Using Copyright Litigation as a Business Model Got a Law Firm in Some Hot Water

Prenda Law Inc., a "law firm," decided that it wanted to use the strict liability and statutory damage provisions of the Copyright Act to receive payments from copyright infringers.  Throughout the years in my practice, I have seen how expensive this type of litigation can be when the copyright owner's damage is nothing compared to the statutory damage amount allowed (up to $ 150,000 per infringement) and the litigation costs associated with defending oneself against an infringement action.  Most of my clients are entrepreneurs or small businesses.  As such, I have seen the wrongful use of intellectual property litigation cause great financial distress (and, in some cases, bankruptcy or financial ruin).

In the case of Prenda Law, Inc., the firm is taking copyright infringement cases to a whole new level.  Its business model appears to be to purchase copyrights (primarily those relating to pornography) and use those copyrights to extort settlements from persons who download the movies from the internet.  Apparently, Prenda Law Inc. ("Prenda") added the embarrassment factor as well as the steep penalties to extort "nuisance value" settlements from individuals.  Prenda clearly took its cue from the patent trolls who do much the same thing.  Where Prenda's tactics took trolldom to a whole new level happened when a court recently discovered who Prenda represented.  Apparently, two of Prenda's "clients" were actually shell companies for Prenda! Talk about a conflict of interest.  In addition, Prenda's claiming to "represent" these other companies without revealing that they are really owned by Prenda could be considered committing fraud on the court.  Prenda's bad conduct did not stop there.  Apparently, one of the "officers" of these shell corporations was no such thing.  Prenda simply used the name of someone who cares for one of Prenda's attorneys' property without that person's knowledge.  Yup, this "officer" is now suing Prenda.

While this is an extreme case of misuse of the Copyright Act by the Prenda attorneys (I hope), it simply reinforces the notion that Congress should take a long, hard look at the Copyright Act.  Hopefully, Congress can find a better balance between protecting the product of creativity and protecting against the use of the Copyright Act as an extortion device.