian law.  For example, some speculative invoicing letters we have encountered commonly demand payment of an unauthorised use licence fee far in excess of the licence fee that would have been payable had the content been reproduced lawfully.  Under Australian copyright law, damages for infringement are compensatory and not punitive in nature.  In the context of unauthorised reproduction of a film, damages are likely to be calculated by reference to lost royalty the copyright owner would have received for the infringing copy had it been licensed.  While exemplary or ‘additional’ damages are available, these are discretionary and would be unlikely to be awarded where the alleged infringement was made for the sole purpose of private or domestic viewing only.

Copyright owners are entitled to seek redress for infringement and a letter of demand is a necessary first step in doing so. However, speculative invoicing is a risky practice for content owners and their lawyers if a letter of demand is misleading or without sufficient evidentiary foundation.  This potentially gives rise to issues under Australian consumer protection laws, professional conduct obligations and civil procedure rules.  These issues have played out in the United Kingdom in recent years, where companies and lawyers engaging in speculative invoicing have earned the rebuke of the courts and suffered significant reputational damage as a result.