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)?
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.
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.