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Do copyright holders profit off of their lawsuits?

February 13, 2013

Yes. Some copyright holders have adopted a “pay up or else” scheme in order to profit from their litigation. There are three main steps to this scheme: Index infringing IP addresses, start a lawsuit against those IP addresses as John/Jane Does and subpoena the Does’ individual ISPs for their personal information during discovery, and then send each Doe a settlement offer threatening to sue if they do not pay up. Copyright holders are able to easily index infringing IP addresses by participating in the torrents that share their content. Most defendants would rather pay the settlement than go to court, so the copyright holders avoid excess legal fees. When defendants do not respond and refuse to pay, the copyright holders frequently ignore them and rarely bring them to court. In such a way copyright holders can maximize their profit.

This scheme has been prevalent in the U.S. since 2010. Only recently have courts started to rule in favor of the defendants (the John/Jane Does) when they realized that privately owned IP addresses do not necessarily represent the responsible party. For instance if I downloaded something illegally from my father’s Wi-Fi, he would be sent the settlement offer and taken to court. Not me. The caveat in this is the fact that public Wi-Fi is protected from such lawsuits, whereas a private ISP subscriber could still be taken to court if their private Wi-Fi was open to the public and some awful person used it to download copyrighted files.

In fact, copyright holders have been working together with ISPs to create a six strike policy. According to this policy, after your ISP catches you downloading copyrighted material on six separate occasions, your ISP will terminate your internet connection and give your personal information to the infringed copyright holders for litigation. This policy has started to go into effect all over the world and has been predicted to activate in the U.S. this year. However, unfortunately for copyright holders the ISPs and governments involved refuse to fund the policy. So in countries like New Zealand copyright holders refuse to use the six strikes policy, claiming that the “costs to send notices to infringers are too high.” In other words their profit margin is too low. They want the government and the ISPs to help foot the bill so they can more easily sue the ISPs’ subscribers and the government’s citizens. In fact the music industry (U.S.) has asked that instead of disconnecting their users’ internet access, ISPs should instead charge their users cash fines. To be paid to the copyright holders, of course.

Currently the music industry, the porn industry, the movie industry, and the video game industry are all on board with the six strikes policy (or the three strike policy in France.) In short, the video game industry (at least in France) plans to join the music, porn, and movie in their new and improved “pay up or else” scheme. Apparently this scheme has proven itself profitable. How long until ever other copyright holder joins in?

I do not condone piracy, because that would be immoral and potentially illegal. However I do condone safe internet use, so I recommend using a proxy or a VPN. The fact that these services prevent you from being identified by your IP address and consequentially prevent you from being sued by these schemes is not my problem.


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  1. I see exactly where some of these industries are coming from. By incorporating larger penalties to hopefully scare people whole illegally download/pirate movies/music/games/ect is a solution, do you believe this is going to help the rate of these items being copied in an illegal fashion or will the risk invite more problems than there already are?

    • “Larger penalties”? From my understanding the average penalty has been decreasing. These pay up or else schemes are focusing on smaller penalties for more people, rather than HUGE penalties for a few. Before these pay up or else schemes became prevalent in the U.S. around 2010, we had lawsuits like this and this. Now we have a shift towards this.

      I mentioned this in my post, but I’ll reiterate it because I feel it’s important here, the copyright holders in these lawsuits primarily gather infringers’ data by tracking torrents. “Tracking torrents” means that they know what and where content is being infringed and could have it taken down via DMCA notice (or at least have it removed from indexes), but choose not to and instead chose to use those torrents as lucrative honey pot traps to harvest data for lawsuits. The shift towards three/six strike policies only works to bypass the courts, not increase the penalty for infringement. Instead of creating a John Doe lawsuit and using discovery process in court to subpoena ISPs, the copyright holders will be able to bypass the courts and get infringers’ data directly from the ISPs with their “cooperation.”

      The risks used to be much larger and copyright holders who profit off of these lawsuits have no incentive to stop infringement. These policies are designed to increase profits, not decrease infringement. If I am correct then these policies, which are not designed to decrease piracy, will not decrease piracy.

      I’m biased here. Mostly because I’m not rich and don’t hold any valuable copyrights. But from my perspective these companies/copyright holders are the problem. It costs pirates time and money to remove copyright protection from content, and they aren’t (in most cases) paid for it. They do it to contribute to/participate in a demanding community that thrives because of this content being overpriced and badly represented. Maybe piracy wouldn’t be such an issue if copyright holders would adapt to the environment and stop overcharging/using bad systems.

  2. From what I’ve read in the past (and what you’ve shared here) it sounds like the original strategy was not profitable (taking violators to court) so they simply changed strategies. Very clever indeed. It’s like a “soft billing” strategy. Pay this bill or I will take you to court! Some will pay it out of fear. Will they really spend the money to take you to court if you don’t?

    This is a great example of how technology impacts legal policies and vice versa.

    • “Will they really spend the money to take you to court if you don’t?”

      This is tricky to answer, because the system is changing rather quickly at the moment. I had this link in my post, and it demonstrates how the legal system has started to adapt to accommodate these sorts of lawsuits (aka throws them out.) The recent switch to the six strikes policy (that went into effect this Monday) not only acts as a broader net to catch pirates, but also acts as a method to bypass the courts, which are starting to rule in favor of pirates, by partnering up with the ISPs. With the six strikes policy in place I expect the number of people taken to court to decrease, the number of settlements to increase, and the number of pirates should decrease. The number of people being taken to court should decrease because it isn’t profitable, whereas the number of settlements should increase because pirates will have their internet shut off if they don’t comply. The number of pirates should decrease (a bit) because it’s easier to get caught (however it’s important to note that there’s a pretty steadfast pirate community.) At least this is my understanding of the system.

      If I were to receive one of these notices requesting a settlement in the mail tomorrow, I would not pay it (hypothetically; I shouldn’t receive one.) Unless it included a date for me to appear in court. If this were the case then I’d pay because I would only be left with two other options: A) Default judgement against me or B) Lawyer up and fight the good fight. That “fighting the good fight” bit is what landed so many people with $100,000-1,000,000 rulings against them back around 2010. They were offered settlements, but foolishly chose to keep fighting.

      I do not think copyright holders would pay the money to take *everyone* who refuse to settle to court. However I do think that they will continue to pick winnable cases to take to court in order to keep the threat real in people’s minds. The fact that they could sue you, and essentially ruin your life for something so trivial, is reason enough to pay the settlement in most cases.

      On the other hand in Finland they can have S.W.A.T. teams raid your house and confiscate your tech if you don’t pay up:

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