Admission of Guilt

Why Being Served in a Bittorrent Case Can Lead To Settlement

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Bittorrent ‘John Doe’ Defendants are being forced deeper into copyright infringement lawsuits. Being served can backfire on a troll forcing a cheap settlement.

DISCLAIMER: In this article I speak a lot about plaintiff attorneys cheating their own copyright holder clients, billing them “by the hour” (rather than the conventional method of accepting the copyright holder clients “on contingency”), and in some cases, wasting time to generate additional billing to their own clients.  It is my observation and opinion that this is happening, but short of a lawsuit like we saw with the Dallas Buyers Club copyright holders against their Voltage Pictures licensee, it is difficult to prove that such things are taking place.  However, “honor or dishonor among thieves” is not the topic or the point of the article — the point of the article is that plaintiffs are dragging defendants further into the federal lawsuits by naming and serving them, and it is my opinion that it is still possible to obtain a settlement, even after a client has admitted guilt in an answer to a deposition question.

It is a sad day when trolls force those they’ve accused to become legal experts and to stick their toes into the federal courts to defend themselves. In the attached article, DTD is correct that lawyers (myself included) can get expensive, and defending a case (e.g., answering a complaint, showing up and defending a deposition, answering the various requests for information that are required in a federal lawsuit, etc.) is often more expensive than simply paying a copyright troll plaintiff a few bucks to make them go away.

Unfortunately (at least in my Texas Southern District federal court), the copyright-troll attorneys appear to be billing their copyright-holder clients BY THE HOUR (which differs from the old model of a plaintiff attorney agreeing to take a case on contingency and only sharing in the settlement profits believing [the lie] that “they’ll make millions going after John Doe Defendants”), so these ‘hardened’ plaintiff attorneys seem to be running-up the bill by dragging the defendants through the mud — naming them, serving them, filing documents, and wasting everyone’s time.

In short, while I agree that IN NORMAL CIRCUMSTANCES doing what DTD suggested (filing an answer with the court and fighting your case) would normally not be something one would ever dare do [at least without a lawyer holding his/her hand, or sitting in and defending a deposition], in today’s evolution of the bittorrent cases, filing an answer and at least being willing to endure the legal process until a settlement is offered (and a settlement is usually offered eventually) has become a necessity.

WHY BEING FORCED TO ANSWER QUESTIONS IN A DEPOSITION MIGHT LEAD TO A SETTLEMENT:

Let’s take a quick example.  In the typical scenario, the goal in representing a client who wants to settle is to contact the plaintiff attorney on the client’s behalf and negotiate a settlement.  For a plaintiff attorney who is billing his copyright troll client by the hour (as is what appears to be happening in the Texas bittorrent-based copyright infringement cases), agreeing to a settlement is too easy of an outcome because the plaintiff attorney does not make the kind of money he could make “dragging the defendant through the mud while charging his client hourly to do so.”  (Remember, as we saw with the Voltage / Dallas Buyers Club cases, a crooked attorney steals not only from his victim [the accused defendant], but also from his client (as we saw in the Voltage / Dallas Buyers Club cases where Voltage was sued for failing to pay Dallas Buyers Club monies earned and owed to it through its copyright enforcement activities)).

More likely than not, the plaintiff attorney’s client (the actual copyright holder seeking to “monetize” or “enforce” the rights given to him via his copyright) is not aware that the attorney is over-billing (e.g., engaging in such “mud-dragging”, “revenue-producing” activities often cannot be proven, and thus it continues until the copyright holder gets tired of paying his attorney’s bill).  Thus, free of scrutiny from his client, the plaintiff attorney needlessly exacerbates the situation by demanding from the defendant something unreasonable (e.g., that unless the defendant is willing to agree to sign an explicit admission of guilt prior to being made aware of the kind or amount of settlement he will be offered, there will be no settlement).  [FYI, this is something no sane person would agree to.]  As a result, the defendant refuses to admit guilt, he gets named and served, and he is forced to spend thousands of dollars more to defend himself.  Why?  Because his plaintiff attorney figured out a way to milk not only him (the defendant), but his copyright-holder client as well.

There are a number of steps that happen after being named and served, but the point is that eventually, the plaintiff attorney is going to schedule a deposition (where the defendant will need to answer questions “under oath,”) and the defendant is going to tell the truth about what happened.  If the download indeed happened, this will come out in the deposition.

However, this “nightmare” fear that the defendant will “admit guilt” will only cause one result — the plaintiff will have proof that at trial, based on the information elicited from the defendant in the deposition, that defendant could be held liable for the $150,000 in statutory damages.  But then… how many of these defendants have $150K sitting around in their mattresses or in their bank accounts?  And if they do, don’t you think that instead of paying the judgment, they would rather hire a bankruptcy lawyer and file for a bankruptcy to discharge the copyright infringement judgment in bankruptcy?

In short, the worst-case-scenario in a deposition is that the defendant admits guilt, which is often what will likely happen if the defendant is the downloader of the copyrighted film.  But then after all this excitement, the plaintiff attorney and the copyright holder still want to get paid (and they know they are likely not going to collect anything by obtaining a $150K judgment against the defendant).  This is why the plaintiff attorney will likely initiate settlement talks with the defendant, taking his financial circumstances into consideration.

This is not to say that settling a case right away (and before being named and served) is no longer an option — there are multiple copyright holders filing in the Texas and New York courts, including Criminal Productions Inc., September Productions Inc., CELL Film Holdings LLC, the infamous Malibu Media LLC, Fathers & Daughters Nevada LLC, Dallas Buyers Club LLC, and the related non-bittorrent copyright holders which include DISH Network L.L.C. (not so much anymore) and Siemens Product Lifecycle Management Software, Inc. (a software company), each of whom have their priorities and specific instructions on how they would like their plaintiff attorneys to handle the lawsuits on their behalf.

But, what I do want you to glean from this commentary (really, it’s an article, but I did re-blog DTD’s article and I need to stick to that topic), is that plaintiff attorneys ARE naming and serving defendants, and it should be expected that this could happen — and if a defendant is named and served, they could still negotiate a settlement.  But be aware that in order to get to that point, the plaintiff attorney (who might be motivated by maximizing his billing to his own client [think, stealing from you AND stealing from his own client]) might drag you through a deposition and a number of steps before he accepts a settlement from you.

LAST NOTE: BILLING IN “BLOCKS.”

I agree that lawyers are expensive simply because we charge for the time it takes to complete each step of the legal process. However, many attorneys (myself included) already know how much time each step will take, so “flat fee” billing is an option (understanding that billing would happen based on timelines of where you are in the lawsuit).

Thus, it might make sense to hire an attorney who charges you a flat fee for a certain “block” or piece of the lawsuit (e.g.,

BLOCK 1: FROM GETTING NOTICE OF THE LAWSUIT THROUGH BEING NAMED AND SERVED [WITH THE INTENT OF NEGOTIATING A SETTLEMENT PRIOR TO BEING NAMED AND SERVED].

BLOCK 2: FROM BEING NAMED AND SERVED (E.G., FILING AN ANSWER WITH THE COURT, PROVIDING ANY NEEDED DISCLOSURES, FILING ANY PROTECTIVE ORDERS, SETTING DISCOVERY TIMELINES).

BLOCK 3: FILING INTERROGATORIES AND REQUESTS FOR PRODUCTION, AND ANSWERING INTERROGATORIES AND/OR REQUESTS FOR PRODUCTION.

BLOCK 4: PREPARING FOR AND DEFENDING A DEPOSITION.

BLOCK 5: SETTLEMENT NEGOTIATIONS AND RELEASE OF LIABILITY.  Or, BLOCK 5A: FILING A SUMMARY JUDGMENT MOTION TO RELEASE DEFENDANT FROM LIABILITY,

…AND SO ON, BLOCK 6: …TRIAL (my opinion, unlikely, unless the copyright holder figured out a way to prevent the deep-pocket defendant from filing for bankruptcy).

I have laid these out as a template, as each case and each copyright holder often needs to be handled differently.  Typically, clients were able to negotiate a settlement and be released from liability with just BLOCK 1.  However, as we discussed above, we are seeing more-and-more that plaintiff attorneys are taking defendants deeper into the lawsuits (“deeper down the rabbit hole, so to speak”), specifically past the “naming and serving” stage, past the answer stage, and into the discovery stages before considering or accepting settlements.  I am not one to advocate doing this on your own, and if you could afford an attorney (me, or anyone else), that is the safest way to go.  But if hiring me or another attorney is not an option, fighting this on your own (called, “pro se”) is the best alternative, and DTD’s article gives you a good first and necessary step in getting the ball rolling.

As I said before, good article, DTD!

Caveat – I’m not an attorney and I’m not practicing law. This is simply my thoughts and views based on what I see concerning BitTorrent (BT) Copyright Infringement Trolls. If you decide you need legal advice, please hire a knowledgeable attorney. IF you truly cannot afford an attorney, here at least is one possible option. […]

via Answering A BT Copyright Troll Summons/Complaint — DieTrollDie

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CONTACT FORM: If you have a question or comment about what I have written, and you want to keep it *for my eyes only*, please feel free to use the form below. The information you post will be e-mailed to me, and I will be happy to respond.

    NOTE: No attorney client relationship is established by sending this form, and while the attorney-client privilege (which keeps everything that you share confidential and private) attaches immediately when you contact me, I do not become your attorney until we sign a contract together.  That being said, please do not state anything “incriminating” about your case when using this form, or more practically, in any e-mail.

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    CEG-TEK: Naughty or Nice?

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    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:

    Admission of Guilt in CEG-TEK Settlement Agreement

    [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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    CONTACT FORM: If you have a question or comment about what I have written, and you want to keep it *for my eyes only*, please feel free to use the form below. The information you post will be e-mailed to me, and I will be happy to respond.

      NOTE: No attorney client relationship is established by sending this form, and while the attorney-client privilege (which keeps everything that you share confidential and private) attaches immediately when you contact me, I do not become your attorney until we sign a contract together.  That being said, please do not state anything “incriminating” about your case when using this form, or more practically, in any e-mail.

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