Beware of the defense attorney “settlement factory.”

This post was originally written as a “rant” against volume-based “settlement factory” attorneys.  At the time, the kind of damage they caused to accused defendants in bittorrent cases was unknown, as was their existence.  Even today, settlement factory defense attorneys continue to feed inquiring ‘John Doe’ subpoena recipients false information.  

As a result, settlement prices paid to copyright trolls ended up being grossly and artificially inflated.  

After writing this article, Ernesto from Torrentfreak wrote an article entitled, “BEWARE: PIRACY DEFENSE LAWYERS CAN BE “TROLLS” TOO.“.  -Rob Cashman

In 2018, I wrote the article, “Exposing Fear Based Copyright Settlement Factories” to simplify the settlement factory articles into an easy to read “Just the Facts — The Good, The Bad, the Ugly” styled article.

[2023 UPDATED.]

As of 6/1/2023, I have revisited the topic, and it is still as valid today as it was in 2016 [when I initially wrote this article].

The reason I am updating this particular 2016 article is because the information here is still VERY GOOD. The difference between what I wrote in 2016 and now in 2023 is that the lawsuits I referred to in 2016 were mass-John-Doe-lawsuits, often with case names, such as “Digital Sin v. Does 1-2340” (yes, 2,340 John Doe Defendants), or even Malibu Media v. Does 1-120).

These days, the lawsuits are: ONE TROLL v. ONE JOHN DOE DEFENDANT. Thus, some of the strategies I used to do in 2016, e.g., the “ignore” route, and other similar strategies no longer work. Thus, I am making a few edits here and adding context to what in 2016 was a great article! For clarity, when I can, I will put my edits in brackets [ ] so that you can see what I changed.

Beware of Attorney Settlement Factories

I started writing this article because there is too much conflicting information floating around the web about whether to settle a ISP subpoena-based infringement lawsuit.  The attorneys who are causing this confusion are trying to profit from the current broken state of the copyright laws.  These attorneys use fear tactics and manipulation to scare a John Doe Defendant into settling with their law firm.  

Credible Websites Teach That Settlement is NOT a Requirement

There are credible websites that blog almost daily on copyright troll issues.  

see “Fight Copyright Trolls,”

see “Die Troll Die.”

Copyright Trolls Do Not Take Cases To Trial

Because these infringement lawsuits are often based on scare tactics, and because the attorneys filing the lawsuits sue many John Doe Defendants in one lawsuit [e.g., at the time, it was common to see Troll v. John Does 1-2240 cases], they only named only a small sliver of defendants sued, ignoring such an attorney and his threats can be a good strategy. [2023 UPDATE – OBVIOUSLY THESE MASS-INFRINGEMENT CASES NO LONGER EXIST.]

[Based on the way those lawsuits were originally filed,] IGNORING A COPYRIGHT INFRINGEMENT CLAIM AGAINST YOU CAN OFTEN BE A VIABLE OPTION TO RESOLVE THE PROBLEM (WITHOUT SPENDING $$$$ ON A LAWYER). 

Thus, beware of the so-called “defense” attorneys who tell you that you will lose your home and your life savings if you do not settle.

What are “SETTLEMENT FACTORY” defense attorneys?

NOTE: In this section, I give you the red flags to look for to spot these attorneys, and I hope this helps clarify some of the conflicting information you get from speaking to different attorneys.

“SETTLEMENT FACTORIES” are what I call law firms who focus on providing apparent “low cost settlements” to clients (as you will see, the settlements end up not being low cost).

These settlement factory law firms hire multiple attorneys [or, non-attorneys who pretend to be attorneys on their consultation calls] to solicit and lure accused ‘John Doe’ defendants into hiring them “for a cheap and anonymous settlement.”

From a business perspective, more attorneys for the business owner means the ability to make more phone calls to solicit more accused defendants [to process more settlements], and the ability to “capture” more clients for their law firm means more profits.

[2023 UPDATE: Beware of ANONYMOUS SETTLEMENTS. Back in 2016, I shouted that there might be a problem with them, but now years later with hindsight, I’ve represented clients who have been sued again (and again), and they “settled anonymously” the first time around with a settlement factory.]

SETTLEMENT FACTORY law firms PRE-ARRANGE settlement amounts.

Rather than actually negotiate a good settlement for their client, settlement factories run what I refer to as a “volume business.” They PRE-ARRANGE an often inflated settlement price with the copyright holder, so they will agree to the arrangement with minimal [or no] effort by the so-called defense attorney.

In return, the copyright troll “allows” that so-called BT defense attorney to not have to negotiate the settlement for each client, since they have a prearranged agreed-upon “settlement amount.”

[Thus, the defense attorney worked SIGNIFICANTLY FEWER HOURS on the settlement negotiation, so they can charge the client SIGNIFICANTLY FEWER DOLLARS for their fee.

I would have been okay with this if they charged, e.g., 5 hours @ $300/hour = $1,500 for 5 hours of work. Where I screamed “pig” is when these same attorneys charged $3,000 for those same 5 hours of work, if they even spent that much time on their clients’ cases.

The problem with the settlement factory attorney’s pricing model (and I’m sure now that they read this, they’ll all say, “I’m doing X amount of hours for this work,”), is that their fee is a FLAT FEE.

FLAT FEE means that while I need to work 10 hours to achieve a $3,000 fee, that settlement factory billing a flat fee can work 1-2 hours and still charge $3,000. That’s maddening!

Further, their BUSINESS MODEL is to get as many clients as possible, and for whatever cost-per-click possible (right now, on Google AdWords, two attorneys are fighting it out between $129-$250 *per click* for your business). Thus, for that $129-$250 that they paid for you to visit their sponsored website ad, they are hoping to get $3,000 for your business.

Thus, the more clients they can get, the better their ROI (return-on-investment). And, to keep them profitable, they would need to spend as little time on your case as possible. How do they accomplish this? Anonymous Settlements.]

By the way, the reason I opened the “cost per click” field is to show that generally, Google AdWords (sponsored listings) should cost $2.00 – $4.00 per click. Even $7.00 per click is already maxing out their charts, and yet look at how much these attorneys are charging for each Strike 3 Holdings keyword!

In full disclosure, I have a paid-in-full lifetime subscription to Neil Patel’s Ubersuggest service. He’s a master as what he does, and I have run ad campaigns in the past (for $2.00-$3.00 per click), which is why I understood the absurdity of what I was looking at here.

The missing piece of this analysis is who is actually paying this amount for these keywords. To answer that, just to go to Google.com, type in one of the keywords, and look for the “Sponsored” results.]

Why settlement factory attorneys are PART OF THE PROBLEM of copyright trolling.

This arrangement creates a “cottage industry,” where the so-called defense attorney and the plaintiff attorney (who are supposed to be opponents) are allies for profit.  Settlement factory attorneys are part of the problem of copyright trolling; they are not part of the solution, and the only one that gets hurt is the accused defendant.  Why?  Because with settlement factories, the accused defendant almost NEVER gets the lowest possible settlement amount.

SETTLEMENT FACTORY law firms DO NOT NEGOTIATE SETTLEMENT AGREEMENTS either.

What compounds the problem is that negotiating the settlement amount is only HALF of the solution. The SETTLEMENT AGREEMENT itself must also be negotiated.  However, settlement factory attorneys do not negotiate settlements either (even though they tell you they do).

Why settlement agreements need to be negotiated.

They need to be negotiated because “boilerplate” settlement agreements contain ADMISSIONS OF GUILT and UNFRIENDLY LANGUAGE.

[They also now are likely ANONYMOUS SETTLEMENTS which means that it was John Doe subscriber assigned IP address 123.45.231.44 who was the “legal entity” who settled the lawsuit and was released from liability.

Thus, semantically, that same defendant with that same IP address (but sued again later in a different lawsuit having a new case number) is no longer “that same defendant” who settled in the first lawsuit.

Even moreso is a new “John Doe subscriber” assigned a different IP address as he had in the first lawsuit. Is that the same person? Does the first settlement cover this second (or the third) lawsuit? (The settlement factories after reading this will now be sure to explain to you how they make sure that the settlement covers all future John Doe entities with any IP address). That doesn’t stop them from being a settlement factory for any of the other reasons I listed here.]

These boilerplate settlement agreements do not protect the client because they often:

1. do not properly identify the accused defendant by name,
2. they do not contain proper confidentiality clauses (to stop the plaintiff attorney from suing again or asking for more money later on), and
3. they do not release the accused defendant from liability.

As a result of this article, settlement factory attorneys will take steps to hide their scheme.

For me, where writing this article will become infuriating is that suddenly these attorneys and their “beefed up” staff of hired attorneys will now start advertising 1) that they spend the time to actively negotiate the best settlement for their client, and 2) that they take the careful time to negotiate the terms of the settlement agreement so that the accused John Doe Defendant will be released from liability and the negotiated terms will properly protect the client’s rights.  Sure they will.

‘RED FLAGS’ TO SPOT A SETTLEMENT FACTORY

I know settlement factory attorneys follow this blog, and thus all I could say is “caveat emptor.”

At the time of writing this blog, here are the items to look for:

1) How long that attorney has been in practice [REMEMBER: “Copyright Troll” mass infringement lawsuits targeting multiple “John Doe” defendants have only been in existence only since 2010, so any attorney who claims he has been fighting copyright trolls for 20 years is obviously lying.],

2) Check the attorney’s blog to see the HISTORY of his articles — was he one of the first attorneys who fought these cases, or is he a new “me too” copycat attorney who is standing on the shoulders of giants? (after reading this, no doubt these attorney will now add “older” articles to make their website look older), but archive.org’s Way Back Machine DOES NOT LIE.

3) Check the blog article itself for “SEO OPTIMIZED” content, or “KEYWORDS” placed into the article.  Ask yourself, “was the purpose of this article to provide me valuable information? or was the purpose of the article to bulk it up with keywords so that search engine spiders will reward the author with first page rankings on the search engines?“

2017 UPDATE: When I mentioned SEO OPTIMIZED content, I am referring to the fact that settlement factory websites & blogs often lack content.  In our TorrentLawyer blog, we have over 200+ information-packed articles that we wrote TO EDUCATE.  Obviously many clients came to our firm as a result of our articles, and this is wonderful.  However, settlement factories have ONE MOTIVE ONLY: TO PROFIT.  Look for sites that advertise to you rather than inform you and educate you.

4) Last, but not least, check the EARLY ARTICLES of the blog to see whether the attorney actually tried to fight these cases and hash out the legal arguments, or whether they were merely reporting on the lawsuits already in existence to attract new business.  I call these attorneys “me too” attorneys, and you can usually spot them because all they do is report the cases.

Again, check archive.org to confirm everything I have written (including what some of these attorneys used to charge for this same “service” that they are now charging you many thousands of dollars for.) Once you see this, you’ll have to ask yourself what are they doing now that they didn’t do five years ago that justifies such a larger fee payment of your money to them?

AUTHENTICITY AND ORIGINALITY

In 2010, I and a small handful of attorneys were contacted by the Electronic Frontier Foundation (better known as EFF) to help understand and resolve the developing copyright troll problem.  This was back when ISPs began sending letters out to their subscribers informing them that their ISP would be handing out their contact information and their identity to the plaintiff attorney (the one who filed the lawsuit) unless they filed objections (or, “motions to quash”) with the courts. Thus, I credit the EFF for even noticing the problem in the first place and contacting us to figure out what to do about it.

COPYCATS / FOR PROFIT ATTORNEYS

Unfortunately (or, fortunately, however you see it), that initial list of 20 attorneys has grown to over 100+ names, and some attorneys have negotiated with EFF to list them as representing clients in multiple states, hence increasing their visibility in an ever-growing list of lawyers. Watch for these attorneys — they are usually the “settlement factories” I referenced above, and again, caveat emptor.

REPUTABLE ATTORNEYS DO EXIST

Let’s pretend, for a moment, that you did not like me or my use of pretrial strategies (often making use of federal procedure) to defend a client. Or, let’s pretend for a moment that I could not take you as a client (e.g., because my case load was full, or because I did not have time to speak to you about your matter).

Because there were only a handful of us attorneys on the original EFF list who knew anything about these copyright infringement lawsuits, over the years, we have become friends and have helped each other out on many of the lawsuits in which we represented both John Doe Defendants and “named and served” defendants [now in 2023, we have made a WALKTHROUGH of what potential clients would need to do if they are named and served].

Some of these good and reputable attorneys are still around today, and some have moved on to other areas of law.  Some of them have stopped taking clients because fighting mass copyright infringement cases has become more burdensome than the effort was worth (especially when some copyright holders do not “play fairly” or follow the federal rules when doing discovery [think, Malibu Media, LLC]).

PIPEDREAMS AND REFERRALS

Finding “that special client who will pay my fees to fight this case to trial” for many attorneys has become an unrealized pipe dream, and is something us attorneys often discuss.  

If you truly want to fight your case, I have nothing wrong with either me, or anyone else I trust representing you in your lawsuit (I will happily tout another attorney’s merits and advanced skillsets when speaking to clients [based on:

1) where you live,

2) where I am licensed to practice law (and which federal courts I have represented clients in before), and

3) whether there are any good attorneys in your state.

(NOTE: I just wrote an article that Strike 3 Holdings, LLC is now suing in obscure locations, so this is immediately relevant).]

AND, I will happily refer you to someone if I find that one of my peers would better assist you.

NO REFERRAL FEES

I *DO NOT* believe in referral fees, nor do I “share the workload” with other attorneys (this is code word for “I referred you this client, so pay me a piece of the legal fees you receive and call it paying me for my “proportional efforts.”). This is something that is often done in my field which, in my opinion, needs to stop.

Over the years, I have upset many attorneys who know nothing about these cases.  In the typical fashion, they call me with a client they would like to refer to me (coincidentally, asking to share in the fees, but not in the work).  I have rejected each request.

So in hindsight, while I thought I’d be reintroducing ISP subpoenas and basic copyright infringement concepts to clear up some conflicting information found on the web, instead I am providing a clear warning to those who are being actively solicited by these predatory law firms. A law firm simply should not be calling you or contacting you to solicit your business.

BACK TO IGNORING A CLAIM OF COPYRIGHT INFRINGEMENT

Attorneys may sue many John Doe Defendants in one case, but only a small number of them are named and served.  When you are evaluating your options, STOP AND [CONSIDER THE OPTION OF *NOT SETTLING*], BECAUSE *NOT SETTLING* A CLAIM OF COPYRIGHT INFRINGEMENT CAN OFTEN BE A GOOD IDEA.

Similarly, in a lawsuit, DOING NOTHING MAY OFTEN BE YOUR BEST STRATEGIC MOVE, as counterintuitive as that might sound.  Again, this is because much of the ‘copyright trolling’ problem is based on a bluff — namely, that the companies filing the lawsuits have evidence against you [the evidence is not their “Exhibit A,” but rather, it is your testimony under oath at a deposition!], and the risk is that they will take you to trial if you do not pay them money to settle.

Remember, a Settlement Factory attorney makes NO MONEY if you ignore.

When you are bombarded with attorneys and law firms who actively market their fear-based services by using “Google AdWords” (ethically or unethically “buying” more well known attorney’s names as keywords so that THEY show up at the top of a search [2023 UPDATE – YES, this happened, to my surprise!]).

Then, those attorneys have their “assistant” attorneys calling you and pushing you to anonymously settle the claims against you, think twice. Is this person trying to get you to be yet one more client in their “volume” business??

WHY WE DISCUSS THE “IGNORE” OPTION WITH EVERY POTENTIAL CLIENT

In every one of my calls, I discuss what I call the “ignore” option which in many people’s scenario is a viable option [; I also was offering at one point a “no settlement” letter representation, but that worked better in theory than in practice]. I often just pushed a client towards the “ignore” side of things.

[NOTE: There are many political reasons I have for this, such as “not feeding the troll,” or “not funding their extortion-based scheme,” or simply because I have been trying to change the laws to limit or hinder a copyright holder’s ability to accuse or sue an internet user for the so-called infringement of their copyright rights, but NONE OF THOSE REASONS ARE REASON WHY I SUGGEST SOMEONE I SPEAK TO IGNORES THE CLAIMS AGAINST THEM.]

WHEN TO CONSIDER THE “IGNORE” OPTION.

Sometimes an individual’s circumstances allow them to IGNORE the lawsuit filed against them (or the copyright violation claimed against them in the DMCA notice).  Such factors include:

1) the individual’s financial situation,

2) whether they live in an apartment or a home,

3) the location of that apartment or home,

3) the state in which the plaintiff attorney has his law firm,

4) whether that copyright holder authorizes his attorneys [and pays their fee] to “name and serve” defendants and move forward with trial,

5) for strategy purposes, e.g., the psychological impact of having one or more John Doe Defendants ignore the claims against them (while other defendants rush to settle in fear of being named and served [that link referenced the old 2012 article on being named and served; in 2022, I re-wrote an article on the topic from scratch here], or

6) simply because ignoring is the only option in that person’s situation.

[2023 UPDATE: I actually just wrote an article for my clients detailing MANY MORE PRACTICAL REASONS now (see my letter to clients here) — with the lawsuits as they are today — why an accused defendant:

1) would NOT settle (I have many more reasons flushed out now based on our experiences over the years), and

2) circumstances where you WOULD settle.

3) EXACTLY HOW MUCH STRIKE 3 SETTLEMENTS SHOULD COST.

And coincidentally, I re-wrote a whole section on “Settlement Factories – Why You Should PASS on Them,” re-hashing many of the topics I covered here in 2016.

IN SUMMARY

[So as you can see, it is now 2023, and I have a lot more to say on this topic. Settlement factories were a business model that annoyed me in 2016 because I thought it hurt the accused defendants in the case. Now in 2023, I’m of the opinion that running a settlement factory today with today’s lawsuits is irresponsibile.]

In summary, this has been a stream of thought article, but if you have made it to this point, you now understand the difference between a defense attorney who does settlements (among other forms of representation), and the settlement factory.

If the attorney you are speaking to is running your case as a volume business, or he is pushing you towards a “quick anonymous settlement” without showing you the merits of either 1) IGNORING, or 2) DEFENDING the claims against you, beware.

And if you need help and want my honest opinion about your case, or whether a particular attorney is engaging in a certain practice, just ask me.  I do not need to have all of you as clients, and I will answer you honestly.  And if you need, I will provide you a referral.

[2023 UPDATE: I enjoyed reviewing and updating this article. I enjoyed reading in 2016 “what I thought the problems of settlement factories could be,” but now in 2023, I was saddened to see the damage they have done to the copyright litigation “John Doe” lawsuits.

I was sad to see that the “copyright troll” <—-> “settlement factory” relationship has only continued to grow over the years to the point that many of the attorneys I worked with and spoke to almost daily are no longer in practice because they couldn’t compete with the volume-based law firms (the settlement factories).

If I couldn’t help a client myself (or if it would be in their best interest to have someone local represent them), I have done my best to refer people to “attorneys licensed to practice in your state with a physical office in your state.”

As a result of the settlement factories, many defendants today no longer have an attorney skilled in federal pre-trial civil practice in their state, depriving them of the representation they need (especially now that Strike 3 Holdings, LLC is branching out into new federal courts). I feel for both the attorneys lost, the defendants who went unrepresented, and each of their families as a result of these volume-based law firms advertising in everyone else’s state except their own.

I have always run the Cashman Law Firm, PLLC as a small law firm, and we have run it always within our means. I do have staff, accountants, and someone handling each branch of the business (sometimes on staff, sometimes per diem, sometimes on a per-project basis [for a particular litigation case, or handling a particular patent or trademark client], or on an as-needed basis), but we are still a small firm.

I only hope these lawsuits find a way to morph once again to make the lawyer representing the best interests of the client a priority for defense attorneys once more.]

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