New Jersey Law Journal September 15, 2014 S-9 217 -N.,11.J. 857

The Brave New World of Internet Copyright Trolls

By Jonathan Bick Bick is of counsel at Brach Eichler in Roseland, N.J. He is also an adjunct professor at Pace and Rutgers law schools, and the author of 101 Things You Need to Know About Internet Law (Random House 2000).

Copyright trolls are in the busi­ness of acquiring the right to bring lawsuits against alleged

infringers and threatening to file copyright infringement claims in order to induce rapid settlements against large groups of defendants.

The term "troll" has been used in the patent arena since prior to 2000, but only recently have several nonauthor rights holders adopted a version of the patent-troll business model using copy­right rights and associated statuto­ry damages on a large-scale basis.

The Intellectual Property Clause of the Constitution (U.S. Const. art. I, § 8, cl. 8) and Copyright Act of 1976 (17 U.S.C. §102(a)) regulates copyrighted works. Infringement claims can be properly brought against "anyone who violates any of the exclusive rights of the copyright owner." 17 U.S.C. §501. The Copyright Act also affords rights holders two infringement remedies, either actual damages resulting or statu­tory damages. 17 U.S.C. §504.

Due to the extensive use of the Internet, and therefore the ease of copying copyright-protected worlcs provided by advances in digital technology, there has been an increase in copyright litigation. Accordingly, both copyright own­ers and unintentional copyright infringers are generally open to negotiating some type of com­pensation to resolve infringement-related difficulties. However, such openness has regularly been abused.

Entities such as Righthaven and United States Copyright Group (USCG), neither of which create, produce or distribute any content, have filed hundreds of copyright infringement lawsuits implicating thousands of Internet users and threaten a judgment of the maxi­mum penalty allowable by law in copyright suits ($150,000 per download). Though a judgment of that magnitude is unlikely in cases arising from a single noncommer­cial infringement, such judgment allegations are used to pressure the alleged infringers to settle prompt­ly for $1,500 to $2,500 per matter.

Righthaven LLC was a copyright holding company that entered agreements with copyright content owners whose content had been copied to Internet sites with­out permission and engaged in litigation against the owners of said sites. The Wall Street Journal described such activity as copy­right trolling.

USCG is a business registered by the law firm Dunlap, Grubb & Weaver that is engaged in suing entities who have allegedly used file sharing protocol to download certain content. USCG uses cus­tom software that monitors the Internet, records IP addresses of the file sharers, files suits in order to obtain subpoenas to force Internet service providers (ISPs) to release the identities of the users, and then sends out letters to these users threatening to sue and offering settlements in the $1,000 to $3,000 range.

Some firms, such as Getty Images, are now using automated software sometimes called bots to hunt for copyright infring­ers. When "evidence" is found, instead of sending a cease-and desist warning, these firms send a settlement demand letter. Thus, if a server has an unlicensed image stored on it, even if the image is not displaying on a website, auto­mated robot crawlers may find it, and a settlement demand letter is generated.

Getty Images uses automated robots that crawl the Internet look­ing for its images. Getty's tools are so sophisticated that if a person uses a part of one of their images in a logo, banner or button, it will be recognized The Getty Images software can find images even if they've been altered, inverted, flipped or turned upside down, regardless of the fact it has been renamed.

Getty Images uses an auto­mated system to mail out -a demand letter claiming substantial sums of damages to owners of websites which it believes have used their images in infringement of their photographers' copyright. It has been reported that Getty Images also tries to intimidate website owners by sending collec­tion agents, even though a demand letter cannot create a debt.

The fact that an image or other content has been purchased or sent from a third party is not an indemnification basis for copy­right infringement, since copyright infringement does not require intent. As a consequence of the technical protocol of copying con­tent from server to server, used by every Internet user to communi­cate via the Internet, each user is likely to engage in thousands of actions that likely constitute copy­right infringement.

Some copyright trolls have mimicked patent trolls' standard operating procedure by find­ing a large group of alleged third infringers and aggressively pur­suing settlement agreements. Copyright trolls have modified patent troll programs by introduc­ing Internet software to identify alleged infringers and by implying that maximum statutory damages are applicable in every case.

Unlike traditional copyright enforcers, copyright trolls imme­diately attempt to pressure alleged infringers into settlement through either filing a complaint ("litigate prior to notice" tactic) rather than sending cease-and-desist letters, or Digital Millennium Copyright Act (DMCA) take-down notices toasts. 17 U.S.C. §512(c).

The use of the so-called "liti­gate prior to notice" tactic was pri­marily used by firms that contract­ed for the right to "enforce" oth­er's copyrights, such as newspaper content owners. This tactic was rendered impotent by Righthaven v. Democratic Underground, No. 11-16751 (9th Cir., May 9, 2013). In that matter, the court concluded that a contract giving a party right to sue on behalf of a copyright holder does not give the party legal standing to file such lawsuits.

In particular, the court found that while an entity who claimed to be a copyright holder simply based upon a contract calling said entity a copyright owner, even though it lacked the rights associ­ated with copyright ownership, did not make it so. The Ninth Circuit explained that Righthaven lacked standing because, under Silvers v. Sony Pictures Entertainment, 402 F.3d 881 (9th Cir. 2005) (en banc), the assignment of the right to sue for infringement, without the transfer of an allied exclusive right, is impermissible under the Copyright Act. Some entities still use the "litigate prior to notice" tactic under special circumstance cases. One particularly successful special circumstance is the filing of a complaint without prior notice in pornography-related infringe­ment suits for clients such as AF Holdings v. Does, U.S. Dist. Court for the Dist. of Minn., 2014 U.S. Dist. LEXIS 43318, March 31, 2014. In this matter, the plain­tiff filed hundreds of copyright infringement lawsuits against thousand of John Doe defendants across the country for alleged ille­gal BitTorrent downloads.

Initially the U.S. District Court for the District of Columbia granted a motion to compel an ISP to comply with the plaintiff's subpoena because it was not an "undue burden." Consequently, the ISP was required to disclose information regarding the identity of 1,058 individuals who alleg­edly downloaded and distribut­ed the plaintiffs' obscure adult film entitled "Popular Demand" through BitTorrent. However, as characterized in the ruling by the U.S. District Court for Central California, the entity in question was a "porno-trolling collective" whose business model "relies on deception" and which resembled most closely a conspiracy and racketeering enterprise. Ingenuity 13 v. Doe, 2013 U.S. Dist. LEXIS 64564 May 6, 2013. As a result of this court's action, the matter is likely to be the subject of an action under RICO, the United States federal antiracketeering law.

Copyright trolls have found the Internet to be an advantageous environment. The Internet allows copyright trolls to find, commu­nicate and align themselves with copyright holders. The Internet allows copyright trolls to find and send an extortionate settle­ment letter coupled with the threat of statutory damages to coerce Internet hyperlink users into quick settlements to avoid costly litiga­tion.

Copyright trolls have also taken advantage of some courts' propensity to allow copyright trolls to obtain the identities of thousands of alleged pornography downloaders per subpoena to an ISP. The copyright trolls then use the Internet to send settlement letters to the entities identified by the ISP.

While Internet use has result­ed in an increase in copyright infringement-related difficul­ties, Congress has enacted the Digital Millennium Copyright Act (DMCA) to ameliorate said copyright infringement-related difficulties. In particular, Internet site operators may assert defenses to copyright infringement claims and alternatively argued that they qualify for one of the four safe-harbor limitations of liability set forth under Title II of the DMCA. Title II of the DMCA, 17 U.S.C. § 512, is also known as the Online Copyright Infringement Liability Limitation Act (OCILLA).