Copyright Troll Perfect 10 Ordered To Pay $5.6 Million Over Bogus Lawsuit

from the justice-served dept

Earlier this year, we noted that famed copyright trolling operation Perfect 10 had lost big time in its lawsuit against Giganews. Perfect 10 is a copyright trolling operation that pretends to be a pornographic magazine publisher, but whose main line of business has long been threatening online platforms to pay up linking to or hosting some of its content that users uploaded. While some online websites have paid up to avoid lawsuits, in basically every case that went to trial, Perfect 10 has lost big time, often setting very useful and very important precedents on copyright and fair use. If you haven’t gone through Perfect 10’s Hall of Fame in setting up great precedents for fair use and intermediary liability protections, check out some of the classics:

And now we can add Perfect 10 v. Giganews to the list with a great final act: the judge in the case has ordered Perfect 10 to pay up $5.6 million in attorneys’ fees for filing such a ridiculous lawsuit. We knew that the judge was unhappy with Perfect 10 based on the original ruling, but the ruling on attorneys’ fees [pdf] is worth reading as well. The court notes that it has wide latitude in determining if attorneys’ fees are reasonable, especially in copyright cases, even though such awards are pretty rare. The court admits that it’s a “close call,” but doesn’t find Perfect 10’s claims to be “frivolous.” However, that doesn’t mean that the court doesn’t recognize the games that Perfect 10 has been playing: copyright trolling as a tax write-off.

As the Court observed in both its order granting Giganews? summary judgment motion on indirect copyright infringement and in its order denying Perfect 10?s motion, Perfect 10?s undisputed conduct in this action has been inconsistent with a party interested in protecting its copyrights…. All of the evidence before the Court demonstrates that Perfect 10 is in the business of litigation, not protecting its copyrights or ?stimulat[ing] artistic creativity for the general public good.?

Perfect 10 has never been a self-sustaining business, and to date, has lost more than $50 million dollars, if not more…. However, this loss appears to be largely intended by Perfect 10?s President and CEO Norman Zada, who described Perfect 10 to non-party Rebekah Chaney as a ?tax writeoff.?… Because Perfect 10 is a closely held corporation, Zada testified he is able to deduct Perfect 10?s significant losses on his personal income taxes…. In fact, Zada told Ms. Chaney that he ?needed [Perfect 10] to offset money he made in the market? and ?needed the loss to represent how small businesses couldn?t make money because of piracy on the Internet.?…

Rather than bringing suit for the purpose of protecting its copyrights and stimulating artistic creativity, the evidence reveals that Zada?s interest in the copyrights held by his ?tax write-off? is solely in litigation. In deposition, for example, Perfect 10?s President and CEO Norman Zada testified that, to date, it has filed between 20 and 30 copyright infringement lawsuits…. In the life of the company, more than half of Perfect 10?s revenues have been generated by litigation…. However, all of those revenues were generated by settlements and defaults ?Perfect 10 has never obtained a judgment in a contested proceeding in any of its roughly two dozen copyright lawsuits…. Similarly, litigation expenses make up the largest share of Perfect 10?s expenses, which are on par with, if not greater than, Perfect 10?s personnel expenses…. In his capacity as President and CEO, Zada spends ?eight hours a day,? 365 days a year on litigation…, ?working on various court cases that [Perfect 10] ha[s] going on.? … Indeed, Zada admitted that, in the past, Perfect 10 has expressly purchased copyrights from other copyright holders ?because [Perfect 10] thought they would be helpful in [its] litigation efforts … .?

The evidence before the Court also demonstrates Perfect 10 continued that pattern in this litigation, which, as the Court previously noted, has been inconsistent with that of a plaintiff interested in actually protecting its copyrights from unauthorized use.

As has been noted before, part of the game that Perfect 10 plays is to send ridiculous and impossible “takedown” demands, sometimes just including printouts of thumbnails, with no clear explanation over where those images reside or what URLs they’re found on. The court noted this as well:

Perfect 10 has a long, documented history of sending service providers inadequate takedown notices under the DMCA that fail to identify specific infringing material, and then bringing suit for the service providers? failure to respond to deficient DMCA takedown notices…. Despite numerous admonitions that its inadequate notices ?unduly burden[] service providers? and reminders that ?the burden of policing copyright infringement? falls ?squarely on? Perfect 10 …, Perfect 10 never attempted to submit a takedown notice in this action that Giganews could actually use.

Indeed, even after Perfect 10 admittedly learned of a method to produce a takedown notice in ?15 minutes? that would result in almost immediate removal of ?90 percent of the Perfect 10 content on Giganews?s servers,? Perfect 10 refused to do so.

Given all that, the court had no problem ordering that Perfect 10 pay Giganews’ legal fees. It laughs off the idea that such a finding would scare off “starving artists” from suing over infringement, since that situation is totally different:

In light of Perfect 10?s well-documented improper motive in bringing suit…, the Court has little concern that an award of attorneys? fees in this action will discourage ?starving artists? from protecting their copyrights. If anything, it will discourage serial litigants from bringing unmeritorious suits and then unnecessarily driving up litigation costs in order to drive a settlement. Such a result is entirely consistent with the purpose of the Copyright Act, and this factor weighs in favor of an award of attorneys? fees.

Later, the court mocks Perfect 10’s argument that it shouldn’t have to pay legal fees because it is basically insolvent and heavily in debt. In fact, the court notes that Perfect 10 has been making this same exact claim for years in just about every case, making it somewhat unbelievable:

Perfect 10 admits that it has likely ?never been solvent? in more than 15 years of operation…. Indeed, Perfect 10 has repeatedly reported that it was on the verge of bankruptcy. See, e.g., Perfect 10, Inc. v. Google, … (noting Perfect 10?s argument the same year this action was filed that Perfect 10 was ?very close to bankruptcy?). That is, despite the fact that Perfect 10?s primary business is copyright litigation, Perfect 10 effectively argues that it could never be subject to any attorneys? fee award under the Copyright Act because it is perpetually in debt and on the verge of bankruptcy. The Court is not persuaded, particularly where, as here, the evidence suggests Perfect 10?s impecunity is intentional.

Much of the rest of the ruling goes into the details of calculating the attorneys’ fees (and again pointing out some bizarre claims by Perfect 10 in trying to lower the fees). In the end, the court does award slightly less than Giganews requested, but it’s still pretty close. Who knows if the “insolvent” Perfect 10 will actually ever pay up, but the real question is if it will ever stop filing such questionable lawsuits.

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Companies: giganews, perfect 10

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Comments on “Copyright Troll Perfect 10 Ordered To Pay $5.6 Million Over Bogus Lawsuit”

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That One Guy (profile) says:

Good news... in theory

Who knows if the “insolvent” Perfect 10 will actually ever pay up, but the real question is if it will ever stop filing such questionable lawsuits.

That would be ‘No’, and ‘No’ respectively.

Unless there’s an actual penalty for refusing to pay, like being barred from filing any future lawsuits until they have done so, they have no reason to pay. What, is the judge going to send them a sternly worded letter?

Ultimately, they have no reason care what the fine amount is, they’ll just keep on filing lawsuits, collecting money from those that can’t fight back, losing in court against those that do, and utterly ignoring any judgements against them. An order to do something carries absolutely no weight behind it unless there is a penalty for refusing to follow it, and I’m not seeing any such penalty here, though I’d love to be wrong.

Anonymous Coward says:

In fact, Zada told Ms. Chaney that he […] “needed the loss to represent how small businesses couldn’t make money because of piracy on the Internet.”

Wait, what? How in the hell does that make sense? A) NOT a small business, when dealing with millions of dollars, and B) the business model wouldn’t even EXIST without this silly (and faux) ‘war on piracy’!

I’ve run a small business. It NEVER dealt with funds of that magnitude. It didn’t go well, and I did shut it down, not because of ‘piracy’, but because of an economy that still hasn’t recovered from the last crash, and a government too busy with ‘copyright’ and apathetic to it’s needs.

Go to Hell, Zada! Better yet, go try and run a REAL small business!

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