Debt collectors may join antipiracy fight

First it was the lawyers. Then it was the politicians. Now debt collectors may be coming after people accused of film piracy, even before they have their day in court.

A group calling itself the Copyright Enforcement Group (CEG), which according to its Web site specializes in media rights enforcement, appears to advocate the use of debt collectors even before the courts have rendered a judgment against accused copyright violators. CNET has obtained a copy of CEG's "service contract," which specifies the terms the group offers to client copyright owners.

"In the event that the opposing parties fail to pay in full, the client grants power of attorney to and instructs the debt collection agencies and [legal office] to proceed with the further recovery and enforcement of claims for payment by means of debt collection procedures and legal proceedings."

The new tactic targets computer users accused of illegally sharing films over peer-to-peer networks who refuse to settle out of court with copyright owners. Most of the attorneys doing this kind of work typically take accused content pirates to court. To this point, none of the other firms have even mentioned debt collectors. But the CEG appears to be taking a more aggressive stance. The contract has been seen by other attorneys who are working for the entertainment industry and they expressed shock, questioning whether the tactic is even legal.

Who exactly is behind CEG is still unclear. Ira Siegel, a Beverly Hills-based attorney who earlier this month filed a suit against 1,568 accused file sharers, has represented the group in some legal dealings. In a phone interview with CNET, Siegel said he only participates in the lawsuits for CEG, apparently suggesting that someone else at CEG handled other business aspects. He declined to comment further. (See update at bottom of story) CEG did not respond to an interview request.

Clearly, there are a number of unanswered questions about CEG and the service contract. The copy of the contract obtained by CNET is heavily redacted and identities of the parties who had entered into the agreement weren't visible. We don't know whether the debt collectors would be used for administrative purposes or would they be cut loose to employ heavy-handed tactics, such as using abusive language and calling debtors at odd hours? Such practices by some in the collections industry have come under scrutiny recently by the Federal Trade Association, according to a report last month by ABC News.

The specter of debt collectors joining the downloading fray is yet another sign the movie industry is taking an increasingly tough line with accused pirates. In the last several months, attorneys from across the country have filed lawsuits accusing thousands of people of illegal file sharing. Thomas Dunlap, founder of the law firm of Dunlap, Grubb & Weaver, likely led the way when he filed suit against thousands of accused film pirates on behalf of indie filmmakers, including the makers of "The Hurt Locker," this year's Oscar winner for Best Picture.

Since then, a growing number of porn studios have embraced the idea of suing individual file sharers. Porn impresario Larry Flynt has filed suit in Texas against people who illegally shared Hustler's "This Ain't Avatar XXX." Third World Media, a maker of so-called fetish porn, has filed suits in West Virginia and California. And Vivid Entertainment, one of the best known and largest adult-film producers in the world, has hired Ken Ford, an attorney already in involved in four different copyright cases brought by pornographers. Ford told CNET yesterday that he will file a suit on the studio's behalf within the next two weeks.

Cindy Cohn, legal director for the Electronic Frontier Foundation, was sent a copy of the CEG contract by CNET yesterday. She cautioned it wasn't entirely clear what the debt collectors would be asked to do, but she called some of the contract's wording "troubling."

"All cases which do not entail a settlement of payments in full by the party who received the warning," the contract reads, "will be handed over to debt collection agencies immediately after the [expiration] of the allotted payment period for further extra judicial recovery (debt collection)."

Translation: the line suggests that once a person accused of pirating a movie declines to settle, his or her case will be handed over to debt collectors. There's no mention of first winning a court judgment.

This hardball approach isn't how most attorneys representing copyright owners operate. Instead, they typically collect the Internet Protocol addresses belonging to thousands of people they say illegally shared their films on P2P networks and then file suits against them in federal court.

Since at that point the lawyers only know the accused person's IP address, in the suits the defendants are listed as "John Does." To obtain the name, the copyright owners request that the court issue subpoenas to each defendant's Internet service providers. After obtaining the names, the copyright owner contacts the accused person and offers to settle, typically for between $1,000 and $2,000.

If the alleged file sharer refuses to settle, then some of the lawyers, including Dunlap and Ford, say they will name the person in a federal copyright complaint. To this point, neither of the attorneys has filed such a complaint. But they said that in such situations, there is no other alternative to legally obtaining payment. Mark Litvack, the Motion Picture Association of America's former chief legal council for antipiracy, agreed.

"You need a judgment before you can collect," Litvack said. "Otherwise you don't have a debt."

The law is very specific about when and how lenders can collect a debt, said Vincent Howard, managing partner of the Anaheim, Calif., law firm Howard-Nassiri. His firm represents clients in cases of predatory lending and violations of the Fair Debt Collections Practice Act, the law designed to eliminate abusive practices in the collection of consumer debts. He questioned the language of the CEG contract.

"It seems to me that sending in debt collectors there is premature because it assumes you have the judgment against the alleged defendant," Howard said. "But you have to prove your case in court first. These people may not have committed any violation. What would happen if this person pays and then after trial isn't found liable?"

Just the introduction of debt collectors into the antipiracy discussion adds a new worry to those who illegally share movies. In the investigative piece by ABC News last month, the network focused on one agency employed by Bank of America that used racial slurs and foul language during calls to one African American who owed the bank $80. The man later won a $1 million judgment against the collections agency.

Update: Dale Spislander, a spokesman for Copyright Enforcement Group, contacted CNET on October 27 and denied that the group had created a contract that included terms regarding debt collectors. The group does acknowledge, however, that the contract in question was distributed by Ira Siegel, an attorney under contract with the group. Spislander said that CEG does not use debt collectors.