Archive for October, 2011

One of the readers spotted an excellent paper written by a DC attorney Guity Deyhimy, “Copyright Infringement in Cyberspace – Decoding Strict Liability.” This paper was published in the Journal of the Bar Association of the District of Columbia in May 2011.

This paper questions the notion that a dynamic IP address coupled with a timestamp reliably identifies an alleged infringer. Ms. Deyhimy sees the same problems with the “business model” of copyright trolls as we discuss daily in this blog:

A great number of these Doe defendants would testify under oath that in fact they did not download and have no knowledge of the allegedly unlawful download using their respective dynamic IP addresses. The specter of substantial legal expenses in defense of a proceeding away from home, however, often militates towards an agreement to pay between $1,000 and $3,500, to purchase freedom from prosecution of the case against them.

While a few of this blog’s commenters admit that they indeed shared the files in question, the majority are saying something like: “What is going on here? I haven’t done anything and I’m getting these threatening letters. Can somebody help me?” The high collateral damage rate inherent in the current state of the Internet technology has always been the main concern of my postings (needless to say that I myself was caught in the crossfire and asked the same question). Most of my articles reiterate the same thought: the “business model” built on a questionable evidence and incentive to pay settlements regardless of the guilt is nauseous to say the least.

Thankfully, more and more attention is being paid to the sleazy methods utilized by a handful of greedy attorneys, who inflict tremendous harm on the reputation of legal profession. Given another big problem with copyright trolling — inequality of arms — it is especially nice to see that IT professionals and copyright attorneys loudly voice their concerns.

In my opinion, if you file a motion to quash, referencing this article can bolster your position.


John Steele

Nicholas Ranallo wrote a very interesting article about Steele Hansmeier and MCGIP for TorrentFreak on September 23. I linked to that article many times, but today I thought it would be helpful if I had this article republished here.

One of the reasons: John Steele, a brave pirate slayer, has honored this blog by his appearance in the comments to my recent article about his amicus brief in a VA troll case. Calling the commenters “wannabe lawyers,” he is having fun mocking our ways of fighting his (and other trolls’) scam. But what about taking the challenge of replying to accusations and concerns from a professional IP attorney?

By the way, I saw this article as an attachment to a motion in one of the troll cases and I hope the judge on that case will take his time to read it carefully.

Who is MCGIP (and Why are They Suing for Other People’s Movies)?

Nicholas Ranallo

Our story begins at the IDS tower in downtown Minneapolis, a city known for its wholesome values and that special kind of crazy known as “Minnesota Nice”. Number 900 in this tower is an exceptionally busy place these days as the home office of Media Copyright Group, LLC. MCG is the technology company behind Steele Hansmeier, PLLC, and the affidavit of this firm’s “technicians” have formed the basis of countless motions seeking the identity of IP address owners. It wasn’t the contents of the technician’s affidavit that interested me initially, however, it was his identity — Peter Hansmeier. Hansmeier? Hmm. That name rings a bell.

A look at the LLC filings available from the Minnesota Secretary of State reveals that Media Copyright Group is managed by Peter Hansmeier from #900 IDS tower. Notably, Paul Hansmeier (attorney for Steele Hansmeier) is the registered agent for the LLC. In a way, then, the sole evidence submitted in favor of many of Steele Hansmeier’s subpoenas is a statement by one brother that his other brother really should be able to get this information. But wait, it only gets worse from here.

Media Copyright Group proudly proclaims on their website¹:

“The cost of our services is paid out of the damages that are collected on your behalf. In other words, you do not pay us any money up front, and we are paid only out of the damages that are collected…”

Peter Hansmeier appears then to be more than merely a witness, and more than just a witness and the brother of an involved attorney, but appears to be an interested party to the lawsuit himself. As the website makes clear, the witness against a John Doe defendant does not get paid unless damages are collected. If this alarms you then it’s time to buckle up, because we’re about to take a trip way down the rabbit hole.

At the bottom of the hole is MCGIP, LLC, a Steele Hansmeier plaintiff that has filed multiple lawsuits against hundreds of Doe defendants in the last year. As another peek at Minnesota’s Secretary of State website reveals, MCGIP’s registered office address is #900 in the IDS, the same bustling office as Hansmeiers’ Media Copyright Group. It also lists its c/o as Alpha Law Firm, yet another business registered to #900 in the IDS tower. Notably, Paul Hansmeier’s LinkedIn Profile lists him as “Partner” at Alpha Law Firm. This tangled web has several potential implications and leaves me wondering if MCGIP is Steele Hansmeier’s baby Righthaven, with all of Righthaven’s fatal flaws.

1. “Exclusive Licenses” and Potentially Defective Standing

As noted above, MCGIP does not own the copyrights to the allegedly infringed works, instead acquiring an “exclusive license” for the rights at issue. MCGIP says in its complaints that the work is publicly available, but only to “bone fide purchasers.” In a way MCGIP is right — the works are publicly available. Unfortunately for MCGIP, the works aren’t being offered by MCGIP. MCGIP does not have any web address where its purportedly licensed works are available, nor does it have any website at all. Take the heartwarming coming-of-age tale, “Blacks on Blondes — Mariah Madysinn,” for example. This movie is the title at the center of MCGIP, LLC v. John Does 1–55 in the Northern District of California (3:11-cv-03312). This film is registered to Directech, Inc. d/b/a Dog Fart Productions (keepin’ it classy), but copyright.gov makes no mention of MCGIP, LLC. The video is presently available only from the original owner’s website. Another blush-worthy example is “Well Hung Amateurs 5,” the movie at issue in MCGIP v. John Does 1-18. This situation is even more interesting, and the “exclusive” license even more questionable. This film is registered to Xplor Media Group and again the registration info makes no mention of MCGIP. It appears that this movie was created in 2006, has been consistently distributed by multiple online outlets in the time since, and continues to be available through multiple (apparently) legitimate adult vendors including Spice and Homegrown Video. Copyright.gov notes that the registration date for this movie was in April, 2011, and MCGIP’s lawsuit based on its “exclusive” license alleges infringements in Mid-March of 2011. All of this made the Righthaven alarm bells start ringing in my head, and they haven’t stopped since.

For those who are unfamiliar, Righthaven appears to be doomed by its business model, which relied on purportedly exclusive licenses from the copyright owners that allowed Righthaven to do little more than sue. Sound familiar? In Righthaven’s case, suit after suit was dismissed for lack of standing. You see, copyright law only allows the owner or exclusive licensee of a protected right to bring suit to enforce that right. Righthaven repeatedly failed to convince courts that they had the requisite exclusivity, and the cases were dismissed. Righthaven was sunk. This doesn’t seem like an ideal business model to copycat, but it appears that Steele Hansmeier might have done just that.

The case for MCGIP’s standing doesn’t seem any stronger than Righthaven’s and the status of these purportedly exclusive licenses needs to be scrutinized. It seems unlikely that the actual owners of these movies gave MCGIP the exclusive right to distribute the works, especially in light of the fact that the actual owners and/or numerous internet distributors continue to offer the works themselves. This makes the license seem, by definition, non-exclusive. Some of MCGIP’s filings seem to indicate that they are only the exclusive licensee of the right to distribute the movie on BitTorrent. This would be astounding, if true, and highlights the highly illusory nature of these licenses. A large section of Steele Hansmeier’s filings are devoted to explaining how a single user only exchanges bits of information through BitTorrent, and the entire structure of the network makes an exclusive BitTorrent license ridiculous and potentially impossible. It is a disguised license to sue, and little more. And if MCGIP’s licenses don’t support standing, all of the MCGIP cases should be dismissed and all of their collection efforts should cease.

2. Potential Failure to Disclose Interested Parties

You might be asking yourself, “didn’t Righthaven get in trouble for its litigation practices?” Indeed they did. Specifically (and most pertinent to this discussion), Righthaven was fined $5,000 for failing to disclose that the actual owner of the copyrighted work was entitled to 50% of settlement proceeds from its suits. I have not seen the purported assignments from the owners to MCGIP, but I find it hard to believe that they would give their reproduction rights to a company that does not appear to be in the movie business (but is certainly in the lawsuit business), and failed to retain at least some interest in the outcome of the litigation. What incentive would they have to participate? The Northern District of California Local Rule 3-16 (b)(1) explicitly requires disclosure of:

any persons, associations of persons, firms, partnerships, corporations (including parent corporations), or other entities other than the parties themselves known by the party to have either: (i) a financial interest (of any kind) in the subject matter in controversy or in a party to the proceeding; or (ii) any other kind of interest that could be substantially affected by the outcome of the proceeding.

Beyond the interest of the actual copyright owner, Media Copyright Group is fairly explicit in its own claims to an interest in the lawsuit. If they collect their fees only out of damages (as the website claims), aren’t they by definition a firm with a financial interest in the litigation? Peter Hansmeier’s sworn declarations (which are publicly available from a number of sources online) and the MCG website lead me to believe that they are heavily involved in the Steele Hansmeier suits, yet to my knowledge this interest has never been disclosed in any of Steele Hansmeier’s filings.

The Takeaway

MCGIP has received little to no discussion in the ongoing debate about mass copyright practices. This needs to change. Their entire business model seems to be built on shifting sands, and I’m not sure if anyone has brought this to a court’s attention. Steele Hansmeier has declined to comment on this article.

If you are a defendant, make sure that your attorney is following up on all of the potential angles for your defense. If you don’t have an attorney and you or your case is in California, call me, or visit my website. If you are a defense attorney or anyone else with something to add to this discussion, I’d love to hear from you too. In the words of former Supreme Court Justice Louis Brandeis, sunlight is the best disinfectant, and I’m happy to add a bit of light to this debate. This article now qualifies as attorney advertising.


¹[SJD] As of today (10/29/11), the MCGIP website’s is not available: “Forbidden: You don’t have permission to access this server.” I suspect that the initial publication of this article in TorrentFreak is the reason.


Timothy V. Anderson

Following judge Gibney’s order, another Virginia judge, Tommy E. Miller trashed a similar mass p2p porn lawsuit by a Virginia troll, Timothy V. Anderson (the same attorney who undersigned Steele Hansmeier’s amicus brief — a desperate attempt to prevent copyright trolling “business model” from falling apart). The judge was not convinced by the trolls’ “swarm theory” that was employed to justify improper joinder of multiple Does and ordered to sever all but one Doe from the case.

Judge Miller did not go as far as judge Gibney did: he did not label this case as frivolous, but there is an interesting paragraph in the order:

Further, Timothy Anderson, Esq., attorney for Plaintiffs, is ORDERED, within 5 days of the entry of this Order, to advise the Court as to whether he is associated with John Steele, Esq. in any way in this case.

The reason for that is a letter to Court, filed by an anonymous Doe, about a threatening call from John Steele himself:

On October 13, 2011, another anonymous Doe Defendant (“Doe Defendant X”) filed a letter under seal with the Court. Letter, ECF No. 16. In this letter, Doe Defendant X stated that he had been contacted by John Steele, Esq. regarding this matter. During the phone call, Mr. Steele offered Anonymous the ‘opportunity’ to settle for $3,400 by October 18th. Mr. Steele informed Doe Defendant X that Doe Defendant X would be named as a defendant in the case should this settlement offer be rejected.

This paragraph’s footnote refers to Steele, and this reference is far from being flattering:

John Steele, Esq., is an Illinois-based attorney, who has represented numerous other adult entertainment producers in cases now, or recently pending in the Northern and Southern Districts of Illinois. See VPR Internationale v. Does 1-1017, No. 11-2068, 2011 U.S. Dist. LEXIS 64656, at *6 n. 1 (C.D. Ill. Apr. 29, 2011). District judges have begun recognizing Steele’s representation of these companies against multiple Doe Defendants, named without sufficient evidence as to their involvement, as “effort[s] to shoot first and identify his targets later.” Mem. Order, Boy Racer, Inc. v. Does 1-22, No. 11-C-2984 (C.D. Ill. May 5, 2011).

So, it seems like a mere association with John Steele is poisonous for any local attorney, and this is not my thinking, but judges’. Reputation is something that is built over years of hard work, but it can be destroyed in no time. Having switched from divorce law to ethically questionable mass p2p litigation, Steele destroyed his reputation pretty quickly. However, he still managed to collect some cash from uninformed defendants during a short period of time — until judges all over the US have finally learned about him and his scam.

Thanks to “yes im a doe” for the great news.

Update

Mr. Anderson has replied to judge Miller’s order and disobeyed judge’s order:

Further, the Court ordered Plaintiff’s counsel to disclose his association with attorney John L. Steele, Esq. Plaintiff has carefully reviewed the Court’s Order and respectfully believes that it is inconsistent with the spirit and letter of the Federal Rules.

Then he even tried to defend Steele and attack judge Shadur:

The Court’s views on Mr. Steele—and by extension, Plaintiff—have obviously been impacted by the sealed pleadings of putative infringers who have been impliedly granted the right to proceed pseudonymously. In its order, the Court heavily criticizes Mr. Steele, who has never even appeared before the Court.

…and what’s most egregious, he accused the anonymous filer of lying:

…Based on the Court’s discussion, the sealed pleadings discussed attorney John Steele, Esq. According to the Court, an anonymous filer claimed that he was called by Mr. Steele regarding this action, that Mr. Steele conveyed an offer of settlement to the anonymous filer and that Mr. Steele informed the anonymous filer that he would be named as a defendant in the case should the settlement offer be rejected.

Plaintiff is confident that the sealed pleading contains false representations. Contrary to “Doe Defendant X’s” representations, Mr. Steele has not personally “cold called” Virginia-based infringers in this action.

I have no slightest doubt that it was indeed Steele who called the anonymous filer. How wonderful it would be if the guy had recorded the conversation… But scumbags know when it is safe to lie: no proof of the conversation exists, yet if they think they fool general public (and judges) this way, they grossly overestimate their IQs.

To finish on a good note, judge Miller denied Anderson’s Motion to Reconsider outright.

Update 2

I found the evidence of Timothy Anderson’s association with John Steele, presented by… John Steele himself:

John Steele of the Chicago law firm Steele Hansmeier is the chief lawyer filing these suits around the country.

He said he enlisted Virginia Beach attorney Timothy Anderson to file the two suits here on his behalf. Anderson did not respond to messages seeking comment.

Does it prove that Anderson’s lied in an official court document saying that Steele never called and blackmailed “Doe Defendant X”? I don’t know, but if I were a judge I would consider an investigation and sanctions for lying to the Court.

Recently I wrote about judge Gibney ordering a minor troll Wayne O’Bryan to show cause why his mass file-sharing lawsuits are not frivolous and as such, why he shouldn’t be sanctioned according to Rule 11(b).

The hearing on this order is set for October 24. If O’Bryan is indeed sanctioned, it will be a huge blow to the entire swarm of US copyright trolls. Knowing that, Steele Hansmeier, one of the major troll outfits that runs Righthaven-style fraud, has filed an amicus brief, trying to protect its puppet troll and the extortion-like “business model” in general: this is an unusual and, in my opinion, quite a desperate act, showing the state of panic among trolls.

Prior to that, Wayne O’Bryan filed a response in a hurry, which is full of tactical mistakes and insults to the court. I don’t want to go over his filings now because I want to get the news out ASAP.

Seems like the P2P Armageddon is emerging in Virginia and I hope for big players (EFF) from the defendants’ side to intervene.

Thanks to DrownTheTrolls for alerting me about this development.

Updates

1. Thanks to Ernesto of TorrentFreak for spreading the news and linking to my post.

2. Although calling this case “Armageddon” was probably an overstatement, the battle is raging on and it is not boring: a very interesting document has been filed at the same date as Steele’s amicus.

Twitter thinks that I’m similar to Aaron Kotzker. I would prefer to be similar to Al Capone, the latter at least honestly admitted that he was an extortionist; and he did not whine about the creative jobs being lost because of “bootleggers”.

I’m never tired of repeating over and over again that talking to plaintiff’s attorney (a copyright troll) directly, not through your own lawyer, is not only a questionable idea, but just a plain stupid idea. Reading numerous comments on TorrentFreak, ArsTechnica, Techdirt and other discussion boards, I sometimes see someone bragging: “If I received a call from a troll, I would tell him…” Wrong! You don’t want to tell him anything. Just hang up. Ignore emails and scary ransom letters¹.

TAC has pointed to a very-very sad story: a guy from one of the mass Liberty Media Holdings lawsuits received a call from an attorney notifying him that his IP address was recorded in connection with sharing a copyrighted material on BitTorrent, demanding money and asking questions. Instead of hanging up, this guy did the worst thing possible: he answered the questions and admitted that he downloaded that damned movie! He explained that he did not know that it was illegal, probably thinking that a reasonable copyright holder who cares about its business would say something like “ok, you are a good guy, and we appreciate the interest in our studio products, what you did was illegal, please stop doing that and here is the URL where you can buy and enjoy our products legally”. Note, however, that here we are not talking about copyright holders who are interested in retaining fans and promoting their products. Instead, we are talking about scum of the Earth, disgraced attorneys who can’t think about anything but money right now with as little investment as possible. Ruining someone’s life for a $40 movie is something that these vampires wouldn’t hesitate to do if it could possibly bring them a couple of dollars.

So what happened next? As a result of this phone conversation, our former Doe, now a named defendant, got himself an individual lawsuit, in which the trolls are accusing him of willful infringement (up to $150,000 “damages” sought – the complaint is embedded below).

13. When counsel for Plaintiff contacted Fraga regarding AE3 Lawsuit, and after counsel advised Fraga to seek legal representation, Fraga admitted to using BitTorrent to download and share the Motion Picture. Fraga took the position that the unlicensed copying and distribution of the Motion Picture over a BitTorrent file sharing network was somehow not illegal.

14. Fraga, who was Doe 19, has been dismissed from the AE3 Litigation in lieu of the present proceeding. Given Fraga’s admissions, Plaintiff has opted to pursue its cause of action against him individually.

If not for this confession, there would be no way trolls could prove the tort; they just don’t possess any court-grade evidence. Bluffing works in Poker, bluffing worked here.

So, do you still think that talking to a random lawyer on the phone and answering his questions is a good idea? If you do, please see your physician as soon as possible.

The trolls involved in this assault:

Marco Randazza, the most hypocritical troll as of today: one of his hands defends Righthaven victims, the other wanders in similarly abused citizens’ pockets.

 

Aaron Silverstein, a thin-skinned troll, whose feelings were hurt when I included him in my copyright troll list on Twitter.
 

Note that the troll attorneys think that

The conduct of Fraga is causing and will continue to cause Plaintiff great and irreparable injury.

This is not only laughable, but the direct opposite of the truth: it’s not Fraga, it’s you, trolls, who cause irreparable injury to your client’s business by methodically destroying its reputation.


¹Of course don’t ignore summons if you are named in a lawsuit.

IO Group v. Does 1-244 case, which I have been a part of, is effectively over. Today federal judge William Alsup ruled in plaintiff’s favor and entered the final default judgment against the two remaining defendants, Mariusz Pralat and Malgorzata Frazyk. Defendants were ordered to pay, jointly and severally¹, $20,000 to plaintiff.

This is not the first pyrrhic victory of this kind. Motions for default judgment were granted in this type of cases previously. Why “pyrrhic”? Firstly, it is not a judgment based on merits, but rather a technical decision. As stated in the order,

The fact that defendants refuse to participate in the judicial process renders a decision on the merits virtually impossible

Secondly, good luck to plaintiff collecting the abovementioned sum from the two who live in Wisconsin and Illinois. Maybe Sperlein will negotiate a nominal amount to be paid: his buddy troll Marc Randazza loves to brag about one particular default judgment, but conceals the fact that the actual payment he is receiving in installments is lower by orders of magnitude than the one awarded.


Federal judge
William Alsup

Though judge Alsup’s decision did not surprise me, I was disappointed by his shortsightedness and formalism. A judge of his rank should be capable of seeing the forest for the trees. He had an opportunity to crash the shakedown scheme in a way judge Gibney did, but decided to close his eyes on the bigger picture and concentrate on technicalities. Misled by Sperlein’s twisted assertions, he made numerous questionable statements in his ruling, especially while applying Eitel factors. I may go over each point of his analysis later, but for now I want to repeat: it was not the judgment based on merits, because no sane judge could possibly admit the “evidence” provided by a sleazy German company as a proof of wrongdoing.

Update: As I learned later, judge Alsup’s reputation is not that high among lawyers and litigants: read what they think about him.

If those two defendants had indeed received the summons and then deliberately did not answer to the complaint, I must admit that they brought this misery on themselves. I have been repeating over and over again that while ignoring ransom letters from a troll is the only right thing to do, not responding to official summons is plain stupid. Even if that’s the case, I still feel sympathy for these two: while reduced 3 times, the punishment is still grossly disproportionate.

Also, I’m not convinced that the two defendants have indeed received the papers. I have my reasons for this doubt, and I will elaborate on them in a separate post later.

I’m worried that this judgment can potentially prompt Sperlein’s return to copyright trolling arena: he has just obtained a BFG-9000 of fear that can be effectively used against poor students and closeted gays in order to extort settlements from them, though the likelihood of his return is rather low: Sperlein is obviously more clever than other trolls, and I don’t believe that he is blind and does not to see the growing opposition among victims, judges and the public in general. I was virtually alone when I confronted him half a year ago, now I have many good people on my side, including experienced and talented attorneys.


¹Under joint and several liability or all sums, a claimant may pursue an obligation against any one party as if they were jointly liable and it becomes the responsibility of the defendants to sort out their respective proportions of liability and payment. This means that if the claimant pursues one defendant and receives payment, that defendant must then pursue the other obligors for a contribution to their share of the liability.


Federal judge
John A. Gibney

Noticeably, I’ve been busy over the last couple of weeks and did not cover many significant events in the p2p litigation world. Fortunately, other people were on top of that. DieTrollDie’s blog has covered new victories of common sense diligently, and big thanks to the author for that. In addition, he was active on my and his blog’s discussion boards answering questions and comforting victims, which is invaluable. We need more people to help bring copyright trolling plague down. I’m convinced that we together are already making a difference by bringing light of truth under the bridge, where trolls dwell and make their cowardly assaults on passers-by.

 
 

It’s worth noting that all the recent events were positive: subpoenas to quash granted, cases dismissed, etc. Half a year ago the news were mixed, but the times have changed, and the critical mass of judges now clearly see the predatory and fraudulent nature of mass p2p lawsuits.


Wayne O’Bryan

Yesterday federal judge John A. Gibney severed all defendants but one (a typical response to improper joinder) in 3 cases filed in the Eastern District of Virginia by a copyright troll Wayne O’Bryan.

  • 3:11-cv-00469-JAG K-Beech, Inc. v. John Does 1-85
  • 3:11-cv-00531-JAG Patrick Collins, Inc. v. John Does 1-58
  • 3:11-cv-00532-JAG Raw Films, Ltd. v. John Does 1-32

This kind of dismissal is not unusual nowadays, but the judge moved way further, beyond my humble hopes: he suggested that this type of lawsuit is frivolous in nature and directed the troll to show cause why his actions don’t violate Rule 11(b):

This course of conduct indicates that the plaintiffs have used the offices of the Court as an inexpensive means to gain the Doe defendants’ personal information and coerce payment from them. The plaintiffs seemingly have no interest in actually litigating the cases, but rather simply have used the Court and its subpoena powers to obtain sufficient information to shake down the John Does. Whenever the suggestion of a ruling on the merits of the claims appears on the horizon, the plaintiffs drop the John Doe threatening to litigate the matter in order to avoid the actual cost of litigation and an actual decision on the merits.

The plaintiffs’ conduct in these cases indicates an improper purpose for the suits. In addition, the joinder of unrelated defendants does not seem to be warranted by existing law or a non-frivolous extension of existing law.

Pursuant to Rule 11(c)(3), the Court, therefore, will direct the plaintiff and its counsel to show cause why the conduct specifically described in this Memorandum Order has not violated Rule 11(b). See Fed. R. Civ. P. 11(c)(3); Fed. R. Civ. P. 11(b).

When I first became aware of these lawsuits, one of the first thoughts I had was about the frivolous nature of the lawsuit that I was involved in, but at that time I thought that it was too daring to bring up this point in my filings. I’m glad to see that my instincts were correct.

Update

12/14/11

The battle is raging on. A total of 3 attorneys appeared on the case begging the judge not to sanction O’Bryan. That’s funny: one of their main arguments is that everything Does wrote in their motions is “hearsay”. If Internet contains thousands of stories about Steele’s and other trolls’ extortion practices, this “hearsay” is more reliable than a sworn affidavit by any member of a troll’s gang.