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Judge: Righthaven Has No Standing To File Lawsuits-Case Dismissed

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The saga of controversial copyright-enforcement company Righthaven may be slowly drawing to a close. A judge has dismissed its lawsuit against the Democratic Underground website, saying that the contract Righthaven struck with Stephens Media, owner of the Las Vegas Review-Journal, doesn’t give it the right to sue anyone. Righthaven has been “disingenuous, if not outright deceitful” in how it described its business dealings with Stephens Media, the judge wrote. It’s a loss that endangers many of the more than 200 copyright lawsuits the Righthaven has filed in the past year.

In his order, U.S. District Judge Roger Hunt accepted in full the argument put forward by Democratic Underground’s lawyers that it’s simply not allowed under copyright law for Stephens Media to transfer only the right to sue, while keeping the many other rights that come with a copyright grant. Righthaven and its owner, Steve Gibson, tried to make the argument that Stephens Media really only had a license to use the material, and that Righthaven did indeed own the entire copyright. But that argument has now fallen apart with this order.

“Critically, the [contract] expressly denies Righthaven any rights from future assignments… other than the bare right to bring and profit from copyright infringement actions,” writes Hunt. “Stephens Media retained all other rights. Even Righthaven’s right to sue is not absolute,” because under the agreement, Stephens Media has the right to put a stop to any lawsuit it doesn’t like.

Hunt also wrote that Righthaven’s failure to tell the court that Stephens Media is getting 50% of its litigation proceeds is a violation of Nevada’s local litigation rules. The failure to disclose Stephens Media’s interest in the lawsuits was only “the most factually brazen” of “multiple inaccurate and likely dishonest statements to the Court,” writes Hunt.

What this means:

»  Most of Righthaven’s lawsuits are going to fall apart. A judge has now ruled that every copyright transfer done under its original agreement is essentially worthless–they can’t be used to file lawsuits.

»  Righthaven did amend its agreement on May 9, 2011, and the court did not rule on whether the post-May 9 lawsuits are allowed. So those lawsuits could theoretically continue. But the judge wrote that he “expresses doubt that these seemingly cosmetic adjustments change the nature and practical effect of the [contract]. In other words, Righthaven is pursuing those cases at its own risk.

»  In all likelihood this ruling will be an insurmountable obstacle for the 57 lawsuits Righthaven filed in Colorado, as well. A judge in that state put the cases on hold until the standing issue was decided. Now it’s been decided, and not in Righthaven’s favor. Righthaven’s contract with The Denver Post owner MediaNews has not been made public like its contract with Stephens Media, but it’s probably not very different.

»  If Righthaven ends up getting sanctioned or being forced to pay attorneys’ fees, that would be a seriously bad (and costly) ending, not just for Righthaven but for the newspaper companies that chose to work with Righthaven as well. Righthaven has been ordered to explain to the court why it shouldn’t be sanctioned. And DU lawyers, from Fenwick & West and the Electronic Frontier Foundation, are going to be allowed to continue litigating to collect attorneys’ fees. And lawyers may even look to represent the dozens of defendants that have already settled Righthaven’s (now clearly illegitimate) claims.

»  Righthaven can, of course, appeal. But it would be risky to keep prosecuting its existing lawsuits while it appeals this judgment; it’s now on notice from a federal judge that its business method-at least the one it was using until May-is not legal under copyrigth law.

Democratic Underground was represented by Laurence Pulgram of Fenwick & West, as well as the Electronic Frontier Foundation. In an e-mailed statement, Pulgram said:

“To Righthaven and Stephens Media, the Court has issued a stinging rebuke. The Court also ordered Righthaven to show cause why it should not be sanctioned for ‘flagrant misrepresentation’ to the Court in concealing from the Court that Stephens Media stood to recover 50% of any recovery in these lawsuits. For those desiring to resist the bullying of claims brought by pseudo-claimants of copyright interests, the ruling today represents a dramatic and far reaching victory.”

EFF attorney Kurt Opsahl adds: “Today’s decision shows that Righthaven’s copyright litigation business model is fatally flawed, and we expect the decision to have wide effect on the over 270 other cases Righthaven has brought.”

I reached out to Righthaven CEO Steve Gibson to comment on this development but haven’t heard back.

Further reading:

»  Judge Hunt’s Order Dismissing Righthaven v. Democratic Underground [PDF]