The decision is surprisingly quick given the trial only concluded at the end of November last year.

At that time, iiNet CEO, Michael Malone, said in a press release that he was confident the Court would find that the ISP had no case to answer and dismiss AFACT’s claims.

We’ll find out on Thursday if Malone’s confidence was well placed.

By publishing broadband provider comments about legal advice they may have obtained, the mag could have led them to waive the right to keep the details secret.

It’s vital for CSPs to understand the risk they may create if they publicly refer to legal advice they have received.

The problem

Normally, legal advice obtained by a company is ‘privileged’.  That means that nobody … particularly somebody who is suing it … can demand to see a copy.

But the courts have ruled that by publicly referring to legal advice in certain ways, the company may waive that privilege.  In other words, in a legal case, the other side may be entitled to say, ‘Great.  You claim to have taken legal advice and it says you’re in the clear.  Fine.  Give us a copy.’

Potential disaster

Because lawyers write legal advice for their clients’ eyes only, it often contains material that would do damage if it leaked.  For instance, they might talk about serious weaknesses in their client’s position.  Or they might discuss facts that would not be known to the company’s enemies.

Disclosure could be a first class disaster.

When is privilege waived ?

It’s complicated.  Normally, merely stating that you have obtained legal advice isn’t a problem.  And sometimes it could even be safe to go a little further and indicate the general thrust of the advice.  Or say, ‘We have taken the advice carefully into account in our actions.’

But it is easy to step over the line and waive privilege on all or part of the private advice.

Sound advice from the Victorian Government Solicitor

The Victorian Government Solicitor’s office offers good advice on the subject. 

Making public statements about legal advice

[The] manner in which legal advice is disclosed in public can lead to a waiver of [privilege].

It is less likely that [privilege] will be waived where reference is made only to the fact that legal advice has been obtained. Revealing the substance of that advice should generally be avoided. This includes summarising or describing the conclusion of legal advice, or giving the ‘gist’ of what it says.

If maintenance of the confidentiality of a particular legal advice is important …, advice should be obtained prior to publicly commenting on that legal advice to ensure there is no inadvertent waiver of [privilege].

While the VGS made these remarks in the context of advising Government, they stand true for private companies as well.

A case in point:  iiNet comments

We’ll be interested to see whether iiNet’s nemesis AFACT will try to use a public statement by iiNet to gain access to a copy of advice received from its lawyers about compliance with the copyright ‘safe harbour’ rules. 

iiNet may have obtained legal opinion on the effect of its public statement, and be confident that it does no harm.  Otherwise, it was extremely dangerous ground for the company to be treading on.

What if your company is asked about legal advice ?

What’s in it for you to take any risk ?  Unless there’s a special factor that makes it worth your while, just say that it is company policy not to comment on legal advice that may or may not have been received.

You might still make some general comments on whatever issue is at stake, but nothing that infers that you hold advice, or what its contents or effect may be.

No stranger to innovation – FunnyTel was Australia’s first ISP to introduce the random number billing that has since proved so popular with Telstra management – the FAT plans include Australia’s first internet unit pricing scheme.

‘We read about the Government’s idea for unit pricing with groceries,’ says FunnyTel spokesman Chad Blake.  ‘And we thought “This makes sense.”  Why should customers pay for an 80 gigs download allowance and not know exactly how many P2P movies they’ll get for their dough ?’

‘We’re actually thinking of applying to the ACCC for an award for this,’ said Blake.  ‘Our 2 New Hollywood Releases a Night’ plan is a revolution in truth-in-advertising.  ‘And that’s A-FACT !’ says Blake with a cheeky wink.

We asked Chad if he thought that other market leaders like iiNet would adopt the system. 
 
iiNet to be next ?

‘Not likely,’ he said.  ‘Pretty good operators at iiNet but they’ve been completely unsuccessful in attracting any customers interested in peer-to-peer movie downloads.  Haven’t you been following the court case ?

‘We can’t figure out where they’ve gone wrong, actually.  They seem to be offering all the right plans.  But somehow, they’ve only managed to sign up customers who need fifty gigs to spend between midnight and dawn for sharing home movies with the rellies in England. 

‘Must be very frustrating for them.  All the rest of us have to do is mention a big-gigs off-peak plan and we’re chockers with hungry pirates.  Poor bloody iiNet get stuck with a mob of Methodist parsons peer-to-peering their sermons around the world all night.  There’s no justice.’

FAT plans the NBT

‘Next Big Thing for sure.  Don’t want to give too much away, but you’re gonna love the Harry Potter Lovers’ Special and our new Parrot & Peg Leg package.’

We asked Blake whether marketing thought the ‘FAT’ tag would help customers get the message that the plans were ideal for super-sized downloading.  ‘Hadn’t thought of that,’ he said.  ‘Actually, it stands for Film And Television.’

Yesterday, the Federal Court largely rejected iiNet’s request, limiting the scope of the documents to be produced by AFACT to certain categories  relating to local infringement investigations.

At the same time, the Court ordered that iiNet discover the details of 20 anonymous customer accounts, well short of the 300 to 400 accounts reportedly sought by AFACT.

Both sides were quick to claim a minor victory – AFACT saying 20 accounts is sufficient for them to prove their case and iiNet saying they have effectively got the documents they asked for.

View today’s court orders.

Trial dates can be moved for a variety of reasons, but the judge has previously indicated an intention to get the case resolved promptly.

There will also be a Directions Hearing on 29 July to deal with any further matters that are required before trial. 

In the meantime, iiNet has approached the copyright owners with a suggestion that they sit around a table with a mediator and attempt to negotiate an outcome.  We’re not surprised that the company’s gung ho attitude to a court battle has softened.  The copyright owners have said they’ll think about it, but won’t agree to anything that delays the formal trial.

More information and expert analysis to follow.

As usual for a preliminary hearing, the court only made procedural orders to advance the case to the next stage.

Orders made in the Federal Court

1. Evidence in the proceedings be by way of affidavit.
2. The Respondent file and serve its defence by 5 February 2009.
3. The matter be listed for further directions at 9:30 am on 6 February 2009.
4. There be liberty to apply on 2 days’ notice.

The court notes that the Applicants have indicated that they will reply to the request for particulars contained in the letter from Herbert Greer (sic) dated 15 December 2008, before 16 January 2009.

Comment

Nothing unusual in this.

Evidence by affidavit

Evidence by affidavit is usual.  It means that witnesses must provide affidavits before the trial date.  The other side will then be entitled to require any witness to attend court for cross examination.

Date for defence

50 days to serve a defence document is a bit longer than usual, but the court is allowing for some Christmas / New Year ‘down time’.

Further directions

Absolutely normal to bring the matter back to court after the steps in this package have been completed.

Liberty to apply

This simply means that if a party wants to raise some further issue between now and 6 February, the judge will let them come back to him on 2 days’ notice to the other side.

For instance, if AFACT fails to meet its agreed time to deliver ‘further particulars’ – see below – iiNet might apply to the judge for orders that it give the particulars by a set date and / or that the time limit for a defence be extended a bit because of the delay.

Request for particulars

Pretty normal step.  iiNet has asked AFACT ‘Tell us more detail about this or that, so we can better understand your claim.’

What else ?

According to an SMH report:

• The judge stated his desire for the matter to ‘move along rapidly’, with a hearing to potentially begin as early as March.
• Lawyers for iiNet said that timetable was too ambitious, indicating a long, drawn out legal battle.
• AFACT lawyers said they would reject iiNet’s claims that it was not liable for the actions of its users due to safe harbour provisions introduced with the US free trade agreement.

In fact, the safe harbour rules only become relevant if a CSP has already been found ‘guilty’ of copyright breach.  Even though the CSP is ‘guilty’, as long as it has operated inside the safe harbour it cannot be ordered to pay damages.

So safe harbour is truly just for ‘losers’.  But if you do lose an infringement case, you’ll feel like a winner if your safe harbour claim holds up and damages aren’t awarded.

About safe harbour

The safe harbour rules were introduced into Australian copyright law in 2005.  They limit the orders a court can make against an internet service provider that is found to have breached a third party’s copyright.

The key limitation is that there can be no award of damages, and that’s where the ‘big bucks’ normally come from.

But it only applies after the CSP is found ‘guilty’

Here’s an analogy.  Imagine that the government introduced safe driving courses and said that anyone who completes one will get a 25% discount off any court speeding fines they are up for in the following two years.

You complete the course, and a week later you get charged with speeding.  You dispute the charge and fight it in court.

In making your defence, it’s irrelevant that you completed a safe driving course.  You defend the charge solely on the basis that you say you were not speeding. If the court accepts that, you win.  Nothing to do with safe driving courses.

But if you lose, the judge says ‘It’s a $500 fine.’  That’s when you say, ‘But I have done a safe driving course and I claim my 25% discount.’  The only relevance of your course is if you have already been found guilty.

It’s exactly the same for safe harbour

Safe harbour is a limitation on ‘penalty’ if an ISP has been found ‘guilty’ of copyright infringement.  It isn’t a defence to alleged copyright infringement.

As a service to the debate, CSP Central has launched a ‘just facts’ page.  No commentary.  No analysis.  Just facts.  Bookmark it for access to a growing library of reliable information about the case and copyright law.

We’ve begun by posting the applicants’ court documents, and explaining what an ‘applicant’ is.

Writing on Whirlpool, Australian broadband’s town square, Malone laid down the law:  ‘We have yet to receive any independently verified notice that show (sic) that a customer has actually infringed.’

His statement goes on to make it clear that iiNet will argue that an ISP is never obliged to discipline a user for peer-to-peer copyright infringement allegations unless they have been declared an infringer by a court; evidence that falls short of a court finding does not give an ISP any obligation to act.

Malone draws the battle lines

This view takes paragraph 63(a) of the Federal Court ‘Statement of Claim‘ head on.  The para reads that ‘at all material times, iiNet knew or had reason to suspect that iiNet users engaged in, and were likely to continue to engage in’ copyright infringement.

No says Malone.  We did not know that, and had no reason to suspect it.  All we had was the evidence provided by AFACT, and that wasn’t a court judgment as (we say) is required.

Their evidence was pretty good, says Malone

Malone acknowledged that the evidence delivered to him wasn’t at all bad.

With the evidence that AFACT has, I’m betting that a magistrate will happily issue an order for us to disclose the account holder’s identity for under $50.

Michael Malone, iiNet

That’s a big concession, and shows how iiNet is committed to its argument that nothing short of a court finding carries any weight.

For a court to order disclosure of an account holder’s identity, it must be satisfied that there’s a realistic prospect that an unlawful act has been committed.  So Malone is happy to admit that the evidence he received from AFACT would satisfy a court that there ‘could be something in it.’

Evidence has to be ‘independent’

As noted above, Malone’s position is that: ‘We have yet to receive any independently verified notice that show that a customer has actually infringed.’

This head buts a key element of the AFACT Statement of Claim:  that third party DtecNet did independently verify infringement.

Another part of Malone’s post suggests that this denial is based on the same key argument:  ‘Whatever the action, it will then be overseen by the independent legal system.’  If we read this correctly, iiNet will say that only the legal system is independent, so DtecNet could never be.

That would explain why he can claim that, despite having the DtecNet evidence, ‘We have yet to receive any independently verified notice …’

Our take on it

This is an interesting move by iiNet.  It has made it clear, before the company has even filed a Defence document, that it will argue a very simple case.  Malone’s statements strictly don’t limit the defences iiNet’s lawyers can raise, but they do set a clear course for the defence team to follow.

It’s a different kind of case to the recent iiNet litigation.  Interville was storing and serving up whole copyright files, not just supplying bandwidth that was used by customers for peer-to-peer file sharing.  But the Australian Federation Against Copyright Theft is involved in both cases, and a win is a win.  The court result underscores how much is at stake for iiNet and its shareholders.

‘It’s a raid !’

The first Interville Technology knew of a long-running investigation into its file sharing activities was an Australian Federal Police raid on 18 December 2007.

According to a Sydney Morning Herald report at the time ‘heavy duty electronic equipment was discovered at the premises and employees at the internet cafe were hired to scour the web for suitable material to download.’

According to industry body MIPI:  ‘The internet cafe was operating 60 computer terminals and three servers which contained a total of 8 terrabytes storage which contained hundreds of thousands of infringing movie, TV and music titles. Seized movie titles included titles not yet released in Australian cinemas including American Gangster, National Treasure Book of Secrets while numerous music tracks from over 150 well-known artists such as 50 Cent, Alicia Keys and Justin Timberlake.’

Interville ‘rolls over’

In Downing Centre Local Court, Interville pleaded guilty to a bundle of charges, probably in a negotiated ‘plea deal’ with prosecutors.

AFACT commented:

The conviction and sentencing marks the successful conclusion of excellent work by the Australian Federal Police, said Neil Gane, AFACT Director of Operations at the conclusion of the case.

It is satisfying to see sentences handed down which properly reflect the damage operations like this do to rights owners and the 50,000 Australians working in the film and TV industries. The sentences will send a clear message to all Internet cafe owners engaged in commercial scale copyright infringement; you will be caught and you risk severe penalties.’

Our take on it

This was a case of ‘direct’ copyright infringement, and was clearly on a commercial scale.  Criminal charges were plainly available to the Commonwealth, so that’s what it has done.

The claim against iiNet is based on a second kind of alleged breach:  ‘authorisation’.  It’s more subtle to prove than direct infringement.  But if ‘authorisation’ infringement is proven, it’s hard to see how it wasn’t also on a commercial scale.

It should also be noted that the $82,000 represents a criminal fine, not civil damages.  It isn’t a benchmark for damages that might be sought from iiNet if things get that far.