Copyright trolls suffer big loss

A ruling from a federal appeals court in Washington, DC, has knocked out one of the primary tactics used by copyright "trolls" in their campaigns to shake down accused infringers. This represents a major victory, and one that the Electronic Frontier Foundation -- the digital civil liberties organization where I work -- has pursued for years.

In the first appeals court decision of its kind, a three-judge panel ruled Tuesday that the technique used by appellee AF Holdings of bundling together dozens of Internet users in a single suit in order to obtain their identities is an unfair abuse of the legal process.

Unfortunately for the trolls, that illegal practice is a critical part of their business model. Like email spammers, copyright trolls depend on the ability to cheaply cast a very wide net, sending out hundreds or thousands of accusations at once and getting settlement payments back from some percentage. In recent years, many copyright trolls have focused on unauthorized downloads of pornography, adding to the risk of embarrassment that would come with being named in a lawsuit.

Following this strategy, some of these trolls have been able to collect major sums -- often a few thousand dollars at a time. The court's decision cites an article by Kashmir Hill that claims Prenda Law, a firm closely linked with AF Holdings, had made something like $15 million over three years of settling lawsuits. This model works because these trolls bring an enormous volume of lawsuits: Recent research indicates that another pornography group, Malibu Media, is the nation's most prolific copyright lawsuit filer, responsible for more than a third of all copyright litigation over the past year.

All this litigation hits a major roadblock after this new decision that the cost-cutting measure of lumping together suits -- regardless of whether the accused infringers are in the court's jurisdiction or have any relationship with each other -- is not consistent with the law. As the court notes, a plaintiff bringing a suit against multiple defendants needs to demonstrate that those defendants took part in the same transaction, which is generally not true in copyright troll cases.

By contrast, the court followed an analogy that EFF raised during oral argument: These defendants, by taking part in a BitTorrent swarm, can be compared to casino patrons walking up to a blackjack table on separate occasions. Though those players may win the same amount of money, use the same strategy, or even play against the same dealer, they are engaged in fundamentally different transactions.

Beyond the questions of bundling together defendants, the court also found that AF Holdings had failed to ensure it was seeking subpoenas in the right jurisdiction.

But few plaintiffs go after thousands of unknown Internet users at a time. There are, of course, some high-profile exceptions; between 2003 and 2007, the Recording Industry Association of America sued over 30,000 individuals over online infringement. So while the court's ruling is a major blow to trolls, it probably won't have much of an effect on other copyright litigation.