International Men Of Mystery: How Discredited German 'Anti-Piracy' Company May Secretly Be Behind Malibu Media's Copyright Trollery

from the well,-look-at-that dept

Things have been getting more interesting on the Malibu Media front lately. The company, which is responsible for 40% of all copyright cases, has certainly faced claims of abusive and seriously questionable practices. But some new information suggests it goes much further down the rabbit hole of questionableness. Like Righthaven and Prenda before it, new accusations are coming out about some highly questionable shell games to try to hide what's really going on.

In this case, it's come out that behind all of Malibu Media's shady tactics, the folks actually pulling the strings (or, at least, heavily involved) may be the German company Guardaley, or one of its many sneaky shell companies. If you've been following copyright trolls for a while, you may recognize Guardaley as the shady company involved (secretly) in some of the original copyright trollery in the US, which was slammed in court for highly questionable technology that was at the center of its attempts to "identify" people to go after in the shakedown scam known as copyright trolling.

Guardaley had been laying low for a while, but back in April, Sophisticated Jane Doe over at FightCopyrightTrolls turned up Guardaley's secret playbook, which was clearly not meant for public consumption. It is... quite a read. It highlights the various shell games and individuals involved -- and also notes how Guardaley can quickly churn out cookie cutter legal filings against the various individuals it "sues" (with the entire effort actually focused on getting people to pay them to go away). And, astoundingly, it basically admits that Guardaley will supply bogus "experts" to support the claims in court. From page 35 of the presentation: Okay, now jump back to January, in which one of the lawyers representing Malibu Media admitted that the "expert" company it uses, IPP (a Guardaley shell) worked "pursuant to an oral contingency fee." In other words, it was getting a cut of any money secured via these lawsuits and corresponding shakedowns. That's kind of a big deal: when your "expert witness" has a direct financial stake in the outcome, that means your expert witness is doing something very, very shady. No wonder Guardaley doesn't want the judges to question them too much.

For the past few months there had been some ongoing efforts to get various Malibu Media lawyers to reveal the details of their relationship with Guardaley/IPP and other related shells. Not surprisingly, Malibu Media lawyers are trying to block all of that. This finally resulted in an impressive filing from copyright troll fighter, lawyer Morgan Pietz, who accuses the company of champerty -- a scheme to "buy into" lawsuits, something that is at the very least frowned upon, but more frequently against the law. Furthermore, Pietz notes that Malibu Media should have been proactively disclosing Guardaley's interest in the cases, but has not -- instead highlighting how the company (actually, its lawyers) has been "fighting tooth and nail all attempts by defendants to inquire about these arrangements." He even calls Guardaley "the German computer guys."

Separately, the filing dismantles Malibu's bizarre attempt to avoid this whole issue by blaming it on some other guy in Florida.

Malibu concedes that it did [disclose this information] here, and counsel on the pleadings here in Maryland concludes that there could not possibly be any kind of breach of this duty because lead national counsel in Miami, not counsel here, negotiated the improper witness contingency agreement. Regardless of what local counsel here did or did not know, lead counsel in Miami, whose firm presumably authored the early discovery papers in the first instance, and who participated in the consolidated proceedings in this district before Judges Titus and Grimm, had a duty to make sure this fact was disclosed to the Courts here and across the country.

The filing then goes into significant detail about the whole mess, under the wonderful title:

International Men Of Mystery: Tobias Fieser, Michael Patzer, Daniel Macek, Patrick Achache, Guardaley & The Shell Companies, And The Software With A Name Nobody Seems To Know

The "software with a name nobody seems to know" involves constantly changing claims about what software is being used to identify people accused of infringement, along with the claims that this unnamed and ever-changing software is somehow infallible (despite Guardaley's tech being so discredited previously). In an amusing section, Pietz points out how quite clearly "fallible" the technology is:

In the letter Malibu submitted to Judge Titus and Judge Grim last year, they argued that IPP’s proprietary software was literally “infallible.” ... In the opposition to the instant motion, Malibu submits a declaration from Michael Patzer where he avers that “the PCAPs recorded the IP address 76.100.228 [sic] infringing Plaintiff’s copyrights.” That is incorrect. Mr. Patzer left out three digits in that IP address. This simply goes to show that no matter how “infallible” Malibu and Patzer think the software and corresponding proprietary system they designed may be, there is always room for human error, at either the input stage, or the output stage.

The filing highlights the similarities of these shell companies with the recent ruling against Prenda, and highlights increasing evidence of how the people above are really deeply involved in a bunch of shell games. It calls out evidence in a non-Malibu Media case, Elf-Man LLC v. Lamberson, which lays out more evidence of an incredible circle of shell companies. I won't repost it here, but it's worth reading, just to see some of the crazy chain of shell companies. This is not the whole chain of crazy, but just a snippet:

As the defendant’s own investigation revealed in Elf-Man, Crystal Bay Corporation, the company Macek (and Patzer?) supposedly “worked for” ... was a defunct South Dakota corporation, apparently incorporated in 2012 by a disbarred lawyer who, according to his website, “now specializes in creating ‘anonymous’ ‘shelf’ corporations.” .... The official address Crystal Bay Corporation registered with the South Dakota Secretary of State? It belongs to a mail forwarding company, and it is the same address given for the disbarred lawyer’s “Agent Services” company.... Same thing with the Stuttgart, Germany address given for Patzer and Macek: it corresponds to an office building in Stuttgart “that offers mail drop services and short term office rents, even by the hour.” ... The Elf-Man defendant also investigated the phone numbers given for Patzer and Macek. The regional code for Macek’s number corresponded to Karlsruhe, Germany. The regional code for Patzer was for a suburb of Karlsruhe....

The coup de grace from Elf-Man: when defense counsel there recently called the (Karlsruhe) phone number given for Macek in the initial disclosures in that case, the person on the other end of the line answered it “Guardaley.”

Boom. Also, there's the part in which one of the guys admits he works for one of these shell companies and then has to be lead by Malibu Media's lawyer into saying he didn't actually work for the company:

More importantly, the testimony Malibu complains Pietz omitted only further supports the argument that Guardaley = IPP = Excipio, and that Patzer, Fieser, and Macek are all part of the same organization. For starters, at the beginning of Patzer’s testimony, he first says “yes” when asked if he works at IPP Limited.... Malibu’s counsel then asks him a leading question, reminding him that “you don’t actually work for IPP, Limited. You said you work for a firm that provides these services to IPP, Limted, correct?” and Patzer confirms that.... However, throughout Patzer’s testimony, he constantly refers to “we” when it is clear he is referring to IPP. None of that suggests that Excipio is really a totally different company that should be credited as possibly more trustworthy than Guardaley; it suggests Patzer thinks of himself as working with Fieser at IPP.

And, of course, days after this was filed, the lawyer who had been representing the copyright holders in Elf-Man, Maureen VanderMay, suddenly filed a motion to withdraw as counsel, noting that "issues have arisen between Plaintiff's representative and counsel, the nature of which make it impossible for counsel to both continue with representation and comply with the governing rules of professional conduct." However, she refuses to detail those reasons, citing their "privileged and confidential nature," though says that if required to, she would like to do so under seal. It's not too difficult to put two and two together here, suggesting the likely issue is that VanderMay realized how much trouble everyone involved in this scheme may be in soon. And, anyone who witnessed both the Righthaven and Prenda debacles knows that random outside lawyers who help out are the first ones often thrown under the bus in these disputes.

There have been stories for quite some time suggesting Malibu Media was, in some ways, worse than Prenda. Now, it appears that it may have been Guardaley and its rotating crew of shell companies behind all of this all along -- something they'd mostly been able to keep quiet. However, it looks like the scheme may be starting to unravel. Now, we just need Pietz to put together one of his infamous org charts like he did with Prenda.

Filed Under: champerty, copyright trolls, daniel macek, elf-man, michael patzer, patrick achache, shell companies, tobias fieser
Companies: apmc, excipio, guardaley, ipp, malibu media

Amicus Brief Calls Into Question The Legality Of Righthaven's Entire Business Model

from the read-it-all dept

Marc Randazza was kind enough to send over the amicus brief his law firm filed on behalf of the Media Bloggers' Association in response to one of Righthaven's lawsuits. You should read the whole thing (it's embedded below). I'll repeat: you should read the whole thing. It rips apart Righthaven's entire strategy and shreds it to pieces, accusing the company of champerty among other things. Here's just a snippet:

If the Las Vegas Review-Journal (hereinafter, the "LVRJ") or its parent company, Stephens Media LLC (hereinafter, "Stephens Media"), were the plaintiffs in these cases, this argument would not apply. But Righthaven's exercise in champerty seeks to make an end-run around the rule of law limiting the right to sue for copyright infringement to creators and those legitimate enterprises that make creativity possible and protectable. Nobody can seriously believe that Righthaven, which publishes nothing anywhere, has acquired the full ownership of the articles it sues upon. The assignments it secures -- only after finding "infringed" articles to sue over -- contain mysterious (and heretofore unexamined) language about a "right of reversion" which, on frank consideration, demonstrates how transparently illegitimate these "assignments" are.

Phony "assignments" are not the only venal and manipulative aspects of the Righthaven scheme. By design, Righthaven sues mostly retirees who, terrified of losing their retirement savings, generally settle their cases quickly and without discovery. But this Court should not restrain its own duty to inquire into the underlying law and facts on which both Righthaven’s claims and Righthaven's coerced settlements are based when considering its decision on damages in this case. This Court should hold serious doubts about the propriety of Righthaven bringing these suits with rights obtained from a third party that has no stated stake in this litigation or related cases. Either the LVRJ and Stephens Media are "selling lawsuits," which is impermissible under Silvers, 402 F. 3d at 884-85, or Righthaven is simply a law firm in disguise, engaged in champerty, which is impermissible in Nevada, as it is almost everywhere legal ethics and fundamental justice are a concern of the law. Schwartz v. Eliades, 113 Nev. 586, 589 (Nev. 1997); Lum v. Stinnett, 87 Nev. 402, 408 (Nev. 1971). Without revealing exactly what exclusive rights Righthaven has acquired in the works, if acquiring any at all, Righthaven essentially buys the bare right to sue for copyright infringement -- which purchase is banned by copyright law -- and uses it to sue small website operators by the hundreds. Left unchallenged, Righthaven's practices create a secondary commodities market for copyrights, or exclusive subsidiary rights in copyrights, to be used only in suing others who may have valid defenses, but cannot afford to raise them -- or engage counsel whatsoever, as is the situation in this case. This is inimical to the purpose of the Copyright Act, which was intended to protect the intellectual investments of creators, rather than creating lawsuit mills that use registered copyrights -- only after their infringement was discovered -- as a source of income, rather than a shield against others' misappropriation. See Silvers, 402 F.3d at 886.

We've seen some of the defenses to Righthaven suits raise some of these issues, but never in such a detailed manner. And it's especially interesting in this case, where the filing comes as an amicus brief, rather than lawyers for the defendant. In fact the defendant in the case, Bill Hyatt, did not reply. As we've discussed in the past, normally when that happens, the court will make a default judgment -- basically giving the plaintiff everything requested. However, they don't have to and Randazza points out that Righthaven's claims reach far beyond reasonable. Among other things, it also challenges Righthaven's ridiculous standard demand that those sued hand over their entire domain name, noting that copyright law does not allow such a remedy.

There's also a very long and worthwhile section on why the demand for $150,000 is not just ridiculous, but goes against the law. I won't post that whole thing, but here's a snippet:

The Due Process clause of the U.S. Constitution has long been a source of limitation on all forms of damages awarded in judicial proceedings. Damages beyond those actually suffered by a plaintiff, awarded as a deterrent against similar unlawful acts in the future -- known as exemplary damages -- have been tightly limited by the courts under the Due Process clause. Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 42 (1992); State Farm Mut. Ins. Co. v. Campbell, 538 U.S. 408, 417 (2003). Because these exemplary damages may become detached from the harm actually caused to the plaintiff by defendant, these awards may fail to serve any legitimate purpose, and instead hold a "devastating potential for harm." Campbell, 538 U.S. at 417.

This due process protection is both substantive and procedural in nature. See Id. Courts analyze three figures in relation to any award of exemplary damages to determine whether any such award is grossly excessive:

1) The degree of reprehensibility of the defendant’s conduct;
2) The disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and
3) The difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in similar cases.

Id. at 418; Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 436 (2001); BMW of N. Am. v. Gore, 517 U.S. 559, 575 (1996). Though the Court has not yet awarded any damages in this case, the third factor, weighing the difference between awarded damages in this case and the penalties authorized in similar cases, should consider the damages sought by Righthaven in comparison to those authorized in other cases.

This analysis and scrutiny applies to the Copyright Act, just as it does to any federal law. Every act of Congress, including the enactment of the Copyright Act, is subject to due process limitations on account of the Fifth Amendment’s limits on Congress’ power. Nebbia v. N.Y., 291 U.S. 502, 510 (1934). These statutory damages allow by the Copyright Act serve the same purpose as punitive damages awarded by a jury (to punish and deter unlawful conduct) and therefore require the same level of constitutional scrutiny.

The argument here is quite interesting, since we're likely to see similar arguments made in the Jammie Thomas and Joel Tenenbaum appeals on the constitutionality of the damages awards.

Filed Under: business model, champerty, copyright, due process
Companies: righthaven