All of us at some point know someone that has told us about illegally downloading a movie via an internet site. It seems unfair for those of us who pay full price through iTunes but most of us just figure that the younger generation are smarter than us.

A new Federal Court case sheds some light on the rights of the movie makers as owners of the copyright and those pesky downloaders. What happens when they get caught and how do they get caught?

It seems from the evidence in the Dallas Buyers Club Movie (DBC) and a group of Internet Service Providers (ISP), including IINet, Internode and Dodo, that the fight continues. On 14 August the Federal Court gave an indication of the compensation copyright owners can expect to claim in future copyright breach matters and how the illegal downloaders might expect to receive a bill.

What happened here was a digital investigator found 4,726 IP Addresses from which the DBC movie was illegally downloaded and shared on “Bit Torrent”. The owner sought a Court Order requiring the relevant ISP to provide details of the owners of the IP Addresses.

To get an Order like this they had to demonstrate a right to obtain relief against potential Defendants, namely the ISP account holders. The judge ordered the ISP to provide this information but DBC had to provide the letter of demand to the account holders. The concern here was an unreasonable demand for the level of damages suffered from the copyright infringement.

In terms of the amount of money the owner of the copyright intended to claim, the letters set out four things:-

1. A claim for the cost of downloading a film;
2. A claim relating to the uploading or sharing of the film on Bit Torrent;
3. A claim relating to additional damages because of repeat infringing;
4. A claim for part of the costs of proceedings.

The general principle is that damages must put the party who has had their rights breached, in the same position it would have been in, had the infringement never occurred.

The judge found that a claim relating to the cost of downloading the film and a claim for a proportionate part of the cost of proceedings was permissible. However the Court found that a claim relating to the uploading or sharing of the film on Bit Torrent and additional damages due to potential repeat infringements was not.

I learnt that a user downloads slivers of a movie file from many other uses, and the slivers are then put together to form the full movie. By doing this Bit Torrent automatically shares and uploads the slivers of the file to each of the other downloaders. It must be a Gen Y thing!

The owners of the copyright claim that each sliver shared was actionable. This meant they would have been charged for sharing the film on the internet at full price for each sliver. The Court found this was not permissible even though it was clearly designed to act as a deterrent to the illegal downloading.

The Court also found additional damages could be claimed when taking into account all the other relevant matters including downloaders history on Bit Torrent so that the more they downloaded, the higher the additional damages should be. The Court found that this approach by the copyright owner was not reasonable and it came back to the cost of hiring the film by download and a proportionate part of the cost of the proceedings.

The Court said they would only allow access to the identities of the downloaders if DBC undertook to make a claim for the cost of download of the movie and proportionate part of the proceedings only. The Court required the foreign based owner of the copyright to pay a bond of $600,000.00 to the Court which would be lost if they failed to follow the undertakings. Heavy stuff!

So the general principles to be derived are:-

1. Illegal downloaders can be pursued by virtue of the ISP; and
2. Reasonable damages will be awarded as well as a proportionate part of the cost of the action of the breach, but no more.

The tricky situation for an owner of a copyright is, will the costs of proceedings and pursuing the illegal downloaders and recovering small amount of damages be cost effective and enough of a deterrent. It certainly makes you think very carefully about how technology is disrupting the traditional framework of access to material, rights to exercise over the cost of sharing copyright material and whether any potential claims are adequate deterrent from doing it.

Owners of copyright of should think very carefully about how it is shared by the internet. Call us if you would like to discuss your copyright issues.

It is a surprise to many of our clients that the exchange of emails can constitute a binding Contract. The courts are frequently holding people to these Contracts and it is a topic that requires some careful consideration in times where email is the dominant method of communication. Stodgy old paper Agreements with a lengthy witnessing clause might get left on the desk when parties are talking. However, if there is sufficient dialogue and certainty of terms by email, that may be enough to create a legally binding agreement.

When parties are negotiating it is a real danger time and there are some rules that should be followed during those exchanges.

Although the Courts are often perceived as being backwards in regards to technology, they have in fact responded to this shift in communication by accepting email as a means of creating binding agreements.

Not all business managers have caught up with this trend and are regularly placing their company at risk.  It is a mistake to believe that what is said or agreed over email is not binding, and that a legally binding contract is only made when a formal written document is signed.

Take a look at some recent cases with us and let us know if you have a similar issue in your business.

EMAIL NEGOTIATIONS – BINDING OR NOT?

If you have started to negotiate by email but don’t want your emails to be a binding contract, then you must clearly state in your emails that “no binding agreement is formed unless and until a formal contract has been executed”.

If you don’t expressly state this condition, a Court is unlikely to read it that implied in your emails, is the intention to be legally bound.

In May this year, the Queensland Supreme Court held in Stellard Pty Ltd v North Queensland Fuel Pty Ltd¹ that a binding contract for the sale of land had been made by email. Amazingly, both the offer email and the email accepting the offer referred to the offer being “subject to contract” and “subject to execution“. This was not enough to make the offer conditional apparently.

Following the email exchange, the buyer sent a contract to the seller for execution but it was not signed. The seller later withdrew from the deal and entered into a contract with a third party. This is where the problem started as the buyer had understood the deal to be done.

The Court found that within the broader context of the emails, the parties had intended to be bound immediately. This was the case, even though the parties expected to substitute the agreement with a formal contract containing additional terms. Essentially the guts of the deal had been agreed to and were not able to be refuted.

The Court was also satisfied that the emails met the requirement that a contract for the sale of land be in writing and signed, applying the Electronic Transactions (Queensland) Act 2001(Qld).

The Stellard decision was very similar to an earlier decision this year by the Western Australian Court of Appeal in Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd². In this case, it was held that a binding contract to lease commercial premises had been made by a series of emails, despite the emails referring to the offer as being “subject to formal approval“. You can see the problem and the pattern here.

In its decision, the Court was not influenced by the fact that the parties could not agree on a reinstatement clause and that no formal lease was ever signed despite the parties’ intentions to do so.

The ‘binding email’ trend extends to settlement negotiations between lawyers by email.

In late June, the NSW Supreme Court found a binding settlement agreement had been made by email between lawyers in Universal Music Australia Pty Limited v Pavlovic³.

The Court held that the lawyer’s email stating that the client would sign the settlement deed, combined with the rest of the communications and conduct, was enough to create a binding contract. Whoops! It is a very old practice to ensure that you state “this offer is subject to final instructions from our client” just to cover your backside.

Although it was intended that a deed would be signed (and it never was), the Court refused to imply from the emails that no binding agreement would be created until the deed was actually signed.

THE SEDUCING BY EMAIL

The speed and casual ease with which emails can be written and exchanged is their attraction. Matters can progress much more quickly and the issues narrowed faster using this method. The down side is the danger emails represent when they are used for contractual negotiations, and why parties frequently find themselves in binding contracts.

These recent cases show that Courts may be inclined to imply a binding contract is made even though it has not been formally executed. The courts view emails as a modern business tool capable of binding parties and clearing even strict legislative requirements such as having a paper document in writing and signed by the parties.(Property Law Act)

We say loud and clear, to all our business clients, it’s crucial to manage the risk of being bound by emails. Statements like “subject to contract” are not enough. Clearly and consistently state in your emails that no binding agreement is made until a formal contract is executed.

Footnotes

¹ [2015] QSC 119.

² [2015] WASCA 21.

³ [2015] NSWSC 791.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances