R-J owner fighting copyright suit fraud allegations
7 August 2011
The Stephens Media LLC newspaper chain is denying allegations that its copyright lawsuit campaign involves a fraud perpetrated on Nevada’s federal judges.
Stephens Media, owner of the Las Vegas Review-Journal, last year teamed up with Righthaven LLC of Las Vegas to sue website owners, bloggers and message board members who had posted Review-Journal material online without authorization.
Stephens Media is owned by the family of Arkansas investment banking billionaire Warren Stephens -- and another Stephens company owns half of Righthaven.
Righthaven, which also sues over Denver Post material, has filed 275 copyright infringement lawsuits since March 2010.
The lawsuit spree, unprecedented in the newspaper industry, has faltered with four federal judges ruling Righthaven lacked standing to sue over R-J material and a judge in Colorado threatening to do the same thing with Denver Post lawsuits there.
Righthaven has also lost three lawsuits on fair use grounds and it was fined $5,000 by one of the Nevada judges for filing false court documents covering up the fact that Stephens Media receives a 50 percent cut of revenue from R-J lawsuits, minus costs.
In throwing out Righthaven lawsuits based on its lack of standing, judges said Righthaven didn’t control the material it was suing over because of flawed copyright assignments from Stephens Media that left Stephens Media in control of the material.
Righthaven and Stephens Media have twice amended their lawsuit contract and they both now say Righthaven has full ownership of the material it sues over and therefore an ironclad right to sue.
Several defendants and their attorneys dispute this, with defendant the Democratic Underground charging in a July 26 court filing that the restated lawsuit contract, called the Strategic Alliance Agreement (SAA), "perpetuates a fraud on the court."
The Democratic Underground, operator of a big political website, was sued by Righthaven one year ago after a message board user posted the first four paragraphs of a 34-paragraph R-J story about then U.S. Senate candidate Sharron Angle.
By crediting the R-J and linking to the R-J, this post likely would be protected by fair use under Righthaven-created case law and the lawsuit over the post has become a debacle for Righthaven and Stephens Media.
This is the case in which the Democratic Underground, represented by the digital rights group the Electronic Frontier Foundation (EFF) of San Francisco, first succeeded in showing Righthaven lacked standing to sue.
It’s also the case in which U.S. District Judge Roger Hunt fined Righthaven for deliberately hiding Stephens Media’s role in its R-J lawsuits.
With Righthaven removed from the case for lack of standing, a Democratic Underground counterclaim is active against Stephens Media in which the Democratic Underground is seeking recovery of its legal fees – by now in the hundreds of thousands of dollars – and a fair use declaration so it can again post the Sharron Angle story information.
The counterclaim is where the Democratic Underground on July 26 made its claim that Righthaven still lacks standing to sue and that it and Stephens Media are perpetrating a fraud upon the Nevada federal court.
To back up that claim, EFF attorneys wrote in their filing:
• Righthaven and Stephens Media aren’t being honest when they say it was their intent all along that the copyright assignments convey full ownership of copyrights to Righthaven, as Hunt has already ruled just the opposite, finding, “Righthaven and Stephens Media went to great lengths in the SAA to be sure that Righthaven did not obtain any rights other than the bare right to sue."
"In reality, Righthaven actually left the transaction with nothing more than a fabrication since a copyright owner cannot assign a bare right to sue," Hunt wrote in his June 14 order.
• Righthaven and Stephens Media with their lawsuit contract amendment were trying to "collusively rewrite history" in hopes of undermining Hunt’s decision that Righthaven lacks standing.
"It would make a mockery of this court’s process to adopt the pretense that Righthaven now is in the business of owning and licensing exclusive rights in copyrights, rather than merely suing on them, when it has done, and is empowered to do, nothing else. This is especially true given Righthaven’s history of false representation as to the nature of its relationship and Righthaven’s authority," EFF attorneys for the Democratic Underground wrote in their filing.
• "Righthaven’s most recent Restated (SAA) Amendment could not change the inherently unlawful nature of its relationship with Stephens Media."
• "This relationship by definition constitutes champerty, an illegal practice under Nevada law." (Champerty is when a party with no interest in a dispute tries to make money by inciting litigation over that dispute).
• "The entire Righthaven scheme constitutes the unlawful, unauthorized practice of law." (Hunt, in his sanctions order, said Righthaven was masquerading as a company while practicing law, even though it’s not a law firm.)
• Claims that Righthaven is the exclusive owner of material it receives from Stephens Media are false as the Sharron Angle story and other Review-Journal stories at issue are licensed by Stephens Media to information providers including Lexis-Nexis and ShareThis.
For instance, EFF attorneys charged, "In its deal with ShareThis, Stephens Media warranted that it `owns or otherwise controls all of the rights to the’ content that will be shared or accessed through the ShareThis application."
"Moreover, Stephens Media purports to 'grant a worldwide, non-exclusive, assignable, fully paid up, and royalty free license' to ShareThis. This representation is entirely inconsistent with its purported grant to Righthaven of all exclusive rights in the (Angle) news article (that is still available through ShareThis)," the Democratic Underground/EFF filing said.
The EFF attorneys also said Stephens Media’s deal with Lexis-Nexis includes language "contrary to the purported grant to Righthaven of all exclusive rights, which Lexis-Nexis would infringe by making the (Angle) news article available—as it does today."
"A non-exclusive licensee, as Stephens Media purports to be, has no right to sublicense, absent an explicit provision," the EFF attorneys wrote in the filing. "The restated (SAA) amendment contains no provision allowing sublicensing. Nevertheless, the news article at issue in this litigation remains available through ShareThis and on Lexis."
The bottom line for the Democratic Underground and its attorneys with the EFF is that "Righthaven’s new-found 'ownership' exists only on one piece of paper, fabricated solely for the purpose of presenting a new argument to the court. The truth is reflected in the original SAA and the clarification, which protected these license arrangements (with Lexis-Nexis and others) by preventing Righthaven from exploiting the Las Vegas Review- Journal articles."
"The Restated Amendment is nothing but a fraud and Righthaven and Stephens Media’s presentation of it to this court are inexcusable," said the Democratic Underground filing.
The Democratic Underground is represented in the litigation by attorneys Laurence Pulgram, Clifford Webb and Jennifer Johnson of the San Francisco office of the law firm Fenwick & West LLP; Kurt Opsahl and Corynne McSherry of the EFF and by Las Vegas attorney Chad Bowers.
In court filings Friday, Stephens Media and Righthaven fired back, with Stephens Media first announcing it was withdrawing its request for Hunt to reconsider his June 14 order removing Righthaven from the case, a decision Stephens Media had said left it in the unusual position of defending the counterclaim even though it was unable to sue the Democratic Underground since it had transferred the copyright at issue to Righthaven.
"As a non-exclusive licensee, Stephens Media cannot sue for copyright infringement," Stephens Media attorneys wrote in their June 28 motion for reconsideration.
In dropping that motion on Friday, Stephens Media attorneys J. Colby Williams and Donald Campbell of the Las Vegas law firm Campbell & Williams wrote that Stephens Media was not disavowing the validity of its lawsuit contract amendments with Righthaven, but "believes the parties’ resources as well as those of the court are better utilized addressing substantive matters that will arise in the future rather than revisiting issues decided in the past."
"Stephens Media unequivocally denies that is has sought to perpetrate any fraud on the court," the attorneys wrote in their brief.
"By leveling this serious charge, Democratic Underground signals its belief that it can spew forth any allegation, no matter how outrageous it, and it will nevertheless receive a receptive audience with the court," said the filing, which charged the Democratic Underground presented no authority to "support the ill-conceived notion that the act of amending an assignment agreement to eliminate concerns regarding standing is tantamount to fraud on the court."
They also wrote that Stephens Media’s licensing deals with non-parties such as Lexis-Nexis don’t undercut the amended lawsuit contract with Righthaven.
"Because Stephens Media is the owner of the copyright in an article at the time it is published and, by definition, any assignment of that article to Righthaven will not occur until some undetermined time in the future (e.g. when infringing activity has been detected), Stephens Media has every right to authorize the limited use of the article at the time of publication," Stephens Media’s filing said.
Righthaven, in the meantime, filed its own brief on Friday arguing again it has the right to intervene in the Democratic Underground case since, under the restated lawsuit contract, it now has full rights to the copyright at issue.
Righthaven attorneys wrote that U.S. District Judge James Mahan, in dismissing a Righthaven lawsuit against the Pahrump Life blog on July 27, "rejected" charges of fraud, champerty and the unauthorized practice of law.
(In fact, Mahan didn’t comment on these issues one way or the other. In a setback for the Democratic Underground and other Righthaven critics acting as friends of the court in that case, Mahan dismissed the Pahrump Life case without prejudice, giving Righthaven the opportunity to sue Pahrump Life again under its revised lawsuit contract with Stephens Media, with the judge saying, "I want people to have their day in court."
"Nevertheless, Democratic Underground is apparently perfectly content with trotting out its previously rejected arguments under the hope of garnering a different result from this Court," Righthaven attorneys Shawn Mangano of Las Vegas and Dale Cendali wrote in Friday’s filing. Cendali is with the New York office of the law firm Kirkland & Ellis LLP.
They also, again, disputed allegations the company has been involved in champerty and the unauthorized practice of law.
Hunt hasn’t indicated when he’ll rule on Righthaven’s effort to re-inject itself into the Democratic Underground case, or on the Democratic Underground’s counterclaims against Stephens Media.
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