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U.K. Judge Denies Hollywood's Demand for Money From File-Sharing Site's Operators

Ruling says that to order proceeds of copyright infringement handed over could lead to a "chilling effect on innovation and creativity."

"The King's Speech"
The Weinstein Co.
The King's Speech

Hollywood studios were handed a courtroom loss Tuesday when the U.K. High Court denied an attempt to recover money derived from copyright infringement from the operators of Newzbin2.

The indexing website, which provided download links to popular movies and music, has been a Hollywood target for years. At its height, Newzbin2 was reported by one studio executive to be pointing some 700,000 users to 75 different versions of The King's Speech. The studios attributed "several hundreds of millions of pounds a year" in lost revenue to the site.

In March 2010, studios were able to obtain a ruling that ordered the website to remove pirated material. Then the following year came legal decisions that ordered British Telecom and Sky to block access to the website. In late November, the website shuttered.

But the win streak ended Tuesday when a judge decided that it was too much to issue proprietary injunctions against several individuals and companies alleged to have links to Newzbin2.

In the ruling, Justice Guy Richard Newey presented the scenario of a landowner whose ground was trespassed.

"Suppose, say, that a market trader sells infringing DVDs, among other goods, from a stall he has set up on someone else's land without consent," he wrote.

Can the owner of the land make a proprietary claim to the proceeds of the trading?

The judge shook his head, adding, "There is no evident reason why the owner of the copyright in the DVDs should be in a better position in this respect."

Hollywood studios including 20th Century Fox, Universal, Warner Bros., Paramount, Disney and Columbia Pictures were represented by attorney Richard Spearman.

Newey was worried about bad precedent.

"On Mr. Spearman's case, a copyright owner's claim would not even be limited to the infringer's profits," he wrote. "In principle, the entire proceeds of sale would be held on trust for the copyright owner. That might both be unfair and stultify enterprise."

The judge said the threat of having to pay over gross receipts would be disastrous not only for the infringer but also for others.

"A person might be deterred from pursuing an activity if he perceived there to be even a small risk that the activity would involve a breach of copyright or other intellectual property rights … that could have a chilling effect on innovation and creativity."

Here is the full ruling.

A spokesperson for the Motion Picture Association gave The Hollywood Reporter this statement:

"Newzbin has been found by the High Court to be an illegal site. The operators of the site have made a large amount of money from the unauthorized use of other peoples’ creative works. We made it clear that we would take further action against the individuals in the hope that the site would close and welcome the fact that this has finally happened. Intellectual property is a property right that creates value and stimulates investment and growth. Recognition and protection of this right underpins innovation. The court has already ordered that assets that have been acquired with the proceeds of infringement should be frozen pending a trial later this year.

"The judge’s decision applies to one particular point in the case. We do believe that the decision does not take the specific facts of this case into account, and we are seeking leave to appeal. The only innovation and creativity Newzbin has shown is the way in which the site has operated outside the law to exploit what others have taken the time and money to create.”

E-mail: eriq.gardner@thr.com; Twitter: @eriqgardner