Sanctions Ordered Against Porn-Piracy Litigants

May 7, 2013 11:45 AM PST

LOS ANGELES — A federal judge lowered the boom yesterday and ordered $81,000 in sanctions against the Prenda Law Firm, attorney John Steele and other affiliated lawyers, as well as two adult film copyright holders, AF Holdings LLC and Ingenuity 13 LLC.

The attorneys and copyright holders, according to U.S. District Judge Otis Wright, have "outmaneuvered the legal system" in their porn piracy cases and should not only be sanctioned, but also be held accountable over possible federal racketeering violations and probed over their tax returns, among other disciplinary measures.

Prenda Law, Steele and the other affiliated attorneys nationwide have filed hundreds of porn file-sharing suits against thousands of defendants during the past few years, with some describing the enterprise as mass copyright trolling.

Wright, in a scathing ruling Monday, said that they have engaged in fraud while litigating the case Ingenuity 13 LLC vs. John Doe, as well as others.

"They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs," Wright's order said Monday. "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, Wright said, 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," Wright said. "Plaintiffs do have a right to assert their intellectual-property rights, so long as they do it right."

Using the same boilerplate complaint against dozens of defendants raised the court’s alert, Wright said.

"It was when the court realized plaintiffs engaged their cloak of shell companies and fraud that the court went to battle stations," Wright said.

Wright said the plaintiffs engaged in vexatious litigation designed to coerce settlement and have shown little desire to proceed in the lawsuits when faced with a determined defendant.

"Instead of litigating, they dismiss the case. When pressed for discovery, the principals offer only disinformation — even to the court," Wright said.

The jurist noted that plaintiffs even stole the identity of Steele's groundskeeper, Alan Cooper of Minnesota, and fraudulently signed copyright assignments for at least one porn film using his signature.

Wright said that the plaintiffs' enterprise clearly relies on deception.

"Part of that ploy requires cooperation from the courts, which could only be achieved through deception," Wright said. "In other words, if the principals assigned the copyright to themselves, brought suit in their own names, and disclosed that they had the sole financial interest in the suit, a court would scrutinize their conduct from the outset. But by being less than forthcoming, they defrauded the court. They anticipated that the court would blindly approve their early-discovery requests, thereby opening the door to more settlement proceeds."

As a result of his ruling, Wright ordered attorneys Steele, Paul Duffy, Brett Gibbs, Paul Hansmeier, as well as Prenda Law, AF Holdings and Ingenuity 13 to pay the sanctions within two weeks.

The sanctions include a punitive multiplier "justified by plaintiffs’ brazen misconduct and relentless fraud"; Wright also ordered further misconduct sanctions, including refering them to respective state and federal bars.

Wright, who riddled the ruling with Star Trek references — including an epigram quoting Spock from the 1982 film "Star Trek II: The Wrath of Khan": "The needs of the many outweigh the needs of the few" — promised additional investigations in his order, including a possible probe over RICO and federal tax violations.

 "[T]hough plaintiffs boldly probe the outskirts of law, the only enterprise they resemble is RICO. The federal agency 11 decks up is familiar with their prime directive and will gladly refit them for their next voyage. The court will refer this matter to the U.S Attorney," Wright said. "[It] will also refer this matter to the Criminal Investigation Division of the IRS and will notify all judges before whom these attorneys have pending cases."

Wright, in his order, requested that one of the defendant attorneys, Morgan Pietz, to assist in identifying every bar where the attorneys are admitted to practice and every judge before whom these attorneys have pending cases.  

Steele on Tuesday told XBIZ that he plans on appealing Wright's order with the 9th U.S. Circuit Court of Appeals.

"Obviously we don't agree on the ruling," Steele said. "Judge Wright based his order on an eight-minute hearing where there was no testimony, no evidence introduced. Clearly Judge Wright does not like this type of litigation and he's no fan of intellectual property law."

Pietz, one of the attorneys representing the defendants, said that he's "gratified and appreciative" that the court awarded compensatory sanctions. 

"But this isn’t my victory alone," Pietz told XBIZ." It was because of a number of attorneys all over the country that took on this fight against Prenda Law that we were able to unravel the puzzle pieces and reveal them for what they are, profiteering copyright trolls who are abusing the law.

"Over the past two to three years, Prenda Law has harassed approximately 20,000 people — teachers, students, elderly women, software technicians, nurses and so on — accusing them of copyright infringement on the basis that their ISP was connected to the illegal download of pornography.

"I think it is fair to describe yesterday's ruling as a direct hit by a photon torpedo," he said. "The Prenda enterprise is a sinking ship. At bottom, Prenda Law has acted like the courtroom equivalent of a common bully. They have talked tough and bullied those who couldn’t or wouldn’t fight back. When they were confronted with resistance, they often ran.

"This time, they were not quite fast enough.  Justice — and Judge Wright — caught up with them. And, I suspect that justice may not yet be quite done with them."

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