Righthaven: We Might Have To Declare Bankruptcy

In a remarkable court filing, copyright enforcer Righthaven today warned that it cannot afford to pay a defendant $30,000 in legal fees and asked a judge to lift a ruling that prevents it from suing other individuals. And, in a man-bites-dog turn of events, Righthaven warned that the aggressive defendant would try and take the firm’s assets if a stay was not granted.

The emergency motion, filed in Nevada federal court and first reported by a Las Vegas reporter, caps a tumultuous week for Righthaven LLC. It was earlier reported that the firm had terminated its in-house attorney and that one of its two newspaper clients was firing Righthaven after calling its business model a “dumb idea.”

Since May of 2010, Righthaven has made a business of filing copyright lawsuits against individuals who cut and paste newspaper articles and then taking a slice of the profits when the lawsuits are settled. It has filed over 275 suits so far but was stopped in its tracks earlier this summer after a Nevada judge ruled Righthaven did not have standing to enforce the copyright that it was using to file one of its lawsuits because it didn’t actually possess the copyright.

Today’s filing shows that Righthaven is determined to continue its aggressive, and sometimes puzzling, legal tactics. Here in plain language is what Righthaven asked the court today:

“Please lift the order making us pay $30,000 and let us keep suing people so that we can raise some cash. This is only fair because we are appealing and we will win. If the court doesn’t do this by next Wednesday, the defendant we tried to sue will attempt to collect its $30,000 in legal fees from us by seizing our copyright assets. If the court doesn’t lift the order, we might have to declare bankruptcy.”

Righthaven’s filing is significant on a couple of levels. First, it informs the court that the company has reached a new deal with its one remaining client (Stephens Media) that gives it clear control of the newspaper’s copyrights. It was this lack of control that led the Nevada judge to kick Righthaven out of court in the first place. Righthaven is saying it has now fixed that problem.

The second important takeaway from today’s filing is that Righthaven is willing to keep pushing its luck with the federal courts, which have already expressed disdain for its litigation practices. The company is now asking the courts to believe that it is too poor to pay $30,000 (relative chump change for law firms) even while it is pursuing an expensive appeal before the 9th Circuit Court of Appeals.

Righthaven’s bankruptcy warning is also a risky strategy. The courts, already skeptical of the company’s actions, may decide to reject a bankruptcy filing as a fraudulent attempt on the part of Righthaven to shield its assets from the Nevada defendant.

Stay tuned.