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Hollywood Studios Win Massive Hotfile Lawsuit

According to the MPAA, this is the first time that a US court has ruled that a cyberlocker can be held liable for copyright infringement.

The Hollywood Sign - Los Angeles - H 2011
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A Florida federal judge has handed down a huge ruling, determining that Hotfile is liable for copyright infringement. 

The lawsuit led by the Motion Picture Association of America on behalf of its member studios was a path-breaking and controversial one when it was filed in February, 2011. It represented an attempted strike against the burgeoning popularity of cyberlockers. The particular one in question was alleged to be storing thousands of copyrighted movies and television shows. During the lawsuit, Hotfile was charged with enabling copyright infringement "on a mindboggling scale," and deemed "more egregious" than Napster, Grokster and Limewire and "indistinguishable" from Megaupload.

RELATED: Read the MPAA's Big Lawsuit Against 'Cyberlocking' Site Hotfile 

What made the case one to watch from a legal standpoint was the argument by Hotfile, one of the top 100 trafficked sites in the world, that it had safe harbor from copyright liability and had no vicarious liability for what users were doing. The dispute gave U.S. District Judge Kathleen Williams an opportunity to address the kinds of questions that have come up in the Supreme Court's Grokster decision, as well as Viacom's dispute with YouTube and Universal Music's dispute with Veoh. Namely, what kind of knowledge and control is necessary before an Internet Service Provider has a legal duty to clean up copyright infringements on a network.

Unfortunately, the ruling hasn't been made public. It is pending redaction, and we hear that Judge Williams will be releasing it in 14 days. UPDATE: Here it is.

In the meantime, the MPAA is cheering the outcome.

 “This decision sends a clear signal that businesses like Hotfile that are built on a foundation of stolen works will be held accountable for the damage they do both to the hardworking people in the creative industries and to a secure, legitimate internet,” said Senator Chris Dodd, chairman and CEO of the MPAA. “We applaud the court for recognizing that Hotfile was not simply a storage locker, but an entire business model built on mass distribution of stolen content. Today’s decision is a victory for all of the men and women who work hard to create our favorite movies and TV shows, and it’s a victory for audiences who deserve to feel confident that the content they’re watching online is high quality, legitimate and secure.”

What led the MPAA to target Hotfile of all cyberlockers is up for debate, but our guess is that it had something to do with Anton Titov, a foreign national residing in Florida who is a co-defendant in the case for running Hotfile. Unlike many other cloud-storage cyberlockers, here was one being controlled on American soil. 

In asking for summary judgment, the MPAA also said that "no other early pirate services had the temerity actually to pay its users to upload infringing content," a reference to Hotfile's "Affiliates" program.

During the case, Titov put up a fight.

He not only vigorously contested the massive copyright lawsuit by pointing to the safe harbor provisions of the Digital Millennium Copyright Act, but he filed counterclaims against Warner Bros. for allegedly abusing his site's anti-piracy tool. The basis of the allegation was that the studio was given a "Special Rightsholder Account" that enabled it to delete or disable files that were believed to be infringing, and that Warners had "betrayed that trust" by causing the deletion of thousands of files "when in fact Warner had no right to do so."

But evidently, Judge Williams saw enough in the MPAA's allegations to award them a victory on summary judgment. The judge also found Titov personally liable, according to the MPAA, and rejected the defendant's defense under the DMCA. 

According to a brief excerpt made available, the judge found that "Hotfile was successful in large part because it did not control infringement activity on its system."

That certainly raises some provocative issues. We'll have more when the ruling is released.

E-mail: Eriq.Gardner@THR.com
Twitter: @eriqgardner