Last week, an Australian court issued an encouraging ruling pushing back against extreme copyright demands. A company called Dallas Buyers Club LLC (DBC) has been chasing thousands of alleged file sharers around the world. In the United States, these cases often lead to Internet users being shaken down for thousands of dollars each. In contrast, the Australian court is insisting that DBC’s money demands bear some sensible relationship to the harm it has suffered. If this becomes standard practice, it may protect Australian Internet users from the kind of abusive copyright trolling that has become too common in the United States.

Mass copyright litigation tends to follow a pattern. First, the copyright owner goes to court seeking the subscriber details for IP addresses that may be associated with file sharing. In some cases, copyright owners have improperly sued thousands of users at once without making any demonstration that the defendants had ties to the court or each other. Once the purported copyright holder gets its hands on IP addresses, it starts contacting subscribers (who, of course, are not necessarily the person who engaged in copyright infringement) to demand a settlement. In many cases, the copyright holder demands thousands of dollars for downloading a single work.

DBC, owned by Voltage Pictures, has been among the most aggressive practitioners of mass copyright litigation. Data from Lex Machina shows it filed over 250 cases in United States courts. Once it gets subscriber details, DBC demands as much as $5,000 per torrented file. Obviously, this amount bears little relationship to the actual harm it has suffered (the movie is available on iTunes for $14.99). But DBC is able to use the expense of litigation, and the threat of statutory damages, to extract settlements hundreds of times higher than the cost of its movie.

Last year, DBC decided to take its litigation campaign on tour. It filed suit in the Federal Court of Australia demanding that local ISPs, like iiNet and Dodo, turn over the subscriber information for nearly 5,000 Internet users. The ISPs fought back, arguing that DBC provided insufficient evidence of infringement. But the Federal Court ruled that DBC should be given subscriber information.

In a silver lining, the court said that it would require any communications with Internet users to be approved by the court before it would allow subscriber information to be handed over. This meant that, unlike in most US cases, DBC could not immediately start contacting subscribers to demand thousands of dollars. The court seemed concerned that DBC had engaged in “speculative invoicing” in the United States and wanted to ensure that it would not make unreasonable demands of Australian Internet users. The court wrote that it was not “going to open the sluice gates until it saw the proposed correspondence and until DBC satisfied the Court that it was that approved correspondence, and not something else, such as a dead cat, that DBC was going to send to account holders.”

Though DBC may not have planned to mail anyone a dead cat, its proposed correspondence was extreme, and seemed to be part of a shakedown. Although the exact text is not available (the proposed letter and telephone script were filed under seal), we know that DBC included a number of unusual and aggressive details. For example, it planned to ask Internet users to tell it how much they earn and how many other films they have torrented. In addition to damages for the copy the user actually downloaded, DBC would demand a separate license fee for every packet shared over BitTorrent. In addition, it would ask for punitive damages founded on the sharing of movies that DBC doesn’t even own. We don’t know the final amount, but the court suggested the settlement demand was “substantial.”

Last Friday, in an entertaining and strongly-worded opinion, the court rejected DBC’s proposals. The court said that DBC’s theory that individual users should pony up cash for every single BitTorrent packet was “surreal.” The court also rejected DBC’s theory that it could collect punitive damages based on alleged infringement of other people’s copyright. Such a claim would be “summarily dismissed” under Australian law.

The court ruled that DBC could only ask for damages for the actual copy uploaded, and for damages relating to costs of acquiring the subscriber’s information. The Court seemed concerned that, given its prior record, DBC might not limit itself to these more modest demands. So, before it would allow subscriber details to be handed over, the court required DBC to post a $600,000 bond. This sends a strong message to DBC: limit yourself to settlement demands permitted by the court or face a penalty for contempt.

Although it does not shut down DBC’s campaign, Justice Perram’s ruling at least prevents it from engaging in the kind of egregious trolling that has become common in the United States. Why do we see this difference? The answer is straightforward: Australia does not have statutory damages for copyright infringement. This allowed the court to tie damages to the actual harm DBC suffered. In contrast, U.S. copyright law provides statutory damages of up to $150,000 per work and does not require any showing of harm. Excessive penalties are baked into the U.S. system which encourages trolling and abuse. Ultimately, we need fundamental reform of statutory damages to bring fairness to the US copyright system.