CEG-TEK: Naughty or Nice?

Copyright Enforcement Group (CEG-TEK) has sent possibly hundreds of thousands of letters to internet users accused of downloading copyrighted content. In their letters, they invoke the Digital Millenium Copyright Act (DMCA) as the justification for their “intellectual property (IP) enforcement” activities. They claim to be the good guys, but are they?  Are they “naughty or nice”?

CEG-TEK claims to be the good guys — they stop piracy, and as a result of their efforts, fewer people download on the ISPs’s networks (a social “good” and a “win” for the copyright holders). They have stopped the copyright troll lawsuits, for the moment. And, although they are charging $300 per title for each downloaded movie (sometimes higher) for what is often an accidental “click of the mouse,” they claim that they are not “bad” or “vindictive” like their Rightscorp competitor, which charges only $20 per title, but then sues the accused downloaders in federal courts, and then even go so far as contacting the ISPs in order to attempt to shut down the internet accounts of those accused of downloading their clients’ copyrighted titles.

But then again, CEG-TEK is a business. While I have had success negotiating away cases against veterans, the elderly, and in many cases, college kids, CEG-TEK has taken a number of steps which at best would be questionable.

Most relevant is the “admission of guilt” clause in their settlement agreements, which at the time of writing this article has flipped back to the version which does not include this clause. Months ago, when CEG-TEK expanded into Canada and then Australia, the settlement agreements which released those who have settled from liability included the following clause:

[For those of you who cannot see the image, it says, “…in the event of a (i) failure to clear, (ii) chargeback, (iii) cancellation, (iv) failure to complete…this Release shall be considered admissible and conclusive evidence of RELEASEE’s infringement of the copyright in the Work and that RELEASEE will be liable to CONTENT COPYRIGHT OWNER for all damages, statutory and/or otherwise, for such infringement plus attorney fees plus costs as of the Settlement Date…” (emphasis added)]

[Now as a side note, for those who are particular about formatting and details, note that CEG-TEK placed that inflammatory clause at the bottom of Page 2, and they split it up where half of it is at the bottom of the page, and the other half is at the top of the next page, where even a careful individual might not read the clause in its entirety because the inflammatory clause is separated by being on different pages.]

The problem with such a clause admitting guilt is that it is binding on an unsuspecting individual who tries to settle the claims against him by paying with a credit card. How?  These contracts are available to the individual paying the settlement fee on the CopyrightSettlements.com website to review, and upon processing the credit card payment, they agree to the terms contained within the contract.

Then, when their credit card transaction fails (either because their card is not accepted by CEG-TEK’s website, or because the transaction is declined, or, if through no fault of their own, because of the website itself the bank flags the transaction as suspicious (fraud alert for a large online charge) and fails to approve the transaction), at that point, the individual has admitted guilt to copyright infringement, which carries a $150,000 statutory fine for each title downloaded. Assume for the moment that the individual has five (5) cases.  Multiply this $150,000 amount by five separate copyright holders, and the individual could be looking at 5 x $150,000 lawsuits (= $750,000 in statutory damages separated into multiple lawsuits filed by different copyright holders all of whom hired CEG-TEK as their agent to enforce their copyrights) where the internet user has already admitted guilt.

Then, when the confused internet user who tried to settle calls CEG-TEK on the phone already having admitted guilt, what sort of leverage does the individual have if they are asked for more than $300 per title? Legally, they likely have no defense because according to the terms of the agreement, they already admitted guilt — even if the credit card transaction failing was not their fault.

So… Copyright Enforcement Group may be the “good guys” because they let attorneys negotiate away cases for vets, old ladies, and elderly gentlemen who don’t realize that they should be using basic privacy tools when they download adult content, and CEG-TEK may serve the public good by demonstrating that piracy has gone down because of their efforts. While this is all true, remember: watch their contract, because caveat emptor still applies.

I don’t want to make this into a “you should have hired an attorney for your $300 matter” blog entry, but really, this is but one example of how even the “good guys” need to be approached with caution, and better yet, through a proxy by using an attorney. [I won’t even go into the conspiracy theories about CEG-TEK trying to get more than the $300 per title that is listed on the website.] Let’s stick to the facts and look at their contract to judge them on whether they are truly “naughty or nice.”

[2017 UPDATE: Carl Crowell has created a new entity called RIGHTS ENFORCEMENT which has reverse-engineered CEG-TEK’s proprietary DMCA copyright infringement notice system.  Many of you have visited CEG-TEK links thinking that RIGHTS ENFORCEMENT was CEG-TEK, but really they are an ‘evil twin’ competitor.  Since their methodologies are nearly identical, this article is still very useful.]

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