A federal judge takes on 'copyright trolls'

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A letter mailed to a Pietz client by Brett L. Gibbs, a Prenda lawyer in Northern California, demanded a response within two weeks. "I hope for both our sakes to hear from you," Gibbs wrote, oh so sympathetically.

Prenda's strategy began to unravel in Wright's court shortly after Thanksgiving. That's when Pietz submitted evidence that two production companies the firm supposedly represented as clients, Ingenuity 13 and AF Holdings, were shell companies Prenda lawyers set up on the West Indies island of Nevis, a notorious money-laundering haven.

Pietz suggested that the Prenda attorneys therefore concealed their direct interest in lawsuits they ostensibly brought on clients' behalf, which violates court rules. Wright himself apparently believes that the movie firms are just fronts for the lawyers: "From what I know about this case, there is no difference at all" between the companies and Steele, he said in court April 2. (Wright, by the way, threw out a nuisance lawsuit filed against The Times last year.)

Pietz also raised questions about "Alan Cooper," purportedly an officer of Ingenuity 13 and AF Holdings. He couldn't find an executive named Alan Cooper. He did, however, find an Alan Cooper who was the unpaid caretaker of Steele's cabin in rural Minnesota. That Cooper testified before Wright that Steele advised him one day to call him if anyone contacted him about Steele's business. Cooper has also sued Steele, alleging that his name was used on the corporate documents without his knowledge.

As these suspicions multiplied, Prenda opted to shut down the questions by voluntarily dropping the lawsuits in Wright's court. At that point the judge said, in effect, "Not so fast."

Wright ordered Prenda's Gibbs to explain the firm's business model. Among other things, he was unhappy with Prenda's method of selecting defendants for the lawsuits. The method boiled down to collecting Internet account numbers and "blindly picking" a "pubescent male in the house" of an Internet subscriber to sue as the purported pirate. That kind of "hunch" isn't sufficient to form the basis of a lawsuit, he said, although he acknowledged that the expense of performing a genuine piracy investigation "would destroy Plaintiff's business model."

Furthermore, he observed, if Cooper's identity really was misappropriated, then Gibbs and Prenda may have committed a "fraud on the court."

Gibbs' hearing took place March 11. By then there was more evidence about the shadiness of Ingenuity and AF, including a deposition given by Paul Hansmeier, whom Gibbs identified as a Prenda manager.

At the deposition, Wright fumed, "there was so much obstruction ... that it is obvious that someone has an awful lot to hide."

When Gibbs' own lawyer, Andrew Waxler, tried to claim that Ingenuity and AF were distinct from Prenda, Wright shot him down.

"Seriously?" he snapped. "You can hardly keep a straight face, can you?"

"No, your honor," Waxler replied.

Wright hasn't said what he'll do about Prenda, but his options include asking federal prosecutors to investigate the firm, referring the lawyers to the state bars of California and other states for discipline, even disbarment, and imposing monetary sanctions.

More important, he's drawn a line against the sort of mass lawsuits that have been the stock in trade of Prenda and other law firms. His actions may embolden his fellow jurists to take a closer look at these fishing expeditions and even goad Congress into fixing copyright law by aligning the penalties for infringement more closely with real-world losses. There's a difference between commercial piracy and home downloading, but the law doesn't fully recognize it.

Wright certainly has signaled his intention to shut down the abuses he's seen in his own courtroom.

"This court's focus has now shifted dramatically from the area of protecting intellectual property rights to attorney misconduct," he said at last week's hearing. Then he delivered an ominous warning to a lawyer for Steele: "If you say answering these kinds of questions would incriminate him, I'm inclined to take you at your word."

Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at mhiltzik@latimes.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.

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