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What the Dallas Buyers Club ruling means for piracy in Australia

The DBC resolution appears to cement the Federal Court's methodology in calculating damages for online copyright infringers, but how will this be affected by the three-strikes code and the TPP rules?
Written by Corinne Reichert, Contributor

With Australia's three-strikes piracy code yet to be brought into effect, and the Trans-Pacific Partnership (TPP) in large part leaving it up to the judiciary to determine a system for calculating damages, the common law precedent set by the Australian Federal Court, and Dallas Buyers Club's (DBC) refusal to continue fighting it, could have significant consequences for any company seeking damages from copyright infringers.

Justice Nye Perram, who initially ruled in favour of DBC recovering damages from the 4,726 people who allegedly infringed on the studio's copyright by downloading the film of the same name, put in place a sufficient number of limitations to ensure that rights holders could not claim "untenable" damages in such cases.

The court's judgment was in response to DBC's attempts to claim damages under four heads: The actual cost of legally purchasing the film, the infringer's uploading activity of the film, additional damages for an infringer's downloading history, and damages covering the cost it took for DBC to obtain that infringer's details.

The first and fourth of these were allowed by the court, as they were "squarely within the kind of consequential loss which can be recovered on ordinary principles".

"If matters had rested there, I would have given DBC access to the account holder information," Perram J said in August.

However, DBC had continued pushing the boundaries, ultimately ensuring that the letters were knocked back, with costs.

The second head of damages, which referred to the infringer's uploading activity of the film, would have been dismissed immediately from court had it been the sole damages claim, according to Perram.

The third attempted claim, wherein DBC took at stab at charging alleged infringers for downloading unrelated copyrighted materials under the ownership of others, is not only not covered by Australian law, but also unequivocally "inconsistent" with Section 115(4) of the Copyright Act, Perram said.

"The court was not going to open the sluice gates until it saw the proposed correspondence, and until DBC satisfied the court that it was that approved correspondence, and not something else, such as a dead cat, that DBC was going to send to account holders," Perram stated.

Alongside the court saga, the Australian government has been simultaneously codifying a set of piracy-centric rules: A three-strikes policy for those who are caught downloading copyrighted material, which was released in draft form by internet service providers (ISPs) and rights holders early last year.

ISPs and rights holders had been asked to collaborate on the code by Australian Attorney-General George Brandis and Communications Minister cum Prime Minister Malcolm Turnbull in late 2014.

Under the draft code, rights holders would send reports to ISPs identifying IP addresses that have allegedly infringed on copyright, with the ISPs to then match IP addresses with account holders and send the associated customers infringement notices. Customers can be warned three times over a 12-month period in escalating education notices, warning notices, and final notices, after which the ISP involved must make a user's details obtainable through a Federal Court order.

Once final notices are sent out and a consumer's details are obtained through the Federal Court, punitive measures will be sought.

The code does not specify what these punitive measures will be, and were Perram to continue manning the "sluice gates", it could be entirely up to the court to keep denying any damages to claimants other than the minimal costs of legally purchasing a copy of the film or show, and the cost it took for the rights holder to obtain an infringer's details.

Freshly inked international regulations -- the Trans Pacific Partnership (TPP), which was signed last week after reaching agreement in October -- similarly mandate that member states force ISPs to give up identification details of alleged copyright infringers so that rights holders can protect and enforce their copyright.

Under TPP Article 18.74, the judiciary must provide damages "adequate to compensate for the injury the right holder has suffered because of an infringement of that person's intellectual property right".

In order to calculate the monetary amount for these damages, the judicial authorities may consider "any legitimate measure of value the right holder submits", including profit loss, the market value of the goods or services, and the recommended retail price, according to Article 18.74(4).

Additional damages should also take into account the "nature" of the conduct as well as future deterrence -- something that Perram classed as "untenable" and therefore unrecoverable.

However, the TPP goes on to say that each judicial system must build its own framework for calculating pre-established damages, which could mean the Federal Court's DBC judgment limits all future rights holders to, again, the cost of legal purchase and the cost to obtain the infringer's details at the court's discretion.

It remains to be seen whether the federal government chooses to enshrine a harder line on additional damages as proposed by the TPP, though considering the government's current obsession with policing piracy, this is entirely possible.

To combat online piracy, Article 18.73 states that all TPP members must collect, analyse, and publish data on copyright infringement, and use this to come up with an effective strategy for preventing and combating future infringements.

The TPP did not describe what to do when the research gathered actually serves to undermine copyright laws and regulations, however -- something that is pertinent given research by the Australian Department of Communications last July revealed that only 21 percent of respondents said an education notice would prevent them from consuming copyrighted content for free.

Ironically, users who consume paid content in addition to downloading copyright-infringing content also spend more than users who consume only non-infringing content, the same report said.

"Rights holders' most powerful tool to combat online copyright infringement is making content accessible, timely, and affordable to consumers," Turnbull admitted at the time.

Others have argued that the prevalence and increasing popularity of streaming services such as Netflix is sufficient to combat piracy, without the need for such heavy-handed laws and regulations.

"It would be in the best interests of content producers, as opposed to content distributors, if we all accepted that the main reason why most people unlawfully download is that they can't get what they want through legitimate channels," Internet Australia CEO Laurie Patton said on Thursday.

"There is ample research evidence that people are willing to pay if they can get the content they're after. In fact, surveys show that the people who 'pirate' are also among the most active legal downloaders."

The Australian Communications and Media Authority (ACMA) recently estimated that as of June 2015, Netflix Australia has 2.5 million users, with the availability and timely delivery of content helping the cause of preventing piracy.

Australia's three-strikes regime, meanwhile, is still ailing in its draft form. Having been originally set to be implemented from September 1, 2015, it was pushed back due to stalling negotiations over the costs imposed by instituting it, and whether ISPs would receive any compensation for being required to enforce copyright on behalf of rights holders.

"Why would either party want to bear the costs of running something that isn't going to achieve much? It is not surprising, therefore, that the copyright notice scheme hasn't materialised," Patton added.

With the government's own research supporting the case against heavy-handed piracy laws, with the TPP leaving damages considerations up to the discretion of the judiciary in any case, and with the far, far cheaper system of encouraging uptake of streaming services over implementing costly codes and regulations, it is possible that the Federal Court's reluctance to give much in the way of damages to DBC could cement the methodology for the consequences of illegal downloads in Australia.

Unfortunately, the government does not have the best track record when it comes to basing policy on realism.

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