Opinion Says Plaintiff by Dropping Its Complaint, Did Not Render Counterclaim Moot
By a MetNews Staff Writer
A man was properly granted summary judgment on a counterclaim seeking a declaration that he was not a copyright infringer and awarding him $47,776.63 in attorney fees and costs, the Ninth U.S. Circuit Court of Appeals has held, rejecting the contention of the Los Angeles porn studio that sued him, that once it dropped its own suit for infringement, his action became pointless and should have been tossed out.
The studio—Strike 3 Holdings, LLC (“S3H”), which operates commercial websites—has drawn nationwide attention for bringing a torrent of legal actions against individuals for sake of gaining settlements in suits based on allegations that they downloaded copyrighted porn videos and then shared them with others—with some of the settlements allegedly being for nuisance value where the allegations lacked merit.
“S3H is a pornography production studio with several related entities located in the Los Angeles area of California,” the second amended counterclaim says. “S3H operates three website brands: Blacked, Tushy, and Vixen.”
It sets forth that the cross-complainant is an ex-police officer in his 70s, married for 40 years, and, until he was sued, “had never heard of the pornographic websites: ‘Blacked, ‘Vixen’, or ‘Tushy’ ” and “does not know who downloaded these movies.”
The counterclaim accuses S3H of “extortion through sham litigation.”
S3H’s complaint alleges that its videos, after having been downloaded, were disseminated impermissibly via BitTorrent, explaining:
“BitTorrent is a system designed to quickly distribute large files over the Internet. Instead of downloading a file, such as a movie, from a single source, BitTorrent users are able to connect to the computers of other BitTorrent users to simultaneously download and upload pieces of the file from and to other users.”
S3H said in the complaint that it sued the defendant as “John Doe” because it knew only his network identifier, or “Internet Protocol” (“IP”) address, but not his personal identity. (Doe’s actual name was kept secret in the litigation even after his true name was ascertained.)
Thursday’s memorandum opinion by a three-judge panel—comprised of Circuit Judge Johnnie Rawlinson, Senior Circuit Judge Jay Bybee, and Senior District Court Judge Morrison C. England Jr. of the Eastern District of California, sitting by designation—affirms a decision of District Court Judge Thomas S. Zilly of the Western District of Washington.
The opinion says that although S3H voluntarily dismissed its action, Doe retained a cause of action because S3H might sue again.
“The pending litigation between Doe and Strike 3, coupled with the real threat of future litigation between the parties, constitutes the type of injury that confers constitutional standing,” the panel said, elaborating:
“Strike 3’s voluntary dismissal of its infringement claims against Doe placed him in the precarious position of deciding whether to pursue his non-infringement counterclaim or to surrender the claim and hope that Strike 3 would not bring further action based his prior alleged infringement. And while Strike 3 enjoyed the ‘absolute right’ to dismiss its infringement claim…, it did not have the absolute right to choose the consequences of its without-prejudice dismissal. Doe’s fear of future prosecution, based on the very real prosecution to that point and the thinly veiled threats of fixture contributory-infringement claims, was concrete and imminent.”
With respect to “contributory infringement,” the opinion says:
“As Strike 3 admitted at oral argument, it was nearly certain that Doe’s son was the infringer, making it likely that Strike 3 would pursue other infringement claims against Doe in the future. Thus, Doe did not lack standing to pursue his counterclaims.”
In opposing summary judgment, S3H had argued:
“Plaintiff had evidence of substantial and long-term infringement of its works coming from Defendant’s IP address. To confirm the person responsible for that activity, Plaintiff sought the name and address of the ISP subscriber. Defendant refused to provide that information for months, but once it was provided, Plaintiff conducted a further investigation and determined that the likely infringer was Defendant’s adult-aged live at home son and Plaintiff dismissed the action.
“But the action continued for one reason: Defendant’s attorneys wanted to try to recover attorneys’ fees, so they continued their declaration of non-infringement counterclaim for months, forcing the Parties to incur countless motions, depositions, and discovery related expenses.”
Zilly was unsympathetic to S3H’s cry that attorney fees should not be ordered in favor of Doe. He wrote in his Jan. 31, 2020 order granting summary judgment:
“To deny John Doe’s request for attorney’s fees, as Strike 3 proposes, would improperly reward Strike 3 for adhering to its suspicious litigation script.”
District Court Decision
In a footnote, Zilly, cited a Nov. 16, 2018 opinion by Senior District Court Judge Royce C. Lamberth of the District of Columbia District in Strike 3 Holdings, LLC v. Doe. Lamberth denied S3H discovery to ascertain the identity of a Doe and dismissed the action.
(That decision was reversed and remanded by the Circuit Court of Appeals for the D.C. Circuit on July 14, 2020—subsequent to Zilly’s ruling—because Lamberth had relied on extrajudicial sources as to the number of lawsuits the porn studio had filed.)
Zilly’s order says:
“Strike 3 has been described as a ‘copyright troll.’…A copyright troll’s success derives ‘not from the Copyright Act, but from the law of large numbers.’…Nationwide, during the thirteen months from October 2017 through November 2018. Strike 3 filed 1,849 cases similar to this one….In 2015, copyright trolls accounted for 58% of the federal copyright docket….The copyright troll’s playbook outlines the following strategy: ‘file a deluge of complaints: ask the court to compel disclosure of the account holders: settle as many claims as possible: abandon the rest.’ ”
Also expressing concern over “copywrite trolling” was District Court Judge Otis Wright of the Central District of California in Ingenuity 13, LLC v. Doe, decided May 6, 2013. Wright’s opinion, cited by Doe in the counterclaim, says:
“Plaintiffs have outmaneuvered the legal system. They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs. And they exploit this anomaly by accusing individuals of illegally downloading a single pornographic video. Then they offer to settle—for a sum calculated to be just below the cost of a bare-bones defense. For these individuals, resistance is futile; most reluctantly pay rather than have their names associated with illegally downloading porn. So now, copyright laws originally designed to compensate starving artists allow, starving attorneys in this electronic-media era to plunder the citizenry.
“Plaintiffs do have a right to assert their intellectual-property rights, so long as they do it right. But Plaintiffs’ filing of cases using the same boilerplate complaint against dozens of defendants raised the Court’s alert. It was when the Court realized Plaintiffs engaged their cloak of shell companies and fraud that the Court went to battlestations.”
(He imposed monetary sanctions and attorney fees. An appeal was dismissed on Nov. 18, 2013; after further skirmishes, Wright was eventually affirmed by the Ninth U.S. Circuit Court of Appeals on June 10, 2016).
In a follow-up opinion on Aug. 23, 2016, Wright said:
“This case was but one of hundreds filed around the country. Various shell companies that purchased the copyrights to pornographic movies would file suit against fictitious defendants, alleging that these unknown individuals violated the Copyright Act by illegally downloading these movies. The shell companies would then apply to the Court for leave to conduct early discovery, serve subpoenas on internet service providers to discover the identities of the fictitious defendants, and demand settlement payments from them. Because the amounts demanded were typically just below the cost of a barebones defense, and because of the stigma that would attach to being publicly accused of illegally downloading pornography, the defendants almost inevitably elected to pay up rather than contest the allegations.”
Thursday’s opinion came in Strike 3 Holdings LLC v. Doe, 20-35196.
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