“You could be liable for $150k in penalties—settle instead for $20 per song”
Growing copyright cop Rightscorp hopes to be a profitable alternative to "six strikes."
Aurich Lawson / Thinkstock
Six years after the US recording industry stopped seeking money from file-sharers, a new company is now preparing technology that could flood the Internet with "hundreds of millions of notices" to alleged copyright infringers.
Rightscorp, the company behind the campaign, already sends out thousands of notices to users, while making big promises to investors—and not-so-subtle threats to Internet Service Providers. The company's whole strategy is based on telling ISPs that they're likely to face a high-stakes copyright lawsuit if they don't forward the notices that Rightscorp creates.
It works like this: users accused by Rightscorp are found via IP addresses appearing in BitTorrent download swarms. If ISPs agree to forward Rightscorp's notices—and an increasing number of them are doing so—the users get notices that they could be liable for $150,000 in damages. Unless, that is, they click on a provided link and agree to settle their case at a low, low price. Typically, it's $20 per song infringed.
Enlarge / Rightscorp COO Robert Steele
LinkedIn
To make itself the Internet's premier copyright traffic cop, Rightscorp needs the help of Internet service providers. Steele and other Rightscorp executives insist that ISPs will help them, not because they want to, but because they have to. The company believes ISPs are obligated to forward their notices under the Digital Millennium Copyright Act (DMCA) if they want the "safe harbor" against lawsuits offered by that law (though this is an interpretation not everyone agrees with).
Rightscorp is a small company, with just seven full-time employees, but it's growing fast. The company went public in October, and it reported its annual financial results a few months ago. It had revenue of $324,016 during 2013, up from less than $100,000 in 2012. Rightscorp is on pace to blow that record away again, having collected more than $188,000 in just the first quarter.
Since Rightscorp splits its settlement cash 50/50 with its clients, those numbers mean that Internet users paid up almost $750,000 last year over its notices. The company's two anchor clients are large music labels: BMG Rights Management and Warner Brothers accounted for 25 percent and seven percent of Rightscorp revenue, respectively.
Even with those marquee colleagues, it remains to be seen whether Rightscorp will be a business success. At this point, it's still way in the red, with its growing revenue outweighed by $2.1 million in expenses last year.
Looking at the big picture, attempts to enforce Internet copyrights on a wide scale haven't generally been profitable. (Remember Righthaven?) The one big exception has been "porn trolling," and critics say the quick payouts in that field are driven largely by consumers who are too embarrassed to fight back. Rightscorp has ruled out that line of work, promising it won't go into the business of enforcing copyrights on adult material. "We're holding big American corporations accountable for something they are participating in that hurts people," said Steele. "We need the moral high ground."
In any case, many Internet users who don't know the name of Rightscorp may be learning it soon. The company has settled with 72,000 users who they say broke copyright laws, and it sent notices to hundreds of thousands, if not millions, of others. On a recent call with investors, Rightscorp CEO Christopher Sabec said the company is working with more than 70 ISPs, including five in the top 10. (Rightscorp won't disclose which ones.)
Only a few of the Rightscorp notices have been published. Last summer, a Charter subscriber posted one of 14 notices he received on reddit. The notice accuses the user of downloading a track from Daft Punk's newly released album, and it read in part:
Your ISP has forwarded you this notice.In the same thread, another user said that Comcast forwards Rightscorp notices but removes the settlement details and links. If it's true that some big ISPs strip Rightscorp's notices down to their bare bones and then forward, Rightscorp may be overstating its case when it tells investors that five of the 10 largest ISPs "participate with us and our clients."
This is not spam. Your ISP account has been used to download, upload, or offer for upload copyrighted content in a manner that infringes on the rights of the copyright owner.
Your ISP service could be suspended if this matter is not resolved. You could be liable for up to $150,000 per infringement in civil penalties.
CSI: Repeat Infringers
Sabec and Steele co-founded the company in 2011. Sabec is an attorney with roots in the music industry. He worked with Dave Matthews and Hansen, and he later licensed intellectual property for the Jerry Garcia Estate.Steele, meanwhile, is the tech guy. During the first dot-com boom, he made software to put AOL's Mapquest and Microsoft Powerpoint on early handheld devices. At Rightscorp, he's taken that knowledge and used it to build a system that searches file-sharing networks that use BitTorrent software.
"Just like Google has a crawler, we have a crawler," Steele explained. "It crawls the entire world, all the file-sharing networks. It finds all of the different seeders that are giving away our clients' products for free, all day long."
The 'seeders' that Rightscorp is looking for are IP addresses uploading pieces of files through BitTorrent. It's not complicated to find those IP addresses, but only an ISP has the records that connect those addresses to actual Internet users.
IP addresses change over time, and that's where Rightscorp's "secret sauce" kicks in. Steele said his company has a proprietary method of identifying particular users, without ISP cooperation, even when IP addresses get rotated over time.
That, Steele said, allows them to finger "repeat infringers" with certainty. Faced with such evidence, the ISPs are legally obligated to take action, up to and including cutting off Internet access. Under the DMCA, that's what those companies must do if they want to keep their "safe harbor" from copyright lawsuits.
"We're showing the ISPs that they have this potential liability," said Steele. "Their shield for liability is contingent on terminating repeat infringers. Prior to our company, there was no way to hold them accountable."
Rightscorp creates notices for every infringement and sends the notices to every ISP. Some ISPs don't do Rightscorp's bidding, but an increasing number do agree to forward the notices. (It also isn't clear how many may alter the notices or offer a lower level of compliance than Rightscorp would like.)
Steele wouldn't go into details about the technical aspects of how Rightscorp is able to track users even as their IP addresses change. But he did say that when he let ISPs know that Rightscorp had such an ability, they didn't believe him. "I said, oh, well, just look them up," he said. "They know who they've assigned the IP addresses to every time. Once we showed them we could pierce that veil, they saw that's potentially opening them up to this liability.
"It's a bit like watching CSI," he said. "When someone has been shot, they want to connect a gun to a slug. They fire a new bullet and say, 'Judge, there's a 99 percent chance this bullet out of the gun matches the bullet in the victim.' We can show a 99 percent chance of the same subscriber account [over two IP addresses]."
Rightscorp puts the data about what repeat infringers are up to in a Web-based "dashboard," where it can be looked at by both Rightscorp's copyright owner clients as well as ISPs.
The dashboard is a "groundbreaking" technology, he says. Rightscorp has filed five patents around its system for locating and tracking repeat infringers.
The system puts Rightscorp ahead of other companies using threats or lawsuits to do large-scale copyright enforcement, Steele said. The ability to identify with certainty repeat infringers makes Rightscorp "the only company to have legal leverage with ISPs, compelling the ISP to deliver settlement notices by leveraging the DMCA," according to the company.
A not-so-subtle threat
Without ISPs going along with its program, Rightscorp doesn't have a business. Of course, US ISPs are already in the process of creating a system that deals with repeat infringers. The "six strikes" system run by the Center for Copyright Information has just released the first major report on its activity, revealing that 1.3 million copyright notices were sent out under that system.Rightscorp's financial filings suggest it believes that system won't be sufficient. "Graduated-response style interdiction is too costly to scale to any significant portion of total infringements and yields little or no results," the company stated in its annual financial statement. "ISPs have no incentive to participate in any meaningful way without copyright holders sending them notices."
The company relies on the threat of a lawsuit, but that seems unlikely to materialize. The "six strikes" regime itself suggests that ISPs and most entertainment companies are interested in détente, not brinksmanship.
Perhaps more important, as stated above, Rightscorp's interpretation of what the DMCA requires is open to debate. The law does require terminating the accounts of "repeat infringers," but there's a lot of leeway in how that might get done. Even the seemingly simple question of what constitutes a repeat infringer is open to interpretation.
So ISPs have to "adopt and reasonably implement" a policy for terminating accounts of repeat infringers. But the statute doesn't detail how that has to be done, explained Jonathan Band, a technology policy lawyer who helped draft parts of the DMCA.
"It could be you have in place a system of forwarding notices, or you could have something else," said Band. "You could just wait for three strikes and then terminate the account, although from a customer relations point of view that wouldn't be the smartest thing to do." Some universities that provide Internet service will terminate it after just one "strike," he noted.
The bigger question is, who's a repeat infringer?
"Do they have to be adjudicated as infringers [by a court]?" asked Band. "Or is it enough for there to be a claim of infringement? That's a big difference."
It's a big enough gap that copyright owners, for the most part, have decided not to gamble with high-stakes courtroom combat against ISPs. On the one hand, if a copyright holder beat down an ISP, entertainment companies could compel Internet providers to be tougher on infringing users. But if they lost, they could be in a worse situation, with ISPs taking an even more hands off approach.
It's also reasonable to assume that big ISPs wouldn't likely back down without a fight. Terminating a user account on a free website like YouTube is one thing; forcing out a subscriber who may be paying more than $150 each month for a bundle of TV and Internet service is quite another. A court ruling that leaned even slightly in the direction of compelling punishment of those high-value subscribers would get the full attention of ISP legal departments and budgets.
A decade-old precedent
"If there are a bunch of notices about someone being an infringer, that could be enough to trigger the obligation to do something about their account," said Band. "If [copyright owners] say, 'We sent you three notices that this guy was a bad guy, and you didn't do anything,' then they could argue that whatever policy you had wasn't a good policy."
RIAA v. Verizon is more than a decade old now, and it's telling that there aren't more examples of copyright holders pushing courts to detail ISP obligations in terms of protecting copyrights. In a way, the "six strikes" system that's now going into effect is a compromise, born of the fact that neither side has an incentive to push this issue to a final decision. There's no crystal clear answer.
Future ambitions
That murky legal landscape hasn't stopped both ISPs and content industries from thriving. Yet it's also made room for one attempt after another at leveraging copyright law into for-profit Internet policing schemes. Rightscorp is merely the latest incarnation.In the future, the company hopes to get more ISPs to comply—and it will expect more of those that are already cooperating, said Steele. Ultimately, Rightscorp is hoping for a scenario in which the repeat infringers it identifies aren't just notified by e-mail. Instead, Steele hopes to see those users re-directed to a Rightscorp notice right at the moment they open their Web browsers.
"You wouldn't be able to get around the re-direct page, and you'd have to pay a fine to return to browsing," he explained. The company is in discussions with four ISPs about imposing such a re-direct page, according to Steele. But the details about which ISPs cooperate with Rightscorp, and how much they cooperate, is a secret that the company guards closely.
The reality is, Rightscorp is a tiny company seeking to change the behavior of industry behemoths like Comcast and Verizon. And while it seeks to wield a "big stick" in the form of a potential copyright lawsuit, at the end of the day, it's the company's music industry customers who would have to take such a bold step.
In the meantime, Steele doesn't want his company to appear antagonistic. Instead, he paints an optimistic picture that more ISPs will be coming to his side voluntarily.
"Every month we get more ISPs that are forwarding the notices," he said. "It's a unique business model, but it works. We believe five years from now, worldwide, this is how file sharing will be remediated. And we'll be the company that does it, around the world."
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