Third Parties Increasingly Targeted In Infringement Cases

from the getting-out-of-control dept

We’ve seen, lately, that the entertainment industry has been targeting third parties for liability. For years, they’ve talked about making ISPs more “liable” for infringement, but now they’re extending that web in potentially problematic ways. Of course, this is a lot of what the whole COICA debate is about. Part of the way COICA works is by extending liability to third parties — ISPs, advertising partners, domain registrars, payment processors — if they don’t cut off all services to those accused of infringement (often without any adversarial hearing). But in some cases, they’re already targeting those third parties, and two separate stories on TorrentFreak demonstrate that.

The first involves Liberty Media suing Paypal along with Hotfile (and 1,000 John Does) for alleged infringement. Hotfile is a cyberlocker, which has plenty of perfectly legitimate uses, but is also frequently used for infringement. Liberty Media walks through a complex set of relationships, which it seems to interpret in the most nefarious way possible. For example:

“Demonstrating that Defendant is aware of the illegality of its conduct, it offers two methods for download services. For its first option, Defendant permits its partners to download a stolen movie at a very slow transfer speed for no charge. The other option allows users to pay a premium to download the movie ten times faster.”

It certainly sounds bad when you put it like that, but of course, plenty of file storage/file transfer sites offer tiered packages that involve paying for faster transfer rates. That, in no way, demonstrates awareness of illegal content. I’m not saying Hotfile isn’t potentially liable, but claiming the tiered pricing is evidence of that seems strange.

But it seems even worse that Liberty is suing PayPal as well — and I would bet that PayPal will quickly file to be dismissed from the case, as an unrelated third party, or one protected by safe harbors. It’s going to be quite a stretch for Liberty to prove that Paypal is somehow liable for the actions not just of a company that uses Paypal, but the users of that company. It’s fourth or fifth party liability, rather than third party liability.

The other story involves a case that’s a bit further along, where a judge has ordered a preliminary injunction against two ad providers and a domain registrar over a website that allegedly hosts infringing scans of various books. Since the holder of the domain is kept private via eNom’s Whois Privacy Protection Service, the court ordered eNom to reveal the identity of the domain owner and to “disable the website.” The judge also ordered the two ad networks — Clicksor and Chitika — to stop working with the site.

While I could see suing the John Does behind the site, and then working to get a subpoena to identify the real parties behind the alleged infringement, directly suing these three companies seems like a huge stretch, and it’s disappointing that the judge rushed to issue the injunction so quickly. The original complaint (pointed out by Eric Goldman, makes some ridiculously broad claims about third party liability.

This is unfortunate, but not a surprise. We’ve been warning for the better part of a decade the problems with third party liability. Those who benefit from it will always push to stretch it to dump liability on third parties who had absolutely nothing to do with the actual infringement, and often had no idea that any infringement was going on. These payment companies, ad networks and registrars are quite far removed from any actual infringement. As noted above, they’re barely “third parties” at all, as they’re really fourth or fifth parties, so far removed from the actual infringement as to make these legal actions really quite questionable. It’s hard to see how anyone can reasonably argue that a registrar or a payment processor or an ad network should somehow be liable for actions done by the users of a site that they work with. If this continues it will severely stifle many of these activities, as payment providers and ad networks won’t do business with all sorts of perfectly legitimate sites, just to avoid the liability of being blamed for the actions of someone two steps removed.

Filed Under: ,
Companies: chitika, clicksor, enom, hotfile, liberty media, paypal

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Comments on “Third Parties Increasingly Targeted In Infringement Cases”

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Mike says:

I find it kind of funny how you always have to resort to a “slippery slope” to make a point. If you want to defend Hotfile for its piracy, please do so directly.

American credit processors should not be processing payments for a pirate site. Neither should American advertisers place ads to fund illegitimate sites. COICA is correct in both regards.

Last I checked, Mastercard endorses COICA.

John Doe says:

Re: Re:

Say what? Why should any 3rd party be held liable for what others do? Do you want to be held liable for what others do? I sure don’t. Until a site has been found guilty of infringing, no court should ban people from doing business with that site. No site should be found guilty of infringing if the users of the site are the ones doing the infringing.

Next you will ban alcohol because people drive drunk and kill people? Maybe throw in guns too. That is why it is a slippery slope. And it is very slippery.

Chris Rhodes (profile) says:

Re: Re:

First Party: Infringer
Second Party: Online File Locker (for aiding 1st)
Third Party: Online Payment Processors (for aiding 2nd).
Fourth Party: Google (for sending traffic to 3rd)
Fifth Party: Advertisers (for providing funding to 4th)
Sixth Party: Random Internet Troll (for providing revenue to 5th)

Makes perfect sense. Get out your wallet, troll-boy!

Mike Masnick (profile) says:

Re: Re:

I find it kind of funny how you always have to resort to a “slippery slope” to make a point. If you want to defend Hotfile for its piracy, please do so directly.

I’m not defending Hotfile. I’m pointing out that it’s Hotfile’s users who are doing the infringing, so it seems rather silly to put the liability on others.

Do you think it’s right to blame Ford for bad driving? That’s the argument you’re supporting.

American credit processors should not be processing payments for a pirate site. Neither should American advertisers place ads to fund illegitimate sites. COICA is correct in both regards.

Your opinion is that censoring the internet is “correct.”

Okay. Good luck with that.

Last I checked, Mastercard endorses COICA.

Indeed, it does. And it’s why fewer people trust Mastercard.

Mastercard should not be in the position of telling someone how they can or cannot spend their money.

Why do you support Mastercard telling you what you can do with your money?

Anonymous Coward says:

Re: Re: Re:

What you don’t seem to get is that without paypal processing payments for them, hotfile would not exist, and as a result the infringement would not occur, at least not on their site.

Hotfile knows exactly what they are selling, speedy access to content of questionable legality. The more illegal the content, the more likely people will pay to get it faster.

It really isn’t hard.

Paypal can also see where the traffic is coming from, and as the cash register for the business, are in the old “jointly and severally” position. As paypal is generally very strict about what the process for (they don’t process gambling, porn, or anything of that nature), it would seem unusual that they wouldn’t consider a file trading site to be somewhat suspect up front.

At the end of the day the original poster is correct. If you are going to support piracy, just do it directly. All the tap dancing around the edges makes you look like a wuss.

Josh in CharlotteNC (profile) says:

Re: Re: Re: Re:

Hotfile knows exactly what they are selling, speedy access to content of questionable legality.

The same argument has been made against Xerox machines, the VCR, cassette tapes, YouTube, and more. It is an old, tired argument that is wrong.

Hotfile and other file locker services have significant legitimate use. It is not their responsibility to protect the business models of other companies who cannot adapt to the market.

Richard (profile) says:

Re: Re: Re: Re:

Please get your facts straight.
Try reading the Hotfile policies on their fdront page!
HotFile is a service provider under the Digital Millennium Copyright Act, 17 U.S.C. section 512 (“DMCA”). HotFile has adopted the following policy concerning copyright infringement in accordance with the DMCA and copyright law. Hotfile will respond promptly to claims of copyright infringement reported to its designated copyright agent. It is Hotfile’s policy to: (1) accommodate and not interfere with standard technical measures (as defined by the DMCA) used to identify and protect copyrighted works; (2) disable access to or remove content that it believes in good faith may infringe the copyrights of third parties; and (3) discontinue service to users who repeatedly make such content available or otherwise violate HotFile?s Terms of Service. Please do not abuse the HotFile service by using it to distribute materials to which you do not have the rights. “

It seems to me that they do absolutely as much as it is possible to do whilst offering a legitimate backup and file distribution service.
Hotfile are totally legit.

Legal action against them is an abuse of law.

Mike C. (profile) says:

Re: Re:

So by your logic, the major labels should have their web sites taken off the Internet and credit processors should no longer deal with them since they performed over 300,000 acts of copyright infringement in Canada…. right? After all, what’s good for the goose is good for the gander.

Or do you really mean that only the sites the major labels don’t like and the labels get to do whatever they want.

/somehow, I think it’s the latter.

hmm says:


I can’t WAIT for fourth and fifth party liability….

Hey, your Honor, I’m now suing YOU because you didn’t pass an injunction quickly enough to stop these guys infringing….

Oh BTW I’m also suing your mother, because if she had given birth to someone else who WOULD have given an immediate injunction then All this evil infringing wouldn’t be happening……

Whilst I’m at it I’m gonna sue the President of the United states because if he’d just implemented a policy of “shoot all file sharers, ask questions later” then we wouldn’t be in this mess today……….

Anonymous Coward says:

There is something else to add here, the payment companies aren’t “third parties”, they are second parties. They are second party to the transaction that sells access. That access is in itself likely an infringement (subject to DMCA) which certainly makes Paypal a second party, and a very close one, as they control the purse strings.

Anonymous Coward says:

Re: Re:

That access is in itself likely an infringement (subject to DMCA) which certainly makes Paypal a second party, and a very close one, as they control the purse strings.

Nope. Access to a site with links to something that is infringing is not infringement in itself. It’s only infringement if you actually infringe. So processing payment for access to a site is nowhere near infringement.

It would be like blaming TicketMaster because someone bought a ticket to a concert, went to the concert and was busted for selling pot while at the concert.

Mike Masnick (profile) says:


Downloaders are not liable at all unless they also upload. Last I checked anyway.

That’s not true. What is true is that many of the lawsuits were about uploading, because that was all that could be determined, but downloading is infringement as well. Downloading is a violation of the reproduction right. Uploading is a violation of the distribution right.

Kelso80 says:

File-hosting sites such as Hotfile are widely used for piracy because they reward uploaders with points, and money, for the amount of downloads they get from their uploaded files. This feature is actively advertised on numerous pirate sites, and many copyright infringers (pirates) in fact use affiliate links to ask people to subscribe to such sites so they could be paid more money. Hotfile and similar sites all feature these rewards programs as a central feature of their services, and as such they are widely used and advertised in the pirating community. In particular, these inducements are often compared and pirates frequently switch services in order to maximize the money they make from others downloaded their pirated content.

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