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Cyberlocking Site Hotfile Responds to Big MPAA Lawsuit

A lawsuit by movie studios against Hotfile stands as a test case of the copyright liability of so-called "cyberlockers" online. We now take a look at how Hotfile, one of the top 100 sites on the Internet, intends to defend itself from allegations that it has built an "entire business model" out of facilitating the infringements of movies, television shows, and music.

As we've reported, cyberlockers are file-hosting websites that give users personal storage room for large files. The websites have legitimate uses but also are an increasingly popular pathway for file-sharers to store and share copyrighted material.

In February, the MPAA spearheaded a lawsuit against Hotfile and claimed the massively popular site was "responsible for the theft of thousands of MPAA member companies' movies and TV shows - including movies still playing in theaters - many of which are stolen repeatedly, thousands of times a day, every single day."

At the time the lawsuit was filed, we speculated that the MPAA had picked its target carefully. Hotfile is domiciled in Florida instead of overseas, and in a previous lawsuit, the defendant has shown a willingness to settle instead of fight. This time, Hotfile isn't backing down. Last week, the company filed a motion to dismiss the movie studios' claims.

Hotfile reaches back to the famed 1984 Supreme Court decision over Sony Betamax VCRs, saying that its storage services are capable of "substantial non-infringing uses," as well as defending itself with the copyright defense de rigueur. "The Studios do not deny that Hotfile scrupulously complies with the DMCA safe harbor provisions," says Hotfile in its memorandum to the court. "They nonetheless complain that they are 'left to play catch-up' because of the 'scale' and 'speed' of users' alleged infringement."

Much like what the 2nd Circuit will soon be examining in Viacom's lawsuit against Google/YouTube -- see here and here -- a big part of a Florida court's analysis will center on the minimum amount of knowledge that an ISP like Hotfile needs before having the legal obligation to take proactive steps to clean up their network of infringing material.

Cyberlockers -- and perhaps cloud computing networks, too -- pose an interesting challenge in this respect.

Hotfile, as it emphatically points out in its memorandum, doesn't allow its users to search for files. The lack of search capacity befits its explicit purpose of being: It only gives customers storage capacity, so these users can do things like back up their files or move files from one owned computer to another.

The movie studios see this as a sham. In the eyes of industry leaders, such as Paramount Pictures COO Fred Huntsberry, who has declared cyberlockers to be Hollywood's biggest threat, Hotfile is winking and nodding to other third parties, such as bloggers and other websites, which are more than happy to share "hotlinks" to pirated material hosted by Hotfile. Plus, Hotfile doesn't need a search engine. Google and other search giants index material from cyberlockers like Hotfile, Rapidshare and Megaupload, and so any individual who is looking for pirated material has a pretty good roadmap to get there.

But do nods and winks meet the legal definition of having intent to induce copyright infringement?

Hotfile says no.

Referring to the file-sharing company that lost at the U.S. Supreme Court, it writes, "In stark contrast to Grokster, the Studios have not alleged facts constituting 'clear expression' or 'other affirmative steps' to establish specific intent. Indeed, when stripped of their rhetoric, the allegations are entirely consistent with Hotfile being a bona fide web hosting service."

Perhaps sometime in discovery, the plaintiffs will find a smoking gun whereby co-defendant Hotfile CEO Anton Titov expresses some knowledge of how his service is being used by the mass public. Right now, the company is framing itself as an innocent, even if its technology pretty clearly is being used malevolently by others. But technologies don't commit crimes -- those behind the technology or those in front of the technology do. It's up to a court now to jump in and decide the gray areas separating the responsibilities of the former over the latter -- right from wrong.This will not be the last time this important issue comes up.