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Malibu Media: File Sharing Litigation's New Normal?

In the 2010’s, the U.S. federal courts were confronted with the sudden emergence of a brand new type of litigation. Over the span of a relatively few years, thousands of lawsuits were filed alleging copyright infringement by anonymous individuals sharing files online, usually by means of the BitTorrent protocol. Rarely seen before around 2010-211, the number of BitTorrent and other file sharing suits skyrocketed until, by 2014, they made up over half of the total number copyright infringement complaints in the United States. File sharing lawsuits tend to proceed in a very different manner from a typical copyright infringement suit and have raised a number of previously novel legal issues. It’s no wonder, then, that they’ve been accompanied by considerable controversy and turmoil as both courts and the parties themselves struggle to establish new rules and norms. Branded “copyright trolls” by analogy to the abusive patent litigants long described as patent trolls, file sharing plaintiffs quickly established a reputation for troubling litigation tactics. In particular, many plaintiffs and their attorneys were accused (with apparent justification) of using U.S. copyright law not to protect their rights as content creators or to deter piracy but as an engine of profit in an illegitimate extortion racket, exemplified at its extreme by the rise and fall of the infamous Prenda Law operation, whose principals were arrested in December, 2016 and indicted on 18 federal counts related to an “elaborate scheme to fraudulently obtain millions of dollars.”

With Prenda Law’s corpse still dangling in the town square as a grim warning and with judges subjecting troll-like plaintiffs to newfound scrutiny, file sharing litigation has tapered off somewhat. But it has by no means disappeared.

The biggest player still working the BitTorrent lawsuit game is Malibu Media. The company filed nearly 3,000 copyright infringement lawsuits in 2015-2016. After a brief lull, it filed 201 lawsuits in February, 2017 alone.

While Malibu goes after alleged pirates all over the country, this article focuses on its efforts in the Northern District of California, where the company filed 240 suits in 2015-2016, including 56 in October, 2016 through its attorney Henrik Mosesian Mosesi. Malibu’s ND-CA cases have all been assigned to Judge William Alsup, who is considered one of the more technology savvy judges in the district and who appears to regard file sharing copyright allegations with a skeptical eye.

In some ways, Malibu’s pleadings before Judge Alsup are consistent with the familiar file-sharing-suit playbook that’s emerged over the last 7 years: The plaintiff engages an “investigator” (in this case, mysterious European firms IPP International, UG and/or Excipio, GmbH) to participate in a BitTorrent swarm that’s allegedly sharing a particular work or works (in this case, pornographic videos with titles ranging from the enigmatic Go Fish to the more straightforward but less grammatical Tiffanys Tight Ass). The investigator logs the IP address of a peer from whom it downloads part or all of the file, and the plaintiff then prepares a complaint against an anonymous “John Doe” who is allegedly affiliated with that address.

Once in court, the plaintiff asks for leave to serve a subpoena on AT&T, Comcast or another member of the small oligopoly of companies that provide Internet service in the U.S., requesting the identity of the subscriber who was assigned that IP address on the relevant date and time. If the court agrees and the ISP complies, the plaintiff then sends a letter to the subscriber, sometimes accompanied by a summons or waiver of summons form, informing them of the lawsuit and demanding a settlement payment, usually in the range of thousands to the low tens of thousands of dollars.

However, in other ways, Malibu Media’s Northern District of California cases look a little different from earlier lawsuits. Thanks in part to pushback from Judge Alsup and others, Malibu’s pleadings seem increasingly crafted to anticipate and avoid the objections that have brought the gavel down on the copyright trolls of yesteryear.

For example, like Prenda Law, Malibu Media’s copyrights are in porn. And this gives rise to a concern that the embarrassing subject matter might be used to pressure defendants into settling meritless claims, simply to avoid being outed in a public lawsuit as the John Doe who was caught sharing Enjoy My Backdoor or one of the other videos that Malibu produces under its X-Art brand. Recently, however, Malibu Media has been eager to signal its willingness to allow defendants to proceed anonymously and to file identifying information that it obtains from ISPs under seal.

It also attempts to emphasize that, unlike Prenda, it is a legitimate content creator. It touts X-Art as a leading name in “artistically produced adult oriented content suitable for upscale women and couples” and frets that its work may be uneconomic to produce if piracy is allowed to continue unchecked. Seemingly conscious of cultivating the impression that its suits are more than just an empty shakedown, it claims not to make settlement demands until after serving its complaint and summons (unless initiated by the defendant).

Moreover, Malibu Media has been forced to sue one John Doe at a time. The additional filing fees and administrative costs involved in this new paradigm arguably challenge the economics of the copyright troll business model, but the tactic allows Malibu to bypass the allegations of improper joinder that led to the dismissal of many mass-defendant complaints filed by thrifty trolls trying to sue on the cheap.

Forced to refine their tactics under Judge Alsup’s scrutiny, could Malibu Media’s Northern District of California cases be a model for future file sharing litigation? Might Prenda’s shadowy grab-and-run extortion scheme be replaced by a less lucrative but more sustainable practice, a distasteful but ultimately legitimate litigation niche?

To be sure, Malibu Media has challenges ahead. It continues to face questions over whether it can in good faith allege proper jurisdiction and venue for its complaints based merely on an IP address, given the limitations of IP geolocation technology. Indeed, Judge Alsup has threatened a moratorium on future lawsuits in the Northern District if Malibu cannot satisfy the court’s concerns. However, following a May 16, 2017 hearing, the court appeared to grudgingly concede that the plaintiff’s geolocation claims had a veneer of plausibility and that its ISP subpoenas would continue to be approved.

Nevertheless, even if the court agrees that Malibu’s allegations clear the minimum threshold of stating a viable copyright infringement claim, far more would be needed to satisfy its burden at trial. Judge Alsup, for example, has repeatedly made clear that his authorization of early discovery is in no way an endorsement of the underlying claims. A defendant willing to vigorously defend one of Malibu’s lawsuits could make the case exceedingly difficult for the plaintiff and could plausibly triumph.

For one thing, the nature of BitTorrent makes it complicated to prove infringement, since individuals only distribute small unreadable sections of a data file at a time and may never distribute a complete work, though courts have typically been skeptical that this totally obviates infringement.

In addition, an IP address is not a person. Just because an ISP says that an address was assigned to a particular subscriber at a particular time does not mean that it was the named subscriber who infringed the copyright in question, though Malibu Media attempts to anticipate this argument by alleging that the IP address was observed engaging in the infringement over a long period of time, making it less likely that John Doe was a complete stranger merely exploiting an unsecured wifi network.

Most importantly, in our opinion, the threats of staggering copyright damages that plaintiffs like Malibu Media continue to use to terrorize defendants into settling can be called into question. It’s true that the Copyright Act provides for statutory damages up to $150,000 per work if the infringer acted willfully, provided the copyright was registered prior to the infringement. However, the low end of these statutory damages is just $750 per work, and the amount awarded is at the discretion of the court. Different courts weight different factors in setting this number, but most are of the opinion that statutory damages should bear some relation to actual damages, i.e. the money that the copyright holder actually lost due to the infringement. By that measure, the $750 minimum would probably be considered a windfall in comparison to the cost of a single download of Pool Party for Three.

A modest damages award might be Pyrrhic comfort to a defendant who’s been forced to expend tens of thousands of dollars on legal fees defending a suit. But if a precedent was established that seeding a video by BitTorrent warranted only the minimal statutory recovery, it would seriously challenge the economics of Malibu Media’s litigation strategy. The margins have already grown slim, thanks to the new single-defendant policy and the renunciation of other corner-cutting tactics. These costs might be offset with higher settlements, but the higher the plaintiff’s demands get, the more defendants will choose to fight.

Despite these challenges, however, we see no reason to assume that Malibu Media is heading for a Prenda-like downfall or will withdraw from U.S. courthouses any time soon. In the faces of its doubters and detractors, it can flourish its victory in a 2013 trial in the Eastern District of Pennsylvania (dubbed the “Bellwether Trial”), one of the few filing sharing cases to go to trial, which, despite extenuating circumstances (including a defendant who destroyed evidence and lied under oath) appeared to vindicate many of Malibu Media’s theories and awarded $240,850.50 in damages and attorney fees.

If Malibu can convince Judge Alsup and other federal judges that it can prove its John Does live within the districts where its lawsuits are filed, we see no reason not to expect another wave of lawsuits in the near future. If its model appears to have staying power, imitators may well join them before long.

If you’re in California or Illinois, and you receive a notice from your ISP that your subscriber information is the subject of a subpoena or a letter or complaint accusing you of online copyright infringement, give us a call or send us an email, and we’d be happy to discuss your options. (831)-275-1401

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