Righthaven Charged With Racketeering In Somewhat Epic Filing

from the novel-or-court-ruling dept

Karl points us to the news that the lawyers for one of the people sued by Righthaven, one Dana Eiser, have filed what can only be described as an absolutely epic answer and counterclaim lawsuit in the case in South Carolina, raising an astounding 56 (count 'em) defenses. The 119-page filing, which is embedded below is worth a read. As Karl points out, some of it is pretty far out there (with some parts being simply wrong), but it does make for entertaining reading, with some new and interesting claims about some of Righthaven's actions.

The point that's getting a lot of attention is the fact that the filing raises a racketeering charge against Righthaven under the RICO Act, claiming that using sham copyright transfers to shake people down for money is good, old-fashioned racketeering:
The extortion tactics and fraudulent conduct detailed in this Complaint each constitute a predicate act under RICO of (1) extortion, because such communication were threats intended to obtain money or property premised upon legal action that was a complete sham; and (2) fraud, because each mailing, phone call, and email furthered and executed the scheme to defraud Righthaven’s targets.

Righthaven has a knowing, willful, and specific intent to defraud its targets into entering into settlement agreements under the threat of fraudulent claims.
While I actually think there's a half decent argument here given Righthaven's actions, I just can't see any judge really buying the racketeering claim. Such claims have been made in the past against the RIAA for its mass lawsuits, and they didn't seem to go anywhere. I doubt that will change here, but it would be a pleasant surprise if they did.

Some other interesting tidbits from the filing:
  • The filing highlights that all three of Righthaven's clients have admitted to the press that they decide who to sue, not Righthaven, again indicating that Righthaven is not the actual copyright holder here:
    Officers of each of these client entities have publicly stated that the media entities, not Righthaven, have the right to dictate who can and cannot be sued.

    In an article appearing in the Arkansas Democrat-Gazette, Stephens Media LLC’s General Counsel Mark Hinueber is quoted as saying “I can tell Righthaven not to sue somebody.” ...

    In the same article, WEHCO Media’s President Paul Smith is quoted as saying that if Righthaven discovers someone has violated WEHCO’s copyright, “it would be [WEHCO’s] decision whether or not to move forward with it[.]” ...

    Finally, in The New York Times, MediaNews Group’s Vice President Sara Glines stated that MediaNews Group “reviewed every violation and only approved actions against sites that carried advertising and were not charities.”
  • In fact, Eiser takes the above quotes even further. Because this particular lawsuit was over MediaNews (Denver Post) content, and the site that the material was reposted to does not have advertising, she claims that there can be no lawsuit, since Glines (above) noted that they do not approve lawsuits against sites with no advertising. She uses this over and over again to claim a lack of standing to sue, promissory estoppel (i.e., the company promised not to use Righthaven to sue certain sites, but then did so anyway) and that Glines/MediaNews had issued a waiver of sorts. I don't see how this would carry much legal weight, but it is amusing in suggesting that MediaNews was less than truthful.
  • There definitely are mistakes in the filing. Whoever wrote it, seems wholly unfamiliar with the nature of the "work for hire" doctrine, and confused about when it would apply.
  • It claims that the main lawyer that Righthaven has used in many of its cases, Steve Ganim, is only on the Florida bar, and not allowed to practice law in Nevada, despite doing so. Eiser uses this to claim that Ganim and Righthaven are engaged in the unauthorized practice of law in Nevada. The filing also claims that when another defendant brought this information to light, "Righthaven attorney Shawn Mangano threatened a frivolous defamation action against Leon to shut him up." This would be amazing, if true.
  • The filing claims that after a judge indicated support for the claim by the EFF and others that Righthaven is probably not open to winning lawyer's fees in its cases, because its lawyers are in-house, that it suddenly started hiring outside counsel for its lawsuits.
  • As others have done, Eiser claims that the Denver Post's "sharing" tools give her an implied license to share the works.
  • Eiser claims that "under 20" people saw the article posted to the website, raising questions about how much "damage" was actually done.
    Even if it could show that every single person who read the Rosen Letter on the Lowcountry 9/12 Project blog would have read it at The Denver Post instead, only then would any actual damages be shown, and they would be in the neighborhood of 40 cents.

    The South Carolina Supreme Court was offended by a case over five cents in 1918.

    Adjusting for inflation, five cents in 1918 was worth 72 cents in 2010, when the alleged damages were sustained.

    The approximately 40 cents of damages suffered (not even by Righthaven) is well within the rule of de minimis non curat lex.
  • Eiser tries a First Amendment claim, saying that the use was for communicating ideas. This argument is one that I find interesting, but is clearly dead in the water. The courts have been pretty blind on First Amendment implications of copyright law, and they're certainly not going to jump in now on a case like this.
  • Eiser tries to bring up the famed BMW v. Gore case to say that statutory infringement rates are illegal. This argument has been made before (in the Jammie Thomas and Joel Tenenbaum cases) without much luck. I can't see them suddenly getting a sympathetic ear here either.
  • Eiser claims that Righthaven is technically a debt collector, and that it does not follow proper procedures and laws as a debt collector.
  • We've discussed a few times how bizarre it is that Righthaven demands the publisher's domain name in each lawsuit it files, despite that not being a standard remedy (or a reasonable remedy) for copyright lawsuits at all. In this filing, Eiser suggests that this attempt to get others' domain names is effectively a form of illegal cybersquatting on those sites. That one also sounds like a big stretch, but an interesting idea.
  • There's another big reach, claiming an antitrust (Sherman Act) violation in seeking to stomp out competitors through a fraudulent claim. Again, a nice try at a novel legal theory, but one unlikely to get very far.
All in all an entertaining read, but most of the really out there arguments are unlikely to get very far. However, if they did get some traction, Righthaven could be in even deeper trouble.


Reader Comments (rss)

(Flattened / Threaded)

  •  
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    Chris Rhodes (profile), Jun 27th, 2011 @ 12:34pm

    Turn About is Fair Play

    I hope Righthaven bankrupts itself on legal costs, even if they eventually prevail. Would be just desserts, given their business model.

     

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    Pickle Monger (profile), Jun 27th, 2011 @ 12:37pm

    what goes around, comes around

     

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    :Lobo Santo (profile), Jun 27th, 2011 @ 1:21pm

    A tried and true strategy:

    Throw it at the wall and see what sticks.

    Good on 'em! I hope they win some against the Righthaven schmucks.

     

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      Hephaestus (profile), Jun 28th, 2011 @ 12:30am

      Re: A tried and true strategy:

      What would be really funny is if someone forwarded this to every person righthaven sued and they all filed pro se lawsuits. Imagine them trying to defend themselves against people in half a hundred states. The airfare alone would bankrupt them.

       

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    weneedhelp (profile), Jun 27th, 2011 @ 1:26pm

    Kick 'em while they are down.

    They take a very Righthaven approach to this suit; throw a bunch of stuff at them and see what sticks.

    Given what has been revealed about Righthaven, I think:
    The extortion tactics and fraudulent conduct detailed in this Complaint each constitute a predicate act under RICO of (1) extortion, because such communication were threats intended to obtain money or property premised upon legal action that was a complete sham; and (2) fraud, because each mailing, phone call, and email furthered and executed the scheme to defraud Righthaven’s targets.

    Righthaven has a knowing, willful, and specific intent to defraud its targets into entering into settlement agreements under the threat of fraudulent claims.

    Sums it up well, and may have a good chance.

     

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    Anonymous Coward, Jun 27th, 2011 @ 1:28pm

    It pretty much would fail, because they would have to prove that Righthaven knew *before* court rulings that what they were doing was fraudulent. At this point, it still hasn't been shown to be fraudulent, just not withing the scope of the law as per judgements rendered.

    It's a non-starter, someone trying to jump and piss on their graves before they are buried.

     

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    •  
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      Anonymous Coward, Jun 27th, 2011 @ 1:32pm

      Re:

      They MUST have known it was fraudulent, because they were never transfered copyright, only the right to sue, which is non transferable by itself.

      or they KNEW it was fraudulent because they were threatening lawsuits with the specific intent of getting settlements, no actual judgement

       

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        Anonymous Coward, Jun 27th, 2011 @ 1:35pm

        Re: Re:

        Nope, that wouldn't do it. If they have a reasoned legal opinion that this is "enough", there would be no fraud. Attempting to determine intent would be very, very hard.

         

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        crade (profile), Jun 27th, 2011 @ 1:50pm

        Re: Re:

        How could they not have known? The lawsuits are their only income. What possible legitimate reason could they have to sue?

         

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          Anonymous Coward, Jun 27th, 2011 @ 1:52pm

          Re: Re: Re:

          Let's see: they felt that there was a valid business model doing the copyright enforcement for the others, at a percentage or fee rate?

           

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            crade (profile), Jun 27th, 2011 @ 1:57pm

            Re: Re: Re: Re:

            You're allowed to front lawsuits for another company for a cut of the "damages"? If so, that is hilarious.

             

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              Anonymous Coward, Jun 27th, 2011 @ 2:25pm

              Re: Re: Re: Re: Re:

              Umm, let's see... ever heard of class action? Ever heard of "pay nothing if you don't win" accident lawyers? It's an entirely legal concept.

               

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                Scote, Jun 27th, 2011 @ 3:10pm

                Accident lawyers...

                "Umm, let's see... ever heard of class action? Ever heard of "pay nothing if you don't win" accident lawyers? It's an entirely legal concept."

                Uh, yeah, because those are **law firms**. It is legal for law firms to represent clients on contingency. Rightaven is not law firm but an independent corporation. It is not legal to act like a law firm, to represent clients in litigation for a contingency fees, if you aren't one.

                 

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        A Guy, Jun 27th, 2011 @ 11:40pm

        Re: Re:

        Unfortunately for all of us (except RightHaven)... being stupid is still not illegal, even for lawyers.

         

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      Paul Keating, Jun 28th, 2011 @ 6:58am

      Re:

      I disagree. The knowledge standard is not absolute. Knowledge is found in the facts and the matter would go to a jury to determine. Here are a few of the "facts" I would introduce to show knowledge: (1) The publicity out there questioning the claim; (2) they tried to hide the evidence that showed the failure of the claim; (3) they made sanctionable misrepresentations to the court in their original complaints; (4) their counsel is in-house which means it is not independent legal advice; (5) any 3rd year law student could have read the contract and seen the errors - (and btw ignorance of the law is not an excuse last time I checked); (6) no doubt there were lots of emails and other notes exchanged in connection with the negotiation of the document - all of which would be interesting to read; (7) in-house general counsel for the actual copyright owners may (should) have reported to the board on the viability of the action; (8) etc. Lots out there for a curious attorney drafting discovery requests.

      And, while they are at it they should also name the copyright owner in the RICO claim for the same reasons because the same facts could show a conspiracy - particularly the ability to select and approve defendants. They all used the wires (mail, phone, email) to transmit the threats so I cannot see how they would fail to state a claim (which is different from winning).

      Finally, an investigation into the ethics rules of the Fed. Ct in Nevada and the Florida rules on professional conduct may lead to further claims and perhaps even a disciplinary action.

      All told enough to make the Copyright Club take notice and avoid similar plans.

       

      reply to this | link to this | view in chronology ]

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    Scote, Jun 27th, 2011 @ 1:36pm

    Right about "work for hire."

    I believe the filing is correct about work for hire. Work for hire only presumptively applies to employees. A free-lancer is an independent contractor who works for their self, they pay their own social security taxes and are **self employed**, and thus their work is copyright by their employer, which is their self.

    A free-lancer can sign away their copyright to their client, and then the work can be *called* "work for hire," but absent such a specific copyright transfer the newspaper does not own the copyright. And, AFIK, the newspaper never provided proof of such an agreement.

     

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      Karl (profile), Jun 27th, 2011 @ 3:47pm

      Re: Right about "work for hire."

      I believe the filing is correct about work for hire. Work for hire only presumptively applies to employees. A free-lancer is an independent contractor who works for their self, they pay their own social security taxes and are **self employed**, and thus their work is copyright by their employer, which is their self.

      They're not just demanding that a work-for-hire contract be shown. They're actually claiming that Stephens' claim on the copyright is fraudulent. And they are basing it on nothing more than the fact that the author wasn't actually an employee at the time.

      In fact, work-for-hire contracts are incredibly common among freelance artists (graphic designers, studio musicians, commercial actors, etc). In general, if a work is commissioned by an employer, there's a good chance that it involved a work-for-hire contract. Hiring a freelance journalist to write op-ed pieces would be just such a situation (though of course it's not necessarily so).

      A free-lancer can sign away their copyright to their client, and then the work can be *called* "work for hire," but absent such a specific copyright transfer the newspaper does not own the copyright.

      Actually, if they sign away the copyright post-creation, it's more likely an "assignment." Either way, the newspaper owns the copyright, but there is one major difference: copyrights that are assigned can be reclaimed by the original artist after thirty-five years, regardless of the contract. Works made for hire cannot.

      That's why musicians were up in arms when Mitch Glazier secretly designated all sound recordings as works for hire when he was a Congressional staffer (and before he became Senior VP of the RIAA).

       

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        Paul Keating, Jun 28th, 2011 @ 7:02am

        Re: Re: Right about "work for hire."

        Almost.

        Work for Hire requires an employment relationship (employee/employer). It automatically vests the copyright in the employer. Anything else is by way of post-creation assignment. If the contract only attempted to claim WFH and there was no actual employer/employee relationship (e.g. no withholding, etc) then there is NO transfer of the copyright. It is for this reason that I was taught to have both a WFH and a separate assignment in every contract creating IP.

         

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          Karl (profile), Jun 29th, 2011 @ 12:38am

          Re: Re: Re: Right about "work for hire."

          Work for Hire requires an employment relationship (employee/employer). It automatically vests the copyright in the employer. Anything else is by way of post-creation assignment. If the contract only attempted to claim WFH and there was no actual employer/employee relationship (e.g. no withholding, etc) then there is NO transfer of the copyright.

          From what I can gather, this is not quite true.

          It is true that there has to be some sort of "employee-employer" relationship. But this does NOT have to be of the type we typically think about, e.g. an employee that is listed as such on your tax returns.

          Say, for example, that your local McDonald's wants to have a logo. You, as the designer, decide to do it. McDonald's would then hire you, as an outside contractor, to design their logo. In the contract you sign, it would most likely be clear that the logo design was done solely at McDonald's request, that it was a work for hire, and that McDonald's is to be considered the "author" for copyright purposes.

          McDonald's could do this without legaly hiring you as an "employee." For example, they wouldn't be required to pay for your health insurance. Nonetheless, that logo does not belong to you, but to McDonald's, and no judge in the land would claim differently.

          For industries that have a high rate of independent contracting - like, say, newspapers - these sort of contracts are standard. Just because you're an independent contractor does not mean that an employee-employer relationship does not exist; and it does not mean that the work could not then be considered a work-for-hire.

          That's all I'm saying. The person who wrote up this filing does not seem to get this.

           

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    ervserver (profile), Jun 27th, 2011 @ 1:40pm

    Even more twists

    This story is way more interesting than Hugh Hefner getting dumped at the alter

     

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    Anonymous Coward, Jun 27th, 2011 @ 2:03pm

    Racketeering was presumably a total non-starter against the RIAA because the RIAA labels actually owned the copyrights in question and the lawsuits were legit.

    Here, on the other hand, it seems conceivable it could lead to an actual subpoena, which I suspect would reveal that Righthaven was simply incompetent and didn't know that the relevant precedents meant they had no standing to sue.

    Of course, it might also reveal that Righthaven decided to continue sending threats out after it knew that the copyright assignment was a sham, in which case there might be a case.

     

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    Ben, Jun 27th, 2011 @ 2:55pm

    How can I donate to her suit?

    Anybody got any ideas?

     

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    identicon
    Payback Time, Jun 27th, 2011 @ 3:16pm

    Re: Righthaven

    Righthaven claims it can refile these lawsuits because the amended agreement with SM gives it standing. Only problem is that all the copyright registrations are invalid and since no valid registration was filed within three months of publication date, neither Righthaven nor Stephens Media can collect statutory damages or attorneys fees.

    This shakedown racket is shut down for good.

     

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      Paul Keating, Jun 28th, 2011 @ 7:05am

      Re: Re: Righthaven

      Not really. As the court stated, "standing" is measured at the time of filing. If there is no standing at that time the court has no jurisdiction and thus the court itself is not legally permitted to proceed with anything. The only correction that can be undertaken here as I see it is for RH to refile new complaints. Unfortunately, in those cases where the court did not reach the fair use issue, the complaint is dismissed and the plaintiff is permitted (as long as there is no statute of limitations issue) to refile.

      For the "public" the better result would thus have been to uphold standing and then dismiss on fair use or some other substantive grounds.


      PRK

       

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        Karl (profile), Jun 29th, 2011 @ 12:46am

        Re: Re: Re: Righthaven

        Not really. As the court stated, "standing" is measured at the time of filing.

        The issue that Payback Time brings up is not quite the issue of standing.

        If you didn't know, Stephens Media themselves never registered the copyrights. That means the first time a copyright on the articles was ever filed with the copyright office, was the time that Righthaven did it.

        When Righthaven filed the copyright, they in fact did not have any right to do so. Thus, the fundamental copyright on the article itself is invalid. Does this mean that Stephens, who is actually the copyright owner, cannot now file for a copyright on the work? Especially since Stephens (the owner) did not file any copyright claim within the deadline set by the Library of Congress?

        It's actually a good - if wholly technical - question. I honestly don't know the answer. I'm guessing that a judge would rule that copyright was filed, but retained by Stephens. That's just a guess, though.

         

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          Karl (profile), Jun 29th, 2011 @ 1:12am

          Re: Re: Re: Re: Righthaven

          To be absolutely clear:

          Stephens "assigned" the rights to Righthaven within three months after publication. The three months have passed since then, and after three months, the assignment was found to be invalid.

          In the words of the Copyright Office (PDF): "If registration is made within three months after publication of the work or prior to an infringement of the work, statutory damages and attorney’s fees will be available to the copyright owner in court actions. Otherwise, only an award of actual damages and profits is available to the copyright owner."

          Does this mean that nobody can ever demand statutory fee's or attorney's fees, since (by definition) any legitimate registration was not made within three months of publication?

           

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    identicon
    Phil, Jun 27th, 2011 @ 4:46pm

    Trite slang

    Epic? That was a slang term for middle-schoolers . . . in 2006.

     

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      freak (profile), Jun 27th, 2011 @ 6:43pm

      Re: Trite slang

      Man, that was a slang term for poets thousands of years before middle-schoolers got their hands on it.

      . . . I'm semi-serious. Of course, the english word 'epic' itself wasn't around, but the use of the same word to mean both "grand or heroic in nature" and "impressive"/"awesome" has been.


      In any case, Mike is using it in the non-slang way: The filing, at 119 pages and 52 defences, is, in fact, "grand in nature".

       

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    Christopher Bingham (profile), Jun 28th, 2011 @ 7:05am

    Righthaven vs RIAa

    So the thought just occurred to me: If Righthaven can't sue alleged infringers because one can not sell only the right to sue, then how can the RIAA sue alleged infringers?

    Surely the RIAA doesn't own the copyrights. Is the RIAA just the enforcement arm of the labels and not actually party to the lawsuits?

     

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    identicon
    Paul Keating, Jun 28th, 2011 @ 7:08am

    Practicing Law - License

    Any attorney can "appear" and represent a client in a federal court as long as (1) they are licensed in some state in the US and (2) they apply to the federal court for permission. The permission is then granted for that particular case. It allows the attorney to appear. However, to the extent the claim involves non-federal law (e.g. a State claim), they cannot technically deal with that aspect or advise their client since they are not licensed as to the State law matter.

    I cannot imagine that the attorney was not admitted for the case. The court would not have permitted him to speak otherwise.

    The violation, if any, would be a violation of Nevada law and would be for the Nevada authorities to deal with.

     

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    identicon
    Paul Keating, Jun 28th, 2011 @ 7:10am

    Domain Names

    "We've discussed a few times how bizarre it is that Righthaven demands the publisher's domain name in each lawsuit it files, despite that not being a standard remedy (or a reasonable remedy) for copyright lawsuits at all. In this filing, Eiser suggests that this attempt to get others' domain names is effectively a form of illegal cybersquatting on those sites. That one also sounds like a big stretch, but an interesting idea."

    The proper action would be under the ACPA seeking Reverse Domain Name Highjacking - not for some potential cybersquatting claim (that would be based on their having succeeded and obtained the domain and then used it). Under the ACPA, a RDNH action is permitted when there has been a legal threat to recover a domain name AND the plaintiff/claimant has no trademark. It is a declaratory relief action.

     

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    Androgynous Cowherd, Jul 3rd, 2011 @ 11:22pm

    I think a possible reason for the sheer size and diversity of this countersuit is specifically to make Righthaven's legal expenses balloon. Every one of those claims will cost Righthaven billable hours to shoot down in court. The idea may be to make Righthaven's business model unworkable: if even a small fraction of their targets, but one not predictable in advance, launch countersuits like this one, Righthaven may lose more money in legal expenses than it gains in settlement money -- even if Righthaven wins in court. Classically, it's the very method big businesses have so long used to force small companies and individuals into settlements: bury them in paperwork and make it more expensive for them to fight it. It's poetic justice to see a litigious business on the receiving end of the same tactic.

     

    reply to this | link to this | view in chronology ]


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