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Oz Swiftel case settled in a shroud of secrecy

So, what happened? No ... really ... what happened?

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The long running Australian Swiftel case was settled today. All the important issues and players were involved in this case – ISPs, alleged BitTorrent and P2P users … film, music and other content holders. There were also allegations of large-scale internet-based copyright infringement. The case was supposed to represent another significant piece in the Australian judicial puzzle known as the “legal framework in the digital age”. So, why was this case settled, and why were the terms of the settlement sealed?

When we watch people or companies over a period of time, it is natural to observe patterns of behaviour. This is especially the case when we watch the copyright enforcement industry.

Australia’s Music Industry Piracy Investigations (MIPI) has had a golden run of successes over the past decade. Many MIPI cases have gone to judgement. Through these judgements MIPI has effectively “made law”. So, how can a private organisation make law? Lawyers call it precedent. MIPI has brought a number of cases in the Federal Court over the past few years. These cases have been heard, and MIPI has been successful (to varying degrees) in each of these cases. As a result, MIPI have helped develop a body of legal judgements which can be used by judges in Australian courts to interpret legislation (such as the Copyright Act) well into the future. Here is a sample of some recent MIPI copyright cases (in alphabetical order):

• CooperMiyamotoSharmanSmithUniversities case

MIPI has also settled a number of cases over the past few years. In these settled cases, MIPI has gone in “hard”, with cease and desist letters, Anton Piller (civil search and retention) orders, and has supported these actions with an effective public relations campaign. Respondents faced with such a campaign have been faced with two choices – either fight the “good” (and expensive) fight, or simply settle with the recording industry (read: surrender).

Typically, when MIPI has settled cases the respondents have had to make a payment of a substantial sum of money. Often the sum approximates the amount of the alleged loss, which in turn approximates the amount of damages that would have been payable had the case run its course, and had the respondents lost. The settlement sum may include court costs and the applicant’s legal expenses to date. There may be “goodwill” discount which acknowledges the respondent’s admission of liability. MIPI usually publicly disclose settlement terms. This is not only so that MIPI and its stakeholders can “claim” a victory in their press releases, but it is so that MIPI can use the settlement as a precedent for future cases.

On October 14, 2005, it was announced that the Swiftel case had been settled. The Swiftel case was supposed to be the first Australian case dealing with the use of BitTorrent technology for alleged copyright infringement. The case was also supposed to be the first major test of new laws designed to limit ISPs' liability for copyright breaches carried out by their customers. At the time that the case commenced a MIPI representative identified “Swiftel as an ISP which has adopted BitTorrent technology to link infringers to music clips and sound recordings.” According to s MIPI representative, “hundreds of thousands of downloads (were) conducted in the last year in breach of copyright laws.” The case focused on two internet servers including a website known as “Archie's Hub”.

Anyway - the case was settled … nothing unusual about that … except, for perhaps the first time in MIPI history, the terms of a settlement in a copyright infringement case were sealed. This means that we cannot find out how much money the respondents will have to pay to the applicant record companies as part of the settlement. Nor can we find out the other terms (if any) of this deal. This is very unusual, given that MIPI has always been about setting precedents. In this case, there will be no precedent set. No citation. No bragging rights. Next time an ISP is sued in Australia, it will be as if the Swiftel case never happened …

So what were the settlement terms? Early MIPI media statements talk of “hundreds of thousands of downloads”, so perhaps the settlement sum is close to a million dollars. Alternatively, the sum payable may be smaller … perhaps much smaller. In fact, the settlement sum may be so small, that the recording industry does not want other respondents (and would-be respondents) to know how little money it takes to “get out of a case” involving high volume internet-based copyright infringement.

The shroud of silence is intriguing. All the important players were involved in the Swiftel case. ISPs were involved, and we saw how important that was in the Cooper case. There are allegations of high volume P2P file sharing. That was crucial in the Kazaa case. There were allegations of financial gain and substantial losses to copyright holders – just like the other MIPI cases. However, from an Australian legal perspective there were new factors involved in this case, such as the use of BitTorrent, the interaction between the Federal Magistrates Court and the Federal Court, and the impact of the Australia/US Free Trade Agreement.

So, why the secret settlement given that the recording industry was seemingly so confident in the merits of their case? Could it be the recording industry didn’t want to spend any more money on this case – even if it would potentially yield good legal precedents? Could it be the Oz recording industry has swapped a long term perspective for short term gain? Could it be the recording industry is still reeling as a result of a budget “blow out” in the Kazaa case? Or could this be part of a wider exit strategy – a plan by the recording industry to take a step back from copyright enforcement proceedings?

Alex Malik is a technology lawyer and music industry commentator. He can be contacted at Alex.Malik@student.uts.edu.au.

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