17 June 2011

Righthaven Suffers Potential Death Blow To Business Model

In a post yesterday, Technology and Marketing Law professor Eric Goldman summarizes a judge's June 14, 2011 order dealing a major defeat to Righthaven, a Internet copyright violation litigation company with the parent companies of the Denver Post and Las Vegas Review-Journal as major clients that has employed a very aggressive litigation strategy against bloggers who quote newspaper reports in their posts. 

An ongoing dispute over a cease and desist letter sent by Righthaven on behalf of the owner of the Denver Post to Colorado Pols, asserting rights in excess of those legally available to the newspapers under copyright law and largely complied with by the Colorado Pols blog to the detriment of the newspapers has earned Righthaven infamy in Colorado's political blogosphere.

The judge found that Righthaven didn't own the copyrights it claimed to be suing under its contract with the media company, and according to Goldman that judge ruled "that Righthaven can't fix the existing contract defect for the existing litigation because standing is measured when the complaint is filed. This could lead to dismissal of all pending Review-Journal litigation and, depending on the exact wording of the MediaNews contract, possibly the Denver Post litigation as well."

The ruling is a blow to Righthaven's entire business model:

"If Righthaven can't get this opinion reversed on appeal and other judges defer to this opinion on the standing question (which I think it likely), Righthaven may be back at square one with its entire business. Thus, I assume Righthaven will appeal this decision. However, this is a pretty well-constructed opinion, so Righthaven will have an uphill battle overturning it on appeal."

The judge also severely criticized Righthaven's litigation conduct and is likely to impose sanctions:

* the judge rejects Righthaven's basic substantive argument as "flagrantly false—to the point that the claim is disingenuous, if not outright deceitful."
* . . . "the Court believes that Righthaven has made multiple inaccurate and likely dishonest statements to the Court."
* the judge then goes on to lambaste Righthaven for not identifying [Las Vegas Review-Journal Owner] Stephens Media as an interested party in the lawsuit, calling that omission "brazen" and "egregious."

[As the order explains: "not only did Righthaven fail to identify Stephens Media as an interested party in this suit, the Court believes that Righthaven failed to disclose Stephens Media as an interested party in any of its approximately 200 cases filed in this District. Accordingly, the Court orders Righthaven to show cause, in writing, no later than two (2) weeks from the date of this order, why it should not be sanctioned for this flagrant misrepresentation to the Court."]

The judge requires Righthaven to explain why the judge should not order sanctions. Given the tenor of this opinion, it seems like a sanctions order is inevitable. The opinion also hints that Democratic Underground may get its attorneys' fees. All told, this case is probably going to cost Righthaven dearly. And after a ruling like this, Righthaven's entire enterprise is on the ropes.

Since standing goes to the subject-matter jurisdiction of the federal courts in which Righthaven has already obtained judgments and settlements resulting from federal court litigation, it is not impossible that litigation to set aside those ruling and even to obtain restitution of the settlements paid based on litigation premised on misrepresentations to the Courts by Righthaven could be brought successfully if this judge's order survives attempts to set it aside on appeal.

The Electronic Frontier Foundation, which provided a legal defense to the Democratic Underground also noted that:

"The Court permitted Democratic Underground's counterclaim to continue against Stephens Media -- the publisher of the Review Journal -- allowing Democratic Underground to show that it did nothing wrong in allowing a user to post a five-sentence excerpt of a 50-sentence article."

More details are found in my diary at Colorado Pols on the subject and the comments therein.

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