The reason they're not suing the 17 year old, is because iiNet has refused to pass on the infrindgement notices.
Its a civil law matter in australia, Its not up to AFAICT(our version of the MPAA/RIAA) or the ISP to determine that someone is downloading copyrighted material, The studio's need to goto the police, File a court case against the individual, Only once they're actually considered to be doing something illegal by the court can the ISP hand over personal details about the individual.
The ISP is *not* required to do anything by law, they're not a content provider, mearly a tunnel, Regardless of if they were to filter the material, under australian law that doesnt make them a content provider.
The law clearly states that the ISP is exempt from lawsuits over copyright infrindgement by customers under the safe-harbour clauses.
The ISP in question (iiNet) has passed all copyright infrindgement notices to the Authorities(WA Police in this case), AFAICT has chosen to not deal with the legal authorities.
So, Its not the ISP's choice to legally say that someone has commited a crime, Nor can the studio's.
As soon as they take people to court(As anonymous internet users) and present their evidence, have it checked out, and determined that the users belonging to those IP addresses at the time were indeed commiting a crime, THAT is when the ISP needs to pass on the courts decision, and give the court the names assoc. with the internet accounts, Not before.
The larger ISP's in austrlia ignore the notices too, Telstra(#1) activly ignores them, they've got something like 50% broadband hold right now. Optus(#2) doesnt pass them onto customers, But has in the past used multiple complains as a reason for terminating someones account. Exetel is the only isp *I* know of who activly passes on the notices, with a client base of 160,000 people IIRC, the user only needs to acknoledge they received the notice and they continue to download whatever they want.. (after 6 months some peoples contracts will be terminated if they get too many notices - ie. waste the isp's time in dealing with the notices, they're a minimal-margins isp, if a user doesnt make them a profit, you're out the door once your contract is up)