Copyright trolls like Malibu Media, Voltage Pictures, Dallas Buyers Club, TCYK, and Manny Film LLC now account for over 40% of all copyright infringement lawsuits in the United States. Over the last half decade, these and other vexatious litigants have devised a scheme to outmaneuver the legal system by exploiting the nexus of antiquated U.S. copyright law — which has miserably failed to keep up with the technology and capabilities of the Internet — with the paralyzing social stigma of being accused of stealing, in federal court, and the relative costs of paying for a legal defense versus paying the copyright troll to “settle out of court.” While it is true that existing copyright law allows up to a $150,000 statutory penalty per single act of willful infringement, copyright trolls aim for much lower hanging fruit; most district court judges use the statutory minimum of $750 as a starting point, and adjust that amount based on the egregiousness of the circumstances. Depending on how many titles were allegedly downloaded, however, at $750 each, the damages can snowball fairly quickly.
That is the precise strategy of the now infamous Malibu Media LLC, which operates the $20/mo. subscription pornsite X-art.com, but is more notoriously known as a copyright troll, for the nearly 5,000 copyright infringement cases they’ve filed in U.S. District Courts since 2012. According to Malibu’s chief legal counsel Keith Lipscomb, of the South Florida law firm Lipscomb, Eisenberg, and Baker, the majority of those lawsuits settle, for somewhere between $2,000 and $30,000. Here’s how they do it:
Malibu Media uses, more or less, the exact same complaint template to file lawsuits in every federal court across the country. Then they hire local counsel in each jurisdiction to file those complaints against unidentified Internet subscribers using the subscribers’ IP addresses, which they allegedly get from a German investigation company. After they file the complaints, they ask the court for special permission to serve a third-party subpoena upon the unidentified individual’s Internet service provider (ISP) seeking their name and address of the alleged copyright infringer. But the ISPs are required by federal law to notify the subscribers before disclosing their information. They send a letter to the subscriber notifying them about the lawsuit and the subpoena, and give them a deadline to respond, to prevent their identity from being disclosed.
If you get one of these letters from your ISP, you then have three options: (1) ignore; (2) settle; (3) fight. With very few exceptions, it’s generally a very bad idea to ignore legal papers you receive. As an aside — because I get this question/comment all the time from clients — whether the papers arrived by regular mail or certified makes very little difference. There is no greater weight or legal effect of papers sent certified versus regular U.S. Mail; the only difference is that when papers are sent certified it’s easier to prove they were received. Some jurisdictions and courts require certain legal documents to be sent certified, but regardless, you should never rely on the fact that you received something via regular mail as a defense. But I digress…
(1) Why shouldn’t you ignore an ISP letter and subpoena? First and foremost, because you will forfeit any option to keep your name from being published on the court’s docket, which includes having your name appear on documents that can be downloaded by the general public from U.S. federal courts database P.A.C.E.R. (Public Access to Court Electronic Records). Another downside to ignoring an ISP subpoena is that won’t be notified whenever there is activity on the case. If you have an attorney file an appearance on your behalf, you can not only prevent disclosure of your identity, but also your attorney will automatically be notified every time something is filed with the court.
(2) Why would you pay money to settle a case filed by a copyright troll? This is an easy answer: YOU DID IT. If you know you downloaded the titles alleged in the lawsuit, it’s usually more economical to negotiate a settlement than to fight the claims. Even if you know you did it, however, that doesn’t mean you should open up your checkbook and call the attorney listed on the ISP subpoena. Don’t talk to an attorney who represents an opposing party in litigation; nothing good will come from it. You need to have your own attorney review the court documents and the claim(s), to make sure everything is valid. You also need your own attorney to negotiate the best settlement. In most cases a good copyright attorney will save you more money off the settlement amount than he will charge as his fee for representing you in the negotiation.
(3) If you didn’t download the file(s) at issue in the lawsuit, then you should fight it. It’s that simple. Will it cost more than settling? Possibly, but not necessarily. One thing the copyright trolls don’t want you to know is that if you can show the court that they filed a lawsuit against you in bad faith, the court can — and oftentimes does — make the copyright troll pay the defendant’s attorney’s fees. Another important consideration is that when people pay copyright trolls to settle bogus lawsuits, they are just making it more likely that more bogus lawsuits will continue to be filed. So long as kids buy Justin Bieber’s songs, he will continue to record them.
Based on 1,589 copyright suits already filed by Malibu Media in 2015 alone, assuming they settle half of them at an average of $6,000, they will make $4.7 Million. Even after subtracting an average filing fee of $400 per case, they are still left with over $4.1 Million. That’s not a bad return on investment, assuming you can look yourself in the mirror every day.
If you get a letter from your ISP, don’t ignore it. Contact a copyright lawyer who has experience dealing with the likes of Malibu Media. Make sure the lawyer you hire is licensed to practice in the state where the lawsuit was filed (based on personal experience, I’ve found that this is especially important in New Jersey, Ohio, and Oregon, because of the various rules of local practice). Be honest with your lawyer; we can’t help you if you’re not. Finally, don’t delete any data from any of your computers or drives. Even deleted files leave evidence behind, and it will be found. It’s also unlawful to destroy evidence, and if you’re caught, it will usually cost you more than that whatever you tried to cover up.