Is Prepared Food Photos Running a Scam, Not Just a Scheme to Extract Excessive Rents?

Last spring, I posted two articles about a new force among the corps of copyright trolls – a law firm calling itself CopyCat Legal, representing a copyright holder that we had challenged before, now calling itself Prepared Food Photos, Inc. (“PFP”).  When I last wrote about these two, I called their monetary claims outlandish.

But based on what we have learned since that time, as well as on inferences drawn from its litigation strategy, I am now inclined to think, for reasons explained below, that the sobriquet “scam” may come closer to the mark.

My criticisms last year

As I discussed last year, for the past three years, the standard demand letter from PFP sought outlandishly high damages payments – pay us $30,000 within twenty-one days or we will sue you in Florida.  Its claimed basis for this excessive amount was a factual assertion: that  it only sells licenses to its entire database of tens of thousand stock photos of food, for a minimum of $999 per month, with a minimum subscription of one year. Thus, it argued, its lost license fee (one of the two components of actual damages under the copyright law) is not the few dollars one might expect to pay for use of stock photo of food, but at least $11,992, or $35,964 if the use had continued for three years before the suit. And, the standard demand letter warns, that figure could be doubled or tripled if statutory damages were sought, plus an award of attorney fees. What’s more, CopyCat Legal pointed to a few cases in which it had hoodwinked judges into buying this damages theory by filing ex parte affidavits and memoranda that ignored contrary precedent, awarding various five figure sums, more than $70,000 in one case. Thus, the demand letter sought to make to $30,000 seem utterly reasonable. Just call your insurance company, the letter says, and they will pay to take care of your little problem.

But if the target found knowledgeable counsel, this bubble could be pierced, as I explained in my blog posts last year. Courts repeatedly say that the lost license fee is fixed by not what the copyright owner would have charged, but rather what a reasonable buyer would have paid for the use that was made of the infringed work. And certainly, given the plenitude of stock food photos that can be found online for free use, or for a license fee of a few dollars, the reasonable market price, and thus the lost license fee, would be a few dollars. Moreover, until 2016, AdLife Marketing and Communications (the predecessor of Prepared Food Photos) made its photos available on stock photo sites for license, one by one. In 2016, AdLife pulled its photos off the stock sites, registered the copyrights in them, initiated the “subscription only” model, and began filing lawsuits for infringement using this damages theory..

Citing these and other arguments, I responded to demand letters sent to an Asheville NC acupuncturist, Jamie Whittle, who use had begun in 2010, and a DeWitt VA farmer, Debbie Lingerfelt, whose use had been more recent. In both cases, CopyCat Legal backed away. But my responses for these two clients had not put a stop to the trolling. I could see from a Pacer Party Search that CopyCat Legal was still filing several lawsuits each month, racking up default judgments in large amounts (or settlements in amounts not revealed on the dockets); and, I had to assume, it was sending out hundreds of demand letters. Moreover. CopyCat Legal’s web site showed its founder, Daniel DeSouza, relishing his reputation as a copyright troll: he ended one article with the words, “trust me, as a ‘troll,’ I’m always looking for a few good meaty bones!”.  In the same article, he gloried in the extraordinary amounts his letters demand as the price of avoiding suit: “What constitutes ‘too much’? The Copyright Act provides for statutory damages ranging from $200.00 – $150,000.00 (subject to broad discretion), so how much can any particular photographer demand when his/her work is infringed? $75,000.00? $50,000.00? $10,000.00? $200.00? Does the photographer (or the law firm representing him/her) need to call the infringer in advance to ask how much is reasonable to demand?”

Plainly, the only way to put a stop to this rent-seeking would be to defend a lawsuit after Prepared Food Photos had filed it; to file an answer, so that it could not just drop its claim; to take discovery; and then move for summary judgment. A court ruling could help defendants in future cases under principles of non-mutual collateral estoppel, preventing PFP from using its arguments in any other cases.

Prepared Food Photos v. Pool World

A lawsuit filed in the Eastern District of Washington against Pool World was the ideal case.  Back in 2010, Pool World, a small company in Spokane that mostly sells swimming pools and hot tubs, had created a web site to promote a small part its business – the sale of grills. The home page carried a few images, including a composite image that combined a photo of skewered shrimps on a grill with a photo of skewered vegetables on a grill. PFP sent its typical demand letter, claiming that it owned a copyright in the vegetable kebab photo. When Pool World took the photo down but did not pay off the infringement claim, PFP sued, and that was when the Public Citizen came into the picture. I concluded that, for several reasons, this would be an ideal client for a test case against PFP.

Pool World could have just sent the case to its insurance carrier, but it knew that an insurance company would simply pay off the strike suit. It felt it was being bullied, and was ready to stand up against the bully to make sure that other small companies like itself would not have to go through the same thing. (After we entered the case and identified Pool World’s insurance carriers, as required by the initial disclosures provision, PFP sent a message to the insurer threatening to sue it to collect any judgment. Perhaps PFP thought the insurer would insist that Pool World settle the case. But this stratagem did not work – it just showed how desperate PFP was to avoid having to prove its case).

Moreover, because use of the photo had begun long before the copyright was registered, Pool World did not face the two biggest risk factors present for alleged infringers whose use of Prepared Food photos began after 2016 – a claim for statutory damages under section 504(c) and a claim for attorney fees under section 505. And because grills are such a small part of Pool World’s business, it would not face a substantial claim for profits earned from the use of the image.

And most important, the lawsuit against Pool World provided an opportunity to litigate the two issues that we most wanted to use to pare back PFP’s bullying campaign. First, I was reasonably confident that back in 2010, the cost of a license for an image like the one whose copyright was allegedly infringed was a few dollars at the most. Moreover, PFP had all of its photos offered for licensing on iStock, a subsidiary of Getty Images, and Pool World believed that it had obtained the composite image from one of its vendors which, it assumed, must have had permission to use the vegetable kabobs photo in the montage. Moreover, a quick online search for comparable images in 2023, revealed that similar photos could be found online for licensing for $12 – or even without any charge. So Pool World had a strong argument against the PFP damages theory.

In addition, the case provided an opportunity to get a court ruling on whether copyright trolls can reach back more than ten years to find allegedly infringing uses that were posted long before the time of suit, but remained  online just because nobody had ever removed them. In our view, the single publication rule should trump the discovery rule in this situation. Moreover, the facts of this case would give us the chance to argue that the equities that justify application of the discovery rule to enable copyright plaintiffs to defeat the statute of limitations do not uniformly run in favor of the plaintiff. Here, the Pool World staff person who had actually done the work on the web site had moved on to another job, and she did not remember just where she found the composite image; and Pool World itself did not have records showing just where it had obtained the composite image. I knew already that AdLife had never received information from iStock about which iStock customers were buying license for its works. But if PFP did not have the records because its predecessor, AdLife, never bothered to keep the records that would be needed to identify legitimate users, why should the burden of uncertainty fall on the defendant in one of these cases? Why was it equitable to let PFP sue in such cases?

The statute of limitations issue was raised in a different case brought by Prepared Food Photos, in which PFP was shocked at having to oppose a real defense. I discussed that case, Prepared Food Photos v. Arcadia Academy, here.  But that case was eventually resolved, apparently on confidential terms.

I had previously litigated against the company then called AdLife which had sent a demand letter to a research scientist, by an action for a declaratory judgment of non-infringement. The  company objected to jurisdiction and disclaimed any intent to sue our client. But here it was a plaintiff, and once we filed an answer, it could not unilaterally drop the case without prejudice: it would need either our consent or a court order. Thus, we would be able to use a potential claim for award of attorney fees as leverage to force PFP to dismiss the complaint with prejudice.

So we agreed to represent Pool World, answered the complaint, and began discovery. And that was where the most interesting revelations came.

Revelations in Discovery

As soon as I had met and conferred with local counsel for PFP about the initial scheduling conference, we issued a set of interrogatories and requests for production that would enable us to establish Pool World’s defenses. PFP’s initial responses were cursory and evasive, but they provided some key information. First, not only had AdLife never kept track of who had bought licenses to its work, but it also had no records of what amounts were paid to iStock for licenses, no copies of its contracts with iStock, and no records showing how much money it had been paid by iStock either for individual licenses or, indeed, for an entire year for the years 2010 or 2011. PFP even claimed not to know who its employees were in 2010. And yet it felt it could place the burden on Pool World to know what had happened in 2010.

Because PFP had discarded these relevant documents—and in some cases never had the documents— we had to serve a Rule 45 subpoena on iStock. Its responses told us that, in the 18 months before Pool World obtained the composite image that included the copyrighted image, iStock had sold 52 licenses for the half of the composite: the image of vegetables on a grill. The prices for these licenses ran from a few cents more than a dollar to slightly more than ten dollars. (One license sold after 2010 cost 19 cents!) And AdLife did not get all of the dollar or 12 dollars paid for the license – it only got a percentage of each license fee; its payments might be as little as 20% or as much as 45% of the license fees (depending on various factors laid out in the royalties scheme). So PFP’s lost license fee in this case—its actual damages claim— might have been as low as twenty cents or as much as five dollars. Moreover, the iStock licenses were “royalty-free,” which means that they could be used indefinitely in the future, and they can be used by the licensor’s customers. So it is quite possible that whoever it is that created the composite image that Pool World placed on its website in 2010 had a license to use the vegetable kabob image. Whose burden should it be to figure out that factual question?

Additionally, PFP refused to answer the key question how much it had earned from its copyright trolling operations. It claimed to be in the business of licensing high end photos, and to be suffering from a rash of damaging infringements – a possibly sympathetic portrait to present to a jury – but I believed that its main business was trolling for copyright settlements, and indeed using inequitable means to extract unjustifiable settlements. We moved to compel responses to several related discovery requests, thus putting on the record for the first time some of the legal arguments on which our statute of limitations defense would be based. (This affidavit, filed in support of a discovery motion, marshals the ways in which PFP’s bullying campaign represents a “failure to do equity” that might deprive it of access to the discovery rule).

Third, PFP finally disclosed the subscription agreements on which it was relying to support its damages claims. Initially, it demanded that the agreements be subject to a protective order, but after we pushed back, it limited its demand to keep the names of its customers confidential. In the discussion that follows, I do not mention any names – but what we learned from reviewing the contracts was potentially devastating to PFP’s legal claims in this case. It even raises questions about the veracity of affidavits filed by PFP in support of its ex parte damages claims after securing defaults.

Why would a HOSPITAL pay $12,000 for access to the Prepared Food Photos Database?

Three things jumped out at me when I reviewed the subscription agreements that were provided in discovery.

First, they were not all at the level of $999 per month. A couple were higher, and several were for exactly $999 per month. But several of the agreements were for less than $999 per month, some for significantly less than that – there was one agreement for $99 per month, and another for $300 per month. Several were priced around $500 per month. One of the contracts provided for either $999 per month or for a lesser amount, the actual price to be determined by whether the subscriber was using the emailing service of Bad Adz, a company under common ownership with PFP that was spun off from AdLife, so far as we can tell, when AdLife changed its name to Prepared Food Photos. Almost every one of the contracts included a one-year term; provided that charges would be billed to a credit card; and provided that it would require a specific notification by the subscriber to continue the subscription beyond the one year term. These terms implied to us that the parties did not expect that the contracts would extend beyond a single year. No information was provided about which contracts had been extended beyond the initial year, even though, for periods of time when subscriptions were continuing at $99 per month or $300 per month or whatever other amount lower than $999, PFP’s claim that it was entitled to damages in the amount of $999 per month, because that is the only price at which users can buy access to its photos, was eviscerated.

Second, almost every contract had a liquidated damages provision, to the effect that the parties agreed that the cost of the misuse of a single photo in the database would be $8000. Not $999 per month, and not $999 per month for at least a year, and not $35,964 for three years misuse.  Now, $8000 is absurdly high, compared to the actual market for stock photos comparable to the vegetable kabob image, but this provision alone contradicts the claim in the complaint, and the repeated sworn assertions in default judgment damages affidavits, that PFP never allows payment for use of a single photo.

But the third point is the most interesting. One of the subscribers was a small grocery store in an isolated part of Massachusetts, which was not likely to want to pay large sums for access to the whole database. And another was a hospital—why on earth would a hospital find it worthwhile to pay nearly $11,992 for access to the database of PFP photos?

So I started calling the subscribers. Not all of them were willing to talk to me, but I had good conversations with enough of them to find a pattern: Every single PFP subscriber who talked to me told me that the impetus for subscribing had been receipt of a threat to sue for copyright infringement. Instead of paying damages, these companies had been allowed to sign subscription agreements whose costs would be in lieu of damages payments. Many of them told me that they had never downloaded photos during the terms of the agreements. And every one of them was bitter about the experience – they felt bullied, even extorted. but they had concluded that paying off was cheaper than hiring a lawyer to litigate the case.

One conclusion from this analysis was that at least some of the subscription agreements represented, not revenue from the sale of licenses, but proceeds from the same extraction scheme that was being directed at Pool World. And I also began to wonder whether any of the subscription agreements was a legitimate reflection of the market value of access to the entire database, or rather whether the entire subscription system just a charade, formed to create an evidentiary basis for extracting large damages settlements?

Putting Prepared Food Photos to the Test

To find out, we served an additional set of document requests on plaintiff, seeking information to test the veracity of PFP’s representations about its business and its representations about the reasons why companies paid subscription fees. PFP refused to provide any of this information, on the ground that it has no bearing on the issues in the litigation. So I promptly requested the opportunity to meet and confer about a motion to compel. The request to meet and confer made clear what our analysis of the subscription agreements had shown, and that a motion to compel would revealing some unpleasant facts about its subscription agreements.  The documents sought were so clearly relevant that the refusal to produce them created an inference that the truth is something that Prepared Food Photos needed to hide.

Two days later, I had a meet and confer session on the motion to  compel and other outstanding issues. That evening, PFP filed an unopposed motion asking that the judge refer the case to mediation and put the litigation on hold. This would postpone our further motions to compel as well as our interrogation of PFP officers. Over the previous few weeks, PFP had been making noises about seeking mediation before it had to spend time and money on depositions, but the threat of this motion to compel appears to have spurred it to file such a motion.

Why Mediate?

Why would Prepared Food Photos want to mediate? Two possibilities come to mind.

The dirty truth about copyright trolls is that they want the easy money. I know of many situations in which CopyCat Legal, like other troll firms, have been challenged by counsel familiar with copyright law and suddenly lost enthusiasm for claims of infringement that had been made in the most strident and threatening tones. Reviewing the AdLife / PFP litigation record, it is apparent that almost every one of its lawsuits has led to either a quick settlement – presumably based on a payment of excessive damages – or a default judgment, then made concrete based on an ex parte presentation of facts. It is my guess that CopyCat Legal sues only when it thinks it will score a quick settlement or a default. It appears to have come as a real shock to PFP and its counsel that Pool World was willing to litigate and was not willing to make even a token offer of money to make the case go away. And litigating this case has imposed a real drag on PFP’s – and CopyCat Legal’s – main business of sending threatening letters and waiting for the cash to roll in.

I do not have much optimism that Prepared Food Photos is ready to do what needs to do to get out of this case – dismiss with prejudice and either make a substantial payment of attorney fees, or agree to let the fees issue be litigated. Because we insist that any payment be public, the payment will send a message to other targets of PFP’s scheme that it can make sense to stand and resist bullying.

But perhaps Prepared Food Photos will decide that an expensive settlement (or a non-monetary dismissal that leaves the issue of attorney fees to be resolved later) is better than litigating to summary judgment, or a jury verdict against PFP, in a case where the possible recovery cannot justify the expense of litigation. A summary judgment opinion (or a Ninth Circuit opinion, if PFP appeals) could then be cited as collateral estoppel in future cases. Moreover, a grant of summary judgment against PFP would be followed by a motion for an award of costs and attorney fees – based on the hours spent to date, this will be in the six figures, an amount in line with the AIPLA’s biennial survey of the costs of IP litigation.

This would not, indeed, be the first time that a monetary sanction has been awarded, in part, for this plaintiff’s having sought inflated damages for infringement of the copyright in a single stock food photo.  Adlife Mktg. & Commun. Co. v. Buckingham Brothers, 2020 WL 4795287 (N.D.N.Y. Aug. 18, 2020), available here. But that was a sanctions award against AdLife’s lawyer based on the court’s inherent power. A summary judgment and an award against the plaintiff under section 505 of the Copyright Act, not against its lawyers, would be a much more effective deterrent and a better incentive to future victims than a settlement would be.

But if the case can be resolved on sensible terms without imposing further burdens on the courts, that is an outcome for which we should strive. For that reason, we consented to mediation.

I have one other concern – that Prepared Food Photos wants to put the litigation on hold so that it can postpone the inevitable, continuing to shake down targets of its infringement claims for a few months longer. But the information obtained in discovery so far can be useful to other PFP targets. I can hope that this article gets into their hands.

Prepared Food Photos SHOULD Be Able to Enforce Its Rights

Assuming that Prepared Food Photos has valid copyrights in its photos – a proposition that surprisingly it has not yet established by its responses to discovery – it has every right to enforce those copyrights against infringers. Although the fair market value of licenses to use the individual photos is not high enough to warrant the time and expense of litigation seeking actual damages, Congress has provided incentives for enforcement, and deterrence against unreasonable refusal to pay, in the form of statutory damages at the minimum level of $750 as well as awards of attorney fees in appropriate cases. When targets come to me with demand letters in that scenario, my standard advice to PFP targets who are exposed to a claim for statutory damages is to send a check for $750 – which worked for Debbie Lingerfelt and Curt Archambault. If Prepared Food Photos confines itself to filing suits within the statute of limitations, and making demands for reasonable statutory damages rather than the grossly inflated figures sought since CopyCat Legal came on the scene, it will face no opposition from me.

Leave a Reply

Your email address will not be published. Required fields are marked *