U.S. District Judge Otis Wright‘s May 6 ruling in Ingenuity 13 v. John Doe is one of those decisions every lawyer should read. It’s only six pages long and sprinkled with Star Trek references, but its value lies in the cautionary tale outlined by the San Francisco judge. Wright was presiding over one of the many, many cases filed in the last few years by copyright owners suing tens of thousands of defendants over the supposedly illegal downloading of their content via online file-sharing sites. The litigation, as you probably know, is a specialty of pornography producers, whose cases benefit significantly from defendants’ understandable reluctance to be outed (even falsely) as consumers of online pornography. Occasionally defendants or their Internet service providers have stood up to porn purveyors. More often, defendants identified through subpoenas of their ISPs chip up a few thousand bucks to make the whole nightmare go away, leading public interest groups such as Public Citizen and the Electronic Frontier Foundation to call these en masse illegal downloading cases a shakedown operation.
Wright is one of the first judges to agree wholeheartedly with that assessment and issue sanctions based on it. “Plaintiffs have outmaneuvered the legal system. They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs,” he wrote. “Copyright laws originally designed to compensate starving artists allow starving attorneys in this electronic-media era to plunder the citizenry.” The judge went considerably further than mere rhetoric, though. In the course of hearing discovery motions by the plaintiff, a copyright holding company called Ingenuity 13, the judge found out a bit about Ingenuity’s counsel, a shadowy firm known as Prenda Law. When Wright’s preliminary inquiries about Prenda revealed what he called a “cloak of shell companies and fraud,” the judge “went to battle stations,” he said in his opinion. He ordered four lawyers associated with Prenda (but not in the Ingenuity case) and two purported principals in holding companies engaged in the business of asserting porn copyrights to appear at a series of hearings in March and April.
Based on testimony and filings, Wright said, he concluded that the lawyers John Steele, Paul Hansmeier andPaul Duffy, who had all previously experienced “shattered law practices,” began copyright trolling as a way to make “easy money.” According to the judge, the attorneys had forged the name of Steele’s former groundskeeper on a copyright assignment and had otherwise engaged in a pattern of deceit and subterfuge, involving shell companies and elusive law firms, to mask the reality that they were the only beneficiaries of the suits they brought. “The principals’ web of disinformation is so vast that the principals cannot keep track – their explanations of their operations, relationships, and financial interests constantly vary,” Wright wrote. “Though plaintiffs boldly probe the outskirts of law, the only enterprise they resemble is RICO.” The judge ordered sanctions of $81,320 against all of the lawyers and firms he found to be part of the copyright scheme. He also referred his ruling to the U.S. Attorney’s office, the Internal Revenue Service and relevant bar associations.
Steele, Hansmeier, Duffy and the other folks smacked by Wright have all appealed the sanctions order. Hansmeier and Duffy didn’t return my phone messages, but Steele told me in a phone interview that Wright should never have issued sanctions against him, since he’s never appeared before the judge or even practiced in California. He also claimed Wright based his ruling on a 12-minute hearing. “There was no evidence introduced, no testimony offered, nothing,” said Steele, who told me he was never a partner in Prenda Law but was merely “helping on an ad hoc basis” with some oral arguments. Steele said he’s licensed only in Illinois and hasn’t really practiced law in more than a year. “I’m not interested in litigation,” he said. “This is a controversial area of the law.”
Steele told me that what has been lost in the extensive coverage of Wright’s decision is that copyright owners have legitimate claims against downloaders who steal their content. “The only racket going on is the widespread use of BitTorrent,” he said. “The image is of out-of-control lawyers, but you have to remember: The vast majority of cases wind up in our favor.”