Roadshow Films Pty Ltd v iiNet Limited (includes summary) (No. 3) [2010] FCA 24 (4 February 2010)

Last Updated: 4 February 2010

FEDERAL COURT OF AUSTRALIA

Roadshow Films Pty Ltd v iiNet Limited (No. 3) [2010] FCA 24

SUMMARY

Citation: Roadshow Films Pty Ltd v iiNet Limited (No. 3) [2010] FCA 24







Parties: Roadshow Films Pty Ltd (ACN 100 746 870) and the parties in the attached Schedule I v iiNet Limited (ACN 068 628 937)







File number: NSD 1802 of 2008







Judge: COWDROY J







Date of judgment: 4 February 2010









Roadshow Films Pty Ltd v iiNet Limited (No. 3) [2010] FCA 24

SUMMARY

In accordance with the practice of the Federal Court in some cases of public interest, importance or complexity, the following summary has been prepared to accompany the orders made today. This summary is intended to assist in understanding the outcome of this proceeding and is not a complete statement of the conclusions reached by the Court. The only authoritative statement of the Court's reasons is that contained in the published reasons for judgment which will be available on the internet at www.fedcourt.gov.au . The judgment in this proceeding is necessarily complicated both as to fact and law. It is also lengthy, running for 636 paragraphs and almost 200 pages. I have decided to provide short oral reasons for the judgment which I am presently to hand down. These reasons are not intended to be a substitute for reading the judgment itself which will be accessible online this morning. This proceeding raises the question whether an internet service provider or ISP authorises the infringement of copyright of its users or subscribers when they download cinematograph films in a manner which infringes copyright. In Australian copyright law, a person who authorises the infringement of copyright is treated as if they themselves infringed copyright directly. This proceeding has attracted widespread interest both here in Australia and abroad, and both within the legal community and the general public. So much so that I understand this is the first Australian trial to be twittered or tweeted. I granted approval for this to occur in view of the public interest in the proceeding, and it seems rather fitting for a copyright trial involving the internet. That this trial should have attracted such attention is unsurprising, given the subject matter. As far as I am aware, this trial, involving suit against an ISP claiming copyright infringement on its part due to alleged authorisation of the copyright infringement of its users or subscribers, is the first trial of its kind in the world to proceed to hearing and judgment. The 34 applicants who have instituted this claim represent the major motion picture studios both in Australia and the United States. They have brought this proceeding against iiNet which is the third largest ISP in Australia. An organisation known as the Australian Federation Against Copyright Theft or AFACT has, on behalf of the applicants, been prominent in the conduct of the claim. AFACT employed a company known as DtecNet to investigate copyright infringement occurring by means of a peer to peer system known as the BitTorrent protocol by subscribers and users of iiNet’s services. The information generated from these investigations was then sent to iiNet by AFACT, with a demand that iiNet take action to stop the infringements occurring. The measures which AFACT requested iiNet perform were never precisely elucidated. However, as the evidence at trial indicated, AFACT wanted iiNet to send a warning to the subscriber who was allegedly infringing. If a warning was not sufficient to stop the infringement, AFACT intended that iiNet suspend the internet service of that subscriber. If the subscriber remained unco-operative, termination of the internet service was sought as the ultimate sanction. In addition, or in the alternative, the applicants suggested that iiNet should block certain websites. The evidence of infringement gathered by AFACT utilised the BitTorrent protocol, a blueprint for a highly efficient and effective mechanism to distribute large quantities of data. This protocol was created in 2001. It has been used, or more accurately, the constituent parts of the protocol (such as the client, tracker and .torrent files) have been used by those accessing the internet through iiNet’s facilities (the ‘iiNet users’) to download the applicants’ films and television shows in a manner which infringes copyright. I shall refer to the constituent parts of the BitTorrent protocol together as the BitTorrent system. The critical issue in this proceeding was whether iiNet, by failing to take any steps to stop infringing conduct, authorised the copyright infringement of certain iiNet users. The first step in making a finding of authorisation was to determine whether certain iiNet users infringed copyright. I have found that they have. However, in reaching that finding, I have found that the number of infringements that have occurred are significantly fewer than the number alleged by the applicants. This follows from my finding that, on the evidence and on a proper interpretation of the law, a person makes each film available online only once through the BitTorrent system and electronically transmits each film only once through that system. This excludes the possible case of a person who might repeatedly download the same file, but no evidence was presented of such unusual and unlikely circumstance. Further, I have found, on the evidence before me, that the iiNet users have made one copy of each film and have not made further copies onto physical media such as DVDs. The next question was whether iiNet authorised those infringements. While I find that iiNet had knowledge of infringements occurring, and did not act to stop them, such findings do not necessitate a finding of authorisation. I find that iiNet did not authorise the infringements of copyright of the iiNet users. I have reached that conclusion for three primary reasons which I now refer to. Firstly, in the law of authorisation, there is a distinction to be drawn between the provision of the ‘means’ of infringement compared to the provision of a precondition to infringement occurring. The decisions in Moorhouse, Jain, Metro, Cooper and Kazaa are each examples of cases in which the authorisers provided the ‘means’ of infringement. But, unlike those decisions, I find that the mere provision of access to the internet is not the ‘means’ of infringement. There does not appear to be any way to infringe the applicants’ copyright from the mere use of the internet. Rather, the ‘means’ by which the applicants’ copyright is infringed is an iiNet user’s use of the constituent parts of the BitTorrent system. iiNet has no control over the BitTorrent system and is not responsible for the operation of the BitTorrent system. Secondly, I find that a scheme for notification, suspension and termination of customer accounts is not, in this instance, a relevant power to prevent copyright infringement pursuant to s 101(1A)(a) of the Copyright Act, nor in the circumstances of this case is it a reasonable step pursuant to s 101(1A)(c) of the Copyright Act. The reason for this finding is complicated and lengthy, and is not suitable for reduction to a short summary for present purposes so I shall refrain from attempting to do so. Thirdly, I find that iiNet simply cannot be seen as sanctioning, approving or countenancing copyright infringement. The requisite element of favouring infringement on the evidence simply does not exist. The evidence establishes that iiNet has done no more than to provide an internet service to its users. This can be clearly contrasted with the respondents in the Cooper and Kazaa proceedings, in which the respondents intended copyright infringements to occur, and in circumstances where the website and software respectively were deliberately structured to achieve this result. Consequently, I find that the applicants’ Amended Application before me must fail. However, for the sake of completeness, I have considered all the issues argued before me. I find that the Telecommunications Act would not have operated to prohibit iiNet from acting on the AFACT Notices of infringement. However, as I have already found that iiNet did not authorise copyright infringement, such issue is irrelevant. I find that s 112E of the Copyright Act would not have operated to prevent a finding of authorisation of copyright infringement against iiNet. However, as I found on conventional principles of authorisation that the respondent did not authorise copyright infringement, such issue is irrelevant. Finally, I find that iiNet did have a repeat infringer policy which was reasonably implemented and that iiNet would therefore have been entitled to take advantage of the safe harbour provisions in Division 2AA of Part V of the Copyright Act if it needed to do so. I have drawn assistance from United States authority dealing with similar statutory instruments in making the finding. While iiNet did not have a policy of the kind that the applicants believed was required, it does not follow that iiNet did not have a policy which complied with the safe harbour provisions. However, as I have not found that iiNet authorised copyright infringement, there is no need for iiNet to take advantage of the protection provided by such provisions. The result of this proceeding will disappoint the applicants. The evidence establishes that copyright infringement of the applicants’ films is occurring on a large scale, and I infer that such infringements are occurring worldwide. However, such fact does not necessitate or compel, and can never necessitate or compel, a finding of authorisation, merely because it is felt that ‘something must be done’ to stop the infringements. An ISP such as iiNet provides a legitimate communication facility which is neither intended nor designed to infringe copyright. It is only by means of the application of the BitTorrent system that copyright infringements are enabled, although it must be recognised that the BitTorrent system can be used for legitimate purposes as well. iiNet is not responsible if an iiNet user chooses to make use of that system to bring about copyright infringement. The law recognises no positive obligation on any person to protect the copyright of another. The law only recognises a prohibition on the doing of copyright acts without the licence of the copyright owner or exclusive licensee, or the authorisation of those acts. In the circumstances outlined above and discussed in greater detail in my judgment, it is impossible to conclude that iiNet has authorised copyright infringement. In summary, in this proceeding, the key question is: Did iiNet authorise copyright infringement? The Court answers such question in the negative for three reasons: first because the copyright infringements occurred directly as a result of the use of the BitTorrent system, not the use of the internet, and the respondent did not create and does not control the BitTorrent system; second because the respondent did not have a relevant power to prevent those infringements occurring; and third because the respondent did not sanction, approve or countenance copyright infringement. I will now make my formal orders. For the reasons provided in the written judgment I make the following orders. The Amended Application be dismissed. Subject to Order 3 and 4, the Applicants pay the costs of the Respondent, including costs thrown away as a result of the Applicants’ abandoning the primary infringement claim against the Respondent. Any party or person applying for an order for costs different to that provided by Order 2 is to notify the Court within 14 days in which event Order 2 will be vacated and in lieu costs will be reserved. If any application for costs is made as provided in Order 3 the parties and/or persons are to consult and prepare consent directions for the filing of submissions and, if required, for a hearing on costs. I publish my reasons.





Cowdroy J



Sydney



4 February 2010

SCHEDULE I – THE APPLICANTS

UNIVERSAL CITY STUDIOS LLLP



Second Applicant

PARAMOUNT PICTURES CORPORATION



Third Applicant

WARNER BROS. ENTERTAINMENT INC.



Fourth Applicant

DISNEY ENTERPRISES, INC.



Fifth Applicant

COLUMBIA PICTURES INDUSTRIES, INC



Sixth Applicant

TWENTIETH CENTURY FOX FILM CORPORATION



Seventh Applicant

PARAMOUNT HOME ENTERTAINMENT (AUSTRALASIA) PTY LTD



Eighth Applicant

BUENA VISTA HOME ENTERTAINMENT, INC.



Ninth Applicant

TWENTIETH CENTURY FOX FILM CORPORATION (AUSTRALIA) PTY LIMITED



Tenth Applicant

UNIVERSAL PICTURES (AUSTRALIA) PTY LTD



Eleventh Applicant

VILLAGE ROADSHOW FILMS (BVI) LTD



Twelfth Applicant

UNIVERSAL PICTURES INTERNATIONAL B.V



Thirteenth Applicant

UNIVERSAL CITY STUDIOS PRODUCTIONS LLLP



Fourteenth Applicant

RINGERIKE GMBH & CO KG



Fifteenth Applicant

INTERNATIONALE FILMPRODUKTION BLACKBIRD VIERTE GMBH & CO KG



Sixteenth Applicant

MDBF ZWEITE FILMGESELLSCHAFT MBH & CO KG



Seventeenth Applicant

INTERNATIONALE FILMPRODUCKTION RICHTER GMBH & CO KG



Eighteenth Applicant

NBC STUDIOS, INC



Nineteenth Applicant

DREAMWORKS FILMS L.L.C



Twentieth Applicant

WARNER BROS INTERNATIONAL TELEVISION DISTRIBUTION INC



Twenty-First Applicant

TWENTIETH CENTURY FOX HOME ENTERTAINMENT INTERNATIONAL CORPORATION



Twenty-Second Applicant

WARNER HOME VIDEO PTY LTD



Twenty-Third Applicant

PATALEX III PRODUCTIONS LIMITED



Twenty-Fourth Applicant

LONELY FILM PRODUCTIONS GMBH & CO KG



Twenty-Fifth Applicant

SONY PICTURES ANIMATION INC



Twenty-Sixth Applicant

UNIVERSAL STUDIOS INTERNATIONAL B.V.



Twenty-Seventh Applicant

SONY PICTURES HOME ENTERTAINMENT PTY LTD



Twenty-Eighth Applicant

GH ONE LLC



Twenty-Ninth Applicant

GH THREE LLC



Thirtieth Applicant

BEVERLY BLVD LLC



Thirty-First Applicant

WARNER BROS ENTERTAINMENT AUSTRALIA PTY LTD



Thirty-Second Applicant

TWENTIETH CENTURY FOX HOME ENTERTAINMENT LLC



Thirty-Third Applicant

SEVEN NETWORK (OPERATIONS) LTD



Thirty-Fourth Applicant

FEDERAL COURT OF AUSTRALIA

Roadshow Films Pty Ltd v iiNet Limited (No. 3) [2010] FCA 24

IN THE FEDERAL COURT OF AUSTRALIA



NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION



NSD 1802 of 2008

BETWEEN: ROADSHOW FILMS PTY LTD (ACN 100 746 870)



First Applicant



THE PARTIES IN THE ATTACHED SCHEDULE I



Second Applicant to Thirty-Fourth Applicant AND: IINET LIMITED (ACN 068 628 937)



Respondent

JUDGE: COWDROY J DATE OF ORDER: 4 FEBRUARY 2010 WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

The Amended Application be dismissed. Subject to Order 3 and 4, the Applicants pay the costs of the Respondent, including costs thrown away as a result of the Applicants’ abandoning the primary infringement claim against the Respondent. Any party or person applying for an order for costs different to that provided by Order 2 is to notify the Court within 14 days in which event Order 2 will be vacated and in lieu costs will be reserved. If any application for costs is made as provided in Order 3 the parties and/or persons are to consult and prepare consent directions for the filing of submissions and, if required, for a hearing on costs.





Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.



The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA



NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION



NSD 1802 of 2008

BETWEEN:



ROADSHOW FILMS PTY LTD (ACN 100 746 870) First Applicant THE PARTIES IN THE ATTACHED SCHEDULE I Second Applicant to Thirty-Fourth Applicant AND:



IINET LIMITED (ACN 068 628 937) Respondent

JUDGE: COWDROY J DATE: 4 FEBRUARY 2010 PLACE: SYDNEY

REASONS FOR JUDGMENT

PART A: INTRODUCTION

These proceedings primarily concern the question whether an Internet Service Provider (‘ISP’) authorises the copyright infringing acts of its subscribers or users of its services if those subscribers or users, without licence, download films in respect of which copyright is claimed. The judgment is structured as follows,

PART A: INTRODUCTION [1] The parties [2] The proceedings [5] The Amended Application [6] The FASOC [9] The Amended Defence of the respondent [17] The applicants’ Reply [37] Structure of judgment [41] PART B: TECHNICAL BACKGROUND [43] The internet [44] IP addresses and packets [44] NAT [49] Physical facilities [52] Dynamic IP addresses [54] The BitTorrent protocol [56] BitTorrent client [58] .torrent file [61] Hashes [62] Location of .torrent files [68] The tracker [69] Summary [70] How are pieces shared? [74] Conclusion [78] PART C: THE EVIDENCE [79] Role of AFACT [80] AFACT witness – Aaron Guy Herps [83] Downloading films and television programs [85] AFACT witness – Gregory Donald Fraser [91] AFACT witness – Neil Kevin Gane [93] Evidence of copyright infringement [94] Investigations of online piracy in Australia [96] Expert witness – Nigel John Carson [105] DtecNet witness – Thomas John Sehested [109] DtecNet witness – Kristian Lokkegaard [110] Collection of data using DtecNet Agent [113] Michael John Williams [114] ‘Repeat infringer bundles’ [115] Bundles involving the RC-20 accounts [116] DNS Lookups [118] The iiNet subscriber accounts [122] Studio witnesses [126] Respondent’s witness – Michael Martin Malone [129] Findings as to the credit of Mr Malone [132] WESTNET ISSUE [137] REPEAT INFRINGER POLICY [155] TELCO ACT DEFENCE [159] VARIOUS OTHER STATEMENTS OF MR MALONE [163] PROSECUTION OF MR HERPS [167] ‘Compelling evidence’ [172] Freezone [181] ‘Robot’ notices [192] Respondent’s witness – Stephen Joseph Dalby [193] Credit of Mr Dalby [195] PREPARATION OF AFFIDAVIT [197] LACK OF UNDERSTANDING OF AFACT NOTICES [203] TELCO ACT ISSUE [212] Submissions regarding the respondent’s failure to call more witnesses [216] Respondent’s witness – David Buckingham [221] The respondent’s financial interests – ‘The iiNet business model’ [224] Is ‘bandwidth’, ‘downloading’ or ‘quota use’ necessarily infringing? [239] Proof of infringement – catalogue vs identified films [251] PART D: PRIMARY INFRINGEMENT [253] The authorisation of acts, not of persons [258] Nature of the primary infringements [264] The dispute [270] ‘Make available online’ a substantial part of the film to the public [272] Repeat infringers? [276] How DtecNet produces multiple allegations of infringement [279] Correct construction of ‘make available online’ [285] ‘Electronically transmit’ a substantial part of the film to the public [301] ‘Substantial part’ [302] ‘To the public’ [307] The solution [310] Who makes the communication? [319] Were the applicants’ investigators licensed? [326] STUDIO WITNESSES’ EVIDENCE [330] MR GANE’S EVIDENCE [334] MOORHOUSE [338] Did s 104 of the Copyright Act apply? [345] Make a copy of a substantial part of a film [346] Copies from BitTorrent [347] Further copies made on physical media [349] Conclusion [356] PART E1: AUTHORISATION [357] Judicial consideration of authorisation [359] Kazaa [360] Cooper [363] The ‘means’ of infringement [367] Moorhouse [367] GIBBS J [369] JACOBS J (MCTIERNAN ACJ AGREEING) [376] CONCLUSION [381] Importance of factual context in decisions following Moorhouse [383] APRA CASES [385] TECHNOLOGY CASES [389] Did the respondent provide the ‘means’ of infringement? [400] Section 101(1A) considerations [415] Section 101(1A)(a) Power to prevent [417] AUTHORITY [418] DID THE RESPONDENT HAVE THE POWER TO PREVENT THE INFRINGEMENTS? [424] APPLICANTS’ SUBMISSIONS THAT THE RESPONDENT DID HAVE THE POWER TO PREVENT INFRINGEMENTS [425] THE COURT’S CONSIDERATION [436] TELCO ACT [443] CONCLUSION [444] Section 101(1A)(b) Relationship [446] Section 101(1A)(c) Reasonable steps [454] WHAT IS THE ROLE OF REASONABLE STEPS? [455] WERE THERE REASONABLE STEPS THE RESPONDENT COULD HAVE TAKEN? [458] Other considerations – Knowledge of infringements [461] Other considerations – Encouragement of infringement [473] Failure to act [475] 20 November 2008 press release [476] ‘Golden Girls advertisement’ [480] Encouragement to upgrade [485] Other considerations – Inactivity or indifference [487] Did the respondent sanction, approve, countenance the infringements of the iiNet users? [493] Approve [495] Sanction [496] Countenance [497] Findings [500] Conclusion on authorisation [505] PART E2: THE TELCO ACT DEFENCE [508] The Telco Act [511] Operation of s 276 [513] Does the information required to be used satisfy s 276(1)(a)? [517] Does the information required to be used satisfy s 276(1)(b)? [518] Exceptions [527] Operation of s 279 [528] Operation of s 280 [533] Operation of s 290 [540] Operation of s 289 [543] Conclusion [555] PART E3: SECTION 112E OF THE COPYRIGHT ACT [556] Section 112E [557] Judicial Authority [560] Kazaa [560] Cooper [2005] FCA 972; 150 FCR 1 [563] Cooper [2006] FCAFC 187; 156 FCR 380 [565] The Court’s interpretation of s 112E [568] Can the respondent take advantage of s 112E? [576] Conclusion [579] PART F: SAFE HARBOUR PROVISIONS [580] Interaction between the safe harbour provisions and copyright authorisation [585] What is a repeat infringer policy? [590] US precedent on safe harbor provisions [595] REQUIREMENTS OF THE POLICY [597] IMPLEMENTATION OF THE POLICY [602] CONCLUSIONS [607] Did the respondent have a repeat infringer policy? [611] Has the respondent reasonably implemented such a policy? [620] Other issues [633] Conclusion [634] PART G: CONCLUSION [635] SCHEDULE I – THE APPLICANTS



SCHEDULE II – THE IDENTIFIED FILMS





The parties

In these proceedings there are 34 applicants which comprise most of the major film studios and their exclusive licensees in Australia. In these proceedings the applicants acted together as effectively one party. Attached to this judgment as Schedule I is a list of the applicants. Each of the applicants are the owners and exclusive licensees of copyright in a large number of cinematograph films in the form of films and television programs (the Court will refer to both these television programs and films as ‘films’). A sample of 86 such films for which copyright ownership and subsistence has been proved and upon which the Court has heard evidence are identified in Schedule II of this judgment and these 86 films will be referred to as the ‘identified films’. When referring to the broader catalogue of films of the applicants, the term ‘catalogue films’ will be used. For further discussion of this issue, see [252] below. The respondent, iiNet, is an ISP. Mr Malone, the CEO of the respondent and a witness in these proceedings, commenced the respondent’s business operations in his parent’s garage in Perth in October 1993. The business was incorporated in March 1995. In September 1999 the respondent became a public company and listed on the Australian Stock Exchange. At the time of its public listing, the respondent had approximately 19,000 subscribers. This has now risen to approximately 490,000 subscribers. Following Telstra and Optus, the respondent is the third largest ISP in Australia.

The proceedings

The proceedings commenced on 20 November 2008 by way of Application and Statement of Claim. Subsequently, following amendments to both documents, the litigation was conducted upon the basis of an Amended Application and a Further Amended Statement of Claim (‘FASOC’) filed in the Federal Court Registry on 11 May 2009 pursuant to leave granted by the Court. The Court will now turn to these pleadings.

The Amended Application

The Amended Application seeks declarations that the respondent has infringed the copyright of films contained in each of the applicants’ respective film catalogues by authorising the making in Australia of copies of, and by authorising the communication in Australia to the public of, the whole or a substantial part of those films without the licence of the applicants. Further, a declaration is sought that the respondent carried out such infringing acts flagrantly and that such infringements, together with other likely infringements, were conducted on a commercial scale for the purpose of s 115(5)(d) of the Copyright Act 1968 (‘the Copyright Act’). By way of further relief, the applicants seek injunctions permanently restraining the respondent from infringing the copyright in any of the films contained in the catalogue of the applicants, and an order requiring the respondent to take all reasonable steps to disable access to any online location outside Australia that has been used to infringe the applicants’ copyright. An order is also sought requiring the respondent to terminate specified accounts of the respondent’s subscribers who have engaged in or who have continued to engage in acts of copyright infringement involving the applicants’ films. Lastly, an order is sought for damages or, alternatively (at the election of the applicants), an account of profits pursuant to s 115(2) of the Copyright Act; additional damages pursuant to s 115(4) of the Copyright Act (applicable to conduct which is found to be flagrant); relief under s 115(6) of the Copyright Act which entitles the Court to have regard to the likelihood of other infringements (as well as the proven infringement) in determining what relief should be granted; and costs and interest.

The FASOC

The Court will now summarise the FASOC and, for convenience, the paragraphs referred to hereunder are those set out in such pleading. Paragraphs 1-13 recite the relevant details of incorporation of each of the applicants and paragraph 14 refers to the incorporation of the respondent. Paragraphs 15-56 inclusive refer to the applicants’ claim that they are the owners or exclusive licensees of the films contained in their respective catalogues, that such films are cinematograph films and that copyright subsists in such films. Paragraphs 57 and 58 refer to the provision of internet services by the respondent to its subscribers. The acts of ‘primary’ infringement (see [256] below) of copyright are alleged in paragraphs 59-62. In such paragraphs the applicants claim that from a date unknown to them, but at least since July 2008, the respondent’s subscribers and other persons accessing the internet by means of the respondent’s internet service (henceforth referred to together as the ‘iiNet users’) have, in Australia, whilst accessing the internet by means of the respondent’s internet services, ‘made available online’ to other persons; ‘electronically transmitted’ to other persons; and made copies of, the whole or a substantial part of the identified films and the catalogue films without their licence. Further, or alternatively, it is alleged that such iiNet users have copied such films and thereafter made further copies without licence on DVD or other physical storage media for the purpose of watching, storing or distributing those films. Paragraphs 63-67 allege that the respondent authorised the infringement of the iiNet users. It is alleged that the respondent knew or had reason to suspect that the iiNet users were engaged in, and were likely to continue to engage in, such conduct; took no action in response to notifications sent on behalf of the applicants which claimed that iiNet users were engaging in the conduct referred to above; offered encouragement to iiNet users to engage in or to continue to engage in the conduct; failed to enforce the terms and conditions of its Customer Relationship Agreement (‘CRA’) by which its internet services were provided; continued to provide services to those subscribers who were engaging in the conduct complained of; and through the respondent’s inactivity and indifference, permitted a situation to develop and continue whereby iiNet users engaged in such conduct. Paragraph 64 pleads in the alternative that the respondent had the power to prevent the infringements and continuing infringements from occurring; had a direct and commercial relationship with its subscribers which enabled it to take action against those subscribers who engaged in the infringing conduct; and yet took no steps or adequate steps to prevent or avoid infringement. Paragraph 67A alleges that the respondent further, or in the alternative, has, in the course of providing its internet services, provided facilities for the intermediate and transient storage or, alternatively, caching of copyright material, namely the applicants’ films. Paragraph 67B claims that by reason thereof the respondent has made copies of the whole or a substantial part of the identified films and the catalogue films. Paragraph 67D alleges that the copies were made without the licence of the applicants and therefore the respondent has infringed the copyright in the identified films and the catalogue films. Such claim, being one of primary copyright infringement against the respondent, was abandoned by the applicants shortly before the hearing commenced on 6 October 2009. The applicants informed the Court of this fact in an email exchange on 30 September 2009. Loss, damage and profits are claimed in paragraphs 68-74. The applicants claim that they have suffered or are likely to suffer loss and damage on a commercial scale and that by reason of the infringements the respondent has accrued or is likely to accrue profits to itself and its business. Injunctive relief is sought in paragraphs 76-77 to restrain the respondent from engaging in the infringing activities.

The Amended Defence of the respondent

Similarly to the applicants, the respondent was granted leave to file an Amended Defence on 8 May 2009. Such document was filed in the Federal Court Registry on 15 May 2009. The respondent largely admits all matters regarding copyright subsisting in, and the applicants owning the copyright in, the identified films. The respondent acknowledges that it provided at all relevant times, and continues to provide, telecommunications services to persons in Australia which are listed carriage services within the meaning of ss 7 and 16 of Telecommunications Act 1997 (Cth) (the ‘Telco Act’); says that such services were provided under terms and conditions of supply published by the respondent from time to time in its CRA; and that the provision of those services is subject to the statutory requirements of the Telco Act, the Telecommunications (Interception and Access) Act 1979 (Cth) (the ‘TIA Act’), the Telecommunications (Consumer Protection and Service Standards) Act 1999 (Cth) and the Broadcasting Services Act 1992 (Cth). The respondent pleads that at all material times the services used by its subscribers and other persons in obtaining access to, and exchanging of data on, the internet were facilities for making or facilitating the making of communications within the meaning of s 112E of the Copyright Act. Further, the respondent pleads that at all material times such facilities or services were provided for transmitting, routing or providing connections for copyright material or for the intermediate and transient storage of copyright material in the course of transmission, routing or provision of connections within the meaning of s 116AC of the Copyright Act. The respondent states that it provided its subscribers with access to the internet and that to enable access to the internet the respondent allocated IP addresses for use by those subscribers; that as part of such services it charged its subscribers fees applicable to the relevant plan to which the subscriber subscribed; and that it derived no commercial advantage from its subscribers over and above the payment for such services. The respondent initially did not admit the allegations made in paragraphs 59 and 60 of the FASOC regarding the infringing conduct of the iiNet users. However, by the ‘Respondent’s Statement of Nature of Case’ filed by the respondent on 9 April 2009, the respondent made clear that it conceded that, for the purposes of this hearing, the evidence filed by the applicants by that date showed that iiNet users infringed copyright by ‘making the identified films available online’ and making copies of those films. The respondent maintained its non-admission in regards to further copying described in paragraph 60 of the FASOC and denied that the evidence proved that the iiNet users ‘electronically transmitted’ the identified films. The respondent’s defence also alleges that if the infringing acts were committed, to the extent that those acts involved the activities of employees, agents, or other representatives of AFACT and/or of any of the applicants, such acts were done with the licence of the relevant applicants or alternatively were done in circumstances which, by virtue of the application of s 104 of the Copyright Act, did not constitute infringement of copyright. As to the alleged authorisation by the respondent of the acts of the iiNet users referred to in paragraphs 63 and 64 of the FASOC, if such alleged infringing acts occurred, the respondent replies:

In answer to paragraphs 63 and 64 of the Further Amended Statement of Claim, iiNet:

(a) ...



(b) says that it knew at all material times that a proportion of the internet traffic exchanged via its facilities comprised data exchanged via the BitTorrent protocol;



(c) says that is knew at all material times that copyright owners have alleged that a proportion of BitTorrent internet traffic exchanged over the internet generally included content which was likely to infringe copyright;



(d) says that the BitTorrent protocol has, and is known by the applicants to have, many non-infringing uses and facilities;

The respondent pleads the following in further answer to paragraphs 63 and 64: (i) It [the respondent] did not create the BitTorrent protocol or any BitTorrent software;

(ii) was, and is, not the operator of the BitTorrent protocol or any BitTorrent software;

(iii) has not, and does not, promote the BitTorrent protocol or any BitTorrent software other than for purposes that do not involve the infringement of the applicants’ or any other party’s copyright;

(iv) has not entered into any agreements with BitTorrent Inc. or any other BitTorrent related company;

(v) does not have a direct or commercial relationship with BitTorrent Inc. or any other BitTorrent related companies;

(vi) has not, and does not, encourage users to share files which infringe the applicants’ or any other party’s copyright;

(vii) did not, and does not, support the BitTorrent protocol or any BitTorrent software except for use in a non-infringing manner; The respondent says it knew from 2 July 2008 of the allegations of copyright infringement being made on behalf of the applicants and that it took action in relation to the allegations. However, the respondent pleads that the allegations were ‘mere allegations of copyright infringement’ and that such allegations provided insufficient information to demonstrate the veracity of the allegations made and to allow the respondent to verify the allegations. The respondent further pleads that it is a general purpose ISP and not a facility for ‘making available’, ‘electronically transmitting’ or copying cinematograph films. Further, the respondent pleads that it is required to comply with the legislation regulating communications passing over telecommunications networks and use of information relating to such communications as stipulated in Part 13 of the Telco Act and Chapter 2 of the TIA Act. The respondent says it continued to provide its services to its subscribers subsequent to the allegations of copyright infringement being made against it and relies upon its contractual obligations with its subscribers. The respondent pleads that it did not sanction, approve or countenance the conduct of any iiNet user which would result in the infringement of copyright as alleged. Further, the respondent pleads that it did not have any relevant power within the meaning of s 101(1A)(a) of the Copyright Act or otherwise to prevent alleged infringing acts by iiNet users. It states that it had no ‘relationship’ within the meaning of s 101(1A)(b) of the Copyright Act with the users of its services who are not subscribers; pleads if it did have a relationship, such relationship was neither direct nor commercial; and pleads it does not know the identity of those users. Further, the respondent pleads that it took reasonable steps to prevent or avoid the alleged infringing acts. Otherwise, the allegations against the respondent are denied. The respondent also raises specific defences under the Copyright Act. The respondent relies upon s 112E of the Copyright Act which provides:

Communication by use of certain facilities



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 authorised 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.

Further, or in the alternative, the respondent pleads that if copyright infringement against it is proved, the conduct relied upon by the applicants was category A activity within the meaning of s 116AC of the Copyright Act. Section 116AC is contained in Division 2AA of Part V of the Copyright Act (‘safe harbour provisions’) which limits the remedies available against carriage service providers for infringement of copyright if certain conditions are fulfilled by the carriage service provider. The respondent pleads that it has complied with those conditions in that it has not initiated any transmission of the films nor made any substantive modifications to any films other than as part of a technical process. Further, the respondent submits that it has adopted and reasonably implemented a policy that provides for termination in appropriate circumstances of repeat infringers (as required by condition 1 of item 1 of s 116AH(1) of the Copyright Act) and states that no relevant industry code exists (as referred to in condition 2 of item 1 of s 116AH(1) of the Copyright Act) to which the respondent can adhere. In these circumstances, the respondent submits that even if the applicants were entitled to any relief (which is denied), such relief is limited to an order requiring the respondent to take reasonable steps to disable access to an online location outside Australia or requiring the respondent to terminate specified subscribers’ accounts.

The applicants’ Reply

The Reply filed in answer to the respondent’s Defence (not the Amended Defence) acknowledges the respondent’s pleading which alleges that the respondent is a carriage service provider within the definition of that word in the Telco Act and that the respondent is engaged in the provision of telecommunications services, including internet services, to members of the public in Australia. The applicants admit that the BitTorrent protocol exists and is capable of use in the manner described in the applicants’ particulars. The applicants also admit that there is no relevant industry code in force for the purpose of condition 2 of item 1 in the table in s 116AH(1) of the Copyright Act. The applicants claim that if (which is denied) s 116AH(1) of the Copyright Act applies, the Court should make orders requiring the respondent to take all reasonable steps to disable access by iiNet users to online locations used to infringe copyright, and to require the respondent to terminate accounts of subscribers who have engaged in infringement or whose accounts have been used for infringement. Otherwise the applicants join issue with the Defence. It should be noted that the filing of the Amended Defence did not require the filing of an Amended Reply.

Structure of judgment

The Court is mindful of the substantial length of this judgment. However, given the length of the trial (some 20 days), the length and detail of the closing submissions (over 800 pages, excluding hundreds of pages of tables, graphs and spreadsheets), and the obvious importance of these proceedings to the law of copyright both in this country and possibly overseas, the Court believes that all submissions made and arguments raised ought to be decided to give certainty and finality to the litigation (pending any appeal). To assist the consumption and comprehension of this lengthy judgment, it has been divided into a number of parts, each addressing specific issues. To some extent there may be repetition, but this is unavoidable if the various parts of the judgment are to be readily comprehended. Part A [1]-[42] is the current part, the introduction. Part B [43]-[78] provides a succinct explanation of the operation of the internet and of the BitTorrent protocol. A comprehension of both is necessary to understand the subsequent findings. Part C [79]-[252] discusses important evidentiary issues in the proceedings. In Part D [253]-[356] the Court discusses and makes findings on the issue of whether the applicants have been successful in proving that iiNet users infringed their copyright. Part E1 [357]-[507] concerns the pivotal issue of these proceedings, namely whether the respondent can be said to have authorised any infringement by the iiNet users. Part E2 [508]-[555] concerns the specific issue of whether the Telco Act prohibited the respondent from acting on the AFACT Notices. Part E3 [556]-[579] concerns the issue of whether s 112E of the Copyright Act assists the respondent in these proceedings. Part F [580]-[634] concerns the issue whether the respondent can take advantage of the safe harbour provisions in Division 2AA of Part V of the Copyright Act. Finally, in Part G [635]-[636], the Court makes its conclusions. Following the conclusion, there are two schedules attached to the judgment. The first (‘I’) lists the second to thirty-fourth applicants in these proceedings and the second (‘II’) lists the identified films and their owners and/or exclusive licensees.

PART B: TECHNICAL BACKGROUND

This judgment proceeds into a significant amount of technical detail. In order to better understand the reasons given, a brief technical interlude into the operation of both the internet and the BitTorrent protocol is necessary. The Court will turn first to the internet and then to the BitTorrent protocol. The information in this technical interlude is derived from both the evidence given at trial and certain notorious facts of which the Court takes judicial notice.

The internet

IP addresses and packets

The internet is, in summary, a network of networks of computers. In order for those computers to be able to communicate with each other, they have to be speaking the same language. Protocols facilitate this process. Protocols could be described as languages or, alternatively, sets of rules for computers. If two computers obey these rules, they will be able to understand each other and communicate. The two primary protocols by which communication is effected between computers on the internet are the Internet Protocol (‘IP’), and the Transmission Control Protocol (‘TCP’). TCP is not relevant for these proceedings and will not be discussed further. Data that is sent by means of the IP is ‘packetised’, that is, the data to be communicated is broken up into small packets and then sent by means of the IP. Each packet contains a header (akin to an envelope) containing information identifying the address or location from which the packet is sent and to which the packet is to be sent and other information not presently relevant. The packet itself contains the data which is akin to the letter within an envelope. The IP protocol effects communication between computers by means allocating addresses to the sending and receiving computers and then sending the packets of data from one address to another, in many ways analogous to the mail. Such IP addresses are sold in blocks to ISPs, who then individually allocate them to their subscribers to enable the subscribers to connect to the internet. The body which allocates IP addresses to Australian ISPs is the Asia-Pacific Network Information Centre or APNIC. The identity of the ISP to which certain IP addresses have been allocated is public information. The addresses used by the IP are known as IP addresses. They are a number rendered in binary code but, for the benefit of readability by persons, they are converted into a number of 4 groups of 3 digits separated by a full stop, for example, 192.168.111.123. The IP addresses in evidence in these proceedings are in this form. In most situations, packets of data are not sent directly from one location to another, largely because each computer on the internet is not connected directly to every other computer on the internet. Rather, each computer is linked to other computers which are then in turn connected to other computers and so on. That is why the internet is not a network of computers; it is a network of networks of computers. Further, not all packets dispatched from one computer travel to the same destination by means of the same path.

NAT

A further important concept is Network Address Translation (‘NAT’). This allows a router (which is essentially a device which can ‘route’ data between a network of computers) to take one internet connection and split it between a number of computers. Such routers also allow a number of computers to communicate with each other, creating a network. In this scenario, one internet connection comes through a modem into a router. That router then distributes the data to the computers which are connected to it via ethernet (network) cables, or, alternatively, wirelessly by means of Wi-Fi. This internal network prevails in many households and most businesses. Each computer connected to the router is assigned an IP address by the router in the same format as that used in the internet. However such IP addresses are private, that is, they are known only to the computers on that network. The IP address of a particular computer is not broadcast to the internet. This allows the number of computers connected to the internet to be dramatically increased, because each computer does not need its own public IP address allocated by an ISP. Rather, the computer is connected to the internet through a router, with the router being assigned the public IP address by the ISP. This public IP address is the only address that is seen by other computers on the internet. Therefore, one can know the location of a connection to the internet by means of a public IP address, but a public IP address does not necessarily relate to a specific person or specific computer. There may only be one computer connected to the internet through a public IP address. Equally, there may be hundreds. One cannot know which is the case from outside that particular network. For the balance of this judgment, unless otherwise indicated, the term IP address will refer to a public IP address.

Physical facilities

As mentioned, IP addresses are allocated to subscribers by ISPs. ISPs also connect subscribers to the internet by means of physical infrastructure. Such infrastructure may be owned by multiple ISPs. For a subscriber of the respondent with an ADSL2+ (a type of internet connection) plan, that subscriber’s connection to the internet outside Australia, generally speaking, occurs by the means discussed below. The household computer sends data to the router, which then forwards the data to the ADSL2+ modem. This ADSL2+ modem then transmits data down the copper phone lines to an exchange. The copper phone lines and exchange are owned by Telstra. Exchanges are local hubs of copper telephone wire connections. At the exchange, the copper wire terminates into a Digital Subscriber Line Access Multiplexer (‘DSLAM’), which is owned and provided by the respondent. The DSLAMs allow many copper connections to be aggregated together. The data is then sent from this exchange via the DSLAM to an iiNet data centre, which is a larger facility where connections from multiple exchanges are aggregated. Where the sending computer is based outside Sydney, for example, in Western Australia, the data would need another leap from the city data centre in question (for example, Perth) to Sydney, Sydney being the location of the connection to the rest of the world. This connection occurs from the Sydney data centre to the rest of the world by means of undersea optical fibre cables.

Dynamic IP addresses

For most of the respondent’s subscribers, the IP address provided to them to access the internet is not fixed; rather, it is dynamically assigned. This means the IP address by which a computer is connected to the internet changes over time. The respondent provides a fixed (‘static’) IP address for all subscribers on business plans. As already discussed, protocols are the means by which computers communicate. While TCP and IP have been mentioned, there are many others, for example, smtp (email), ftp (file transfer), http (world wide web), VOIP (voice) and BitTorrent. As already mentioned, the latter protocol is central to the current proceedings.

The BitTorrent protocol

The BitTorrent protocol is essentially a scheme for a highly efficient and decentralised means of distributing data across the internet. The term ‘decentralised’ is used in this context in contradistinction to the traditional model of data distribution which is the client/server model. In that model one computer which has the data (the ‘server’) sends that data to another computer which requests it (the ‘client’), often by means of the http or ftp mentioned above. The BitTorrent protocol operates on a different basis. It operates on a ‘peer to peer’ (‘p2p’) basis whereby all the computers seeking data participate in the distribution of it. The BitTorrent protocol is a set of rules, or, in layman’s terms, a blueprint. It specifies what needs to be done to implement a system of data distribution. It has a number of constituent parts which will be explained in more detail below.

BitTorrent client

The first part of the BitTorrent protocol is the BitTorrent client. The BitTorrent client is a computer program or software which allows a person to access groups of computers sharing a particular .torrent (explained below) file. These groups of computers are known as ‘swarms’. Each computer in a swarm is known as a ‘peer’. The BitTorrent client can have no operation by itself, as it needs to be provided with information in order to fulfil its role. This information comes from a .torrent file. There are a number of BitTorrent clients provided free of charge from a variety of different organisations. The client referred to primarily in these proceedings was uTorrent (pronounced ‘you-torrent’) which is the most popular BitTorrent client. Other BitTorrent clients include Vuze, and, rather confusingly, the BitTorrent Client, which is the BitTorrent client of BitTorrent Inc, such company being founded by Bram Cohen who created the BitTorrent protocol in 2001. Each BitTorrent client operates in the same basic way, as it must comply with the requirements of the BitTorrent protocol in order to be able to function as a part of it. However, as well as these basic functions, different clients may have different graphical user interfaces, a search function for .torrent files, more advanced features and so on.

.torrent file

The second part of the BitTorrent protocol is the .torrent file. The term ‘.torrent’ refers to a file extension. File extensions, such as .doc, .avi, .mp3, .pdf, .exe and so on do nothing more than associate a particular file with a particular purpose. For example, a .doc file is a document, .avi is a film file (the files in question in these proceedings were frequently .avi files), and .mp3 is a music file (the subject of the proceedings in Universal Music Australia Pty Ltd and Others v Cooper and Others [2005] FCA 972; (2005) 150 FCR 1 (‘Cooper [2005] FCA 972; 150 FCR 1’) and Universal Music Australia Pty Ltd and Others v Sharman License Holdings Ltd and Others [2005] FCA 1242; (2005) 65 IPR 289 (‘Kazaa’)). This .torrent file contains the information necessary for the BitTorrent client to contact and participate in a swarm. It is important to emphasise that the .torrent file does not contain the underlying data of a film or television program. Rather, the .torrent file contains the name of the file sought, the size of the file, the hash value of the file, the hash value of the pieces of the file, and the location of the tracker. Before moving on to explain the tracker, the third part of the BitTorrent protocol, an aside into hashes is necessary.

Hashes

The BitTorrent protocol operates by breaking up large files, such as film files (which are usually many hundreds of megabytes or a few gigabytes) into smaller parts (‘pieces’). This is similar in principle to the means by which data is transferred across the internet, as discussed at [45] above. As an aside, a ‘byte’ is a term that refers to a certain amount of data, namely 8 ‘bits’. A bit is either a zero or a one, given that computers compute by means of binary code. A ‘kilobyte’ is 1024 bytes, a ‘megabyte’ is 1024 kilobytes and a ‘gigabyte’ is 1024 megabytes. The size of the pieces to which BitTorrent breaks a file into varies, but the evidence suggests that film files are often divided into pieces which are 512 kilobytes. These pieces will usually be larger than packets, which, as mentioned, are the mechanism by which data is transferred across the internet. Such pieces are shared between the individual peers in a swarm. Over time, pieces are requested and received by the BitTorrent client from various other peers and are ultimately assembled together like a large jigsaw into the film file. In order to ensure that each piece is received correctly, and that the data is not corrupted, the BitTorrent client consults hash values for each piece (‘piece hashes’). A hash value is a means of converting a large amount of data into a smaller value and it is a mathematical function of its input, that is, an identical input equals an identical hash. This means a hash can fulfil the function of an identifier of data. The input in this circumstance comes from the data of the file being shared as a whole or a piece of that file. As mentioned, the .torrent file contains the details of the piece hashes of all the individual pieces of the file in question. When the BitTorrent client receives a piece of the file from another peer in the swarm, it checks that the piece hash of the piece is identical to the piece hash for that piece in the .torrent file. If it is, the BitTorrent client knows that the piece is the correct piece and was correctly received. If it is not, it is discarded and the requested piece is sought again. The ‘file hash’ is different from the piece hash. While the piece hash is a mathematical function of the data of a particular piece, the file hash is the mathematical function of the data of the underlying file as a whole being shared in a swarm. The term ‘file’ is being used in a general sense in this context. A particular swarm may be sharing one file (in the case of an .avi film) or a number of files (for example, the individual songs on a CD in .mp3 format). The file hash applies to what is being shared as a whole, and serves as a mechanism of identifying what file is in each swarm. For example, the film The Dark Knight might be available in many different digital versions (and therefore in many different swarms). One version may be high quality (for example Blu-Ray quality), one lower quality (for example, DVD quality). Each version, and therefore each swarm, will have its own file hash, even though the underlying content, for example, The Dark Knight, is the same. This results from the fact that while the film is the same in each example, the underlying data is different, and therefore the file hash (which is a function of the data) is different. The file hash is used by the applicants to show that a particular swarm is sharing one of their films, because they can watch a copy of the film with that file hash, identify it as their own, and then know that any copy with that file hash would be the same, because if the underlying file were different it would have a different file hash.

Location of .torrent files

The .torrent files are made available for download from a litany of sources. Some examples discussed in these proceedings include The Pirate Bay (http://thepiratebay.org) and MiniNova (http://www.mininova.org). Such sites have a search function which enables a person to search for the file that they want, whether it be a film such as The Dark Knight, or a television program such as Lost. There are also private sites like Demonoid (http://www.demonoid.com) which provide a similar service, but only do so for registered members. There are also a number of specialist sites that provide .torrent files for specific interests. Not all .torrent files relate to copyright infringing material.

The tracker

The third part of the BitTorrent protocol is the tracker. The tracker is a computer program on a server made available for contact by BitTorrent clients by means of a Universal Resource Locator (‘URL’) (in layman’s terms, a web address). As mentioned, such URL is found in the .torrent file. This tracker monitors the particular swarm to which it is attached and monitors the IP addresses of peers in the swarm. The BitTorrent client, when provided with the location of the tracker by the .torrent file, contacts the tracker to request the IP addresses of peers in the swarm. The tracker then provides that information to the BitTorrent client. This allows the BitTorrent client to contact those peers directly (by their IP address) and request pieces of the file from them, and share pieces of the file with them.

Summary

To use the rather colourful imagery that internet piracy conjures up in a highly imperfect analogy, the file being shared in the swarm is the treasure, the BitTorrent client is the ship, the .torrent file is the treasure map, The Pirate Bay provides treasure maps free of charge and the tracker is the wise old man that needs to be consulted to understand the treasure map. Whilst such an analogy grossly oversimplifies the situation it will suffice for present purposes. It demonstrates that all of the constituent parts of the BitTorrent protocol must work together before a person can access the file sought. In this judgment the Court will refer to all the constituent parts together as the ‘BitTorrent system’. Such analogy also demonstrates that a number of deliberate steps are required to be taken by a person to bring about the means to infringe the applicants’ copyright. The person must download a BitTorrent client like Vuze, seek out .torrent files related to copyright material from websites, and download those .torrent files and open them in their BitTorrent client. Thereafter, the person must maintain connection to the internet for as long as is necessary to download all the pieces. The length of this downloading process will depend on the size of the file, the number of peers in the swarm and the speed of those peers’ internet connections. The BitTorrent protocol is able to efficiently distribute data because each peer is connected to many other peers, the file is split into many small pieces, and peers download pieces from other peers as well as uploading pieces. The BitTorrent logic operates so as to ensure that the rarest piece in a swarm is the first to be sought after, to average out the availability of pieces and minimise blockage or bottleneck which would occur if there were certain pieces of the file that many peers requested. By this mechanism the traditional problem with the client/server model is obviated. Under the client/server model, if there are many clients, the server has to provide the data to all of them which means that, given a fixed amount of capacity to provide data, that capacity has be shared amongst all the clients seeking that file. In layman’s terms, this means the more persons that seek a file, the slower each person receives it. However, in the BitTorrent model, generally speaking, the more people wanting a file and therefore the bigger the swarm, the faster each individual peer receives the file. It is a highly sophisticated and efficient means of distributing data.

How are pieces shared?

For the purposes of these proceedings, a deeper understanding of the communication between the peers is required and such understanding will proceed by means of example. In this example, the person has sought a .torrent file related to the film The Dark Knight: TheDarkKnight.avi. Such .torrent file was found on The Pirate Bay, and has been downloaded. The .torrent file has been opened in the BitTorrent client uTorrent. Upon opening the file, uTorrent will contact the tracker, seeking details about the swarm sharing that file, particularly the IP addresses of peers in that swarm. This initial contact is called ‘scraping’. Once uTorrent has the IP addresses it can contact those peers directly. It does so in a process called handshaking. Once this process is completed the peers can communicate directly. The person in this scenario will not, initially, have any pieces of the TheDarkKnight.avi, but uTorrent will know because of the .torrent file all of the pieces it needs to obtain, and the piece hashes of those pieces. uTorrent will query the peers to which it is connected, in order to ascertain which pieces of the TheDarkKnight.avi those peers have. Some peers will have the whole of the TheDarkKnight.avi, and therefore all pieces will be available. These peers are known as ‘seeders’. Other peers may have less than the whole file because they are still in the process of downloading it, but they will still be able to share the pieces that they have. Once the tracker is interrogated, uTorrent can determine which pieces are the rarest, and will therefore request those. As stated above, pieces are not downloaded in sequence; they are downloaded out of sequence, rarest first, and assembled together later. uTorrent will request a particular piece from another peer who is known to have it. This peer then decides whether or not to share it. Generally speaking, the only reason why a peer would refuse to share a piece would be that it had too many other peers connected to it. The assumption is in favour of sharing. If the peer decides to share the piece it will transmit the piece to the requesting peer’s computer. uTorrent will check the piece by means of the piece hash and, if such check is positive, accept the piece. Once this piece is received, uTorrent can then transmit that piece to other peers that request it. This process obviously occurs rapidly, with multiple peers and multiple pieces, and it is entirely automatic. From the point of view of the person, they simply see the file downloading, though they can, if desired, investigate in uTorrent the detail of the transmissions that are occurring. Over time uTorrent will receive all the pieces and the TheDarkKnight.avi will be assembled together. At this point in time the person will become a seeder, because they are sharing the whole file with the swarm. The default, that is, standard setting of uTorrent will result in the person sharing the file with the swarm until uTorrent is closed, or the .torrent file is removed from uTorrent. If the .torrent file is not removed and uTorrent is reopened, uTorrent will continue to share the file with the swarm.

Conclusion

The above explanation and examples are sufficient to enable an understanding of the internet and the BitTorrent protocol for the purpose of these proceedings. With that understanding, the Court will now address the evidence.

PART C: THE EVIDENCE

There has been an extensive amount of evidence placed before the Court in these proceedings. Evidence was given over ten days of the hearing. There were 30 affidavits read during the proceedings and 151 exhibits were tendered. It is impossible and unnecessary to refer to all the evidence that was placed before the Court. Suffice to say the Court has read and considered all the evidence. Each of the witnesses who have provided evidence will be discussed in the following part of the judgment, as well as the key evidentiary issues arising.

Role of AFACT

The Australian Federation Against Copyright Theft (‘AFACT’), though not actually an applicant in these proceedings, has nonetheless played a central role in the collection of evidence on behalf of the applicants for this trial. AFACT is an organisation set up for the purposes of benefiting its members. Those members apparently include all of the applicants (or at least certain affiliate companies of each of the applicants) and other companies engaged in the film production industry. The exact nature of the relationship between the applicants and AFACT is not clear. Mr Gane, the Executive Director of AFACT, suggested that there was no formal membership process by which one can become a member of AFACT, whether by application or agreement. Village Roadshow was an exception. What is clear is that the members of AFACT provide its budget and decide on its business plan, that is, what investigations and activities it will undertake. The Motion Picture Association (‘MPA’) and the Motion Picture Association of America (‘MPAA’) have a membership of the major American film studios. They are not associated with AFACT by any formal written agreement. However, AFACT does report to the regional branch office of the MPA which is based in Singapore. In respect of operations in the Asian region, the Singapore office of the MPA prepares a business plan or budget for AFACT which is approved by the Los Angeles head office of the MPA. The Court considers that AFACT is, for relevant purposes, the local ‘franchise’ of the MPA, though with specific additional interaction with Australian entities that are not part of the MPA, such as Village Roadshow and related entities. Nevertheless, it has not been established that AFACT is an agent of the applicants; rather, its position vis-à-vis the applicants is a loose arrangement to provide certain services for the applicants.

AFACT witness – Aaron Guy Herps

Mr Herps is the Manager of Digital Affairs of AFACT. Mr Herps has provided evidence of copyright infringing acts of iiNet users. He has sworn four affidavits in these proceedings. The Court accepts the evidence of Mr Herps and no challenge was made to any aspect of it by the respondent. On 3 October 2007 Mr Herps signed up electronically for internet services from the respondent. He selected a ‘Home 7’ Plan at a cost of $129.95 per month. That is, Mr Herps became a subscriber of the respondent. To access the internet through his account Mr Herps purchased a computer which was connected to the internet via an ethernet cable and an ADSL modem. As far as the Court is aware, Mr Herps continues to be a subscriber of the respondent.

Downloading films and television programs

On 27 June 2008 Mr Herps went to the MiniNova website and searched for .torrent files related to various films and television programs of the applicants. He noted that multiple .torrent files often existed for each title that he searched. It was his practice to select the specific .torrent file corresponding to the film which was identified as being the most popular (having the largest number of peers). Mr Herps then used uTorrent to participate in the swarms sharing these files, and by such means he downloaded the files to his computer. When the download was complete he became a seeder and kept the computer operating in the same state and continued to share the files with the swarm. Mr Herps observed that from time to time other peers were downloading pieces from one or more of the files he was sharing with swarms. Such connections were visible to him in the uTorrent graphical user interface. After completing such process over a period of some months Mr Herps made copies (‘images’) of his hard drive which were exhibited before the Court. Mr Herps downloaded a total of six films. Mr Herps swore a second affidavit involving a similar process to that described above, in respect of the period from 11 February 2009 until 20 February 2009. However, in this period his method had a crucial difference to the process described previously. During this period, by means of an IP address filter, Mr Herps was able to program uTorrent such that it would only connect to iiNet users. The filter was able to do so, given that, as already discussed, the IP addresses which had been allocated to the respondent (and therefore its subscribers) was publicly available information. After taking this step, Mr Herps repeated the process above of downloading .torrent files from MiniNova which related to films to which the applicants own copyright. The difference of the process enabled Mr Herps to be certain that he would only receive pieces of each film from iiNet users. His affidavit provides evidence of his downloading and sharing of three films in that period. Mr Herps swore a third affidavit in reply to the expert witness of the respondent, Dr Caloyannides. Given that he was not called, no further reference need be made to that affidavit. Mr Herps has also sworn a fourth affidavit in these proceedings which relates to issues of copyright substantiality. As the discussion at [310] and following demonstrates, these issues are irrelevant. Mr Herps’ testimony is submitted to be evidence of copyright infringement of iiNet users on two grounds. First, by his direct infringement of the applicants’ copyright as a subscriber of the respondent; and second because his evidence recorded connections from other iiNet users who themselves must have been infringing. Whether Mr Herps’ actions were infringing will be considered in Part D in relation to the issue of whether he was licensed by the applicants to carry out acts which were copyright in relation to the films.

AFACT witness – Gregory Donald Fraser

Mr Fraser is the Operations Manager of AFACT. Mr Fraser undertook the same task referred to by Mr Herps in his second affidavit. Mr Fraser became a subscriber of the respondent on a ‘Home 5’ Plan, sought out .torrent files from MiniNova relating to the applicants’ films and then proceeded to participate in swarms sharing those films. Like Mr Herps in his second affidavit, Mr Fraser only downloaded pieces of files of the applicants’ films from other iiNet users. Mr Fraser was not cross-examined. As with Mr Herps, the applicants rely on Mr Fraser’s testimony as evidence of infringement by iiNet users both in the sense that he himself infringed and because he recorded connections from iiNet users who themselves were infringing. Similarly to Mr Herps, whether Mr Fraser was licensed by the applicants will be examined in Part D of this judgment.

AFACT witness – Neil Kevin Gane

As mentioned, Mr Gane is the Executive Director of AFACT. Mr Gane has had oversight of AFACT’s actions in the gathering of evidence for these proceedings. Mr Herps and Mr Fraser answer to Mr Gane.

Evidence of copyright infringement

Mr Gane testified that he was aware from his investigations and his own experience that the scale of copyright infringement of films and television programs taking place on the internet has increased substantially in recent years. He has attached two reports confirming this trend. The first is from a United Kingdom company, Envisional, and the second is from a German company, Ipoque. A report entitled ‘Internet Study 2007’ by Ipoque (made between August and September 2007) revealed that in Australia approximately 57% of internet traffic was p2p traffic and 73% of such traffic was associated with the BitTorrent protocol. Mr Gane has also exhibited confidential MPAA reports prepared by Envisional providing an analysis of overall developments related to digital film piracy worldwide. The reports show that the number of persons using the BitTorrent protocol rose steadily over the period assessed and that the BitTorrent protocol remains the most popular p2p file-sharing mechanism.

Investigations of online piracy in Australia

From August 2007 AFACT used the services of DtecNet Software APS (‘DtecNet’) to collect information concerning alleged copyright infringement by internet users in Australia. The contractual arrangement concerning this investigation appears to have been between DtecNet and the Singapore branch of the MPA rather than between AFACT and DtecNet. In June 2008 Mr Gane instructed DtecNet to prepare reports regarding the copyright infringing actions of iiNet users using the BitTorrent system. It would appear that in the period between September 2007 and June 2008, DtecNet investigated 190 Australian ISPs in relation to four different types of file-sharing protocols, including BitTorrent. It then narrowed its investigations to the BitTorrent protocol and targeted four Australian ISPs; namely Optus, Internode, Exetel and the respondent. It was not explained why these particular four ISPs were selected. By email dated 2 July 2008 Mr Gane wrote to the respondent in what would become the first of many ‘AFACT Notices’. The email attached a letter which was entitled ‘Notice of Infringement of Copyright’. The letter, addressed to Mr Malone as Managing Director of iiNet relevantly stated:

AFACT is associated with the Motion Picture Association (MPA), whose members include Buena Vista International Inc, Paramount Picture Corporation, Sony Pictures Releasing International Corporation, Twentieth Century Fox International Corporation, Universal International Films Inc, and Warner Bros. Pictures International...and their affiliates. AFACT represents Australian producers and/or distributors of cinematograph films and television shows, including affiliates of the member companies of the MPA. AFACT’s members and their affiliates are either the owners or exclusive licensees of copyright in Australia in the majority of commercially released motion pictures including movies and television shows. AFACT undertakes investigations of infringements of copyright in these movies and television shows.



AFACT is currently investigating infringements of copyright in movies and television shows in Australia by customers of iiNet Limited (iiNet) through the use of the BitTorrent “peer-to-peer” protocol (BitTorrent). Information has been gathered about numerous infringements of copyright in motion pictures and television shows controlled by AFACT’s members, or their affiliates, by customers of iiNet (the Identified iiNet Customers). These infringements involve the communication to the public of unauthorised copies of the motion pictures and television shows shared with other internet users via BitTorrent.



Attached is a spreadsheet containing the information relevant to infringing activities of the Identified iiNet Customers occurring between 23 June 2008 and 29 June 2008, including:

The date and time infringements of copyright took place; The IP address used by the Identified iiNet Customers at the time of the infringements;

The motion pictures and television shows in which copyright has been infringed; and

The studio controlling the rights in the relevant motion pictures and television shows.

A CD containing an electronic copy of the spreadsheet is enclosed with the hard copy of this letter.

The letter alleged that the spreadsheet attached showed that individual subscribers of the respondent, who were referred to in the AFACT Notice as ‘repeat infringers’, were involved in multiple infringements of copyright. The letter stated that AFACT was ‘unaware of any action taken by iiNet to prevent infringements of copyright in movies and television shows’. The letter relevantly continued:

The failure to take any action to prevent infringements from occurring, in circumstances where iiNet knows that infringements of copyright are being committed by its customers, or would have reason to suspect that infringements are occurring from the volume and type of the activity involved, may constitute authorisation of copyright infringement by iiNet.



AFACT and its members require iiNet to take the following action:

Prevent the Identified iiNet Customers from continuing to infringe copyright in the motion pictures and television shows identified in the spreadsheet, or other motion pictures and television shows controlled in Australia by AFACT’s members and their affiliates; and Take any other action available under iiNet’s *Customer Relationship Agreement against the Identified iiNet Customers which is appropriate having regard to their conduct to date.

Please acknowledge receipt of this letter and confirm when the above action has been taken.

The letter then attached extracts of the respondent’s CRA which had been downloaded from the respondent’s website and pursuant to which the respondent provided internet services to its subscribers. The relevant provisions attached to the AFACT Notice were as follows: Customer Relationship Agreement (CRA): USING THE SERVICE

Comply With All Laws



4.1 In using the Service, you must comply with all laws and all directions by a Regulatory Authority and reasonable direction by us.



Prohibited Uses



4.2 You must not use, or attempt to use, the Service:



(a) to commit an offence, or to infringe another person’s rights;



...



(e) for illegal purpose or practices;



or allow anybody else to do so.

CANCELLING OR SUSPENDING THE SERVICE

Cancellation or Suspension By Us



14.2 We may, without liability, immediately cancel, suspend or restrict the supply of the Service to you if:



...



(j) we reasonably suspect fraud or other illegal conduct by you or any other person in connection with the Service;



...



(l) we are required by law or in order to comply with an order, direction or request of a Regulatory Authority, an emergency services organisation or any other authority;



...



(n) providing the Service to you may be illegal; or we anticipate that it may become illegal;



...



(q) there is excessive or unusual usage of the Service;



(r) We are allowed to under another provision of the CRA; or



...



14.3 If we suspend the Service under clause 14.2, the we may later cancel the Service for the same or a different reason.

iinet Website

“Copyright Regulations and Illegal Content” from the iinet website located at



(http://www.iinet.com.au/about/compliance/copyright.html), page 2:



NOTE: The hosting or posting of illegal or copyright material using an iinet [sic] service constitutes a breach of iinet [sic] contractual obligation [sic] under the Customer Relationship Agreement Sec 4.1 & Sec 4.2. Such a breach of contract may result in the suspension or termination of service without notice to the subscriber.

The spreadsheet attached to the AFACT Notice of 2 July 2008 contained a summary of alleged actions of iiNet users in infringing the copyright of the applicants in the period of 23 June 2008 to 29 June 2008 via the BitTorrent system. The spreadsheet extended over 13 pages of A4 sized paper. It was divided into 11 columns headed ‘Peer IP’, ‘Date and Time UTC’, ‘File Name Downloaded’, ‘Hash’, ‘Film/TV Title’, ‘Studio’, ‘% of file Shared’, ‘MB Downloaded’, ‘% of file Downloaded’, ‘Peer Hostname’ and ‘Country’. In addition to being forwarded by email to the respondent, the spreadsheet and letter were also served by hand on the offices of the respondent located in Perth. Attached to the letter was a CD that contained an electronic version of the spreadsheet in the form of a Microsoft Excel file. On 9 July 2008 a further AFACT Notice, in identical terms to that forwarded on 2 July 2008, was sent by Mr Gane to the respondent together with the same attachments as previously, although the spreadsheet was compiled in respect of the period from 30 June 2008 to 6 July 2008. On 16 July 2008 a further letter was forwarded in similar terms. However, this letter also incorporated three DVDs covering the period commencing 23 June 2008 and ending 13 July 2008. These DVDs contained the electronic spreadsheet found on the CD, as well as the underlying data gathered by DtecNet in its investigations. That is, the DVDs contained the packets of data (and therefore pieces of the file) that the ‘DtecNet Agent’ (see [113] below) received from iiNet users. The DVDs also contained a greater amount of information in relation to each act of infringement alleged. Each included the information under the eleven columns at [100] as well as information entitled ‘PeerID’, ‘Peer client info’, ‘Target Port’ and ‘Fingerprint’. Thereafter AFACT Notices were forwarded weekly to the respondent enclosing the same type of information in similar terms in respect of alleged copyright infringement in the respective week. The respondent does not challenge that in the period of 59 weeks from 23 June 2008 to 9 August 2009, the spreadsheets attached to the AFACT Notices recorded allegations of acts of infringement by the iiNet users. These AFACT Notices, and underlying data attached to them, are the primary evidence before the Court of the actions of iiNet users who are alleged to have infringed the copyright of the applicants.

Expert witness – Nigel John Carson

Mr Carson is the Executive Manager of the Forensics Division at Ferrier Hodgson. Mr Carson was engaged as an expert witness for the applicants. His role was to provide two expert reports. The first was a technical investigation and explanation of the BitTorrent protocol and the second analysed the data gathered by DtecNet to verify independently its veracity. Both reports have been exhibited before the Court. The Court found Mr Carson’s first report to be of great assistance in developing an understanding of the BitTorrent protocol, and much of its content has been used for the purposes of the technical discussion in Part B of this judgment regarding the BitTorrent protocol. The second report of Mr Carson provided evidence that the DtecNet evidence is reliable, that is, that the underlying data of the AFACT Notices does demonstrate that the packets of data received by the ‘DtecNet Agent’ (discussed below at [113]) constituted pieces of the films of the applicants downloaded from iiNet users. Mr Carson was a fair-minded and excellent witness. He provided full and forthright answers to all questions asked of him, including those that may not have provided evidence which favoured the applicants. Therefore, the Court considers him to be an impartial witness. The Court accepts the evidence he has provided in this hearing. No challenge was made to his evidence by the respondent, and indeed the respondent actually relies on such evidence.

DtecNet witness – Thomas John Sehested

Mr Sehested is the Chief Executive Officer of DtecNet. Mr Sehested gave evidence of the investigation of iiNet users by DtecNet and the collection of data by DtecNet regarding iiNet users which commenced in about June 2008. Mr Sehested confirmed that DtecNet supplied AFACT with Microsoft Excel spreadsheets summarising the data collected from the iiNet users and provided hyperlinks allowing AFACT employees to access a secure FTP server (server allowing the downloading of material by means of the ftp discussed above at [55]) operated by DtecNet which contained the data collected by the DtecNet Agent relating to iiNet users.

DtecNet witness – Kristian Lokkegaard

Mr Lokkegaard is the Chief Technology Officer of DtecNet and was responsible for the development of the proprietary software used by DtecNet to gather evidence for the current proceedings. Such software is known as the ‘DtecNet Agent’. Mr Lokkegaard provided a confidential report to the Court which contained significant detail concerning the operation of the BitTorrent protocol and the operation of the DtecNet Agent. The Court made an order for confidentiality regarding the report, as was requested. However, a non-confidential version of the report was later exhibited (exhibit SS). The Court will rely on such non-confidential exhibit and Mr Lokkegaard’s affidavit (which was not confidential) in explaining the operation of the DtecNet Agent. Mr Lokkegaard swore a second affidavit in reply to Dr Caloyannides. However, as with Mr Herps, as Dr Caloyannides was not called, there is no need to refer to such affidavit further.

Collection of data using DtecNet Agent

The DtecNet Agent, being the software used to provide the information underlying the allegations of copyright infringement in the AFACT Notices, is, in essence, a BitTorrent client. However, it has been programmed to fulfil specific functions beyond that of a publicly available BitTorrent client, such as Vuze or uTorrent. The process by which the DtecNet Agent operated was as follows: An employee of DtecNet would identify .torrent files of interest based on content files which were supplied by the applicants/AFACT. The DtecNet Agent would then open the .torrent file. By opening the .torrent file the DtecNet Agent, like any BitTorrent client, was able to query the tracker; connect to peers in the swarm; and download pieces from those peers. Given that DtecNet was gathering evidence of iiNet users infringing, the DtecNet Agent employed an IP filter similar to that used by Mr Herps and Mr Fraser to ensure that it only connected to iiNet users. Initially, the DtecNet Agent downloaded one complete copy of the film sought to be investigated. This copy was then viewed to ensure that the film corresponded with one that was owned by the applicants. Given the information already discussed regarding hashes, this process established beyond doubt that a particular file hash corresponded with a film of the applicants. The DtecNet Agent then reconnected to iiNet users who had a copy of the file or parts of the file of interest and downloaded a piece of that file from those users. It then matched the piece downloaded with the piece hash through the hash checking process discussed in Part B. The DtecNet Agent then recorded information referrable to the peer from which it had downloaded that piece of the file. The DtecNet Agent was calibrated to download only one piece from each IP address and then disconnect from that IP address. It was set up to download a new piece from the same IP address every 24 hours. The DtecNet Agent was designed to create a running log of every activity and this included every single request sent between computers and every packet of data exchanged between those computers. Accordingly, every aspect of the connection and download was recorded and logged by the DtecNet Agent. All the information received or logged by the DtecNet Agent was recorded and stored securely on DtecNet’s servers. The servers were located in Copenhagen under Mr Lokkegaard’s supervision. Once recorded in DtecNet’s secure server, a DtecNet employee prepared a report containing some or all of the information recorded by the DtecNet Agent and incorporated that information into a Microsoft Excel spreadsheet which was provided to AFACT.

Mr Lokkegaard stated that the data collection process carried out by the DtecNet Agent is highly accurate and reliable and is based on a confirmed connection and receipt of a piece of the file from a remote computer. As mentioned, the second report of Mr Carson independently verified such method.

Michael John Williams

Mr Williams, solicitor for the applicants, provided numerous affidavits in these proceedings. His primary role was to collate evidence before the Court by means of the AFACT Notices and also, following discovery from the respondent, to highlight particular aspects of the evidence of infringements as detailed hereunder.

‘Repeat infringer bundles’

Exhibits MJW-1 and MJW-8 are spreadsheets that collate data from the information attached to the AFACT Notices by means of the ‘PeerID’. The PeerID is a number generated by the BitTorrent client upon the program initiating and it remains until the BitTorrent client is closed. As mentioned, the PeerID data was not included in the spreadsheets attached to the AFACT Notices. Rather, it was to be found in the DVDs attached to the AFACT Notices. This number is broadcast to the swarm, and thereby the PeerID of other peers in the swarm can be ascertained. As will be explained in more detail in Part D at [277]-[278], the PeerID is evidence of one computer involved in the infringement of a film or multiple films over a period of time. There was some cross-examination of Mr Williams on the question of the factors necessary to constitute repeat infringement. The Court finds that the definition of repeat infringement is a legal issue, and thus the opinions of any witnesses are irrelevant. The Court’s finding on such issue is found in Part D of this judgment.

Bundles involving the RC-20 accounts

As will be explained in more detail at [122] and following below, during the process of discovery the respondent was ordered to provide data to the applicants in relation to 20 accounts of its subscribers (as described hereunder, these are referred to as the ‘RC-20 accounts’). Exhibits MJW-10, MJW-13, MJW-15 are each bundles which contain this data. MJW-15 is the entire history of communications, whether by telephone or email, between the respondent and each subscriber account. MJW-13 is the login/logout history and history of allocation of IP addresses to those 20 accounts over a period of time commencing with the first AFACT Notice. Finally, MJW-10 uses the IP history in MJW-13, taken in conjunction with the DtecNet evidence in the AFACT Notices, to produce spreadsheets of the alleged infringements that have occurred in relation to each of the 20 subscriber accounts. Mr Williams was cross-examined particularly in relation to MJW-10. While the respondent was able to identify some anomalies in the generation of the spreadsheet, particularly in that some individual allegations of infringement appear to duplicate others in terms of time, as will become apparent from the Court’s discussion of the primary infringement issue in Part D below, these issues are an irrelevancy. Despite these anomalies, the Court finds that, on the whole, MJW-10 is reliable.

DNS Lookups

Exhibit MJW-17 was created using a similar process as MJW-1 and MJW-8. However, rather than arranging the DtecNet data by means of the PeerID, MJW-17 organises the DtecNet data by means of the ‘Peer Hostname’ column. This is used to demonstrate that one peer hostname was responsible for multiple infringements. The purpose of the exhibit and affidavit which attached it appears to be to demonstrate that it is possible to gather details from publicly available sources of information in relation to a static IP address, such that it can be known who is using a particular IP address and therefore, who is potentially infringing copyright. As mentioned, most accounts with the respondent have dynamic IP addresses allocated to them, but as already mentioned, it is possible to receive a static IP address for specific purposes, such as commercial enterprise. The process by which this information is sought is by means of a reverse DNS lookup. ‘DNS’ stands for ‘domain name service’. Whenever one types a URL such as http://www.google.com into a web browser one is actually typing what is known as a ‘domain name’. As already explained, computers communicate in the IP protocol by means of IP addresses. However, IP addresses are very difficult for people to remember. Domain names essentially render IP addresses in a form that is easy to remember. So, when one seeks out http://www.google.com, one is actually seeking out the IP address(es) associated with Google’s website. In order for a computer to actually connect to Google’s servers the domain name must be converted into an IP address. This occurs by means of a DNS lookup. This information, linking domain name to IP address, is stored in various servers around the world. The evidence of Mr Malone and Mr Carson establishes that this information is regularly updated, as it is crucial to communication over the internet. However, the reverse is also possible, that is, it is possible to take an IP address and find a domain name. This information is not as crucial to the operation of the internet and thus it is less regularly updated. It was this information which was used to prepare the affidavit of Mr Williams and exhibit MJW-17. An affidavit sworn by Mr Malone suggests that the information relied upon by Mr Williams in preparing his affidavit on this issue was unreliable, and both Mr Carson and Mr Lokkegaard independently confirmed that reverse DNS lookups were not always reliable. Consequently, the Court finds that MJW-17, and the affidavit of Mr Williams attaching it, are unreliable and the Court will not rely on them. It does not appear that the applicants chose to make any particular submissions in closing in relation to MJW-17 and the corresponding affidavit.

The iiNet subscriber accounts

During the course of the discovery process the applicants sought information concerning some subscribers of the respondent to enable the information relating to those accounts to be matched with the DtecNet evidence. On 15 June 2009 the Court made an order allowing the applicants to select a number of IP addresses and times as logged by the DtecNet Agent in its investigations, as well as some identified by Mr Herps and Mr Fraser from their investigations. This data was then provided to the respondent who examined the IP addresses and times provided in order to identify from them 20 unique subscriber accounts. This process of matching IP address and time to a subscriber account is one of the key evidentiary issues in these proceedings, and it is dealt with in relation to the Telco Act defence in Part E2 of this judgment. ISPs generally keep records of those IP addresses that are associated with subscriber accounts at any given time. Thus, by knowing an IP address and time, a link can be made to a subscriber account, thereby identifying the account subscriber. As it transpired, 45 IP addresses and times were needed to generate 20 unique subscriber accounts. This resulted from the fact that some IP addresses and times related to the same subscriber accounts (remembering that as IP addresses are assigned dynamically it is possible for one subscriber account to have multiple IP addresses over time). These subscriber accounts (the ‘RC-20 accounts’) are the most specific evidence of copyright infringement by iiNet users in these proceedings. In relation to each account, for the period from 1 July 2008, the respondent provided evidence of the allocation of IP addresses, login/logout details, time spent online and disconnection reasons. The respondent also provided all correspondence between the respondent and those subscriber accounts from 1 July 2008 to August 2009. The Court ordered that any personal information related to these accounts be redacted, such that it was impossible to link the data to any particular persons during these proceedings. The Court considered that it was appropriate for such information to remain confidential given that the subscribers of those accounts were not parties to these proceedings. As already discussed, this evidence has been compared with the DtecNet evidence in MJW-10 to create a list of alleged infringements occurring on those accounts. Specific factual issues arising from such evidence will be addressed from time to time throughout the judgment.

Studio witnesses

Each of the applicants have called witnesses (‘studio witnesses’) to confirm matters such as their ownership or exclusive licence of the identified films, the subsistence of copyright in such films and the absence of licence to any iiNet users to do the acts comprised in the copyright of the films. Mr Phillipson testified for Village Roadshow and its related companies. Mr Wheeler testified for 20 th Century Fox and related companies. Mr Perry provided evidence regarding Paramount and its associated or related companies. Ms Solmon provided evidence regarding Columbia Pictures and related companies. Ms Reed provided evidence regarding Disney and its affiliated companies. Ms Garver testified on behalf of Universal and its numerous associated companies. Mr Kaplan testified for Warner Bros and related entities. The studio witnesses were forthright in their evidence, and the Court found them to be reliable witnesses. The primary controversy arising during their cross-examination was their ability to provide evidence upon the question whether the AFACT investigators, Mr Herps and Mr Fraser, were licensed by the applicants to download the applicants’ films using their iiNet accounts. As will be apparent from the Court’s discussion in Part D of this judgment, though the Court finds the studio witnesses to be reliable, their evidence is not necessarily conclusive on this issue.

Respondent’s witness – Michael Martin Malone

Mr Malone is the Managing Director and Chief Executive Officer of the respondent. His key responsibilities are related to customer service; the financial performance of the respondent; business planning and strategy; and corporate governance. The undertaking of the respondent is substantial. As indicated, there are approximately 490,000 subscribers subscribing to the respondent and related entities, making it the third largest ISP in Australia. It operates call centres in Perth, Sydney, Auckland and Cape Town. There are approximately 600 customer service representatives in the respondent’s employ. Mr Malone provided extensive evidence which will be referred to from time to time throughout the judgment. A key issue for present purposes is his credit as a witness.

Findings as to the credit of Mr Malone

The applicants have mounted a vigorous challenge to the credibility of Mr Malone, asserting that he was neither a truthful nor reliable witness. It has been submitted that the Court should not rely on his evidence except where it is against his interests or it is independently corroborated. It is submitted that Mr Malone was determined to advocate the respondent’s cause at every opportunity and where he sensed a conflict between that cause and the truth, he was prepared to subordinate the latter in favour of the former. The Court rejects the attack on the credit of Mr Malone. Mr Malone was an impressive witness who remained consistent (for the most part) in the evidence he gave during three days of gruelling and unnecessarily hostile cross-examination. The specific submissions made by the applicants will be addressed below. However, even in the circumstance that the Court finds against Mr Malone in relation to certain evidence he provided on specific issues, such findings do not lead the Court to make a generalised finding that he was an unreliable witness. In so far as it is alleged that Mr Malone found it impossible to disassociate himself from the respondent’s ‘cause’, such a generalised allegation cannot be sustained. Certainly Mr Malone gave evidence supportive of the respondent’s position and this position was at odds with the applicants’ position, but the Court is not able to infer that in providing those answers they were not provided honestly, nor that they were necessarily wrong. Mr Malone’s demeanour was of someone who believed what he was saying without reservation. Whether Mr Malone’s beliefs in relation to the law and the respondent’s legal obligations were accurate is a distinct matter from whether he provided evidence of that which he honestly believed. Mr Malone may not have been a helpful witness to the applicants’ counsel, but that did not render Mr Malone an unhelpful witness to the Court. Mr Malone was oc