Arizona Legislators Approve Bill That Would Allow Government To Seize Assets From Protesters

from the police-state-groundwork dept

Building legislation on top of the political equivalent of an urban myth is never a good idea. Fold in something routinely abused by law enforcement and you've got a proposed bill whose short name should be "Shit Sandwich."

That's the (tentative) plan in Arizona, where the existential threat of "paid protesters" has resulted in a terrible bill that promises to use a handful of Constitutional amendments as a doormat. (via Raw Story)

SB1142 expands the state’s racketeering laws, now aimed at organized crime, to also include rioting. And it redefines what constitutes rioting to include actions that result in damage to the property of others.

Nothing good can come from the expansion of racketeering laws, which are already abused by government agencies and citizens alike. But it gets worse. A lot worse. It doesn't just apply to protesters who damage property. It applies to anyone possibly connected to a protest in which damage occurs, even if they don't induce or encourage the destruction. (Perhaps even if they speak out against violent acts, but still support the demonstration's premise.)

And, to top it all off, police officers would not only be authorized to arrest people engaged in First Amendment activity just because someone down the street broke a window, but also to enrich themselves in the process.

But the real heart of the legislation is what Democrats say is the guilt by association — and giving the government the right to criminally prosecute and seize the assets of everyone who planned a protest and everyone who participated. And what’s worse, said Sen. Steve Farley, D-Tucson, is that the person who may have broken a window, triggering the claim there was a riot, might actually not be a member of the group but someone from the other side.

Supporters of asset forfeiture always claim it's a great tool for defunding criminal ventures. I can only imagine the verbal gymnastics that will need to be deployed to justify taking cash, cars, whatever from protesters, especially when the state's existing laws already criminalize rioting but without the added "bonus" of depriving rioters of their cash, homes, cars, etc. Do the legislators actually believe protesters are being paid in small, unmarked bills and mid-priced sedans?

The "guilt by association" aspect allows law enforcement to apply its discretion, which is seldom a good thing. The moment anything is damaged, it's open season on protest attendees. In fact, it's open season on non-attendees as well, if cops can dredge up anything that appears to be evidence of protest planning. Acquiring a permit pre-demonstration is no longer an act of good faith. It's self-incriminating.

One supporter of this truly stupid legislation believes the state's existing riot laws don't work because… wait for it… the bail system exists.

Sen. Sylvia Allen, R-Snowflake, said the new criminal laws are necessary.

“I have been heartsick with what’s been going on in our country, what young people are being encouraged to do,’’ she said.

She agreed with Quezada that there already are laws that cover overt acts. But Allen said they don’t work.

“If they get thrown in jail, somebody pays to get them out,’’ she said. “There has to be something to deter them from that.’’

I don't often can't even, but... here we are. People have argued against the bail system because it's stacked against the poorest criminal suspects, but I've never heard the system portrayed as faulty because it works exactly the way it's intended to. And the new law wouldn't change anything this legislator is concerned about. Brand new criminal charges stemming from the stupid bill would still allow suspects to post bail. The only difference is they may not have the cash to do it or a car to drive home if they make bail. Maybe that's what Allen is referring to: extra layers of punitiveness because most current protests are targeting the senator's party -- which also happens to be the party in power at the moment.

This made it past a House Senate vote in Arizona, suggesting the state's craziness isn't confined to Maricopa County. It won't survive a Constitutional challenge if it somehow manages to stumble out the governor's desk without being vetoed.

Filed Under: arizona, asset forfeiture, civil asset forfeiture, first amendment, free speech, protests, racketeering, rico, riot, snowflake

Also A Bad Idea: Gawker Exploring Lawsuit Against Peter Thiel For Tortious Interference & Racketeering

from the not-a-good-move dept

There ought to just be a rule that if you're even threatening to sue someone for "tortious interference" or "racketeering" that you should recognize that your claims are probably bogus and you should probably take a deep breath and think again. I've been quite clear that I have serious problems with Peter Thiel's aggressive campaign to bankrupt Gawker by funding a variety of (mostly specious) lawsuits, but I don't think the answer is to hit back with a similarly ridiculous lawsuit. However, Forbes (warning: adblocker blockers in play) is reporting that Gawker's lawyers are exploring a potential lawsuit against Thiel for tortious interference and racketeering:

“The lawyers are exploring whether this could be a case of tortious interference, racketeering or other potential claims,” said the source.

The thing is, these are the kinds of charges that you throw in to a case when you're just really annoyed at what someone or some company did to you, and you don't have any actual laws you can show they broke. I do think there could be an argument for some sort of anti-SLAPP law that allows companies to go after those financing questionable lawsuits for legal fees of such lawsuits, but expanding that to racketeering just seems extreme (and, also, very unlikely to succeed -- as Ken White has pointed out repeatedly, judges hate civil racketeering claims, as they recognize that they're frequently bogus).

So I'm all for looking for reasonable ways to prevent billionaires from overloading small publications with bogus legal fees, but I don't think making questionable arguments around tortious interference and racketeering are a reasonable approach.

Filed Under: peter thiel, racketeering, slapp, tortious interference
Companies: gawker

Venezuela Sues US Website Owners For 'Racketeering' And 'Cyberterrorism' To Try To Shut Them Up About Exchange Rates

from the oppressive-government-in-line-for-some-First-Amendment-education dept

Cyrus Farivar is reporting that the government of Venezuela has decided the best way to keep its citizens from learning more about its collapsing economy is to sue the US-based operators of a currency exchange information website… in a US federal court.

The US-based website that publishes a daily unofficial exchange rate between American dollars and Venezuelan bolivares has recently filed a vigorous defense in a strange international lawsuit. The site, DolarToday, was sued in October 2015 by the Central Bank of Venezuela (CBV) in federal court in Delaware, where the site is based.

In its bizarre and bombastic civil complaint, the US-based lawyer for the CBV argued that the three Venezuelan-American men who run the site are engaged in "cyber-terrorism" designed to create "the false impression that the Central Bank and the Republic are incapable of managing Venezuela’s economy."

When corrupt and censorious governments engage in litigation, "bizarre" and "bombastic" are a given. It isn't exactly deposed Panamanian dictator Manuel Noriega suing Activision from his jail cell, but it's close. The opening paragraph of the complaint takes a purple swing for the prose fences.

How far will some go to enrich themselves (and their friends) and to regain the political power they crave to enrich themselves further? Would they go so far as to hurt their own countrymen by making their already challenging lives even harder? Defendants would. And they have.

What follows is revisionist history, a rose-tinted view of Venezuela's future prospects as a viable nation state and lots of accusations with little evidence to back them up.

The Venezuelan government claims the real reason the website publishes exchange rates (that the government itself won't allow anyone to publish) is not to inform Venezuelan citizens of the decreasing worth of their cash, but to overthrow the government. Or get rich trying.

Defendants are Venezuelan exiles living in the United States who virulently oppose the Republic’s elected leaders, but not out of concern for their countrymen. To the contrary, Defendants seek only to grab riches and power for themselves and their friends, willingly increasing the hardships of ordinary Venezuelans in the process. And in a ruthless exercise of realpolitik, Defendants seek to trick the Venezuelan populace that elected the Republic’s current government, hoping that voters will turn on their leaders, and blame them for the harm caused by Defendants.

Like many baseless lawsuits filed by censorious entities, the filing claims there's a RICO violation in play here. Oh, and Lanham Act violations. Also: cyber-terrorism.

In taking these steps, Defendants conspired to use a form of cyber-terrorism to wreak, and in fact they have wreaked, economic and reputational harm on the Central Bank by impeding its ability to manage the Republic’s economy and foreign exchange system. Among other things, Defendants’ actions are:

• Exacerbating inflationary pressures that diminish the purchasing power of the Venezuelan people and the Central Bank;
• Diminishing the value of the Central Bank’s seigniorage for the new currency it prints (or the coins it mints) or that it newly puts into circulation;
• Depriving the Central Bank of the higher real returns that it would otherwise receive on monies it lends to other financial institutions and entities;
• Causing trade to be withheld from the Central Bank, as capital that it would otherwise retain or attract instead leaves, with investors seeking returns from other world economies; and
• Creating the false impression that the Central Bank and the Republic are incapable of managing Venezuela’s economy.

The operation of DolarToday is rather simple, at least in terms of establishing an exchange rate. (The constant creation of mirror sites to circumvent government censorship is a bit more complex.) An interview cited by the government's filing indicates the site operators call up trading houses and ask for the current exchange rate without disclosing who they are or which site they work for. This precaution serves two purposes: to "prevent speculation" and to protect the owners of the site, because the Venezuelan government considers publishing anything but the "official" exchange rate to be criminal activity.

Because of this censorious activity, the DolarToday has become a trusted source for credible exchange rates, much to the government's litigious chagrin.

The Central Bank is informed and believes and therefore alleges that the DT Rate has been the most widely read and followed exchange rate reference in Venezuela since 2013. News outlets – including respected ones such as CNN, CNBC, Reuters, and the well-known blog Venezuela Live Economic – have embraced the DT Rate as the authoritative “parallel” or “black market” exchange rate in Venezuela.

The large number of Venezuelan daily visitors to the DT Site, users of the DT App and DT Twitter followers demonstrates that many Venezuelans have likewise been led to believe that the DT Rate represents the “true” dollar-to-bolívar exchange rate. Indeed, the Central Bank is informed and believes that at least one million people – mostly in Venezuela – visit the DT Site (or one of its “mirror” sites) daily, making it one of the most visited websites in Venezuela.

The Central Bank claims DT's owners have distorted the exchange rate on purpose to engage in currency speculation. And yet, other sources appear to agree that Venezuela is suffering from triple-digit inflation. The government could dispel these "rumors," but it has never offered anything substantive to counter claims made by several news sites.

To the consternation of economists and anger of political opponents of President Nicolas Maduro's government, the Central Bank has released no price data this year after inflation hit 68.5 percent in 2014, the highest in the world.

El Nacional cited the source as saying the annual rate could rise even further than the 180 percent range in 2015, given anticipated fourth-quarter price pressures.

If correct, the 16.9 percent inflation figure for September is the second-highest monthly rate in Venezuelan history, according to Central Bank data.

[...]

Central Bank officials said they could not confirm the figures reported in El Nacional. Nor did they know when official data would be given.

Most economists are predicting Venezuela's inflation will be in three figures this year.

The Central Bank claims this is all the result of DolarToday's deliberate misrepresentation of the true exchange rate. The site owners' legal reps disagree with all of the government's assertions.

Facing a national economic crisis largely of its own creation, the Revolutionary Government has censored the press and online media from publishing "negative" information about the Venezuelan economy, under the pretext that it is protecting the Venezuelan people from the damaging effects that negativity has on the nation’s economy. To be sure, the only thing the Revolutionary Government is protecting is its own slippery grip on power. The Complaint is just another "weapon" in the Revolutionary Government’s arsenal of censorship against DT, whose only "crime" has been to facilitate access to information to the general public. But, the Revolutionary Government clearly failed to calibrate its "weapon" before it fired it. Premised on implausible legal theories, the Complaint fails to satisfy even the basic jurisdictional and pleading requirements. For all of the reasons described above, the Court should enter an Order dismissing the Complaint with prejudice, and awarding Defendants such other relief as the Court deems just and proper.

The defendants also point out that it's rather rich for an oppressive regime to avail itself of the benefits of an open court system simply to further its censorious aims.

[T]he Revolutionary Government has failed to silence DT, in large part, because DT operates in the United States where it may exercise its rights to freedom of speech and freedom of the press without reprisal. Put in the proper context, the Complaint is the latest salvo in the Revolutionary Government’s “war” of censorship and harassment of the press and media in Venezuela. Apparently, the Revolutionary Government believes that it will succeed in silencing DT by bringing the “war” to its doorstep. But, just like its previous efforts, the Revolutionary Government’s attempt to silence DT by filing this action in the United States must fail.

Almost ironically, the Revolutionary Government has availed itself of the open and “equal access” to courts afforded to litigants in the United States and filed a Complaint that contains legally deficient claims.

The response also points out that the Central Bank has no standing to pursue any of the claims, thanks to its willingness to conflate itself with the government as a whole as well as the Venezuelan public. Specific injuries must be claimed and limited to specific claimants, not just generally alleged and applied haphazardly to the nation of Venezuela, in whole or in part.

The alleged “injury” underlying all of Plaintiff’s claims is the purported “acceleration” or “exacerbation” of price inflation in Venezuela. However, “price inflation” in a nation’s economy is not an injury sufficiently “particularized” to the Central Bank, but rather, a generalized harm allegedly visited upon an entire nation’s economy and its people. This is manifest on the face of the Complaint which uses the terms “Central Bank” and “Venezuelan people” either conjunctively or interchangeably to describe the alleged “victims” of the “price inflation” allegedly caused by Defendants. Where, as in this case, a plaintiff asserts a “‘generalized’” harm that is “shared in substantially equal measure by all or a large class of citizens,” it will not have standing.

[...]

[N]owhere in the Complaint does it affirmatively plead any facts to support that conclusion, including whether its seignoriage has, in fact, been diminished, and, if it has, the value of any such diminution. Similarly, Plaintiff fails to plead any facts to support its assertions that Defendants’ conduct “robs” the Central Bank of lending or trade income, or the loss of “capital that it would otherwise retain . . . [to] other world economies.” Id. In short, Plaintiff’s alleged injuries are neither “concrete” nor “actual or imminent.” Plaintiff asserts broad, ambiguous, and wholly unsupported theories about the “economic and reputational” harm Defendants have allegedly caused, but nowhere in the Complaint does it affirmatively plead any facts to “nudge” those theories, in the parlance of Iqbal, “from conceivable to plausible...”

I don't imagine this lawsuit will last long once a judge gets ahold of it. It's obviously an attempt by the Venezuelan government to control the narrative on its financial woes -- something it already does on the domestic front by forbidding anything but publication of the official rates and the use of three different exchange rates based on what the currency is being used to purchase. If nothing else, the First Amendment should have plenty to say in the defense of the accused website operators.

Filed Under: currency exchange, cyberterrorism, free speech, racketeering, rico, venezuela
Companies: dolar today

Rather Than Fix The CFAA, House Judiciary Committee Planning To Make It Worse... Way Worse

from the are-they-just-fucking-with-us? dept

So, you know all that talk about things like Aaron's Law and how Congress needs to fix the CFAA? Apparently, the House Judiciary Committee has decided to raise a giant middle finger to folks who are concerned about abuses of the CFAA. Over the weekend, they began circulating a "draft" of a "cyber-security" bill that is so bad that it almost feels like the Judiciary Committee is doing it on purpose as a dig at online activists who have fought back against things like SOPA, CISPA and the CFAA. Rather than fix the CFAA, it expands it. Rather than rein in the worst parts of the bill, it makes them worse. And, from what we've heard, the goal is to try to push this through quickly, with a big effort underway for a "cyberweek" in the middle of April that will force through a bunch of related bills. You can see the draft of the bill here (or embedded below. Let's go through some of the pieces.

Adds computer crimes as a form of racketeering

The bill adds to the current definition of "racketeering activity" so that it would now link back to the CFAA, such that if you are found to violate the CFAA as part of an activity that involves a variety of other crimes, you can now also be charged with racketeering. More specifically, if you look at that long list of related statutes in the definition to 18 USC 1961 (1), it will also include: "‘section 1030 (relating to fraud and related activity in connection with computers)." Basically, this just gives the DOJ yet another tool to use against "computer criminals" when they want to bring the hammer down on someone they don't like. Not only could you be charged with computer fraud, but now racketeering as well. Because, you know, all you hackers are just like the Mob.

Expanding the ways in which you could be guilty of the CFAA -- including making you just as guilty if you plan to "violate" the CFAA than if you actually did so

Section 103 of the proposed bill makes a bunch of "changes" to the CFAA, almost all of which expand the CFAA, rather than limit it. For example, they make a small change to subsection (b) in 18 USC 1030 (the CFAA) such that it will now read:

Whoever conspires to commit or attempts to commit an offense under subsection (a) of this section shall be punished as provided for the completed offense in subsection (c) of this section.

All they did was add the "for the completed offense," to that sentence. That may seem like a minor change at first, but it would now mean that they can claim that anyone who talked about doing something ("conspires to commit") that violates the CFAA shall now be punished the same as if they had "completed" the offense. And, considering just how broad the CFAA is, think about how ridiculous that might become. Now if you talk with others about the possibility of violating a terms of service -- say, talking to your 12 year old child about helping them sign up for Facebook even though the site requires you to be 13 -- you may have already committed a felony that can get you years in jail. That seems fair, right?

Ratchets up many of the punishments

They change around a bunch of the "penalties" that you can get for various CFAA infractions, shaking up a variety of things and basically raising the maximum sentences available for certain infractions.

A very, very minor adjustment to limit "exceeding authorized access."

This one is a very, very tiny step in the right direction, but just barely. Under the old CFAA, "accessing a computer without authorization" and "exceeding authorized access" were lumped together as a a form of breaking the law. The new bill keeps the basic terms of accessing a computer without authorization the same and just ever so slightly trims back the "crime" of exceeding authorized access. Now, to violate the law by "exceeding" authorized access, you'd have to get access to "information from any protected computer" (or financial institution or US gov't agency) and the "value" of that info would need to be over $5,000 (who determines that?) and the access had to have been "committed for purposes of obtaining sensitive or non-public information of an entity or another individual (including such information in possession of a third party), including medical records, wills, diaries, private correspondence, financial records, photographs of a sensitive or private nature, trade secrets, or sensitive or non-public commercial business information" and was committed "in furtherance of any criminal act."

While it's good to see them ever so slightly roll back the issue of "exceeding authorized access," it still seems broad enough that all sorts of activities that shouldn't be seen as criminal would easily get lumped in here by aggressive prosecutors. Rather than "streamlining" the bill and getting rid of the ridiculous "exceeds authorized access" trigger -- as folks like Orin Kerr have suggested -- this tends to just muddle matters even more.

Update: On second look, it turns out that this initial analysis was wrong. This part is worse too! More details here, but basically all those "and" statements are actually "or" which actually push back on how the courts have interpreted the CFAA... and make it worse

And... at the same time, they do something else to make "exceeding unauthorized access" worse. Which brings us to:

Expanding the definition of "exceeding authorized access" in a very dangerous way

That's because the new bill says that you can exceed authorized access: "even if the accesser may be entitled to obtain or alter the same information in the computer for other purposes." Yes, read that again. Even if you are allowed to obtain info via your authorization on your computer, they're now saying that if you use that information in a way that runs afoul of the info above, you can be found to have exceeded authorized access.

Make it easier for the federal government to seize and forfeit anything

We've seen how federal seizure and forfeiture laws are frequently abused to seize goods, which the government claims are used in the commission of a crime (even if they never charge anyone for the crime). And we've seen, with cases like the Dajaz1 case, how the government will use such tools to take and censor websites on no actual basis. And now the CFAA will make it even easier for the government to do such things. It amends the existing sections to basically expand what can be forfeited, because it's not like the government hasn't abused that one before...

The rest of the bill deals with two other things: first a section on "cybersecurity" which includes punishment for those damaging "critical infrastructure" computers, another section that tells the courts to figure out how secure their computers are, and finally a part that creates a "National Cyber Investigative Joint Task Force," to be led by the FBI, because they're an unbiased party.

The final part of the bill relates to "breach notifications." A number of states already have various laws in place that require companies and websites that have data breaches to inform impacted users. This creates a federal law that supersedes those state laws. You can read the details, but basically companies will have to let people (and other companies) know of such breaches within a short period of time -- unless there are law enforcement or national security reasons to delay such notification. It also requires companies to tell the FBI or Secret Service of certain kinds of breaches. If companies don't do this, they can be fined between $500,000 and $1 million -- but only by the DOJ (i.e., individuals or companies can't go after organizations for screwing this up).

Those last two sections are really somewhat unrelated to the rest of the CFAA parts. But the CFAA parts are troubling. Rather than fixing the law, they're expanding it so that computer "crimes" can be hit with racketeering charges, and expanding the general language and punishments for part of the bill. This is not a good thing. The fact that this is being passed around by the House Judiciary Committee suggests that it's likely to be backed by HJC chair Bob Goodlatte, which is unfortunate. You would have hoped that Goodlatte and others on the HJC would recognize that now is the time to fix the CFAA, not to make it worse.

Filed Under: bob goodlatte, cfaa, cybersecurity, data breach, house judiciary committee, punishment, racketeering

Class Action Racketeering Lawsuit Filed Against Copyright Trolling Porn Companies

from the tough-slog dept

The latest news in the world of copyright-trolling porn companies is that one of the people that the porn world tried to shake down with a trolling attempt has hit back with a racketeering lawsuit, which she's trying to turn into a class action. The woman, Jennifer Barker, received a call from someone claiming to work for a law firm (though, in the lawsuit, Barker says she actually works for a third party) demanding a "settlement" payment to avoid being named in one of the lawsuits in Florida (the new favorite for copyright trolls due to some oddities in the law). The caller, like many copyright-trolling porn attempts, played up the fact that it would be embarrassing to be named in a lawsuit for downloading porn. Barker claims she never downloaded the porn and has no clue what BitTorrent is, and -- quite reasonably -- felt that she was being extorted.

From the lawsuit:

Ms. Hansen demanded that Ms. Barker pay money to settle the lawsuit or she would be identified publicly as having downloaded pornography and would be subject to hundreds of thousands of dollars as a judgment if the suit went forward because there were multiple downloads. Numerous individuals on the Internet report receiving a phone call from the same telephone number as that provided by Ms. Hansen to Ms. Barker with a demand that they pay money to settle a lawsuit against them.

Ms. Barker refused to pay any money because she did not know what BitTorrent was and had never downloaded any pornography from the Internet. On information and belief, many other members of the class have paid sums of money in settlement with the pornography purveyors even though they had never downloaded any pornography from the Internet, and certainly had never unlawfully downloaded any pornography from the Internet.

Subsequently, Ms. Hansen and others associated with her called Ms. Barker's place of employment and left messages on the voicemail to which several of Ms. Barker's co-workers also had access and continued to contact Ms. Barker on her personal telephone. Class members have been subjected to the same or similar treatment.

This is hardly the first attempt to use racketeering/RICO laws to counter copyright shakedowns, but to date, most have not been very effective. There is the ongoing lawsuit by Dmitriy Shirokov against US Copyright Group and its parent company Dunlap, Grubb & Weaver, but that was a really fact-specific case, involving the fact that the copyright holder (Uwe Boll) had failed to register the copyright in question in the US in a timely manner, leading to some specific legal questions.

There were also similar attempts to bring a class action racketeering case against the RIAA for its own practice of suing end users for allegedly making works available on file sharing networks. Those lawsuits flopped pretty badly, though.

Again, the case seems to allege some pretty specific facts that potentially could distinguish it from those other ones in the past, though it seems like a pretty massive longshot. The filing focuses on the use of the telephone to seek the money, claiming that it was "wire transmission in a scheme or artifice to attempt to fraudulently obtain money from another" under the law. But, that's actually a pretty high bar to meet, and the porn companies can and will argue that they weren't trying to "fraudulently" obtain money, but legitimately do so. I'd be surprised if the courts allowed this one to go very far.

Filed Under: bittorrent, copyright troll, jennifer barker, porn, racketeering, shakedown

Megaupload Details Raise Significant Concerns About What DOJ Considers Evidence Of Criminal Behavior

from the bad-cases-and-bad-law dept

Yesterday I wrote up a first reaction to the Megaupload case. Having spent some more time going through the indictment in much greater detail, I have some more thoughts and concerns.

First, it's important to acknowledge that the founder of Megaupload, who goes by Kim Dotcom, has a long history of flaunting flouting the law in a variety of ways. That makes him quite unsympathetic in a court. On top of that, there are certain claims in the indictment that, if true, mean it's quite likely that he broke the law. Whether or not the violations amount to racketeering & conspiracy is beyond any analysis that we're going to be able to do here. I would say that I would not be at all surprised if he's found guilty.

Where my concerns come in is in some of the "evidence" that's used to add to the overall indictment. To be clear, in a case like this, the issue is the evidence as a whole, combined to show intent and a general pattern to actions. So the allegations in the indictment don't necessarily mean that any individual action is, by itself, illegal. But, I still worry that some of the specific actions used to paint this picture are (1) potentially taken out of context, (2) are presented in a way that likely misrepresents the actual situation and (3) could come back to haunt other online services who are providing perfectly legitimate services.

• For example, the indictment points out that Megaupload did not have a site search, by which users could find material. That's interesting, but it seems like an odd piece of information in making the case. Other copyright cases have specifically found that having a search engine is part of an inducement claim -- so there's an argument that the idea not to have a search engine wasn't so much "conspiracy," as it was an attempt to follow the guidance of the court and to stay legal. To use the lack of a feature, that previously was shown to be a problem, as evidence of a conspiracy is crazy. Damned if you do, damned if you don't.



• Separately, the indictment lists various feature choices as part of making its case. There is, for example, the fact that if certain files aren't downloaded in a certain amount of time, then they are deleted. The indictment presents this as evidence that the service is mainly for infringement, because it potentially precludes the idea that the site is used for long-term backup. Of course, that falsely assumes that long-term backup is the only legitimate use of a cyberlocker. But that might not be the case at all. The service could (and is) used to just distribute large files in a directed, short-term effort. If anything, the fact that files are deleted after they're done being shared highlights a key legal function of the site: it was used by people to exchange large files once or twice, since they're too big to share via email attachment.
  
  On top of that, other, legitimate, sites have similar policies. The popular image hosting site Imgur does the same thing: if people don't access an image for an extended period of time, Imgur may delete it. That's not because it's encouraging infringement, but because it knows that the service is being used for short-term distribution.



• There is also the question of paying certain uploaders. However, there does seem to be a bit of a stretch in assuming that because some uploaders get lots of downloads by posting infringing content, all such "paid" users must be putting up infringing works. There are plenty of viral videos that are quite popular not because of infringement. In fact, much of this seems to be based on the simple assumption that encouraging more usage means they must be encouraging infringement. It's entirely possible that Dotcom did encourage infringement, but it feels like there should be more actual evidence of that, rather than pasting together a bunch of claims that could be interpreted in legitimate ways. Paying users for popularity is not, and should not, be evidence of criminality, or even infringement.



• There is also the claim that, while the company did remove some works upon takedown notice, it merely removed one link to the work, but left up other links. The issue here, as noted elsewhere in the indictment, is that Megaupload has a system for de-duplication -- so that if multiple people uploaded the same file, it only kept one version, but made it available at a different link for each person. This is the same sort of thing that lots of legitimate sites do, including Dropbox. The question, then, is if you do something like that with a locker service, and keep a single file, accessible through multiple locker links, what do you do if you get a takedown? This is still somewhat of an open question -- and was one of the points raised (in a civil copyright infringement context, which is very different) in the EMI vs. MP3tunes case. In that case, the company was told that it did, in fact, have to delete the actual file. But that raises other questions. Let's present a hypothetical: what if infringer A and authorized distributor B both upload the same file. The system de-dupes and uses a single file for each to access. Now, the copyright holder discovers A's version, and issues a takedown. It will automatically take down B's authorized work as well -- even though that copy was not infringing. Or... what if someone uploads a copy, but for their own personal use to access remotely, but never shares the link? In that case, no infringement is occurring... but DOJ seems to claim that the site would have to delete the file anyway, or there may be criminal risk. That's crazy.



• The complaint argues that because Megaupload's "top 100" list does not actually list the top 100 downloads on the site, this is more evidence of conspiracy. The issue here is that the list apparently removes files that are likely infringing. But... again, in other cases (like the IsoHunt case) such lists were also seen as proof of inducement. So, again it's a damned if you do, damned if you don't situation. If Megaupload's list showed infringing works, then they'd be charged with inducement... but removing them from the list makes them guilty of conspiracy?



• In addition, the indictment shows that, despite the company not being a US company, it did set up a DMCA agent, a tool to make removing files easier, and did take down works on request. There are some reasonable questions about if it ignored some takedown messages (likely) and the fact that it put limits on how many takedowns could be done per day with its tool. Those certainly work against the company in terms of retaining any DMCA safe harbors. Similarly, there is some evidence that the owners of the site may have uploaded infringing files themselves -- which, again, has no DMCA protections.



• The indictment points out that Megaupload used its hashing system to maintain a list of known child porn and block those files from being re-uploaded. The problem here is that copyright is different than child porn. Child porn is a strict liability issue: it is always illegal. There are no extenuating circumstances. But copyrighted content is different. It could be authorized. It could be fair use. And that depends on the specific use, not the file. So using a hash system there doesn't make sense, whereas it can make sense for child porn.



• The indictment also lists all sorts of emails, some of which are more damaging than others, but some of which may be taken out of context. All of them seem to assume that Megaupload employees can easily tell, often just by file name, what's infringing and what's not. I think this is an assumption that many people who don't understand copyright law make. And while you can guess... it's not always so easy. The recording industry, for example, regularly uses cyberlockers as a legitimate way to distribute promo copies. How would Megaupload know if certain files were legit or not, without further details? Yes, there's obvious infringement happening on the site, but will Megaupload always know which specific files are infringing?



• The indictment discusses demands from Universal Music that Megaupload would need to meet before UMG would even discuss a potential license. This included: "proactive fingerprint filtering to ensure that there is no infringing music content hosted on its service; proactive text filtering for pre-release titles that may not appear in fingerprint databases at an early stage; terminate the accounts of users that repeatedly infringe copyright; limit the number of possible downloads from each file; process right holder take down notices faster and more efficiently." While the DMCA does require action against repeat infringers, there are no legal requirements for the other issues. It's not clear why that should be evidence here. The fact that Megaupload didn't go above and beyond what the law requires shouldn't be seen as evidence of wrongdoing...



• Many of the emails discuss the fact that, in general, there are infringing works on the site. Yeah, but that's the same issue in the YouTube case and other cases. General knowledge that your tool is used for infringement is kind of meaningless, because you can't take works down if you don't know what's actually infringing.



• Money laundering claims are tricky and perhaps there was some "money laundering" going on here, but this indictment seems to include basic payments to Megaupload's hosting companies. Using payments to companies for hosting as evidence of money laundering seems pretty extreme, and suggests the possibility that this is just a "lumping in" situation, just to pile on more things that look bad, but aren't illegal by themselves.

Do these kinds of things work together to paint a picture of the company encouraging infringement? It's certainly possible that a court will add up a bunch of things like this and insist that's true. My fear is that, at least with some of these points, there are perfectly reasonable, non-infringing contexts for them. Then, what I worry about, is that in later cases, these types of things are used as "evidence" against companies and services that are legit. Even worse, there's a real worry that it creates chilling effects for lots of legitimate services who do things like de-duplification, or have legitimate backup services. If you're running Amazon S3 or Dropbox, do you now suddenly change how you do business, just to avoid the possibility of being accused of racketeering and criminal copyright infringement? That's worrisome.

But the bigger overall issue is why this action and why now? Companies in the US have filed civil cases against Megaupload in the US and the company was willing to come to the US and deal in US courts. Taking it up to a criminal "conspiracy" and racketeering charge seems like overkill, with tremendous collateral damage and chilling effects.

Filed Under: censorship, chilling effects, copyright, criminal copyright infringement, kim dotcom, racketeering, takedowns
Companies: megaupload

Righthaven Charged With Racketeering In Somewhat Epic Filing

from the novel-or-court-ruling dept

Karl points us to the news that the lawyers for one of the people sued by Righthaven, one Dana Eiser, have filed what can only be described as an absolutely epic answer and counterclaim lawsuit in the case in South Carolina, raising an astounding 56 (count 'em) defenses. The 119-page filing, which is embedded below is worth a read. As Karl points out, some of it is pretty far out there (with some parts being simply wrong), but it does make for entertaining reading, with some new and interesting claims about some of Righthaven's actions.

The point that's getting a lot of attention is the fact that the filing raises a racketeering charge against Righthaven under the RICO Act, claiming that using sham copyright transfers to shake people down for money is good, old-fashioned racketeering:

The extortion tactics and fraudulent conduct detailed in this Complaint each constitute a predicate act under RICO of (1) extortion, because such communication were threats intended to obtain money or property premised upon legal action that was a complete sham; and (2) fraud, because each mailing, phone call, and email furthered and executed the scheme to defraud Righthaven�s targets.

Righthaven has a knowing, willful, and specific intent to defraud its targets into entering into settlement agreements under the threat of fraudulent claims.

While I actually think there's a half decent argument here given Righthaven's actions, I just can't see any judge really buying the racketeering claim. Such claims have been made in the past against the RIAA for its mass lawsuits, and they didn't seem to go anywhere. I doubt that will change here, but it would be a pleasant surprise if they did.

Some other interesting tidbits from the filing:

• The filing highlights that all three of Righthaven's clients have admitted to the press that they decide who to sue, not Righthaven, again indicating that Righthaven is not the actual copyright holder here:

  Officers of each of these client entities have publicly stated that the media entities, not Righthaven, have the right to dictate who can and cannot be sued.
  
  In an article appearing in the Arkansas Democrat-Gazette, Stephens Media LLC�s General Counsel Mark Hinueber is quoted as saying �I can tell Righthaven not to sue somebody.� ...
  
  In the same article, WEHCO Media�s President Paul Smith is quoted as saying that if Righthaven discovers someone has violated WEHCO�s copyright, �it would be [WEHCO�s] decision whether or not to move forward with it[.]� ...
  
  Finally, in The New York Times, MediaNews Group�s Vice President Sara Glines stated that MediaNews Group �reviewed every violation and only approved actions against sites that carried advertising and were not charities.�

• In fact, Eiser takes the above quotes even further. Because this particular lawsuit was over MediaNews (Denver Post) content, and the site that the material was reposted to does not have advertising, she claims that there can be no lawsuit, since Glines (above) noted that they do not approve lawsuits against sites with no advertising. She uses this over and over again to claim a lack of standing to sue, promissory estoppel (i.e., the company promised not to use Righthaven to sue certain sites, but then did so anyway) and that Glines/MediaNews had issued a waiver of sorts. I don't see how this would carry much legal weight, but it is amusing in suggesting that MediaNews was less than truthful.
• There definitely are mistakes in the filing. Whoever wrote it, seems wholly unfamiliar with the nature of the "work for hire" doctrine, and confused about when it would apply.
• It claims that the main lawyer that Righthaven has used in many of its cases, Steve Ganim, is only on the Florida bar, and not allowed to practice law in Nevada, despite doing so. Eiser uses this to claim that Ganim and Righthaven are engaged in the unauthorized practice of law in Nevada. The filing also claims that when another defendant brought this information to light, "Righthaven attorney Shawn Mangano threatened a frivolous defamation action against Leon to shut him up." This would be amazing, if true.
• The filing claims that after a judge indicated support for the claim by the EFF and others that Righthaven is probably not open to winning lawyer's fees in its cases, because its lawyers are in-house, that it suddenly started hiring outside counsel for its lawsuits.
• As others have done, Eiser claims that the Denver Post's "sharing" tools give her an implied license to share the works.
• Eiser claims that "under 20" people saw the article posted to the website, raising questions about how much "damage" was actually done.

  Even if it could show that every single person who read the Rosen Letter on the Lowcountry 9/12 Project blog would have read it at The Denver Post instead, only then would any actual damages be shown, and they would be in the neighborhood of 40 cents.
  
  The South Carolina Supreme Court was offended by a case over five cents in 1918.
  
  Adjusting for inflation, five cents in 1918 was worth 72 cents in 2010, when the alleged damages were sustained.
  
  The approximately 40 cents of damages suffered (not even by Righthaven) is well within the rule of de minimis non curat lex.

• Eiser tries a First Amendment claim, saying that the use was for communicating ideas. This argument is one that I find interesting, but is clearly dead in the water. The courts have been pretty blind on First Amendment implications of copyright law, and they're certainly not going to jump in now on a case like this.
• Eiser tries to bring up the famed BMW v. Gore case to say that statutory infringement rates are illegal. This argument has been made before (in the Jammie Thomas and Joel Tenenbaum cases) without much luck. I can't see them suddenly getting a sympathetic ear here either.
• Eiser claims that Righthaven is technically a debt collector, and that it does not follow proper procedures and laws as a debt collector.
• We've discussed a few times how bizarre it is that Righthaven demands the publisher's domain name in each lawsuit it files, despite that not being a standard remedy (or a reasonable remedy) for copyright lawsuits at all. In this filing, Eiser suggests that this attempt to get others' domain names is effectively a form of illegal cybersquatting on those sites. That one also sounds like a big stretch, but an interesting idea.
• There's another big reach, claiming an antitrust (Sherman Act) violation in seeking to stomp out competitors through a fraudulent claim. Again, a nice try at a novel legal theory, but one unlikely to get very far.

All in all an entertaining read, but most of the really out there arguments are unlikely to get very far. However, if they did get some traction, Righthaven could be in even deeper trouble.

Filed Under: copyright, dana eiser, newspapers, racketeering
Companies: righthaven

NBC, BBC, Travel Channel: Not Guilty Of Racketeering For Asking People About Ideas For TV Shows

from the ownership-culture dept

When you go around preaching the concept that ideas can be "owned," you're just asking for a lawsuit when you then ask people to voluntarily submit their own ideas. At some point, the Travel Channel put up a website, asking viewers for ideas for new shows. I'm sort of surprised they would do this, seeing as they must have known what would happen next. Some guy submitted an idea that probably a dozen or more people submitted: do a reality show on a family driving around the country in an RV. And, when the Travel Channel, along with NBC and the BBC announced a show called "The Great American Road Trip," the guy Christopher Cardillo insisted it was his idea that was being taken unfairly. So he sued for both copyright infringement and racketeering.

Of course, you can't copyright ideas and Cardillo had never actually registered the copyright on the proposal itself anyway, so there was no copyright claim. And, now the court has also tossed out the ridiculous racketeering charge. The idea that setting up a website to solicit show ideas is akin racketeering seems to be a bigger stretch than even some of the most ridiculous lawsuits we see on a daily basis. While it's good that the court dismissed this, I'm amazed at a few things. First, on the copyright issue, the court notes "plaintiffs' failure to register their idea is fatal to their copyright claim." But, um, shouldn't the court know that you can't copyright an idea? While it gets the results right, the reasoning is weird.

Similarly, on the racketeering issue, the court spends a lot of time focusing on how there's no pattern of racketeering from a single incident, but it's not clear that there was even a single incident that is in any way illegal. The idea of doing a reality show of people traveling in RVs around the country is hardly unique, and the actual show is quite different than what Cardillo proposed anyway (his involved just his family driving from the US to South America -- the real show involves a bunch of families around the country involved in a contest).

Still, in the end, it's surprising that in a TV industry made up of folks who keep insisting that ideas can be "owned," that anyone would ever bother to put up a website asking for show ideas, and not expect to get sued.

Filed Under: ideas, racketeering, tv shows
Companies: bbc, nbc, travel channel

RIAA Sued For Racketeering Yet Again

from the we'll-see-how-this-works dept

A few people have filed lawsuits against the RIAA for racketeering in the past, though these charges have always been dismissed. In one such case, where the filed charges were dismissed over the summer, new claims were filed again charging the RIAA with racketeering for extortion, mail fraud and wire fraud in its ongoing efforts involving weakly supported threats against alleged file sharers demanding money to avoid being sued. The file-sharing defendants are trying to turn this into a class action lawsuit on behalf of everyone falsely accused by the RIAA. Given the (lack of) success of all previous racketeering lawsuits on this topic, I wouldn't get too optimistic of this one going anywhere just yet.

Filed Under: extortion, mail fraud, racketeering, riaa, wire fraud
Companies: riaa