Thursday 26 March 2015

A Perfect Fail - and a $5.6 million bill

Perfect 10, the adult magazine and now online company, which had previously litigated against the likes of Google &  Amazon, CCBill, Megaupload and Visa amongst many others, and which is often tarred with the 'copyright troll'' moniker, has suffered a bit of a set back in its litigation quest after a U.S. judge ordered the company to pay $5.6 million in legal fees and costs (Perfect 10 v. Giganews). Judge Andre Birotte Jr's judgment is a educational read on just why the Company faced such substantial fees and costs, and perhaps the background is a good place to start for this explantion: The judge noted that the action has involved more than 30 noticed motions, including a motion for change of venue, two motions to dismiss, three Daubert expert witness motions eight motions for summary judgment, and multiple discovery and sanctions motions. The docket in this action includes nearly 700 entries and exceeded 38,000 pages.

The Judge confirmed the award of fees and costs, not least as the almost complete success enjoyed by the defendant "weighs heavily in support of an award of attorneys’ fees under the Copyright Act. On each of Perfect 10’s three theories of copyright infringement, Defendants won unqualified victories: Livewire defeated Perfect 10’s claims of secondary infringement at the pleading stage without leave to amend, and Defendants won on each of Perfect 10’s remaining claims on summary judgment. This sort of complete victory on the merits is significant" . Including a very interesting review of the nature of 'frivolous' claims,  the judge puts out what might be seen as an interesting warning to other 'trolls': "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.” Fogerty I, 510 U.S. at 527." 

Noting that Perfect 10 seemed to be run as a tax loss entity, the judge also noted "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." He finally went on to consider the last 'Fogerty' factor, considerations of compensation and deterrence, of which which the judge said "weighs in favor of an award of attorneys’ fees under section 505. This aspect of the Fogerty analysis recognizes that “[d]eterring nonmeritorious lawsuits against defendants seen as having ‘deep pockets’ and compensating parties that must defend themselves against meritless claims are both audible ends”.

Judge Birotte ended this section of his judgment with this "In light of Perfect 10’s well-documented improper motive in bringing suit (see section III.A.1.c, above), 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."

The judge also took time to comment on what he clearly regarded as another spurious argument from Perfect 10's - that it shouldn't have to pay legal fees because it is was in effect insolvent and heavily in debt. The court noted that Perfect 10 has been making this same exact claim for years in almost every case it had brought, and that president and CEO Norman Zada seemingly ran the business as a tax write off, making it somewhat unbelievable as a defence to meeting costs: As TechDirt notesPerfect 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."

Perfect 10 is an online adult website - and formerly a monthly and then quarterly men's magazine - that features high resolution topless or nude photographs of 'all natural' women who have not had cosmetic surgery.

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