Bulletin: Fall 2011, Volume 17, Number 1

News Media Copyright Firm “Righthaven” Suffers Critical Legal Setbacks

Following its creation in January 2010, controversial copyright holding firm Righthaven LLC, launched a campaign of lawsuits challenging what it characterized as unauthorized republication of its clients’ copyrighted news stories. By the end of that year, many of the cases had settled, typically costing defendant website operators thousands of dollars per suit. However, court rulings throughout 2011 held that Righthaven lacked standing to bring copyright enforcement actions on behalf of its clients. These developments curbed the company’s litigious behavior and brought the viability of is business model into serious doubt. The controversy illustrates the conflict between copyright law enforcement and the First Amendment right to disseminate news and information that has surfaced in the age of online news dissemination.

Righthaven’s Business Model and Copyright Enforcement Effort

Righthaven began its partnership with Stephens Media LLC, the parent company of the Las Vegas Review-Journal, with the goal of targeting bloggers and other Internet users who copied and republished the newspaper’s stories online. Copyright enforcement lawsuits formed the basis of the companies’ business model, and Stephens Media agreed to fund Righthaven in exchange for a portion of whatever money the firm generated. In December 2010, Righthaven expanded the scope of its business to include graphics and began policing material taken from MediaNews Group publications, including The Denver Post and the San Jose Mercury News.

The firm operates by initiating lawsuits against alleged infringers after discovering republished news media content online, and claims to buy the content’s copyright from a news publication’s publisher. Rather than issue requests to remove covered content, it immediately sues, typically seeking $75,000 in damages from infringers. It also demands forfeiture of the offending website’s domain name to the FBI, who takes custody of the domain and replaces its contents with messages stating that copyright infringement is a crime. The facts among the cases vary, and the lawsuits brought by the firm challenge publication of full stories, as well as republication of story excerpts. (For further details on the relationship between the firm and its clients, see “News Media Seek Legal Tools to Protect Original Content” in the Summer 2010 issue of the Silha Bulletin.)

Righthaven’s copyright litigation drew critical reactions among online commenters and judges alike, with several publications, including the ABA Journal, labeling the firm a “copyright troll.” Attorneys for the Electronic Frontier Foundation (EFF), a digital rights advocacy group providing legal assistance to defendants in several suits, characterized the lawsuits as threats aiming to push defendants into quick settlements. U.S. District Court Judge James Mahan wrote in his opinion in Righthaven LLC v. Jama & Ctr. for Intercultural Org. that the firm’s litigation strategy “has a chilling effect on potential fair uses of Righthaven-owned articles, diminishes public access to facts contained therein, and does nothing to advance the Copyright Act’s purpose of promoting artistic creation.” Righthaven LLC v. Jama & Ctr. for Intercultural Org., 2:10-CV-1322-JCM-LRL, 2011 WL 1541613 (D.Nev. 2011)

Nevertheless, the practice quickly caught hold in Denver and Nevada, with now-former Stephens Media CEO Sherman Frederick writing in a May 28, 2010 blog post on the Las Vegas Review-Journal’s website “It is our primary hope that Righthaven will stop people from stealing our stuff.”

In a phone interview with journalism think tank The Poynter Institute in August 2010, Stephens Media General Counsel Mark Hinueber said that the goal of the arrangement was to protect the company’s intellectual property rights. “We were seeing our entire work product in some stories just being right-clicked and cut and pasted into blogs, where people were selling Google ads around them and making money,” he told Poynter.

According to a May 20, 2011 story in the Bureau of National Affairs (BNA) Computer Technology Law Report, Righthaven filed more than 275 lawsuits since March 2010 in Nevada and Colorado seeking to enforce its transferred copyrights. The blog Righthaven Lawsuits, which has tracked the suits since mid-2010, reported that Righthaven had collected an estimated $352,500 in settlements as of July 1, 2011.

In its complaints, Righthaven generally brings claims asserting violations of exclusive rights enumerated in Section 106 of the Copyright Act, 17 U.S.C. § 106, including the exclusive rights to reproduce the work in question, distribute copies of the work, and publicly display the work. At the crux of the company’s claimed right to take legal action for infringement are its agreements with publishers, which the firm alleges transfer full control over copyrights, thus granting it Section 106’s exclusive rights. These transfers and Righthaven’s alleged copyright ownership were the subject of dispute, with onlookers speculating that the companies’ assignment of copyrights was deficient under the standard established in Silvers v. Sony Pictures Entertainment. For a copyright assignment to be valid under Silvers, pursuant to Section 501(b) of the Copyright Act, only the exclusive or beneficial owner of a specific Section 106 right has standing to sue for infringement. A company’s transfer of a general “right to sue,” the purported right that Righthaven was granted by its agreement with its clients, is insufficient support for copyright ownership under Silvers and fails to confer standing to sue. In June 2011, the U.S. District Court for the District of Nevada identified this flaw in Stephens Media’s agreement with Righthaven in Righthaven LLC v. Democratic Underground LLC, precipitating a string of legal defeats that brought the company’s future into serious jeopardy. Silvers v. Sony Pictures Entertainment,402 F.3d 881 (9th Cir. 2005)

Release of Agreement Impedes Righthaven’s Progress, Facilitates Downward Slide

Defendants in Righthaven’s cases frequently challenged the firm’s standing to sue over the republication of materials, claiming it did not own the content’s copyright at the time of the alleged infringement, as defendant website Majorwager.com argued in an October 2010 motion to dismiss claims brought against it by Righthaven. In denying the website’s motion, U.S. District Judge Gloria Navarro found that Righthaven’s complaint had provided sufficient evidence for an inference that all rights against past infringements were transferred through the firm’s Strategic Alliance Agreement (“SAA”) with Stephens Media. Righthaven v. MajorWager.com, 2010 U.S. Dist. LEXIS 115007 (D. Nev. Oct. 28, 2010) (For full details of Righthaven v. MajorWager.com and other early challenges to Righthaven lawsuits, see “Law Firm’s Approach to Protecting News Media Copyrights Raises Eyebrows” in the Fall 2010 issue of the Silha Bulletin.)

The SAA was unsealed in April 2011 in the course of Righthaven’s lawsuit against political forum Democratic Underground.com. Against the objections of Righthaven and Stephens Media, Senior Judge for the U.S. District Court for the District of Nevada Roger Hunt issued an order to make the agreement public, writing that the public interest in the two entities’ business arrangement overrode any claimed confidential commercial rights. Under the agreement, Stephens Media receives a 50 percent cut of Righthaven’s lawsuit proceeds, and retains ultimate control over who to sue. Clause 3.3 of the contract gives Stephens Media the ability to call off any lawsuit if the defendant is “a charitable organization, is likely without financial resources, is affiliated with Stephens Media directly or indirectly, or is a present or likely future valued business relationship of Stephens Media.” Most significantly, the agreement reveals that Righthaven did not own the copyrights, stating in Section 7.2 that the firm “shall have no right or license to Exploit or participate in the receipt of royalties from the Exploitation of the Stephens Media Assigned Copyrights other than the right to proceeds in association with a Recovery.” In addition, Stephens Media retains a right to terminate the copyright assignment and enjoy a complete reversion of ownership under Section 8. The document’s release confirmed suspicions that Stephens Media’s transfers to Righthaven were insufficient to grant an enforceable interest under Silvers v. Sony Pictures Entertainment. The SAA can be found online at https://www.eff.org/files/filenode/righthaven_v_dem/79-1.pdf. Following the SAA’s unsealing in the Democratic Underground case, Buzzfeed Inc. brought a class action counterclaim in May 2011 in response to a $150,000 Righthaven lawsuit accusing the website of reposting an image of a TSA screening originally published in the Denver Post. Seeking to combine Righthaven defendants as a class to sue the firm for bringing what it deems faulty lawsuits, the class action claimed Righthaven’s legal efforts were an abuse of process and unfair or deceptive trade practices. The complaint alleges that the firm’s litigation tactics and its demands for domain seizure are “motivated solely to intimidate Defendants and extract settlement money.” It also accuses the firm of suing in bad faith, by failing to send a preliminary take-down notice or investigating whether use of content qualifies as fair use. The class action seeks to impose an injunction against Righthaven filing additional copyright lawsuits.

After the Nevada court’s release of the SAA, the U.S. District Court for the District of Colorado in Righthaven LLC v. Rozzell ordered stays of all of Righthaven’s copyright infringement proceedings in the state on May 19, 2011. In the order, Judge John L. Kane, Jr. acknowledged the jurisdictional concerns previously voiced by the defendant in Righthaven LLC v. Wolf. Wolf filed a motion to dismiss suggesting that the terms of Righthaven’s SSA with MediaNews Group were similar to its flawed agreement with Stephens Media. Though the agreement had yet to be released in any of Righthaven’s Colorado cases, Judge Kane wrote “Should I find that I lack subject matter jurisdiction over Righthaven’s claim of copyright infringement, it is likely that I will be required to dismiss all pending actions.” Righthaven LLC v. Rozzell, No. 1:11-cv-00133-JLK (D. Colo. 2011) and Righthaven LLC v. Wolf, No. 1:11-cv-00830-JLK, 2011 WL 4469956 (D. Colo. 2011)

Nevada Courts Rule on Standing Defect Allegations

Two months after ordering the release of the SSA, the federal district court in Nevada dismissed Righthaven’s claim against Democratic Underground for lack of standing on June 14, 2011, finding that the agreement failed to transfer the rights that would allow Righthaven to bring suit against websites copying portions of newspaper articles. Righthaven had sued the website after one of its forum users posted the first five sentences of an article about Nevada Republican Senate candidate Sharron Angle, and the EFF soon stepped in to represent the website. After reviewing the SAA and Copyright Act Section 106, Judge Hunt wrote that “the assignment of a bare right to sue is ineffectual because it is not one of the exclusive rights.” Because the agreement transferred only the bare right to sue, the court determined no transfer of substantive rights took place between the parties, concluding that “[i]n reality, Righthaven actually left the transaction with nothing more than a fabrication.” Righthaven LLC v. Democratic Underground LLC, No. 2:10-cv-01356-RLH-GWF (D. Nev. 2011)

Hunt also criticized the firm’s failure to include publisher Stephens Media in the Certificate of Interested Parties accompanying its complaints, suggesting that this constituted misrepresentation in the roughly 200 Righthaven cases filed in Nevada. Noting Stephens Media’s 50 percent share of litigation proceeds, Hunt ordered Righthaven to show cause why it should not be sanctioned for trying to “manufacture standing,” writing that for Righthaven to bring enforcement suits under its current copyright ownership status was “flagrantly false, to the point the claim is disingenuous if not outright deceitful.” A sanction of $5,000 was imposed on the firm in July. Righthaven LLC v. Democratic Underground LLC, 791 F.Supp.2d 968 (D. Nev. 2011)

Democratic Underground’s holding had a domino effect on the firm’s other Nevada cases, and in the following weeks many of its claims were dismissed for standing defects. On June 20, 2011, less than a week after Democratic Underground’s resolution, the Nevada District Court dismissed Righthaven’s claims in Righthaven LLC v. Hoehn for lack of standing. The case had been filed in January 2011, after the defendant Wayne Hoehn posted a comment to a website in which he reproduced the entirety of a Review-Journal article. Relying on Judge Hunt’s characterization of the SAA in Democratic Underground as creating “only an illusory right to exploit or profit from the work,” Judge Philip M. Pro granted the defendant’s motion to dismiss. Two months after dismissing the suit, Judge Pro ordered Righthaven to pay $35,045 in attorneys’ fees. Other district court cases reached to the same result, and Righthaven saw its complaints dismissed in Righthaven LLC v. DiBiase in June 2011 and Righthaven LLC v. Mostofi in July 2011. Righthaven LLC v. Democratic Underground LLC No. 2:10-cv-01356-RLH-GWF (D. Nev. 2011) and Righthaven LLC v. Hoehn, No. 2:11-cv-00050-PMP-RJJ (D. Nev. 2011)

Fair Use Defense Recognized for Reproduction of Entire Articles

Judge Pro also held in Hoehn that even if standing to bring the suit did exist, the defendant’s posting of the entire article was protected by “fair use” under the Copyright Act, 17 U.S.C. § 107 et seq. To determine fair use, a court looks at four factors surrounding a defendant’s use of copyrighted content, including the nature of the work, the purpose and character of the use, the proportion of the work used, and the use’s effect on the potential market for the copyrighted work. Determining that the defendant’s use was noncommercial because it was posted in the context of an online discussion, the court relied on 9th Circuit U.S. Court of Appeals precedent in A&M Records Inc. v. Napster Inc. to hold that while the appropriation of an entire work weighs against fair use, “wholesale copying does not preclude a finding of fair use.” The court dismissed Righthaven’s complaint for failure to show actual harm to the newspaper’s market, holding that Hoehn’s noncommercial use fit under a fair use exception. Righthaven LLC v. Hoehn, No. 2:11-cv-00050-PMP-RJJ (D. Nev. 2011) and A&M Records Inc. v. Napster Inc., 239 F.3d 1004 (9th Cir. 2001)

This decision was the second to hold that reposting an entire Review-Journal article was protected under fair use. Oregon-based nonprofit Center for Intercultural Organizing (CIO) prevailed on this defense in March 2011 following reproduction of an article on the deportation of illegal immigrants. Judge Mahan raised the fair use question without input from CIO attorneys, and found that the nonprofit used the fact-based story in an informative and educational way while operating in an entirely different market from the newspaper. Mahan also noted that the copyright was removed from the original context in which it was used by the Review-Journal, according it less protection because Righthaven used the copyright to support a lawsuit. “The Copyright Act is important. The First Amendment is important. You’d be remiss if you didn’t run it up the flagpole,” Judge Mahan told an attorney representing Righthaven, according to a March 18 story in the Las Vegas Sun. Fair use was previously found in the October 2010 case of Righthaven LLC v. Realty One Group Inc., which involved reproduction of a smaller portion of a Review-Journal article. (For a full discussion of the Realty One Group case, see “Law Firm’s Approach to Protecting News Media Copyrights Raises Eyebrows” in the Fall 2010 Silha Bulletin.) Righthaven LLC v. Jama & Ctr. for Intercultural Org, 2:10-CV-1322-JCM-LRL (D.Nev. 2011)

Unsuccessful SAA Amendments and Lack of Standing in Colorado

The unfavorable rulings plagued Righthaven throughout the summer and into the fall. The firm attempted to correct the defects in its transfer agreement and secure the exclusive rights to the stories following the unsealing of the SAA. However, courts regarded this “amended agreement” as impermissible. The same conclusion was reached by Judge Mahan in Righthaven LLC v. Pahrump Life, which held that such amendments could not be permitted to cure defects in facts of cases. Righthaven LLC v. Pahrump Life, No. 2:10-CV-1575 JCM (D. Nev. 2011)

Righthaven’s losing streak reached its Colorado market in late September when Judge Kane ruled that it did not have standing to sue the blogger defendant targeted in Righthaven LLC v. Wolf. Characterizing Righthaven’s operation as an “enforcement dragnet,” Judge Kane extended to the U.S. District Court for the District of Colorado the results reached by District of Nevada courts and lead the Denver Post itself to speculate that the ruling would have a “domino effect” on the firm’s other cases in Colorado. The court awarded the defendant costs and attorney’s fees, hoping to “discourage the abuse of statutory remedies for copyright infringement.” Righthaven LLC v. Wolf, 1:11-cv-00830-JLK, 2011 WL 4469956 (D. Colo. 2011)

Righthaven’s Uncertain Future

With its business model’s viability threatened by the precedent-setting rulings in the U.S. Court of Appeals for the 9th and 10th Circuits, the company’s future is uncertain. The firm’s efforts to expand into the eastern U.S. were met with a petition filed in South Carolina Supreme Court on June 27 accusing the firm of engaging in the unauthorized practice of law. The plaintiff group filed a complaint alleging that Righthaven’s copyright litigation was “a copyright-specific form of a scheme that has been rejected, so far as Petitioners can determine, by every court that has ever examined it[.]” A copy of plaintiffs’ petition for jurisdiction in Citizens Against Litigation Abuse, Inc. v. Righthaven LLC is available at http://bloglawblog.com/docs/CALA_v_Righthaven_Supreme_Court_Petition.pdf.

Further adding to company’s problems was the news that John Paton, MediaNews Group’s new chief executive, allowed the Denver Post publisher’s contract with Righthaven to expire at the end of September 2011. Replacing outgoing Chief Executive Dean Singleton, Paton called the agreement “a dumb idea from the start” in a September 8 telephone interview with technology magazine Wired.com’s Threat Level blog. “The idea that you would hire someone on an — essentially — success fee to run around and sue people at will… does not reflect how news is created and disseminated in the modern world.”

Righthaven appealed the orders recognizing fair use in Center for Intercultural Organizing, Realty One Group LLC and Hoehn, and successfully stayed the $34,045.50 attorneys’ fees award in Hoehn. In the order granting the stay, however, the U.S. District Court for the District of Nevada noted that Righthaven “does not enjoy a reasonable probability of success on the merits of its appeal.” Bringing the company’s financial solvency into question, Righthaven’s attorney Shawn Mangano wrote in the emergency motion requesting the stay that “Righthaven faces the very real threat of being forced out of business or being forced to seek protection through bankruptcy” if made to pay the fees. The stay was granted on September 28, 2011, 10 days after one of the firm’s creditors moved to seize its assets.

Righthaven refiled the request for a stay of enforcement on October 9, turning to the U.S. Court of Appeals for the 9th Circuit rather than the district court. Unable to secure a $34,045 bond to secure the judgment, the company argued that “[d]ue to the pending appeals and the stay of certain active litigation matters, Righthaven’s operating capital is being utilized to service its monthly operating expenses.” This request was denied on October 19, and on November 1, the U.S. District Court of the District of Nevada directed the U.S. Marshal for the District of Nevada to use “reasonable force” to seize $63,720.80, the amount of the $34,045.50 judgment with additional attorney fees.

Righthaven largely stopped filing new lawsuits pending resolution of the Hoehn case and its other appeals. Though those cases rejected Righthaven’s efforts to establish retroactive standing, neither determined if its amended agreement could confer standing prospectively. The company refiled Righthaven v. Mostofi on July 13, an action previously dismissed due to a standing defect. Though the complaint alleges that the amended agreement assigns sufficient rights to grant standing, David A. Tashroudian, writing for Law Technology News, notes that the suit still targets conduct predating the amended agreement, making it vulnerable to the same grounds for dismissal as Democratic Underground and Hoehn. Tashroudian suggests that the move shows the firm’s adherence to its established operation, writing that it makes no sense for a company with such a profitable business model “to capitulate because of a few adverse decisions — decisions based on flaws that could be remedied by the clarification and the amended SAA.” Righthaven v. Mostofi, 2:11-cv-01160-LRH-CWH (Mostofi II) (D. Nev. 2011)

Despite many legal and business setbacks, Righthaven’s CEO Steve Gibson remains committed to the cause underlying the firm’s efforts. “Is this really a fight over hyper-technicalities over particular language aspects of this private-party contractual documentation, or is this really a fight over whether the blogosphere should be able to take people’s creative works and reproduce it?” he said in an interview with Wired.com’s Threat Level blog in September 2011.

Changing Attitudes in Online News Media Copyright Enforcement

With the feasibility of outsourcing copyright litigation seemingly foreclosed, some industry participants remain confident that news media and journalists may continue to thrive in the digital age. John Paton has been blogging about MediaNews Group’s efforts to preserve free expression, calling for an end to paywalls, and extolling the value of open-sharing of content. Rather than continuing to pursue litigation, the EFF reports that MediaNews Group joined up with local news and information provider the Journal Register Company to form Digital First Media, an entity devoted to ensuring that journalism survives and finds new ways to harness the Internet to inform the public. Policing websites facilitating copyright infringement is unlikely to end, however, as the FBI remains committed to its Operation In Our Sites anti-piracy and counterfeiting initiative, which has seized 150 domains according to a November 28, 2011 Department of Justice press release. In addition, a powerful U.S. House of Representatives bill introduced by Rep. Lamar Smith (R-Texas), the “Stop Online Piracy Act,” H.R.3261, would allow law enforcement to shut down websites having “only limited purpose or use other than” copyright infringement, potentially providing another protection avenue for news media.

– Mikel J. Sporer
Silha Research Assistant