Righthaven's Copyright Trolling is a Bankrupt Idea

It’s been several months since we last checked up on Righthaven.  How is everybody’s favorite copyright troll doing?

Well, they might be going bankrupt:

The Las Vegas copyright-trolling firm Righthaven told a Nevada federal judge Friday [September 9, 2011] it might file for bankruptcy protection, or cease operations altogether.

To prevent that, Righthaven is asking U.S. District Judge Philip Pro to stay his decision requiring Righthaven pay $34,000 in legal fees to an online commenter it wrongly sued for infringement.

Wired has posted a copy of the Motion to Stay here.  In it, Righthaven is exceptionally candid about the economics of copyright troll litigation:

In Colorado, 35 Righthaven copyright infringement cases have been stayed since May 19, 2011 pending a ruling on whether the company has standing to maintain these actions. Likewise, ten infringement actions, most of which involve an amended version of the SAA that addresses the concerns expressed by this Court in its subject matter decision, have been stayed in this District until a standing determination is made. Thus, Righthaven has been precluded from actively litigating and resolving the stayed cases. Moreover, Righthaven has delayed filing new copyright enforcement actions until a standing determination is made based upon the terms of the currently operative version of the SAA. Throughout this period, and despite a lack of incoming revenue given that numerous pending action are stayed, Righthaven has continued to incur operating expenses.

In other words, Righthaven asked the court for a temporary reprieve on having to cough up the money because they might have to sell some of their assets to satisfy the $34,000 judgment.  As they explain to the court:

Righthaven also has significant proprietary rights in its copyright infringement search engine software (the “Software”), which plays an integral role in the company’s operations. If a stay is not granted pending appeal, this valuable Software may be seized and liquidated in an attempt to satisfy the Judgment. Liquidation may result in the Software being sold to a competing organization or entity.

Take a minute to recognize what this means.  Righthaven was in effect saying that they were already so close to bankruptcy that $34,000 was literally going to wipe them out, forcing them to sell off their core business assets.

And on Monday, we learn that Righthaven did not get its reprieve and made “no effort whatsoever” to pay the $34,000.  It looks like its only a matter of time before they completely implode.

Righthaven always presented its copyright litigation defendants with an unfair dilemma:

(1) pay out a few thousand in “go away” money now, or
(2) mount an actual legal defense (at an initial, minimum cost of a few thousand, with no guarantees that things would work out well).

It seems only fair that Righthaven now face a dilemma of its own:

(1) raise enough capital to pay off this $34,000, or
(2) go bankrupt and have its assets seized.

The difference, of course, is that the dilemma Righthaven faces is fair.  They put defendants to the expense of hiring lawyers.  Some of those defendants won.  A judge said that one of those winning defendants should have his legal expenses paid by Righthaven, as provided by law.  If Righthaven can’t afford to pay for the damages it inflicted on others without going bankrupt, perhaps they never should have been filing lawsuits in the first place.

It’s too early to tell what the full implications will be.  Nate Anderson over at Ars Technica is circumspect:

Perhaps Righthaven 2.0 will fare better. Or perhaps Righthaven 1.0 was such an abysmal experiment it has ruined the basic business model for good.

Still, there is reason to hope.  When I previously wrote about Righthaven in April, I noted that

it remains to be seen whether Righthaven’s follies here will blossom into clear legal precedents protecting bloggers and journalists or simply fizzle into legal footnotes and historical anecdotes. Recent Righthaven cases are full of sound and fury; it would be lamentable if they ended up signifying nothing.

Now, at least we know that there is no easy business model in suing bloggers with a credible fair use defense.  Righthaven’s implosion will make other potential litigators think twice.

Joel is a Massachusetts attorney and a graduate of the Boston University School of Law.  He also writes for his own commentary blog, Legally Sociable.

(Image of "rock trolls" courtesy of Flickr user dmnt licensed under a Creative Commons BY NC SA 2.0 license.) 

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