As the saga of the porno copyright trolls Prenda Law moves into its end-game (likely to involve disbarments and jail time for the fraudsters behind the multimillion-dollar scheme that relied on bogus legal threats and sloppy accusations of copyright infringement), it's worth asking, how, exactly, this scam was able to go on for so long, and what can be done to prevent it in the future.
A pair of articles — one by the Electronic Frontier Foundation's Mitch Stoltz, the other by Ars Technica's Nate Anderson — delve into this in depth.
First, Anderson explains how Prenda hit on a cunning legal strategy that allowed it to try out variations on its scam, looking for the right combination of tactics to extract maximum revenue from its victims, without risking its own finances. This strategy cost the public a fortune in court costs and cost the victims another fortune in their legal costs, but Prenda didn't bear any of that. In effect, the public subsidized its brute-force attack on the American legal system:
How could the scheme go on for so long even as federal judges complained about fraud, as "John Doe" defendants complained repeatedly that they had no idea what the cases were about, and as critics complained about the injustice of the entire business model? The answer is that federal judges aren't generally investigators. Prenda had gone to great lengths to obscure what was really going on, who was doing what, and where the money went. Judges want to clear cases off their dockets and in rare cases will entertain sanctions motions, but to unravel something as complex as Prenda's behavior required a real investigation. Yet without more details, actual criminal investigators had very little to go on; most of the judicial complaints dealt with behavior in court, not public crimes.
So Prenda could essentially turn the entire US judiciary into a laboratory for incrementally refining its porn trolling techniques, testing venues, judges, corporate structures, collection procedures, and legal arguments, looking for perfection. And what it arrived at in the end had a certain devious logic to it. Even Otis Wright, the federal judge in Los Angeles who brought down Prenda's principals and referred them all for criminal and tax prosecution this week, had to concede the conceptual beauty of the system.
But as EFF's Stoltz explains, this isn't a bug in the system, it's a feature. Modern copyright law has been bought, paid for, and designed by the entertainment industry, and they demanded as system with as few safeguards and checks and balances as possible. Every element of copyright law that might enable an innocent person to easily defend herself meant added expense and burden for the entertainment industry's lawsuits against its customers and against technological innovators:
Consider this: U.S. copyright law provides statutory damages of up to $150,000 per work – without the copyright owner having to show actual harm. Individuals have been hit with damages in the six figures, and companies with bankrupting judgments in the tens of millions. Threats of damages like this are one of the main ways that copyright trolls convince their victims to pay $2,000 to $4,000 in "settlements." But statutory damages are also wielded as a club by entertainment, media, software, and technology companies. They can destroy competitors and dry up investment with mere threats of litigation, giving them veto power over new technologies and emerging artists.
And consider "secondary liability," the judge-made rules for when one person can be held responsible for copyright infringement by another. The rules are vague and their application often uncertain. Copyright trolls use this uncertainty to make plausible-sounding threats against Internet subscribers. You may not have been the one who downloaded our movie, say the trolls, but your name is on the cable bill and the law will hold you responsible. It's not always true – in many cases, an ISP subscriber is protected from liability for others' downloading – but the rules are vague and complex enough to make the threat sound real.
Looking beyond trolls, the same vague legal principles create legal nightmares – and sometimes financial ruin – for people that try to play by the rules. Companies like ReplayTV and Veoh went bankrupt trying to convince courts that they shouldn't be held responsible when customers copy TV and movies. Dish Networks/ReplayTV, YouTube, and many less prominent technology companies face lawsuits where the toolmaker must answer for the tool user. Only lawyers benefit, as vagueness means long fights and lots of legal fees.
As Stoltz writes, Prenda is just the beginning. The US copyright system is an attractive nuisance, a moral hazard on steroids, and the entertainment industry's own much-publicized efforts are the tip of the iceberg. Prenda's masterminds weren't all that clever — there are smarter con artists out there who've learned a lot from Prenda's efforts, and they're licking their chops and getting ready to prey on you and your neighbors. And as with Prenda, we'll all foot the bill for their cons, thanks to Big Content's depraved indifference to the fallout from its legal projects.