The film industry has won a 40 percent reduction in the legal costs it will have to pay ISP iiNet, despite losing both the primary case and an appeal in the landmark copyright battle.
In a surprise ruling handed down by the full bench of the Federal Court in Sydney this afternoon, Justice Arthur Emmett ordered the Australian Federation Against Copyright Theft (AFACT) to pay only 60 percent of iiNet's costs stemming from the original trial.
The decision partially altered the quantum of Justice Dennis Cowdroy's judgment that AFACT pay all of iiNet's costs.
A 40 percent discount could mean a saving of up to $1.5 million for the studios, given iiNet's previously reported costs from the first trial of around $3.8 million.
The full bench upheld only part of Justice Cowdroy's primary decision on costs, telling AFACT to pay all costs from an abandoned claim that iiNet was the "primary infringer" in the case.
The bench also made an order that AFACT pay only 60 percent of iiNet's costs on appeal.
Justice Emmett noted in the full bench's ruling that it was at the "general discretion" of the court to "consider an order that involves depriving a successful party [iiNet] of some of its costs".
"Ordinarily the successful litigant receives its costs," he said.
Emmett noted that where there was a "mixed outcome of proceedings", the costs could be split and that the proportions were at "the discretion of the Judge".
"The exercise of discretion in a matter such as this is not always straightforward," Emmett said.
"One starts with the proposition that iiNet has been successful in resisting the claims of the appellants.
"To that extent, it should have the majority of its costs [reimbursed] but there should be some discount to take into account the time involved in preparing significant issues [where iiNet has] been unsuccessful."
iiNet's chief regulatory officer Steve Dalby told iTnews that while the ISP "certainly would have preferred that AFACT pay a greater portion" of the legal costs, the ISP was "satisfied" with today's ruling.
"I don't think it's likely we would have ever got 100 percent [back]," he said.
"We're not paying a penny of AFACT's costs and they're required to pay a portion of ours."
Dalby indicated iiNet had been pleased with Justice Emmett's reiteration - and starting point - that the case had still been won by iiNet.
He also speculated that the quantum of costs "will probably be reviewed again" after any High Court appeal.
"We could get another set of numbers," he said.
"But we won costs and the case so far. That's the main point we take out of this."
Bigger discount overruled
AFACT had argued in the Federal Court today that its "success" in defeating a series of defences put on by iiNet should be reflected in the legal costs it paid them.
The discount was, however, less than AFACT had sought at the start of today's hearing.
AFACT's barrister John Hennessy had proposed that the studios "pay no more than 20 percent of iiNet's costs both below and on appeal."
The submission provoked a surprised response from Justice Arthur Emmett.
"You did lose!," he said, before allowing Hennessy to proceed.
"The appellant's overall position is that we seek an apportionment of costs below and on appeal," Hennessy continued.
AFACT proposed two separate ways to consider costs.
One was that the full bench divide the case into its different 'issues' or defences –authorisation, section 112E of the Copyright Act, the so-called Telco Act defence and Safe Harbours – and apportion costs based on AFACT's relative success or failure to have those various elements dismissed.
The other proposition was that costs be considered in their entirety, but that AFACT still only pay a portion - a proposition which was considered more acceptable to the full bench.
While iiNet's defence to the primary allegation that it authorised infringement on its network was upheld, its back-up defences had been progressively dismissed or weakened on appeal.
That was in part seen to provide AFACT grounds for a High Court appeal, expected to be lodged some time in August or September.