Hotfile Responds To Lawsuit Filed By Studios, Countersues Warner Bros. For Copyright Misuse

from the now-this-starts-to-get-interesting dept

There was a bit of a fuss in the ongoing Hotfile vs. Hollywood lawsuit a few weeks ago when the judge made a minor ruling on discovery about what Hotfile had to hand over. However, now that Hotfile has officially responded to the complaint and added some counterclaims, the lawsuit is finally starting to get interesting. The MPAA/Hollywood studios' case took a big hit earlier this year, when the judge dismissed the claim of direct infringement by Hotfile. Without that, the MPAA has a much tougher case to prove, since it no longer becomes a straight copyright infringement case, but becomes more focused on whether or not Hotfile is protected by the DMCA's safe harbors. Where the counterclaims get interesting is that, as alleged earlier this year by Hotfile, one of the plaintiffs, Warner Bros., regularly abused its takedown tool to issue takedowns on content for which it did not hold the copyright. As in the situation in which Viacom got into some trouble for issuing takedowns on content it had uploaded itself in the YouTube case, this may serve to undermine much of the studio's arguments.

Most of the response from Hotfile seems focused on proving that it's protected by the DMCA's safe harbors, but there are a few other interesting tidbits, including this one:

On information and belief, Plaintiffs have been investigating Hotfile for over a year in which time they were aware of particular URLs of files that they believed to be infringing and had decided to contend that Hotfile’s content protection policies were inadequate. Rather than diligently and promptly bringing suit, however, Plaintiffs and their content protection agents delayed in seeking any remedy. Not only did Plaintiffs inexplicably fail to bring suit or otherwise give Hotfile notice of their allegations during this period, to the contrary, they repeatedly complimented Hotfile’s content protection efforts, offered for Hotfile to become a business affiliate, and refrained from using their Special Rightsholder Accounts to takedown the files they believed were infringing. Plaintiffs thereby perpetuated the very infringement they now allege in this case. Plaintiffs’ unreasonable delay resulted in prejudice by causing Hotfile to leave up the files that are now alleged to infringe, inducing Hotfile to maintain the very content protection policies Plaintiffs now impugn, and causing potentially helpful evidence to be lost....

It also notes that due to the compliments from studios and the questions about business relationships, Hotfile "relied on these representations believing that the Studios found Hotfile’s content protection policies to be more than adequate." The specifics here seem to be that Warner Bros. asked for and received a specific tool made by Hotfile to make deletions easier, and then regularly thanked Hotfile for its actions taking down content. Again, that looks bad for WB.

Other than that, the part that's getting attention is the claim that Warner Bros. issued takedowns on content for which it did not hold the copyright. That certainly looks bad for Warner Bros., and at the very least raises significant questions about how Hotfile could be expected to know who held which copyrights when even one of the plaintiffs appears not to know.

Warner has acted unscrupulously and dishonestly. Not only has Warner (along with four other major motion picture studios) filed this unfounded and contrived litigation against Hotfile employing overly aggressive tactics, Warner has made repeated, reckless and irresponsible misrepresentations to Hotfile falsely claiming to own copyrights in (or to have the owners’ authorization to delete) material from Hotfile.com. Worse, Warner continued to make these misrepresentations even after Hotfile explicitly brought this rampant abuse to Warner’s attention, ruling out any possibility that its wrongful actions were accidental or unknowing. Thus, Warner has knowingly made misrepresentations and it has engaged in DMCA abuse on an unprecedented scale by grossly misusing the powerful anti-piracy software tool that Hotfile specially created at Warner’s request.

The details suggest that Warner started taking down more and more content, even taking down some very popular freeware software that had been purposely uploaded to Hotfile for distribution by its creators. It also appears to have used very questionable simple phrase matching, such as deleting all files that had "the box" in the file name, even if they were totally unrelated to the WB movie "The Box." So that, too, doesn't look good for Warner Bros.

The only thing I'm not sure about here, though, is whether or not Hotfile actually has standing to bring such a claim. I would have thought that it had to be done by the actual copyright holder of the content taken down (or someone else injured by such a takedown). I'm not sure that Hotfile can make such a claim.

Separately, some of these defense and counterclaims are really just directed at Warner Bros., which is only one of the five studios suing -- so Hotfile may still have some issues with the other four. Separately, I just noticed that Paramount is missing from the suing studios. There are six major studios, and all of them except Paramount are involved. That's a bit surprising, since Paramount execs have been some of the most vocal execs speaking out against cyberlockers. Anyone know why they chose not to join in on this one?

Filed Under: copyright, copyright misuse, cyberlocker, dmca
Companies: hotfile, warner bros.

Hotfile Claims Warner Bros. Issued Takedowns On Content It Had No Copyright Over

from the uh-ohs dept

The legal battle between cyberlocker Hotfile and the MPAA continues to heat up. After a judge severely undercut a key claim of the MPAA, the MPAA has been acting petulantly, refusing to hand over certain documents under discovery to Hotfile. The MPAA claims it would reveal their secret "anti-piracy" plans... but the real issue may be that Hotfile believes that Warner Bros. used Hotfile's takedown tool to remove content over which it had no copyright. That would be a no-no and would certainly make the case that much more interesting...

Filed Under: dmca, takedown
Companies: hotfile, mpaa, warner bros.

Judge Drops Key Claim In MPAA's Case Against Hotfile: Cyberlocker Didn't Directly Infringe

from the a-good-start dept

The MPAA has recently decided that "cyberlockers" are enemy number one on its most wanted list, even though they serve perfectly legitimate purposes. As something of a test case, the MPAA sued Hotfile (and its owner, directly) with an astonishingly weak case. After reading it, we were surprised that it didn't include more detail. The case seemed full of conjecture and claims that simply didn't match with reality. While I still think the main show is whether or not Hotfile is guilty of secondary infringement via inducement, the MPAA was certainly betting on a direct infringement claim to be a key part of the argument.

Thankfully, the judge wasted little time in dismissing the direct infringement claims. The judge points out, as we did in our initial post on the lawsuit, that the MPAA's weak filing fails to point out any evidence of direct infringement:

"Nothing in the complaint alleges that Hotfile or Mr. Titov took direct, volitional steps to violate the plaintiffs' infringement. There are no allegations, say, that Hotfile uploaded copyrighted material. Therefore, under the great weight of authority, the plaintiffs have failed to allege direct copyright infringement."

Where this becomes really important is that it means that Hotfile may be protected by the DMCA's safe harbors. Direct infringement isn't covered by the safe harbors. Now, the case will shift (among other things) to see whether or not (like YouTube and Veoh) Hotfile has correctly met the conditions to get safe harbor protection. Of course, it's entirely likely that the MPAA, in its quixotic quest, will appeal this particular part of the ruling, but next time, they should try to provide some actual evidence of direct infringement rather than just insisting that it must be true.

Filed Under: copyright, cyberlocker, direct infringement, dmca, infringement, safe harbors
Companies: hotfile, mpaa

Cyberlocker Responds To MPAA Lawsuit Which Tries To Give Hollywood A Veto On Tech It Doesn't Like

from the it-shouldn't-be dept

Ever since the Supreme Court's Grokster decision, in which it made up a non-legislative "inducement" standard for copyright infringement (a standard, it should be noted, that Congress had a chance to put into law, but declined), the entertainment industry has tried to expand what "inducement" actually means. In the entertainment industry's general definition, it appears to mean "anything we don't like" or "anything that challenges our existing legacy business models." Case in point: cyberlockers. The MPAA has been screaming about "cyberlockers" as this new horrible piracy scheme for a couple years now, ignoring (of course) that cyberlockers serve important and useful legitimate functions in allowing people to share large legal digital files. Like many people, I've used cyberlockers to share PowerPoint presentations, photos and videos I've taken. They're incredibly useful and have significant non-infringing purposes.

However, obviously, those tools can (and perhaps frequently are) used for infringement as well. But, we already have laws to deal with that. The DMCA's notice-and-takedown provision allows copyright holders to alert service providers, who then need to takedown the content. A couple months ago, however, the MPAA went after Hotfile, one of the larger cyberlockers out there, with what struck me as a surprisingly weak case. It was as if whoever wrote the filing didn't quite understand how cyberlockers work, made a bunch of (mostly really bad) assumptions, and then twisted the facts in the most ridiculous possible way to make a case that Hotfile "induces" infringement.

For example, the MPAA claimed that because Hotfile charges fees for premium service, that's a sign of inducement. But that makes no sense. Plenty of online services charge for premium accounts, and since there are real marginal costs here, it makes basic economic sense for cyberlockers to charge premium users for additional services. That has nothing to do with infringement. Separately, the MPAA tries to spin the fact that Hotfile encourages people to use it to share widely, claiming that no legitimate "backup" service would do that. But, the MPAA is (incorrectly) assuming that Hotfile is a backup service. It's not. It's a tool for sharing digital files. None of that adds up to inducement.

The Supreme Court tried to dance around the earlier Betamax ruling, in which it allowed the VCR to exist because it had "substantial non-infringing uses," by creating a specific "standard" for inducement, which (as standards go) is pretty vague:

"[O]ne who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties . . . [but] mere knowledge of infringing potential or of actual infringing uses would not be enough here to subject a distributor to liability. Nor would ordinary acts incident to product distribution, such as offering customers technical support or product updates, support liability in themselves. The inducement rule, instead, premises liability on purposeful, culpable expression and conduct . . . ."

Basically, the Supreme Court says that you have to do something to specifically purposely encourage infringement. Just because your service is used for infringement, that doesn't cut it. Grokster and others lost because there were signs that they advertised or marketed their services specifically for infringement. In the Hotfile case, the MPAA didn't seem to be able to show that at all.

So it's not surprising that Hotfile is fighting back pretty hard on the lawsuit, pointing out that (1) it meets the Betamax standard of significant non-infringing uses, but (2) doesn't come anywhere near the inducement standard of purposefully inducing infringement. The company notes that it promptly responds to DMCA notices and is quick to take down content, once made aware that it's infringing. It notes that providing a legitimate data storage business is not against the law, and it doesn't appreciate the MPAA's insinuations. It goes through the specifics of the Grokster ruling, which clearly don't apply to Hotfile. In fact, they note that one of the reasons Grokster ran into trouble was because it didn't receive revenue directly from users -- and now the MPAA is trying to use the exact opposite argument (that Hotfile does get money from users) to argue it's the same as Grokster?

Similarly, it points out how the fact that Grokster, Isohunt, Limewire and others have had a search function has been one of the key points used against those services to "prove" inducement. The courts have reasoned that since they allow searches for any file, they're "inducing" infringement. Yet, with Hotfile, there's no search. That should settle the issue... but this is the MPAA we're talking about, and so they twist the lack of a search engine into a charge that Hotfile "concealed" the content its users uploaded.

Sued if you do. Sued if you don't.

This seems like a pretty strong filing in response to a clear attempt by the MPAA to twist and extend "inducement" theory way beyond what was intended by the Supreme Court. Hopefully the courts recognize this, but you never know when it comes to these kinds of cases. As Professor Eric Goldman is fond of pointing out, there's regular copyright law, and then there's file sharing copyright law, in which the judges creatively reintepret the law to make activities they don't like illegal, rather than following the actual law.

Either way, this case could become important in determining the boundaries of what really is "inducement." If the MPAA gets its way, it will effectively erase the Supreme Court's Betamax ruling, because it will mean that even if you have substantial non-infringing uses, if there are a lot of people using it for infringement, even if you did not push them to use your service for that particular reason, you automatically become liable. This is a complete fabrication by the MPAA who appears to effectively want to overturn the Betamax ruling here by suggesting that if enough people are infringing, you're automatically guilty of inducement, because any action you do (have a search engine? yes! don't have a search engine? yes!) is interpreted as inducement.

Filed Under: copyright, cyberlockers, inducement, infringement
Companies: hotfile, mpaa

MPAA Files Surprisingly Weak Billion Dollar Lawsuit Against Hotfile

from the you'd-think-there'd-be-a-bit-more-'there'-there dept

Hotfile, one of a number of cyberlockers out there, has been in the news increasingly lately, as various entertainment industry firms have been attacking it as one of the more popular cyberlockers. It appears that the MPAA and its whole content protection staff finally decided to go beyond complaining and actually sue Hotfile, asking (of course) for the maximum $150,000 in statutory damages for each infringing file it found on Hotfile.

The full lawsuit is embedded below, but what shocks me is how weak the case appears to be. Nearly the entire lawsuit is based on innuendo and insistence that perfectly reasonable practices couldn't possibly have legitimate purposes. Hotfile acts as a cyberlocker -- a service that has perfectly legitimate purposes for sharing large files. The MPAA tries to spin the fact that Hotfile charges subscription fees for premium services as nefarious, but that's ridiculous. Hotfile -- like other cyberlockers -- is offering a service in which it pays for all of the bandwidth and storage costs upfront. Offering premium accounts for faster/better service is the very basis of the whole "freemium" model. It does not automatically imply, as the lawsuit suggests, that the company is inducing infringement. The MPAA also tries to make it sound nefarious that Hotfile encourages people to upload stuff that is downloaded more widely, but again that's the whole point of the service. No one ever said that cyberlockers are for personal backup, but they're designed to act as a service for distributing content. And, of course, encouraging people to use it in a way that gets more attention makes perfect sense, but does not automatically imply inducement to infringe.

The most ridiculous section, of course, is where the MPAA lists out all the things that Hotfile could do to reduce infringement -- such as only letting people with accounts download. But the MPAA ignores how that would defeat the legitimate purpose of a service that allows anyone to distribute legal content quickly and easily. It also notes that Hotfile does not use any copyright filters, but there is no law requiring that it has to.

And that's really the biggest problem with the lawsuit. Basically, the MPAA and the big studios it represents have decided they don't like the fact that Hotfile isn't protecting their business model and have decided that, therefore, it must be illegal. But that's not how the law works. It's entirely possible that a court will get blinded by the "but... but... piracy" aspect of this lawsuit. But looking through the details, I'm really shocked at the lack of any actual evidence for direct or contributory infringement. Instead, the crux of the entire lawsuit seems to be: (a) Hotfile makes money (b) people use Hotfile for infringement (c) Hotfile doesn't do the things we want it to do to stop infringement. What the MPAA glosses over is the fact that it appears that Hotfile does, in fact, respond to DMCA takedowns and removes the files in question.

Frankly, I'm surprised. I knew that the entertainment industry would get around to filing lawsuits against cyberlockers, at some point, but I figured they'd have at least something more compelling than "but... but... piracy."

Filed Under: copyright, cyberlockers, filesharing, hollywood
Companies: hotfile, mpaa

Third Parties Increasingly Targeted In Infringement Cases

from the getting-out-of-control dept

We've seen, lately, that the entertainment industry has been targeting third parties for liability. For years, they've talked about making ISPs more "liable" for infringement, but now they're extending that web in potentially problematic ways. Of course, this is a lot of what the whole COICA debate is about. Part of the way COICA works is by extending liability to third parties -- ISPs, advertising partners, domain registrars, payment processors -- if they don't cut off all services to those accused of infringement (often without any adversarial hearing). But in some cases, they're already targeting those third parties, and two separate stories on TorrentFreak demonstrate that.

The first involves Liberty Media suing Paypal along with Hotfile (and 1,000 John Does) for alleged infringement. Hotfile is a cyberlocker, which has plenty of perfectly legitimate uses, but is also frequently used for infringement. Liberty Media walks through a complex set of relationships, which it seems to interpret in the most nefarious way possible. For example:

"Demonstrating that Defendant Hotfile.com is aware of the illegality of its conduct, it offers two methods for download services. For its first option, Defendant Hotfile.com permits its partners to download a stolen movie at a very slow transfer speed for no charge. The other option allows users to pay a premium to download the movie ten times faster."

It certainly sounds bad when you put it like that, but of course, plenty of file storage/file transfer sites offer tiered packages that involve paying for faster transfer rates. That, in no way, demonstrates awareness of illegal content. I'm not saying Hotfile isn't potentially liable, but claiming the tiered pricing is evidence of that seems strange.

But it seems even worse that Liberty is suing PayPal as well -- and I would bet that PayPal will quickly file to be dismissed from the case, as an unrelated third party, or one protected by safe harbors. It's going to be quite a stretch for Liberty to prove that Paypal is somehow liable for the actions not just of a company that uses Paypal, but the users of that company. It's fourth or fifth party liability, rather than third party liability.

The other story involves a case that's a bit further along, where a judge has ordered a preliminary injunction against two ad providers and a domain registrar over a website that allegedly hosts infringing scans of various books. Since the holder of the domain is kept private via eNom's Whois Privacy Protection Service, the court ordered eNom to reveal the identity of the domain owner and to "disable the website." The judge also ordered the two ad networks -- Clicksor and Chitika -- to stop working with the site.

While I could see suing the John Does behind the site, and then working to get a subpoena to identify the real parties behind the alleged infringement, directly suing these three companies seems like a huge stretch, and it's disappointing that the judge rushed to issue the injunction so quickly. The original complaint (pointed out by Eric Goldman, makes some ridiculously broad claims about third party liability.

This is unfortunate, but not a surprise. We've been warning for the better part of a decade the problems with third party liability. Those who benefit from it will always push to stretch it to dump liability on third parties who had absolutely nothing to do with the actual infringement, and often had no idea that any infringement was going on. These payment companies, ad networks and registrars are quite far removed from any actual infringement. As noted above, they're barely "third parties" at all, as they're really fourth or fifth parties, so far removed from the actual infringement as to make these legal actions really quite questionable. It's hard to see how anyone can reasonably argue that a registrar or a payment processor or an ad network should somehow be liable for actions done by the users of a site that they work with. If this continues it will severely stifle many of these activities, as payment providers and ad networks won't do business with all sorts of perfectly legitimate sites, just to avoid the liability of being blamed for the actions of someone two steps removed.

Filed Under: secondary liability, third party liability
Companies: chitika, clicksor, enom, hotfile, liberty media, paypal