A New Jersey district court has issued a devastating order against Strike 3 Holdings, the most active filer of piracy lawsuits in the US. In four separate cases, the court denied a request to obtain identities of alleged BitTorrent pirates. The court argues that the underlying complaints are futile. Even if they held up, other issues such as the privacy of the accused and Strike 3's failure to use other enforcement tools, would warrant a denial.
For more than a decade, alleged file-sharers around the world have been pressured to pay significant settlement fees.
These so-called ‘copyright-trolling’ efforts are pretty straightforward. Copyright holders obtain a list of ‘pirating’ IP-addresses and then request a subpoena from the court, compelling ISPs to hand over the associated customer data.
This scheme can be rather lucrative. With minimal effort, rightsholders can rake in hundreds or thousands of dollars per defendant. That is, if a court grants expedited discovery, allowing the companies to request the personal details of alleged infringers from ISPs.
In the past, it has been relatively easy to pursue these cases, but the tide is slowly turning. Most prominent was a Ninth Circuit Court of Appeals ruling from last year in the Cobbler Nevada v. Gonzales case. Here, the court ruled that identifying the registered subscriber of an IP-address is by itself not enough to argue that this person is also the infringer.
While the Cobbler case wasn’t about a subpoena request, it certainly said something about the strength of the underlying complaints.
As the most prolific filer of piracy lawsuits in the US, Strike 3 Holdings has come under fire as well. For example, last November Columbia District Judge Lamberth accused the company of being a “copyright troll,” that uses “famously flawed” technology to prey on “low-hanging fruit,” flooding the courthouse “with lawsuits smacking of extortion.”
That didn’t stop Strike 3, which produces adult content, from continuing its legal campaign. The company filed has more than 1,150 lawsuits already this year, many of which are believed to have resulted in profitable settlements. However, there have been setbacks as well.
Last week, New Jersey District Court Magistrate Judge Joel Schneider denied Strike 3 expedited discovery in four cases. This means that it’s not allowed to subpoena ISPs for the personal details of account holders whose IP-addresses were used to share pirated videos via BitTorrent.
In a very detailed 47-page opinion, the Judge takes apart various aspects of Strike 3’s enforcement efforts. He makes it clear that these cases should not be allowed to go forward, as the complaints are futile.
“The most fundamental basis of the Court’s decision is its conclusion that, as pleaded, Strike 3’s complaints are futile. The Court denies Strike 3 the right to bootstrap discovery based on a complaint that does not pass muster,” Judge Schneider writes.
The futility lies in the fact that the complaints themselves include very few facts. The only thing that the company really knows is that an IP address is associated with downloading copyrighted works. Strike 3 doesn’t know whether the subscriber is involved in the actual infringements.
Courts have previously ruled both in favor and against allowing discovery to expose the account holders in these situations, but the New Jersey Court clearly sides with the latter.
“The Court sided with the cases that hold it is not sufficient to merely allege in a pleading that the defendant is a subscriber of an IP address traced to infringing activity. Consequently, the Court will not authorize Strike 3 to take discovery premised on a futile John Doe complaint.”
The decision is partly based on the aforementioned “Cobbler” ruling of the Ninth Circuit Court of Appeals. However, the Court makes it clear that even if there was a properly pleaded infringement claim, the requests for expedited discovery would still be denied.
In the opinion, Judge Schneider sums up the other issues as follows:
(1) Strike 3 bases its complaints on unequivocal affirmative representations of alleged facts that it does not know to be true.
(2) Strike 3’s subpoenas are misleading and create too great of an opportunity for misidentification.
(3) The linchpin of Strike 3’s good cause argument, that expedited discovery is the only way to stop infringement of its works, is wrong.
(4) Strike 3 has other available means to stop infringement besides suing
individual subscribers in thousands of John Doe complaints.
(5) The deterrent effect of Strike 3’s lawsuits is questionable.
(6) Substantial prejudice may inure to subscribers who are misidentified.
(7) Strike 3 underestimates the substantial interest subscribers have in the constitutionally protected privacy of their subscription information.
For example, Strike 3 has argued that these cases do not really raise any substantial privacy concerns, but the Court clearly disagrees. Being named in a lawsuit is an invasion of people’s constitutional privacy rights, which should not be underestimated.
“[G]iven the expansive view of individual privacy under New Jersey law, there should be a good reason before subscriber information is turned over. This is especially true in a situation where questionable averments are relied upon to obtain discovery,” Judge Schneider writes.
Another point the Judge brings up is Strike 3’s claim that it has no other available means to stop copyright infringements. According to the Court, this is not true. The DMCA allows the company to send takedown notices to ISPs, but Strike 3 doesn’t use this option.
While the company is by no means required to issue takedown notices, the Court finds it unreasonable for Strike 3 to argue that it has no other options when it ignores the DMCA.
“One would think that Strike 3 would be eager to notify ISPs that its subscribers are infringing their copyrights, so that an infringer’s internet service would be interrupted, suspended or terminated and infringement would stop. However, Strike 3 does not take this simple step but instead files thousands of lawsuits arguing that it has no other recourse to stop infringement,” Judge Schneider writes.
Even if Strike 3 believes that these notices don’t have any direct effect, it could at least try. If an ISP willfully ignores DMCA notices or fails to follow its repeat infringer policy, it could even consider suing the Internet provider, as other rightsholders have done, the Court adds.
Adding to that, Judge Schneider points out that the current legal campaigns against individual file-sharers are not very effective. There doesn’t seem to be a substantial deterrent effect, as Strike 3 admits that the infringements of its works have only increased.
All in all the Court sees no other option than to deny the request for expedited discovery. This is good news for the people who were targeted by these lawsuits, as they won’t be identified. At the same time, it means that Strike 3 can’t continue these cases, as it can’t name a defendant.
The Court realizes that this makes it nearly impossible to track down the alleged infringers, but sometimes that’s how the law works.
“The Court is not unmindful that its ruling may make it more difficult for Strike 3 to identify copyright infringers. To the extent this is the price to pay to assure compliance with the applicable law, so be it,” Judge Schneider writes.
“A legal remedy does not exist for every wrong, and it is unfortunately the case that sometimes the law has not yet caught up with advanced technology. This is not the first time, nor will it be the last, where a party who believes it was wronged was denied discovery,” he adds.
A copy of the full opinion issued by US Magistrate Judge Joel Schneider is available here (pdf).
