Written by Rufina Cheung of Wolters Kluwer
The court will order six internet service providers (ISPs) to reveal the names and physical addresses (but not the email addresses) of the customers associated with 4,726 IP addresses from which the film Dallas Buyers Club was shared online using BitTorrent. This identifying information will be given to the alleged copyright owners, Buyers Club LLC and its parent Voltage Pictures LLC, and will help them to identify the end-users who allegedly used BitTorrent to infringe copyright: Buyers Club LLC v iiNet Limited (2015) AIPC ¶92-488;  FCA 317 at , , .
Privacy obligations will be imposed — the information can only be used to recover compensation for the infringements (ie identifying, suing and negotiating with the BitTorrent downloaders) and cannot otherwise be disclosed without the court’s leave: , –.
Prevention of “speculative invoicing”
The court will also review the letter that the alleged copyright owners plan to write to the account holders. This condition is designed to prevent “speculative invoicing”, in light of the potential vulnerability of many account holders. Speculative invoicing is a practice where copyright owners send letters to internet account holders claiming that they are liable for damages, demanding a large amount of money and offering to settle for a smaller amount which still greatly exceeds the amount that might actually be recovered in litigation: , , , .
Voltage has previously engaged in speculative invoicing, in the United States, sending very aggressive letters to account holders. Perram J formed the impression that Voltage would act as aggressively as they were legally permitted: .
His Honour noted that it was not clear whether speculative invoicing was lawful in Australia, observing that it might constitute misleading or deceptive conduct or unconscionable conduct, but that it may be difficult to identify a supply of goods or services or a financial service as required by the legislation in the case of unconscionable conduct: . The court’s oversight of the letters to account holders is designed to address concerns about “the consequences to persons who are untutored about litigation receiving menacing correspondence apparently resulting from Court orders”: . This requirement for court approval of correspondence has been used in England and Canada. The English case involved pornographic films (which potentially raised blackmail concerns), but Perram J held this was not the basis of the decision, and it should not be distinguished on this basis: .
ISPs did not challenge expert evidence about the software used to identify IP addresses
Dr Richter gave expert evidence about the Maverik Monitor software used to identify IP addresses sharing a particular file using BitTorrent. She said that it was capable of monitoring traffic on the BitTorrent network; it identified the IP addresses of users and recorded the time of the data transfer accurately; and dynamic IP addresses did not influence the accuracy of the software. By not asking for the opportunity to cross-examine Dr Richter, the ISPs gave up the right to suggest that Maverik Monitor was deficient in relation to time stamps and dynamic IP addresses. Instead, the ISPs took the unusual course of cross-examining Mr Macek, who was a user of the software but not an expert on it, to cast doubts on the reliability of the software. His cross-examination revealed that he did not understand the mechanics of how the software operated, but this lack of knowledge was irrelevant because it was foreseeable. The attacks on his credit had no substance. His “cross-examination … was largely of entertainment, as opposed to forensic, value”: . This was not a criticism of the ISPs’ counsel, since Dr Richter’s evidence was imposing and questioning her was unlikely to benefit the ISPs. Attempting to undermine Mr Macek’s credit was the most plausible tactic, but it failed: –, –, –, –.
Downloading a sliver of a film is strong circumstantial evidence of copyright infringement
Perram J was “comfortably satisfied that the downloading of a sliver of the film from a single IP address provides strong circumstantial evidence that the end-user was infringing the copyright in the film”: . His Honour held that it certainly was enough evidence for a preliminary discovery application. The alleged copyright owners did not even need to demonstrate a prima facie case of infringement; it was sufficient that the lawsuit had some prospect of succeeding, ie that it was a real case which was not fanciful. It was not fanciful to say that end-users sharing movies online using BitTorrent infringed copyright. Indeed, if anything was fanciful, it was the proposition that they were not infringing copyright. Therefore, there was a real possibility that the IP addresses identified by Maverik Monitor were being used by end-users who were breaching copyright: –.
Maverik Monitor detected only a download of a very small sliver of the film (sometimes only a few hundred bytes). Perram J rejected the ISPs’ argument that it was not sufficiently shown that the end-users infringed the film’s copyright because no “substantial” copying occurred, because that was not the correct issue. The correct question was whether the end-user made the film available online if they were detected sharing a sliver of a film: –.
Perram J found that the download of a single sliver was consistent with four scenarios:
The end-user has the whole film and made it available to other BitTorrent users
The end-user could be correctly described as making the film available online (falling within the definition of “communicate” in s 10)
The end-user is downloading the film and the sliver comes from the portion already downloaded
The end-user could be correctly described as making the film available online
The end-user has stopped after partially downloading the film and the sliver comes from the downloaded part
This scenario was possible, but it was not plausibly likely to represent the majority of BitTorrent end-users’ activity
The end-user has downloaded a single sliver and is sharing it
This scenario was relevant only to a very small category of specialists, eg Dr Richter.
Both applicants could sue for infringement and seek preliminary discovery
Voltage was certainly able to sue for infringement. It was reasonably arguable that Dallas Buyers Club LLC was the copyright owner and may also have the right to sue for infringement. Both applicants were therefore authorised to seek preliminary discovery: 
Dallas Buyers Club LLC was the original copyright owner, because it made the contractual arrangements needed to bring the film into existence. The court disregarded a certificate that stated that Buyers Club LLC claimed to be the copyright owner: –.
There was a Distribution Licence Agreement, which the ISPs argued assigned the copyright to Picture Perfect. It was reasonably arguable that the Distribution Licence Agreement was what it appeared to be, namely, a licence rather than an assignment of the copyright. If it did assign copyright, Dallas Buyers Club LLC could not sue. However, if it did not assign copyright (as was reasonably arguable), then Buyers Club LLC could sue: , –.
In any case, Voltage could sue for infringement. Under the Distribution Licence Agreement, Voltage was contractually authorised to commence infringement proceedings on behalf of Picture Perfect (whether it was the copyright owner or exclusive licensee). The Copyright Act did not exhibit an intention that the rights to sue for infringement must be exercised personally: –, .
There was a distribution agreement between Content Media Corporation International Limited (Content) and Pinnacle Films, which assumed that Content could grant a license to distribute the film. However, there was no evidence that such rights were ever granted to Content by Dallas Buyers Club LLC (or Voltage). Perram J was not willing to assume that this was proved by the agreement which predated the release of the film (and the existence of the legal title to its copyright). The ISPs had not proven that copyright moved to Content, or that Content had any rights to sue for copyright infringement. However, if Content did have such rights, Voltage could exercise those rights as its attorney: –, .
Requirements for preliminary discovery were satisfied
Perram J held that the court had the power to order the ISPs to give preliminary discovery, and the pre-conditions (listed below) were met: .
The alleged copyright owners had to show that:
(a) they may have a right to obtain relief,
(b) they cannot identify the prospective respondent, and
(c) the ISPs know or are likely to know the identity of that person or have a document which reveals it.
The alleged copyright owners must also believe that there may be a right for them to obtain relief against a non-party, and that belief must be reasonable: . There was no express evidence that Voltage believed it might have a right to sue for infringement. This gap in the evidence was due to confusion about the identity of the copyright owner. It was easy to infer the necessary belief. Both Voltage and Dallas Buyers Club LLC believed they might have a claim: .
(a) Right to obtain relief
(b) Inability to identify the infringers
It was “faintly suggested” that the alleged copyright owners could identify infringers by monitoring internet chat rooms. However this was distinctly unlikely. There was no reasons why participants would be using their own names: .
(c) The ISPs’ knowledge of the infringing end-user
The ISPs submitted that they could only identify the account holders and there was no guarantee that the account holders were the BitTorrent users. Perram J noted that in some situations it might be straightforward to identify the BitTorrent user (eg homes where only two occupants had access to the internet), or it might be relatively easy for the account holder to work out who the downloader was (eg by considering which film was downloaded). Other situations would be more difficult (eg airport lounges): –.
The ISPs argued that preliminary discovery could only be used to identify the actual wrongdoer, and it could not be used to identify someone else who might know who the wrongdoer was. Perram J held that there was no good reason why a rule designed to aid a party in identifying wrongdoers should be so narrow that it only permitted the identification of the actual wrongdoer: –, .
Also, the ISP’s argument was rejected twice in the NSW Court of Appeal, in cases based on the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Perram J held that the legislative history of the preliminary discovery rule in the Federal Court Rules 2011 (Cth) showed that its present wording was not intended to be different in meaning to the UCPR rule. The previous version of the Federal Court Rules were essentially the same as the UCPR. The new rule changed the style to be simpler, but the Explanatory Statement said that the new rule was substantially identical to the previous rule. Therefore, the NSW Court of Appeal cases should not be distinguished, and Perram J held he was probably bound to follow them: –.
The court should not use its discretion to withhold relief
Perram J did not accept that any of the reasons given by the ISPs justified him in withholding relief to the alleged copyright owners. However, some of these factors lead to the conditions that were imposed on the grant of preliminary discovery: .
ISP’s suggested reason for declining to order preliminary discovery
Perram J’s decision
(i) minor infringement: since only a sliver of the film was shared, any infringement was minor
Already covered: 
(ii) lawsuit unlikely: Each copy of the film was worth less than $10 and it was not plausible that the alleged copyright owners would sue to recover small amounts
Preliminary discovery applications are not a procedure for working out how good claims are, other than eliminating plainly frivolous exercises.
(iii) injunction unlikely: there were no realistic chances of the alleged copyright owners obtaining injunctive relief, either because only a sliver was shared or there was no demonstrated risk of repetition
It was not unlikely that an injunction may be granted but a preliminary discovery application was not the appropriate occasion to consider such a submission: .
(iv) no monitoring of serious infringers: the alleged copyright owners had failed to do adequate monitoring which could have revealed serious repeat infringers
This was beside the point given the conclusions on (ii): 
(v) speculative invoicing likely
See the discussion under the heading “Prevention of ‘speculative invoicing’” above.
(vi) privacy concerns: the ISPs were subject to privacy obligations in relation to their customers, and this should be respected
This was relevant. Parliament regards privacy and copyright as both having significant value. Both can be accommodated. See “Privacy safeguards” above: –.
(vii) draft online piracy code pending: the court should wait for the imminent industry code dealing with internet piracy, because it was an alternative avenue to deal with the problem.
The code was only an incomplete draft, and there was no sensible chance of it coming into force in the next few months. Therefore, the draft code was not a reason to decline relief.
(viii) investigation, not identification the Federal Court Rules were being used as a tool of investigation rather than identification
There was an element of investigation involved in identification, in cases such as this one: 
The alleged copyright owners will be required to pay the ISPs’ costs of these proceedings and the ISPs’ costs of giving preliminary discovery.