Germany-based DigiProtect has a long history of using a machine-gun approach to "fight piracy", in which it sends out tens of thousands of letters to people it says have illegally downloaded its clients' content, and demanding a "pre-settlement" payment to stop them from being sued. The big problem is that the company's net catches lots of innocent people, and it's been condemned by all sorts of people, even including the British equivalent of the RIAA. The BBC has been asking some questions of DigiProtect, and as you might expect, the firm sees absolutely nothing wrong with what it's doing, calling its method "the only proven effective proceeding" for dealing with piracy. How, exactly, is the method effective? Because as far as we can tell -- and as far as the recording industry is concerned -- the amount of illegal downloading going on really isn't slowing down much. What it's effective at is generating revenues for DigiProtect, which tells the BBC that after deducting costs, it pays rightsholders at least 50% of the remainder of the "pre-settlements", leaving it a nice commission. These answers from Digiprotect are completely unsurprising, and it's not clear if the BBC expected the company to have some sort of epiphany and shut down or what. After all, another company using a similar model in the UK called it quits last week, saying it was "surprised and disappointed by the amount of adverse publicity that our firm has attracted in relation to this work." I mean, who in their right mind would think that sending out these bully-like letters, particularly to lots of innocent people, would upset anybody?

We recently covered how a recently created outfit going by the name US Copyright Group, had launched tens of thousands of lawsuits (some of which appear to be quite questionable from a legal standpoint), as part of what appeared to be an attempt at copying the efforts of companies like DigiProtect and ACS:Law in Europe (where such practices have been widely condemned). The lawsuits appear to be a smokescreen to get contact information for people to whom this "company" can send "pre-settlement" letters, in which they're told to pay up to avoid the lawsuit.

Considering that this pseudo-shakedown is apparently lucrative in Europe, perhaps others are preparing to do the same in the US as well. A reader who prefers to remain anonymous, but who works for a small ISP, passed along an email he recently received from what appears to be a newish operation called the Copyright Enforcement Group, whose website has a mock law enforcement shield on it. Like US Copyright Group, it doesn't hide behind any claims of stopping infringing content. It focuses solely on how this is a way to "monetize" infringements. The email also points to a separate site called CopyrightSettlements.com, which makes some interesting claims. This is the website where folks can "pay up," and it promises "you will receive a full release of liability" but also that "Your personal information and settlement terms will be kept confidential." Makes you wonder how the two can go together. If your info is kept secret, what's to keep copyright holders from suing again? And does the company make sure it covers all copyright holders for a piece of content? Will it indemnify users if they're threatened or sued again?

As for the letter to the ISP, it was an "introduction," in an attempt to ask for the ISP's cooperation in identifying its users. As we've seen with US Copyright Group, many ISPs refuse to just hand over names, though some will. Hopefully, most ISPs receiving the following letter know better than to just hand over info without a court order. Here's the relevant part of the email:

CEG provides intellectual property management services to a consortium of studios in the entertainment industry. Our clients have entrusted us with their valuable property and authorized us to bring legal action against those individuals who illegally download and/or distribute their copyrighted materials over the Internet.

CEG's proprietary technology detects infringements which occur over the Internet and gathers sufficient evidence to support a claim of copyright infringement against the infringing party. Once infringement is detected, we follow strict multi-step validation procedures to ensure that all information is accurate before we forward the DMCA notice to you. The infringing party is then afforded with an opportunity to settle the matter for substantially less than what will be offered if a lawsuit is filed or compared to the judgment amount a court may enter against the infringer.

We understand and respect the important role that you play in securing the privacy of your subscriber base. However, we, too, are deeply committed to our clients and will vigorously enforce their intellectual property rights against infringement. We sincerely hope that you will join us in our effort to fight Internet piracy.

Looks like this new form of "monetizing" content is spreading. And not in a good way.

With more and more attention being paid to the efforts by firms like ACS:Law and DigiProtect to profit from blasting out hundreds of thousands of letters demanding payment to avoid file sharing lawsuits (which almost never seem to actually get filed), it seems that the companies involved in such things may finally be facing some pretty serious criticism that could force them to curb the practice. First up, politicians. A few different UK officials are coming out loudly against ACS:Law, with some even suggesting that the firm's efforts are like a "scam" or "legal blackmail."

Meanwhile perhaps the most surprising of all is that BPI, the UK's version of the RIAA has also come out against the practice, saying that they don't feel it is appropriate. Perhaps it's not a huge surprise -- given that the clients of ACS:Law/DigiProtect have tended to be video game and porn producers rather than the recording industry. However, when even the recording industry finds your actions against file sharing too draconian, it suggests you've really stepped over the line. At some point, you get the feeling that ACS:Law is going to get slapped down legally.

We've covered in great detail how DigiProtect purposely seeds files of content from its copyright holding partners, in order to send anyone who downloads the content a "pre-settlement" letter that seems not very different from the traditional extortion "protection" rackets ("pay us, or we'll sue.") Those who don't pay are actually discovering that the pre-settlement letters may be handed over to collections agencies despite no agreement to pay nor a court order requiring payment. It turns out this shakedown business is quite profitable but of very questionable legality.

A new report in Germany is suggesting that DigiProtect and a few similar firms in Europe may have sent out 450,000 such letters last year. Unfortunately, NewTeeVee, in reporting on this, claims that each of these are "P2P lawsuits," but that's not true (and a large part of the problem). Nearly every one of these letters are sent without any corresponding lawsuit. The whole idea is to shake people down by threatening a lawsuit, but never having to go through the expense of filing one (or the trouble of actually proving the infringement -- which is a big deal since many, many, many bogus letters have been generated, snaring many innocent users). But, with little in the way of penalties for such bogus pre-settlement letters, there's simply no reason not to keep sending them. Apparently, enough people just pay up to make this an incredibly profitable business.

However, with the massive increase in such letters, and increasing scrutiny about the whole practice, you have to wonder when European governments will start to crack down on this behavior. It's difficult to see anyone defending these actions with a straight face. They clearly have nothing to do with preventing file sharing or unauthorized use of content, but are very much about just getting people to pay up under the threat of a lawsuit.

We've covered how various companies in Europe have built up an extremely profitable business by purposely seeding content they have the rights to on file sharing networks, and then sending "pre-settlement" letters demanding money from the holder of any IP address that connects to them, even if the IP address is not accurately indicating who was involved. They're now sending out these letters at a massive rate, and while they're not actually filing lawsuits, it appears that at least one of the firms involved, DigiProtect, is getting a collections agency involved in some cases. That seems pretty nasty. There's no actual debt here, because the person has not agreed to pay up, but by handing it over to a collections agency, the person will now get hounded with demands for payment. It's difficult to see how this is even close to legal.

We've recently seen efforts to ramp up the system of "pre-settlement" letters as a way to "profit" off of file sharing. The scheme works by having a company that either holds the copyrights to certain works or has merely licensed them for this purpose put those files online and then see who is downloading them. That's the simplest version (though, of questionable legality since if the copyright holder itself is putting the content online, you can raise questions about whether or not the sharing is really unauthorized). Some others in the space don't actually put their content online themselves, but try to find IP addresses of those who are sharing the content, and then sending those users "pre-settlement" letters, in the hopes that many people just pay up, rather than fighting the letters (or, more likely, ignoring them).

Of course, one of the big problems with such a system is that those sending such letters have very little incentive (if any) to actually verify that unauthorized file sharing has happened. They want to cast as wide a net as possible and send out as many letters as possible to as many people as possible. It's a pure numbers game. And, for that reason, plenty of false positives are identified. Now, plenty of people reasonably point out that IP addresses are not indicative of individuals, and there are problems with relying solely on IP addresses -- but those problems become even bigger when you're dealing with folks who don't understand how BitTorrent actually works. That activity leads to claims of copyright infringement by networked laser printers.

Over at Freedom to Tinker, computer science professor Mike Freedman discusses how the popular CoralCDN has been getting hundreds of pre-settlement letters because one of these companies doesn't seem to do even the slightest verification of whether or not an IP address is actually involved in sharing content, and misinterprets the data it has received (despite the self-supported claim that "The information in this notification is accurate"). Of course, since the "punishment" for such things is slight to non-existent, the company in question (in this case, "Video Protection Alliance") has no incentive to improve its process. But it presents a real cost to Freedman, who helps run CoralCDN:

Our personal experience with DMCA takedown notices is that network operators are suitably afraid of litigation. Many will pull network access from machines as soon as a complaint is received, without any further verification or demonstrative network logs. In fact, many operators also sought "proof" that we weren't running BitTorrent or engaging in file sharing before they were willing to restore access. We'll leave the discussion about how we might prove such a negative to another day, but one can point to the chilling effect that such notices have had, when users are immediately considered guilty and must prove their innocence.

At some point, shouldn't we start to consider serious sanctions against those issuing not just bogus DMCA takedown notices, but then also using such notices to demand "pre-settlement" payments from individuals who may not realize their legal rights and may just pay up?

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.

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.

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.

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?