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A federal judge takes on 'copyright trolls'

Prenda Law Inc. made a business out of extracting settlements from people who had downloaded porn movies. Now it's in legal hot water.

April 09, 2013|Michael Hiltzik

There are trolls who live under bridges in fantasy novels. Then there are "copyright trolls."

The latter have always occupied one of the most squalid corners of the legal system. They're people or firms that acquire copyrights to movies, music or other creative works chiefly to turn a profit by filing lawsuits alleging piracy. Often the threat of a lawsuit is used to scare Web users into paying nominal settlement fees to avoid legal costs and a big penalty. Collect a few checks of a few thousand bucks each from enough defendants, and presto! You've got a business.

The business model of Prenda Law Inc. seemed to put the capital "T" in "Troll." The copyrights Prenda claimed to be defending covered pornographic movies, and that added a whole new layer of coercion to the process. Until U.S. District Judge Otis D. Wright II in Los Angeles sank his teeth into the matter, that is.

The Prenda saga already had everything a red-blooded legal observer might treasure: Pornography. Intimations of offshore money laundering. Alleged forgery and identity theft.

Then it got even stranger.

At a hearing 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.

Instead of answering, the lawyers pleaded the 5th Amendment.

"I've seen defendants invoke their right against self-incrimination," says Morgan Pietz, a Manhattan Beach attorney who represents several defendants in the Prenda lawsuits. "In my experience, it's unprecedented for a plaintiff's lawyer to invoke the 5th when asked to explain the conduct of his litigation."

Before we get into the question of why the Prenda folks dodged Wright's questions, let's stipulate that copyrights serve the important purpose of guaranteeing creative people and their heirs the exclusive right to profit from their work for a finite period, typically the life of the creator plus 70 years.

But critics of U.S. copyright law say the penalties are too steep (up to $150,000 per infringement) and the rules governing lawsuits too lax to accomplish their purpose fairly. It's this combination of mass litigation and frightful financial consequences that has empowered the trolls, who prefer to squeeze defendants for quick out-of-court settlements rather than pursuing their claims in court.

The way to trolldom arguably was paved by the recording industry; around 2003 its trade group, the Recording Industry Assn. of America, started suing college students and other users of file-sharing programs to stop them from illicitly downloading music. But public objections to the lawsuits forced the RIAA to abandon the tactic a few years later.

"The RIAA stopped because suing their own customers was ruining their reputation," observes Mitch Stoltz, a lawyer for the Electronic Frontier Foundation, which has helped fight trolling lawsuits, including Prenda's, in court. "But the legal ground they established was picked up by people without reputations to protect."

To the traditional trolling arsenal, Prenda added the threat that recalcitrant defendants — sued initially as "John Does," but often identified by name by their cable company or other Internet service provider under threat of subpoena — would be exposed as slavering aficionados of pornography.

Prenda is not the only firm to exploit the porn angle, but its misfortune may be that its cases landed in Wright's court. Wright had seen this strategy before, and plainly he's got its number. In a ruling last year in a non-Prenda case he called it "essentially an extortion scheme."

The plaintiffs, Wright said, gamble that "because of embarrassment, many Does will send back a nuisance-value check to the plaintiff. The cost to the plaintiff: a single filing fee, a bit of discovery, and stamps. The rewards: potentially hundreds of thousands of dollars."

Indeed, as recently as last year, a Prenda attorney bragged about the value of this litigation strategy. John L. Steele, a onetime divorce attorney in Chicago, told Forbes that he had collected as much as $15 million settling such lawsuits. He claimed to be suing 20,000 defendants for downloading pornography, according to the Forbes report.

"People don't like to get caught doing anything wrong," he said, his smirk virtually leaping off the page and whacking you between the eyes. "They should be embarrassed about the stealing."

Steele and other Prenda attorneys failed to return my calls seeking comment.

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