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OnPoint | Dallas Buyers Club – speculative invoicing update

On 14 August 2015, the Federal Court declined to lift the stay on an order for preliminary discovery made against six Internet Service Providers (ISPs) earlier this year.

In May 2015, the Court ordered the ISPs to provide to the producers of the movie, Dallas Buyers Club (DBC), the names and addresses of 4276 ISP addresses which were said to have illegally shared the movie through a peer-to-peer network. Click here to read our OnPoint update on this decision.

The order was stayed until the Court approved the draft letters that DBC was proposing to send to the alleged infringers. This approval process was to alleviate a concern that DBC would engage in ‘speculative invoicing’. Speculative invoicing generally involves sending letters to persons demanding payment of large sums for an alleged copyright infringement. These letters often threaten court action and state that, if the demand is not complied with, the recipient will be liable to pay large monetary penalties. The Court in its earlier judgment noted that in certain circumstances speculative invoicing may contravene the Australian Consumer Law as it could be misleading and deceptive conduct.

After reviewing DBC’s submissions setting out the types of damages that would be demanded from account holders and how these would be calculated, the Court held that two of the four heads of damage claimed could not plausibly be sued for. Therefore, these heads of damage could not be included in DBC’s letter.

The Court categorised the four types of damages sought by DBC as follows:

Permissible demands

  • The cost of purchasing a copy of the film for each copy downloaded.
  • The cost of obtaining the names of the infringers.

Impermissible demands

  • The cost of a licensing fee each uploader would have paid DBC to legally share the film. The Court dismissed this claim as being “so surreal as not to be taken seriously”.
  • Punitive damages based on the number of copies of other films each infringer had downloaded. The Court dismissed this claim as the Copyright Act does not permit a calculation of damages by reference to other infringements made by an alleged defendant.

The Court indicated that it will lift the stay if DBC undertakes to the Court that its letters will only include “permissible demands” (see above) and pay a $600,000 bond.

What happens now?

While the courts have yet to rule on the legality of speculative invoicing generally, this case demonstrates the practical means through which the courts appear to be addressing concerns about the practice of speculative invoicing.

DBC says it won’t appeal the Court’s decision, but has reserved its rights to take action against infringers for additional damages.

The Court foreshadowed that DBC may still be able to pursue damages against infringers who have uploaded the film, for further ‘downstream’ infringements. However, many questions remain about the mechanics of file sharing and how this translates to a claim for damages under the Copyright Act.

If you would like to learn more about preliminary discovery or speculative invoicing, please contact a member of our Dispute Resolution & Litigation Team.

If you would like to learn more about copyright infringements, please contact a member of our Technology, Media & Telecommunications Team.

Author
 ERIN HOURIGAN 2cm 300ppi B&W psd 2012 Erin Hourigan | Senior Associate
Tel +61 2 9291 6308
E erin.hourigan@maddocks.com.au

On 14 August 2015, the Federal Court declined to lift the stay on an order for preliminary discovery made against six Internet Service Providers (ISPs) earlier this year.

In May 2015, the Court ordered the ISPs to provide to the producers of the movie, Dallas Buyers Club (DBC), the names and addresses of 4276 ISP addresses which were said to have illegally shared the movie through a peer-to-peer network. Click here to read our OnPoint update on this decision.

The order was stayed until the Court approved the draft letters that DBC was proposing to send to the alleged infringers. This approval process was to alleviate a concern that DBC would engage in ‘speculative invoicing’. Speculative invoicing generally involves sending letters to persons demanding payment of large sums for an alleged copyright infringement. These letters often threaten court action and state that, if the demand is not complied with, the recipient will be liable to pay large monetary penalties. The Court in its earlier judgment noted that in certain circumstances speculative invoicing may contravene the Australian Consumer Law as it could be misleading and deceptive conduct.

After reviewing DBC’s submissions setting out the types of damages that would be demanded from account holders and how these would be calculated, the Court held that two of the four heads of damage claimed could not plausibly be sued for. Therefore, these heads of damage could not be included in DBC’s letter.

The Court categorised the four types of damages sought by DBC as follows:

Permissible demands

  • The cost of purchasing a copy of the film for each copy downloaded.
  • The cost of obtaining the names of the infringers.

Impermissible demands

  • The cost of a licensing fee each uploader would have paid DBC to legally share the film. The Court dismissed this claim as being “so surreal as not to be taken seriously”.
  • Punitive damages based on the number of copies of other films each infringer had downloaded. The Court dismissed this claim as the Copyright Act does not permit a calculation of damages by reference to other infringements made by an alleged defendant.

The Court indicated that it will lift the stay if DBC undertakes to the Court that its letters will only include “permissible demands” (see above) and pay a $600,000 bond.

What happens now?

While the courts have yet to rule on the legality of speculative invoicing generally, this case demonstrates the practical means through which the courts appear to be addressing concerns about the practice of speculative invoicing.

DBC says it won’t appeal the Court’s decision, but has reserved its rights to take action against infringers for additional damages.

The Court foreshadowed that DBC may still be able to pursue damages against infringers who have uploaded the film, for further ‘downstream’ infringements. However, many questions remain about the mechanics of file sharing and how this translates to a claim for damages under the Copyright Act.

If you would like to learn more about preliminary discovery or speculative invoicing, please contact a member of our Dispute Resolution & Litigation Team.

If you would like to learn more about copyright infringements, please contact a member of our Technology, Media & Telecommunications Team.

Author
 ERIN HOURIGAN 2cm 300ppi B&W psd 2012 Erin Hourigan | Senior Associate
Tel +61 2 9291 6308
E erin.hourigan@maddocks.com.au