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The Importance of Costs: BitTorrent and The Cobbler

Readers who have a shared server with users of BitTorrent, or who use it themselves, may have received threatening emails forwarded by their ISP alleging Intellectual Property (IP) infringement through the downloading of movies, music, and the like.

These are forwarded to infringing IP address holders by the ISP, who does not disclose the identity of the account holder. The account holder, for their part, may not be the user who is committing the infringement (if one has taken place). I would generally recommend that account holders not volunteer to be named in litigation by responding to these messages and identifying themselves.

In the United States (where I note that I am not licensed to practice) a series of cases brought by particularly litigious IP holders are creating some interesting precedents on this specific issue, as well as underscoring the importance of awards of costs in litigation.

Strangely, at least in my view, one of the stars of this litigation is Adam Sandler’s 2014 movie The Cobbler, a film I have not seen but which receives a score of 5.8/10 on IMDb. The owners, “The Cobbler LLC”, have been quite aggressive in bringing cases of infringement against users or account holders who have allegedly downloaded the movie over the P2P file sharing system BitTorrent.

In one recent decision of the US District Court for the District of Oregon, the Court found in favour of the plaintiff Cobbler LLC but broke with the presumption that a winning party is entitled to a compensatory award for its legal fees in pursuing the claim. Among her reasons, Magistrate Judge Beckerman noted the inequality of power between the user and IP holder:

“When an individual who has illegally downloaded a movie… faces the threat of a statutory damage award that could theoretically reach $150,000 (see 17 U.S.C. § 504(c)(2))… the resulting bargaining process is unequal, and unfair.” [emphasis added]

She found that adding attorney’s fees to the $1000 award for the infringement would encourage “overaggressive assertion and negotiation of these Copyright Act claims”.

This has not dissuaded The Cobbler LLC, nor has Magistrate Judge Beckerman backed down on the proper exercise of the Court’s discretion in assessing costs. In another case before her the same plaintiff had brought suit against a named operator of an adult group care home with an open WiFi connection. While admitting the named owner was not likely the infringer, the plaintiff still claimed against him for permitting or facilitating the infringement by failing to secure and police his internet connection.

The claim against the defendant was dismissed with costs on motion, while the plaintiff was granted judgment against the John Doe with no damages.

Needless to say the investment of legal resources is not without cost, and parties to litigation always need to consider that there is a possibility they will not succeed at trial and be exposed to an additional – and possibly very substantial – costs award in favour of the successful party. At the same time, parties bringing cases of relatively small value [N1] (as the infringement of a single user of a movie) will find they are not economical to pursue if they are not awarded costs that substantially exceed the principal damages.

For parties and of course for the Courts themselves, in which these awards are generally discretionary, costs can be an important lever in the litigation process. In the present cases, it seems unlikely that a client would continue to pay for – or a lawyer would continue to take on contingency – cases requiring substantial investment of counsel time with little prospect of recovering even a fraction of that investment.

[N1] In Ontario, the Small Claims Court has statutory jurisdiction over most civil claims up to $25,000.00; a similar Court exists in most provinces. Claimants in Superior Court who obtain less than this amount lose their presumption to a costs entitlement. However, this provision does not apply to the specific subject matter jurisdiction of the Federal Court; that Court’s rules do not provide for cost consequences for recovery less than $25,000, and the costs would be discretionary (as in the case described here). 

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