Late last month we noted how the Trump FCC under Brendan Carr announced a new “ban” on all routers made overseas (which means pretty much all of them). At the time, we also noted how this was less of a ban and more of a shakedown, with router manufacturers required to beg the Trump FCC for conditional waivers (fees, favors, whatever) to continue doing business in the States.
Not long after, Netgear, which does a lot of work with the U.S. government, announced it had received an exemption from the Trump FCC, though neither Netgear or the government transparently indicated what Netgear had to do to get the exemption. Pay a bribe? Host Brendan Carr for a game of golf? Install a surreptitious backdoor for CIA and ICE access? Nobody knows.
Now Amazon is the latest to get an exemption for both its Eero consumer routers and its Leo low Earth orbit (LEO) routers. Amazon showed up on the exemption list, but again there’s absolutely no indication of what the company had to actually do to get it, or the standards the Trump FCC is using to determine what hardware can be trusted. An Amazon announcement is painfully vague:
“We’re pleased to share that the U.S. government has recognized eero as a trusted and secure provider of routers.”
How did this happen? Does anybody trust the Trump administration to make this determination? Are there concerns about backdoors in exchange for being allowed to continue to do business? Nobody knows, though the FCC has indicated the ban has been expanded to include personal hotspots.
This would all likely be less alarming if the Trump administration wasn’t aggressively transactional, unethical, and authoritarian. Little to nothing Brendan Carr and Donald Trump do is genuinely for the public interest; and while this ban is being proposed as an act to protect national security, with their other hand they’ve taken countless steps to ensure consumers are less secure than ever.
That’s ranged from firing of officials responsible for online election security and investigating hacks, or to the relentless “deregulation” (real, the elimination of corporate oversight) of a U.S. telecom sector that was just the target of one of the worst cybersecurity incidents in U.S. history (in large part because telecom executives failed to change default router admin passwords).
Most press coverage of this new router ban acts as if the Trump FCC is still a trusted actor when it comes to the public interest, but that’s a pretty broad assumption given all the dodgy, unethical, and illegal behavior we’ve seen from the agency and administration more generally.
I don’t think most U.S. journalism is journalism. It’s some weird simulacrum designed to not offend. Why would you not at least include one sentence or paragraph on how nothing about this is transparent? Or that the administration has a bad track record on ethics and transparency?
Similarly, no outlets have been inclined to mention that the Trump administration’s open corruption and mindless dismantling of corporate oversight and consumer protection have most certainly endangered national security and consumer cybersecurity and privacy in ways we’ve not yet begun to calculate. “You can trust us on this,” isn’t something anybody, especially media outlets, should be accepting as an answer.
Again, this lawsuit had absolutely no basis in truth. CBS executives could have fought the lawsuit and found an unlimited supply of public and financial support. Talented lawyers country wide would have been happy to help with the case pro bono in order to shut up an authoritarian bully.
Instead, CBS ownership, keen to head to the exits and transfer ownership of the company to Skydance executives (who look to be even bigger Trump ass kissers), folded to a blatant attempt by our mad king to bully and extort a major media company away from doing basic journalism.
The settlement comes after months of negotiations between the two sides, and had been sped along by concerns of discovery and a looming shakeup on the CBS/Paramount board of directors:
“After weeks of negotiations with a mediator, lawyers for Paramount and Mr. Trump worked through the weekend to reach a deal ahead of a court deadline that would have required both sides to begin producing internal documents for discovery, according to two people familiar with the negotiations. Another deadline loomed: Paramount was planning to make changes to its board of directors this week that could have complicated the settlement negotiations.”
It’s worth noting that it takes the New York Times until the fifth paragraph to make it clear Trump’s lawsuit was baseless. Unsurprisingly, Trump’s legal team tries to frame this unconstitutional extortion racket as some kind of big win for the American public:
“A spokesman for Mr. Trump’s legal team said in a statement that the settlement was “another win for the American people” delivered by the president, who was holding “the fake news media accountable.”
“CBS and Paramount Global realized the strength of this historic case and had no choice but to settle,” the spokesman said.”
The CBS settlement comes despite hints from California lawmakers that they’d be investigating any settlement as a potential bribe under California law. CBS execs initially showed some hesitation in the light of the inquiries, but ultimately likely concluded that any financial penalties (after years of inquiries and litigation) were worth the approval for their $8 billion megamerger.
Over on Bluesky, Senator Ron Wyden promised he’d hold CBS executives accountable, and urged state lawmakers to follow through on their bribery inquiries:
Paramount just paid Trump a bribe for merger approval. When Democrats retake power, I’ll be first in line calling for federal charges. In the meantime, state prosecutors should make the corporate execs who sold out our democracy answer in court, today.
It’s important to view this as an extension of a very successful, fifty-plus year mission by Republicans to bully U.S. journalism and discredit factual criticism of often extremely unpopular right wing ideology (destroying social service programs and rural medical care to fund giant tax breaks for rich assholes, as a random example plucked out of a hat):
CBS’ reward for this feckless appeasement was utterly bogus lawsuits, baseless FCC “investigations,” and getting relentlessly attacked in the right wing media as some sort of leftist rag (when again, CBS, if anything, had spent much of the last decade pandering to the U.S. right). There’s simply no winning when it comes to folding to authoritarian bullshit.
Just an immense, historic act of cowardice for a U.S. media industry increasingly comprised of flimsy artifice. The era of Walter Cronkite and Edward R. Murrow it sure as hell isn’t.
I suppose this was probably inevitable, but boy do I wonder if it’s smart. We were just talking about the celebrity drama du jour between Blake Lively, Ryan Reynolds, and Justin Baldoni. The very short version of this is that Lively and Baldoni starred in a movie together, Lively sued Baldoni and made a series of accusations about gross behavior Baldoni allegedly participated in, including a scheme in which Baldoni and associates were going to try to “ruin” Lively for making those accusations, whereas Baldoni denies all of it and instead accuses Lively and Reynolds of a coordinated scheme to take over the movie they were in and to ruin Baldoni’s career. Mixed in there as well is a lawsuit Baldoni filed against the New York Times for reporting on the accusations and a litigation hold letter Baldoni sent to Marvel and Disney in order to preserve any evidence about the character Nicepool in the latest Deadpool movie, because of the speculation that the character is made in such a way so as to make fun of, or defame as Baldoni will likely claim, Baldoni.
Again, that’s the short version. What you may have noticed is missing in all of that is a countersuit against Lively by Baldoni. We even called this out in our previous post, noting that attacking the coverage but not the accuser was “telling.”
The 179-page complaint — in which Baldoni is seeking $400 million and demanding a jury trial — was filed in the Southern District of New York on behalf of Baldoni, his company Wayfarer Studios, as well as his producing partner, Jamey Heath, his crisis manager, Melissa Nathan, his publicist Jennifer Abel and the It Ends With Us LLC. The defendants are accused of civil extortion, defamation and invasion of privacy.
“Lively stole Wayfarer’s movie, hijacked Wayfarer’s premiere, destroyed Plaintiffs’ personal and professional reputations and livelihood, and aimed to drive Plaintiffs out of business entirely,” the lawsuit states.
The suit of course states a whole lot more than that. The whole thing is below if you want to read it. It’s every bit as catty and gossipy as you’d expect out of this sort of thing, with accusations of doctoring text messages, claims that Reynolds and Lively attempted to coerce Baldoni and the studio to take the blame for the bad press Lively was getting, and so on. Again, for the purposes of our reporting on all of this, the veracity or not of anyone’s claims is not the point.
But it does play a role in our analysis of all of this. On the one hand, if Baldoni’s claims are true and he really is the victim of an organized campaign headed by Lively and Reynolds, well, then a countersuit probably makes all the sense in the world. One of the reasons the initial context of him not suing Lively was supposedly telling is that you typically get people threatening to sue but failing to do so because they are absolutely terrified about the discovery phase of the trial. That’s when all the dirt comes out and eventually gets made public. But if you’re not afraid of discovery because the facts are all on your side, then a countersuit makes sense.
But, man, if that isn’t the case, then we’re going to have to come up with an altered term for the kind of Streisand Effect that this will be. A public trial of this kind, between these levels of celebrities, is going to be like the Depp/Heard fiasco all over again. Everyone is probably going to come out looking real, real shitty. And, again, whatever minor anonymity Baldoni may have had previously is just gone. He and the accusations against him are in the spotlight now. He potentially could have settled all of this out of court and made it go away somewhat quietly. Not any more.
And from the initial responses to the lawsuit, it appears Lively intends for this to indeed be a fight.
Lively’s legal team told CNN in a statement Thursday that Baldoni’s suit “is another chapter in the abuser playbook. This is an age-old story: A woman speaks up with concrete evidence of sexual harassment and retaliation and the abuser attempts to turn the tables on the victim.”
“They are trying to shift the narrative to Ms. Lively by falsely claiming that she seized creative control and alienated the cast from Mr. Baldoni. The evidence will show that the cast and others had their own negative experiences with Mr. Baldoni and Wayfarer. The evidence will also show that Sony asked Ms. Lively to oversee Sony’s cut of the film, which they then selected for distribution and was a resounding success,” the statement also said.
So buckle up, because this is likely to be one hell of a ride. In no small part, I contend, because Baldoni’s actions have skyrocketed the press interest in all of this.
It appears that Meta is serious about no longer bribing news orgs to keep corrupt politicians from forcing them to engage in sketchy wealth transfer schemes to news orgs. While it caved in the past in Australia and paid off news orgs there, the company is informing news orgs that they won’t be renewing the deal.
Around the globe, there remain ongoing attempts to force Google and Meta (mainly) to hand money over to news organizations. Supporters have no fundamental principle behind this other than “Google and Meta are making money, and some news companies are struggling, therefore, they should pay us.” As we’ve discussed at great length, these laws are dangerous on multiple levels. They’re an extreme form of crony corruption, forcing one industry to pay off another. They’re also an attack on the open web, because they are based on the principle of “if your users link to news too much, you have to pay for sending them traffic.”
None of this makes sense. If the news companies don’t want the traffic, they can block it. But they want the free traffic and they want to be paid for it. It’s extraordinarily corrupt.
There have been variations on the link tax model over the past decade or so. Various failed experiments in the EU were followed by Australia’s infamous news bargaining code. Mainstream news orgs continue to insist Australia’s experiment has been a huge success, but that’s because the only ones talking about it are the big media orgs that are getting millions of dollars from Meta and Google. This might cloud their reporting on the law, not that they admit that. About the only Australian news orgs I’ve seen call out the inherent corruption in these plans are the satirical Juice Media and the irreverent Crikey.
Crikey’s summary is dead on:
The logic of the news media bargaining code isn’t that of ending a rip-off perpetrated by foreign tech giants. Instead, it’s similar to Coles and Woolworths successfully demanding, on the basis of all the great work they’ve done for the community, that the government forcibly transfer profit from an international competitor that had successfully disrupted their business model.
The fact is, these link taxes have been a disaster wherever they’ve been implemented, including Australia. The Public Interest Journalism Initiative in Australia tracks changes in the journalism space across the country with laser-like precision. And its data certainly does not suggest a huge grand success for journalism in the country. Rather, it shows a lot of consolidation, and plenty of smaller journalism outlets still struggling, while there’s an increase in areas with little to no journalism coverage. However, contractions in the news business greatly outweigh expansions:
Apparently the money flowing in is — as plenty of people predicted — going to the tippy top of the market, making folks like Rupert Murdoch even wealthier. But not doing much to help journalism.
Google has been much more willing to give in and pay the demanded extortion. A decade ago, Google was willing to take a stand in places like Spain, shutting down Google News in that country. But these days, Google has been willing to cave, quickly, in both Australia and, more recently, Canada.
On the other hand, Meta has been much more willing to push back on these laws. It would be nice to think Meta is doing this to protect the open web, but no one’s going to fall for that. Meta has spent years trying to wall off the open internet, so it’s not like the company magically got a conscience on these issues. But, whether for good reasons or bad, Meta has been way more willing to push back on these laws. In Canada, the company has blocked news links, where it was quickly discovered that news orgs needed traffic from Meta way, way more than Meta needed links from news orgs. Meta has also threatened to take similar steps in the US if various state or federal laws come into effect.
In Australia, you may recall, Meta initially blocked news there, before cutting a few deals with news orgs there. Those deals (and the ones Google did as well) were not technically under the News Bargaining Code. Rather, they were blatant payoffs to avoid the invoking of the code, which would then force the companies into binding arbitration.
But, apparently, Meta has decided enough is enough. It informed the news orgs it paid off a few years ago that it will not be renewing those deals when they finish, and that it’s removing its dedicated news tab.
Facebook and Instagram’s parent company, Meta, has set itself on a collision course with the Albanese government after announcing it will stop paying Australian publishers for news, and plans to shut down its news tab in Australia and the United States.
Meta informed publishers on Friday that it would not enter new deals when the current contracts expire this year.
The news tab – a dedicated tab for news in the bookmarks section of Facebook – will also shut down in April, after a similar shut down in the UK, Germany and France last year.
Again, it’s nearly impossible to get good reporting on this stuff because all the major media sites are biased in that they are recipients of these payoffs. The Guardian report quotes a ton of politicians and news orgs decrying this, and only presents Meta’s PR quotes in response — not bothering to speak to any civil society or academics who are willing to speak out as to why these regulatory schemes are so corrupt and problematic.
But, Meta makes a fairly clear point that highlights the absurdity of these laws: what if Meta just doesn’t want to be in the news business? The company has made it pretty damn clear over the last few years that focusing on “news” as it did for a few years was nothing but a headache. It would rather people just use social media to connect with friends, not argue about the news.
Should it be allowed to do that?
“We know that people don’t come to Facebook for news and political content – they come to connect with people and discover new opportunities, passions and interests. As we previously shared in 2023, news makes up less than 3% of what people around the world see in their Facebook feed, and is a small part of the Facebook experience for the vast majority of people.”
Again, the reaction from people who are mad at this move just puts the exclamation point on just how corrupt the whole scheme is. They don’t care about the reasons or the problems of having to pay to allow users to link to public news sites. No, they just want cash and are mad that they don’t get cash.
The prime minister, Anthony Albanese, told reporters on Friday the decision was “not the Australian way”.
“We know that it’s absolutely critical that media is able to function properly and be properly funded. Journalism is important and the idea that research and work done by others can be taken free is simply untenable,” he said.
But nothing is being “taken free.” It is just that users on Facebook decide they want to point people to news stories, thereby sending free traffic to that news organization by posting the link. A little bit of text and an image shows up on Facebook, but that is entirely controllable by the news org since they can set the details for the cards that show up when linked.
So, Prime Minister, what the fuck is “taken” and what was “taken free”? Because the answer is nothing.
The communications minister, Michelle Rowland, and assistant treasurer, Stephen Jones, called news media companies on Friday following the announcement, advising them the government would be taking all of the steps available under the news media bargaining code.
“We’re not talking about some plucky little startup, we’re talking about one of the world’s largest and most profitable companies,” Jones said. “It has a responsibility to ensure that it pays for the content that … has been used on its platform, and frankly, that it’s making millions and millions of dollars out of it and so the government is adamant it will be backing the code we’ll be taking all of the actions that are available to us under the code.”
No, it’s not a plucky little startup, but it’s also not “using” the content on their platform. It’s allowing its users to link to that content, which is a fundamental part of the open web. And by doing so, they are sending free traffic to that website.
If Albanese and the Australian government are so concerned about things happening without payment, why aren’t they making news orgs pay Facebook for the traffic they’re getting?
It’s like they live in this upside down world.
Either way, it sounds like the end result of this is that the Australian government is likely to try to force Meta to (1) host news it has no interest in hosting, and (2) paying for that news it does not value and which it would prefer not to host.
A rather strange prosecution of a former Uber executive finally comes to an end. And the first tech company executive to be convicted of criminal acts related to a data breach won’t be going to prison, as Joseph Menn reports for the Washington Post.
Former Uber chief security officer Joe Sullivan avoided prison Thursday as he was sentenced for covering up the 2016 theft of company data on 50 million Uber customers while the company was being investigated by the Federal Trade Commission over a previous breach.
Sullivan had been convicted in October of obstruction of justice and hiding a felony, making him the first corporate executive to be found guilty of crimes related to a data breach by outsiders.
To be sure, some poor decisions were made by Sullivan. But this wasn’t a case where a company carelessly exposed user data and then made moves to ensure its users never found out about it. This was extortion by cyber-criminals, an act aided by the accidental exposure of a digital key, which the extortionists used to obtain data on 600,000 drivers and 50 million passengers.
Sullivan’s team tried to satisfy the extortionists with a $10,000 payment under the company’s bounty program but the hackers insisted on a six-figure payout. Sullivan agreed to pay the amount, provided the hackers destroyed the data and never disclosed the breach. These were the acts federal prosecutors claimed amounted to obstruction of justice and hiding a felony.
According to Sullivan, this was done to ensure the data never leaked while also utilizing the back-and-forth with the extortionist to seek clues to their identity. The pair of extortionists was eventually arrested, with one of the two testifying on behalf of the prosecution(!).
With more and more companies paying ransoms to recover data/prevent data distribution, it seems extremely odd the government would go after someone who appeared to be doing what he could to protect drivers and passengers from having their personal data exposed or sold to other criminals.
And it’s not as though Sullivan had a track record of being careless with sensitive data collected by the companies he worked for. That’s the message that came through in the letters of support delivered to the court by more than 180 colleagues and security professionals.
The conviction shocked many security professionals, many of whom saw Sullivan, a onetime federal cybercrime prosecutor, as an industry leader who continued to work in the public interest as the top security executive at Facebook, Uber and Cloudflare.
They also criticized the government for criminalizing questionable judgment in paying off extortionists when the practice has become a regular occurrence at U.S. companies hit by ransomware.
What has now become an acceptable, if a bit unsavory, “solution” to ransom demands was treated as a criminal act in this case. This successful prosecution suggests the feds might go after more big tech targets if it finds out they’ve been secretly negotiating with criminals.
The only assurance we have from the government that it won’t start prosecuting security professionals for paying off crooks isn’t all that assuring:
The FBI has said it will not pursue charges against those who approve payouts that do not go to gangs sanctioned for working in concert with Russian authorities or targeting critical infrastructure.
All well and good, but it’s not like malicious hackers provide targets with business cards and employment history (such as it were…) when trying to extort cash from their victims. Attribution is difficult. With the proper operational security in place, it can be almost impossible. Unless hackers affirmatively declare their affiliation with the Russian government, victims of ransomware attacks won’t actually know where the money is going. And with time being of the essence, sometimes the payment has to be made far ahead of the due diligence.
And it’s not as though the federal government is willing to prosecute its own for careless handling of breaches and lax security practices that invite hackers to partake of massive, government-mandated data collections. This seems like a very selective prosecution meant to show the government won’t let the private sector get away with mishandling their users’ data.
It’s unclear what deterrent effect this is supposed to create. If anything, it encourages companies to take a hands-off approach when dealing with extortionists, increasing the risk exfiltrated data will be publicized or sold to other criminals. That can’t be what the federal government actually wants. But it seems like that’s what it’s going to get.
Elon Musk’s next big revenue bet is that companies really, really, really want to show up as “verified.” All evidence suggests that very few Twitter users are interested in paying Elon $8/month to constantly break the site or engage in ego-driven experiments that make the general experience worse.
A few weeks ago, we found out that he’s trying to get organizations to pay $42,000 a month to access the Twitter API, and maybe that was just a framing technique. Because Twitter has announced the next round of its check mark program, which begins with deleting the “legacy” checkmark holders (which, honestly, to many of us is a huge relief), but also telling businesses and organizations they need to pay $1,000/month if they want to keep their checkmark.
The page for “Twitter Verified Organizations” says (laughably) that they’re “creating the most trusted place on the internet for organizations to reach their followers.” Which is kinda hilarious that anyone believes that. And, apparently, the way to create “the most trusted place” is to make sure that no users know whether or not organizations are legit or not unless they’re willing to pay through the nose.
In the US, it’s a flat rate, $1,000 per month, with a $50/month additional fee for each “affiliate seat subscription.”
That “affiliate” seat subscription” appears to be for employees that work for the company who are promoting it:
The best marketing comes directly from real people on Twitter. Now, you can affiliate your organization’s champions so that everyone knows where they work. Affiliates receive a small image of their organization’s Twitter account profile picture next to their name every time they Tweet, send a DM, or appear in search.
You can affiliate anyone who represents or is associated with your organization: leadership, product managers, employees, politicians, customer support, franchises, sub-brands, products and so on. An account you invite to affiliate must accept your invitation.
I’m sure some sucker companies are going to pay up, but this is going to get expensive very fast for any small or medium-sized business, so why bother? And, yes, this is all flat rate pricing, so giant consumer packaged goods companies may be willing to pay, but non-profits? Small businesses? Governments? It applies to all of them:
Twitter Verified Organizations enables organizations of all types–businesses, non-profits, and government institutions–to sign up and manage their verification and to affiliate and verify any related account.
In some ways, this is just Musk making a bet on extortion. Organizations and governments that don’t pay will be much more likely to get impersonated on Twitter and risk serious problems. So Musk is basically betting on making life so bad for organizations that they’ll have to pay these ridiculous rates to avoid people impersonating them.
I’m not sure how that creates “the most trusted place on the internet,” but then again, I didn’t set $44 billion on fire to fuck up a website I didn’t understand.
Small towns strapped for cash sometimes decide to use their law enforcement agencies to generate a steadily increasing revenue stream. Towns that otherwise would never have been noticed by non-residents have achieved national notoriety by unofficially rebranding as Speed Trap, USA.
Sometimes this notoriety leads to punishment by other government agencies. A small town in Oklahoma was banned from enforcing traffic laws by the state’s Department of Safety after it came to light the town of 410 people was employing six police officers to haul in nearly $500,000 in fees in a single year — 76% of the town’s revenue.
Another small town is generating some national press about its abusive traffic enforcement operations. Brookside, Alabama has only 1,253 residents. But it has nine police officers, two drug dogs (including one named “Cash”), a mine-resistant SWAT vehicle obtained through the Defense Department’s 1033 program, and an unquenchable thirst for traffic enforcement revenue.
Police stops soared between 2018 and 2020. Fines and forfeitures – seizures of cars during traffic stops, among other things – doubled from 2018 to 2019. In 2020 they came to $610,000. That’s 49% of the small town’s skyrocketing revenue.
But the chief seems disappointed with this haul.
“I see a 600% increase – that’s a failure. If you had more officers and more productivity you’d have more,” Jones said. “I think it could be more.”
Nearby law enforcement officials see Brookside and its traffic enforcement as a problem. A district attorney from a neighboring county calls Brookside a “black hole” where drivers and their vehicles (which are often towed immediately following a traffic stop) disappear into the town’s revenue generation machinery. A local sheriff says he’s received calls from drivers claiming to have been pulled over and ticketed by Brookside officers… despite being nowhere near the town.
Here are some more troubling stats:
The town with no traffic lights collected $487 in fines and forfeitures in 2020 for every man, woman and child, though many of those fined were merely passing by on I-22.
[…]
[P]olice in 2020 patrolled 114,438 miles in the 6.3-mile town and issued more than 3,000 citations – a 692% increase from 2018.
And the police department directly benefits from this enforcement-driven revenue increase.
From 2018 to 2020, spending on police rose from $79,000 to $524,000, a 560% increase. The town’s administrative expenditures rose 40% and overall spending jumped 112%, from $553,000 in 2018 to $1.2 million in 2020.
Even if this obscene amount of traffic enforcement was the only thing worth reporting, it would still be concerning. But Chief Jones’ department engages in other troubling, literally shady tactics while converting drivers to currency.
Chief Jones testified under oath that just one of the 10 Brookside vehicles is painted with police striping, but nine others bear no emblems, and seven are tinted all the way around, making it impossible to see inside. Jones testified his officers wear gray uniforms with no Brookside insignias.
Unmarked cars. Unmarked officers. All deployed in search of presumably unmarked bills. And they’ve been emboldened by Chief Jones’ cash-oriented efforts, which has led to officers engaging in abusive behavior that goes beyond the abuse of petty (or imagined) traffic crimes to extract cash and seize vehicles.
Brookside officers have been accused in lawsuits of fabricating charges, using racist language and “making up laws” to stack counts on passersby.
The best time to drive through (or near) Brookside might be during its once-a-month court session, where officers are needed to route the considerable amount of traffic to parking areas and presumably others are tied up offering testimony.
This abuse of police power is generating legal activity. The AL.com report says the town and its PD now face no fewer than five lawsuits. Given the amount of money the department has extracted from Alabama residents, the legal war fund should be well-stocked. Unfortunately, this means those suing Brookside have already contributed to the town’s defense fund, albeit months in advance of their litigation.
Last summer we wrote about an interesting case involving the latest evolution of copyright trolling, involving Jon Nicolini, who some copyright troll watchers may recognize from his participating in an earlier generation of copyright trolling, when he was a sketchy “forensic expert” for copyright trolling firm CEG TEK. These days, Nicolini runs his own firm, Okularity, which appears to have created a new form of copyright trolling. According to the lawsuit, rather than file lawsuits as the pressure point (as was common in the past), Okularity sends a ton of DMCA takedown notices to social media companies, and then once your account gets taken down, Nicolini pounces and demands huge sums to rescind the notices, so you can get back your account.
As we wrote over the summer, one of Okularity’s targets was the well known Paper Magazine, put out by the publisher Enttech Media Group. Enttech said that Okularity sought to have Paper Magazine’s Instagram account shut down, and then offered to “settle,” demanding a pretty massive sum in the process. The lawsuit alleged violations of DMCA 512(f) which is the (unfortunately) mostly toothless part of the DMCA that is supposed to allow those on the receiving end of bogus DMCA takedowns to fight back. In practice, however, courts have mostly rejected all 512(f) claims, or made it so they’re basically impossible to do anything useful with. Because of that, any time we see a 512(f) claim that has legs, we pay attention.
The original complaint also tried to argue that Okularity violated the RICO statute, and long time readers here know what we think of RICO claims. While there did appear to be some unauthorized practice of law happening, there didn’t seem to be nearly enough to make a RICO claim — because there’s basically never enough to make a RICO claim. We predicted that the RICO claim would get tossed out, but that the 512(f) claim might live on.
Turns out, we were right.
While the case has had some twists and turns, this week the judge tossed out the RICO claims, but is allowing the 512(f) claims to move forward. Nicolini and Okularity had argued that Enttech’s lawyer, Robert Tauler, should face Rule 11 sanctions for ignoring evidence regarding their fair use analysis, but the court rejected those as well. Tauler did have to file a third amended complaint, however, to get to this point, as the court did find the first two complaints somewhat deficient.
But on the key point — 512(f) — the court notes that the case can continue, even under the confused Lenz standard in the 9th Circuit, that basically said (1) DMCA filers have to “subjectively” consider fair use to be a “good faith” filing, but (2) automated takedowns may be okay… because we say so. Nikolini and Okularity argued that they do consider fair use before sending notices, while Enttech argued the notices appeared to be totally automated. The court basically says — Enttech has met the initial burden that the case can move forward.
One key point of contention in this: the takedown letters sent by Okularity do contain a “discussion of infringement and fair use,” Okularity claims that shows that it does consider fair use. Enttech responded that every single notice Okularity sends contains an exact copy of this discussion, suggesting no actual analysis is done, and it’s just a cut-and-paste. This point is what the judge focused in on:
ENTTech?s allegation that the DMCA notices contained an analysis of
infringement and fair use presents a question of first impression with respect to
the standard for pleading a claim under § 512(f). Is it sufficient for ENTTech to
allege that, notwithstanding the takedown notices? explicit and extensive fairuse
analysis, Defendants did not actually or sufficiently consider fair use before
issuing the takedown notices? At first blush, the fact that the DMCA takedown
notices contain fair-use analyses?even if those analyses are identical and pro
forma?seems to satisfy the requirement to ?consider? fair use before issuing a
takedown notice. See Lenz, 815 F.3d at 1154. The presence of the purported
fair-use analysis in each takedown notice also distinguishes this case from Lenz
where the plaintiff alleged that the defendant did not consider fair use at all. Cf.
id.
Is ENTTech required to allege additional facts, in view of the appearance
that Defendants considered fair use? For example, must ENTTech allege
evidentiary facts concerning Defendants? analytical process or subjective state of
mind (the type of facts which, in most cases, are not available to a plaintiff before
discovery is taken)? Does the Iqbal/Twombly plausibility standard require
ENTTech to aver its own analysis of fair use to support an inference that
Defendants merely paid ?lip service? to the consideration of fair use? Cf. id.
at 1163. Having considered these questions, the Court concludes that
ENTTech?s allegations in the TAC are sufficient at this stage of the litigation.
The court points out that the ruling in Lenz supports allowing this case to move forward, saying that it’s a factual question whether or not the takedown notice sender had a “good faith belief” that the notice was legit, and therefore, it’s up to a jury to decide.
Although Lenz involved a motion for summary judgment, that decision is
nevertheless instructive with respect to the issue presently before the Court.
Lenz supports the conclusion that the question of whether a copyright owner
formed a subjective good faith belief that an alleged infringer?s copying of the
work did not constitute fair use is, in most instances, a factual issue that is not
appropriate for resolution on a motion to dismiss. ?Because the DMCA
requires consideration of fair use prior to sending a takedown notification,? the
Ninth Circuit held that ?a jury must determine whether [the defendant?s]
actions were sufficient to form a subjective good faith belief about the [allegedly
infringing] video?s fair use or lack thereof.? Id. at 1154. In response to the
arguments in the dissenting opinion regarding the propriety of granting
summary judgment, the Lenz panel majority explained that the relevant question
was ?whether the analysis [the defendant] did conduct of the [alleged infringing
material] was sufficient, not to conclusively establish as a matter of law that the
. . . use of the [copyrighted material] was fair, but to form a subjective good faith
belief that the video was infringing on [the] copyright.? Id. at 1154 n.3.
Therefore, because it is generally a factual issue whether the analysis that
the defendant did conduct of the alleged infringing material was sufficient, see
id., it necessarily follows that to plead a claim under § 512(f), it is enough for
ENTTech to allege that Defendants did not consider fair use (sufficiently or at
all) before issuing the takedown notices. And that is exactly what ENTTech
alleges here. Requiring ENTTech to allege more would effectively impose a
heightened pleading standard, see Fed. R. Civ. P. 9(b), and no authority holds
that claims under § 512(f) must be pleaded with particularity. Thus, although
it may be advisable for a plaintiff like ENTTech to aver additional facts (such as
its own analysis of fair use) to support the allegation that a defendant?s fair use
analysis was merely pro forma, the Court cannot conclude that ENTTech is
required to plead such facts in order to state a plausible claim for relief under
§ 512(f).
In the grand scheme of things, this is only a small step forward, but it is a step forward for 512(f) — a part of the law that rarely ever sees any positive news. This doesn’t mean that Enttech is likely to win, but it does mean that the courts may crack the door open just ever so slightly in letting people and companies fight back against abusive DMCA notices.
The long saga of Paul Hansmeier — one of the Prenda Law Firm partners who turned the already-shady business of copyright infringement lawsuits into a rolling debacle composed of fraud, extortion, and catastrophic failures — has produced another coda.
Hansmeier got into the copyright enforcement business thinking it would produce a steady stream of easy cash. He and his associates went after people who allegedly downloaded porn, thinking that people would pay anything asked to avoid having their sexual predilections exposed to friends, family, and the public at large.
When that didn’t work as well as Hansmeier had hoped, he went further. He and his associates produced their own porn (but didn’t star in it, thankfully) and served it up to piracy services in order to produce a steady stream of defendants. (These home productions were never made available for legal viewing. They only existed as lawsuit bait.) It all ended in a criminal indictment and a guilty plea by Hansmeier, who had recently branched out into ADA trolling in his home state of Minnesota.
That brings us to the Eighth Circuit Court of Appeals, which has affirmed everything Hansmeier wishes wasn’t happening to him, like his 168-month prison sentence for fraud and money laundering and a $1.5 million restitution order.
The court recounts the sordid details of the long-running scam, including the numerous shell companies created to hide the origin of copyrighted films, as well as the profits (and losses) of the law firm supposedly representing a handful of porn-producing clients. It details the use of “ruse defendants” to avoid courts’ limitation of discovery requests after judges started figuring out just how shady Hansmeier and Prenda Law were. What began as sanctions and subpoena denials slowly and steadily turned into disciplinary action from state bars and, finally, a criminal investigation that resulted in guilty pleas by both Hansmeier and his partner, John Steele.
Hansmeier doesn’t want to be on the hook for $1.5 million in restitution. But the Appeals Court [PDF] doesn’t see anything that warrants a reversal of the lower court’s order. As it points out, Hansmeier still comes out ahead, even after being ordered to pay back $1.5 million of his illegal takings.
Based on his review of Hansmeier and Steele’s financial documents, Agent Kary estimated that, between 2010 and 2013, the alleged infringers Hansmeier and Steele targeted paid over $6 million total in settlements. Agent Kary then summarized a spreadsheet the FBI created to estimate the proper restitution amount. The spreadsheet did not include all of the settlement money that came in over this time period. Rather, it was limited to payments made after April 2011, which is when there was evidence that Hansmeier and Steele posted to file-sharing websites a movie to which they held the copyright—in other words, when, under the government’s theory, their fraud scheme began—and to payments that he could link to specific victims. Based on these parameters, he calculated a restitution figure of $1,541,527.37.
The Appeals Court notes Hansmeier’s actions didn’t just screw over internet users and defraud Prenda’s clients and partners. The fraud also affected the courts handling Prenda’s copyright cases. Had judges known what Hansmeier was engaged in, they would have rejected discovery requests and handed down sanctions even sooner than they already did.
It does, however, reject the government’s argument that Hansmeier waived his right to appeal the judgment. The court says he can appeal. But it ultimately doesn’t matter. The figure derived from the government’s inspection of Hansmeier’s criminal activity is as close to accurate as it gets without straying from the “actual loss” guidelines. As noted above, the government was able to find documentation for $6 million in possibly fraudulently obtained settlements. The court only ordered the return of a quarter of this amount. That’s good enough for the Eighth Circuit, which says Hansmeier gets to keep serving his time and watch whatever assets he has left start getting liquidated to pay off this order.
Here, the government met its burden of showing by a preponderance of the evidence that the $1,541,527.37 loss total was attributable solely to settlement payments from the fraud scheme. […] In coming to his final loss amount, Agent Kary included only settlement payments from April 2011 on, when Hansmeier and Steele directed an associate to upload a movie called Sexual Obsession, which they held the copyright to and which they used in their fraudulent lawsuits, to file sharing websites. Agent Kary explained that Sexual Obsession became the “go-to movie as far as gaining settlements from individuals.” He said that other movies were not a “significant” source of profit from that point on, constituting just “a few [payments] trickling in here and there.” Considering this information, the district court characterized potential payments from “legitimate” lawsuits over this period as making up no “more than potentially a negligible amount” of the money Hansmeier and Steele received.
Even more narrowing of the amount followed. But the smoking gun here is Hansmeier’s own testimony, which is perhaps more damning than the results of the government’s investigation. Even with this in play, Hansmeier is still only “out” half of what he took from others illegally.
Finally, Hansmeier himself acknowledged in his plea agreement that, between 2011 and 2014, he and Steele “received more than $3,000,000 in fraudulent proceeds” from their lawsuits.
The $1.5 million judgment stands. The man who helped ruin the lives of dozens of people will have to continue to deal with his multiple self-inflicted wounds. Hopefully, he’ll be a cautionary tale that will dissuade future IP enforcement opportunists from engaging in litigation-adjacent get-rich-quick schemes that defraud the public and the court systems their tax dollars pay for.
For years, the city of Baltimore has handed out settlements to victims of government abuse. And for years, the city has forced them to remain silent about these settlements. The city tied every settlement to an extensive non-disparagement clause that effectively bought people’s silence. If you can’t say anything nice, you can’t have half your settlement, as the old saying goes.
Ashley Overbey chose not to remain silent. She sued the city after her call to report a burglary resulted in officers beating, tasing, verbally abusing, and then finally arresting her. She received a $63,000 settlement that came with strings attached. She yanked some strings in response to the city choosing to disparage her as “hostile” in its public statements about the lawsuit. After her public statements, the city decided she owed it $31,500 for opening her mouth.
Her case made its way to the Fourth Circuit Court of Appeals. The Court was not amused by the city’s multiple arguments in favor of its extortion tactics.
[W]hen the government (1) makes a police-misconduct claimant’s silence about her claims a condition of settlement; (2) obtains the claimant’s promise of silence; (3) retains for itself the unilateral ability to determine whether the claimant has broken her promise; and (4) enforces the claimant’s promise by, in essence, holding her civilly liable to itself, there can be no serious doubt that the government has used its power in an effort to curb speech that is not to its liking.
It’s a First Amendment violation. And an obvious one at that. The case has returned to the lower court and the district court is far less receptive of the government’s arguments the second time around. (h/t Baltimore Sun)
On remand, the city argued it did not owe Overbey the other $31,500 it clawed back when she chose to speak up about the city’s actions. Instead, it claimed the breach of contract claims were time-barred by the statute of limitations, leaving Overbey only the option of recovering nominal damages. And how nominal those damages are!
Instead, it asserts the “better view” is that Ms. Overbey is only entitled to “nominal damages of one dollar” for an infringement of her First Amendment right to speak, “perhaps coupled with a formal declaration to that effect.”
Wrong, says the district court. The contract was violated by the city, thanks to its egregious First Amendment violations. Subtracting half the settlement caused damages to Overbey equal to the half the city withheld for her violation a contract that was unable to be enforced Constitutionally.
The City owes Ms. Overbey the other $31,500. By its conduct in unconstitutionally enforcing the now discredited clause, the City withheld half of the settlement proceeds. Thus, the civil rights violation caused $31,500 in economic harm.
Overbey will also be collecting interest accrued since October 8, 2014. The court has further comments on the city’s inexcusable defense of its inexcusable settlement policy.
The City continues to defend its use of the non-disparagement clause and the “real and substantial questions presented” by facts that led to the settlement agreement in the first place. Therefore, it cites shock that “that the challenge would bear fruit” here and that the serendipity that allowed Ms. Overby’s claim to survive was akin to a “virtual lightning strike.” The seeming inference is that their illegal act should not be undone simply because no one thought, or even suspected, it was illegal at the time. Even if true, all this is beside the point. The City entered the settlement agreement it helped craft knowing that its severability provision contemplated this exact scenario: that a clause may be deemed “invalid, void and illegal,” and that it would subsequently be stricken from the agreement.
Almost six years after the city decided to punish Overbey for her refusal to remain silent, it will finally pay her what she’s owed. Fortunately, future plaintiffs won’t have to put up with this bullshit.
