by Paul Alan Levy
As I have discussed in several previous posts, Mathew Higbee has built up a significant copyright enforcement business that depends on the issuance of threatening demand letters that are followed up by a small army of “compliance resolution specialists” who nag and threaten large awards of damages, the issuance of judgment liens, imposing short deadlines before the matter will be “escalated” to “the litigation team.” In self-congratulatory interviews. Mathew Higbee brags about how successful these threats are, and based on a staff recruitment video, it appears that the Higbee staff operates under daily goals that may be as high as $100,000 per day (this image
appears at the 51 second time mark on the video linked above). Because the Higbee interviews reveal that his earnings are split evenly with this clients, the clients, too, have a substantial incentive to engage his services. Some of the claims the Higbee firm pursues are valid ones, although, even then, the firm tends to take advantage of its pro se targets by demanding payments far higher than it is likely to gain in litigation.
Generally speaking, the targets of this demand letter practice don’t know their rights under copyright law, and would likely have to pay so much in lawyer fees just to assess their potential exposure, not to speak of defending themselves in court, that it makes financial sense for them to simply pay what is demanded, to make the problem go away, then to stand up for their rights. I have concluded that the Higbee firm deliberately, and cynically, preys on the high cost of copyright lawyers to extract undeserved payments for itself and its clients. When the tactic is employed to threaten liability on grounds too unreasonable to succeed in litigation, these tactics provide a sound basis for invoking the “considerations of compensation and deterrence” that support awards of attorney fees in copyright cases.
Over the past year, we have filed four separate declaratory judgment actions against Higbee clients on whose behalf the Higbee firm had threatened infringement litigation over the hosting of images, or deeplinks to images, that appeared on user forums. The first, addressing threats of litigation by the Higbee firm on behalf of Quang Tuan Luong, resulted in a prompt retraction of the claim of infringement. Last September, we filed two more declaratory judgment actions in the Northern District of California in such cases, one against Luong, and one against Mark Seliger and Steven Hirsch. The course of the litigation revealed not only that the Higbee firm’s bark can be much worse than its bite, but that the firm deliberately uses intimidation tactics to extract “settlement payments” from demand letter targets against whom the firm knows that it could not prevail in litigation. Our strategy in response has been to appeal to “considerations of compensation and deterrence” to create some financial disincentives for a bullying demand letter practice that might offset the willingness of some Higbee clients to allow him to pursue this strategy on their behalf. To avoid a full award of attorney fees, the copyright holder in one of the cases has now consented to a five-figure attorney fee award; a fee claim against two other clients remains pending.
Lead-Up to the Litigation
Following its standard method of operations, the Higbee firm sent demand letters both to Mockingbird Foundation, a nonprofit group founded by fans of the band Phish that hosts a fan discussion forum, and Erik Anderson, proprietor of the “AwardsWatch” web site focused on the Academy Awardas and similar competitions, which also at the time hosted a discussion forum (now hosted here). Each received a threatening letter warning of serious claims for damages, wage garnishments, liens on property, and the like, unless they made payments in the low or middle four figures, for the deeplinking by forum users of each of the photographs in question. Then followed a series of emails from “Compliance Resolution Specialists,” warning that the situation was going to “escalate” to the litigation team, and when that did not produce a payment, letters arrived, signed by Higbee, attaching copies of draft complaints that they said would be filed in federal courts demanding both up to $150,000 in statutory damages as well as attorney fees, plus broad injunctions barring further alleged infringements of the copyright in any of the photographers’ works. Ramping up the pressure, the Higbee firm communicated directly with Mockingbird's executive director even after he let them know that the Foundation had counsel, and also threatened to sue the executive director personally even though it was the Foundation that maintained the forum.
We responded by seeking a declaratory judgments of non-infringement, as well as an award of attorney fees, both the Luong and the Seliger/Hirsch cases. Attorney fees are by no means automatic in copyright cases, but we knew that the caselaw in the Ninth Circuit both recognized that deeplinking does not constitute infringement, and provides protections for online hosts against liability for infringing material posted by users so long as no “volitional act” of the host caused an alleged infringement (and so long as the host does not derive direct commercial benefit from the infringement). (We had explained all of this to Mr. Higbee when he threatened Kevin Schlossberg over the hosting of a deeplink to a Luong photograph; this is why Luong promptly gave up when Schlossberg sued him for a declaratory judgment of noninfringement). Given that the Higbee clients’ demands for $25,000 payments based claims of infringement that they could not possibly win in court, we considered it quite likely that we could prevail on a motion for an award of attorney fees at the end of the litigation.
How the Higbee Clients Ended Up Losing the Mockingbird and Anderson Cases
Mr. Higbee’s immediate response to the litigation showed his recognition that his claims of infringement were weak enough that, if his clients lost the case, they faced a significant risk that attorney fees would be awarded against them. My judgment is that Mr. Higbee would really like to burnish his reputation as a copyright plaintiffs’ lawyer by taking on the longstanding Ninth Circuit precedent on deeplinking, trying to persuade the Ninth Circuit to take the issue en banc or at least to persuade it to limit the precedent to search engines. But he knows that he makes no sense to do that in a case that his clients are sure to lose on the alternate ground that hosts cannot be held liable in the absence of volition.
He reached out to me to say that his clients really wanted to enforce their rights so they could take the deeplinking issue up on appeal, and that they would in addition, an offer to simplify the litigation, holding the costs down considerable by stipulating to the relevant facts. That way, we could get quickly to summary judgment and the loser could appeal. But, he said, he would agree to all this only if my clients would agree to drop their claim for attorney fees. Our clients declined that suggestion – with Mr. Higbee having spent several months using the threat of statutory damages and attorney fee awards to try to intimidate them into paying him thousands of dollars for the benefit of those clients, they were not ready to release their own monetary claims against those clients. They were, however, happy to cooperate with the Higbee clients in stipulating the factual issues, thus reducing the potential expense and attorney time to get the legal issues ready for decision at the trial court level and on appeal.
But Higbee changed his tune once I told him that his clients would not be off the hook for attorney fees claims. Now, he told me, his clients had actually decided months ago not to pursue our hosting clients because they did not have the financial resources to pay any judgment. Thus, they declared, each of the photographers was issuing a license allowing the specific use that had been made of the specific photograph that had been the subject of the initial demand letters, and they demanded that the declaratory judgment complaints be dismissed as moot.
Our clients were unwilling to dismiss because, as the hosts of large forums that might well have tens of thousands of posted images or posted deeplinks, they could easily be subject to additional threats over similar postings to other photographs by these same Higbee clients. Moreover, the draft complaints sent to them after they had failed to pay the demanded damages amounts had included a demand for a broad injunction against the infringement of the copyright in any others of the photographers’ works. So we thought it was fair for our clients to insist that each photographer let them off the hook for the posting of or deeplinking to any of their photographs on the forum, and we told Higbee that our clients would dismiss their complaints if, but only if, such licenses were granted. We identified for Mr. Higbee the pertinent Supreme Court decision, Already, Inc. v. Nike, which set the standards for dismissal on mootness grounds of declaratory judgment actions based on last-minute voluntary cessation of the actions by the owners of intellectual property that had previously created an actual case or controversy. Our clients then amended their complaints to make clear that the controversy about the right to engage in deeplinking, and about the non-liability of our hosting clients for postings by forum users in which they had no involvement, extended to the entirety of the photographers’ work.
Despite the amendments, the photographers forged ahead with motions to dismiss in each case, completely ignoring the Already v Nike decision that we had pointed out to their counsel. The motions asserted, without any evidence that the photographers had decided before each case was filed not to pursue the lawsuits that they had threatened, and pointed their limited post-complaint licenses as evidence of the lack of any real dispute. And, they asked the judges in the two cases to award them attorney fees for having had to move to dismiss. We responded by highlighting their failure to meet the Already v. Nike standard, pointing to several decisions following Already v. Nike that were similar to our case. But we also pointed the judges to the long succession of similar demand letters that the Higbee firm had sent on behalf of the same photographers as well as to other hosts of discussion forums and similar interactive web sites, threatening to obtain massive judgments for statutory damages and attorney fees unless the targets of the threats made payments in the high three figures or low to middle four figures. As in our cases, these amounts appeared to have been carefully calculated to be less than targets would likely spend on competent copyright lawyers to advise them on their likely liability or to defend against the threatened litigation.
Discouraging Future Abuses
In both cases, the district courts denied the photographers’ motions and refused to dismiss the actions, finding from the very fact that the copyright owners had refused to grant licenses for the deeplinking of all of their works a hint that they had in mind to scour our clients’ forums for more allegedly infringing works, then threaten additional infringement litigation. And in one of the cases, against Mockingbird, the wording of the judge’s opinion hinted at the trollish character of the Higbee firm’s demand letter practices. All three of Higbee’s clients promptly responded to the denials of the motion to dismiss by granting much broad licenses under which our clients would be protected from any future claims based on any of the photographers’ works. Indeed, in the meantime we had filed yet a fourth declaratory judgment case over a Higbee-firm threat of copyright infringement litigation, this time made to Jessamyn West over her image-sharing site MLTSHP. In that case, after we filed our lawsuit, the Higbee client volunteered a broad license allowing future posting without even the hint of a motion to dismiss on mootness grounds.
These were fine results for these four clients, but we were left feeling that we had been playing whack-a-mole with the Higbee firm. We had been able to dispose of abusive threats made to a small number of targets, but we believe that Mr. Higbee has been making similar claims on behalf of the same photographer clients, or indeed different clients, in situations about which we might well never hear. And, indeed, Mr. Higbee made clear in a conversation with me that, although he claims that he no longer files lawsuits over alleged infringements committed in posts made on interactive forums, because he recognizes that the cases are losers, he has no compunction about threatening to file such lawsuits as a way of producing revenues for himself and his clients, no matter how unjustified those threats may be.
Our solution is to seek an award of attorney fees, contending that when a copyright owner issues an irrevocable license within the course of the litigation, and for the express purpose of mooting a declaratory judgment action, the owner materially changes the legal relationship between the parties just as much as if the owner had sued for infringement but then voluntarily dismissed the lawsuit with prejudice, resulting in a judgment for the alleged infringer. In both cases, we contend, the alleged infringer becomes the prevailing party and hence is able to seek an award of attorney fees and to have fees awarded if the copyright owner’s claims and/or behavior within the litigation were sufficiently unreasonable, and the factors set forth in Fogerty v. Fantasy and Kirtsaeng v. John Wiley & Sons point in the direction of an award of fees. In that regard, we have pointed out that Judge Seeborg’s ruling in Mockingbird is just one of the judicial rulings that have begun to focus on the trolling qualities of the Higbee firm’s copyright practice. Although the Higbee firm has not yet reached the iconic status of Richard Liebowitz as a recognized copyright troll, we argue the considerations of compensation and deterrence argue both for an award of fees under Kirtsaeng and for recognizing that the firm’s practice of sending abusive demands on behalf of its clients, and then yielding rather defending its demands when challenged in court, should lead to recognition of the
demand-letter targets as prevailing parties.
In the course of discussions about our attorney fee applications before we filed them, Mr. Higbee assured me that his firm was no longer pursuing claims against the hosts of forums (of course, for ethical reasons we could not accept any suggestion that we settle the case with an agreement on his part not to represent any other clients in future in cases over posts on forums). And ethics aside, we did not think we could trust his word on this point: I was aware of another case in which, despite telling me he no longer pursues such cases, his firm had asked whether an opposing lawyer would accept service of a lawsuit alleging just such a theory. Indeed, in the past month we have identified at least two more such cases of demand letters to forum hosts.
In the event, one of the photographers, Quang Tuan Luong, accede to a reasonable settlement of our attorney fees claim, which we agreed to reduce after he established that he had limited assets and limited family income – a judgment for $10,000 in attorney fees and costs has been entered. A motion for an award of attorney fees against Mark Seliger and Steven Hirsch is pending.
Photographers are likely attracted to using the Higbee firm’s services by the apparent success that the firm has in using aggressive demand letters to extract undeserved payments from its targets, payments that are shared equally with the clients. In that sense, it is only fair for the clients to bear a share of the risk, and the consequences when a target gets counsel and fights back. We can only hope that the example from the Luong and Seliger cases leads other clients to question the Higbee firm more carefully before they agree to authorize it to pursue similarly baseless and unreasonable demands, and to employ similarly abusive threats and litigation tactics.