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As an attorney, unfortunately there is often information that I need to be tight-lipped about when discussing a case or a particular copyright holder. Malibu Media, LLC and their implosion with Keith Lipscomb (who ran each of their thousands of lawsuits filed across the US) was one such example, but not for the reasons you might consider.

This summer, I sat back and watched what was once one of the biggest copyright trolls and their scheme implode as the relationship between the attorney hired to represent their cases across the US (Keith Lipscomb) and Malibu Media, LLC crumbled. Regardless of the screams of autonomy each local counsel hired by Lipscomb claimed in the courts, it was still plain and obvious to me that Lipscomb was running each of the thousands of lawsuits filed against single “John Doe” defendants (not only because the filings were identical, and the court documents allegedly filed by different attorneys had the same spelling errors in each filing, but because every settlement payment — regardless of which local counsel was allegedly in charge of the lawsuit — went to Lipscomb’s Florida office).

Recognizing that there is ‘no honor among thieves‘, I laughed when I learned that Malibu Media sued Lipscomb for not paying them the settlement monies him and his attorneys extorted from hundreds if not thousands of John Doe Defendants across the US, and… he appears to have kept the settlement monies for himself.

However, the reason I stayed quiet was because I knew of something going on internally at Copyright Enforcement Group (CEG-TEK), and I saw a possible reality where Keith Lipscomb got into negotiations with CEG-TEK, and he got them to agree to send DMCA letters to thousands of accused downloaders through their ISPs, but instead of asking for a $300 settlement for one copyrighted title allegedly downloaded, he would list each-and-every title from his X-Art.com siterips.

Instead of CEG-TEK sending a notice for each title allegedly downloaded, Keith would have them send one notice for the siterip [when accessed by clicking a link on a bittorrent website, and that bittorrent file wold contain possibly 100+ titles to be downloaded]. However, when that unsuspecting user logged into CEG-TEK’s copyrightsettlements.com website using the username and password provided in the DMCA notice, each-and-every title in the X-Art Malibu Media siterip would have appeared. Thus, a $300 per accused downloader settlement could have easily turned into a $30,000+ per accused downloader settlement ($300/title x 100+ titles in the siterip). This could have even been exacerbated if Lipscomb asked for higher per-title settlement amounts, as his attorneys are accustomed to negotiate with other attorneys in the $750-$500/title range.

In my opinion, a Lipscomb-Siegel/CEG-TEK marriage would have been a nightmare, and because at the time CEG-TEK was changing their business model and shifting how they send out letters and to whom (remember the Girls Gone Wild fiasco?), the timing was right for Lipscomb to reach out to them, and I was concerned that they would have accepted his plan.

[In passing, I want to note that CEG-TEK had a shake-up as well over the summer. They were changing their business model from sending DMCA notices and soliciting small $300 settlements for copyright infringement claims for just a few titles to sending notices only to “more egregious downloaders” which in turn would increase the per-person settlement amount paid to CEG-TEK on behalf of their clients. They also appear to have been changing their client base by transitioning away from little porn companies to more well-known copyright trolls (e.g., Millennium Films, LHF Productions, etc.) — copyright holders who threatened to sue downloaders (and in at least one circumstance did sue at least one client of mine in federal court.) The point is that they were changing their image from being a company who’s clients didn’t sue to a company who’s clients do sue. Lipscomb fit their former profile of bringing pornography copyright holders to the table, and he matched their new profile because he brings a strong proclivity to sue defendants who ignored the notices. Thus in a possible reality, I saw Lipscomb meeting with CEG-TEK, and I did everything I could behind the scenes to avert this reality.]

Now we are roughly six-months later, and I am happy to share that the marriage between Lipscomb and CEG-TEK never took place, and CEG-TEK is no longer in a place where they would accept Keith Lipscomb or the $10K/client+ settlement amounts he would have brought to the table.

For this reason, I am sharing the story of this nightmare which — even though the ‘stars aligned’ — never happened (and thankfully, will never happen).

…there is new news for Lipscomb’s former Malibu Media, LLC client. I will post about that next.


CONTACT FORM: If you have a question or comment about what I have written, and you want to keep it *for my eyes only*, please feel free to use the form below. The information you post will be e-mailed to me, and I will be happy to respond.

NOTE: No attorney client relationship is established by sending this form, and while the attorney-client privilege (which keeps everything that you share confidential and private) attaches immediately when you contact me, I do not become your attorney until we sign a contract together.  That being said, please do not state anything “incriminating” about your case when using this form, or more practically, in any e-mail.

JOHN STEELE ARRESTED.

johnsteelearrested

We learned this morning that John Steele was arrested under 17 counts of mail fraud, wire fraud, money laundering, and perjury. I have detailed the charges lower down in the article, and a link to the Star Tribune article can be found here (and sincere kudos to both DTD & SJD for breaking this story).  The link to the indictment itself can be found here.

For those of you who became readers more recently, one of the first prolific copyright trolls was John Steele, formerly from Steele Law Firm PLLC, then from Steele|Hansmeier, then most popularly, from #Prenda Law Inc. (that last name even earned itself a hashtag and a group of followers on Twitter).

John Steele hired many lawyers across the US who acted as his “local counsel” just as Keith Lipscomb later did on a larger scale with the Malibu Media, LLC [x-art.com] copyright holder. [As I’ve written before, I believe that Voltage Pictures, Inc. is doing the same thing in a manner which has not yet become public knowledge with their Dallas Buyers Club, Fathers & Daughters, September Productions, Cell Productions, and a number of other non-pornographic copyright infringement cases slowly making their way through the federal courts.]

The relevance here is that John Steele was the original kingpin, and TODAY HE WAS ARRESTED for the following:

COUNT #1) Conspiracy to Commit Mail Fraud and Wire Fraud (18 USC §1349) [using the U.S. mail to extort settlements from bittorrent defendants]

sh-clip1-mailfraud

COUNTS #2-6) Mail Fraud 18 USC §1341 [using the U.S. mail to send “scare letters” threatening to sue accused John Doe Defendants unless they settled the claims against them.]

sh-clip2-mailfraud
COUNTS #7-16) Wire Fraud 18 USC §1343 [using the internet to process settlement checks and upload torrent files containing porn which they would later track and sue defendants for the download thereof]

sh-clip3a-wirefraudsh-clip3b-wirefraud

COUNT #17) Conspiracy to Commit Money Laundering (18 USC §1956(h)) [for the transfer of settlement funds received, knowing that those funds were proceeds from unlawful activity, and disguising the nature, source, ownership, and control of those proceeds.]

and,

COUNT #18) Conspiracy to Commit and Suborn Perjury (18 USC §371) [by scheming to conceal and disguise their involvement by providing false and misleading testimony and declarations, for example, and Mark Lutz (the paralegal) was really the CEO behind all of their activities, etc.]

In short, there is so much to say about this story which has been an evolving saga since 2010 (now six years and counting).  Many internet users were hurt by their activities, and the injustices that John Steele, the Hansmeier brothers, Mark Lutz, and the others more well known as “the Prenda gang” perpetrated on so many thousands of accused John Doe Defendants are still being copied by many copyright troll attorneys even today.

My personal opinion is that this arrest should be a warning sign to other copyright troll attorneys who are still filing lawsuits against John Doe defendants even today using the same tactics described here.  The scheme described in the indictment has not been stopped, and it continues (albeit in more hidden forms where attorneys go through such great lengths to make their outfit appear legitimate).  

My only message to the other copyright trolls perpetuating this scheme is not that “I’m watching,” or that “you’re being seen by the internet bloggers for what you are,” but that the U.S. Federal Government is watching.  

John Steele’s problems are not over.  There are still other departments likely analyzing their activities.  The one department that comes to mind is the Criminal Law Enforcement arm of the Internal Revenue Service (IRS).

Other Links of interest relating to this topic:

DieTrollDie: John Steele & Paul Hansmeier (Steele|Hansmeier, AKA: Prenda Law) Arrested – December 2016
Fight Copyright Trolls: Steele and Hansmeier Have Been Indicted On Fraud, Money Laundering Charges
ArsTechnica: Prenda Law ‘copyright trolls’ Steele and Hansmeier arrested

…and likely many others to come.


CONTACT FORM: If you have a question or comment about what I have written, and you want to keep it *for my eyes only*, please feel free to use the form below. The information you post will be e-mailed to me, and I will be happy to respond.

NOTE: No attorney client relationship is established by sending this form, and while the attorney-client privilege (which keeps everything that you share confidential and private) attaches immediately when you contact me, I do not become your attorney until we sign a contract together.  That being said, please do not state anything “incriminating” about your case when using this form, or more practically, in any e-mail.

DISCLAIMER: In this article I speak a lot about plaintiff attorneys cheating their own copyright holder clients, billing them “by the hour” (rather than the conventional method of accepting the copyright holder clients “on contingency”), and in some cases, wasting time to generate additional billing to their own clients.  It is my observation and opinion that this is happening, but short of a lawsuit like we saw with the Dallas Buyers Club copyright holders against their Voltage Pictures licensee, it is difficult to prove that such things are taking place.  However, “honor or dishonor among thieves” is not the topic or the point of the article — the point of the article is that plaintiffs are dragging defendants further into the federal lawsuits by naming and serving them, and it is my opinion that it is still possible to obtain a settlement, even after a client has admitted guilt in an answer to a deposition question.

It is a sad day when trolls force those they’ve accused to become legal experts and to stick their toes into the federal courts to defend themselves. In the attached article, DTD is correct that lawyers (myself included) can get expensive, and defending a case (e.g., answering a complaint, showing up and defending a deposition, answering the various requests for information that are required in a federal lawsuit, etc.) is often more expensive than simply paying a copyright troll plaintiff a few bucks to make them go away.

Unfortunately (at least in my Texas Southern District federal court), the copyright-troll attorneys appear to be billing their copyright-holder clients BY THE HOUR (which differs from the old model of a plaintiff attorney agreeing to take a case on contingency and only sharing in the settlement profits believing [the lie] that “they’ll make millions going after John Doe Defendants”), so these ‘hardened’ plaintiff attorneys seem to be running-up the bill by dragging the defendants through the mud — naming them, serving them, filing documents, and wasting everyone’s time.

In short, while I agree that IN NORMAL CIRCUMSTANCES doing what DTD suggested (filing an answer with the court and fighting your case) would normally not be something one would ever dare do [at least without a lawyer holding his/her hand, or sitting in and defending a deposition], in today’s evolution of the bittorrent cases, filing an answer and at least being willing to endure the legal process until a settlement is offered (and a settlement is usually offered eventually) has become a necessity.

WHY BEING FORCED TO ANSWER QUESTIONS IN A DEPOSITION MIGHT LEAD TO A SETTLEMENT:

Let’s take a quick example.  In the typical scenario, the goal in representing a client who wants to settle is to contact the plaintiff attorney on the client’s behalf and negotiate a settlement.  For a plaintiff attorney who is billing his copyright troll client by the hour (as is what appears to be happening in the Texas bittorrent-based copyright infringement cases), agreeing to a settlement is too easy of an outcome because the plaintiff attorney does not make the kind of money he could make “dragging the defendant through the mud while charging his client hourly to do so.”  (Remember, as we saw with the Voltage / Dallas Buyers Club cases, a crooked attorney steals not only from his victim [the accused defendant], but also from his client (as we saw in the Voltage / Dallas Buyers Club cases where Voltage was sued for failing to pay Dallas Buyers Club monies earned and owed to it through its copyright enforcement activities)).

More likely than not, the plaintiff attorney’s client (the actual copyright holder seeking to “monetize” or “enforce” the rights given to him via his copyright) is not aware that the attorney is over-billing (e.g., engaging in such “mud-dragging”, “revenue-producing” activities often cannot be proven, and thus it continues until the copyright holder gets tired of paying his attorney’s bill).  Thus, free of scrutiny from his client, the plaintiff attorney needlessly exacerbates the situation by demanding from the defendant something unreasonable (e.g., that unless the defendant is willing to agree to sign an explicit admission of guilt prior to being made aware of the kind or amount of settlement he will be offered, there will be no settlement).  [FYI, this is something no sane person would agree to.]  As a result, the defendant refuses to admit guilt, he gets named and served, and he is forced to spend thousands of dollars more to defend himself.  Why?  Because his plaintiff attorney figured out a way to milk not only him (the defendant), but his copyright-holder client as well.

There are a number of steps that happen after being named and served, but the point is that eventually, the plaintiff attorney is going to schedule a deposition (where the defendant will need to answer questions “under oath,”) and the defendant is going to tell the truth about what happened.  If the download indeed happened, this will come out in the deposition.

However, this “nightmare” fear that the defendant will “admit guilt” will only cause one result — the plaintiff will have proof that at trial, based on the information elicited from the defendant in the deposition, that defendant could be held liable for the $150,000 in statutory damages.  But then… how many of these defendants have $150K sitting around in their mattresses or in their bank accounts?  And if they do, don’t you think that instead of paying the judgment, they would rather hire a bankruptcy lawyer and file for a bankruptcy to discharge the copyright infringement judgment in bankruptcy?

In short, the worst-case-scenario in a deposition is that the defendant admits guilt, which is often what will likely happen if the defendant is the downloader of the copyrighted film.  But then after all this excitement, the plaintiff attorney and the copyright holder still want to get paid (and they know they are likely not going to collect anything by obtaining a $150K judgment against the defendant).  This is why the plaintiff attorney will likely initiate settlement talks with the defendant, taking his financial circumstances into consideration.

This is not to say that settling a case right away (and before being named and served) is no longer an option — there are multiple copyright holders filing in the Texas and New York courts, including Criminal Productions Inc., September Productions Inc., CELL Film Holdings LLC, the infamous Malibu Media LLC, Fathers & Daughters Nevada LLC, Dallas Buyers Club LLC, and the related non-bittorrent copyright holders which include DISH Network L.L.C. (not so much anymore) and Siemens Product Lifecycle Management Software, Inc. (a software company), each of whom have their priorities and specific instructions on how they would like their plaintiff attorneys to handle the lawsuits on their behalf.

But, what I do want you to glean from this commentary (really, it’s an article, but I did re-blog DTD’s article and I need to stick to that topic), is that plaintiff attorneys ARE naming and serving defendants, and it should be expected that this could happen — and if a defendant is named and served, they could still negotiate a settlement.  But be aware that in order to get to that point, the plaintiff attorney (who might be motivated by maximizing his billing to his own client [think, stealing from you AND stealing from his own client]) might drag you through a deposition and a number of steps before he accepts a settlement from you.

LAST NOTE: BILLING IN “BLOCKS.”

I agree that lawyers are expensive simply because we charge for the time it takes to complete each step of the legal process. However, many attorneys (myself included) already know how much time each step will take, so “flat fee” billing is an option (understanding that billing would happen based on timelines of where you are in the lawsuit).

Thus, it might make sense to hire an attorney who charges you a flat fee for a certain “block” or piece of the lawsuit (e.g.,

BLOCK 1: FROM GETTING NOTICE OF THE LAWSUIT THROUGH BEING NAMED AND SERVED [WITH THE INTENT OF NEGOTIATING A SETTLEMENT PRIOR TO BEING NAMED AND SERVED].

BLOCK 2: FROM BEING NAMED AND SERVED (E.G., FILING AN ANSWER WITH THE COURT, PROVIDING ANY NEEDED DISCLOSURES, FILING ANY PROTECTIVE ORDERS, SETTING DISCOVERY TIMELINES).

BLOCK 3: FILING INTERROGATORIES AND REQUESTS FOR PRODUCTION, AND ANSWERING INTERROGATORIES AND/OR REQUESTS FOR PRODUCTION.

BLOCK 4: PREPARING FOR AND DEFENDING A DEPOSITION.

BLOCK 5: SETTLEMENT NEGOTIATIONS AND RELEASE OF LIABILITY.  Or, BLOCK 5A: FILING A SUMMARY JUDGMENT MOTION TO RELEASE DEFENDANT FROM LIABILITY,

…AND SO ON, BLOCK 6: …TRIAL (my opinion, unlikely, unless the copyright holder figured out a way to prevent the deep-pocket defendant from filing for bankruptcy).

I have laid these out as a template, as each case and each copyright holder often needs to be handled differently.  Typically, clients were able to negotiate a settlement and be released from liability with just BLOCK 1.  However, as we discussed above, we are seeing more-and-more that plaintiff attorneys are taking defendants deeper into the lawsuits (“deeper down the rabbit hole, so to speak”), specifically past the “naming and serving” stage, past the answer stage, and into the discovery stages before considering or accepting settlements.  I am not one to advocate doing this on your own, and if you could afford an attorney (me, or anyone else), that is the safest way to go.  But if hiring me or another attorney is not an option, fighting this on your own (called, “pro se”) is the best alternative, and DTD’s article gives you a good first and necessary step in getting the ball rolling.

As I said before, good article, DTD!

Caveat – I’m not an attorney and I’m not practicing law. This is simply my thoughts and views based on what I see concerning BitTorrent (BT) Copyright Infringement Trolls. If you decide you need legal advice, please hire a knowledgeable attorney. IF you truly cannot afford an attorney, here at least is one possible option. […]

via Answering A BT Copyright Troll Summons/Complaint — DieTrollDie


CONTACT FORM: If you have a question or comment about what I have written, and you want to keep it *for my eyes only*, please feel free to use the form below. The information you post will be e-mailed to me, and I will be happy to respond.

NOTE: No attorney client relationship is established by sending this form, and while the attorney-client privilege (which keeps everything that you share confidential and private) attaches immediately when you contact me, I do not become your attorney until we sign a contract together.  That being said, please do not state anything “incriminating” about your case when using this form, or more practically, in any e-mail.

Monday’s order against John Steele / Prenda Law Inc. / Steele|Hansmeier (no matter which of these entities hurt you through their “copyright trolling” activities) is nothing other than a wonderful victory for justice, and I thank and commend the lawyers involved in bringing justice to one of the worst sets of copyright infringement (bittorrent-based) cases I have seen in my law career.

My apologies for leaving attorneys out of this (as there were many who were involved in making this happen) and for my lack of recollection of the details, but immediate kudos goes to Paul Godfread who served John Steele while he got off of an elevator as soon as he realized that his client Alan Cooper (who did landscaping for Steele) had his identity stolen by Steele and his signature forged as the mastermind behind all of the bittorrent cases.

This was a common theme in Steele’s lawsuits — pick a patsy (whether it was Alan Cooper, Mark Lutz [his paralegal], or Paul Duffy [rest in peace]), elevate that patsy to be the “mastermind” behind all of the lawsuits, hire local counsel across the U.S. to file lawsuits, and run every lawsuit like the captain of the ship while being tied to none of the lawsuits for liability purposes.

The story goes much deeper and it involved many twists and turns, but bottom line, through the hard work of Paul Godfread, Morgan Pietz, Jason Sweet, Erin Russell, Steven Yuen, David Madden, and so many more attorneys that I cannot even remember, AND the almost daily blogging by bloggers such as Sophisticated Jane Doe (FightCopyrightTrolls.com) and DTD (DieTrollDie.com), none of this would have happened and these guys would still be suing hundreds of John Doe defendants at a time in their newest scheme (whether that be accusing defendants of violating the Computer Fraud and Abuse Act (“CFAA”), or shaking down companies for violations of the Americans with Disabilities Act (“ADA”), etc.).

As a result of the judicious reporting of the Steele|Hansmeier / Prenda Law Inc. activities, their scheme has been halted, and the crew are being investigated by the FBI, and (I’ve heard, maybe even) by the IRS for tax evasion.  Paul Hansmeier (one of the Hansmeier brothers) has been disbarred, Steele (I believe) still has his law license (although I remember Steele withdrew from the practice of law himself before being disbarred), and Mark Lutz (the “paralegal” or the “mastermind,” depending on when you ask him) is “in the wind.”

Most importantly, as of Monday, the “Alan Cooper / Paul Godfried” case defending against Steele and Prenda Law Inc. (Case No. 1:13-cv-01569 in the ILND Court) [also known as “Prenda v. The Internet”] has been won.  Judge John Darrah (IL) awarded the defendants $162,448.74 in attorney fees and costs, $11,758.20 in sanctions, AND $500,000 in punitive damages (see Judge’s Order).

Now I am no longer sure whether Prenda Law Inc. has the assets to pay these fees (because if I remember correctly, as part of their scheme, they siphoned the $4-5 Million or so in settlement monies out of the law firm and into an offshore trust in Nevis.

My opinion is that justice is slow to act, and while this is a good result, it does not benefit any of the thousands and tens of thousands of defendants who had their lives destroyed and their savings decimated by these attorneys.  I still think that the justice system failed its people because judges got lazy for years and failed to stop the racket, even when they knew of their activities.  Even today as an outgrowth of the Prenda Law Inc. / Steele|Hansmeier empire, we find Malibu Media LLC lawsuits, Voltage Pictures lawsuits [including Dallas Buyers Club LLC, Fathers and Daughters Nevada LLC, Cell Productions, Criminal Productions Inc.], and too many other “copyright troll” lawsuits which are still rubber-stamped DAILY in the federal courts by judges who ARE AWARE and who WERE AWARE of the “mass bittorrent lawsuit / copyright trolling” problem when the cases initially were filed as early as 2010.

In short, on 5/6/2015, I wrote an article entitled,

No Orange Jumpsuits Predicted For Prenda Law Inc. Just sanctions.

I hate to see that it has been almost seven years since these cases started showing up (six years for team Prenda), and nobody has been jailed.  Judges have failed to guard the gates leading into their courtrooms.  Attorney Generals have sat on their hands and done nothing.  Lawmakers have done nothing.  Bar associations have done nothing.  Thus, I continue to defend these cases in whatever form they have changed into, but I too remain jaded.  This result is a good result, and the FBI/DOJ/IRS so-called investigations are nice to see (referring to SJD’s web logs of individuals visiting her blog), but I am not moved nor is my heart [on behalf of all those who have been affected by this] made whole by this ruling.

Okay, I didn’t expect to go here with the blog article, but in short, awarding $500,000 in damages against Prenda Law Inc. is one wonderful step in the right direction.  I just still want to see orange.

There is a new problem that I am encountering where software developers are writing code in order to catch downloaders – not in the download of the software, but in the illegal USE of that software.  These software developers – with knowledge of the accused IP address of the so-called “pirates” are hiring attorneys to send out DMCA settlement demand letters, often requesting a hefty settlement for the piracy or use of that software without authorization.

Unlike the bittorrent cases that we have seen over the past six years — where an internet user would be caught downloading movies, music, or “scenes” using bittorrent or Popcorntime software (where the connection to other bittorrent users in a “bittorrent swarm” would reveal the IP address of the downloaders) — software developers are increasingly building in to their new software the capability to “phone home” to the developer. When the software “phones home,” it reports certain information to the software developer, including the IP address of users who are actively using the pirated software at that moment.

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When a downloader accesses a “pirate” site (e.g., The Pirate Bay), and downloads a piece of software with a “crack,” that crack alters the software code, to allow it to be used in a “registered state” (e.g., cracked software will allow a user to enter a serial code to register the software whereas in an “uncracked” state, that serial code would be rejected.  Thus, the user sees a message such as “your serial code has been accepted.  Thank you for registering your software.) This “registered” state allows the downloader to actively use the software; however, it does not stop the software from phoning home.

Very often included in the cracked software package will be what is known as “a .NFO file,” (which is a text file, and “NFO” sounds like “info”) where the hacker, a.k.a. the “cracker,” will instruct the user to block the software from connecting to outside networks (often advising that the downloader use a software firewall, such as Comodo Firewall). Conventionally, the purpose of this instruction to the downloader is to avoid the common scenario where the software developer automatically updates the software to work around and invalidate any cracks which it discovers in the wild. As a result, the downloader would find that his once-registered software is no longer registered.

Some software developers who have become savvy to this trend will create a pop-up screen which alerts the downloader that his IP address has been flagged and gives him an opportunity to purchase the software at a discounted rate.  By using this method, the software developer attempts to turn a pirate into a paying customer in a manner that is both ethically and morally sound.  However, and pardon my jaded view of the matter, but people get greedy, and software developers get frustrated with the piracy of their software, and thus they often turn from good business judgment to using the law as a prickly weapon to sting those caught downloading their software.

And with this greed, here is the trend for which I wrote this article.  I am now seeing a trend that the software developers are contacting attorneys and asking those attorneys to use the Digital Millennium Copyright Act (“DMCA”) rules to force the ISPs to send settlement demand letters to the internet users who are suspected of illegally using that software without a license.  However, instead of trying to turn that downloader into a paying customer, the software developer decides instead to gouge the internet downloaders into paying a bloated fee for a software license. In this scenario, this internet user receives a letter demanding that the user purchase the pirated software for an amazingly high amount of money, for example, $5,000-$20,000. If that internet user does not purchase the software as the letter demands, the threat of a copyright infringement lawsuit looms.

Now the first company you might think of when reading this article is the Siemens Product Lifecycle Management Software Inc. company, who is currently suing John Doe Defendants for the download and unlicensed use of the Siemens NX software.  However, in defense of their lawyers, the Siemens attorneys are simply trying to stop engineers and companies who are using their software in a commercial manner from profiting from the use of their software without a license.  They are not gouging (so far as I know), and my personal experience with their attorneys have been (so far) positive.

Thus, the focus of this article is on other software developers and copyright holders who have begun to mimic the Siemens model of suing (or here, sending DMCA settlement letters through the ISPs and threatening to sue) users, and attempting to force them to purchase an enterprise-level, multi-thousand-dollar software license or face a copyright infringement lawsuit in a Federal court, even if they have absolutely no legitimate use or benefit from “owning” that software.

To the internet user who receives such a letter requesting a settlement:  It is important to know that following the instructions of the software developer and purchasing a license (even an expensive one (e.g., a $5,000 license where the software itself costs only $150) does not protect you from being sued. Rather, your compliance may simply operate as an admission of guilt. Instead of simply following the instructions of the settlement demand letter, here is why it is advisable to STOP, THINK, RESEARCH THE TOPIC, and hire an attorney (me, or any other attorney competent in both copyright litigation and software licensing) to resolve the claim or claims against you.

First, the attorney that you hire will provide a legal “buffer” between you and the copyright holder’s attorney. Your attorney will be able to speak on your behalf without admitting guilt, whereas an accused defendant speaking alone to the copyright holder’s attorney might accidentally claim that they were only using the software to test the software (an act which according to the law would be copyright infringement, and would subject the internet user to statutory damages of $150,000 or more if there are multiple instances of infringement). Thus, an attorney can stop the copyright holder’s attorney from contacting you directly by putting them “on notice” (a legal term) that the attorney is representing you and, thus, all communications must go through the attorney.

Additionally, the attorney that you hire (knowledgeable in both copyright law and in software licensing) would be able to negotiate a settlement to allow you to purchase a license at a steep discount from the “gouging” amount that the copyright holder’s attorney was initially asking for in the settlement demand letter. Moreover, your attorney could obtain a release of liability, releasing you from all liability surrounding the unlicensed use and the unlicensed copying of the pirated software – something you would not be in a position to negotiate if you were handling the matter.

Similarly, [or in the alternative,] your attorney might negotiate a software license to allow you to pay for your “experimental” use of their software.

If you are a student, then it may be a good strategy to have your attorney negotiate in the settlement agreement to allow you to purchase that product at a student discount at your local college as your “settlement payment.”

 The above are all options that an experienced copyright/software development attorney (me, or anyone else) would be able and knowledgeable to negotiate on your behalf.  Your attorney would be able to oversee the payment of the licensing fee or the purchase of the actual software [for your own future legitimate use] and to obtain for you a written release of liability from the software copyright holder’s attorney, which means that following the conclusion of the settlement or the signing of the software license, you would never be sued for copyright infringement or any sort of piracy in a Federal court.

These are the benefits of hiring an attorney for your settlement demand letter issue rather than simply going out and paying whatever fine is requested of you.  Remember: Following the copyright holders instructions to pay them a fee or to purchase a piece of software after-the-fact (after the unlicensed activity or infringement occurred) will not provide you any protection.  Paying a settlement fee alone will not provide you with a settlement agreement or a release of liability.  Without a release of liability, you could still be sued in a federal court for copyright infringement, piracy, or any other relevant law relating to the unlicensed use, piracy, and possibly the cracking of software.

OTHER ARTICLES ON THE SIEMENS PLM SOFTWARE CASES:

How an attorney should handle a Siemens PLM Software, Inc. lawsuit, on 1/11/2017.

Siemens PLM NX-based lawsuits – converting accused engineers into loyal customers, on 1/9/2017.

Software Developers are now tracking piracy through the USE of downloaded software, on 9/9/2016.

Siemens Software Case IS a Bittorrent Case, on 6/20/2016.

What to do about the Siemens Product Lifecycle Management Software Inc. v. Does case (TX), on 1/16/2016.

CONTACT FORM: If you have a question or comment about what I have written, and you want to keep it *for my eyes only*, please feel free to use the form below. The information you post will be e-mailed to me, and I will be happy to respond.

NOTE: No attorney client relationship is established by sending this form, and while the attorney-client privilege (which keeps everything that you share confidential and private) attaches immediately when you contact me, I do not become your attorney until we sign a contract together.  That being said, please do not state anything “incriminating” about your case when using this form, or more practically, in any e-mail.

[NOTE: I might be accused at a later time of stating that piracy is a black market SOLUTION to the copyright problem using the URL title of this article as “proof” that my initial thought was that it was a solution, not a symptom.  Rather, this was a mistyping error (I was looking at a “Group Buying is one SOLUTION to fix the broken copyright system,” note and correspondingly used that word in the title.  Because I did not want to interrupt the publication of this blog (in which the old URL was posted to Twitter, Facebook, etc.), I left it as it is.]

This blog post is a response to the “Close to Anonymity” author who is proposing a “group buy” solution to the copyright problem. It is also a follow-up article to my “Group Buying” Through The Eyes of Piracy article written on August 24th, 2016.

[To the author:  Once again, I want to reiterate to the author that I wholeheartedly support the concept of group buying as he proposes it. It is clear to me that he has put a tremendous amount of time and effort thinking this through, specifically on how to implement it. I support him 100% and there needs to be more individuals like him to speak out to fix the broken copyright system.]

The running theme of this blog has been that the copyright advocates (MPAA / RIAA) and copyright holders are over-exerting power given to them by the copyright statutes. Further, the copyright holders are focusing their efforts not on the creation of new and useful content, but on the extreme monetization of old and recycled content, often using unethical means (unconstitutionally high [$150,000] statutory damages for copyright infringement) to achieve their financial goals. I would suggest that while piracy is a legitimate problem, it is a symptom of greed, dishonesty, and an unwillingness to make content reasonably available to the consumer at a price the consumer is willing to pay for that content.

Instead of fixing the problem, those in power have called our side names, e.g., the “copyleft,” or the “pirate party,” whereas most of us who fight copyright holders believe staunchly in copyright, but disagree in the way their enforcement has been applied, often lobbying politicians and lawmakers and asking them to increase penalties and punishments to those caught infringing their copyrighted content, while at the same time clamping down on providing avenues for those same consumers to purchase or view the content lawfully at a reasonable price.

The reality is that a media company selling a piece of software for $100 would in fact claim that [of the 9 individuals who came together to purchase that piece of software at $10 a piece,] if the “group buy” were not available, *IF at least two* would have purchased the software product at full price, they would have lost profits under the group buy model.

*THIS IS THE FALLACY WITH THE COPYRIGHT HOLDERS — THEY FALSELY BELIEVE THERE WOULD BE A MARKET FOR THEIR PRODUCT IF PIRACY (OR IN YOUR CASE, A GROUP BUY) WERE MADE IMPOSSIBLE, AND IF YOU PIRATE SOFTWARE OR IF YOU MAKE GROUP BUYING OF COPYRIGHTED MEDIA POSSIBLE, IT WOULD BE YOUR FAULT THEY HAVE LOST THE PROFITS THEY WOULD HAVE BEEN ENTITLED TO.*

Assume for a moment that you are correct in that there would not be two purchases, possibly NOT EVEN ONE at full retail price. The copyright holder would rather make ZERO sales ($0 profit) rather than risk that multiple (here, 9) individuals would group together to make ONE purchase because they would see that as a disaster for their bottom line and they would count each group buy as a loss (here, of 9 potential sales).

Realistically, the answer is that the market should determine the price of a product, and not a copyright monopoly, threats under the Digital Millennium Copyright Act (DMCA) or statutory damages for copyright infringement. The existence of a “black market” for their copyrighted products (here, through piracy) is a strong indication to the copyright owners that they are either 1) mispricing their products, or 2) that they are failing to make them adequately available to the paying public.

It is 12:30am and I really do not have time to go into this, but I just learned that Dallas Buyers Club, LLC is suing Voltage Pictures, LLC in Montgomery County, TX for, among other things, not paying fees to Dallas Buyers Club for the licensing fees owed to them.

[Hat tip to SJD @ FightCopyrightTrolls for breaking the story.  Her link to the lawsuit can be found here.]

It appears from the TX case filing (Cause No. 15-06-06049) that Voltage Pictures, LLC approached Dallas Buyers Club, LLC and offered to pay for the license to act as Dallas Buyer’s Club’s agent so that they can sell the film abroad and… so that they can file lawsuits against John Doe Defendants across the US. Part of this agreement appears to be that Voltage Pictures was permitted to use Dallas Buyer’s Club’s name.

082516 Voltage-DBC Power of attorney

…and skipping down a bit:

082516 Voltage-DBC Exclusive Agent

Well, now we learn that Nicholas Chartier and Voltage Pictures are being sued because after making all of the sales and suing all of the John Doe defendants for copyright infringement, Voltage Pictures is accused of cheating Dallas Buyers Club out of their earned licensing fees.

I feel as if I just fell down a rabbit hole…

Thus, whenever we saw a Dallas Buyers Club, LLC lawsuit, and whenever we represented a client against Dallas Buyers Club, LLC, we were really representing them against… VOLTAGE PICTURES, LLC?!?

This brings me to the Fathers & Daughters Nevada, LLC cases.  Did Voltage Pictures, LLC make the same licensing deal with the Fathers & Daughters movie producers, and are they also not paying them the money that is due to them?  When we see a Fathers & Daughters Nevada, LLC case, are we really representing clients against the makers of the Fathers and Daughters movie? Or are we representing clients against VOLTAGE PICTURES, LLC who is parading as Fathers & Daughters Nevada, LLC and claiming that they are Fathers & Daughters Nevada, LLC, when really they are not?!?

This also makes me ask who the attorneys for the Fathers & Daughters Nevada, LLC are really representing? Are Josh Wyde and Gary Fischman suing on behalf of Fathers & Daughters Nevada, LLC? Or are they suing on behalf of Voltage Pictures, LLC pretending to be Fathers & Daughters Nevada, LLC?  I know Josh is watching this blog, so please feel free to comment.

Who is their client? Voltage or Fathers & Daughters Nevada?

Last question, and then I’m going to sleep. Will Voltage Pictures, LLC soon be sued by the real Fathers & Daughters copyright holders for failure to pay the licensing fees, proceeds, and sales from the monetization of the Fathers & Daughters movie copyright? Have the same facts that are coming out with the Dallas Buyers Club, LLC lawsuit also transpired with the Fathers & Daughters Nevada, LLC copyright holder?

One more thought — a while back, I was concerned that perhaps the shell companies that were created for various movies were not properly funded. [Well, okay, I backed away from that accusation, but that was on my mind.]  The original thought was that production companies made movies, and to limit their liability, we understood that they set up shell companies as limited liability companies so that if something went wrong or if, say, Dallas Buyers Club caused damage to someone and they were sued, fined, sanctioned, or otherwise held liable for damages from their activities, those damages would be contained to the Dallas Buyers Club, LLC limited liability entity, and they would not trickle “up” to what I thought was the Voltage Pictures, LLC production company.

However, now we see that Voltage Pictures, LLC is NOT the production company, but a LICENSEE (one who signs an agreement to acquire a license to sell or act on behalf of the copyright holder [the licensor]). Thus, this brings me back to the entity that was formed to sue John Doe Defendants in federal court. Dallas Buyers Club, LLC, and Fathers & Daughters Nevada, LLC (the two Voltage-related companies that are currently on my mind). Are they properly funded? Who owns them, and who are the real parties acting through them? Voltage Pictures or Dallas Buyers Club? Voltage Pictures or Fathers & Daughters? Who is providing the funding for them?  And did they properly notify the court of this arrangement when they filed the lawsuits against the John Doe Defendants?

Wow, when they say that there is “no honor among thieves,” they weren’t kidding.  First Keith Lipscomb is sued by Malibu Media, LLC for not paying them the royalties and/or funds received through Lipscomb’s Malibu Media, LLC v. John Doe lawsuits across the US, and now Voltage Pictures, LLC is being sued by Dallas Buyers Club, LLC for the same thing. I also want to point out that Liberty Media also sued their lawyer, Marc Randazza (although the circumstances were different, and if what Marc wrote in his defense was true (e.g., that they used his office desk to shoot adult films), both Liberty Media and Randazza are both to blame, but for different reasons). I also remember when Prenda Law Inc. stopped paying their local counsel here in Houston the fees and commissions he earned through the filing of the lawsuits.

So… in sum, is this the scenario of thieves stealing from thieves as we have seen before? Or is this an example of “copyright trolls stealing also from their own clients”?? Wow, this field of law has skeletons hidden in closets all over the place.

UPDATE: For more on this topic, SJD covered this topic in detail.  See FightCopyrightTrolls article, “How copyright trolls plunder both US citizens and… rights holders.


CONTACT FORM: If you have a question or comment about what I have written, and you want to keep it *for my eyes only*, please feel free to use the form below. The information you post will be e-mailed to me, and I will be happy to respond.

NOTE: No attorney client relationship is established by sending this form, and while the attorney-client privilege (which keeps everything that you share confidential and private) attaches immediately when you contact me, I do not become your attorney until we sign a contract together.  That being said, please do not state anything “incriminating” about your case when using this form, or more practically, in any e-mail.