Commentary: Righthaven may have drawn wrong judge to tangle with

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A few months ago we suggested that Las Vegas copyright enforcement company Righthaven LLC would be receiving some payback from Roger Hunt, the chief United States District Court judge in Nevada.

That payback came Tuesday, and it was more brutal than what some Righthaven observers had expected.

Here’s the background: After Righthaven obtained copyrights for material from the Las Vegas Review-Journal and the Denver Post for infringement lawsuit purposes, some defendants in its 274 lawsuits challenged Righthaven’s standing to sue.

These defendants said copyright lawsuits were reserved for the true owners of copyrights — not lawsuit mills. Righthaven assured federal judges, including Hunt, it was the true copyright owner and in several cases those challenges to Righthaven’s standing were rejected.

“The (copyright) assignment in question clearly assigns both the exclusive copyright ownership, together with accrued causes of action, i.e., infringements past, present and future,” Hunt wrote in a September ruling denying a Righthaven defendant’s motion to dismiss.

After losing rulings on standing, defendants typically settled with Righthaven for several thousand dollars.

Then along came attorneys for the digital rights group the Electronic Frontier Foundation (EFF). They succeeded in unsealing Righthaven’s lawsuit contract with Review-Journal owner Stephens Media LLC.

Hunt ruled Tuesday that lawsuit contract shows Stephens Media — not Righthaven — is the actual copyright owner in the Review-Journal cases. In dismissing a Righthaven lawsuit and threatening sanctions against Righthaven, the judge made it clear in his ruling he didn’t appreciate earlier representations to the contrary by Righthaven.

“Righthaven contends that multiple courts within this district have already determined that Righthaven has standing to bring claims for past infringement under the Silver (case law) standard based on the plain language of the copyright assignment,” Hunt wrote in Tuesday’s ruling. “At best, this argument is disingenuous. As the undersigned issued one of the orders Righthaven cites for this argument, the undersigned is well aware that Righthaven led the district judges of this district to believe that it was the true owner of the copyright in the relevant news articles. Righthaven did not disclose the true nature of the transaction by disclosing the SAA (lawsuit contract) or Stephens Media’s pecuniary interests.”

Hunt went on to threaten Righthaven with sanctions, writing, “the court believes that Righthaven has made multiple inaccurate and likely dishonest statements to the court.”

It’s not often that a litigant is accused of making dishonest statements — and in this case the consequences could be severe as the litigant is headed by an attorney who fully understands the rules of engagement with federal judges.

If there’s any doubt about Hunt’s skepticism of Righthaven and its litigation tactics, keep in mind that Hunt has not only found Righthaven lacks standing to sue, he’s thrown out its controversial domain-name seizure demand in lawsuits and has found merit in arguments Righthaven couldn’t demand attorney’s fees in suits filed by in-house counsel. Those domain name and attorney’s fee demands are widely seen as bullying tactics aimed at coercing defendants into settling.

Hunt, in his order Tuesday, dismissed Righthaven from the case. But Stephens Media wasn’t so lucky. It will have to defend itself against a counterclaim filed by EFF attorneys for defendant the Democratic Underground.

Hunt agreed with the EFF that Stephens Media had sent Righthaven after the Democratic Underground and he noted published commentary by then Review-Journal Publisher Sherman Frederick that he would send “his little friend called Righthaven” after copyright infringers.

The EFF said that was from the famous line in the movie Scarface in which gangster Tony Montana introduced a gangland foe to his “little friend” — an assault rifle.

So with Righthaven found to have no standing to sue over the copyright assignments it obtains from Stephens Media, what happens next?

It’s unclear if Arkansas company SI Content Monitor — an affiliate of Stephens Media that owns half of Righthaven — is going to want to finance an appeal of Hunt’s ruling.

Stephens Media looks to be on the hook already for substantial legal fees in the Democratic Underground case alone and potentially others.

SI Content Monitor and Stephens Media can certainly afford to continue litigating, but whether it makes business sense is another matter.

In the meantime, attorneys said Tuesday, look for Hunt and the other Nevada federal judges to quickly dismiss all the pending Righthaven cases over Review-Journal material.

Because of indications Righthaven’s lawsuit contract with the Denver Post is similar to the Stephens Media contract, look for Righthaven lawsuits over Denver Post material in Colorado and South Carolina to be similarly dismissed based on the standing issue.

And can Righthaven continue to appeal its two fair-use losses?

“In that Righthaven lacks standing, the appeals court has no reason to make a legal determination on the fair use matter as it involves a party (Righthaven) that, even if successful on appeal, cannot proceed with the matter. However, today’s court order expressly held that Stephens Media can maintain a separate claim against Democratic Underground if it so chooses. Stephens Media may seek to ‘step into the shoes’ of Righthaven and take over the appeal,” said attorney Jason Wiley of the Henderson law firm Woods Erickson Whitaker & Maurice LLP.

Wiley, who has represented several Righthaven defendants, said it’s doubtful those who have settled can now seek refunds and return of their legal expenses based on Righthaven’s lack of standing.

“Unfortunately, those defendants that already settled will probably have no recourse within which to reopen their case and attempt to recoup their legal fees and costs. Any settlement agreement previously entered into by and between Righthaven and alleged infringers probably contained a mutual release which would bar the reopening of a settled matter,” he said.

Another attorney familiar with Righthaven, however, told the Las Vegas Sun and its sister newspaper VEGAS INC that defendants that have settled may have some recourse based on the theory the settlements were based on sham or even fraudulent copyright ownership claims by Righthaven.

In Colorado and South Carolina, Righthaven has already been hit with counterclaims, including a class-action claim on behalf of Denver Post lawsuit defendants in Colorado. It’s unclear how Hunt’s ruling may affect those claims, but it certainly didn’t help Righthaven.

And regardless of what happens with the federal cases, Righthaven, Stephens Media, the Denver Post, its owner MediaNews Group and current and former attorneys for Righthaven will have to deal with a state court complaint filed against them this week by copyright defendant Dana Eiser in South Carolina.

One big unknown is whether in any of the cases Righthaven or Stephens Media will get a chance to introduce evidence to back up their financial assertions about the copyright infringements Righthaven typically sues over — assertions that these infringements affect newspaper industry revenue.

Righthaven doesn’t typically sue direct competitors for advertising dollars of the Review-Journal and the Denver Post — real competitors like TV stations, radio stations and daily or weekly newspapers.

Rather, its suits have been against some big names like Matt Drudge and Sharron Angle as well as the likes of Boston cat blogger Allegra Wong, Denver-area retired military nurse Denise Nichols, North Carolina blogger Brian Hill and the Review-Journal’s own sources.

Evidence about the financial impacts of their infringements would be interesting given arguments that these lawsuits were always about profits for Righthaven, rather than dealing with the alleged infringements.

Is there a lesson in all this?

Based on criticism of Righthaven by Hunt and Judges James Mahan in Las Vegas and John L. Kane in Denver, it appears federal judges don’t appreciate their courtrooms being used as ATM machines by Righthaven.

In these cases, it’s always been clear that Righthaven was using the steep statutory damage provisions in the Copyright Act to extract lawsuit settlements from defendants — defendants that often couldn’t afford to properly defend themselves and who would have likely complied with a simple takedown request.

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Discussion 11 comments

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  1. Agreements based on fraud are invalid. Those who settled already can challenge the settlements but the same reason many of them settled, lack of money to mount a defense, could also make it difficult for them to challenge the settlements. It is now time for some enterprising lawyers to come to the defense of these people and go after Righthaven, Stephens Media and Media Newsgroup.

  2. Thanks for all your good work, Steve.

    In your commentary, you said: "It's not often that a litigant is accused of making dishonest statements -- and in this case the consequences could be severe as the litigant is headed by an attorney who fully understands the rules of engagement with federal judges."

    I think that Mr. Gibson did NOT fully understand the rules of engagement in federal courts. Rather he had what seemed to him (and to his client, Stephens Media) to be a really great business model and, for the sake of that business model and all that it offered, turned away from his duties to the courts.

  3. Green -- excellent article, especially for the peek under the court's skirt.

    Standing is basic to any lawsuit. That Judge Hunt only threatened Rule 11 sanctions instead of actually imposing them shows what a game litigation is.

    The circumstances of EFF's involvement also shows that access to justice is really only for the rich -- it seems the ordinary people defendants settled after the sticker shock of shopping their case to attorneys. As with most government entities, dealing with them has become far too complex for common people with common problems, hence the experts -- attorneys, accountants and other parasites.

    "Makes you feel ashamed to live in a land where justice is a game." -- Bob Dylan "Hurricane"

  4. Chunky says:

    Well done Mr. Green! Your coverage of this story from the very beginning has been exceptional.

    Excellent commentary today as well. Hopefully this is the beginning of the end for Righthaven an an early eulogy to their final demise.

    That's what Chunky thinks!

  5. I hope that Drudge has a sense of outrage over being fleeced and seeks to have the settlement language overturned or otherwise voided on grounds of being a sham. That would greatly benefit everyone who was fooled in the same fashion.

    Common sense would say that someone should not be bound by an agreement obtained by what appears to be fraudulent means.

  6. WIred has a story that shows a very defiant Steve Gibson. Says he may refile lawsuits vacated over standing.

    http://www.wired.com/threatlevel/2011/06...

    Gibson is being very defiant at a bad time when the Judge is considering sanctions. I don't think threatening people is a good way to impress the judge.

  7. The SAA can indeed be altered so that RH would have standing, but any changes that would achieve that will substantially alter the fundamental structure of the relationship between RH and SM (or MediaNews if it has a similar agreement.)

    From the very beginning I have questioned the need for SM to transfer ownership of the copyright to RH.

    In the normal course of affairs one would suppose that SM would merely hire an attorney (or use in-house counsel) to pursue litigation. SM could even out-source finding alleged infringements to a service. The only problem with that approach, as far as I can determine, is that such costs show as an expense item on the balance sheet.

    By assigning only a right to sue to RH SM can covert an expense item to a revenue item. But Title 17 has no provision for that, hence the need for the SAA to create the illusion of the transfer of ownership.

    Any genuine transfer of ownership would fundamentally change the relationship between RH and SM, and require a certain amount of trust between the two. And it would appear that SM does not trust RH after reading the SAA.

  8. I am going to love watching Wronghaven going down in flames and cannot wait till those that settled sue them and the RJ out of business.

  9. botfx's comments about the SAA between Stephens Media and Righthaven seem true. Stephens apparently wanted to sue, but use Righthaven as a cutout so that Stephens' good name would not be sullied in the process of protecting its copyrights. So they crafted the SAA to read as it does. The result was that they have damaged the symbiotic relationships their flagship paper has with local resources, sullied their good name, are going to end up with all sorts of expense -- and, possibly liabilities -- on their financial statements as the chickens come home to roost, and, may end up losing their copyrights. I'm sure there must be one or more of Aesop's Fables that apply here.

  10. Ken bingham points out a central problem in the Righthaven case:
    when the lawyer is in the business relationship with his client involving the matter being litigated. This is a real problem facing the courts, because their operation requires counsel to be separate from the litigants. Gibson as counsel had Gibson as Righthaven represent to the Courts that Righthaven was the owner of copyrights when the terms of the Special Assignment Agreement were such that Righthaven was not the owner of the copyrights -- or at least not the owner within the language of the Copyright Act and the prior precedents construing it. Perhaps he could fairly argue for a change in the law -- but the problem is that he is in the position of the armed robber who argues that the law punishing the death of shop keepers during an robbery ought to be. changed -- he is the party, not counsel helping to guide the court to a just result and any arguments will be viewed by the court in the light of that bias.

  11. If the Nevada State Bar determines that Righthaven is a law firm then Gibson has more worries. There are rules that prohibit a law firm from being owned in whole or in part by non-attorneys, and so far as I know SI Monitor, LLC (the SM affiliate that co-owns Righthaven with Gibson's LLC) does not qualify.