US Court Dings Digiprotect On Mass Lawsuit Filings; Worries About Pressure On Those Sued To Settle

from the good-rulings dept

Paul Alan Levy points us to a good ruling in the Southern District of NY district court concerning yet another mass infringement lawsuit filing (pdf and also embedded below), this time by Digiprotect. The ruling touches on a few different issues, and actually may be quite useful, in light of some other recent rulings. Also, if you recognize the name Digiprotect, that may be because it was heavily involved in many of these kinds of mass infringement lawsuits in Europe, helping, in some ways, to pioneer the strategy of suing a ton of people in the hopes that many will settle. I hadn't realized it had set up shop in the US as well, but apparently it has. In this case, it appears to have taken on a Righthaven-like strategy, rather than a US Copyright Group strategy. That is, it actually "purchased" the copyrights, in some form or another, in order to sue, rather than just acting as the lawyers for a copyright holder. In this case, the actual content was produced by a California porn studio, Patrick Collins, Inc., better known as Elegant Angel Productions.

Digiprotect sued 266 individuals based on IP addresses, and asked the court for expedited discovery to find out who those people were. As has happened in similar lawsuits, Comcast and Time Warner protested, and after some wavering, the court asked Comcast and Time Warner to identify how many of the IP addresses listed from their subscribers, were actually in New York. In the end, Comcast said none of its subscribers on the list were in New York, and Time Warner said only 10 were. Digiprotect itself then admitted that on the entire list there were only 20 to 25 in NY. The court then told Digiprotect that it would only allow discovery for the IP addresses for NY subscribers, and suggested that Digiprotect file an amended complaint that only listed those IP addresses.

Digiprotect, apparently seeking to piss off the judge, instead filed an amended complaint still listing all 266 defendants. Bad idea.

The court makes it clear that those outside of its jurisdiction should not be included in this filing, and that it completely understands the business model aspect of what Digiprotect is trying to do:

During that conference the court noted its concern about ensnaring unsophisticated individuals from around the country in a lawsuit based in New York. The court was concerned then, and remains concerned, that defendants over whom the court has no personal jurisdiction will simply settle with plaintiff rather undertake the time and expense required to assert their rights.

That's an important point that we would hope other judges would note as well. Compare this to Judge Beryl Howell's ridiculous claim that lumping all these different defendants into a single lawsuit filed far away benefits defendants.

Separately, the court touches on another recent ruling we discussed, involving jurisdiction for copyright infringement under New York's "long arm" statute. As you may recall in that lawsuit (Penguin Group vs. American Buddha), the court basically said, "if it's on the internet, and the company is based in NY, it's okay to file in NY." We found that troubling, and apparently Digiprotect pointed to that case, since its US operations are based in NY... but the judge isn't buying it, and highlights some important limitations to the Penguin/American Buddha ruling. First, it notes that it's not even clear if that ruling applies to Digiprotect, because the real company "harmed" by the infringement is not Digiprotect, but Patrick Collins, which is based in California, not NY. It notes that Digiprotect really only received a "very narrow license," (which makes me wonder if it could be facing the same problems Righthaven is now facing for "buying lawsuits" instead of "buying copyrights").

More importantly, however, the court notes that even with the Penguin/American Buddha ruling, the company would still need to show that the defendants had "minimum contacts" in the state and that the lawsuit "comports with traditional notions of fair play and substantial justice, as required by the Federal Due Process clause." The court doesn't find that to be the case with Digiprotect:

Digiprotect has made no showing that any of the Doe defendants expected or reasonably should have expected their downloading of this film to have consequences in New York, particularly when the producer of the film is located in California. Furthermore, Digiprotect surely has no basis from which to allege that the unknown defendants derived substantial revenue from interstate or international commerce.

From there, the court limited the subpoenas only to the small number likely to be located in New York. Nice to see another judge recognizing how these lawsuits are more about a business model than about actual justice.

Filed Under: copyright, jurisdiction, mass lawsuits
Companies: digiprotect

Are There More Copyright 'Pre-Settlement' Groups Setting Up Shop In The US?

from the warning-letters dept

We recently covered how a recently created outfit going by the name US Copyright Group, had launched tens of thousands of lawsuits (some of which appear to be quite questionable from a legal standpoint), as part of what appeared to be an attempt at copying the efforts of companies like DigiProtect and ACS:Law in Europe (where such practices have been widely condemned). The lawsuits appear to be a smokescreen to get contact information for people to whom this "company" can send "pre-settlement" letters, in which they're told to pay up to avoid the lawsuit.

Considering that this pseudo-shakedown is apparently lucrative in Europe, perhaps others are preparing to do the same in the US as well. A reader who prefers to remain anonymous, but who works for a small ISP, passed along an email he recently received from what appears to be a newish operation called the Copyright Enforcement Group, whose website has a mock law enforcement shield on it. Like US Copyright Group, it doesn't hide behind any claims of stopping infringing content. It focuses solely on how this is a way to "monetize" infringements. The email also points to a separate site called CopyrightSettlements.com, which makes some interesting claims. This is the website where folks can "pay up," and it promises "you will receive a full release of liability" but also that "Your personal information and settlement terms will be kept confidential." Makes you wonder how the two can go together. If your info is kept secret, what's to keep copyright holders from suing again? And does the company make sure it covers all copyright holders for a piece of content? Will it indemnify users if they're threatened or sued again?

As for the letter to the ISP, it was an "introduction," in an attempt to ask for the ISP's cooperation in identifying its users. As we've seen with US Copyright Group, many ISPs refuse to just hand over names, though some will. Hopefully, most ISPs receiving the following letter know better than to just hand over info without a court order. Here's the relevant part of the email:

CEG provides intellectual property management services to a consortium of studios in the entertainment industry. Our clients have entrusted us with their valuable property and authorized us to bring legal action against those individuals who illegally download and/or distribute their copyrighted materials over the Internet.

CEG's proprietary technology detects infringements which occur over the Internet and gathers sufficient evidence to support a claim of copyright infringement against the infringing party. Once infringement is detected, we follow strict multi-step validation procedures to ensure that all information is accurate before we forward the DMCA notice to you. The infringing party is then afforded with an opportunity to settle the matter for substantially less than what will be offered if a lawsuit is filed or compared to the judgment amount a court may enter against the infringer.

We understand and respect the important role that you play in securing the privacy of your subscriber base. However, we, too, are deeply committed to our clients and will vigorously enforce their intellectual property rights against infringement. We sincerely hope that you will join us in our effort to fight Internet piracy.

Looks like this new form of "monetizing" content is spreading. And not in a good way.

Filed Under: copyright, pre-settlement
Companies: digiprotect, us copyright group

Judge Rejects DigiProtect's Demands For Made Up Legal Fees In Germany

from the there-goes-that-idea dept

Back at the end of last year, we wrote about how some had noticed that DigiProtect, one of a group of companies that purposely puts files online to see who downloads them, and then threatens them with "pay up or we'll sue" letters, was potentially in trouble in Germany for not following the law. German law says that you can't base "legal costs" on a contingency like winning. Yet, DigiProtect's agreement is that it only gets paid if it can collect on the pre-settlement letters. That goes against the law. And, now, a court has agreed, and found that DigiProtect can't ask for legal fees in Germany unless it can actually prove what those real fees are. The court did offer DigiProtect an out: open your books and show what the real costs are, and how they are paid. DigiProtect refused to do so. This basically cuts out pretty much all of the massive profits DigiProtect and others brag about.

Filed Under: germany, legal fees, pre-settlement letters
Companies: digiprotect

Even The Recording Industry Is Criticizing ACS:Law/DigiProtect Pre-Settlement Letter Program

from the hammer-coming-down dept

With more and more attention being paid to the efforts by firms like ACS:Law and DigiProtect to profit from blasting out hundreds of thousands of letters demanding payment to avoid file sharing lawsuits (which almost never seem to actually get filed), it seems that the companies involved in such things may finally be facing some pretty serious criticism that could force them to curb the practice. First up, politicians. A few different UK officials are coming out loudly against ACS:Law, with some even suggesting that the firm's efforts are like a "scam" or "legal blackmail."

Meanwhile perhaps the most surprising of all is that BPI, the UK's version of the RIAA has also come out against the practice, saying that they don't feel it is appropriate. Perhaps it's not a huge surprise -- given that the clients of ACS:Law/DigiProtect have tended to be video game and porn producers rather than the recording industry. However, when even the recording industry finds your actions against file sharing too draconian, it suggests you've really stepped over the line. At some point, you get the feeling that ACS:Law is going to get slapped down legally.

Filed Under: extortion, pre-settlement
Companies: acs:law, bpi, digiprotect

European Rights Holders Drastically Increase Borderline Extortion Pre-Settlement Letters

from the this-won't-last dept

We've covered in great detail how DigiProtect purposely seeds files of content from its copyright holding partners, in order to send anyone who downloads the content a "pre-settlement" letter that seems not very different from the traditional extortion "protection" rackets ("pay us, or we'll sue.") Those who don't pay are actually discovering that the pre-settlement letters may be handed over to collections agencies despite no agreement to pay nor a court order requiring payment. It turns out this shakedown business is quite profitable but of very questionable legality.

A new report in Germany is suggesting that DigiProtect and a few similar firms in Europe may have sent out 450,000 such letters last year. Unfortunately, NewTeeVee, in reporting on this, claims that each of these are "P2P lawsuits," but that's not true (and a large part of the problem). Nearly every one of these letters are sent without any corresponding lawsuit. The whole idea is to shake people down by threatening a lawsuit, but never having to go through the expense of filing one (or the trouble of actually proving the infringement -- which is a big deal since many, many, many bogus letters have been generated, snaring many innocent users). But, with little in the way of penalties for such bogus pre-settlement letters, there's simply no reason not to keep sending them. Apparently, enough people just pay up to make this an incredibly profitable business.

However, with the massive increase in such letters, and increasing scrutiny about the whole practice, you have to wonder when European governments will start to crack down on this behavior. It's difficult to see anyone defending these actions with a straight face. They clearly have nothing to do with preventing file sharing or unauthorized use of content, but are very much about just getting people to pay up under the threat of a lawsuit.

Filed Under: collections, europe, pre-settlement
Companies: acs:law, davenport lyons, digiprotect, logistep

DigiProtect Now Handing Pre-Settlement Threat Amounts Over To Collections Agencies

from the that's-not-good dept

We've covered how various companies in Europe have built up an extremely profitable business by purposely seeding content they have the rights to on file sharing networks, and then sending "pre-settlement" letters demanding money from the holder of any IP address that connects to them, even if the IP address is not accurately indicating who was involved. They're now sending out these letters at a massive rate, and while they're not actually filing lawsuits, it appears that at least one of the firms involved, DigiProtect, is getting a collections agency involved in some cases. That seems pretty nasty. There's no actual debt here, because the person has not agreed to pay up, but by handing it over to a collections agency, the person will now get hounded with demands for payment. It's difficult to see how this is even close to legal.

Filed Under: collections, pre-settlement
Companies: digiprotect

P2P Pre-Settlement Letters In Germany May Have Been Illegal; Lawyer Who Reveals This Threatened With Lawsuit

from the extortion-or-not... dept

There have been plenty of legal questions over the activities of a small group of companies in Europe, including law firm Davenport Lyons, ACS:Law, Logistep and Digiprotect among others -- who all seem to work together to purposely put files online that they have licensed, and then send threat letters to the owner of any IP address that connects to them. This leads to a fair number of totally bogus demands for people to pay up to avoid getting sued. Apparently, the business is quite profitable, even as no actual lawsuits have been filed.

Yet, now reader Dan alerts us to the news that, at least in Germany, the pre-settlement letters and relationships between these companies may be entirely illegal. This was discovered due to a recently leaked document -- the one that showed how profitable all this was -- which also noted that the relationships between the various companies were not based on any direct monetary exchange:

The document states that "the whole project is kind of a joint venture where no party charges the other party with any costs." The problem with such a set-up is that the pre-settlement offers are usually based on costs incurred by retaining a law office to pursue the claim. File sharers are asked to pay 450 bucks for a porn movie because it costs money to investigate their IP address and send them the cease and desist letter.

However, German law specifically states that these costs can't be based on the success of the claim. In other words: In order to invoice file sharers for lawyer fees, these fees have to occur and be paid by someone no matter whether a file sharer pays up or not. Invoicing someone for costs that haven't actually occurred could be seen as fraud.

Oops. After a German lawyer, Thomas Stadler, reviewed all this and posted his analysis saying that the efforts in Germany were clearly illegal under German law (Google translation from the original) , the German lawyer who had sent the original document (the leaked one, detailing how these operations worked), Udo Kornmeier sent him a cease-and-desist letter (again, Google translation from the original), demanding he take down his blog post that showed the whole operation was illegal. Apparently, lawyers who may be breaking the law in Germany don't like other lawyers exposing them...

Filed Under: germany, legality, pre-settlement letters
Companies: acs:law, davenport lyons, digiprotect, logistep

Profitable 'Pay Us Or We'll Sue You For File Sharing' Scheme About To Send 30,000 More Letters

from the and-here-we-go-again dept

Remember ACS:Law? The shakedown organization that appears to have taken over where Davenport Lyons left off (including using some of the identical documents), and who has "partnered" with DigiProtect, the company that gleefully admits that it purposely puts files on file sharing networks just to collect the IP addresses of anyone who downloads, is asking for the identifying info on 30,000 UK users. To put that in perspective, in the years long campaign by the RIAA to sue people for file sharing, they apparently requested info on about 35,000 IP addresses. Of course, when spreading such a big net, it's no surprise that tons of innocent people get caught in it. But that's really of little concern, since no real lawsuits have been filed. They're just hoping a bunch of people feel that it's easier to pay up. It's not about stopping piracy or getting people to buy -- it's about shaking people down for as much money as possible.

Filed Under: demand letters, file sharing, uk
Companies: acs law, digiprotect

Extortion Is Profitable Too, Doesn't Mean That It's A Fair Way To Profit Off Piracy

from the just-saying... dept

We've covered in the past how companies like Digiprotect convince the entertainment and software industries to sign over copyright licenses to allow them to purposely load file sharing networks with their content -- and then send anyone who downloads the content a threat letter demanding payment. The idea here is not to actually take anyone to court or to stop file sharing. Not at all. The idea is to profit from these threat letters. And, as it turns out... it's quite a profitable scheme. TorrentFreak has some numbers from a music industry presentation discussing how these extortion-like enterprises can pay quite handsomely. Basically, this one group, DRS, sends out emails demanding €450 ($650) per offense, with the company getting to keep 80% of any proceeds. Furthermore, DRS claims that approximately 25% just pay right up, which means for every infringement letter DRS sends out, it can expect to bring in $162.50, with 20% going to the artist rights holder. That's $32.50 that the rightsholder can expect per infringement, on average. That sure as hell beats a few pennies per download. No wonder such programs are becoming so popular. Of course, that doesn't make them any more ethical. Purposely putting files online and then sending out threat letters isn't exactly the moral high ground here.

Filed Under: copyright, extortion
Companies: digiprotect, drs

Digiprotect Admits It Shares Files Just To Find People To Demand Settlement Money From

from the well,-look-at-that dept

Last week we wrote about claims that copyright holders were purposely putting their own content online to see who downloaded it, and then suing them. In that post, we mentioned a post from last year, about one of the companies that's been hired to track down file sharers, DigiProtect, and how its contract seems to suggest this is exactly what the company does. After that came out, there was some talk about how that contract clause really was only used to make sure the company had the right to investigate infringement. However, the company now appears to be quite forward in admitting that it puts files online specifically to catch downloaders:

"We get the legal rights from the companies to distribute these movies to stores, and with these rights we can sue illegal downloaders. Then we take legal action in every country possible, concentrating on the places where such action will be profitable."

Of course, this seems questionable on a variety of levels. First, if it's getting the distribution rights to the content, then the distribution is authorized, and not infringing. Second, DigiProtect makes it quite clear that its focus is on figuring out the most profitable way to do this -- not the best way to cut down on infringement. The company apparently doesn't pay anyone on a fixed salary, but everyone shares in a cut of whatever is "collected." In other words, the program is not at all about stopping unauthorized file sharing, but figuring out the best way to profit from sending threat letters to people. The company even admits that the numbers it demands from people, and the numbers used in lawsuits have nothing to do with actual damages, but are entirely about what they think is mostly likely to get them paid. That sounds an awful lot like the what most people call extortion.

Filed Under: file sharing, licenses, uploads
Companies: digiprotect