by Paul Alan Levy
Back in June 2019, the last time I had occasion to write about Mathew Higbee’s bullying pursuit of copyright claims against alleged infringers, he had just backed away from a confrontation on the part of one of the longtime members of his stable of clients, Quang-Tuan Luong, and had, indeed, suggested that he was reconsidering whether he would pursue future demands against the hosts of interactive web sites whose users were the ones to post allegedly infringing content. Regrettably, it appears that the lure of illegitimate profit has led him not to take that path.
As I noted in my last couple of posts, like Righthaven before it, the Higbee firm has been taking advantage of hosts who failed to take the proper registration steps to perfect their DMCA immunity from copyright claims, by both identifying an agent for the receipt of DMCA takedown notices and registering that agent with the Copyright Office. The firm does this, I believe, because it has encouraged its clients to believe that such situations are low-hanging fruit and can easily be the basis for an easy collection of exorbitant license fees. But even where DMCA immunity is absent, Higbee's clients must still establish the legal elements of any copyright claim. And what the firm consistently ignores in its demand letters (and we do not know whether they have informed their clients of this problem) is the longstanding precedent, in every circuit that has addressed this issue, that an alleged infringer cannot be held directly liable for copyright infringement unless he has undertaken some volitional act to cause the infringement; nor can a host be held liable for indirect infringement (under theories of secondary or vicarious liability) unless the host derived financial benefit from the infringement.
Excessive Monetary Demands
Given my writing on this subject, and because we are willing to undertake impact litigation from time to time to address bullying by the Higbee firm and others, I hear quite frequently from Higbee firm targets, as often as several times a week. Many of them have no sound defenses against copyright infringement claims (and I tell them so); but even so, in many such cases the Higbee firm demands far more in “settlement” than it could realistically expect to recover in litigation. But, as with the less legitimate Righthaven and “Prenda” shakedowns, many of the demand letters insist on payments which, albeit excessive, are just low enough that it would not be worthwhile for the targets to hire a lawyer to defend the claim. On this business model, Mathew Higbee has built a law firm that now boasts of having 13 lawyers in 21 offices around the country, plus a number of “claims resolution specialists” who nag targets into signing confidential settlements to avoid repeated threats of being sued.
For example, when the Higbee firm demands payment for the alleged infringement of copyrights that were not timely registered, and which, therefore, cannot give rise to a claim for attorney fees or statutory damages, the demand letter will typically seek payment of an amount in the high three figures for each work infringed; the letter describes the demanded amount as having been developed based on "the normal licensing fee, the costs incurred in detecting and pursuing the unauthorized use, and the nature of the use." (emphasis added) The bolded language has always struck me as implying that the Higbee firm is demanding payment of attorney fees, even though they are unavailable. I asked Mathew Higbee if he had any authority supporting "the cost of enforcement" as an element of actual damages; he did not admit that he had none, but he did not claim that such precedent existed. To the contrary, his response (linked here) basically admitted that he is seeking this amount in the hope that something developed in discovery might eventually support a claim for statutory damages and fees. Higbee targets whose alleged infringement was of copyrights that were not timely registered have, as I see it, been justified in sending the Higbee firm a check for the amount of a reasonable license fee and expecting that to be the end of the matter. So far as I have been able to learn, that tactic has been effective for such targets, no doubt because it makes no sense financially for a HIgbee client to pay that firm to litigate an infringement case when the actual damages have already been paid.
Continued Illegitimate Claims Against Hosts of Allegedly Infringing Content
When the Higbee firm claims to be enforcing a timely registered copyright, different considerations are at play. When we sought a declaratory judgment of noninfringement last spring against Higbee client Quang-Tran Luong, Luong chose not to pursue his infringement claims, asserting that this was simply a matter of grace because he had been contacted by the forum member who had posted a deeplink to the image, and that Luong had accepted that member’s explanation for the posting and hence was not going to pursue the infringement claims against anybody. At the same time, Higbee told me that he was considering whether to stop making enforcement claims against other hosts taking advantage of their failure to register their DMCA agents.
We let Luong out of that case without any financial consequences. But following that dismissal, I have heard from a number of targets of Higbee infringement claims that he is still demanding significant payments from hosts based on postings by their users, including demands based in posts that included deeplinks. Luong himself has allowed the Higbee firm to continue to make such demands on his behalf; he hasapparently not learned from the first time he was sued. One user with a track record of effective pro se resistance to corporate repression has managed to discourage the Higbee firm from pursuing him by transmitting a strongly worded response; and it appears that, when a target turns out to be represented by knowledgeable intellectual property litigators, the Higbee firm trims its sails. But not every Higbee target has the benefit of supportive IP counsel. Consequently, we have entered two cases in which the Higbee firm persisted in demanding substantial damages despite the fact that the targets had only hosted deeplinks posted by users on their forums, had no knowledge of those links before Higbee's threats began, and, in fact, promptly removed the links to try to avoid trouble following Higbee’s demands.
Two New Declaratory Judgment Actions
We have filed an action seeking declaratory judgments of non-infringement against Luong on behalf of the nonprofit Mockingbird Foundation, which operates a forum for fans of the band Phish, and one against Higbee clients Mark Seliger and Steven Hirsch, on behalf of an individual named Erik Anderson who operates a forum for discussions of possible candidates for the Academy Awards and similar honors. In both cases, the Higbee firm sent demand letters, followed by the typical nagging from “compliance specialists,” which was ramped up by sending draft lawsuits alleging infringement which, the Higbee firm said, would be filed unless the targets paid as demanded.
In the case of the demand on behalf of photographer Luong, the Higbee firm increased the pressure by repeatedly communicating directly with the leadership of the Foundation even after the Foundation explained that it had counsel (a serious ethical breach on the Higbee firm’s part, both under the national model rules and under the rules in California where the Higbee firm is based), and by threatening to sue the Foundation’s leadership personally. In the case of the demands on behalf of photographers Seliger and Hirsch, the Higbee firm increased the potential chilling effect of the threats by threatening to file suit in New York, where the photographers live, instead of in California where the forum host lives, even though cases suggest that the photographers could be hard-pressed to justify personal jurisdiction in New York. We are doing both cases in conjunction with Phil Malone and his students at Stanford Law School’s Juelsgaard Clinic.
We expect that discovery will show that the Higbee firm's lawyers are fully cognizant of the fact that they cannot secure judgments of liability for copyright infringement without showing volition, but still demand settlements from forum hosts based on the threat of the filing of litigation in which this element cannot be established. The clients, too, may well be aware of these legal limitations. Certainly Quang-Tuan Luong was notified by the suit we filed on behalf of Kevin Schlossberg of the Ninth Circuit precedents protecting both the deeplinking of images displayed on his own gallery web site, and protecting hosts who engage in no volitional conduct leading to the placement of allegedly infringing links on the discussion forums that they provide. Assuming that Higbee shares with his clients the responses from the alleged infringers, Seliger too has been given notice that he cannot seek relief against hosts of discussion forums.
Litigating such claims — and threatening to litigate them in the hope of intimidating targets into paying substantial sums to avoid having to hire expensive copyright counsel — is patently unreasonable, and exposes his clients to awards of attorney fees.
Who Should Be Held Responsible for the Bullying?
At the same time, we are loath to file suit against the Higbee firm itself, as an increasing number of lawyers have done, alleging RICO claims under federal law or unfair practices claims under state law. We continue to believe that the right approach in these cases is to seek declaratory relief, as in Golden v. Michael Grecco Productions in federal court in New York, and in American Hellenic Educational Progressive Association v. PicRights in cases where the clients have allowed the Higbee firm to bully alleged infringers based on unsustainable claims, and to let those clients suffer the financial consequences that follow from the pursuit of meritless copyright claims.
As I have emphasized in the past, we are sympathetic to photographers who consider that their livelihood is threatened by the prevalent (but erroneous) popular assumption that there is nothing wrong with grabbing copies of photographs found online and posting them on commercial or nonprofit web sites and newsletters. When such infringers are identified, photographers have every right to seek lost license fees and even modest statutory damages where the copyrights were timely registered. But at the same time photographers must also bear responsibility when the Higbee firm threatens legally unsustainable claims or engages in other excesses on their behalf. If the photographers won’t rein their lawyers in, they have nobody to blame but themselves when they have to pay double attorney fees, first to the Higbee firm and then to the targets who have been wronged on the photographers behalf.
This round of litigation could only be the beginning. We are looking at several other possible cases.
Paul,
In light of your bolded sentence, this is my actual response to one of Higbee’s Senior Claims Resolution Specialist:
Your silence speaks volumes with your failure to discuss an itemized accounting of (1) “the normal licensing fee,” (2) “the costs incurred in detecting and pursuing the unauthorized use,” and (3) “the nature of its use” mentioned in the Demand Letter. In light of your silence, I’ll begin the discussion of the itemized accounting. The photo in question presents a [field of] daffodils. While the photo certainly uses nature, the nature of its use on a church’s website isn’t one for making income or profit. So, in my opinion, an amount attributable to “the nature of its use” is no discernable amount (i.e., $0.00).
With respect to “the costs incurred in detecting and pursuing your alleged unauthorized use,” this appears to be minimal. I’ll assume that the information technology employed in this matter is a sunk cost and no additional expense was incurred. Although Higbee has probably entered into an agreement with AFP that is based upon a contingency fee, I will assume for the sake of discussion that the agreement is based upon a fixed fee and the amount of billable hours. Mr. Higbee’s cost is not likely to be more than $5.00; here, I’m assuming that his billable rate is $300/hour and no more than one minute was spent reviewing and signing the boilerplate Demand Letter (although the signature could just be a rubber stamp). Then, there’s your cost which is not likely to be more than $5.00; here, I’m working under the assumption that your hourly rate of pay is $20.00/hour and no more than fifteen minutes of your time has been taken in this matter. Then, there’s a cost for paper and postage which I’ll assume is probably no more than $5.00. As shown by my calculations and the assumptions upon which they are based, “the costs incurred in detecting and pursuing the unauthorized use” is no more than $15.00.
When you subtract these costs from your client’s asking price of $3,390, you would be stating that the “normal licensing fee” is $3,375. Of course, if my assumptions are incorrect, please educate me with an itemized accounting as I originally requested. Until then, my church will take a pass upon paying a licensing fee of $3,375.
Keep up the great work, Paul!