As we wrote over the summer, one of Okularity's targets was the well known Paper Magazine, put out by the publisher Enttech Media Group. Enttech said that Okularity sought to have Paper Magazine's Instagram account shut down, and then offered to "settle," demanding a pretty massive sum in the process. The lawsuit alleged violations of DMCA 512(f) which is the (unfortunately) mostly toothless part of the DMCA that is supposed to allow those on the receiving end of bogus DMCA takedowns to fight back. In practice, however, courts have mostly rejected all 512(f) claims, or made it so they're basically impossible to do anything useful with. Because of that, any time we see a 512(f) claim that has legs, we pay attention.

The original complaint also tried to argue that Okularity violated the RICO statute, and long time readers here know what we think of RICO claims. While there did appear to be some unauthorized practice of law happening, there didn't seem to be nearly enough to make a RICO claim -- because there's basically never enough to make a RICO claim. We predicted that the RICO claim would get tossed out, but that the 512(f) claim might live on.

Turns out, we were right.

While the case has had some twists and turns, this week the judge tossed out the RICO claims, but is allowing the 512(f) claims to move forward. Nicolini and Okularity had argued that Enttech's lawyer, Robert Tauler, should face Rule 11 sanctions for ignoring evidence regarding their fair use analysis, but the court rejected those as well. Tauler did have to file a third amended complaint, however, to get to this point, as the court did find the first two complaints somewhat deficient.

But on the key point -- 512(f) -- the court notes that the case can continue, even under the confused Lenz standard in the 9th Circuit, that basically said (1) DMCA filers have to "subjectively" consider fair use to be a "good faith" filing, but (2) automated takedowns may be okay... because we say so. Nikolini and Okularity argued that they do consider fair use before sending notices, while Enttech argued the notices appeared to be totally automated. The court basically says -- Enttech has met the initial burden that the case can move forward.

One key point of contention in this: the takedown letters sent by Okularity do contain a "discussion of infringement and fair use," Okularity claims that shows that it does consider fair use. Enttech responded that every single notice Okularity sends contains an exact copy of this discussion, suggesting no actual analysis is done, and it's just a cut-and-paste. This point is what the judge focused in on:

ENTTech’s allegation that the DMCA notices contained an analysis of infringement and fair use presents a question of first impression with respect to the standard for pleading a claim under § 512(f). Is it sufficient for ENTTech to allege that, notwithstanding the takedown notices’ explicit and extensive fairuse analysis, Defendants did not actually or sufficiently consider fair use before issuing the takedown notices? At first blush, the fact that the DMCA takedown notices contain fair-use analyses—even if those analyses are identical and pro forma—seems to satisfy the requirement to “consider” fair use before issuing a takedown notice. See Lenz, 815 F.3d at 1154. The presence of the purported fair-use analysis in each takedown notice also distinguishes this case from Lenz where the plaintiff alleged that the defendant did not consider fair use at all. Cf. id.

Is ENTTech required to allege additional facts, in view of the appearance that Defendants considered fair use? For example, must ENTTech allege evidentiary facts concerning Defendants’ analytical process or subjective state of mind (the type of facts which, in most cases, are not available to a plaintiff before discovery is taken)? Does the Iqbal/Twombly plausibility standard require ENTTech to aver its own analysis of fair use to support an inference that Defendants merely paid “lip service” to the consideration of fair use? Cf. id. at 1163. Having considered these questions, the Court concludes that ENTTech’s allegations in the TAC are sufficient at this stage of the litigation.

The court points out that the ruling in Lenz supports allowing this case to move forward, saying that it's a factual question whether or not the takedown notice sender had a "good faith belief" that the notice was legit, and therefore, it's up to a jury to decide.

Although Lenz involved a motion for summary judgment, that decision is nevertheless instructive with respect to the issue presently before the Court. Lenz supports the conclusion that the question of whether a copyright owner formed a subjective good faith belief that an alleged infringer’s copying of the work did not constitute fair use is, in most instances, a factual issue that is not appropriate for resolution on a motion to dismiss. “Because the DMCA requires consideration of fair use prior to sending a takedown notification,” the Ninth Circuit held that “a jury must determine whether [the defendant’s] actions were sufficient to form a subjective good faith belief about the [allegedly infringing] video’s fair use or lack thereof.” Id. at 1154. In response to the arguments in the dissenting opinion regarding the propriety of granting summary judgment, the Lenz panel majority explained that the relevant question was “whether the analysis [the defendant] did conduct of the [alleged infringing material] was sufficient, not to conclusively establish as a matter of law that the . . . use of the [copyrighted material] was fair, but to form a subjective good faith belief that the video was infringing on [the] copyright.” Id. at 1154 n.3.

Therefore, because it is generally a factual issue whether the analysis that the defendant did conduct of the alleged infringing material was sufficient, see id., it necessarily follows that to plead a claim under § 512(f), it is enough for ENTTech to allege that Defendants did not consider fair use (sufficiently or at all) before issuing the takedown notices. And that is exactly what ENTTech alleges here. Requiring ENTTech to allege more would effectively impose a heightened pleading standard, see Fed. R. Civ. P. 9(b), and no authority holds that claims under § 512(f) must be pleaded with particularity. Thus, although it may be advisable for a plaintiff like ENTTech to aver additional facts (such as its own analysis of fair use) to support the allegation that a defendant’s fair use analysis was merely pro forma, the Court cannot conclude that ENTTech is required to plead such facts in order to state a plausible claim for relief under § 512(f).

In the grand scheme of things, this is only a small step forward, but it is a step forward for 512(f) -- a part of the law that rarely ever sees any positive news. This doesn't mean that Enttech is likely to win, but it does mean that the courts may crack the door open just ever so slightly in letting people and companies fight back against abusive DMCA notices.

Hansmeier got into the copyright enforcement business thinking it would produce a steady stream of easy cash. He and his associates went after people who allegedly downloaded porn, thinking that people would pay anything asked to avoid having their sexual predilections exposed to friends, family, and the public at large.

When that didn't work as well as Hansmeier had hoped, he went further. He and his associates produced their own porn (but didn't star in it, thankfully) and served it up to piracy services in order to produce a steady stream of defendants. (These home productions were never made available for legal viewing. They only existed as lawsuit bait.) It all ended in a criminal indictment and a guilty plea by Hansmeier, who had recently branched out into ADA trolling in his home state of Minnesota.

That brings us to the Eighth Circuit Court of Appeals, which has affirmed everything Hansmeier wishes wasn't happening to him, like his 168-month prison sentence for fraud and money laundering and a $1.5 million restitution order.

The court recounts the sordid details of the long-running scam, including the numerous shell companies created to hide the origin of copyrighted films, as well as the profits (and losses) of the law firm supposedly representing a handful of porn-producing clients. It details the use of "ruse defendants" to avoid courts' limitation of discovery requests after judges started figuring out just how shady Hansmeier and Prenda Law were. What began as sanctions and subpoena denials slowly and steadily turned into disciplinary action from state bars and, finally, a criminal investigation that resulted in guilty pleas by both Hansmeier and his partner, John Steele.

Hansmeier doesn't want to be on the hook for $1.5 million in restitution. But the Appeals Court [PDF] doesn't see anything that warrants a reversal of the lower court's order. As it points out, Hansmeier still comes out ahead, even after being ordered to pay back $1.5 million of his illegal takings.

Based on his review of Hansmeier and Steele’s financial documents, Agent Kary estimated that, between 2010 and 2013, the alleged infringers Hansmeier and Steele targeted paid over $6 million total in settlements. Agent Kary then summarized a spreadsheet the FBI created to estimate the proper restitution amount. The spreadsheet did not include all of the settlement money that came in over this time period. Rather, it was limited to payments made after April 2011, which is when there was evidence that Hansmeier and Steele posted to file-sharing websites a movie to which they held the copyright—in other words, when, under the government’s theory, their fraud scheme began—and to payments that he could link to specific victims. Based on these parameters, he calculated a restitution figure of $1,541,527.37.

The Appeals Court notes Hansmeier's actions didn't just screw over internet users and defraud Prenda's clients and partners. The fraud also affected the courts handling Prenda's copyright cases. Had judges known what Hansmeier was engaged in, they would have rejected discovery requests and handed down sanctions even sooner than they already did.

It does, however, reject the government's argument that Hansmeier waived his right to appeal the judgment. The court says he can appeal. But it ultimately doesn't matter. The figure derived from the government's inspection of Hansmeier's criminal activity is as close to accurate as it gets without straying from the "actual loss" guidelines. As noted above, the government was able to find documentation for $6 million in possibly fraudulently obtained settlements. The court only ordered the return of a quarter of this amount. That's good enough for the Eighth Circuit, which says Hansmeier gets to keep serving his time and watch whatever assets he has left start getting liquidated to pay off this order.

Here, the government met its burden of showing by a preponderance of the evidence that the $1,541,527.37 loss total was attributable solely to settlement payments from the fraud scheme. [...] In coming to his final loss amount, Agent Kary included only settlement payments from April 2011 on, when Hansmeier and Steele directed an associate to upload a movie called Sexual Obsession, which they held the copyright to and which they used in their fraudulent lawsuits, to file sharing websites. Agent Kary explained that Sexual Obsession became the “go-to movie as far as gaining settlements from individuals.” He said that other movies were not a “significant” source of profit from that point on, constituting just “a few [payments] trickling in here and there.” Considering this information, the district court characterized potential payments from “legitimate” lawsuits over this period as making up no “more than potentially a negligible amount” of the money Hansmeier and Steele received.

Even more narrowing of the amount followed. But the smoking gun here is Hansmeier's own testimony, which is perhaps more damning than the results of the government's investigation. Even with this in play, Hansmeier is still only "out" half of what he took from others illegally.

Finally, Hansmeier himself acknowledged in his plea agreement that, between 2011 and 2014, he and Steele “received more than $3,000,000 in fraudulent proceeds” from their lawsuits.

The $1.5 million judgment stands. The man who helped ruin the lives of dozens of people will have to continue to deal with his multiple self-inflicted wounds. Hopefully, he'll be a cautionary tale that will dissuade future IP enforcement opportunists from engaging in litigation-adjacent get-rich-quick schemes that defraud the public and the court systems their tax dollars pay for.

A writer named Eric San Juan used the image, properly attributed on his blog. Last month, Eric received an email from "Aldwin Sturdivant" from a company called "Green Cap Marketing" which claims to be one of the many companies that will scan the web on behalf of photographers and shake down anyone who used those images for money. The site claims "Your Images. Your Revenue." Also, somewhat ironically, it claims: "Nothing is more frustrating than knowing your work is being stolen and used for someone else’s gain." It's ironic, because it appears that it's actually "Green Cap Marketing" that is trying to gain from pretending to hold the copyright on someone else's images. Here's the email that Sturdivant sent to San Juan:

It says:

Hi I hope you are the right person on this.,

I hope you’re doing well.

I am very pleased to see that my creative work in https://commons.wikimedia.org/wiki/File:Running_Man_Kyle_Cassidy.jpg is being used on this article found on your site: .http://ericsanjuan.com/get-more-exercise-day-to-day-with-these-stunning-hacks/.

It means a lot to me that you selected my work. I prefer that you keep the image on as I can see it provides value to your followers.

Simple image credit to my site is all I ask. It motivates me to continue uploading images that contribute to informative content like yours.

Can you support my humble work? Stay safe. 🙂

Cheers,
Aldwin Sturdivant
Content Editor
Green Cap Marketing

Just looking at this should raise some alarm bells. I mean, photograph's file name actually has the name of the actual photographer, Kyle Cassidy, in the file name. San Juan originally assumed that Sturdivant was sincere, and noticed that the Wikimedia Commons page did say that he was the photographer:

But, if you look in the Wikipedia edit history, you'll see that the "photo taken by" credits have changed over time, with a bunch of name changes in the past few months:

Basically, on August 13th, someone changed the photographer to be "Natasha Spencer" of a sketchy health site I will not name. That was reverted. On August 17th, the same thing happened. It was reverted. On November 23rd, the same day "Sturdivant" emailed San Juan, it was changed again to say the photo was taken by Sturdivant, again in association with the sketchy health site.

Indeed, this appears to not be so much a copyright trolling scam, but a search engine optimization scam. "Sturdivant" and Green Cap Marketing didn't ask San Juan for payment... but to link to an affiliate site. According to San Juan:

In no time, they send a reply with the link info for me, but what he sent back was a website that had nothing to do with him or the photo, and the photo attribution they asked for was for a BUSINESS, not the photographer. It was a link affiliate site, a commercial site that earns money through clicks. What the hell?

San Juan has blacked out the URL, but I'll take a wild guess that it's likely to be the same one that "Sturdivant" and "Spencer" named when they claimed credit for the Wikimedia photos.

So what originally looked like a copyright trolling scam, may be more of an SEO scam. Either way, it's a scam.

Cassidy himself went snooping and found that there were a bunch of other files attributed to A. Sturdivant, but honestly, many of those appear to be legit, as they appear to be old documents that have some connection to an actual "Sturdivant" from very far in the past.

However, others have pointed out that this is a common problem, with people vandalizing photo credits, and that "A. Sturdivant" was a name used for this in the past as well. Some Wikipedia editors have been reporting and banning users for engaging in this kind of scam.

However, what does seem clear is that Green Cap Marketing (since the "Sturdivant" emails came from there) is not just engaged in typical copyright trolling, but has expanded its business into the truly scammy SEO game, by faking credits on photos and then asking sites to link to their affiliate fee links instead of the actual photographer's images and sites.

It doesn't always work. At the first sign of resistance, trolls often cut and run, dismissing lawsuits as quickly as possible to avoid having to pay the defendant's legal fees. This isn't anything new. And there are very few courts left that treat the rinse/repeat cycle as novel. Judges are calling trolls trolls with increasing frequency and more than a few trolls and their legal representation have turned to theft and fraud to make ends meet.

Via Fight Copyright Trolls comes another decision where a porn-based copyright troll is getting its financial ass handed to it by a federal judge. Strike 3 tried to dismiss a lawsuit when it became obvious it couldn't prove infringement, opting for a voluntary dismissal without prejudice in hopes of dodging a bill for legal fees. It didn't work.

After some discussion of the technical aspects of Strike 3's aborted discovery attempt -- which involved Strike 3's experts failing to find evidence of infringement on the defendant's hard drive -- the court gets down to the business of cutting the troll off at the knees to prevent it from escaping the costs of its bogus litigation.

The court [PDF] says Strike 3 can't have everything it wants -- the cake, the celebratory disposable plate, the opportunity to consume the cake at its leisure, etc. Arguing that this is cool because some other troll tried it doesn't impress Judge Thomas Zilly.

Unlike in LHF Productions, in which an alleged BitTorrent user’s counterclaim for a declaration of non-infringement was dismissed as moot in light of the plaintiff’s dismissal with prejudice of the underlying copyright infringement claim, in this matter, Strike 3’s voluntary dismissal was without prejudice, see Notice (docket no. 53), and in contrast to the plaintiff in Crossbow, Strike 3 has not provided any covenant not to sue. Indeed, not only has Strike 3 preserved its ability to pursue further litigation against John Doe, it has indicated that it will not consent to a declaration of non-infringement unless John Doe is precluded from receiving attorney’s fees and costs and Strike 3 is explicitly permitted to bring copyright infringement claims against John Doe’s son.

Then the court quotes another case involving yet another copyright troll (Malibu Media) to shut down Strike 3's "heads we win, tails you lose" exit strategy.

In essence, Strike 3 is attempting to thwart John Doe’s efforts to obtain attorney’s fees and costs by, on the one hand, refusing to dismiss its Copyright Act claim with prejudice and thereby denying John Doe “prevailing party” status, while on the other hand, deploying its dismissal without prejudice as a jurisdictional shield against John Doe’s declaratory judgment claim. The Court will not permit Strike 3 to use such “gimmick designed to allow it an easy exit... [now that] discovery [has] reveal[ed] its claims are meritless.”

The court is going to hand the defendant the victory, as well it should. The burden of proof for infringement rests on the accuser and Strike 3 failed to show any infringement occurred. Since Strike 3 can't prove this -- and its attempt to dismiss the case makes it clear it has no intention of proving infringement occurred -- the defendant's declaration of non-infringement is the default winner.

Consistent with Strike 3’s lack of proof of copying, John Doe’s expert has indicated that John Doe’s computer does not contain any of the motion pictures described in Exhibit A to the Complaint. No genuine dispute of material fact exists, and John Doe is entitled to judgment as a matter of law. John Doe’s motion for summary judgment is GRANTED, and a declaratory judgment of non-infringement will be entered.

Since Strike 3 lost -- and engaged in a bad faith dismissal to dodge paying Doe's legal fees -- the defendant and his representation are getting almost everything they've asked for. That's $40,000 in legal fees and $7,000 costs Strike 3 will have to pay for two years' of failed litigation. But mostly Strike 3 paying because it tried to forfeit rather than take the L.

As the court notes, the tide of trollish litigation may be slowing, thanks to the Ninth Circuit's Cobbler Nevada decision. It's not over yet. This isn't the last time we'll see a troll light itself on fire in its haste to escape a losing lawsuit. But it's enjoyable all the same.

This may have to do with an attempt to avoid precedence in rulings as to the evidence it uses, chiefly the practice of pretending that IP addresses identify people. If that isn't it, it could also be some version of the trick Prenda Law attempted to pull in moving copyright-cases-in-disguise to Florida courts. Essentially, they sue instead with a nod toward the CFAA as a way to enter into discovery, while also naming a bunch of co-conspirators -- rather than defendants -- to the case. All of this as a way to get at IP address and account information for a whole bunch of people in state court, only to turn around and sue those same co-conspirators in federal court. If that is what Strike 3 is doing, it's really dumb because it got Prenda in a bunch of trouble.

It turns out that's exactly what is happening. Strike 3 is suing ISPs with complaints of "a pure bill discovery". The entire purpose of those types of suits are to discover defendants. In this case, Strike 3 is asking the court to order ISPs to identify account holders of IP addresses it claims are infringing copyright. It's not actually a copyright lawsuit, however, as that would have to be filed in federal court. Instead, this looks to be an end run around copyright law and the costs associated with filing in federal court.

In this case, this means a subpoena directed at ISPs to identify the account holder that’s linked to the allegedly infringing IP-addresses. This tactic provides the same result as going through a federal court and allows Strike 3 to demand settlements as well. While the number of cases in state court is relatively modest, these cases target a substantially higher number of defendants per case. That’s also one of the main advantages. By filing a single case with dozens or hundreds of defendants, the filing fee per defendant is very low.

In federal court, the company generally targets one defendant per complaint, which is far more expensive. And while Strike 3 mentions that it is requesting the information for a subsequent copyright lawsuit, it will likely try to get a settlement first.

These state courts also don't have the muscle memory built up to push back on Strike 3's trollish lawsuits, using scant evidence such as IP addresses to unmask private citizens. Reporting suggests Florida courts have already granted subpoenas in many of these cases. In others, however, there is thankfully some pushback.

Attorney Jeffrey Antonelli and his firm Antonelli Law‘s local counsel Steven Robert Kozlowski objected to these subpoenas on behalf of several defendants. In his motion to quash he highlights a variety of problems, including the earlier observation that copyright cases don’t belong in a state court.

“This Court lacks subject matter jurisdiction over the copyright claims at issue in the lawsuit which the subpoena to Comcast is premised upon. Federal courts have original and exclusive jurisdiction over civil actions arising under federal copyright law,” the motion reads.

Another problem is that the purpose of the “pure bill of discovery” is to obtain facts or information a defendant has. However, the targeted ISPs are not defendants in these cases. Finally, the motions highlight that the IP-addresses may not even be linked to Florida, where the court is based. Strike 3 should have known this, as they always disclose the location in federal court. However, they may have omitted it on purpose, the defense argues.

It's some form of justice to see a copyright troll sue ISPs in state court over federal copyright laws, looking for defendants that aren't subjects of the suit, and all while that same troll withholds facts from the court that would illuminate yet another reason the lawsuit shouldn't have been filed in that state court to begin with. Whatever the trifecta is for getting a court to sanction a lawfirm, this certainly seems to fit the bill.

And, yet, with state court judges not being as well versed in copyright law as their federal cousins, these subpoenas often get approved. That's a problem, one which will see copyright trolling get exponentially worse if it's allowed to continue. Here's hoping there is enough pushback from defendants so as that doesn't occur.

Rep. Hakeen Jeffries, who was the sponsor of the bill -- and who (coincidentally, I'm sure) offered lobbyists the chance to join him at the recording industry's biggest party for just a $5,000 contribution -- made a bunch of utter nonsense statements in support of the bill:

“There is no gun that is being held to anyone’s head, because the small claims court like tribunal is voluntary in nature,” Jeffries told The Verge. “Any argument made to the contrary, represents a deliberate attempt to misrepresent what’s at stake as part of the effort to do away with the content copyright laws that have been part of the fabric of our democracy since the founding of the Republic and in fact the Constitution.”

“The internet doesn’t change the Constitution,” Jeffries continued.

Sure. The internet doesn't change the Constitution. But Congress sure has gone a looooooooong way in changing copyright law, away from its Constitutional roots, to the point that it is almost unrecognizable. Let's remember that the Constitution only provides for copyright law if it is used to "promote the progress of science," which at the time it was written meant "learning and education." What about the CASE Act promotes education? Can Jeffries answer that?

Also, the Constitution promised us that copyright should only be for "limited times." Yet, Congress has extended copyright over and over and over again such that no one can honestly claim that it matches up with the initial understanding under the Constitution.

So, sure, if you're going to cite the Constitution as the reason for your new copyright law, I'm going to point out that, as originally interpreted in the very first Copyright Act, it was believed that the Constitution only provided for 14 years of protection for "maps, books, and charts." What we have today is kinda different, don't you think? Congress has made a mockery of the Constitutional concept of copyright. Rather than 14 years, it's "life plus another 70 years." Instead of "maps, books, and charts" it's literally every newly created work. Instead of only applying to things that are registered, it now applies to everything. Instead of applying almost entirely to commercial operations, it applies to everyday sharing. If you're going to cite the constitution for favoring a massive expansion of copyright trolling, you might want to at least acknowledge how unlike the original concept of copyright the law has become today. Or did the lobbyists paying $5,000 a pop to party with you at the Grammies forget to tell you that part?

The bill still needs to go to the Senate, but given the overwhelming vote in the House, it's not encouraging. The only bright side is that we'll have plenty of new stories to cover as this law gets widely abused by trolls.

Unfortunately, not everyone is like Doug Collins with multiple real estate holdings and a teacher's pension, and can afford a $30,000 fine for merely posting an image you like on social media.

Part of the insanity of the CASE Act is Congress's complete unwillingness to recognize that in making copyright trolling easier, we are guaranteed to see a significant increase in copyright trolling shakedowns. They act as if that won't happen -- which is quite incredible.

But, even worse, is the process behind all of this. As well-respected copyright expert Pam Samuelson explained, the CASE Act is likely unconstitutional, because it's fairly well established that the executive branch (Article 1) cannot route around the judicial branch (Article III) by setting up its own tribunals to handle disputes involving "private rights." While the courts have upheld other tribunals, including the important PTAB patent review tribunal, that's an entirely different matter. The PTAB is analyzing whether or not a patent was properly granted by the Patent Office, not whether or not there is infringement.

The tribunal established by the CASE Act, on the other hand, would be adjudicating questions of infringement, which is clearly an Article III issue.

Incredibly, with so many problems with the bill and so many concerns about the constitutionality of it, you'd think that Congress would be interested in exploring a more careful approach or in investigating the potential consequences of the bill. You'd be wrong:

While there was a hearing held at the end of the 115th Congress on September 27, 2018, there was no hearing in the 116th Congress. Most of the House Judiciary Committee has changed due to retirements and a new democratic majority in the House. Additionally, none of the numerous public interest groups or constitutional scholars that have issues with the legislation were invited to testify. Even so, with almost no notice, the bill was marked up late in the evening in the House Judiciary Committee on September 10, 2019, when Members were tired or simply leaving. Furthermore, the CASE Act was added to the markup after a marathon session on several highly controversial firearms bills. Fortunately, multiple Members raised concerns and were promised by the sponsors that amendments would be considered before bringing the legislation to the floor. Unfortunately, there has been no opportunity to amend the bill. The manager's amendment is nearly identical to the original bill.

Yup. The original bill, which faced no hearings in the current Congress, and which the leadership has blocked any ability to fix or amend, is up for a vote tomorrow. It's time to call your Congressional Reps right now and tell them what you think of the CASE Act and the sorts of copyright trolling it will enable. As EFF explains:

The new tribunals will receive complaints from rightsholders (anyone that has taken a photo, video, or written something) and will issue a “notice” to the party being sued.

We don’t actually know what this notice will look like. It could be an email, a text message, a phone call with voice mail, or a letter in the mail. Once the notice goes out, the targeted user has to respond within a tight deadline. Fail to respond in time means you’ll automatically lose, and are on the hook for $30,000. That’s why EFF is concerned that this law will easily be abused by copyright trolls. The trolls will cast a wide net, in hopes of catching Internet users unaware. Corporations with lawyers will be able to avoid all this, because they’ll have paid employees in charge of opting out of the CASE Act. But regular Americans with kids, jobs, and other real-life obligations could easily miss those notices, and lose out.

The CASE Act creates a massive, incredibly detrimental, change to copyright law that will enable massive amounts of trolling, and huge fines for ordinary people doing ordinary things online, like sharing photos on social media. That Congress is rushing this through, ignoring all the concerns, is a travesty and should not be allowed.

That said, as with so many copyright bills before it, Congress ignores all the problems associated with the CASE Act, because a bunch of vested interests pretend that there's some real problems solved by this law. So, once again, the bill has moved forward, this time with the House passing the bill out of the Judiciary Committee, meaning that it can go to a full vote on the floor. The end result here would be really dangerous for free speech online, but no one in Congress seems to care about it. Yet.

EFF is asking people to contact their elected officials in Congress to let them know that theyshould not massively expand copyright in this manner, which will only lead to that much more extortion and shakedowns, while creating even more chilling effects for free expression online.

Sometimes ideas based in good intentions are so poorly thought out that they would actually make things worse. This seems to be especially prevalent in the copyright world of late (I'm looking at you, Articles 15 and 17 of the EU Copyright Directive), but the most recent example is the Copyright Alternative in Small-Claims Enforcement Act of 2019 (CASE Act). This bill intends to give photographers and small businesses a more streamlined way to enforce their rights with respect to online infringements by reducing the costs and formalities associated with bringing infringement claims in federal court. Pursuing infringement claims can be expensive and time-consuming, so this may sound like a good thing, especially for rightsholders with limited resources. It is not.

The CASE Act would establish a quasi-judicial body within the Copyright Office (part of the legislative branch) empowered to hear a limited set of claims, make "determinations" about whether those claims are valid, and assign "limited" damages. The bill structures the process so that it is "voluntary" and lowers the barriers to filing claims so that plaintiffs can more easily defend their rights. Without the "quotes", this description might sound like a reasonable approach, but that's because we haven't talked about the details. Let's start at the top.

The bill would establish a Copyright Claims Board (CCB) in the Copyright Office. This would not be a court and would be entirely separated from the court system. The only option to appeal any of the CCB's determinations, based on the CCB's legal interpretation, would be to ask the Register of Copyrights to review the decision. It would be theoretically possible to ask a federal court to review the determination, but only on the grounds that the CCB's determination was "issued as a result of fraud, corruption, misrepresentation, or other misconduct" or if the CCB exceeded its authority. So if you disagree with the CCB's legal interpretation, or even its competence to make a decision, you are out of luck. This raises red flags about potential due process and separation of powers problems under the Constitution.

The "small claims" part of the bill is also troubling, in that the CCB can award damages up to $30,000 per proceeding. This amount is only considered small in the context of copyright statutory damages, which range between $750-30,000 per work infringed, unless the infringement was willful, in which case, damages can be $150,000 per work. The $30K cap is a 2x-10x multiple of the maximum awards for small claims courts in 49 of 50 states. (Side note: what's going on, Tennessee?) So losing a single small-claims action before the CCB could be a financial disaster for many people, potentially for nothing more than uploading a few pictures to your blog.

You may be thinking, "I won't infringe copyright, I'll just make sure not to use any protected works." Here's why that will not be as easy as you might think. First, copyright is automatic. This means that when someone snaps a new photo, they immediately hold the rights to it. If you found a photo or other work that you wanted to use, you would need to get permission from the rightsholder. In some cases, determining who to ask is relatively easy. You may know the photographer or there may be clues indicating who likely owns the rights, such as watermarks or attribution information (photo courtesy of x). However, the only sure way to identify the rightsholder for any given work is to check with the Copyright Office to see who registered the work.

Even though the Supreme Court recently ruled that the registration process must be completed (either the Copyright Office granted or denied the application for registration) before filing infringement claims, registration is not required to bring an action under the CASE Act. This leaves everyone (other than the original author/photographer) with no guaranteed way to determine who holds the rights to unregistered works. Even if you identified someone as a potential rightsholder, it could be difficult or impossible to verify their claim of ownership without the official recognition by the Copyright Office. So even if you are acting in good faith and attempt to obtain permission before using a work, you may not be able to do so and there is no guarantee that you will have obtained permission from the correct party, leaving you exposed to claims via the CASE Act.

For example, you see an image (perhaps a vacation photo) on a friend's social media page and ask their permission to share it with your network. They agree and you share, not realizing that your friend copied that image from somewhere else, perhaps a travel company website. Your friend did not have the rights to that photo, and you made and distributed an unauthorized copy, exposing you to the possibility of an infringement claim from the actual photographer. Sharing that single photo could cost you $7500.

So, to recap, it may be impossible to obtain the correct permissions to use a work, and using a work with or without permission (relying on the fair use doctrine) may leave you exposed to claims up to $30,000, which will be determined by a panel of non-judges, whose decision you will have almost no way to appeal. Once their decision is final, you are also barred from relitigating your loss in federal court (unless you can prove fraud, etc). You may remember that this process is "voluntary." Let's talk about what that means in reality.

The process created in the CASE Act allows defendants to opt-out of the process. Specifically, defendants are given 60 days from when they are notified of the claim to tell the CCB that they do not wish to be subject to the procedure. (This is how the bill's drafters hope to skirt around all the constitutional issues—by getting people to voluntarily give up their due process rights and willingly accept the legal determinations of a non-judicial body.) So it's easy, right? Simply opt-out.

Yes, for many would-be defendants, especially the more legally sophisticated ones like large internet companies, opting out of each claim brought against them is not likely to be difficult, even if it is time and resource intensive. However, think about what you might do if you received an envelope claiming to be from a governmental body you have never heard of and asserting that you are potentially liable for infringing copyright. Many would simply ignore it or simply not understand the significance or the potential consequences. Others might perceive this notification as a form of phishing or a potential scam. 60 days elapse and you are now subject to the determinations of the CCB. The next letter you receive may be correspondence from a law firm (on behalf of the claimant) offering you a settlement deal that lets you buy your way out of the legal fight and the possibility of a $30,000 liability. Now what should you do: settle or try to defend yourself at the risk of a higher liability amount?

This litigation model is often called "trolling" and the CASE Act sets up a process that serves that model well. Sure, the process is voluntary, which means that only the least legally savvy people will be defendants. Yes, the statutory damages are reduced (compared to those available through federal courts), but they are still plenty high enough to push defendants toward settlement, especially given the limited options for appeal.

Despite its good intentions, the CASE Act is a legal disaster waiting to happen.

"It is almost incalculable how much your abuse of trust has harmed the administration of justice," [Judge Joan] Ericksen said during the sentencing hearing in U.S. District Court in Minneapolis.

At the Steele hearing, after federal prosecutors apparently heaped praise upon Steele for confessing, and helping build the case against Hansmeier, Erickson gave Steele a chance to speak, at which point he at least put on a credible performance of contrition. He explained how he had met Hansmeier, how Paul had concocted the scheme and he joined in -- including lying to federal judges about what they were up to. From the Star Tribune's Dan Browning's excellent reporting:

First, he said, he enrolled at the University of Minnesota Law School at the age of 37 without any sense of mission other than making money. It was there that he met and befriended Hansmeier, which led to a second poor decision in April 2010.

“I’ll never forget that day,” Steele said, choking up. “I received a call from Paul Hansmeier about an idea he had about seeding pornography content online.”

The third bad decision came when federal judges around the country began questioning Hansmeier’s and Steele’s methods of filing hundreds of lawsuits to identify the owners of computers that were used to download pornography so that they could pressure them to settle to avoid public humiliation.

Steele said he could have told the judges the truth but opted to blame others and hide behind offshore companies that had technical ownership of the copyrights on the movies.

This is... a very different version of Steele. I remember the long interview he gave with Kashmir Hill where he boasted of the success he was having and mocked the idea that his copyright trolling, by threatening to expose people's porn habits, was unethical by saying:

“People don’t like to get caught doing anything wrong,” he says. “They should be embarrassed about the stealing.”

Interesting quote. Or then there's the interview Steele did with Joe Mullin in which he did his usual bluster after a judge (Otis Wright) had first called him on his bullshit trolling scam. At the time, Steele seemed overly boastful of his ability to succeed:

It's not our job to—there was no evidence against us! I think everyone, even the people that dislike anti-piracy litigation, would agree that I don't have to answer questions if I don't want to. That's my right. The fact that people take the Fifth Amendment, against compelled testimony, is not allowed to be a negative inference.

I have no involvement in this case. I've never made a misrepresentation [to the court], either me or Paul Hansmeier.

This judge is completely biased against our type of litigation. Anyone who's researched this judge knows it. There have been some very harsh rulings by this judge against intellectual property plaintiffs. I think there were some errors made, and that's why we have appellate courts.

I think the judge knows we're going to appeal. He wrote that the sanctions were designed to cost just less than [an effective appeal]. Look, you may hate me and the litigation that's gone on in the past, but most people have to be a little nervous when a judge puts out a number and says that.

In that interview, he insisted that he had "no involvement" with the shell companies AF Holdings and Ingenuity 13. Of course, part of the federal charges, which Steele admitted to in great detail in his guilty plea, was that he and Hansmeier set up AF Holdings and Ingenuity 13. In his guilty plea documents:

In or about 2011, defendants convinced R.R., the owner of Heartbreaker Productions, to transfer the copyrights to Sexual Obsession and Popular Demand to AF Holdings. In order to disguise their control over AF Holdings, defendants used the name of an acquaintance of STEELE--whose initials are A.C.--on the copyright transfer agreement to purportedly sign on behalf of AF Holdings. Furthermore, defendants represented and caused to be represented to multiple courts that AF Holdings was owned by a trust named "Salt Marsh" whose manager and sole beneficiary was M.L., a paralegal employed by STEELE and Hansmeier. In fact, and as defendants knew, M.L. was nothing more than a figurehead who agreed to pose as the owner of AF Holdings in order to help STEELE and Hansmeier obscure their ownership and control over the company.

For long time Prenda watchers, you may recognize those initials. A.C. being Alan Cooper, a former caretaker for a cabin John Steele owned, whose name Steele forged on the various documents. Cooper, having no idea what was going on, later sued over the forged documents. M.L., of course is Mark Lutz, the "paralegal" who Steele and Hansmeier falsely tried to present as the real mastermind behind everything.

This week, in court, Steele told a very different story.

He said he went back to building and rehabbing homes and began studying stoicism. He said for the past couple of years he has been working for one of his sisters in Phoenix.

“I’m trying to live a life of virtue,” Steele said. “All I can control is obviously the thoughts and actions now and in the future. I think it’s important that I stand here today and look at you and apologize.”

The Assistant US Attorney in the case heaped praise upon Steele for his cooperation, and contrasted Steele to Hansmeier in how they dealt with the charges -- including noting how much Steele's assistance helped in getting Hansmeier to plead guilty as well (though Hansmeier's was "conditional" based on some of his legal attempts to dump the case).

Judge Ericksen still noted how abusive and serious the trolling operation was, but also noted that it appeared that Steele recognized how serious this whole thing was:

“You abused the court system, as you say, for your personal ends,” she said, adding that the courts “are not a tool in the box for anybody’s hustle.”

Even so, Ericksen agreed with prosecutors that given Steele’s cooperation and efforts to turn his life around, five years in prison was “eminently fair.” ....

“I condemn the actions that you took in committing this crime. I congratulate you, however, on the actions you took” in responding to the charges, Ericksen said.

The Judge had already order Hansmeier to pay back $1.5 million, and now put that on Steele too, making the two of them "jointly and severally liable" -- effectively meaning that the two of them together need to figure out how to come up with that cash to pay back.

Given how vocal and how adamant (and, frankly, how sleazy and confident he was that he could talk his way out of any mess) Steele was over the years, consider me not totally convinced that he's really had a change of heart. It would be great if that were true, but it's going to take more than a single performance in court to convince most of us. Either way, five years in prison is still a significant prison sentence. And, now, it appears we can finally close the books on Prenda.

Over and over and over again, Hansmeier and Steele played every possible game with a single focus in mind: getting names of people to send threatening shakedown letters to. And, apparently, they took in about $6 million over the years -- though a bunch of civil cases have forced them to cough up plenty of that before the criminal charges came down.

And there is no indication that Hansmeier had any regrets about all of this. Even after his arrest, he (and his wife) engaged in an analogous scheme of ADA trolling, looking for small businesses who might technically violate the ADA, and demanding cash from them to avoid a lawsuit. Hansmeier is facing an investigation over that as well.

Oh, and then there was the whole bankruptcy fraud thing. Seriously, the list goes on and on and on and everytime you think you remember it all, you're reminded of some other really sketchy thing Hansmeier and Steele did.

So it should probably come as little surprise that the judge in the case was not impressed, and even said he considered giving him even more time in jail:

"It is almost incalculable how much your abuse of trust has harmed the administration of justice," [Judge Joan] Ericksen said during the sentencing hearing in U.S. District Court in Minneapolis.

[....] Ericksen said she considered going beyond sentencing guidelines but decided instead to impose the maximum of that range, followed by two years of supervised release. She ordered Hansmeier to pay restitution, calling it a conservative toll for his crimes. While the amount of money is significant, she said, "that's not even a major part of the harm" he'd done with his scheme.

"The major harm here is what happens when a lawyer acts as a wrecking ball," Ericksen said.

She did actually sentence him to longer than the DOJ requested, but only said he has to pay back $1.5 million, as that's the amount they apparently received after they started posting torrent files themselves in order to track down people to shake down.

John Steele's sentencing is still to come, though, unlike Hansmeier, Steele actually started cooperating much earlier, meaning it's likely that he'll get a somewhat shorter sentence.

As I said years ago, Steele and Hansmeier remind me of some people I've met over the years who basically seem to think that they can talk their way out of anything, and thus lie and scam with impunity, and when caught, just keep thinking they can talk their way out of that as well. In this case, it finally caught up to them.

Paul Levy and Public Citizen filed for declaratory judgment that the use was non-infringing, and in the process, pondered publicly whether or not Higbee had warned his various clients that they might end up in court in response to Higbee's aggressive tactics. Apparently, in the case of photographer Quang-Tuan Luong, the photographer was not particularly happy about ending up in court, and Higbee and his client quickly agreed to cut and run, despite Higbee's insistence that he was ready to take this matter to court.

I gave Higbee a chance to withdraw his client’s claims; however, Higbee had previously told me that my arguments about non-liability for infringement in an identical case were “delusional,” so we decided to give Higbee a chance to explain to a judge in what way these defenses were delusional, that is, in response to an action for a declaratory judgment.

I confess that, in filing that lawsuit, I wondered whether Higbee had ever warned Luong that he would not necessarily get to make the final decision whether his demand would end up in litigation, in that the very aggressiveness of Higbee’s demand letters, coupled with persistent nagging from paralegals to offer a settlement or face immediate litigation, sets up his clients to be sued for a declaratory judgment of non-infringement. That speculation proved prescient, because Higbee’s immediate response to the lawsuit was to offer to have his client covenant not to sue Schlossberg for infringement. Higbee also told me that he had offered to defend Luong against the declaratory judgment action for free.  It appears, however, that even such a generous offer was not enough to hold onto Luong as a copyright infringement claimant in this case. A settlement agreement has been signed; because there is no longer a case or controversy, the lawsuit has now been dismissed. 

Levy makes it clear, however, that he's actively looking for other such cases to challenge in court in response to Higbee's overaggressive demands:

Since that blog post, I have got wind of several other situations in which Higbee has claimed large amounts of damages against forum hosts.  We are considering which ones would make the best test cases.  

My last blog post about Higbee mentioned another case in which he had made a demand against the host of a forum about United States elections, where a user had posted a deep link to a photograph by another of Higbee’s stable of clients, Michael Grecco. Higbee has sued on Grecco’s behalf on a number of occasions, and Higbee told me that, unlike Luong, Grecco was a true believer who was looking for opportunities to pursue Higbee’s copyright theories in litigation.  Higbee said that he was going to be talking to Grecco to confirm that he wanted to litigate against the election forum. I could not help suspecting at the time that Higbee was blowing smoke to show what a tough guy he is.  That was a month ago, and yet so far as I can tell, Higbee has not yet got around to talking to his client about the subject. I have to wonder just who it is that wants to litigate Higbee’s legal theories.

Indeed, I have asked Higbee whether he warns his clients generally that they can be sued for a declaratory judgment of non-infringement even if they have never given Higbee authority to go to court on their behalf. He told me that he is too busy to address my questions.

He also notes that another such declaratory judgment filing has been made against the very same Michael Grecco:

That case involves another demand letter from Higbee, this time to an indigent young man named Lee Golden who lives in Brooklyn with his parents and blogs about action movies.  Because Golden included a Grecco photograph of Xena the Warrior Princess, Higbee sent his typical aggressive  demand letter, setting $25,000 as the required payment to avoid being sued. Golden responded with a plaintive email, apologizing profusely, saying that he had no idea about copyright issues, that he had taken down the photo...own, returning to its demand for $25,000 and threatening to seek $30,000 or even $150,000 if the case had to be litigated. Higbee even sent a draft infringement complaint, threatening to make Golden defend himself in the Central District of California even though many of Higbee’s actual lawsuits are filed in the jurisdiction where the alleged infringer lives, perhaps because Higbee wants to avoid having to litigate personal jurisdiction.

But Golden’s counsel likely did not know this, so Strupinsky and his partner Joshua Lurie have filed suit on Golden's behalf in the Eastern District of New York, seeking a declaratory judgment of non-infringement. We will see how anxious Michael Grecco is to litigate this case.

We see this again and again with copyright trolling operations. They often promise potential clients that this is a "no risk" way to make money. Just sign up and they'll scour the internet and you'll just sit back and receive the payments. Indeed, Higbee's site suggests just that:

Let a national copyright law firm take care of all of your copyright enforcement needs— from reverse image search to collecting payment. You pay nothing up front. We only get paid when you get paid. Best of all, by using us for reverse image search you will be eliminating the middle man and nearly doubling your profit.

His site also claims that he'll go to court for you "assuming you want us to" -- leaving out the risk of a declaratory judgment filing (and associated embarrassment for trying to shake down non-profits and personal websites of people with no money).

But not this Congress.

Instead, it has decided to bring back a truly awful idea: a special copyright trolling court, which it likes to say is the equivalent of a "small claims court" for copyright. The latest version of the CASE (Copyright Alternative in Small-Claims Act of 2019) in the House and the Senate was introduced recently, and is getting lots of love from all the usual sources.

We should note, that the House bill is sponsored by Rep. Hakeem Jeffries, along with Jerry Nadler. You may recall that those two Congressman were recently seen hosting a giant $5k per ticket fundraiser at the Recording Industry's biggest party of the year, the Grammys. And, right afterwards, they suddenly introduce a bill that will help enable more copyright trolling? Welcome to the world of soft corruption.

As we explained last year when this monstrosity was introduced as well, the bill is written in a manner totally disconnected from reality. Supporters insist it is "too difficult" to sue over copyright, yet provide no evidence that this is true. But, more importantly, the entire framing of the bill is based on the idea that those who sue for copyright infringement only do so when they have valid claims. Indeed, anyone paying even the slightest bit of attention to copyright lawsuits over the last decade would know this is laughable.

The entire bill is disconnected from reality and would only serve to make copyright trolling become an even bigger problem, and would enable an even more significant level of the copyright shakedown game, in which dubious claims of infringement are tossed around in hopes of extracting settlement fees. At a time when we should be looking to stop such extortionate acts, these bills move in the other direction. It's a joke.

But the key to ending the plague of copyright trolling has probably been best outlined in a recent decision by a US Magistrate Judge against Strike 3 Holdings, in which the judge argues using Strike 3's own statistical analysis that it is abusing the court system to the detriment of innocent people.

Judge Orenstein denied motions for expedited discovery in thirteen cases. This means that the adult video company can’t get a subpoena to identify the alleged pirates. While we have incidentally seen similar decisions, the motivation, in this case, is worth highlighting.  

In his order, the Judge writes that allowing Strike 3 to obtain the identities of the account holders creates a risk.

Specifically, it will put Strike 3 “in a position to effectively coerce the identified subscribers into paying thousands of dollars to settle claims that may or may not have merit, so as to avoid either the cost of litigation or the embarrassment of being sued for using unlawful means to view adult material.”

In other words, the Judge is noting that Strike 3's copyright troll business model is, by nature, one that should disallow it from the kind of unmasking of account holders it so desperately needs to do to make any of this work. Essentially, granting these motions in favor of Strike 3 would have the court endorsing, if not actively participating in, the systematic extraction of money from people based on fear and embarrassment. Whatever that is, it sure ain't justice.

The court doesn't stop there, however. The order continues by noting that granting the discovery of account information would almost certainly not result in Strike 3 actually bringing any cases to trial. Trial proceedings are supposed to be the point of such subpoenas, but Strike 3's own statistics prove it's not after trials at all.

Since 2017, Strike 3 has filed 276 cases in the district, but zero have gone to trial.

Of the 143 cases that were resolved in the district, 49 resulted in a settlement and 94 were voluntarily dismissed. The latter number includes 50 cases where Strike 3 wasn’t confident that the defendant is the infringer. In other words, people who are likely wrongfully accused. This means that in one-third of the resolved cases, Strike 3 has likely targeted the wrong person. This number is “alarmingly high,” according to the Magistrate Judge.

“Strike 3 acknowledges that in many cases, the ‘Doe’ it has sued – that is, the subscriber – will prove to be someone other than the person who engaged in the allegedly unlawful conduct the Complaint describes,” the order reads. “And as it has now revealed in response to my inquiry, the proportion of such unprovable cases is alarmingly high,” Judge Orenstein adds.

None of this is surprising to readers here, of course. This is how Strike 3 operates. The entire business model relies on a scattershot approach to threat letters, in which some percentage will comply and pay out of pure fear. The problem is and has always been that too many courts don't actually consider this fact when granting subpoenas to unmask account holders. Here, the court manages to put that thought into its decision.

And, as a result of these "alarming" statistics, the judge has denied the motion to unmask the account holders in these cases. It's not exaggerating to say that if all, or even most, courts took the same route as this one, copyright trolling as a business model would completely fall apart.

And that would be a very good thing.

But, as Michael Geist pointed out at the time, that hope was always fleeting, as the new law failed to put in place any punishment for copyright trolls should they simply ignore the law. And ignore the law they most certain did!

Unfortunately the new rules – as predicted – are being abused by companies who feel the law doesn’t apply to them.

As reported by TF earlier this month, anti-piracy outfit Digital Millennium Forensics (a Canada-based company), in conjunction with Elevation Pictures, is continuing to send notices that breach all of the rules, especially the demands for cash settlement. Since the publication of our article, TF has received numerous additional copies of notices sent to even more customers of Eastlink, the ISP featured in the piece. The government says that ISPs don’t have to pass abusive notices on but Eastlink told us they don’t have the capability to filter them out, since there are so many of them.

Since then, the flow has continued. TorrentFreak has received even more copies of abusive notices sent by Digital Millennium Forensics and forwarded by other ISPs. They include Shaw, one of Canada’s most prominent providers, through to Xplornet, the country’s “leading supplier” of rural high-speed Internet.

The examples continue to flourish from there. ISPs that have bothered to comment have pointed out that they have no good way of filtering the letters trolls send to them for content that violates the law. There are so many of these letters, which was the entire problem to begin with, that doing this manually would be a full on nightmare. It's also worth noting that the ISPs' job is not to confirm that third parties are complying with these new aspects of Canadian copyright law. So the ISPs are throwing up their hands, forwarding all notices along as they had been before, and nothing has changed.

Well, some ISPs have suggested how this might be fixed: the standardization of these notices and some actual teeth in the law to punish violations.

Unfortunately, Xplornet did not respond to TorrentFreak’s request for comment. Shaw Communications did, however, and a spokesperson indicated that it’s aware of the issue and is calling for measures against senders of abusive notices.

“Unfortunately, some rightsholders and their representatives may continue to disregard the requirements of the notice-and-notice regime. Shaw makes it clear to our customers that they are not obligated to comply with settlement demands,” Shaw said in its response. “At the same time, we are urging the introduction of measures in the Copyright Act to end this practice – such as monetary penalties applicable to rightsholders who issue notices that include settlement demands or other prohibited content.”

Frankly, the very least the government could do would be to give its constituents some reason to comply with its written law. After all, if the law was worth writing, isn't it worth making sure that that same law is actually followed? Not to mention that ISPs are already under threat of monetary fine if they don't comply with the law in forwarding the notices on to customers, so why not ensure rightsholders are treated the same?

Geist is back again, pointing out that this is all a problem of scale. A problem of the copyright trolls' own making.

“The problem is that the government’s approach does not penalize sending settlement notices via this system. Instead, it merely states that ISPs are not obligated to send such notices,” Geist told TF. “However, given that ISPs are still required to send compliant notices under threat of penalty, many ISPs will send all notices because it is too difficult to manually distinguish between compliant and non-compliant notices.”

Like the ISPs, Geist says there are potential solutions, such as the standardization of notices or establishing penalties for sending non-compliant notices, as suggested by Shaw. As things stand, however, things are likely to continue as they are.

Making the much-needed changes to Canadian copyright law is an exercise in mental timewasting and isn't worth whatever paper the law was written on. The encouraging part of all of this is that ISPs were able to get this law written in the first place. Hopefully, they'll be able to get the law some actual teeth as well.

Which is the standard that then should be applied to Strike 3 Holding's lawyer, Lincoln Bandlow, who had to go to court to explain why he and his firm failed to provide a status update on 25 cases, despite the court ordering he do so, and was forced to explain why he thinks the court shouldn't just sanction him. Barlow attempts to explain this all away as a simple matter of he and his firm not being able to make their technology work.

The most recent sanctions hearing in Sacramento came as a result of Bandlow and Strike 3 failing to provide a status report related to at least 15 cases within a 45-day period. On Jan. 2, Magistrate Judge Carolyn Delaney ordered Strike 3 to explain why it shouldn’t be sanctioned $250 for missing those deadlines. At least 25 Strike 3 cases are at issue on Wednesday, according to a search of Strike 3’s court dockets.

Bandlow said in court filings that Strike 3 failed to file the status reports because it had “encountered issues with its calendaring procedure” for cases in U.S. District Court for the Eastern District of California. He also said the filing mistakes were in part due to a lack of staff during the holidays and an inability to receive emails from the court.

In a separate interview, Bandlow complained that this whole issue is ridiculous, since he claims that in his copyright trolling cases there would be very little about which to update the court after a mere 45 days. He also blamed the failure to provide these status updates on his firm's spam filter. The claim is, apparently, that the firm's spam filter blocked several emails from this specific court. In addition, he and his firm also had issues using this specific court's docketing software.

None of which, mind you, would have been valid excuses were this one of Bandlow's copyright cases. You can practically hear one of Strike 3's victims proclaiming that they weren't sure how to set up proper security on their wireless access point to make sure others couldn't come along and use it to infringe. It's obvious how that argument would play to Bandlow's ears were it to be made.

It's also worth noting that this particular lawyer aand this particular law firm are not the typical copyright trolling outfits. Fox Rothschild is an enormous firm, employing more than 900 attorneys. Barlow is a higher-up at the firm. With the resources afforded to this lawyer at this firm, blaming technology for not meeting court-mandated deadlines is laughable. And, yet, here he is blaming his inability to whitelist the court's email server as the reason he should not be sanctioned for not following the court's orders.

Well, that and the ridiculous claim by Bandlow that he's already sanctioned himself.

Bandlow voluntarily dismissed the cases in which he missed a deadline and told the court he would not file new cases in the Eastern District of California until he was able to fix the technical problems he was experiencing with the court.

“In essence, we’ve sort of sanctioned ourselves in a weird way because that is $400 per filing, and all of that is down the drain,” Bandlow said.

It takes a lot to make me cry and this doesn't quite reach that bar. And it didn't meet the court's bar either, apparently as the decision came down to sanction Barlow despite his excuses and despite the voluntary dismissal of the cases in question.

In light of Mr. Bandlow’s representations at the hearing, the court recognizes that his bad faith is not the most egregious kind. The court believes that Mr. Bandlow’s apologies are sincere. At the same time, the fact remains that Mr. Bandlow delayed and disrupted the litigation here by willfully ignoring, and thereby disobeying, explicit orders and warnings from the court—conduct that is unacceptable from any attorney, let alone one with over twenty-five years of experience. See Chambers, 501 U.S. at 46. Therefore, for the foregoing reasons, the court determines that it is appropriate to impose monetary sanctions on plaintiff’s counsel, Lincoln D. Bandlow, but in a lesser amount than originally contemplated.

The sanctions only amount to $750. Still, this is the first time Barlow has ever been sanctioned by a court and it only happened once he decided to get into the trolling bed with a porn company infamous for copyright trolling. Perhaps that will serve as some kind of a warning for other attorneys out there.

Such appears to be the case when Bodyguard Productions went after Ernesto Mendoza in court, claiming that he downloaded the film via bittorrent. The problem with the case is that Mendoza is both very, very insistent on his innocence and also manages to cast about as sympathetic a figure as one might be able to find. Mendoza is in his 70s and has end-stage cancer. When Bodyguard Productions attempted to voluntarily dismiss the case when it became clear that Mendoza wasn't going to settle, he tried to push the court to force the case to go forward so that he could recover his legal expenses. Sadly, the court refused.

After hearing both sides, Illinois District Court Judge Robert Dow decided to dismiss the case, ordering both parties to pay their own fees. This was a huge disappointment for the alleged file-sharer, who now has to bear the costs for a case that he isn't allowed to fight. According to his attorney Lisa Clay, the Court should ensure that plaintiffs are ready and willing to prove their case.

“Unfortunately, the Court’s recent order does not,” Clay tells TorrentFreak. “Granting the Plaintiff’s disingenuous motion to dismiss without penalty has the real consequence of strengthening the troll business model."

That's exactly correct. The fact that copyright trolls can simply back out of a case they aren't going to have settled -- the entire point of the troll's business model -- acts as an insurance policy against its efforts. By not forcing trolls to face the potential penalty of paying legal fees, there is essentially no consequence to firing off lawsuits with no regard to the facts. That's a truck-sized loophole in the legal system that clearly does an injustice to the accused party in copyright lawsuits.

It seems that even the court in this case recognizes the problem.

On a broader scale, there’s a positive note for future defendants. In the order, Judge Dow notes that the Court should re-evaluate how it handles these cases. In addition, the potential for abuse may also deserve the attention of the Rules Committee.

“[T]he points advanced by Defendant about the potential for abuse across the universe of peer-to-peer copyright infringement cases convince the Court that it should re-evaluate its own overall treatment of these cases and consider whether to suggest that the Rules Committee in this district look into the matter as well,” Judge Dow writes.

Which is great, except we still have a 70-year-old cancer patient out legal fees after a copyright troll cut and run from its own lawsuit simply because the troll was careless in filing its lawsuits. It's quite obvious that whatever that is, it sure isn't justice.

Hi. My name's Daniel Quinn. Off the bat, there's a few things you should know about me:

1. I'm a self-taught web designer.
2. I have a background in English literature, creative writing, and publishing.
3. I'm a huge scifi nerd.

I probably value those three things from most important to least important in reverse order.

One of my favorite fandoms of all time is The X-Files. As a kid, I wanted to grow up to be as dreamy and mysterious as Fox Mulder himself. Of course I now have a lifelong affection for conspiracy theories, cerebral redheads, and aliens. I just finished writing a science fiction novel that features all three elements.

Back when dial-up modems were a thing, I loved The X-Files so much I used to list my physical address on social media as Fox Mulder's fictional apartment in The X-Files: 2360 Hegal Place Apt #42 in Alexandria, VA 23242. To this day, my physical address on Facebook is listed as Mulder’s address—something I do intentionally to confuse Facebook’s greedy algorithm. (This will all become relevant later.)

I never expected that the show which brought me so much happiness in my youth would become responsible for grief and terror at age thirty-four.

In 2016, Fox released The X-Files season 10 and broke my heart with its retconning of the series' central mystery. I wrote a fraught review about it on my personal blog, as I am wont to do whenever a fandom lets me down. Writing stuffy, literary critiques of pop culture on my blog, usually about science fiction movies or TV shows (e.g., “A Feminist Reading of Grindhouse” or “Mr. Robot is Cyberpunk for the Masses”), is about the only hobby I have time for outside of freelancing.

In both my web design work and scifi review-writing hobby, I'm rather meticulous about my IP research. I always source photography that accompanies my articles via Creative Commons-licensed or license-free photography on Flickr. I even check the “commercial use allowed” option just to be safe. That’s thanks to interesting coursework on intellectual property I took during my Masters in Writing & Publishing from Emerson College. There I learned about the copyleft movement. Larry Lessig is someone I admire. In fact, all of my website’s original content, including my blog posts, are licensed Creative Commons because I believe in its mission. As a web developer I work frequently with open source software. My very own WordPress boilerplate—for which my livelihood depends on as a web developer—is licensed open source.

This is all to say I'm not some lazy pirate who copy-pastes from Google Image Search to source photography. As a creative, I care about copyright. And as a freelance web designer, I'm managing intellectual rights all the time, whether it's by signing over the copyright to websites that I create as a work-for-hire contractor, or by selecting stock assets for my clients to buy, be that photography or software.

This winter I got a phone call out of the blue from one “Tuesday Maudlin” at the law firm Higbee & Associates claiming I was infringing on the copyright of a photographer Michael Grecco. I was more mortified than I was scared. How could that even be possible, given that I've been so careful to attribute everything I use? The photo in question was a thumbnail on my X-Files Season 10 review, a picture of Mulder and Scully I'd found listed as “Creative Commons” on Flickr over two years ago.

Over the phone, I explained to Tuesday how I source photos, and asked her whether this image had been mistakenly uploaded or mislabeled. Tuesday said her client doesn’t provide Creative Commons licenses. While I had her on the phone, I clicked madly through the Flickr archive to see if I could still find the photo there … but of course, two years on the web is an eternity, and I couldn’t find that particular one. When I offered to take the photo down right then and there (which I did), Tuesday said her client “also wants to recover the license fee that should have been paid prior to the usage.” I asked her what his license fee might be for this image, thinking that I could pay Mr. Grecco a few hundred bucks for my (albeit accidental!) usage. After all, he seemed like a legit professional, and as a freelancer myself, I have respect for honest contract work.

Tuesday said that Grecco’s license fee was $20,000.

Honestly, my heart leapt into my throat. I freaked out. Winter is my slow season. It was the middle of December, the month I take off to recoup for new business in the new year. Like most working Americans, I didn't have $20k lying around. I had major end-of-year expenses coming up. I didn't have any assets, except my millennial-sized retirement fund. Would I have to dip into that in order to pay what seemed like an absolutely crazy license fee?

I mean, I've bought stock from Getty in the past for clients. Getty can get pretty expensive, but honestly I’d never even seen a license for a single image that was more than $500. And that’s for 8,000+ pixel photos with global usage rights and unlimited print runs / digital impressions. I have some experience working in the publishing industry: $20k is what a midlist author would earn as an advance on an entire book, or what a photographer might earn for the exclusive rights to a photo that might appear on the cover of Rolling Stone, which has a paid circulation of like 1.5 million! My usage amounted to a single, 558-by-263 pixel-wide image that, according to my own analytics, reached a total worldwide audience of 98 visitors in the two years it’s been published on my personal blog. How the heck was I going to prove to Tuesday Maudlin that I innocently got the X-Files image from Flickr two years ago? And (just my luck), I couldn't find the damned thing in Flickr's ever changing archive.

I also had a lingering suspicion in my head that Tuesday might not be a real person. Who has a name like Tuesday Maudlin? Her name sounds like a character from a Wes Anderson movie. Or maybe Higbee & Associates might not be a real law firm. While she was on the phone, I Googled “Higbee and Associates.” What I found was not comforting. Today, when I do the same search I get two links from the website of the supposed “National Law Firm,” and the third from a website called ExtortionLetter.info. The fourth is from /r/legaladvice with the title “Copyright Image: $1,000 payable to firm?” The fifth, from Techdirt with the excerpt “Back in June I was begrudged with a large piece of mail that I soon found out was from a National Law Firm, known as Higbee & Associates.” (I expect Paul Levy’s and Mike Masnick’s posts from last week will soon be indexed and rise up in the rankings.) Something seemed fishy.

Tuesday then told me she'd emailed me several times about the claim. Now, I’m not one to overlook emails. I practice Inbox Zero every day. As a web designer, every missed email is a potential missed lead. It wasn't until I was off the phone that I found the Higbee emails: they had all been captured by my junk filter in Postbox. At a glance, I could see why my junk filter classified them as spam: the message headers were not DMARC compliant. Two of the three emails lacked SPF authentication and all of them lacked DKIM signatures. Tuesday’s email in particular was the spammiest looking, given the all-caps subject line “517865 / IMPORTANT LEGAL MATTER” and the scrunched together paragraphs of text with mismatched fonts. The original email links to an “online portal” and provides login credentials—all things which were, in my opinion as someone who’s created HTML emails for clients in the past, tell-tale signs of a phishing attack.

Honestly, even if I had seen them prior to the phone call, I probably would've dismissed them as elements of an automated scam. But Tuesday also claimed she'd mailed a physical letter to me; the earliest-dated email that I recovered from my junk folder also mentioned a physical letter. Where to, I asked? After all, in the past two years, I had moved to three different apartments, so I wouldn’t have been surprised if a letter wasn’t forwarded.

She gave an address: 2360 Hegal Place Apt #42 in Alexandria, VA 23242.

I was too sick to laugh. Higbee & Associates must have found Fox Mulder’s fictional address from my Facebook, and mailed it there. I told her to mail me the paperwork to my actual address, and we could go from there.

I told my wife the news when she got home. I felt helpless and ashamed. How could I, of all people, make this sort of mistake? My wife reassured me that whatever happened, we'd survive. I became less optimistic the more I learned about Higbee & Associates. I worked up the courage to download the Higbee emails into a virtual machine so I could safely open the files they'd attached to the emails. Sure enough, there was the supposedly infringing X-Files photo staring back at me, and in Higbee's letter, the scary demand:

“If forced to go to court, my client will ask for the maximum relief possible, which may include statutory damages under 17 U.S.C. §504 for up to $150,000 for intentional infringement or $30,000 for unintentional infringement. My client would also ask the court to have you pay court costs and attorneys fees. Copyright lawsuits can result in judgments, wage garnishments and liens on property. In some instances, the business owner can be held individually liable.”

The copyleft movement suddenly felt like a trap. What if other images I'd acquired from the Creative Commons were misattributed like this one? I took down ALL the posts on my blog and stayed up all night, going back to see which ones I could find again on Flickr, making a log of the attributions and screenshotting the links. If I had any doubt at all, I replaced images with better-sourced ones and live links. I couldn't afford to be ruined financially for any fandom, let alone my favorite.

Higbee & Associates brags about their high success rate and the money they’re generating for their clients. That scares me. If Higbee & Associates is in fact using automated technology to search for infringements and then issuing these demands en masse, most people will not have the resources at their disposal to defend themselves or pay the mind-boggling settlements. How many thousands of other people are in a position similar to mine, right now? Unable to afford an exorbitant fee, believing the threat is real, and terrified to lose their home over a single photo?

One of wife’s close friends suggested I get in touch with an attorney specializing in IP law. She said the demand letter looked suspect, but she was in no position to advise because her area of expertise wasn’t in intellectual property rights. My wife reached out to a women’s networking group for referrals—which led to my meeting Carolyn Homer.

Needless to say, I am so glad I did. Not only is Carolyn a nerd like me, but she lives and breathes IP. The depth of her generosity in taking on my case was matched only by her confidence and knowledge of copyright law. I started to breathe again. There were serious problems with Higbee’s demand. I could contest them, not roll over and cough up $20k.

The second post, by Carolyn Homer is now available here.

The applicable language is part of the budget implementation Bill C-86 and reads as follows.

A notice of claimed infringement shall not contain
(a) an offer to settle the claimed infringement;
(b) a request or demand, made in relation to the claimed infringement, for payment or for personal information;
(c) a reference, including by way of hyperlink, to such an offer, request or demand; and
(d) any other information that may be prescribed by regulation.

This text will effectively ban all settlement attempts. That’s good news for members of the public who are no longer at risk. However, the Rightscorps of this world will be less pleased, as it destroys their business model in Canada.

It seems to me that this actually goes further than ISPs had requested. All those ISPs had asked was to not be party to something that looks like extortion of their own customers. This law, by my reading, goes further and forbids the common settlement letter entirely. While this all still has to be voted on and approved before it becomes law, all of the early response to this news has been positive from the Canadian public. The government going against that sentiment and siding instead with copyright trolls would be an insane move, meaning that this will likely pass into law.

And then, perhaps, we can export a like law to the States. You know, to "bring our copyright laws in line to meet our international trade obligations"?

So dire is the plague of threat letters, in fact, that ISPs in Canada are using this opportunity to suggest outlawing those threat letters be included in the updates of Canadian copyright laws.

During a hearing before the House Heritage Committee last week, Pam Dinsmore of Rogers Communications mentioned that her company sends roughly 2.4 million notices per year. Like other ISPs, Rogers is not against the system itself, but it believes that updates are required.

This was the focus of an earlier hearing last month before the INDU committee, where Canadian ISPs including TekSavvy, Shaw, Rogers, and Bell shared their experiences. One issue all parties appeared to agree on is that the notice-and-notice scheme should ban settlement demands.

TekSavvy was actually more pointed in its criticism, with its representative calling out the current settlement letter schemes as designed to intimidate and mislead consumers to extract money from the uninformed. He also helpfully pointed out that these settlement letters have all the hallmarks of spam, scams, and spear phishing attempts, often designed to simply get consumers to reveal more information about themselves that can then be weaponized for more threats and demands.

“This puts ISPs in a difficult position, since we’re required to forward notices to end-users, including whatever extraneous, misleading or harmful content may be included,” he added.

TekSavvy recommended that the notice-and-notice scheme should be updated to ban these types of settlement notices as well as other unrelated info. This ban on settlement requests or other clear abuse was shared by Shaw, Rogers, and Bell.

And why not? The copyright holders and their partners did this to themselves, after all, designing a business model built on intimidation and obfuscation, and then expecting the public and government to simply be okay with all of it. The notice and notice system, after all, was designed to curtail piracy through education and transparent oversight, not through strong-arm tactics. And it's not as though outlawing settlement letters within the notice and notice system would prevent rightsholders from targeting pirates themselves. It would just mean that they couldn't rely on ISPs to do their dirty work for them.

The law firm of Higbee & Associates should know better than to go to this well twice. But it doesn't. Due diligence doesn't seem to be a priority. If it was, some of its "pre-litigation" specialists might have noticed the firm went after Something Awful in 2015 for using an image from Under the Skin in its review of the movie. Obviously, this was fair use and a little bit of web searching turns up multiple uses of the same image, suggesting it had been made available by the studio for promotional purposes.

You'd think one failure to turn Something Awful (SA) into an ATM would have been enough for Higbee & Associates. Apparently not. Richard "Lowtax" Kyanka -- having taken over SA's legal department after the departure of Leonard "J" Crabs -- received a demand letter from the law firm over the supposedly unauthorized use of a picture of (go figure) Hitler.

The law firm apparently thought the threat letter would result in Kyanka cutting a check to prevent being sued for up to and including $150,000. But the firm's stupidity goes further than simply trying to threaten a site it had failed to threaten successfully in the past. The demand letter references an image not hosted by Something Awful but one posted to a forum thread by an SA member.

Here's Kyanka's take on the legal conundrum posed by Higbee's ridiculous letter.

As you can clearly see, I had been given a bill for nearly $7,000 because somebody on the Something Awful forums linked to an image of Hitler, a file being hosted on the third-party site Imgur. "Now wait a minute Rich 'Lowtax' Kyanka," you may be saying to nobody in particular. "How can you possibly get sued for somebody linking to an image hosted on a third party site?" The answer is simple: because Higbee and Associates exist.

This garbage dicked law firm generates nearly $5 million a year by encouraging photographers to sign up with their company, then performing a reverse image search for anything matching their client's submitted photos. An automated system then flags the suspected offending site, spits out a super scary legal threat based off a template, and delivers it to the site owner. Upon receiving the notice of possible legal action, many victims freak out and pay these idiots the stated arbitrary amount of cash, under the looming threat of being taken to court for $150,000. Higbee and Associates operate one of the biggest dirtbag law firms to ever pollute the internet, preying on fear and dealing in bulk.

Unfortunately, in my 20 years of running this site, I've been forced to brush up on general copyright law, and I damn well know that linking to an image hosted on a third party image site breaks absolutely no law, even if it is digital, lossy compressed Hitler.

Kyanka's immediate response to Higbee's threat letter is both hilarious and profane, mostly simultaneously.

I have an even better idea: I'm not going to pay you a fucking dime and you can go fuck off to hell for eternity because I am absolutely in no way responsible for images hosted by a third party service, in this case Imgur. Go fuck yourselves and prey on some other website that hasn't been around for two decades and knows damn well what their legal responsibilities entail, and what they're responsible for. Your entire law firm is a straight up piece of flaming shit that tries to intimidate folks with EXPENSIVE LEGAL THREATS in the hope that your extortion scheme will work on some of them. I am not one of those people. So I cordially invite you to take your pdf, print it out, and ride it like a sybian until the cows come home. Then I invite you to fuck the cows as well.

The staff at Higbee's was presumably not amused, nor willing to ride threat letter PDFs like marital aids for the rest of eternity. It handed over Kyanka and his angry communications to one of its "pre-litigation" people so they, too, could harvest the vitriol from the seeds the firm had planted. A few more rounds of law firm employees hoping to sound serious and threatening being greeted with disdain, mockery, and creative insults followed.

Finally, Kyanka decided to do the firm's due diligence for it.

Oh, and since I'm such a swell guy, I'll send you a little graphic explaining Imgur's copyright and linking policies, which clearly dictates the copyright responsibility for each and every image is the sole responsibility of the individual who uploaded it. I'm sure it was just a freak accident that you guys somehow missed the literal first search result for "copyright law and internet image links Imgur," but it's not like you guys are lawyers whose sole job is to do such things as required by the law. Here's the link as well; let me know if you require explicit, step by step instructions detailing how to click internet links.

https://help.imgur.com/hc/en-us/art...ws-article-etc-

Maybe this finally got through to the Higbee & Associates. There have been no further legal threats issued since this last salvo by Kyanka. This is the way it should be, minus all the unpleasant interactions preceding this. A hotlinked image isn't a violation of anyone's copyright. The violation, if any, was committed by the person who uploaded the image to Imgur, not the forum poster who linked to it. A DMCA notice sent to Imgur should have been the full extent of Higbee's actions, but instead it decided to subject itself to public mockery by handling this like an overeager hobbyist, rather than the capable law firm it imagines itself to be.

Meanwhile, down in Texas, there's the UMG v. Grande Communications case, which many had seen as a parallel case to the BMG v. Cox case. This was another case that involved an ISP being bombarded with shakedown (not takedown) notices from Rightscorp, in which Righscorp and its clients felt that ISP was not willing to pass on those notices (thus denying Rightscorp and its clients the ability to collect money in exchange for a promise not to sue). As we noted back in April, while still in the district court, the Grande case wasn't going nearly as smoothly as the Cox case for those wishing to copyright troll. The magistrate judge was quite skeptical, and had tossed out entirely the claims of vicarious infringement (while somewhat skeptically allowing the claims of contributory infringement to move forward).

Vicarious and contributory infringement are often lumped together, but they are different. For there to be vicarious infringement, you have to show that the party being sued both had the right and ability to supervise the activity, and that it would directly financially benefit from the infringement. The court rejected that in the case of Grande, noting that just because Grande makes money from its subscribers, that's not enough to show that it was profiting from the infringement.

Universal Music tried to amend the complaint to show that it had "more evidence" that Grande and its management company, Patriot, were still vicariously liable -- but the magistrate judge says it's just trying to re-litigate what it lost last time. The recommendation makes fairly quick work of UMG's arguments:

The new evidence Plaintiffs rely on is: (1) Grande tracks its infringing customers; (2) these customers are “a la carte” internet customers; (3) Grande’s profit margins on a la carte customers are its highest of any business lines; and (4) Grande never terminated any user regardless of how many notices of infringement it received... Plaintiffs contend that these facts make a difference, and are enough to suggest that Grande’s failure to terminate infringers is a draw.... The Court disagrees. First, the original Complaint alleged essentially the same or similar facts. Second, the new allegations still fail to say anything about the motivations of Grande’s subscribers when they sign up with Grande. That is, Plaintiffs still fail to plead facts showing Grande gained or lost customers because of its failure to terminate infringers. Instead, the proposed amended complaint states that, “the evidence demonstrates that Plaintiffs’ Copyrighted Sound Recordings were a draw to Grande’s infringing customers, including customers Grande had identified as repeat infringers.” ... But as has been noted in prior orders, the means by which Plaintiffs contend the infringing subscribers infringed the Copyrighted Sound Recordings by use of the internet and the BitTorrent protocol, which one can access through any ISP. Again, the draw must be something more than this to state a vicarious infringement claim. The allegedly “new” facts are insufficient to overcome the deficiencies of the original Complaint.

This is important. For years, the legacy copyright players have continually tried to expand what third parties could be liable for when it came to infringement. It's always been a stretch to use both vicarious and contributory infringement claims in these ways, and it's good to see courts pushing back (though, in this case, the contributory infringement claims still have a chance...). The court directly pointing out that just because a company makes money from a client, that doesn't mean the money is from infringement is an important point that many among the copyright legacy world would like to ignore.

According to Swedish Internet provider Bahnhof, which keeps track of these cases on a dedicated website, records are being broken this year.

“Thousands of Swedes have received threatening letters from law firms which accuse them of illegal downloading. They are asked to pay a sum of money, ranging from a couple of thousand Swedish Kronors up to several thousand, to avoid being brought to justice,” Bahnhof Communicator Carolina Lindahl notes. “During 2018 the extortion business has increased dramatically. The numbers have already exceeded last year’s figures even though four months still remain.”

The over 35,000 individuals targeted totals more than the number of targets in the last two years combined. It also totals more than all of the filesharing cases in the United States and Canada combined. And, in case the point isn't sinking in just yet, that's insane. And, again, while Bahnhof today is using all of this data in its messaging to the public as to why they should be Bahnhof customers, the company's long-term goal is actually to get the government involved to clarify the law and disallow this business practice.

“It’s time to reverse the trend before another 100, 1000 or 10,000 individuals have to join the growing group of victims. The practice of sending extortion letters to internet users solely based on IP-addresses does not meet any requirements of legal certainty and must be stopped,” Bahnhof’s Communicator stresses.

“We want to see a reform of copyright law aimed at promoting artistic creation instead of the commercial interests of the copyright industry.”

It remains to be seen just how high the victim count must go before the Swedish government indeed does its job.

It didn't work. The Supreme Court is refusing to hear the case, potentially putting an end to copyright trolling in Denmark.

Unfortunately for the trolls, their hopes were shattered this week when the committee responsible for references to the Supreme Court said it would not be putting the case forward.

As a result, the May 7th decision of the Østre Landsret will stand, with Telenor and Telia no longer required to cooperate with parties involved in trolling cases.

As the article notes, the ISPs will no longer have to cooperate with copyright trolls moving forward. And that really should be the end of copyright trolling entirely, as the whole business model hinges on ISPs being forced to give up their customer information so that those customers can be targeted with the threat letters that have milked so much money from the public. This of course doesn't mean that these ISPs will never be required to hand over customer information. Rather, such unmasking can only occur at the request of police investigating criminal conduct.

Telenor Denmark’s Legal Director, Mette Eistrøm Krüger, welcomed the decision.

“Both personally and on behalf of our customers, I am really glad that we are being strictly ruled by the National Court’s decision, and we once again find that logging data should only be handed over to the police to combat serious crime,” he told Version2.

And so now we're left to hope that the rest of the world's courts will catch up to the pro-consumer stance taken by the legal system in Denmark.

In this copyright action, we consider whether a bare allegation that a defendant is the registered subscriber of an Internet Protocol (“IP”) address associated with infringing activity is sufficient to state a claim for direct or contributory infringement. We conclude that it is not.

The case involved well known copyright trolling lawyer Carl Crowell representing Cobbler Nevada LLC. As we discussed in our article on the district court decision, the actions in this case were particularly nefarious. Crowell quickly learned that the IP address in question belonged to an adult foster care home, but decided to go after the operator, Thomas Gonzales, even though he was aware that any of the many residents or staff may have actually been responsible for the infringement. Gonzales (reasonably) refused to just cough up the names and details of residents and staff without a court order, and Crowell's response was just to go after Gonzales directly. But the facts of this case made it especially easy for the lower court to highlight how a mere IP address is not nearly enough to allege infringement.

The district court properly dismissed Cobbler Nevada’s claims. The direct infringement claim fails because Gonzales’s status as the registered subscriber of an infringing IP address, standing alone, does not create a reasonable inference that he is also the infringer. Because multiple devices and individuals may be able to connect via an IP address, simply identifying the IP subscriber solves only part of the puzzle. A plaintiff must allege something more to create a reasonable inference that a subscriber is also an infringer. Nor can Cobbler Nevada succeed on a contributory infringement theory because, without allegations of intentional encouragement or inducement of infringement, an individual’s failure to take affirmative steps to police his internet connection is insufficient to state a claim.

The direct infringement part is easy. Obviously, there's no evidence presented with a single IP address that Gonzales was downloading, so it's on its face ridiculous to claim to have evidence of direct infringement.

The only connection between Gonzales and the infringement was that he was the registered internet subscriber and that he was sent infringement notices. To establish a claim of copyright infringement, Cobbler Nevada “must show that [it] owns the copyright and that the defendant himself violated one or more of the plaintiff’s exclusive rights under the Copyright Act.” Ellison v. Robertson, 357 F.3d 1072, 1076 (9th Cir. 2004). Cobbler Nevada has not done so.

The more important part here is the contributory infringement argument. Crowell/Cobbler claimed that Gonzales could be liable for contributory infringement for failing to lock down and police his internet connection. That's a pretty big leap and the court is not impressed. It first highlights the ever important Betamax ruling that you can't make a third party liable for infringement for distributing a product or service that is "widely used for legitimate, non-infringing purposes." Internet access counts. It also points to the Grokster ruling, in which the Supreme Court said that "inducement" to infringe could be seen as contributory liability. But merely failing to police your internet connection is, in no way, inducement.

Cobbler Nevada’s complaint lacks any allegations that Gonzales “actively encourage[ed] (or induc[ed]) infringement through specific acts.”... Nothing in Cobbler Nevada’s complaint alleges, or even suggests, that Gonzales actively induced or materially contributed to the infringement through “purposeful, culpable expression and conduct.” ... No allegations suggest that Gonzales made any “clear expression” or took “affirmative steps” to foster the infringement—Gonzales’s only action was his failure to “secure, police and protect” the connection.

And, based on the Betamax test, Gonzales is in the clear as well:

Providing internet access can hardly be said to be distributing a product or service that is not “capable of substantial” or “commercially significant noninfringing uses.”

The court has some additional words on Crowell trying to push his theory of contributory liability:

We note that Cobbler Nevada’s theory both strays from precedent and effectively creates an affirmative duty for private internet subscribers to actively monitor their internet service for infringement. Imposing such a duty would put at risk any purchaser of internet service who shares access with a family member or roommate, or who is not technologically savvy enough to secure the connection to block access by a frugal neighbor. This situation hardly seems to be one of “the circumstances in which it is just to hold one individual accountable for the actions of another.”

The court then upholds the lower court's awarding of attorney's fees to Gonzales, noting the "objective unreasonableness" of Cobbler's arguments.

Specifically, the court flagged as unreasonable Cobbler Nevada’s decision to name Gonzales as the defendant, even after concluding that Gonzales was not “a regular occupant of the residence or a likely infringer.” The court also considered deterrence: it reasoned that awarding fees would deter Cobbler Nevada from an “overaggressive pursuit of alleged infringers without a reasonable factual basis” while encouraging defendants with valid defenses to defend their rights. See Fogerty, 510 U.S. at 534 n.19. The court’s rationale is in keeping with the purposes of the Copyright Act. See Kirtsaeng, 136 S. Ct. at 1988–89 (a district court “may order fee-shifting . . . to deter . . . overaggressive assertions of copyright claims”).

Now, where this case may have a bigger impact is in lawsuits against ISPs for failing to police their networks. You may have heard of a few of these cases recently. Just last week Cox settled one of those cases, but it's facing an even bigger one from all the major record labels.

But that case is not unlike this one, just on a different scale. In this case, Gonzales is the ISP, and got sued for failing to police his network, despite receiving many infringement notices. As the court makes clear, that does not make him liable for infringement. In the Cox case, it too is the ISP who was sued for failing to police its network, despite receiving many infringement notices (indeed, Cox did much more than Gonzales). So it would appear that we may have a bit of a circuit clash here, in which the 4th Circuit says that ISPs can be liable for infringement based solely on notices of evidence that is nothing more than IP addresses, while the 9th Circuit (correctly) understands the implications of such a ruling, even to the point of finding it "objectively unreasonable."