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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Court Says Demanding Settlement To Avoid Clearly Baseless Lawsuit Is Extortion

from the hmmm... dept

Over the past few years, we've seen a small, but growing, number of businesses that set up lawsuit settlement factories, of sorts. The most common, of course, is the RIAA, which built a nice little business threatening to sue people for file sharing if they didn't hand over a few thousand dollars. Of course, before the RIAA, DirecTV did this for a group of folks who had purchased card readers. For many people, this whole process of demanding payment to avoid a lawsuit sounds an awful lot like "protection money," or extortion. Eric Goldman alerts me to a recent ruling by the New Hampshire Supreme Court that agrees that such settlement demands can be extortion, if the potential lawsuit is clearly baseless. Of course, this is only in New Hampshire and folks at the RIAA (I'm sure) would insist that its lawsuit threats were not "clearly baseless." That may be true in some of them, but you do have to wonder about the time they threatened a deceased woman who was 83 years old at the time of the supposed sharing, and seemed unlikely to have used Kazaa or the user named "smittenedkitten" while sharing 700 songs.

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Automated Copyright Settlement Letters Apparently A Lucrative Business

from the pay-up-or-we'll-sue dept

We've covered a few different stories of companies that have been involved in what certainly has a lot of similarities to extortion: sending automated letters insisting that you're violating the law, and demanding payment to prevent a lawsuit. DirecTV was one of the first companies to put a big push behind such a revenue stream, but it was eventually shot down by the courts. The RIAA, of course, has used such a program for a while. More recently, we've seen some companies in Europe experiment with similar programs. The latest is Nexicon, a former cigarette retailer that's now rebuilt itself as an automated legal threat sender, scanning BitTorrent for what it believes is infringing content, and dashing off automated legal notices, demanding payment within 10 days, and suggesting that simply paying up is a lot cheaper than even contacting a lawyer. At what point do politicians realize just how badly the system is being abused? Or do they just let this sort of activity continue?

In the meantime, it looks like ACS:Law, which is one of the organizations that's been involved in a similar settle-or-we'll-sue letter sending campaign has been outed as sending bogus letters to people who had nothing to do with the content they're alleged to have infringed upon. The most amazing thing? The companies involved seem to admit it. In a letter used by multiple firms, they note that "We do not claim that your computer was used to commit the infringing act (although we do not exclude this possibility), nor do we claim that you downloaded our client's work. Our claim is that your Internet connection was used to make our client's work available via one or more P2P networks. The file may not, therefore, be on your computer." But they still want you to pay up, of course. It's guilty until proven innocent, because that's a lot more lucrative.

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Class Action Lawsuit Against The RIAA For 'Stolen' Money?

from the this-won't-end-well dept

A bunch of folks have been submitting the story about how Jammie Thomas' new lawyer, Kiwi Camara (a Charlie Nesson protege) and Nesson himself are apparently preparing to file a class action lawsuit against the RIAA in an attempt to get back the $100 million plus that they claim the industry "stole" in its settlements. This may be interesting from an academic standpoint (or from a PR/circus standpoint), but I have difficulty believing it will get very far in terms of actually succeeding. I do find the settlements distasteful, and bordering on extortion ("pay up or we sue" is really questionable), but earlier attempts at similar lawsuits haven't gone very far at all. Still, considering that the RIAA has always insisted that its entire legal campaign was part of a grossly misguided and ultimately self-damaging "PR campaign" perhaps it's okay that someone is effectively doing the same thing on the other side.

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RIAA Sued For Racketeering Yet Again

from the we'll-see-how-this-works dept

A few people have filed lawsuits against the RIAA for racketeering in the past, though these charges have always been dismissed. In one such case, where the filed charges were dismissed over the summer, new claims were filed again charging the RIAA with racketeering for extortion, mail fraud and wire fraud in its ongoing efforts involving weakly supported threats against alleged file sharers demanding money to avoid being sued. The file-sharing defendants are trying to turn this into a class action lawsuit on behalf of everyone falsely accused by the RIAA. Given the (lack of) success of all previous racketeering lawsuits on this topic, I wouldn't get too optimistic of this one going anywhere just yet.

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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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Another Day, Another Big Data Breach

from the do-people-even-pay-attention? dept

These days, it's probably best to just assume that any private data you've ever provided to a company is public. Given the pace at which the data you've entrusted to companies is leaked, whether via malicious hackers or via company carelessness, it's almost as if the exception to the rule is a company that's actually been able to keep your data safe. So it's hardly surprising that Express Scripts, the massive medical benefits management company, has said that its records appear to have been compromised. Apparently, the company was sent a note, detailing the medical records of about 75 people, with an extortion threat telling the company to pay up or face the exposure of millions of patient records. The FBI is now investigating. Still, we're reminded once again that companies have very little incentive to really keep your records straight. It's almost reached the point where these stories are barely worth commenting on, since they're so common. There's something quite depressing when you realize that these sorts of data breaches are barely even newsworthy any more.

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Company Wants To Patent Automated Pay-Up-Or-We-Sue Pre-Settlement Letters For File Sharing

from the by-a-cigarette-company? dept

Well, well, well. The latest story about a "solution" to the "problem" of piracy has an interesting twist to it. A company named Nexicon, claims that it's about to launch an automated piracy tracker/payment collector. It says that it's able to watch various file sharing systems, tracking who's sharing and downloading unauthorized files -- and then sends them an automated letter demanding they pay up, including a "convenient" one-click payment system where you can settle up via your credit card or PayPal. Even better, the company claims that it's trying to patent this method, which is hardly new or unique (and, you have to wonder if Nexicon is paying Amazon a license for using "one-click" payments -- as the company even seems to brag that it copied Amazon's one-click solution).

There are plenty of questions raised by this. First, if it's actually put into use as described, it would be the first time we see the industry attempting to target downloaders as opposed to uploaders. All of the various lawsuits and pre-settlement letters have always targeted those who share the unauthorized content. But the article claims this will go after downloaders (though, it's not entirely clear how they'll know who actually downloads the file). Then, of course, there's the whole extortion question of demanding payment to avoid a lawsuit -- especially when the actual evidence may be rather flimsy.

As for the patent application (which a casual search did not turn up), it's hard to see how copying the same strategy that's been used for years by the recording industry, merged with the already-questionably-patented Amazon 1-click method is somehow patentable.

Oh yeah, there are also some questions about Nexicon itself. Just last week the company announced a deal with YouTube to provide some audio fingerprinting technology -- at which point Wired pointed out the rather bizarre history of Nexicon. It started out as an online cigarette seller, that got sued for taking orders from kids, falsely advertising cigarettes as being tax-free and then (not surprisingly) failing to report taxes. Then there were the problems with the SEC over not filing its tax returns on time as well as questionable activities in some sort of reverse stock swap merger. Oh, and did we mention at one point the company was going to be a portal? These are the folks who are going to be popping up automated messages demanding you pay up for downloading a Frank Zappa tune?

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Scammers Copying Big Copyright Extortion Tactics

from the learn-from-the-best dept

It really was only a matter of time. For a while now, the entertainment industry has been using borderline extortion tactics with "pre-settlement" letters that promise individuals they won't get sued if only they pay a fee upfront -- ranging from a few hundred dollars to a few thousand. These letters have proven to be incredibly effective in getting people to simply pay up, so it's no surprise that other scammers have started copying the technique as well. Right now it sounds like they're simply calling people, but it's really only a matter of time until they start sending nearly identical "pre-settlement" letters on threatening letterhead, and getting folks to pay up as well. Of course, given the extremely flimsy nature of the evidence often used by the entertainment industry in sending out those letters, we'll once again note the very fine line between what these supposedly legitimate companies are doing and the out-and-out scammers are doing.

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RIAA Shakedowns Similar To Big Retailers Shaking Down Suspected Shoplifters

from the not-so-different dept

We've talked in the past about how both DirecTV and the RIAA have used a borderline legal version of a shakedown to get people to pay them money, without them having a chance to defend themselves. The way the process works is simple. They come up with a mere slip of evidence that the person might be guilty, and then send them threatening letters offering not to sue if they merely pay up first. With DirecTV, the company used names of people who had bought smart card writing devices, even though such devices have perfectly legitimate uses beyond pirating satellite TV signals. With the RIAA, obviously, it was through a list of (often questionable) IP addresses. By using this method, many people pay rather than face a lawsuit -- even if they're innocent. They recognize that the cost of a lawsuit is much worse than just paying the settlement charge. In the organized crime world, this is generally known as a shakedown, or if you prefer, extortion. Yet, for some reason, it's legal when these businesses do it.

And, it turns out, the RIAA and DirecTV are not alone in doing so. Perhaps they even learned the practice by watching how big retailers approach shoplifters. Reader Josh sent in a Wall Street Journal article showing how many large retail chain stores are using a very similar process against suspected shoplifters. In the most egregious case, Home Depot detained a guy it thought was stealing drill bits, but dropped the effort after he showed them a receipt. A few weeks later, though, he received a letter demanding $3,000, which was later raised to $6,000. Admittedly, the amount is quite high there as the law firm that handled the case later admitted to a typo in entering the amount -- but the process seems quite similar to the RIAA/DirecTV process. It doesn't matter if the person is guilty or innocent. You just ask them to pay up or threaten them with a lawsuit. The retailers all insist this is a necessary process since shoplifting costs them so much -- but it's hard to see how forcing people to pay up without a chance to defend themselves is ever right, no matter how much shoplifting costs these retailers.

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IBM Trying To Get Patent On Patent Extortion?

from the recursive-patent-abuse dept

Have fun with this one. As seen on Slashdot and sent in by a few different readers, it appears that IBM is trying to patent the process of using a large patent portfolio for patent extortion. Technically, the patent is for "A system and method for extracting value from a portfolio of assets." Of course, if any company can claim credit for such a thing, it's IBM. After all, there's the famous story of IBM demanding patent licensing dollars from Sun. They accused Sun of patent infringement, but when Sun engineers and lawyers pointed out how they didn't infringe on the patents in question, IBM's lawyers responded: "OK, maybe you don't infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?" Nice to see they're now patenting that process. One could hope that IBM is hoping to get this patent either to prevent others from doing the same thing or (maybe?) to show just how ridiculous the patent system has become. Either way, it's still only an application, so perhaps a patent examiner will realize that there's a bit of prior art around this particular concept.

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Appeals Court Says That Just Buying A Smart Card Reader Doesn't Mean You Pirated DirecTV Signals

from the well-that's-good dept

While we often talk about the extortion-like tactics of the RIAA in going after file sharers, people sometimes forget that it was DirecTV that really pioneered this practice on the corporate level. Well before the RIAA started suing music fans, DirecTV sued a company that had been selling a device that would let people hack smart cards, and as part of the suit, DirecTV ended up with the company's customer list. They then set out to sue most of the folks on that list, without any evidence that those customers actually used the equipment to make smart cards for unauthorized access to DirecTV signals. The lawsuits snagged innocent folks who had plenty of legitimate reasons for wanting to program smart cards -- but DirecTV found the process so profitable that it pushed its "anti-piracy" team to do many questionable things in trying to convince people to settle -- even if they were completely innocent. Eventually, the company was accused of extortion and was told to stop threatening people if it didn't have any evidence.

However, there were still some people who were found guilty of unauthorized access, even though DirecTV's only evidence was that they had purchased these smart card devices. Reader jedipunk lets us know that an Appeals Court has now tossed out one such decision, noting that simply possessing the device is not evidence of unauthorized access. The court notes that the defendants can still be found guilty if there's proof that they were accessing DirecTV signals with unauthorized equipment -- but simply possessing the smart card hacking device is not illegal and is not proof that they were doing anything illegal with it. Slowly, but surely, it appears that judges are picking up the details on some of these tech cases.

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