MPAA Files Surprisingly Weak Billion Dollar Lawsuit Against Hotfile

from the you'd-think-there'd-be-a-bit-more-'there'-there dept

Hotfile, one of a number of cyberlockers out there, has been in the news increasingly lately, as various entertainment industry firms have been attacking it as one of the more popular cyberlockers. It appears that the MPAA and its whole content protection staff finally decided to go beyond complaining and actually sue Hotfile, asking (of course) for the maximum $150,000 in statutory damages for each infringing file it found on Hotfile.

The full lawsuit is embedded below, but what shocks me is how weak the case appears to be. Nearly the entire lawsuit is based on innuendo and insistence that perfectly reasonable practices couldn’t possibly have legitimate purposes. Hotfile acts as a cyberlocker — a service that has perfectly legitimate purposes for sharing large files. The MPAA tries to spin the fact that Hotfile charges subscription fees for premium services as nefarious, but that’s ridiculous. Hotfile — like other cyberlockers — is offering a service in which it pays for all of the bandwidth and storage costs upfront. Offering premium accounts for faster/better service is the very basis of the whole “freemium” model. It does not automatically imply, as the lawsuit suggests, that the company is inducing infringement. The MPAA also tries to make it sound nefarious that Hotfile encourages people to upload stuff that is downloaded more widely, but again that’s the whole point of the service. No one ever said that cyberlockers are for personal backup, but they’re designed to act as a service for distributing content. And, of course, encouraging people to use it in a way that gets more attention makes perfect sense, but does not automatically imply inducement to infringe.

The most ridiculous section, of course, is where the MPAA lists out all the things that Hotfile could do to reduce infringement — such as only letting people with accounts download. But the MPAA ignores how that would defeat the legitimate purpose of a service that allows anyone to distribute legal content quickly and easily. It also notes that Hotfile does not use any copyright filters, but there is no law requiring that it has to.

And that’s really the biggest problem with the lawsuit. Basically, the MPAA and the big studios it represents have decided they don’t like the fact that Hotfile isn’t protecting their business model and have decided that, therefore, it must be illegal. But that’s not how the law works. It’s entirely possible that a court will get blinded by the “but… but… piracy” aspect of this lawsuit. But looking through the details, I’m really shocked at the lack of any actual evidence for direct or contributory infringement. Instead, the crux of the entire lawsuit seems to be: (a) Hotfile makes money (b) people use Hotfile for infringement (c) Hotfile doesn’t do the things we want it to do to stop infringement. What the MPAA glosses over is the fact that it appears that Hotfile does, in fact, respond to DMCA takedowns and removes the files in question.

Frankly, I’m surprised. I knew that the entertainment industry would get around to filing lawsuits against cyberlockers, at some point, but I figured they’d have at least something more compelling than “but… but… piracy.”

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Companies: hotfile, mpaa

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Comments on “MPAA Files Surprisingly Weak Billion Dollar Lawsuit Against Hotfile”

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83 Comments
Anonymous Coward says:

Re: Re:

It’s pointed out that users can have multiple links to the same content, thus frustrating attempts at removal.

The complaint is actually very strong, and rather damning.

The exact opposite of what Masnick writes above.

Why is that Mike tries to spin it otherwise?

Because he’s the biggest piracy defender on the net.

TheStupidOne says:

You fell victim to one of the classic blunders – The most famous of which is “never get involved in a land war in Asia” – but only slightly less well-known is this: “Never assume ‘but… but… Piracy’ when it’s really ‘Here’s a bunch of money and incredibly expensive court proceedings'”! Ha ha ha ha ha ha ha! Ha ha ha ha ha ha ha! Ha ha ha…

Anonymous Coward says:

We must remove every possible manner of copyright infringement.

– But but we can’t, no matter what we do they will just work around it

Well we can try goddamit.
Someone play the national anthem while I go down with the ship.

– You could just get in the lifeboats and go over to that bigger ship over there.

– I see no ship.

Are you serious? there’s bands, fireworks and a free buffet!
Just there, aw come on just look.

– Free is morally bankrupt

At least let the rest of the crew and passengers go.

– No, and shoot those who try to use the lifeboats.

Oh bother

– Gurgle

Anonymous Coward says:

Does it really have to be strong at this point?

It seems like the lawsuit would only have to be strong enough to get a subpoena for the company’s emails, which then would hopefully include evidence that their marketing was designed to specifically target people who wanted to use the service for infringement.

As weak or even frivolous as the lawsuit may seem to you, I suspect it’ll turn out to be adequate for getting such a subpoena, and the ultimate strength of the suit will depend on what the subpoena turns up.

average_joe says:

Re: Does it really have to be strong at this point?

It seems like the lawsuit would only have to be strong enough to get a subpoena for the company’s emails, which then would hopefully include evidence that their marketing was designed to specifically target people who wanted to use the service for infringement.

As weak or even frivolous as the lawsuit may seem to you, I suspect it’ll turn out to be adequate for getting such a subpoena, and the ultimate strength of the suit will depend on what the subpoena turns up.

I just read through the complaint and did some surfing to check out the Hotfile search sites, and two words popped into my mind: willful blindness. I don’t think the complaint is weak at all, despite our pirate-apologist host’s claims otherwise, and I fully expect Hotfile will lose this case no matter their emails say. Hotfile knows damn well that their site is all about piracy. The court will know that too. I’m actually LOL at Mike’s attempt to defend these people. Good grief, Mike!

Anonymous Coward says:

Actually, there is one problem with Hotfile’s business model that perhaps tips it’s hand: It collects the money from the wrong people.

Hosting a file is about providing access. If I pay for an account at host X and put up a website, I am the one paying for the content to be delivered. What Hotfile is doing is charging to received the file. That implies value in the received file (because you would have to know what you are getting before you pay for it, right?). The only reason people would pay for a download is if there is something of value to them.

(oh yes, before anyone goes there, I know a video of Grandma on vacation can have value… but then again, you would just email that).

Hotfile’s business model is entirely based on the content uploaded to be valuable enough for people to pay to get. The most valuable content is what cannot be had any other way, or cannot be had for that price.

Mike C. (profile) says:

Re: Re:

You missed the part where you don’t actually have to pay to get files from Hotfile. The premium membership is so that you get to skip advertisements and get to the download a little faster. If you really don’t care about the ads or can tolerate them, you can get the file the same as any premium member.

Think of it as a VIP pass to the download line. You pay the fee, you get to go to the front of the line. Since they have an infinite supply, as long as you’re patient, you’ll get your copy.

Anonymous Coward says:

Re: Re: Re:

It is still a “charge for access” rather than “charge to host” system. They aren’t selling hosting, they are selling access to files. You don’t pay, you get it slowly with ads (effectively paying). If you want it quickly, buy a membership and get access to it more quickly.

That seems pretty much like profiting from piracy to me. ๐Ÿ™‚

cmsturg (profile) says:

Re: Re: Re:2 Re:

At what point will MPAA go after the internet providers for providing the vehicle for people to download copyrighted materials? Could use the same argument that while there are legitimate uses of the internet service, they are providing a service that facilitates the downloading of copyrighted material. Although they are not providing the content they are a party to the user getting the content. (Don’t flame me, I think it nuts). Perhaps the DCMA covers this and its all a moot point. But then again, if HotFile is a registered DCMA agent and the MPAA is still going after them, then maybe the providers are fair game.

Anonymous Coward says:

Re: Re: Re:3 Re:

You guys sort of seem to be intentionally missing the point.

hotfile (and other locker companies) specifically profit on download. It is against their economic benefit to be strict in checking files for copyright material. In fact, if they have tons and tons of copyright material that people really want, they will get a ton of traffic to it. So there is little to make them want to control what is on their servers.

An ISP provides only the connectivity to the internet cloud. They don’t profit specifically from holding copyright files and charging you to get them. You may do so (using P2P, example), but it isn’t the main thrust of their business.

I am sure that hotfile (and megaupload, and others) know which files are getting many downloads, and could easily check them (grandma’s video isn’t going to get 5000 downloads… but a copyright movie posted on a chat board might).

Willful ignorance is like consent, turning a blind eye while you rake in the cash.

average_joe says:

Re: Re: Re:5 Re:

And yet, nothing in the law requires them to do so. Oops.

As Judge Posner explains:

Willful blindness is knowledge, in copyright law (where indeed it may be enough that the defendant should have known of the direct infringement, Casella v. Morris, 820 F.2d 362, 365 (11th Cir.1987); 2 Goldstein, supra, ? 6.1, p. 6:6), as it is in the law generally. See, e.g., Louis Vuitton S.A. v. Lee, 875 F.2d 584, 590 (7th Cir.1989) (contributory trademark infringement). One who, knowing or strongly suspecting that he is involved in shady dealings, takes steps to make sure that he does not acquire full or exact knowledge of the nature and extent of those dealings is held to have a criminal intent, United States v. Giovannetti, 919 F.2d 1223, 1228 (7th Cir.1990), because a deliberate effort to avoid guilty knowledge is all that the law requires to establish a guilty state of mind. United States v. Josefik, 753 F.2d 585, 589 (7th Cir.1985); AMPAT/Midwest, Inc. v. Illinois Tool Works Inc., 896 F.2d 1035, 1042 (7th Cir.1990) (?to know, and to want not to know because one suspects, may be, if not the same state of mind, the same degree of fault).?

In re Aimster Copyright Litig., 334 F.3d 643, 650 (7th Cir. 2003)

Once they knowledge and do nothing about it, they lose their safe harbors under section 512(c)(1)(a). Without the safe harbor, liability is practically certain.

Modplan (profile) says:

Re: Re: Re:6 Re:

From that same case:

We turn now to Aimster’s defenses under the Online Copyright Infringement Liability Limitation Act, Title II of the Digital Millennium Copyright Act (DMCA), 17 U.S.C. � 512; see 2 Goldstein, supra, � 6.3. The DMCA is an attempt to deal with special problems created by the so-called digital revolution. One of these is the vulnerability of Internet service providers such as AOL to liability for copyright infringement as a result of file swapping among their subscribers. Although the Act was not passed with Napster-type services in mind, the definition of Internet service provider is broad (“a provider of online services or network access, or the operator of facilities therefor,” 17 U.S.C. � 512(k)(1)(B)), and, as the district judge ruled, Aimster fits it. See 2 Goldstein, supra, � 6.3.1, p. 6:27. The Act provides a series of safe harbors for Internet service providers and related entities, but none in which Aimster can moor. The Act does not abolish contributory infringement. The common element of its safe harbors is that the service provider must do what it can reasonably be asked to do to prevent the use of its service by “repeat infringers.” 17 U.S.C. � 512(i)(1)(A). Far from doing anything to discourage repeat infringers of the plaintiffs’ copyrights, Aimster invited them to do so, showed them how they could do so with ease using its system, and by teaching its users how to encrypt their unlawful distribution of copyrighted materials disabled itself from doing anything to prevent infringement.

http://homepages.law.asu.edu/~dkarjala/cyberlaw/inreaimster(9c6-30-03).htm#Document1zzHN_B9

Completely different situation. From Veoh:

UMG nevertheless argues that Veoh is ineligible for the safe harbor because its founders, employees, and investors knew that widespread infringement was occurring on the Veoh system. But even if this were true and undisputed, UMG cites no case holding that a provider?s general awareness of infringement, without more, is enough to preclude application of section 512(c).15 No doubt it is common knowledge that most websites that allow users to contribute material contain infringing items. If such general awareness were enough to raise a ?red flag,? the DMCA safe harbor would not serve its purpose of ?facilitat[ing] the robust development and world-wide expansion of electronic commerce, communications, research, development, and education in the digital age,? and ?balanc[ing] the interests of content owners, on-line and other service providers, and information users in a way that will foster the continued development of electronic commerce and the growth of the Internet.? S. Rep. 105-190, at 1-2 (1998); H.R. Rep. 105-551(II), at 21. See also Perfect 10, Inc. v. Visa Int?l Serv. Ass?n, 494 F.3d 788, 794 n.2 (9th Cir. 2007). Congress explained the need to limit service providers? liability by noting that ?[i]n the ordinary course of their operations service providers must engage in all kinds of acts that expose them to potential copyright infringement liability. . . . [B]y limiting the liability of service providers, the DMCA ensures that the efficiency of the Internet will continue to improve and that the variety and quality of services on the Internet will continue to expand.? S. Rep. 105-190, at 8.

http://docs.justia.com/cases/federal/district-courts/california/cacdce/2:2007cv05744/395693/575/

Anonymous Coward says:

Re: Re: Re: Re:

Some folks have limited email attachment sizes. Some videos can’t be emailed. Sometimes, people have to transfer large files to multiple people at different times. There are plenty, legitimate uses for selling access to a file. You can use it to distribute files to others for free. They collect money to support this ability by charging the users on the other end, whether by ads or subscriptions.

Rekrul says:

Re: Re: Re:

You missed the part where you don’t actually have to pay to get files from Hotfile. The premium membership is so that you get to skip advertisements and get to the download a little faster. If you really don’t care about the ads or can tolerate them, you can get the file the same as any premium member.

Frankly, Hotfile sucks if you’re not a paying member. The downloads are pathetically slow, to the point where a file you should be able to download in just a few minutes can take an hour or more. Then there’s the long wait times between downloads, the fact that you can’t resume broken transfers, etc. Unless it’s the absolute only place to get something I really want, I avoid Hotfile like the plague.

fogbugzd (profile) says:

But we'll still count it in bogus piracy stats

I have noticed in a couple of industry written articles lately that they are counting all locker transactions as piracy. Never mind that the services themselves have been found legal on several occasions and that (some/quite a bit/a lot/most)* traffic is legitimate.

*pick your adjective based on the service and your personal prejudices.

Anonymous Coward says:

Re: Re: Re:2 But we'll still count it in bogus piracy stats

You’re numbers don’t mean much when they come from sources that have been spouting entirely fictional numbers for years. Like a sample of 2000 files is a true reflection of the many millions of files out there, and since file hosters don’t provide an index to what all is actually being hosted on their servers, these sample numbers are even more dubious.

Anonymous Coward says:

Re: Re: Re:4 But we'll still count it in bogus piracy stats

Wow! You really are full of it!

Please quote me where I say “I’m a pirate”. Then quote me where I say piracy isn’t happening. All I said is the study’s numbers are likely bogus, like typical Hollywood accounting.

I run a perfectly legitimate business doing live video shoots for bands at reasonable prices, usually for smaller bands that can’t afford a full production video shoot. Often they are bands that are just passing through and I use these services to pass the edited/finished video to them. These files are never indexed or posted publicly, so obviously there’s no chance of them being accounted for in some ridiculous sample like that. I’ve also used them to send personal videos to family and friends. So who the fuck are you to judge me?

Now again… Since file hosters don’t provide an index to what files they all host, where exactly did these “random” samples come from and how can anyone reasonably accept these numbers as fact? In fact they couldn’t be very random at all if all they did was go to some 3rd party site designed for infringing purposes and pull samples from there. Then of course the numbers would be skewed to reflect the numbers they desire.

Anonymous Coward says:

Re: Re: Re:6 But we'll still count it in bogus piracy stats

So… what exactly is that link supposed to prove?

If it’s meant to prove the claim that “3/4 of cyberlocker files were found to be infringing” it failed big time. Just a quick glimpse, er random sample, at the first ten pages and I’d say the number the MPAA could make a claim on would very significantly lower than that.

In a blanket sense, the number would still be wrong the way the law stands now, because if I make a recording of some 10 yr old banging on some pots and pans, I own the copyright on that. So then 100% of everything is copyrighted.

If your just trying to prove there’s a way to use a 3rd party site to provide a list of files… between user uploads, user deletions, DMCA takedowns, files that may expire due to inactivity at any given moment… the list means nothing. It changes by the minute and between the time Google loads the page and you try to download the file it may be gone. How often is it updated? Real time? Hourly? Daily? Weekly?

You’ve proved nothing.

AR (profile) says:

Maybe they are trying the "extortion" route?

Maybe they aren’t so dumb. They could be trying a more elaborate acslaw & uscg scheme/scam. Instead of doing the threat letter thing and getting called on it, they are actually filing lawsuits (for huge amounts) that they know they will have a hard time winning. Then they try to get an out of court settlement for something like half of the amount. If they succeed then it wont go to court, except for rubber stamp approval, and no one will question their intent. It might even pay their salaries for another year.

Hephaestus (profile) says:

Desperate house lawyers ...

In the US, the average lawyer makes less than the average engineer based on years of experience. The reason for this is because there is a market glut of lawyers. In one of my previous posts today I mentioned the reasons for the failure of the IP industry.

The one reason I failed to mention was the glut of lawyers and a simple comparison between the real estate bubble and the lawyers involved. Since the failure of the real estate market, and much like a plague of locusts, lawyers are descending on the IP industry to make an easy buck. During the real estate bubble they created elaborate legal contracts, and schemes to generate wealth. It ultimately got to complex and failed.

Much like the real estate bubble, this bubble is getting over extended in its complexity. It is destined to fail.

Failure is 2-4 years away.

Anonymous Coward says:

Re: Re:

I am a bit confused why the author of this article brands the complaint as “weak”.

You must be new here. Not to worry, you will soon find that Mike Masnick defends all piracy, whatever the circumstances are. Whatever the enforcement scenario, he’ll find some delusional reason for thinking it’s wrong.

He’s the biggest piracy apologist on the net.

Anonymous Coward says:

Re: Re: Re:

I read the complaint twice, and then did the same with the article. The complaint appears to meet all the criteria required by the FRCP for a well pleaded complaint, and impresses me as thoughfully prepared an too predictable responce in mind under FRCP 10(b)(6), i.e., the failure to state a claim(s) for which relief can be granted.

There is not the slightest bitching in the post. The article provides little substance addressing each of the fact contained in the complaint. They are far from being based upon inuendo based upon inuendo.

What I found most surprising of all is the business model adopted by the site, and the rejoinder here that in essence states “but the site does have legitimate uses”. Of course it does, but the manner by which the site is allegedly structured appears to demonstrate that those who engage in legitimate uses almost certainly are overwhelmed in number by those engaged in illegitimate uses.

Fortunately, courts tend to align themselves with what is actually going on versus musings about how it might be legitimately used.

Any Mouse (profile) says:

Re: Re: Re: Re:

The problem that I have with the complaint is where they specifically say the defendant is a Panamanian Company, not a US company. That puts the company out of US jurisdiction. Granted, Titov could, possibly, be cornered. If he doesn’t sell off his US property and go back to Panama, or anywhere else outside of the US.

So there you have it. How does the US have jurisdiction? How do they plan on enforcing any judgment rendered on a foreign national?

average_joe says:

Re: Re: Re: Re:

I read the complaint twice, and then did the same with the article. The complaint appears to meet all the criteria required by the FRCP for a well pleaded complaint, and impresses me as thoughfully prepared an too predictable responce in mind under FRCP 10(b)(6), i.e., the failure to state a claim(s) for which relief can be granted.

There is not the slightest bitching in the post. The article provides little substance addressing each of the fact contained in the complaint. They are far from being based upon inuendo based upon inuendo.

What I found most surprising of all is the business model adopted by the site, and the rejoinder here that in essence states “but the site does have legitimate uses”. Of course it does, but the manner by which the site is allegedly structured appears to demonstrate that those who engage in legitimate uses almost certainly are overwhelmed in number by those engaged in illegitimate uses.

Fortunately, courts tend to align themselves with what is actually going on versus musings about how it might be legitimately used.

Exactly! This is the thread-winner. What’s this article lacks in substance, it makes up for in unintentional humor.

Jeff Rife says:

Re: Re: Re:

As many have noted in the Slashdot thread on this lawsuit, where Hotfile may have issues is that they give “rewards” to the uploaders with more downloads of their files.

This means that people who upload the most desired content will get things like premium access for downloading. Since the most broadly desired content does tend to be “big company media”, if Hotfile in any way admits that MPAA-copyrighted content is “very desirable”, they might have an issue with contributory infringement.

Also, since the daily download limit for free accounts is very small compared to the size of most movie or music files, and if infringing files make up the majority of “files too large to download with a free account”, Hotfile might be seen as requiring people to pay for access to these files.

I don’t think the MPAA will get anywhere with this suit, but Hotfile has some policies that makes it a little different from some of the other “digital lockers” which do seem to encourage the upload of infringing content.

Eric says:

Outlawing Farms

According to the commentators here who claim Hotfile is illegal because it can be used / is used for illegal content, then by that definition we should outlaw all farm land.. because it could be used to grow marijuana or other illegal goods.
Someone comes and plants some marijuana in a farmers corn field, the farmer didn’t know.. according to you all of the farmers crops should be burned. Just because it CAN be used for bad, doesn’t make it bad.

Joe Lawyer says:

DMCA

The points the author calls ‘irrelevant’ and ‘weak’ are actually strategic and serve one purpose:

To deny hotfile’s ONLY defense: that it is protected by the safe harbors of the DMCA.

Every one of those points is aimed at proactively cornering Hotfile and slamming them up against a wall when they claim they are protected by the DMCA.

No repeat infringer policy, affiliate program which encourages infringement AND through these affiliate uploaders enables Hotfile to make more money: Another big no no as per DMCA. Legitimate Use: the basic requirement of being considered an ISP.

This was not weak…it just needs to be read by a lawyer and you will understand.

Anonymous Coward says:

Re: DMCA

Not that HotFile has only one defense, but clearly as to the DMCA the complaint was crafted with it in mind.

Of course, many who may provide rejoinders here will proclaim “but it does not provide proof”, which not only ignores notice pleading (plus at least some modicum of relevant factual allegations), but manifests a fundamental misunderstanding of the role played by a complaint under our rules of federal and state civil procedure.

Quite frankly, and as I noted above, 12(b)(6) will likely prove to be a very difficult defense to successfully assert.

This complaint was certainly not prepared casually, is certainly not weak as the author states, and the basis for the court to exercise in personam jurisdiction against all of the named defendants is well presented.

I believe the same can be said for each of the stated causes of action.

I find it unfortunate a site that examines an affidavit by and ICE agent to secure a seizure order in exacting detail has chosen to forego a similar analysis of the allegations in the complaint. Instead, it resorts to broad hand waving almost entirely. If anything is weak, it is the statement here by the author that the complaint is weak. This hardly seems to be the case.

none says:

changing format

When they went away from film to tape and dvd didn’t they give us permission to change the format. We must take the recording and convert it to analog to play on the tv. So converting it to avi or mkv is just the same thing. I prefer storing the video on a hard drive instead of getting up and down loading dvds. How I use the dvd that I bought is my business. Where I store the backup, is it my business or theirs. do I have the right to loan a dvd that I purchased to my friends? What if they scratch it an make it unplayable? I now have options to save and preserve what I have purchased!

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