Winning Battles But Losing The War?

Dallas Buyers Club – Musings on the Strategy of Prosecuting Customers to Protect Intellectual Property Rights

The movie Dallas Buyers Club made the headlines in 2014 when it garnered a slew of awards, most notably the Best Actor nod for its lead Matthew McConaughey and a Best Supporting Actor Oscar for Jared Leto out of the six Academy Awards that it eventually won. This week, Dallas Buyers Club seems to be on everyone’s lips again, but for entirely different reasons.

In a bold move to curb movie piracy, Dallas Buyers Club LLC (“DBC LLC”) has brought the fight against illegal movie downloading to end-users. Sophisticated web-tracing techniques were used to track torrent networks and identify IP addresses connected to alleged illegal downloading activity. Thereafter, legal proceedings were initiated in various countries including Australia, the US and Singapore to compel internet service providers (ISPs) to hand over the particulars of customers identified with those IP addresses. Despite ISP’s (sometimes vigorous) efforts to resist the disclosure of subscriber information, in most cases DBC LLC has been largely successful in obtaining the requisite court orders compelling the release of such information.

Having managed to secure this information from the ISPs in Singapore and Australia, DBC LLC has been reportedly sending letters of demand through its lawyers to the said customers asking them to propose a settlement offer for DBC LLC’s consideration (in Singapore, at any rate). According to a Singapore Straits Times report dated 7 April 2015, it seems that DBC LLC may be going after as many as 4,700 users in Australia, 1,000 users in the United States and more than 500 users in Singapore.

With numbers like these, it is unsurprising that the internet has been abuzz with discussions surrounding DBC LLC’s aggressive action. Various questions and issues have been thrown up in online forums and by news commentators as a result. These include:

• the customers’ rights to privacy and whether DBC LLC is entitled to their personal particulars, especially if they have not yet been shown to have infringed the rights in question;
• the identity of the person downloading – whether DBC LLC can establish that the customer on record is in fact the person who actually performed the download, and not their children, a foreign domestic helper, a visitor to their home, or even a hacker making use of the customer’s unsecured wi-fi connection, etc.;
• the potential for excessive damages being sought;
• whether DBC LLC is engaged in “speculative invoicing” (i.e. sending intimidating letters of demand to customers seeking significant sums for an alleged infringement) as it has been termed in the Australian proceedings that DBC LLC undertook against iiNet and other ISPs; and
• whether DBC LLC is conducting selective prosecutions, since it has emerged that no action would be taken against servicemen, schools, halfway houses, welfare recipients and the mentally disabled, with Michael Wickstrom, Vice-President of Royalties and Music Administration at Voltage Pictures LLC in the Australian proceedings for Dallas Buyers Club infringements being quoted as saying “…that kind of press would ruin us”.

These issues raise valid questions of fact and law, and the finer details of legal argument and evidentiary proof will no doubt be a fascinating and consuming topic on its own. However, I don’t propose to weigh in on those points at all.

Rather, I would like to take this opportunity to consider a more pertinent question: “Are there better ways for rights-owners to protect their intellectual property instead of hauling individual users to court?”

Regardless of how DBC LLC’s cases against the users turn out in the various jurisdictions, current public opinion on DBC LLC’s actions is poor and likely to get worse, with comments from the online community and even some of the ISPs being largely unfavourable and in some cases downright critical. Even more worrying perhaps is the fact that some users are banding together on forums and forming organised groups against what they now perceive to be their common “enemy”, sharing tips, tactics, resources and information with each other on how to defend themselves against legal action or to circumvent the law entirely and continue watching movies illegally on the Internet.

Mass prosecution of end-users for infringement is not a new phenomenon, and my observation is that actions like these tend to end badly for rights-owners from a public relations standpoint.

In Singapore for example, Virtual Map (Singapore) Pte Ltd, which licensed maps from the Singapore Land Authority, pursued actions against end-users for infringing the copyright asserted in their online maps whenever these end-users made copies of the maps for their own websites. A few years later, Odex Pte Ltd, a licensed distributor of anime, with the blessing of the rights-owners, brought legal proceedings against end-users for illegally downloading anime videos from file sharing and peer-to-peer sites. Both companies rightfully sought legal remedies against the infringers, often settling out of court for various amounts, but had to withstand severe criticism from the public and the online community for what was perceived as an overly-aggressive stance throughout the process. DBC LLC appears to be the latest company seeking to brave this well-worn path and as expected, the torches and pitchforks are out.

For the embattled rights-owner, it would therefore seem to be a case of lose-lose: even if the law is in their favour and they have a strong winnable legal case, they often fail in the court of public opinion. They are legitimately entitled to enforce their intellectual property rights, but always seem to be painted as the bad guys in the end. What else can they do?

In this writer’s humble opinion, winning the hearts and minds of the customer and gaining more support for their enforcement efforts would be a good place to start. Here are three suggestions to help rights-owners win their battles without losing the war:

1. Bouquets, not Brickbats for the Customer

Consider a scenario where the rights-owner receives the information they wanted from the ISPs after a court application. With this list of customers, they send out letters saying something along the lines of:

“We note that you have downloaded a copy of the movie [name] and we hope you enjoyed viewing it. We would however like to inform you that the copy you have downloaded is illegal and infringes the copyright belonging to [the rights-owner]. However, as this appears to be the first instance you may have done something like this, we would like to extend to you the opportunity to legitimise your copy of the movie by purchasing a licence from us. You can then view the movie with the peace of mind of knowing that you are not in violation of any laws.”

If the intention is to create awareness and increasing compliance, I’d say that this approach communicates those intentions much more clearly than a legal demand that could be characterised as heavy-handed “intimidation”. If the rights-owners can link up effectively with their local distributors, they can also use this opportunity to get these customers to buy a legitimate Blu-ray and prop up local businesses as a part of the legitimisation process, all in one fell swoop. If they don’t, then the instruction to the customer would be to delete the offending copy and to not infringe again in the future. In this way, the rights-owner also builds up a database of potential infringers, strengthening its case for future proceedings if these customers ever offend again.

So maybe instead of looking at the list of customers obtained from the ISPs as a “hit list” of people to seek compensation from, rights-owners could choose to see it as a list of potential customers who already like their product. In short, this is a marketing and sales opportunity. If revenues have indeed been affected by piracy, couldn’t this be addressed through revenue-generating methods instead of legal proceedings?

After all, which letter would you prefer to receive? Such graciousness might also result in additional sales to these embarrassed infringers if the enterprising rights-owner also included a movie catalogue in that letter – worth a try wouldn’t you say?

2. Targeting the Real Culprits

In the intellectual property enforcement environment, end-users are low-hanging fruit. They aren’t hardened criminals, usually aren’t making millions trading in illegal downloads and probably aren’t doing much to hide their trail. Hence, it is relatively easy for a rights-owner to bring proceedings against them and to get a judgment. This is what I call a short-term solution.

The one party missing from most infringement cases tends to be the original infringer: the party that first ripped the Blu-ray or copied the digital file and uploaded it onto the internet. They always seem to be based out of the jurisdiction, are protected by dubious legal systems that do not sufficiently enforce intellectual property rights or they do not leave much of a digital signature that can be traced. Most rights-owners tend to give up the chase after a certain point, since these infringers seem to be hard to track down or prosecute, or otherwise require a measure of deep, long-term strategy that may be beyond their stamina.

But perhaps more effort ought to be concentrated here: trawling the darknet or the deepnet for infringers hosting links to pirated materials, recruiting white hat assets to trace syndicates or networks circulating ripped content, or developing informants operating within popular file-sharing sites like the Pirate Bay, perhaps. Going after the sources and developing a cure instead of just treating the symptoms as it were. Rights-owners should also ensure that there are no leaks within their own internal organisations and distribution chains, especially when sharing preview copies of unreleased material.

Technology might offer more solutions too: incorporating unique serialised fingerprints in digital media so that every copy is unique and rights-owners can trace the exact copy that was duplicated so that each download or Blu-ray can be identified. Unlawful copying can then be traced back to an individual transaction from a particular region or country, and hopefully to an individual purchaser. A universal standard could be developed among the media companies to encode data in such a way so that files can be tracked and traced more easily and piracy patterns identified so that appropriate measures can be taken in high-risk areas. Even a simple subscription model may work, as it seems to have for iTunes and Google Play offering movie rentals and outright purchases for affordable amounts in some countries.

All this might be hard to accomplish compared with the immediacy of a lawyer’s letter to a user, but they would be worthwhile as a long-term strategy that has more enduring results and prove to be a better choice in the end-game, especially if they can provide valuable data about who are the true culprits and allowing rights-owners to go after them in court.

In my experience advising clients on intellectual property protection, we have found the best results in long-term, deep cover operations focused on developing intelligence about the activities of infringers in order to properly uncover networks and criminal syndicates. When the time comes for legal action, it is swift, precise and focused on disabling the piracy structure rather than just prosecuting individuals. It goes without saying that lobbying for more proactive enforcement in countries where greater protection can be accorded to intellectual property rights should also be a key part of any rights protection strategy.

Above all, tactical communication of these efforts to the public should also be a priority: law-abiding consumers appreciate it when right-owners ring-fence their intellectual property, since it helps their purchase retain its value.

3. Giving Non-US Customers Greater Access to Media Content

The digital age demands a paradigm shift on the part of content providers and media companies. Consumers outside the US are seeking more access to content these days but the sources of supply remain the same. Perhaps more options can be given to the international consumer?

Moviegoers want to be able to try out content before making a purchase, but the options are often limited depending on whether there is a local video rental service within striking distance, whether they can rent it off iTunes or stream it via Netflix in their country or whether a friend has a Blu-ray that they are willing to loan. No one wants buyer’s remorse or being forced to sit through an interminable rom-com just because they paid for it, but options are limited depending on just where you’re situated, especially if you’re outside the United States.

What about the possibility of providing direct streaming services, with the first 20 minutes free and the rest of the movie chargeable if the consumer doesn’t exit the show? Limit it to a one-time option so that it can’t be abused and work with local media authorities to exhibit movies that have undergone the necessary ratings certifications, if necessary. If the movie wasn’t worthwhile, you needn’t pay for the rest of it and can simply select another show. If you did like it, you can keep your access to it forever. Expand such services outside the US and develop more content delivery channels so that end-users have more alternatives. This part is easy – the more access non-US customers have to affordable and fairly-priced media content, the less they will depend on illegal downloads.

More content reaching more customers can only be a good thing for rights-owners if they are the ones controlling the channels. And a freemium here and there won’t go amiss either: I know of more than a few households that have purchased entire seasons of Downton Abbey after watching Episode 1 of Season 1 for free on iTunes.

Rights-owners may need to consider that even though some errant customers may have broken the law, they aren’t the real enemy and perhaps more out-of-box thinking could be exercised to encircle, educate and engage them to try and build a dialogue with them towards establishing more openness and trust.

Just as in a game of chess, I’m sure that there are other strategies that can be employed and the suggestions above are by no means exhaustive. There can also be no single answer to the complex question of how to stem the tide of content piracy online. However, I believe that there can be a deeper commitment to devote resources towards a more finessed, multi-angled approach in combating piracy that does not rely solely on a legal solution as a blunt instrument to fight multiple legal battles in court, which is in itself a draining and uncertain exercise, but to work on developing the kind of legal, business, economic, educational and social environment that would make intellectual property piracy untenable, unattractive and unnecessary.

“To win one hundred victories in one hundred battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill. –Sun Tzu, The Art of War“

The writer is currently the Director of Xavier & Associates LLC, a Singapore law firm advising clients on corporate, commercial, IT and intellectual property matters. He has had extensive experience in dealing with intellectual property enforcement issues, both as a practicing attorney and as in-house counsel. The opinions expressed above are his alone and should not be considered or relied upon as actual legal advice, whether pertaining to the cases mentioned above or otherwise.