Financial bind for Dallas Buyers Club rights holders

Document reveals reasoning behind movie studio’s attempt to reduce the number of alleged pirates it would seek a settlement from

Complying with a court order to lodge a $600,000 bond before contacting alleged pirates of the 2013 film Dallas Buyers Club would “significantly hinder the commercial activity” of Voltage Pictures, according to the film studio.

An affidavit lodged in December by Voltage Pictures as part of its attempt to revisit an August Federal Court decision, which required the $600,000 security and an undertaking from the company that it would seek from downloaders only classes of damages specified by the court, reveals the financial bind the company found itself in.

The company’s attempt to pursue downloaders yesterday suffered a major, and possibly fatal, blow in court.

Voltage is obliged to first distribute any profits from a film to the film’s financiers, the affidavit stated, and the company’s profits are used to finance further film-making.

“Voltage has already allocated these funds to current film productions,” stated the affidavit, signed by Michael Wickstrom, the vice-president of royalties and music administration at Voltage Pictures LLC.

To meet the security imposed by the court, the company would most likley need to obtain a loan.

“If [Voltage and linked company Dallas Buyers Club LLC] cannot obtain a loan for the bond, they will be required to use funds that have been allocated to current film productions and which are necessary to continue production of those films.”

Legal action first launched by Voltage in 2014 has sought to obtain the details of ISP customers it believes illicitly downloaded the film. The company wants to contact alleged downloaders in order to potentially obtain financial settlements from them, in exchange for not proceeding with potential court action.

The company contracted Maverik Eye to collect IP addresses linked to downloading the film via BitTorrent.

The financial bind the company found itself in led it, in an interlocutory application lodged in September, to narrow the scope of the group of alleged pirates it was seeking, proposing to contact to only 10 per cent of the initial 4700+ it had sought details of.

The company argued that it should as a result be able to lodge 10 per cent of the security initially imposed by the court.

More contentious, in arguments rejected yesterday by the Federal Court’s Justice Nye Perram, was Voltage’s push to revisit the classes of damages it would seek from alleged downloaders.

A new letter that Voltage proposed to send to ISP customers that was included in the affidavit was similar in most respects to the one it had initially drafted (notably it was changed to make clear that the 10 per cent of the IP addresses it was proposing to target were associated only with iiNet customers).

Consistent with the company’s initial arguments, the tweaked letter threatens potential damages for “unauthorised distribution” of the film (via BitTorrent uploading) and additional damages, as well as a portion of Voltage’s legal fees.

Perram had ruled in August that the company would only be able to seek settlements based on the cost of a copy of the film and a portion of its legal fees.

Some language has been altered in the second letter draft, however.

The original draft in relation to damages for distributing the film states:

Read more: Google slams Australian copyright laws

Piracy includes the unauthorised distribution of the film. Voltage has entered into exclusive distribution agreements in respect of the Film both in Australia and overseas. Piracy negatively affects the value of those agreements and any future agreements which DBC and/or Voltage may enter into in respect of the Film and/or future productions. As such, DBC and Voltage are entitled to seek the payment of damages for Piracy.

The new version of the letter directly connects the “distribution” (through uploading) to lost profits from Dallas Buyers Club. In the revised draft, with a note that the paragraph would be included subject to the court’s determination, the section states:

The Infringing Conduct amounts to the unauthorised distribution of the Film. Voltage has entered into an exclusive distribution agreement in respect of the Film in Australia. The Infringing Conduct has caused DBC and Voltage to lose profits which they would have otherwise made through the payment of royalties under the distribution agreement had you not engaged in the Infringing Conduct. As such DBC and Voltage are entitled to seek the payment of damages for the Infringing Conduct.

The section relating to additional damages sought by Voltage under section 115(4) of the Copyright Act has also been tweaked.

The section in both versions of the letter states:

The circumstances that a Court may have regard to in assessing additional damages include:
(a) The flagrancy of the infringement;
(b) the need to deter similar infringements of copyright;
(c) the conduct of the person who infringed copyright after the act constituting the infringement or, if relevant, after that person was informed that the person had allegedly infringed copyright; and
(d) any benefit shown to have accrued to the person by reason of the infringement

The newer version of the letter adds: “The Infringing Conduct is sufficient to justify the Court awarding additional damages.”

The letter states that in the absence of a settlement, Voltage and DBC may seek damages for both uploading and downloading of the film, legal costs for unearthing a subscriber’s personal details and for the cost of taking them to court, and additional damages. The letter gives subscribers a 28-day deadline to contact the rights holders.

Perram yesterday issued his fifth judgement in the matter. The judge rejected the attempt to alter the restrictions he had placed on the settlements Voltage could seek from alleged pirates.

The judgement said that the question of Voltage lodging a reduced security did not arise because Perram would not allow the company to proceed in a manner contrary to his August ruling, which imposed the restrictions.

Unless Voltage and DBC LLC take further court action, the court proceedings will be terminated on 11 February 2016 at noon, the judge ruled.

Perram said that would be disposed to grant leave to appeal his May and August rulings.

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