The Rise of the New 'Copyright Troll'

, New York Law Journal

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Elizabeth McNamara
Elizabeth McNamara

The issue of whether intellectual property actions are "trolls" is by no means a new one, whether considering the now-well-established existence of patent trolls, the infamous "porn troll" or the Righthaven copyright claims. More recently, a wave of photo copyright claims against the media have been filed in the Southern District of New York, leading media entities to once again evaluate the costs of defending an action versus settling, sometimes independent of the merits.

Patent Troll Bills

In the patent arena, the concept of trolls is well-documented. On Dec. 9, 2013, the House passed the Innovation Act, H.R. 3309 (113th Cong., 2013-2014), a bill that makes numerous changes to U.S. patent law. The Innovation Act was motivated, in significant part, by concerns about "patent trolls." The term "patent troll" is not subject to a uniform definition, and in common parlance, includes both those entities that try to claim ownership over basic (and unprotectable) inventions or otherwise assert overbroad or invalid claims, as well as those entities that obtain patents primarily for obtaining licensing fees (rather than practicing the patent to produce goods), sometimes referred to as "patent assertion entities."

The Innovation Act has the support of such frequent targets of trolls as Google, Oracle and Apple, and the Electronic Frontier Foundation has heralded the act as "the best shot we've had at meaningful patent reform yet," "giving defendants access to information and the tools they need to fight back against trolls." On the other side, the former chief judge of the U.S. Court of Appeals for the Federal Circuit, the American Intellectual Property Law Association, and the American Bar Association (among others) have expressed reservations about the breadth of the Innovation Act.

At the same time, the Patent Transparency and Improvements Act of 2013 has been introduced in the Senate. While less aggressive than the Innovation Act, the Patent Transparency and Improvements Act would make demand letters sent in bad faith—that is, demand letters that assert patent rights in a manner that is fraudulent or materially misleading in order to extract "license fees"—an unfair and deceptive trade act that is subject to FTC enforcement actions. These two are by no means the only patent troll bills to be introduced over recent years, as the awareness of abusive litigation has grown. These bills, and the commentary surrounding them, illustrate how difficult it can be to devise legislation that protects the innocent/innovator without penalizing legitimate actions by rights holders.

Nuisance Copyright Claims

While the concern may not yet have reached patent troll proportions, nuisance copyright claims and lawsuits are likewise on the rise. Like patent law, copyright law is controlled by statute. In addition to the costs of litigation and discovery, various aspects of the Copyright Act, 17 U.S.C. §101 et seq., such as the threat of statutory damages and attorney fees, see 17 U.S.C. §§504, 505, make it an attractive vehicle for those seeking to exploit claims in the grey area. Also like patent reform, copyright reform is a long time in coming, and, as a result, fails to keep pace with technological developments.

Prenda Law, the notorious (and now defunct) "porn troll" firm, is one extreme example. Prenda Law is thought to have "extorted" settlements from thousands of users by misusing the copyright laws. As Judge Otis Wright II of the Central District of California explained in an order imposing sanctions upon Prenda Law:

Plaintiffs have outmaneuvered the legal system. They've discovered the nexus of antiquated copyright laws, paralyzing social stigma and unaffordable defense costs. And they exploit this anomaly by accusing individuals of illegally downloading a single pornographic video. Then they offer to settle—for a sum calculated to be just below the cost of a bare-bones defense. For these individuals, resistance is futile; most reluctantly pay rather than have their names associated with illegally downloading porn. So now, copyright laws originally designed to compensate starving artists allow starving attorneys in this electronic-media era to plunder the citizenry.

Ingenuity 13 v. Doe, No. 2:12-cv-8333-ODW(JCx) (Doc. No. 130, May 6, 2013). While recognizing a copyright holder's right to police infringements, Wright noted that "the filing of cases using the same boilerplate complaint against dozens of defendants raised the Court's alert." Ultimately, Wright concluded that the failure to perform a reasonable investigation before filing a complaint and vexatious litigation of baseless claims was worthy of a double award of attorney fees, and referrals to the U.S. Attorney for the Central District of California, the Criminal Investigation Division of the Internal Revenue Service, and each of the attorneys' respective state and federal bars. More recently, on Nov. 27, 2013, U.S. District Judge G. Patrick Murphy of the U.S. District Court for the Southern District of Illinois sanctioned Prenda Law for its pursuit of baseless claims against Internet service providers (ISPs) Comcast and AT&T, stating that "[t]hese men have shown a relentless willingness to lie to the court on paper and in person, despite being on notice that they were facing sanctions in this court, being sanctioned by other courts and being referred to state and federal bars, the United States Attorney in at least two districts, one state attorney general and the Internal Revenue Service." Lightspeed Media v. Smith, Case No. 3:12-cv-00889 (S.D. Ill. Nov. 27, 2013).

The business model of another notorious (and now defunct) "copyright troll," Righthaven, was dependent upon suing sites that reposted portions of newspaper news stories. Righthaven sued more than 200 websites, bloggers and commenters for copyright infringement, and more than 100 of those suits settled up front, out of court. Like Prenda Law, Righthaven's downfall came only after certain defendants refused to settle and put Righthaven to its proof. Then came a series of decisions that found Righthaven lacked standing to assert copyright claims. In one, U.S. District Judge Roger Hunt, of the District of Nevada, threatened to sanction Righthaven, calling its litigation efforts "disingenuous, if not outright deceitful" when it came to standing. See Righthaven v. Democratic Underground, 791 F.Supp.2d 968 (D. Nev. 2011), aff'd in relevant part, 716 F.3d 1166 (9th Cir. 2013).

Specifically, Hunt found that Righthaven has pursued 200 claims arising out of Las Vegas Review Journal articles on behalf of its publisher Stephens Media, pursuant to an agreement to share the proceeds of any damages awards or settlements, while Stephens Media kept ownership of the copyright. Despite this, Righthaven never disclosed, as required, whether third parties had a "pecuniary interest" in the outcome, an omission that Hunt suggested was part of a scheme to deceive courts into allowing suits to go forward. In another case, the court found the challenged use protected by the fair use doctrine—a defense that can be highly fact specific, and therefore often unsuited to up-front motions to dismiss. See Righthaven v. Hoehn, 792 F.Supp.2d 1138 (2001).

Photograph-Based Claims

The Prenda Law, Righthaven and related cases illustrate the fundamental problem of identifying and preventing "troll-like" litigation, when its very strategy is to discourage defendants from asserting meritorious defenses. Indeed, they teach us that it is possible to have a business model based on boilerplate complaints and meritless claims, provided that settlement demands remain at "nuisance level." So, where do trolls go from here? While that is difficult to predict, it is beyond dispute that digital media entities are increasingly the target of photograph-based copyright claims brought by a number of firms and entities.

The digital era has presented challenges for both rights holders and publishers of third-party content. On the one hand, there is the need to protect the interests of copyright holders in an era where it is increasingly easy to create and/or disseminate a high-quality digital copy of a copyrighted work—concerns which led to the expansion of secondary copyright liability through decisions like Grokster, Aimster and Napster.1 This concern is compounded by the view expressed by some that what is available for free on the Internet is free to be used and exploited. At the same time, media entities are increasingly plagued by copyright demand letters and lawsuits that appear to assert overbroad and invalid copyright claims for the purpose of extracting settlement, primarily to avoid the costs of litigation. The relative ease of creating content means that content creation and dissemination are no longer the exclusive province of large media entities. Small entities are particularly susceptible to nuisance claims because the cost of a "license" is typically far less than responding to a complaint, regardless of the merits of the claim.

In the Southern District of New York in the last six months alone, photo-based copyright lawsuits against media entities are legion, and the vast majority of these cases have settled before any responsive pleading is filed. Because it is difficult to evaluate the merits of these claims based on the complaint alone, it remains to be seen whether these suits represent the latest wave of copyright trolls, or are merely the manifestation of the efforts of some copyright holders to crack down on infringement in the digital arena.

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