Universal Music Australia Pty Ltd v Sharman License Holdings Ltd

REASONS FOR JUDGMENT WILCOX J: 1 Before the Court are two notices of motion seeking the discharge of Anton Piller type orders made by me on 5 February 2004. The orders were made in a proceeding intended to be instituted by six applicants, Universal Music Australia Pty Ltd, Festival Records Pty Ltd and Mushroom Records Pty Ltd trading as Festival Mushroom Records, EMI Music Australia Pty Limited, Sony Music Entertainment (Australia) Limited, Warner Music Australia Pty Limited and BMG Australia Limited. Although these six parties are respondents to the motions, it is convenient to refer to them in these reasons as 'the applicants'. 2 One motion is brought by the five respondents to the principal proceeding, Sharman License Holdings Ltd, Sharman Networks Ltd ('Sharman Networks'), LEF Interactive Pty Ltd ('LEF'), Nicola Anne Hemming and Philip Morle ('the respondents'). The other motion is that of Brilliant Digital Entertainment Pty Limited ('BDE') and Kevin Glen Bermeister. I will refer to these two persons as 'the Brilliant Digital parties'. Although not respondents to the principal proceeding, the Brilliant Digital parties were named in Schedule 1 of the Anton Piller orders (along with the five respondents) as 'Kazaa Parties'. They were subjected to the operation of the Anton Piller orders in the same way as if they had been respondents to the principal proceeding. The Anton Piller orders 3 In accordance with usual practice, the Anton Piller orders were made on the ex parte application of counsel for the applicants. Counsel's application was supported by four volumes of material comprising the application proposed to be filed to commence the principal proceeding, two draft notices of motion (one of which was the motion seeking Anton Piller orders), a solicitor's undertaking, an outline of submissions, a draft order for ex parte relief and numerous affidavits. 4 The affidavit evidence indicated that all the applicants are Australian record companies with extensive catalogues of copyright sound recordings. 5 Paragraphs 3 to 6 of counsel's outline of submissions explained the background to the application: 'These proceedings relate to large scale infringement of copyright in sound recordings by the operation of a so-called "peer to peer" internet "file sharing" system and associated computer software generally known as "Kazaa". Technological developments in recent years have greatly increased opportunities for, and the scale of, piracy of sound recordings. This has been particularly so with the availability of a range of technologies, including compact discs (CDs), personal computers and the internet, which have together enabled the copying and online transmission of digitally accessible versions of sound recordings. There is in Australia no right of private copying of copyright sound recordings. Accordingly, it is an infringement of copyright for an individual to "rip" (copy) the content of a copyright commercial CD, or to download a digital music file that is a copyright sound recording, unless specifically authorised to do so. The developments described in paragraph 4 above have led to the promotion of various schemes designed to facilitate the exchange between computer users of copyright sound recordings, including the so-called "peer to peer" technology.' 6 Counsel went on to describe the 'Kazaa' system. They described it as a scheme using software known as Kazaa Media Desktop (sometimes 'KMD') 'that permitted users to distribute and receive digital music files to and from each other'. They stated this software first appeared in the Netherlands. Legal proceedings were brought in the Netherlands, after which 'there was a relocation of the entities apparently associated with supplying the software to countries outside the Netherlands'. 7 In para 10 of their outline of submissions, counsel made a reference to legal proceedings in the United States. They said: 'The second set of proceedings was commenced in the United States in relation to infringement of United States copyright. The applicants in those proceedings include but are not limited to five of the applicants in the present case. In October 2002, certain of the present respondents were joined to those proceedings. Those proceedings remain on foot. Ancillary proceedings (relating to a letter of request to obtain evidence and documents in Australia pursuant to the Hague Convention) are on foot in the Supreme Court of New South Wales. These are not substantive proceedings and they do not relate to Australian copyright.' 8 At a directions hearing after the grant of the Anton Piller orders, counsel for the applicants told me the second sentence in this passage is erroneous. The sentence should have stated that the United States applicants (plaintiffs) include companies associated with the present applicants, not the applicants themselves. Nothing turns on this difference. 9 In their outline of submissions, counsel for the applicants referred to the release of new Kazaa software in June 2003, and changes to that software in September and December 2003. They asserted: 'it has become apparent that the Kazaa scheme, which promotes enormous infringement of sound recording copyright, is now substantially administered from Australia. Further, it has become apparent that representations previously made by those associated with the Kazaa scheme about their inability or the inability of the Kazaa system to track or distinguish between legitimate and illegitimate (infringing) sound recordings, are not (or are no longer) correct.' 10 Counsel then said: 'However, there remain significant features of the Kazaa system about which the applicants have not been able to obtain detailed knowledge. These include the nature and extent of communications passing between various elements of the Kazaa system, including encrypted communications, the content of such communications, and the existence and operation of mechanisms used by the operators, programmers and administrators of the Kazaa system to control or monitor aspects of the system. Accordingly, the applicants move for ex parte relief in the nature of Anton Piller orders against the respondents, and analogous orders against a number of third parties whose computer systems are believed to be involved in the operation or facilitation of the Kazaa system or the provision of the Kazaa software and are likely to contain specific information relevant to these proceedings. In essence, the relief currently sought relates to the inspection and (in certain cases) preservation of information and data relating to aspects of the Kazaa system and its operation.' 11 It is not necessary for me to refer to all the material contained in the affidavits used to support the application for Anton Piller orders. None of that material is disputed, for present purposes. However, it is desirable to note the evidence put before me as to the nature of the risk of destruction of evidence, if Anton Piller type relief was not obtained. 12 Jorg Michael Speck is the Manager of Music Industry Piracy Investigations, an organisation apparently controlled by the applicants. Mr Speck has held that position for nine years. Prior to that time, he was a detective sergeant and senior investigator in the New South Wales Police Service. The material in his affidavit suggests he is well conversant with the problem of copyright piracy in the music industry. He has been deeply involved with investigations into the Kazaa system, the features of which he explained at length. He set out some information about each of the Kazaa Parties. At paras 185-187 of his affidavit, he said: 'Information gained from files contained on the computers of the server or of the site operators is likely to reveal information about the structure, operation and monitoring of the Kazaa system and the infringement of copyright of the applicants occurring on that network or committed by Kazaa users. Based on my experience in the enforcement of copyright in cases of online copyright infringement, I believe that there is a very high risk of the destruction, dissipation or unavailability of documents and computer records in the event that notice is given to the respondents of the allegations of copyright infringement. I hold this belief for the following reasons: (a) There is real risk that with notice of the application some, or all of the respondents, and their associates, will destroy documents and data. The first and second respondents are not companies incorporated or registered in Australia. The applicants are entirely unable to identify the persons, other the [sic] fourth and fifth respondents (who are identified on the sharmannetworks website), who are in practical control of the company. I therefore have no knowledge of how many unidentified persons may be directing the activities of the first and second respondents and able to direct staff in Australia to destroy or transfer documents out of Australia. (b) Much of the information to which the applicants seek access for use in the proceedings is inherently vulnerable to destruction or loss. I have significant concerns about the high risk of destruction of crucial evidence given how quickly electronic files can be moved and/or deleted, particularly around the highly complex Kazaa system. I have found in previous internet piracy investigations that information is frequently overwritten or lost by the ordinary operation of computer systems. Once overwritten it becomes much more difficult to retrieve by computer forensic processes. This is particularly the case with logs of data or electronic transactions which can be overwritten as new data is recorded. (c) The transient nature of many aspects of the Kazaa system, and the data likely to record its actions. The [sic] I understand from the evidence filed by the forensic experts in this matter that the Kazaa supernodes are transitory, existing for anywhere from hours to days only to disappear without warning. It is not, in my view feasible for evidence about their activity to be gathered without being able to take a snapshot of the system. Any notice of this is likely in my view to enable the operators of the Kazaa system time to remove or alter the processes to prevent the analysis of individual network elements thereby denying the applicants the opportunity of analysis of the information. (d) The enormous scale of copyright infringement involved and the potentially very large number of people involved in the infringements of copyright (including KMD users on the Kazaa system) means that there are likely to be a large number of participants who would seek to conceal themselves from detection by the applicants by deleting data and changing their behaviour for the period of observation. This is not a case in which, in my view, the applicants can simply seek to make document and data requests in the ordinary way and expect that any of the that [sic] information will be recoverable.' 13 On the basis of the material put before me on 5 February 2004, I made a number of ex parte orders. Order 4 required each 'Kazaa Party' - that is, each of the respondents and the Brilliant Digital parties - to permit a total of not more than five persons, comprising representatives of the applicants and forensic experts ('the Attending Representatives'), together with an independent solicitor, to enter and remain upon specified premises during specified hours. Order 5 authorised the Attending Representatives to: '(a) search for, identify, observe, monitor and examine (including with the use of facilities to examine, decode or restore data): (i) any Electronic Materials which contain information or data listed in Schedule 2 (Kazaa Party Electronic Materials); (ii) any documents in non-electronic format which contain information or data listed in Schedule 2 (Kazaa Party Documents); (b) copy or capture (including with the use of forensic methods) from any Kazaa Party Electronic Materials or Kazaa Party Documents any information or data listed in Schedule 2; (c) subject to order 14 below, remove into the possession and safekeeping of the Applicants' solicitors any information or data copied or captured pursuant to sub-paragraph (b) above.' 14 Order 6 required each Kazaa Party to disclose to the Attending Representatives all Kazaa Party Electronic Materials and Kazaa Party Documents in that party's possession. 15 The terms of Schedule 2 are of critical importance to the operation of these orders. The Schedule read: 'DEFINITIONS In this Schedule 2: Kazaa Software means the software applications Kazaa Media Desktop and Kazaa Plus; Kazaa System means the Kazaa peer-to-peer file sharing system or any network involving the use of any of the Kazaa Software; Kazaa Websites means the websites (in any language) accessible at and , and any substantially identical websites. RELEVANT INFORMATION AND DATA Kazaa System