Extortion Is Profitable Too, Doesn't Mean That It's A Fair Way To Profit Off Piracy

from the just-saying... dept

We've covered in the past how companies like Digiprotect convince the entertainment and software industries to sign over copyright licenses to allow them to purposely load file sharing networks with their content -- and then send anyone who downloads the content a threat letter demanding payment. The idea here is not to actually take anyone to court or to stop file sharing. Not at all. The idea is to profit from these threat letters. And, as it turns out... it's quite a profitable scheme. TorrentFreak has some numbers from a music industry presentation discussing how these extortion-like enterprises can pay quite handsomely. Basically, this one group, DRS, sends out emails demanding €450 ($650) per offense, with the company getting to keep 80% of any proceeds. Furthermore, DRS claims that approximately 25% just pay right up, which means for every infringement letter DRS sends out, it can expect to bring in $162.50, with 20% going to the artist rights holder. That's $32.50 that the rightsholder can expect per infringement, on average. That sure as hell beats a few pennies per download. No wonder such programs are becoming so popular. Of course, that doesn't make them any more ethical. Purposely putting files online and then sending out threat letters isn't exactly the moral high ground here.

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Digiprotect Admits It Shares Files Just To Find People To Demand Settlement Money From

from the well,-look-at-that dept

Last week we wrote about claims that copyright holders were purposely putting their own content online to see who downloaded it, and then suing them. In that post, we mentioned a post from last year, about one of the companies that's been hired to track down file sharers, DigiProtect, and how its contract seems to suggest this is exactly what the company does. After that came out, there was some talk about how that contract clause really was only used to make sure the company had the right to investigate infringement. However, the company now appears to be quite forward in admitting that it puts files online specifically to catch downloaders:

"We get the legal rights from the companies to distribute these movies to stores, and with these rights we can sue illegal downloaders. Then we take legal action in every country possible, concentrating on the places where such action will be profitable."

Of course, this seems questionable on a variety of levels. First, if it's getting the distribution rights to the content, then the distribution is authorized, and not infringing. Second, DigiProtect makes it quite clear that its focus is on figuring out the most profitable way to do this -- not the best way to cut down on infringement. The company apparently doesn't pay anyone on a fixed salary, but everyone shares in a cut of whatever is "collected." In other words, the program is not at all about stopping unauthorized file sharing, but figuring out the best way to profit from sending threat letters to people. The company even admits that the numbers it demands from people, and the numbers used in lawsuits have nothing to do with actual damages, but are entirely about what they think is mostly likely to get them paid. That sounds an awful lot like the what most people call extortion.

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Davenport Lyons Reported To Authorities; DigiProtect Insists Its Actions Are Aboveboard

from the the-developing-story dept

It seems things kept getting worse for Davenport Lyons and DigiProtect, who have teamed up to threaten an awful lot of people that they need to pay up to avoid getting sued for file sharing, usually on extremely flimsy evidence. That means, way too often, the letters are received by innocent people who wonder why they should pay £500 to avoid being sued for something they never did. It certainly feels like a good old fashioned protection racket, and a UK consumer group has now complained to the Solicitors Regulatory Authority (SRA) in the UK, noting that a number of innocent folks have been apparently bullied by Davenport Lyons into paying up just to avoid being sued for something they never did. The group points out:

Davenport Lyons' letters to alleged file sharers: make incorrect assertions about the nature of copyright infringement; ignore the evidence presented in defense; and increase the level of compensation claimed over the period of correspondence. In addition, the letters threaten, incorrectly, that failing to properly secure an internet connection is grounds for legal action.

Meanwhile, last month we talked about a clause in DigiProtect's contract that appeared to say that the firm promised to upload the content to various file sharing networks, which certainly looked like they were going to spread the content more widely in order to be able to send out more of these "pre-settlement" letters. Considering DigiProtect promotes its service as helping companies profit from piracy, it wouldn't be surprising to find out that in order to increase profit, it has every incentive to first increase the "piracy." However, the company (who has been rather quiet during all of this) has granted an interview to xbiz where it refutes the arguments that it's uploading content, saying that the terms of the contract were simply necessary to transfer the legal rights to DigiProtect. Of course, if that were true, why not say they transferred the actual copyrights, rather than say they had obtained the rights to make content available, along with listing out the specific file sharing networks. Oddly, DigiProtect then goes on to claim that any online distribution of porn is illegal online due to laws against distributing porn to minors. That seems like a total nonsequitor.

The company doesn't explain the claims from its only named client, Evil Angel, about the fact they were told the pre-settlement letters would be for more like $50. It also refuses to name any other customers, though points out that it works with companies besides porn movie makers, specifically noting that it works with software companies too, but it refused to name any. Perhaps that's because software firms like Atari have backed away from these tactics after all of the negative publicity.

In the end, the whole thing seems pretty questionable. Trying to force people to pay up with threatening, misleading letters with extremely flimsy evidence (which has been barred in some countries) is hardly a reasonable business model. Hopefully, companies think twice before signing up for such a program -- and perhaps the SRA will sanction Davenport Lyons for its participation in this scheme.

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Porn Company Claims DigiProtect Lied About Davenport Lyons Settlement Letter Fees

from the well,-look-at-that... dept

The saga of UK law firm Davenport Lyons, and its ongoing efforts to extract money from people for a promise not to sue them, for copyright infringement continues. The BBC is the latest publication to pick up on the story, noting an awful lot of upset people are pissed off at bogus claims from Davenport Lyons about downloading porn films which they insist they had nothing to do with. Since Atari backed out of its deal with Davenport Lyons following the negative publicity, it seems that the law firm is focusing on its porn clients -- the same ones that apparently encouraged middleman DigiProtect to upload their content widely, to make sure more people were "pirating" it.

But the really interesting claim comes buried at the end of the article. The BBC contacted the porn company, Evil Angel, which hired DigiProtect, to get their thoughts on the negative reaction to the whole campaign, and the guy in charge claims that DigiProtect misrepresented the details to him, and he believed the pre-settlement demands were much lower than the £500 that is in the pre-settlement letter:

"It's not my understanding that they ask for anything near that. I think the amount was $50 or €50. I would be very surprised and I wouldn't be happy because it would mean it was completely misrepresented to me."

Of course, this probably means that Evil Angel is only getting $50 (or maybe even less) per "settlement" leaving somewhere in the range of $700 (depends on the exchange rate) for Davenport Lyons and DigiProtect to split. For doing what? Getting some IP addresses and sending out auto-generated form letters. Nice margins, but sort of proves that these settlements have nothing to do with compensating the content creator.

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Are Copyright Holders Purposely Putting Content On P2P In Order To Demand Money?

from the that's-what-we-call-extortion dept

We've discussed the highly questionable activities of UK law firm Davenport Lyons for its supposed campaigns on behalf of various copyright holders. From what we had seen, the firm wasn't particularly interested in actually protecting content from being shared online -- only in threatening as many people as possible with "pre-settlement letters" to get them to pay up to avoid being sued. This certainly feels like what's commonly called extortion, especially, as it came to light that the pre-settlement letters are being sent to many innocent bystanders. Since this is a business model issue (squeezing individuals to pay up) rather than actually being about protecting copyright, it's no surprise that the pre-settlement letters would be sent as widely as possible, even if there was no actual evidence showing guilt.

However, the situation may be even worse than originally suspected. In an article about Davenport Lyons' latest client, TorrentFreak notes that the copyright holder may be contracting with a company to purposely spreading the content on file sharing networks for the purpose of making it easier to find people to threaten with pre-settlement letters. There are a number of different players involved here, but basically, copyright holders are licensing the copyright on various movies to a firm called DigiProtect. DigiProtect, in turn, hires Davenport Lyons to send out the pre-settlement letters. But in a leaked contract between DigiProtect and one copyright holder, it's made quite clear in the contractual language, that DigiProtect is expected to upload the movies as widely as possible prior to having a law firm send out the pre-settlement letters:

To achieve the purpose outlined in clause 1, LICENSOR grants DIGIPROTECT the exclusive right to make the movies listed in Appendix 1 worldwide available to the public via remote computer networks, so-called peer-2-peer and internet file sharing networks such as e-Donkey, Kazaa, Bitorrent, etc. for the duration of this agreement

In other words, it's quite clear that this has nothing to do with preventing content from getting on file sharing networks. Instead, they're specifically putting it there themselves, apparently hoping to get it as widespread as possible, in order to send out the threat letters more widely, so they can collect on the "settlements" from people scared that they're about to get sued. It's hard to see how that's not a massive abuse of copyright law.

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