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California porn firm makes money off lawsuits

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Updated: December 18, 2013 6:20AM



The dozens of lawsuits filed in northern Indiana by Malibu Media appear, at first, to be basic copyright infringement claims.

The company makes videos, and the suits accuse defendants of downloading some of those videos illegally, without paying for them.

But the videos are pornographic movies, and some of the 56 defendants in U.S. District Court in Hammond say Malibu and its attorneys are using the threat of embarrassment to get them to pay thousands of dollars without a fight.

“What they want to do is scare people and get them to settle,” Ann Rominger, dean of Indiana University Northwest’s School of Business and Economics, said.

Faced having their names publicly connected to explicit film titles, the thinking goes, the defendants will instead choose to pay Malibu a quick settlement.

One defendant who Malibu says lives in Hobart filed a counterclaim against Malibu last month, alleging the company is a copyright troll — a term for a firm that makes money not by selling a product but through litigation. He claims Malibu intentionally makes it easy to download videos, then sues people when they do.

Malibu is “formed solely for the purpose of creating copyright registrations and suing an extensive number of defendants for financial gain,” the counterclaim says.

Thousands of suits

Despite the legal contentions, everyone does seem to agree on a few points. Malibu has filed more than 2,000 copyright infringement lawsuits in federal courts across the country since the company was created in February 2011. Almost all federal cases in northern Indiana were filed this past spring; two were filed in 2012.

The lawsuits all use similar language and rely on a German information technology company that tracks bit torrent sites — websites where computer users can share digital files.

The German IT company looks for anyone with digital files of Malibu’s movies. The IT company then tracks the computer’s location. From there, Malibu needs the help of the courts. In every lawsuit, the company asks to subpoena the local Internet service provider to reveal who owns the account.

Malibu’s creators, the husband-and-wife couple of Brigham and Colette Field, have defended their lawsuits in court filings. Although the number of court filings seems large, it’s a drop in the bucket to the hundreds of thousands of people who illegally download their movies, they claim, costing them millions of dollars.

Paul Nicoletti, the lawyer who is representing Malibu in the northern Indiana cases, defended the company in an email, saying that several federal judges have ruled in Malibu’s favor, including U.S. District Judge Michael Baylson in eastern Pennsylvania, who specifically wrote that the company is not a troll in that it produces its own content and holds valid copyrights.

“My client has a very real problem with copyright infringement, and they have every right to defend their copyrights in court,” he wrote.

He added that illegal online downloading of Malibu’s film’s was the company’s greatest problem and that the only way to stop it was through the lawsuits.

Tactics debated

But defendants, law firms representing them and at least one not-for-profit group argue Malibu is abusing the copyright system by exploiting several factors, the first of which is that Malibu makes it easy for people to share its movies through bit torrent sites.

The Hobart defendant, in his counterclaim, alleges Malibu does not encrypt its movies, which would make it harder for them to be illegally downloaded. He also claims Malibu actually uploads its own videos to bit torrent sites.

“Malibu intentionally made its unprotected works available” and “knew would lead to mass distribution of its works,” the counterclaim says.

Valparaiso attorney Fred Grady, who represents the Hobart defendant, did not want to disparage Malibu and said he is still collecting evidence. However, he said he felt he had done enough research to support the allegations in the counterclaim — which was filed, as the court allows, with his client identified only as “John Doe.”

Once Malibu has the name of the defendants from the cable companies, it sends the users letters threatening to make their names public if they don’t pay to settle.

Kurt Opsahl, a senior staff attorney for the Electronic Frontier Foundation, says the costs of not settling can be considerable. Malibu’s choice of a German IT company means defendants would have to spend thousands of dollars and lots of time just to depose the employee who did the work, he said. Instead, Malibu likely offers a settlement that’s still tens to hundreds of times more than they would get from selling the movies but is just less than what a basic defense would cost, he said.

“It would be very difficult to effectively defend this lawsuit because it would cost more than settling,” he said.

Opsahl said Malibu has also been indiscriminate in whom they sue, going after the owner of an Internet account even if they have no evidence that person downloaded the videos.

That’s the case with another local defendant, identified in court filings as “Jane Doe” in Valparaiso. Her attorney, Thomas Vetne, called her as a middle-aged executive who never put a password lock on her wifi, meaning any one of a dozen neighbors could have used it to download the Malibu movies. Vetne says he has told Malibu this but the company is still pursuing its lawsuit. That’s why she’s fighting instead of settling, he said.

“She doesn’t mind exposing the fact that these people are trying to get money out of people whether they deserve it or not,” he said. “She doesn’t like the idea of giving in to bullies.”

Troll or not?

Although a Google search of Malibu Media brings up dozens of pages calling the company a copyright troll, not everyone agrees.

Rominger said one tell-tale sign of a troll is suing a large amount of people, which Malibu has done. She said she was surprised the company had sued 56 defendants in northern Indiana alone, a number Rominger said was significant. She added that companies need to take steps to show they are protecting their copyright, such as by advertising their products, clearly labeling them with a full copyright notice and taking steps to protect their digital content, such as by using encryption. She noted that people can’t copy items from IUN’s website because the university employed digital protections.

With Malibu Media, “the bottom line is, it’s a scam,” she said.

Marshall Leaffer, a law professor with Indiana University Bloomington, disagreed that companies must take so many steps to protect their copyright. He said technology encryption can be expensive and copyright owners don’t have to use it to show infringement.

“If I download something, and I have no right to do so, I’m an infringer,” Leaffer said.

He added that a true troll is a company that buys up copyrights for the sole purpose of taking legal action while not actually producing any copyrighted material. Although he had not heard of Malibu’s case before, he said the company sounds more like a cousin to the copyright troll. The differences might make it hard if not impossible to fight their legal claims, he said, because the company actually made the movies being legally disputed.

“I don’t like them, but you’ve got to admit they’re enterprising, and they’re preying on people’s vulnerabilities,” he said.

Winners and losers

Malibu has seen mostly victories in the courtroom, with many defendants, including 15 in northern Indiana, settling with little to no litigation. One case went to trial in June in the Eastern District of Pennsylvania; Malibu won a $112,500 judgment.

Information on pretrial settlements is not public, but the company did win a default judgment against one northern Indiana defendant for about $27,000.

However, some defendants in the federal courts in western Wisconsin won a small legal battle. U.S. Magistrate Judge Stephen Crocker sanctioned Malibu’s attorneys for attaching a list of all files a defendant had downloaded, including movies not owned by Malibu. Those extra files, which also are in the lawsuits filed in northern Indiana, almost always contain an even longer list of porn movies with even more explicit titles.

“One needn’t be a cynic to suppose that an intended purpose — perhaps the primary purpose” of including those extra titles “is to increase the pressure” on defendants to settle before they are “publicly linked to hardcore/deviant titles that are completely irrelevant to plaintiff’s actual claims in the lawsuit,” Crocker wrote in his opinion, issued in May.

He ordered all cases in the Western Wisconsin district stayed until other judges ruled on each one individually, and a judge in northern Illinois followed suit with the sanctions.

None of the northern Indiana defendants have so far asked for Malibu to be sanctioned. John Doe from Hobart wants the court to rule that Malibu granted an implied license of use for its works through its actions. He also wants Malibu to pay damages and his legal fees. Malibu filed a motion Nov. 7 to have John Doe’s counterclaim dismissed.

The company, meanwhile, continues to file copyright infringement lawsuits, including 22 cases nationwide in one week this month, Opsahl said.

“Evidently they think it’s worth their while to do so,” he said.



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