Copyright trolls

New Matthew Sag’s paper is an essential milestone in the fight against copyright extortion

Yesterday Matthew Sag, a Law Professor at Loyola University Chicago School of Law and the Associate Director of the Institute for Consumer Antitrust Studies published his second copyright troll-related paper “Defense Against the Dark Arts of Copyright Trolling.” This paper was co-authored with Jake Haskell – a recent graduate of Loyola University Law School. The first prof. Sag’s work on this topic, “Copyright Trolling, An Empirical Study,” published by the Iowa Law Review in 2015, was mostly a statistical analysis of mass bittorent litigation in the US. Nonetheless, that paper was widely quoted by the defense bar and even judges.

The new work goes far beyond the indifferent observer’s position: strongly (by academic standards) condemning the copyright trolling phenomenon, prof. Sag analyses the cogs of the bittorent litigation machinery, enumerates the majority the Achilles’s Heels of the trolling business model, and gives some solid practical recommendations to defense attorneys. While seasoned Doe defenders won’t likely find a lot of new information, there is a myriad of otherwise competent IP lawyers who never wandered into the bittorent litigation corner of the legal landscape, and one of the paper’s main goals is to empower such attorneys with knowledge, so that they would help their clients efficiently and cheaply (thus, driving down the profitability of the legal shakedown):

[…] defendants may seek legal advice from attorneys who do not know enough about copyright litigation to realize how weak the plaintiff’s case is and who rightly conclude on a cost-benefit analysis that it would be cheaper to settle than to properly investigate the strength of the claim.

[…] our objective in this Article is to make it easier for lawyers without substantial experience in copyright law or a deep understanding of the Internet to be able to defend their clients against copyright trolls. In our view, lawyers should not charge large fees to settle weak allegations but instead should either charge low fees for quick settlements for actual infringers or reasonable fees to defend their non-infringing clients. […]

The other major goal is to provide a clear bigger picture to the US federal judges and magistrates. Because copyright trolling business model is largely based on sleazy attorneys taking advantage of unrepresented laypeople, many judges never had a chance to hear competent counterarguments and hence have been making their decisions based solely on trolls’ misinterpretations.

However, lawyers are not the only ones with a social and ethical responsibility to take the problem of copyright trolling seriously. District court judges have an inherent authority to control their own proceedings and significant discretion to supervise discovery and in areas such as attorney’s fees and statutory damages. We hope that judges will take steps to discourage the abusive use of civil litigation and find ways to manage John Doe copyright litigation in the interests of justice and consistent with the goals of copyright.

When we, anonymous bloggers, ring alarms – no matter how well evidenced – the impact on judiciary is limited. It doesn’t require an explanation why judges will listen to a law professor much more attentively. Therefore, I expect this paper to have a greater impact on the current legal situation than my six-year layperson’s advocacy.

Related

  • Matthew Sag: Prenda is gone, but copyright trolling continues

    It is satisfying to see justice finally catch up with Steele and Hansmeier, but anyone who thinks that this is the end of copyright trolling has not been paying attention. In fact, other than a brief hiccup in early 2016, the filing of lawsuits designed to extract settlements from alleged online pirates has only increased since Prenda went out of business.

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Seattle judge splits minimum statutory award among defaulted defendants, drastically reduces fees awarded to copyright troll

Chief Judge Ricardo S. Martinez

WAWD Chief Judge Ricardo Martinez knows what’s going on in his district with a flurry of copyright infringement Bittorent lawsuits steered by foreign criminals and unscrupulous US attorneys. Well, maybe the judge does not know the exact details of the racket, but he obviously smells rampant abuse.

Today Judge Martinez ruled on the motions for default judgment against 28 defendants in five cases, awarding minimum statutory damages ($750) per case, $550 in attorney’s fees per defendant, and various per-defendant costs (in the $90-150 range):

The copyright troll attorney (David “He said Griffin!” Lowe) asked for $2,500 in damages along with $2,605.50 in attorney’s fees – per defendant. He didn’t get what he wanted by a large margin.

Statutory damages

Judge Martinez wasn’t impressed by an overboard demand:

LHF argues that a statutory damage award of $2,500 per defendant should be awarded. The Court is not persuaded. Statutory damages are not intended to serve as a windfall to plaintiffs, and enhanced statutory damages are not warranted where plaintiffs do not even try to demonstrate actual damages. Additionally, the Court notes that LHF has not shown that any of the Defendants is responsible for the “seed” file that provided LHF’s copyrighted work on the BitTorrent network, and LHF has not presented evidence that Defendants profited from the infringement.

So, the judge awarded the very minimum ($750), which becomes increasingly common these days. However, there is something new that I never saw in the past (emphasis is mine):

[…] Because the named Defendants in this action were alleged to have conspired with one another to infringe the same digital copy of LHF’s motion picture, the Court will award the sum of $750 for Defendants’ infringement of the same digital copy of London Has Fallen. Each of the Defendants is jointly and severally liable for this amount.

You read it correctly: the judge ruled that each case’s minimum statutory award should be split among the defaulting defendants, which effectively yields $94-$250 per person.

Indeed, if the troll lumps together multiple Does to pay a single filing fee, and he justifies this conduct by claiming that the defendants were a part of a single transaction, he should accept the consequences: the award will also be “a single transaction.”
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Guardaley

A Chicago bittorent defendant files a class action complaint against the Germans and troll attorney Michael Hierl

Michael Hierl

Today one of the defendants in Clear Skies Nevada v Does 1-30 (ILND 15-cv-06708) filed a third-party class action complaint against the plaintiff (CSN), two copyright troll attorneys from a Chicago mid-sized lawfirm “Hughes Socol Piers Resnick & Dym, Ltd.” – Michael Hierl and Mark Cisek – and two Guardaley’s “experts”: a fictional character Darren Griffin and a German national Daniel Macek:

[…] Plaintiff uses German corporations and/or German nationals, claiming they possess “expert qualifications” they do not, so as to complicate and discourage depositions and discovery. […]

The complaint is kind of emotional: the defendant’s attorney Lisa Clay tells a gruesome story of her client – a 62-year-old African-American lady of very modest means (“She lacked the financial means to obtain proper medical treatment for her symptoms”) and two ethically challenged attorneys, who harassed her for months, trying to extort a couple of thousand dollars from her, threatening with a possibility of insane maximum statutory damages ($150,000) – all without sufficient evidence:

Hierl and Cisek, with the knowledge and consent of co-conspirators CSN and German John Doe [Griffin/Macek], and more importantly, with the knowledge that evidence provided by German John Doe is insufficient to meet evidentiary standards, filed suit against 360 anonymous Does in seven cases filed on June 29, 2015 and eight cases filed on July 31, 2015.

Mark Cisek

In the beginning, the defendant understandably thought that she was a target of a scam, failed to respond to the allegations¹, and default was entered against her. This default was later set aside, and the Answer was filed yesterday.

Accusations presented in this complaint are hardly new to the readers of this blog. The defendant alleges a conspiracy to improperly prosecute copyright infringement (including theft by deception, deceptive practices, barratry, and maintenance). The defendant claims that the Germans seeded the allegedly infringed film Good Kill – a kind of an allegation that resulted in a criminal indictment against copyright trolls John Steele and Paul Hansmeier.

Upon information and belief, CSN, German John Doe(s), or one of his/her/their agents seeded a copy of Good Kill after copyright protection was requested, but before the movie was released in American theaters. The date on CSN’s Certificate of Registration is February 27, 2015. The first date of alleged infringement on an exhibit is April 4, 2015, at least a month before the movie was released in theaters.

Upon information and belief, CSN and its co-conspirators intentionally released Good Kill into the bit torrent environment knowing, authorizing and inviting its copying and distribution.

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Prenda

Prenda indictment – with links

Undeniably, the criminal indictment of copyright trolls John Steele and Paul Hansmeier was the main positive event of 2016 for thousands of Prenda’s (as well as other trolls’) victims. Last week, in the wake of the news, a reporter contacted me asking to explain the details of some charges. I was happy to help, and I did not have to do a lengthy explanation: I simply sent him a link to one of my and Raul’s 150 Prenda stories. Then he asked something else, and a link to another blog post was a perfect answer. So, I thought it would be helpful if I run the indictment through OCR and post the text with added links – mostly to this blog’s stories, but also to DieTrollDie‘s, Popehat’s, TechDirt’s, ArsTechnica’s, TotrrentFreak‘s etc., as well as to original court documents. If I missed some helpful references, let me know, and I will be happy to enhance this small project.

 

Happy New Year!

 


CASE 0:16-cr-00334-JNE-KMM    Document 1    Filed 12/14/16

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

UNITED STATES OF AMERICA,
Plaintiff,

v.

PAUL R. HANSMEIER and
JOHN L. STEELE,
Defendants

INDICTMENT

18 U.S.C. § 1349
18 U.S.C. § 1341
18 U.S.C. § 1343
18 U.S.C. § 1956(h)
18 U.S.C. § 371
18 U.S.C. § 2

THE UNITED STATES GRAND JURY CHARGES:

OVERVIEW

1. Between 2011 and 2014, defendants Paul R. HANSMEIER and John L. STEELE orchestrated an elaborate scheme to fraudulently obtain millions of dollars in copyright lawsuit settlements by deceiving state and federal courts throughout the country. In order to carry out the scheme, the defendants used sham entities to obtain copyrights to pornographic movies—some of which they filmed themselves—and then uploaded those movies to file-sharing websites in order to lure people to download the movies. To learn the identities of the people caught in the trap they constructed, HANSMEIER and STEELE filed specious copyright infringement lawsuits and fraudulently procured permission from courts to send subpoenas to internet service providers for subscriber information associated with the IP addresses used to download their pornographic movies. After receiving this information, the defendants—through extortionate letters and phone callsthreatened the subscribers with enormous financial penalties and public embarrassment unless the subscribers agreed to pay a settlement, all the while concealing their collusion in the alleged copyright infringement. When courts restricted their ability to sue multiple individuals in the same lawsuit, the defendants shifted tactics. They filed lawsuits falsely alleging that computer systems purportedly belonging to their sham clients had been infiltrated by hackers, and then recruited ruse defendants against whom they brought these illusory “hacking” lawsuits. Finally, when courts became suspicious of the defendants’ tactics and motives, the defendants began a long process of lies and deceit designed to conceal the truth and deflect responsibility from themselves. In total, the defendants obtained approximately $6,000,000 made possible by the fraudulent copyright lawsuits they peddled to courts throughout the country.
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Copyright troll David Lowe drops three nine defendants after defense attorney threatens to expose fraud

 

A month ago, a copyright troll from Washington David A. Lowe dismissed a defendant with prejudice promptly after the defense counsel Christopher Lynch threatened to expose a massive fraud upon the US federal courts. This story made rounds on the Internet (DieTrollDie, TorrentFreak, Techdirt).

David A. Lowe

What followed next was both astonishing and encouraging (I’ll explain why shortly): as of today, the same troll attorney dropped three more cases following the same pattern:

1 & 2

On 12/13/2016, Mr. Lynch sent two letters to Mr. Lowe asking to dismiss his clients Patricia Alexander, a 69-year old grandmother, and James Collins, a 76-year old US Navy veteran, from LHF Productions v. Does 1-18 (WAWD 16-cv-1017):

We remain concerned that these LHF cases continue to progress through the Western District of Washington when they have a direct tie to the prolific use (over 40 instances) of a fictitious declarant in the Western District of Washington. For example, we note Dkt. #16 filed by LHF in this WD WA matter cites the ED WA Elf-Man case as authority. That ED WA Elf-Man case is where your law firm represented to the Court (e.g. ECF No. 105 at p. 3) that the prolific fictitious declarant was a “former investigator” for “Crystal Bay Corporation” of “South Dakota.” That same Dkt. # 16 also cites to other WD WA cases your law firm has filed (e.g. 2:14-cv-1336) using a declarant, Daniel Macek, who claimed to work for the same “Crystal Bay Corporation” of “South Dakota” in its “technical department,” just as the fictitious declarant falsely stated “he” worked for. That same declarant, Mr. Macek, has testified for LHF in WD WA, stating he now works for a German company (although he claims to work for Crystal Bay Corporation in an LHF declaration filed in Ohio). In discovery, we assume Mr. Macek will have no documentary evidence of his “work” for “Crystal Bay Corporation” and will have to admit that he has no personal knowledge of any “Darren M. Griffin,” despite being aware of declarations filed under that name.

[…]

Please consider our offer to not Answer, nor pursue defense attorneys’ fees, if the case against Ms. Alexander is dismissed by Noon, Monday December 19, 2016. Otherwise, we will submit our Answer that afternoon and patiently work towards Ms. Alexander’s full exoneration and the ruling on our request for defense attorneys’ fees.

Three days later (and three days before the deadline), the troll dismissed the claims against both defendants.
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Guardaley | X-Art

Appellate brief filed in a Malibu Media case after the troll cuts and runs to avoid compensating wrongly accused

At the end of a case, although a litigant may be disappointed in the outcome, he should still leave the courthouse feeling that he has been treated fairly.
From the opening brief in CA6 16-3628

As I wrote in my 6/11/2016 post “Righting the wrongs: Malibu Media defendants appeal bad rulings,” in Malibu Media v Ricupero (OHSD 14-cv-00821), a competent defense by Booth Sweet caused the troll to cowardly cut and run, i.e. after plaintiff’s walk-away offer was rejected by the defendant, Malibu moved to dismiss the case without prejudice — to avoid paying loser’s fees.

To our astonishment, Magistrate Judge Terence P. Kemp allowed the dismissal, ignoring well-documented and well-presented evidence of plaintiff’s discovery shenanigans. The order reads like the judge was annoyed by aggressiveness of the defense and simply wanted this case out of the docket — damn the merits.

Initially the opening brief was due on 8/3/2016. However, the deadline was extended a couple of times because the defendant requested the district court to supplement the record with the statements of proceedings: i.e., to put in writing what happened during two phone conferences.

After the district court satisfied the defendant’s requests, no more extensions were allowed, and the opening brief was finally filed today.

Denying any chance of recovery under § 505 after Malibu voluntarily dismissed its suit provides an escape hatch encouraging abusive behavior and vitiate the application of § 505 where it is needed most, and leaves Ricupero nothing but a pyrrhic victory in a meritless case.

As discussed above, when confronted with a meritless suit, defendants face the dilemma of settling for anything less than the cost of litigation or litigating at great expense. Malibu has further leveraged the lopsided, upfront costs of discovery with the goal of forcing early settlements while assuming little risk. The possibility of incurring fees under § 505 has the potential to help balance the litigants’ positions and discourage meritless suits. Problem is Malibu starts with the conclusion a defendant is the infringer, then works backwards ignoring or discounting anything that does not fit that narrative.

Disallowing Ricupero’s potential recovery after a voluntary dismissal eliminates any chance of balance, especially where the most abusive litigation strategies always end in settlement or dismissal before trial. Such a result is manifestly unjust and would all but force defendants like Ricupero to settle regardless of the underlying merits of the case.

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Prenda

Steele and Hansmeier have been finally indicted on fraud, money laundering charges

 

Sweet holiday gift. The masterminds of a porn extortion outfit PrendaJohn Steele and Paul Hansmeier — are finally indicted (USA v. Hansmeier et al, MND 16-cr-00334). Congratulations to everyone who made it happen. Slow wheels of justice do grind.

Paul HansmeierPaul Hansmeier

Twin Cities’ Star Tribune was the first who broke the story:

Authorities arrested Paul Hansmeier, of Woodbury, and John L. Steele, an attorney in Illinois who was a former classmate of Hansmeier’s at the University of Minnesota, shortly before U.S. Attorney Andrew Luger announced charges Friday morning.

They were charged Wednesday in an 18-count indictment with orchestrating a multimillion-dollar extortion fraud. The charges, unsealed Friday, include conspiracy to commit fraud, conspiracy to perjure and conspiracy to launder money.

The indictment refers to other Prenda parties by initials:

  • P.H. = Peter Hansmeier, Paul’s brother: I believe that his role in the scheme is under reported. It may very well be that his participation as a racket mastermind was even bigger that his brother’s
  • M.L. = Mark Lutz, a paralegal, faux owner of fake corporations and trusts
  • P.D. = Paul Duffy. De mortuis nil nisi bonum
  • B.G. = Brett Gibbs

Although the indictment names only Steele and Hansmeier, the language used to describe the scheme can be easily applied to the ongoing extortion racket perpetuated by other outfits: Malibu Media, Voltage Pictures, CEG-TEK, Rightscorp. Today’s event resurrects my hopes that this judicial plague is curable.
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