Summary:

Righthaven founded its controversial copyright-enforcement business by hoping to collect money from websites that copied newspaper content,…

Steve Gibson, CEO, Righthaven

Righthaven founded its controversial copyright-enforcement business by hoping to collect money from websites that copied newspaper content, several thousand dollars at a time. But it looks like money is about to start flowing out of Righthaven’s pockets, not into them. Today, the judge in charge of the company’s lawsuit against the Democratic Underground has ordered Righthaven to pay $5,000 for not disclosing the fact that it was splitting its revenues 50/50 with Stephens Media, owner of the Las Vegas Review-Journal.

A quick recap: Righthaven has filed more than 270 copyright lawsuits against various blogs and websites, claiming that they illegally copied material from The Denver Post and the Las Vegas Review-Journal. More than 100 websites have reached confidential settlements, but dozens of others have pushed back. None have pushed harder than Democratic Underground (DU), a liberal political news site which acquired pro bono counsel from Fenwick & West and the Electronic Frontier Foundation. U.S. District Judge Roger Hunt, who is overseeing the DU case, ultimately ordered Righthaven to reveal its contract with Stephens Media; and two weeks ago, Hunt ruled that Righthaven didn’t have standing to file suit at all.

He also ordered Righthaven to explain why it shouldn’t be sanctioned for violating a local Nevada litigation rule that requires it to disclose any party with a significant financial interest in the lawsuit. Stephens Media stood to gain 50% from any lawsuit Righthaven filed over its copyrights, but that wasn’t disclosed until the contract was unsealed–several months after the suit was filed.

Righthaven explained its oversight by essentially saying it was an honest mistake by two attorneys who no longer work with Righthaven. Judge Hunt didn’t accept that excuse, saying that it was Righthaven CEO Steve Gibson who created the contract, signed off on some disclosures, and guided the entire Righthaven copyright-enforcement campaign.

A transcript of the sanctions hearing isn’t yet available, but Steve Green of the Las Vegas Sun reported from the hearing this morning.

After the hearing, Righthaven lawyer Shawn Mangano told the Sun that despite the relatively light sanction, Righthaven is considering appealing Hunt’s decision.

When the transcript does come out, it’s going to show that the lack of disclosure wasn’t the only thing that Hunt was upset about. Hunt kicked off the hearing by saying: “In the court’s view, the arrangement between Righthaven and Stephens Media is nothing more, nor less, than a law firm – which incidentally I don’t think is licensed to practice law in this state – with a contingent fee agreement masquerading as a company.”

In a separate case that Righthaven lost, it has been ordered to pay $3,815 in legal fees by July 25. And in the Hoehn case against an online commenter–which Righthaven also lost–defense attorneys are asking for more than $30,000. The Democratic Underground has indicated it will also seek legal fees, and the demand in that heavily litigated case could easily be six figures.

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