Copyright owners have tried a variety of options over the years to combat online piracy, including direct legal action
More recently, we’ve seen lawsuits against people who allegedly downloaded and shared pirated content, but pirated content operators and developers have also been sued.
A group of independent film companies based in the US have expanded their legal reach by pursuing third-party agents. The makers of movies like Hellboy, Hunter Killer, Rambo V: Last Blood, and The Hitman’s Bodyguard have targeted VPN services and their hosting companies.
This legal campaign has already achieved several successes. Earlier this year, the filmmakers won $14 million in damages in their case against VPN provider LiquidVPN. Other companies including Torguard, VPN Unlimited and VPN.ht have settled their disputes and agreed to block torrent traffic on US servers.
Hosting companies have not been spared either. Sharktech, for example, initially resisted, but later agreed to populate and block prominent pirate sites such as Pirate Bay, YTS, and RARBG.
$4.2 million in damages
Another win was added to the list last week. In a federal court in Colorado, United States District Judge R. Brooke Jackson entered judgment against defunct hosting company MICFO, awarding it $4,200,000 in statutory damages for contributory copyright infringement.
The verdict is a clear victory for the film company Millennium and its subsidiaries. For MICFO, which is no longer operational, it only adds to its problems.
In addition to this civil lawsuit, MICFO is at the center of criminal proceedings. The hosting company and its owner were indicted by a grand jury in Charleston, South Carolina in 2019, accused of a plan to fraudulently obtain IP addresses from ARIN.
These IP addresses were sold to big companies like Amazon and Saudi Telecom for millions of dollars. MICFO also used the IP addresses to serve its own customers, including VPN companies Hide My Ass, NordVPN, and Proton.
Ignored piracy notices
The filmmakers accused the hosting company of turning a blind eye to piracy activities allegedly committed by its VPN customers’ subscribers. In practice, this meant that none of the piracy notifications sent were forwarded.
“The defendant took no action against those customers in response to the notices because it was motivated to receive subscription monies from the customers rather than terminate the service,” Judge Jackson wrote in his order.
MICFO was found liable by default for copyright infringement and, after hearing evidence, the court ruled that the maximum statutory damages of $150,000 per work are appropriate. With 28 movies in play, the grand total is $4,200,000.
Judge Jackson argued that these damages were “more than reasonable,” since the film companies calculated that the actual damage suffered was much greater.
“The court finds that plaintiffs’ request for maximum statutory damages of $4,200,000 is more than reasonable given the plaintiffs’ nearly $7,000,000 in lost revenue,” the order reads.
MICFO is no longer operational. The company and its CEO pleaded guilty to the criminal wire fraud case and will soon be convicted. Interestingly, that seems to be good news for the filmmakers, as the US government has seized nearly $17 million in funds and assets in the case.
Some of the confiscated property could be used to pay damages. And indeed, Judge Jackson’s order makes it clear that plaintiffs can immediately enforce the judgment to seek a refund from the South Carolina District Court.
The filmmakers are also assigned any third-party breach of contract claims that the hosting company has against its customers. This includes any claims against the VPN companies it serves.
MICFO’s terms of service oblige its customers to hold the hosting provider harmless in the event of liability claims. This means the filmmakers can use this as a stick to track the hosting company’s VPN clients.
Further legal action
Over the past several years, Millennium Funding and related film companies have compiled a track record of gaining leverage in court that can then be used on related matters, both in and out of court. It wouldn’t be a big surprise if this pattern were to repeat itself.
The only active VPN case we are aware of is against VPN provider PIA, which recently dismissed direct infringement claims with a motion to dismiss. However, the indirect and legal claims for copyright infringement remain in force.
Following the partial termination, the filmmakers filed an expanded complaint against PIA, and the case is ongoing.
A copy of the monetary order against MICFO, issued by US District Judge R. Brooke Jackson, is available here (pdf). The corresponding findings and conclusions can be found here (pdf)