Sony Hack Reveals That MPAA's Big '$80 Million' Settlement With Hotfile Was A Lie

from the of-course-it-was dept

For years, we've pointed out that the giant "settlements" that the MPAA likes to announce with companies it declares illegal are little more than Hollywood-style fabrications. Cases are closed with big press releases throwing around huge settlement numbers, knowing full well that the sites in question don't have anywhere near that kind of money available. At the end of 2013, it got two of these, with IsoHunt agreeing to 'pay' $110 million and Hotfile agreeing to 'pay' $80 million. In both cases, we noted that there was no chance that those sums would ever get paid. And now, thanks to the Sony hack, we at least know the details of the Hotfile settlement. TorrentFreak has been combing through the emails and found that the Hotfile settlement was really just for $4 million, and the $80 million was just a bogus number agreed to for the sake of a press release that the MPAA could use to intimidate others.

“The studios and Hotfile have reached agreement on settlement, a week before trial was to start. Hotfile has agreed to pay us $4 million, and has entered into a stipulation to have an $80 million judgment entered and the website shut down,” the email from Sony’s SVP Legal reads.

Considering the time and effort that went into the case, it would be no surprise if the movie studios actually lost money on the lawsuit.

The good news for the MPAA is that the money was paid in full. There were some doubts if Hotfile would indeed pay up, but during the first weeks of December last year the $4 million was sent in three separate payments.

Of course, all of this is just for show. You can safely assume that none of the much lower $4 million went back to any content creators. Instead, it's likely it got plowed back into the MPAA's vast "anti-piracy" machine, allowing it to be used for other lawsuits and funding investigations by state Attorneys General.

Still, is it any surprise that the industry famous both for its fictional "Hollywood Endings" and "Hollywood Accounting" where a hit movie like one of the Harry Potter films can bring in nearly a billion dollars, but still have a "loss" for accounting purposes, would create a made-up scenario in which everyone pretends many tens of millions of dollars are paid due to "infringement"?

Filed Under: copyright, file sharing, settlements, sony hack
Companies: hotfile, mpaa

Key Fair Use Case Settles, Rather Than Continue (And, No, It's Not The Beastie Boys)

from the settlement-day dept

Yesterday was apparently "settlement day" for high profile copyright cases. Lots of attention was paid to Google and Viacom finally settling the ridiculous seven year battle in which Viacom tried to fight the future and reinterpret the DMCA... all for naught. And then, you may have seen that the Beastie Boys and Goldieblox settled their high profile lawsuit as well. However, that was almost a foregone conclusion. There was no way that lawsuit was going to move forward.

However, a much more important copyright case, also settled. The legal fight concerning fair use between photographer Patrick Cariou and famed artist Richard Prince also happened to settle on the very same day. We'd been covering that important fair use case, which really highlighted the importance of the "transformative" step in determining fair use. Prince had taken photographs of Cariou and created "collage paintings" in which he added to the photographs. While a lower court had said this was not just infringing, but that Prince's artwork (valued at millions of dollars) needed to be destroyed, an appeals court, thankfully, mostly overturned the decision, declaring that most of the works in question were fair use, and leaving the lower court to re-examine whether a few more were or were not transformative enough to be fair use.

As with the YouTube lawsuit, the settlement means that the final precedent set by this case is not nearly as clear-cut as it could be, but (again like the YouTube case), on the whole, the state of the case when it ended is generally useful. With YouTube, while the appeals ruling could have been more definitive concerning the DMCA's safe harbors, it was generally supportive of them and completely rejected Viacom's wacky theories. Similarly, in this case, while the appeals court didn't wholly support fair use for all of Prince's works, at the very least it did find most of them to be fair use, and (unlike the district court) recognized that immediately jumping to a claim of "infringement" and ordering the destruction of artwork that the art world clearly valued quite a lot was a dangerous step to take. While some might argue that having an eventual Supreme Court ruling in either case helps establish a clearer set of rules, given the unpredictable nature of the Supreme Court on copyright issues, the settlement in both of these cases, when the results were generally positive, may be the best thing for the state of copyright law currently.

Filed Under: appropriation art, beastie boys, copyright, fair use, patrick cariou, richard prince, settlements
Companies: goldieblox

'Defendant' In Prenda Law Case Reveals He Agreed To Take A Dive

from the incredible dept

Back in December, we wrote about one of Prenda Law's latest tricks (or, rather, a whole bag of tricks) involving using shell companies (who appear to be controlled by Prenda itself, where the CEO may have been faked via identity fraud) to file cases against a single "named" defendant who settles quickly... but part of that "settlement" is that the "defendant" agrees to allow discovery of a long list of "co-conspirators." Prenda argues that those co-conspirators cannot fight back against discovery, because they're not "defendants." And, thus, Prenda gets a big list of names/contact info of more people to shake down.

As we noted, there was some suspicion that the "named" defendants and their lawyers were somehow in on the deal -- and the judge in at least one case flat out asked Prenda's John Steele, and the defendant's lawyer Adam Urbanczyk, if they "were in bed together" to come up with such a settlement. At the time, we pointed out that it was still a big leap to assume that, but now there's a bit more evidence. In one of these cases, involving the likely-Prenda-shell-company Guava, one of the named defendants, Spencer Merkel, has filed an incredible affidavit in which he admits that Prenda had offered him a "settlement" in which he would be "named" in a lawsuit and agree to cough up his BitTorrent log files. And Prenda provided him with the lawyer who would then represent him thousands of miles from his home.

Michael offered me a settlement deal. The deal consisted of the following parts:

a. I would agree to be sued.

b. Prenda would ask for, and I would provide, a copy of the bit-torrent log from my computer. The excuse for gathering this log is that it would corroborate the IP address evidence that they had already gathered through the use of Prenda's sottware.

c. Prenda would, upon receipt of the information, dismiss the case against me.

4. In discussion of the settlement, Michael stated that he did not know of any pro bono attorneys in Oregon, but could provide the name of an attorney who might take my case in Minnesota. Because I cannot afford to pay an attorney, I agreed to be sued in the state of Minnesota. I then retained my attorney, Trina Morrison, based on the information provided to me by Prenda Law.

Now, throughout all of this, he believed that Prenda was representing Hard Drive Productions, one of the porn companies that Prenda used to represent, but whose cases they dropped entirely not too long ago to focus solely on these questionable shell companies they claim to be "representing."

5. Before the start of this case, I had not heard of Guava LLC. I believed that I would be sued by Hard Drive Productions, Inc. I believe that Guava LLC's case against me is based on my admission to Michael that I downloaded the video at issue in the Hard Drive Productions case.

6. Before the case against me was filed, I had not heard of Alpha Law Firm. I believed that opposing counsel was Prenda Law.

7. Afier subpoenas were served in the case against me, I learned of Guava LLC's and Prenda Law's practice of finding one John Doc to be a named defendant, and then discovering the names of and requesting settlement money from other John Does by issuing subpoenas to ISPs.

Oh, and it gets worse. After all of this... Prenda went after him again, which seems to be why he's now willing to speak out about the "deal."

8. Last week, on 01/15/13, I was once again contacted by Prenda Law Firm. I received a voice mail from someone on behalf of Prenda Law stating that I needed to make payment arrangements or I would be sued.

At the very least this raises very serious questions about the conduct of Prenda Law and some of the lawyers who represented these named defendants. Given that Prenda is already dealing with serious questions in multiple courts about possible fraudulent activity, finding out that they may have effectively blackmailed a defendant into taking a dive, for the purpose of "agreeing" to discovery to find another batch of people to go after, can't look good.

Filed Under: discovery, john steele, prenda, settlements, spencer merkel
Companies: guava, prenda, prenda law

Yet Again, Netflix Class Action Shows That Class Action Lawsuits Are Mostly About Making Lawyers Rich

from the not-stopping-people dept

For years, we've been pointing out that our class action lawsuit system is broken. It makes sense, in theory, that if a large group of people are wronged, they can team up to right that wrong—but in practice it has morphed into a system where a bunch of bottom-feeder lawyers sue just about any company at every opportunity... and then those lawyers end up taking the bulk of the money. The "class" (the people supposedly wronged) rarely get much, if any money at all. Of course, one of the first stories that clued me into all of this involved a settlement in a class action lawsuit against Netflix way back in 2005, in which the lawyers got $2.5 million... and everyone in the "class" just got their accounts upgraded for a month (and if you forgot to manually downgrade after that month was over, you were charged more). As I noted at the time, this seemed more like a promotional stunt for Netflix and a way for a bunch of lawyers to make a ton of money.

So it's interesting to see that with yet another class action lawsuit being settled involving Netflix, there are similar concerns. A whole bunch of folks sent in variations on the fact that Netflix will be paying out $9 million with a grand total of none of it going to the class (unless you happened to be one of the two named plaintiffs -- Jeff Milans and Peter Comstock -- who get to split $30,000). Most of the money is going to a charity. But somewhere around $2.25 million is going to the lawyers.

To be clear, I think the lawsuit itself is a bit silly anyway. It involves the fact that Netflix retained info on customers who quit. Big whoop. But whether or not you agree with the premise of the lawsuit, the end result seems even sillier: those supposedly "harmed" get nothing, but the lawyers walk away with over $2 million? It's this kind of thing that creates incentives for more such lawsuits driven by law firms in the hopes of cashing in.

Filed Under: class action, lawsuits, lawyers, settlements
Companies: netflix

Why Red Hat Is Wrong That It's Better To Just Pay Patent Trolls Sometimes

from the that's-why-you-get-more dept

Last year, people got reasonably upset when it came out that Red Hat had settled one of many patent lawsuits filed against it, this time from patent troll giant Acacia. People were upset both at the decision to settle and then to keep the terms secret. Red Hat, after all, has spoken out many times against software patents and patent trolls. Slashdot points us to the news that Red Hat's CEO has explained that sometimes it's just easier to pay up. It's clear that he really doesn't want to and thinks the whole practice is distasteful, but there are times when he recognizes it's just cheaper to pay up:

"When it's so little money, at some point, bluntly, it's better to settle than fight these things out."

He does say that they fight on bigger cases or cases they feel are especially ridiculous. But, in others, it's just cheaper and easier to settle. I certainly understand the reasoning. And I definitely understand the short-term cost-benefit analysis. If you can pay off the patent holder for less than it'll take to fight the case, even if you win, that seems like a good deal. Except... in the long run, this may be penny-wise and pound-foolish, because as you build up the reputation as a company who will fold as long as the settlement demands are under a certain level, then all you do is encourage more trolling behavior, leading to more new lawsuits with more patent holders demanding a handout.

Again, I can certainly understand the basic reasoning for settling, and can't really begrudge any company that decides to settle to avoid a lawsuit, but it is a little disappointing that this just perpetuates the problem.

Filed Under: patent trolls, patents, settlements
Companies: red hat

Apparently Twitter Will Be Allowed To Mislead Consumers In 20 Years (But Not Before)

from the odd-terms dept

Twitter recently settled a complaint from the FTC concerning some of its security practices. That story, by itself, isn't all that interesting: basically Twitter had some problems when it was growing, the FTC slapped them down, and the company is now promising to be more careful , going forward. Nothing too out of the ordinary. However, ChurchHatesTucker points out one odd aspect to the settlement:

"Under the terms of the settlement, Twitter will be barred for 20 years from misleading consumers about the extent to which it protects the security, privacy, and confidentiality of nonpublic consumer information, including the measures it takes to prevent unauthorized access to nonpublic information and honor the privacy choices made by consumers."

From that quote, it certainly sounds like Twitter will actually be allowed to mislead consumers about the extent to which it protects the security, privacy and confidentiality of nonpublic consumer information after those 20 years are up. I mean, why even put such a term on something like this?

In the meantime, it seems worth pointing out the contrast here, where the FTC (part of the Obama administration) is slapping down Twitter for revealing nonpublic consumer information... at the very same time that the very same administration has demanded all sorts of nonpublic consumer information about Twitter users. Mixed messages much?

Filed Under: mislead, settlements
Companies: ftc, twitter

Spying School District Pays Out $610,000 To Settle Lawsuit -- Mostly To The Lawyers

from the legal-fees dept

We've been following the case in suburban Philadelphia of the Lower Merion School District, which was sued by a student for spying on the student in his home with district issued laptops (the kid was disciplined for supposedly using drugs, with the evidence being a photo of him in his room at his laptop -- the kid claims he was just eating Mike & Ikes candy). While the district initially denied it was spying on students, later reports found 58,000 images were taken, including 469 of another student who also sued.

While the feds declined to bring criminal charges, it looks like the school district has now settled the outstanding lawsuits mainly by giving the lawyers a big chunk of money. In total, the school district paid out $610,000, with $425,000 going to the lawyers. The student who brought the first case will get $175,000, and the student in the second case will get $10,000 (the article mistakenly suggests two separate payments of $185,000, but I believe that's wrong). The district, in its announcement admits that, in total, this whole thing is costing about $1.2 million, which is actually being covered by insurance.

The situation is a bit tricky, because, in some sense, taxpayers are footing the bill for the district's ridiculous policy choices (even though insurance is covering the direct cost). I would imagine that this sort of thing will act as a reasonable deterrent to other school districts considering (or already using) similar technology.

Filed Under: lower merion school district, schools, settlements, spying

The Rise Of Mass Copyright Infringement Filing Shakedown Factories In The US

from the they're-everywhere dept

For years, we'd heard the stories of the mass infringement "pre-settlement" sending law firm operations in the UK, such as (for a time) Davenport Lyons and ACS:Law -- and we wondered why nothing like that had popped up in the US. Earlier this year, of course, up popped the US Copyright Group operation (really an off-shoot of DC-law firm Dunlap, Grubb and Weaver). Since then we've seen more and more such operations set up -- with many focused on the porn industry.

Ars Technica has a list of just a few of the law firms (and the silly names they've come up with) who have jumped into this game in the US. The more we see of this, the sooner it is that (as in the UK) backlash and hopefully legal sanctions will come as well. There's little indication that any of these attempts have anything to do with actually protecting copyright or preventing infringement. Instead, they appear to be using the court system as a way to scare people into paying lots of money. Yes, it's probably true that many of the people accused did infringe, but there is little effort made to ascertain the reality of the situation. Instead, the focus is on discovering who the people are so they can be hit with a "pre-settlement" offer.

Filed Under: copyright, pre-settlements, settlements

Red Hat Settles Patent Case With Acacia... But Won't Share The Details

from the too-bad dept

Of the software companies out there, Red Hat has been the most aggressive in fighting against software patents. It's stood up on principle, and earlier this year even won a lawsuit from one of Acacia's many, many shell companies (and it won in East Texas too, making it that much more impressive). However, Slashdot points us to the news that, in another lawsuit involving another Acacia shell company (this time, called Software Tree) it looks like Red Hat has settled -- and, unfortunately, it's keeping pretty quiet about what happened. I'm sure that's part of the terms that Acacia negotiated (patent hoarders never want the details of settlements released), but it's unfortunate, because it leaves everyone else in the dark, and lets Acacia continue to shake down others with this patent. The patent in question (6,163,776) covers "System and method for exchanging data and commands between an object oriented system and a relational system," because, you know, without patents, no one would have ever figured that out.

Filed Under: patents, settlements, software
Companies: acacia, red hat

Typosquatter Plays Innocent By Casting Microsoft As Big And Mean

from the pot-meet-the-kettle dept

Last month, Microsoft sued typosquatter Alf Temme for redirecting mistyped domains like "ho0tmail.com" and "hot5mail.com" to his own website, which sells ridiculously expensive exercise machines. Typosquatting has been going on since the early days of the internet, and the practice eventually resulted in the passage of the Anti-Cybersquatting Consumer Protection Act (ACPA), which essentially makes typosquatting illegal. That said, Temme is complaining that the $500,000 settlement offer that Microsoft has requested from him amounts to "extortion" in his eyes. Microsoft originally sued for $2.4 million, or about $100,000 in statutory damages for each of the 24 domains named.

Typosquatting seems to attract persistently slippery individuals. For example, even after typosquatter John Zuccharini served time and was fined for his typosquatting behavior in 2003, it was not long before he returned right back to his typosquatting behavior in 2007, earning him another $164k in fines.

Temme claims that Microsoft's $500,000 settlement offer is "in effect trying to do is put a small company of eight employees out of business." While the David & Goliath angle might play well, digging a little more deeply into the story casts a different light. Considering that Temme has registered around 1,000 domains that could be considered typosquatting, it's clear that he has made a habit of this deceptive practice. Furthermore, Temme has already lost $130,000 to Dell in a similar lawsuit. So, while Temme claims that he would happily turn over the domains in question, to do so would merely make typosquatting even more profitable than it already seems to be. Likening mistyped domains to prime real estate, Temme equates the practice to buying "some property next to Disneyland."

Though this case may have some slight similarities to the pre-settlement groups that have been set up to deal with copyright infringement, the difference is clear: in this case, unlike the copyright "criminals," not only is Temme in clear violation of typosquatting laws, he has made it an integral part of his business practice to do so. So, whereas the pre-settlement groups use a shotgun approach in an extortion-like shakedown, Microsoft's offer is specific to the Temme case only. Settling potential lawsuits, by themselves, is not a form of extortion. It's just when the potential viability of the actual lawsuits are suspect that questions of extortion-like actions begin.

That said, Temme must be selling a good number of $14,000 exercise machines if he considers these fines to be just a part of his cost of doing business.

Filed Under: lawsuits, settlements, typosquatting
Companies: microsoft