Righthaven says it might have to file for bankruptcy
9 September 2011
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Despite its backing by the billionaire Warren Stephens family, Las Vegas copyright lawsuit filer Righthaven LLC warned today it may have to file for bankruptcy because of a series of setbacks in its litigation campaign.
The warning came in an emergency request by Righthaven to a federal judge in Las Vegas that he stay his order that Righthaven pay $34,045 in legal fees to attorneys who successfully defended Kentucky message board poster Wayne Hoehn against a Righthaven lawsuit.
Righthaven has already appealed U.S. District Judge Philip Pro’s fee award to the 9th U.S. Circuit Court of Appeals.
Righthaven is also appealing the underlying rulings by Pro finding Righthaven lacked standing to sue Hoehn and – even if it had standing – that Hoehn was protected by fair use in posting an entire Las Vegas Review-Journal column on a sports betting website message board.
Righthaven says its lawsuits are necessary to deter rampant online infringement of newspaper content, but attorneys for Hoehn and other defendants claim Righthaven's suits are frivolous and are based on sham copyright assignments and are merely part of a get-rich-quick scheme.
Righthaven’s bankruptcy warning came a day after MediaNews Group, the owner of the Denver Post and other newspapers, revealed it won’t renew its contract with Righthaven for copyright protection services in the form of its controversial no-warning lawsuits.
While the Righthaven bankruptcy warning may sound ominous, a bankruptcy filing wouldn’t prevent Righthaven creditors from asking the bankruptcy court for permission to seize Righthaven’s assets. Such a filing also would require Righthaven to reveal detailed financial information that so far has been secret as it's a private company.
And Righthaven copyright lawsuit defendants considering countersuing Righthaven over what they call sham copyright claims would likely target not just Righthaven, but its deep-pocketed newspaper partners including the owners of the Review-Journal and the Post.
In today’s court filing in the Hoehn case, Righthaven noted its litigation campaign has stalled this summer while judges in Nevada, Colorado and South Carolina determine whether it has standing to sue over R-J and Post material.
Not only is Righthaven paying attorneys to litigate over the stalled and appealed cases, it has held off on filing new copyright infringement lawsuits until judges definitively rule on whether Righthaven has standing to sue under its amended lawsuit contract with the owner of the Review-Journal.
The R-J’s owner is Stephens Media LLC, controlled by billionaire Little Rock, Ark., investment banker Warren Stephens and his family. The Stephens family also owns half of Righthaven.
Righthaven today said the gridlock over its lawsuits has hurt its finances – and expressed concern that attorneys for prevailing defendants like Hoehn may seize its assets and put it out of business.
Those assets consist largely of scores of copyrights Righthaven claims to own to R-J and Post material that are the basis of its 275 lawsuits filed since March 2010.
"While these circumstances have not exhausted Righthaven’s resources, it certainly brings the value of its intangible intellectual property assets to the forefront of any judgment enforcement efforts. Permitting such judgment enforcement efforts to proceed during pendency of Righthaven’s appeal unquestionably exposes the company to the threat of irreparable harm," Righthaven said in its filing.
"Righthaven faces the very real threat of being forced out of business or being forced to seek protection through bankruptcy if the court does not stay the (attorney’s fee) judgment pending resolution of the company’s appeal to the 9th Circuit," Righthaven’s filing today said.
The company expressed concern that seizure and liquidation of its copyrights would compromise litigation in the future, even if Righthaven were to prevail in its appeals to the 9th Circuit.
"Any new holder of an assigned copyright could compromise potential future infringement actions by granting releases from liability to suspected infringers," Righthaven’s filing said.
Righthaven also claims to own software that detects infringements of newspaper material – though anyone can find such infringements with free searches using Google and other search engines.
"If a stay is not granted pending appeal, this valuable software may be seized and liquidated in an attempt to satisfy the judgment. Liquidation may result in the software being sold to a competing organization or entity. Alternatively, the software could be sold to any one of a host of infringers or other supporting organizations that would attempt to reverse engineer the software in order to devise methods for evading detection," Righthaven warned.
Pro has not yet indicated when he’ll rule on Righthaven’s emergency request that he stay his fee order that required Righthaven to pay Randazza Legal Group by Wednesday.
Separately, another copyright expert is commenting on the Denver Post’s decision to part ways with Righthaven.
Eric Johnson is an associate professor of law at the University of North Dakota and an affiliate scholar at the Stanford Law School Center for Internet and Society.
Here’s his statement:
The law has long had a special affection for newspapers. That's reflected in a long line of Supreme Court cases. Given that history, it has been very dispiriting to see newspapers try to game the law in pursuit of a quick-money scheme, especially one that involves suing readers.
The participation of MediaNews Group was especially troubling to me, given that they operate many of the nation's most important and well-respected newspapers. Thus, it is a great relief to see that MediaNews has parted ways with Righthaven.
A newspaper is sometimes described as a community talking to itself. Can a newspaper uphold that vision while partnering with Righthaven? I don't think so. And that's a point that I think most publishers understood as soon as Righthaven pitched them.
MediaNews Group was the only big news organization that put aside the sense of public trust we expect of newspapers to take part in this misadventure. They have shown integrity and good sense by now walking away.
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