Warner Bros. Can't Escape Hotfile's Claim of Abusing Anti-Piracy Tool

Hotfile logo - H 2012

Hotfile logo - H 2012

Late last month, the MPAA took credit for a massive legal win: The film industry's trade association reported that a federal judge in Florida had found that Hotfile and its leader Anton Titov had been found "liable for copyright infringement." The MPAA said it was the first such ruling against a cyberlocker.

While true, a look at the 99-page ruling that has finally been released presents a little more nuance. To be sure, the ruling is still a win for the MPAA. U.S. District Judge Kathleen Williams says "the extent of infringement by Hotfile's users was staggering," and goes through a meticulous breakdown of why Hotfile, one of the top 100 trafficked sites in the world, doesn't qualify for safe harbor from the studios' copyright claims. But the judge also says that summary judgment on the issue of Hotfile's liability for inducement and contributory infringement is "inappropriate" at the moment, denying the studios' motion there. Hotfile is only deemed vicariously liable for the actions of its users.

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What's more, Warner Bros. has suffered a setback.

After the lawsuit was filed, Hotfile hit back with a counterclaim alleging that the studio abused its anti-piracy tool and made misrepresentations under the Digital Millennium Copyright Act. Rejecting Warners' summary judgment motion, Judge Williams writes, "there is sufficient evidence in the record to suggest that Warner intentionally targeted files it knew it had no right to remove."

Warners is facing claim of violating section 512(f) of the DMCA, which doesn't automatically penalize a copyright holder for issuing a defective takedown notice, but can if a claim of infringement is false and the sender of the notice had knowledge of that fact. Courts have grappled with how to apply the standards, and here, Judge Williams focuses on the studio's "subjective knowledge," and can't immediately accept its argument that "mistakes should be excused," saying that motive and how it used Hotfile's system will be presented to a jury.

That's only small solace to Hotfile, however.

The cyberlocker is ruled to have fallen well short of implementing a reasonable repeat infringer policy on its network, that despite receiving eight million notices for five million users, it had only terminated the accounts of 43 before the lawsuit was filed.

"Aside from infringement notices," the judge says, "Hotfile had no alternative method for preventing repeat infringers by its users."

Citing the "scale of the activity," the judge adds that no matter what Hotfile said publicly about its policies, Hotfile didn't address the problem. For that reason alone, Hotfile isn't eligible for DMCA safe harbor, but the judge rubs salt in the wound by also faulting the company for not moving fast enough nor obeying all the protocol in registering a DMCA agent to respond to infringement notices. Further, the judge says that Hotfile may be deemed as possessing "red flag knowledge" after receiving a significant number of DMCA notices from studios and failing to investigate and having communications with users alluding to the nature of infringing files.

And yet, even after saying there was "some evidence suggestive of a deliberate design to facilitate infringement" through Hotfile's various incentive programs, Judge Williams says, "a number of questions remain regarding Hotfile's intent (actual or imputed) to foster infringement and the capacity for and scope of noninfringing uses of Hotfile's system."

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The judge says that "while Hotfile may have a difficult time explaining its 'innocence' to a jury," there needs to be further fact-finding about Hotfile's knowledge, intentions and actions in relation to the piracy of its users. Thus, she won't make a summary judgment on inducement and contributory infringement. On the other hand, she will on vicarious infringement, which focuses on how Hotfile enabled piracy. The judge says Hotfile exercised control over its system and that it undeniably benefited financially from infringements.

The judge says that it is "clear" that prior to the lawsuit, Hotfile "failed to properly exercise its control in light of the number of users who were blatantly infringing and the estimates of the Studios' experts regarding the prevelance of protected content available for download."

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