Filers Beware: No Expedited Discovery in Copyright Suits

Litigation tactics employed by frequent filers of copyright infringement suits may face heavy criticism in light of a recent ruling by a federal judge in New Jersey. Prejudice to defendants and the administration of justice outweigh the interest of plaintiff Strike 3 Holdings in obtaining expedited discovery in a group of piracy suits against John Doe defendants, U.S. Magistrate Judge Joel Schneider of the District of New Jersey decided. Although expedited discovery had been granted to Strike 3 and other repeat copyright litigants in the past, new case law has been published and the court has learned of new material information that was not previously presented, Magistrate Schneider said. Strike 3 Holdings LLC v. Doe, 18-2674.

Expedited discovery has been granted under prior cases with similar circumstances, but parties filing those cases should know they can no longer expect business as usual, Magistrate Schneider said. The court "sees no reason why it should be consciously wrong today because it was unconsciously wrong yesterday," the magistrate noted.

The lawsuits at issue allege John Doe defendants illegally downloaded adult films owned by Strike 3 Holdings. Since it began filing copyright suits in 2017, Strike 3 has filed over 3,000 complaints nationwide. As of this past summer, it had filed 311 cases in New Jersey, but more than half of the cases, 161, were dismissed without prejudice for various reasons.

Magistrate Schneider said he was prompted to take a closer look at Strike 3's tactics after U.S. District Judge Royce Lamberth of the District of Columbia issued a blistering opinion against that company in December 2018. In denying Strike 3's motion for expedited discovery, District Judge Lamberth called it a "copyright troll," using technology that is "famously flawed," of preying on "low-hanging fruit" and flooding the courthouse "with lawsuits smacking of extortion." See, Strike 3 Holdings LLC v. John Doe, 351 F. Supp.3d 160 (D.D.C. 2018), on appeal, 18-7188 (Dec. 19, 2018).

After conducting his own review, Magistrate Schneider found Strike 3's John Doe complaints name the unidentified IP subscriber as the defendant, even though the company admits it does not know who infringed its works. "Despite its admitted lack of knowledge of who downloaded its works, whether the subscriber lives at the identified address, and who lives at the address, Strike 3's complaints unequivocally aver in conclusory fashion that the listed subscriber to the identified IP address directly infringed its copyrights," the New Jersey federal magistrate wrote.

Strike 3 files John Doe complaints against unnamed parties linked to an IP address that the company says was connected to the BitTorrent file-sharing network, which allows users to download, copy and distribute videos. After filing the complaint, Strike 3 moves for expedited discovery on the Internet service provider associated with the IP address. After receiving the name of the subscriber associated with the IP address, Strike 3 either settles the case, dismisses it or amends the complaint to name the specific subscriber.

Magistrate Schneider concluded that, as pleaded, Strike 3's complaints were futile because they did not pass muster under Rule 12(b)(6) of the Federal Rules of Civil Procedure. And even if Strike 3 did plead a cognizable claim for infringement, the court would deny its requests for discovery, he said.

The magistrate noted that Strike 3 bases its complaints on unequivocal affirmative representations of alleged fact that it does not know to be true. In addition, its subpoenas are misleading and create too great of an opportunity for misidentification and its claim that expedited discovery is the only way to stop infringement of its works is incorrect, he said. He added that other means are available to stop infringement besides suing individual subscribers in thousands of John Doe complaints and that the deterrent effect of those suits is questionable.

In addition, substantial prejudice might inure to online subscribers who are misidentified and Strike 3 underestimates the substantial interest subscribers have in the constitutionally protected privacy of their subscription information.

Strike 3 argues its complaints pass muster because it is plausible the IP subscriber was the infringer, despite lack of knowledge of who downloaded the works. But Magistrate Schneider disagreed, citing Cobbler Nevada LLC v. Gonzales, 901 F.3d 1142 (9^th Cir. 2018), holding that a direct infringement claim based on a defendant's status as registered subscriber of an IP address failed, because that status alone "does not create a reasonable inference that he is also the infringer."

The New Jersey federal court also acknowledged that the ruling might make it harder for Strike 3 to identify infringers. "To the extent this is the price to pay to assure compliance with the applicable law, so be it. A legal remedy does not exist for every wrong, and it is unfortunately the case that sometimes the law has not yet caught up with advanced technology," the magistrate wrote.

John Atkin of The Atkin Firm in Morristown, NY, who represents Strike 3 alongside Los Angeles attorney Lincoln Bandlow, said he would appeal the ruling.

*****

Charles Toutant is a litigation writer for the New Jersey Law Journal an ALM sibling of Entertainment Law & Finance.