US courts bash patent trolls

Posted by Mike Magee

It is starting to look like the US courts are losing patience with copyright troll companies and they are starting to find themselves on the wrong side of the law. 

Take for example Prenda Law, which thought it would be a wizard wheeze to act on behalf of porn companies. The model was simple, find a list of IP addresses which appear to be downloading your client's copyrighted material and threaten to sue them for hundreds of thousands, then offer an out of court settlement which is much lower. Normally the threat of a lawsuit is used to scare web users into paying nominal settlement fees to avoid legal costs and a big penalty. 

Prenda Law was doing rather well until US District Judge Otis Wright in Los Angeles decided that enough was enough. Last week Wright asked several Prenda lawyers to explain their legal strategy in filing lawsuits accusing hundreds of internet users of infringing porn movie copyrights by downloading the films from the web.

Seems a straight forward question, but instead of answering, the lawyers pleaded the Fifth Amendment claiming that they would be incriminating themselves. As the LA Times pointed out  this was a WTF moment in legal circles. In fact few laywers could remember a situation where a legal team would do that.

Prenda is probably regretting the fact that its lawyers ended up in Wright's court. In a ruling last year in a non-Prenda case he called copyright trolling "essentially an extortion scheme". He said that the plaintiffs gamble that because of embarrassment, many Does will send back a nuisance-value check to the plaintiff. The cost to the plaintiff is tiny but the rewards are huge.

Prenda attorney John L. Steele bragged to Forbes that he had collected as much as $15 million settling such lawsuits. Who would not pay up if a letter on your door showed up and accused you of downloading a flick called "Anything for Daddy" and pointing out that if you defend it this information will be public? But things started going wrong for Prenda when evidence was submitted that two production companies the firm supposedly represented as clients, Ingenuity 13 and AF Holdings, were shell companies Prenda lawyers set up on the West Indies island of Nevis. Prenda attorneys concealed their direct interest in lawsuits they ostensibly brought on clients' behalf, which violates court rules. 

Wright himself apparently believes that the porn companies are fronts for the trolls. The court heard questions about "Alan Cooper," who was supposed to be an officer of Ingenuity 13 and AF Holdings. Alan Cooper was the unpaid caretaker of Steele's holiday cabin in Minnesota. Cooper had been told by Steele to call him if anyone contacted him about Steele's business. Cooper has also sued Steele, alleging that his name was used on the corporate documents without his knowledge.

Prenda realised that its number was up and tried to shut down the questions by voluntarily dropping the lawsuits in Wright's court. Wright told them to go forth and multiply.  He worked out that Prenda’s method boiled down to collecting internet account numbers and "blindly picking" a "pubescent male in the house" of an internet subscriber to sue as the purported pirate. He also thought that if Cooper's identity really was misappropriated, then Gibbs and Prenda may have committed a "fraud on the court." Wright hauled Gibbs into court to explain himself and decided that it was fairly clear that someone was hiding a lot.

Gibbs' own lawyer, Andrew Waxler, tried to claim that Ingenuity and AF were distinct from Prenda, Wright growled that he could not say that with a straight face. Wright hasn't said what he'll do about Prenda, but it is likely that he will ask federal prosecutors to investigate the firm.

He might also ask for the lawyers in the case to be disciplined or disbarred. What it means is that other judges will start to look very closely at the copyright trolls they get in their courts and are less likely to allow them the free reign they had in the past.