Perth ISP iiNet will today defend a lawsuit brought against it by the film industry that could affect the way internet providers operate within Australia.
The case, being heard in the Federal Court, has been levelled in an attempt by the film industry to hold service providers responsible for any illegal downloads on their networks.
Led by Roadshow Films and organised by the Australian Federation Against Copyright Theft (AFACT) - which represents several major film companies and the Seven Network - the legal action began late last year with allegations iiNet did not do enough to prevent its broadband subscribers from illegally sharing copyright-protected works.
The companies seek a ruling that iiNet infringed copyright by failing to take reasonable steps, including enforcing its own terms and conditions, to prevent "known" unauthorised use of copies of the companies' films and TV programs by iiNet's customers via its network.
AFACT executive director Adrianne Pecotic said on the day of the court filing last year that the action by AFACT's members was necessary because the ISP ignored repeated notices over "many months" identifying "thousands" of illegal file transfers via iiNet's network carried out by its customers.
"iiNet refused to address this illegal behaviour and did nothing to prevent the continuation of the infringements by the same customers," Pecotic said. "iiNet has an obligation under the law to take steps to prevent further known copyright infringement via its network," she said.
Managing director of iiNet Michael Malone said iiNet did not support or encourage breaches of the law, including infringement of copyright. He said iiNet had advised the AFACT that their complaints had been forwarded to law enforcement agencies and that they should follow the matter up with them.
"iiNet cannot disconnect a customer's phone line based on an allegation. The alleged offence needs to be pursued by the police and proven in courts. iiNet would then be able to disconnect the service as it had been proven that the customer had breached our Customer Relations Agreement," Malone said.
He also said that iiNet had been "leading the industry" when it came to making content available legally. He said this included agreements with content providers such as iTunes and ABC iView.
The Minister for Broadband, Communications and the Digital Economy Stephen Conroy called the case "stunning" and "a classic" on March 31 at the CommsDay Summit in Sydney.
He said that the idea that iiNet "have no idea if any customers are illegally downloading music" on their network was a "stunning defence".
"The capacity to be able to ignore what your customers are doing on your network is being fought out in the Courts but I thought the defence of 'we have no idea what anyone is downloading over our network' was a classic," Conroy said.
Shadow Communications Minister Nick Minchin took Conroy to task over his response to the active case.
"Conroy obviously has a problem with iiNet," Minchin said.
Malone said he believed Conroy was weighing in on the upcoming Federal Court trial to "get back at iiNet" over the ISP's opposition to internet filtering trials.
"We're disappointed that a minister would use his position to interfere in an active court case, especially a landmark case in his own portfolio," Malone said. "It really does seem that his motivation is just to get back at iiNet for raising concerns about his censorship plan."
Malone said he had sought legal advice on whether Conroy had tried to influence the outcome of the case. Since then no further known action had been taken.
The legal battle has also been mired by allegations by AFACT that iiNet is stalling the case.
But iiNet said the delays were "due to claim adjustments on AFACT's part".
The so-called adjustment removed a claim called 'conversion' from the case. Conversion suggested that iiNet turned the benefits of holding the copyrights to its own advantage by allegedly allowing customers to illegally download copies of the films over its network.
iiNet was "awarded costs for the cost of developing [a] defence against this claim and were given time to amend our defence accordingly" after it was pulled, the iiNet spokesperson said.
The awarded costs amounted to $1,159,000, according to iiNet's annual report.
During directions hearings iiNet was ordered by the Federal Court to hand over a sample of twenty customer records, to be used as evidence in a the case. It was also denied a request to seek documents from overseas jurisdictions.
The Directions Hearings also saw Michael Caloyannides, a senior scientist at Northrop Grumman in the U.S., visit iiNet and Telstra facilities in Sydney and Perth to prepare an affidavit as an expert witness.
Last month Australia's Internet Industry Association announced its intention to intervene in the case. It told the court in September that it wanted to become an amicus curiae ('friend of the court') in the case being made by the film industry against ISP iiNet. This meant they would be able to be called upon as an expert in the case.
Judge Justice Cowdroy said he was not sure "what purpose would be served" by IIA's application, but did not rule out the IIA's involvement.
Last minute preparations
Last week, AFACT claimed there was a link between ISP iiNet upgrading the service plans of heavy-internet users and the proliferation of film piracy.
In AFACT's outline of opening submissions - an abridged version of which was released - it alleged that "through inactivity and indifference, iiNet has ... permitted a situation to develop and continue where users of its internet services are free to engage in infringements of ... copyright".
"It [iiNet] has also encouraged heavy users of its network to upgrade their services, thereby increasing its profits," it read. "In other words, iiNet has allowed a widespread culture of infringement to become entrenched."
The Australian Federation Against Copyright Theft also confirmed Ferrier Hodgson IT forensics executive Nigel Carson as its expert witness in the case.
Another last minute adjustment last week saw AFACT drop another claim in its case. The claim withdrew allegations that iiNet cached illegal copies of films on its servers.
It was the second time the group had dropped part of its case against iiNet.
Last week, iINet revealed its defense in which it will attempt to throw the spotlight on the film industry, accusing it of being the primary copyright infringer.
The case will commence today and be heard for four weeks.