Implications of Dallas Buyers Club LLC v iiNet Ltd for Speculative Invoicing in Australia
Dallas Buyers Club LLC v iiNet Ltd (2015) FCA 317 (7 April 2015) concerned an application for preliminary discovery of the personal details of approximately 5000 Internet subscribers whose Internet connections were allegedly used to download the film Dallas Buyers Club. The applicants were Dallas Buyers Club LLC (a limited liability company registered in Texas) which purportedly owned the copyright to the film, and its parent company Voltage Pictures LLC (a limited liability company registered in California). The respondents were several Australia Internet service providers (‘ISPs’) whose subscribers’ details were being sought.
The respondents opposed the application on a number of bases, among which was the concern that the applicants intended to engage in the practice of ‘speculative invoicing’, a practice that is controversial politically and judicially. Speculative invoicing involves a copyright holder indiscriminately sending letters ‘to the account holders demanding a large sum of money and offering to settle for a smaller sum which [is] still very much in excess of what might actually be recovered in any actual suit.’1 Perram J acknowledged that
there is no doubt that Voltage has done this in the past. There were a number of instances put before me of Voltage having written, in the United States, very aggressive letters indicating to the identified account holder a liability for substantial damages and offering to settle for a smaller (but still large) sum.2
This case appears to be the first in Australia to consider speculative invoicing. His Honour suggested that the practice may come within the meaning of ‘misleading and deceptive conduct’ or ‘unconscionable conduct’ prohibited by sections 18 and 21 of the Australian Consumer Law respectively.3 Alternatively, it may be unconscionable conduct of the kind prohibited by section 12CB of the Australian Securities and Investments Commission Act 2001 (Cth).4
Due to the lack of precedent for speculative invoicing in Australia, Perram J referred to foreign authorities from the United Kingdom and Canada for guidance. In Golden Eye (International) Ltd v Telefonica UK Ltd  EWHC 723 (Ch), the High Court of England and Wales granted preliminary discovery against an ISP of the kind sought by Dallas Buyers Club LLC and Voltage Pictures LLC, subject to the condition that the applicant submit to the Court for approval a draft of the letter proposed to be sent to account holders. This approach was also taken by the Federal Court of Canada in Voltage Pictures LLC v John Doe  FC (Canada) 161.
As a consequence of the potential vulnerability of the targets of these practices, Perram J imposed conditions on the applicants to prevent speculative invoicing. By taking the approach of the British and Canadian courts, his Honour avoided encouragement of speculative invoicing by requiring judicial oversight to ensure that the use of the information about account holders is not abusive.
An indication of the content was provided by the Federal Court of Canada, which required letters to ‘contain a statement that no Court has yet found any recipient of the letter liable for infringement and that recipients should seek legal assistance.’5 Further, the letters were required to include a copy of the Court’s order and to be submitted to the Court for review and approval prior to it being sent to subscribers.6
Speculative invoicing was greatly criticised in the United Kingdom and the practice has waned as a result. In considering the controversial speculative invoicing practices of ACS:Law and Media CAT in the United Kingdom, Arnold J of the High Court of England and Wales stated that:
Although it is not normally the role of the courts to supervise pre-action correspondence, the draft order requires the letter of claim to be in the form set out in Schedule 2 and which I have reproduced above. In my view the ACS:Law/Media CAT episode shows very clearly why that this is an appropriate course to take, and why a court being asked to make a Norwich Pharmacal order in circumstances such as these needs carefully to consider the terms of the draft letter of claim.7
A Norwich Pharmacal order is essentially an order for preliminary discovery (see Norwich Pharmacal Co v Customs and Excise Commissioners  AC 133).
Arnold J took specific issue with a number of ‘objectionable’ aspects of the draft letter presented by the applicants, among them the lack of acknowledgment that the Court had not considered the merits of the allegations and that the subscriber may not be the targeted infringer, the overemphasis on the consequences a defendant could face, the short response time allowed (two weeks), and threats to make applications to ISPs requesting throttling or termination of the subscriber’s Internet connection.8
Additionally, the demanded sum of £700 was ‘unsupportable’ because some of the intended defendants were not infringers and therefore not liable.9 The claimants could not, Arnold J explained, have any idea about the scale of the infringements committed by each infringer: ‘I appreciate that it may not be cost-effective for disclosure to be pursued if the Intended Defendant is unwilling to cooperate, but I do not consider that that justifies demanding an arbitrary figure from all the Intended Defendants in the letter of claim.’10 His Honour declined to assume that additional damages would necessarily be awarded, indicating that the settlement figure would need to be negotiated individually with each defendant.11
Although Australian courts are not bound to follow these foreign decisions, they are compelling and will no doubt be persuasive in guiding the development of case law in this area, in particular the way that orders are framed.
Dallas Buyers Club LLC v iiNet Ltd (2015) FCA 317 (7 April 2015) . ↩
Ibid . ↩
Ibid  citing Competition and Consumer Act 2010 (Cth) sch 2 ss 18, 21. ↩
Ibid citing Australian Securities and Investments Commission Act 2001 (Cth) s 12CB. ↩
Voltage Pictures LLC v John Doe  FC (Canada) 161 . ↩
Golden Eye (International) Ltd v Telefonica UK Ltd  EWHC 723 (Ch) . ↩
Ibid –. ↩
Ibid . ↩
Ibid . ↩
Ibid . ↩