Last month we reported how seven major Hollywood studios teamed up to sue iiNet, Australia’s third largest ISP. The studios monitored iiNet's customers using BitTorrent - including a 'copyright infringing' subscriber they planted there themselves - and on whose shoulders the case appears balanced.

The claim of the Hollywood studios goes like this – they accuse Australian ISP iiNet of “failing to take reasonable steps, including enforcing its own terms and conditions, to prevent known unauthorized use of copies of the companies’ films and TV programs by iiNet’s customers via its network.”

The studios want iiNet to disconnect alleged infringers, but the ISP has refused to do so. Adrianne Pecotic, Executive Director of the Australian Federation Against Copyright Theft said that the studios were forced to sue, since iiNet failed to take action against its customers. The case returns to the federal court shortly, but the lead up to this action proves interesting.

With the approval of AFACT, the Hollywood studios started a secret investigation back in June this year. After employing investigator Aaron Herps (and getting him to join up as an iiNet customer) and Copenhagen-based anti-piracy firm DtecNet for its software resources, they went online from 2 July to 30 October. Herps then actively shared copyright works via BitTorrent in a quest to gather evidence to prove that iiNet authorized the copyright-infringing activities of its own subscribers. But how would they prove this?

After the 18 week investigative period, the studios had collected the IP addresses of many thousands of iiNet subscribers, which were handed over to iiNet boss, Michael Malone, who later commented, “They send us a list of IP addresses and say ‘this IP address was involved in a breach on this date’. We look at that and say ‘well what do you want us to do with this? We can’t release the person’s details to you on the basis of an allegation and we can’t go and kick the customer off on the basis of an allegation from someone else.”

Crucially, the studios felt they had an ace up their sleeve in the shape of their investigator and now iiNet customer, Aaron Herp. Herps’ own ‘infringements’ were reported to iiNet along with everyone else’s, but of course, iiNet took no action against him, bolstering the claims that the ISP knew about piracy, but did nothing about it.

Interestingly, as Herps was actually authorized to share the movies and TV shows by the studios, he committed no copyright infringement, so if iiNet had disconnected him, they would have been acting incorrectly. It’s unclear what bearing this will have on the case.

Instead of taking direct action itself, iiNet handed all the evidence provided by the studios directly to the police. “So we say ‘You are alleging the person has broken the law; we’re passing it to the police. Let them deal with it’,” said Malone.

Ultimately it will be for the court to decide if iiNet ‘authorized’ the infringements, but the claims center around a number of assertions – that iiNet knew that its users were infringing copyright and that it took no action against them (i.e warnings, disconnection), that the ISP did not enforce its own terms of service (no sharing of copyright works) and that this liberal environment encouraged iiNet’s users to share more files.

According to Business Spectator, a hearing will take place tomorrow which will decide a date by which iiNet will have to file a defense, a defense they have promised to mount, vigorously.

Similar to elements of the DMCA, the ISP has a defense under Copyright Act 1968 – Sect 112E: A person (including a carrier or carriage service provider) who provides facilities for making, or facilitating the making of, a communication is not taken to have authorized any infringement of copyright in an audio/visual item merely because another person uses the facilities so provided to do something the right to do which is included in the copyright.

However, the Copyright Act 1968 – Sect 116AH states, “The carriage service provider must adopt and reasonably implement a policy that provides for termination, in appropriate circumstances, of the accounts of repeat infringers.”

However, proving that someone is an infringer takes more than a simple allegation, and it could hardly be considered ‘appropriate’ to disconnect someone on this basis. Time for Justice Dennis Cowdroy to decide.