Suffocating Financial Power Means Mismatches in Copyright Cases

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Being an entrepreneur in the digital age comes with risks, particularly when a business model is connected in any way with the music and movie industries. Kim Dotcom says he's spent $40 million in legal bills fighting his corner while TVAddons founder Adam Lackman is already facing potential bankruptcy. Neither defendant is anywhere close to a full trial on the merits of their respective cases.

Entrepreneurs on the Internet face risks that are in many ways the same as those operating in the physical realm. All have to find a suitable market while combining hard work, skill, and elements of luck to create a sustainable and profitable business model.

While there are plenty of opportunities out there to do things that other people have already done, the online world presents a whole raft of new possibilities to build projects in areas where few – if any – have trod before.

Take for instance Megaupload, the file-hosting site created by Kim Dotcom, which initially tried to solve the problem of sending files that were too big to email. Or TVAddons, the portal created by Canadian Adam Lackman, that set out to become the world’s leading repository of third-party Kodi media player addons.

Both businesses thrived for many years, working within what they believed to be the parameters of the law.

In Megaupload’s case, taking down content when asked to do so and working with copyright holders to ensure a smooth relationship. In TVAddons case, never hosting or linking to copyrighted content at all and never responding to copyright complaints – because none were ever received.

Now, however, both companies are resigned to history. Megaupload was shut down in 2012 and TVAddons (in its original form) was shuttered in 2017. While the force used against both has been documented in detail (few need to be reminded of the helicopters and armed police in Dotcom’s case or the specialist warrant used against Lackman) both have faced an onslaught of legal action.

Last week, Dotcom revealed that in the 2,375 days since the raid and after reporting for bail 670 times and appearing in court for 165 days, he has spent $40 million on legal fees.

Quite clearly Kim Dotcom is no ordinary person. Conjuring up $40m in legal fees is an astonishing feat, not least since the man was supposedly near destitute just a few short years ago.

But despite spending dangerously close to six whole months in court and more money than most of us could hope to see in several lifetimes, Dotcom is no closer to finding out whether his Megaupload operation was legal or not. Most proceedings thus far have dealt with how his case was (often wrongly) handled in New Zealand and whether or not he should be extradited to the United States.

Letting that sink in, the legality of Megaupload and the actions of its operators is yet to be determined on the merits, yet Dotcom has already spent $40m defending his corner. Whether you support the man or not, whether you believe Megaupload was brilliant innovation or the epitome of infringement, the numbers are staggering and are as far away from a reasonable fight as one can imagine.

Granted, someone with fewer abilities and resources than Dotcom would have been shipped off to the U.S. years ago where the case would’ve been decided much more cheaply. However, that would’ve been done under a system that tends to listen to arguments more closely when they’re made by defendants with huge financial resources.

That status certainly isn’t a good fit for TVAddons founder Adam Lackman who, unlike Dotcom, doesn’t appear to have the ability to conjure up millions of dollars to pay his lawyers.

On numerous occasions over the past 12 months, Lackman has turned to users of the now reborn TVAddons to ask for their financial support to help fight his case against the largest telecoms companies in Canada. He’s currently asking for their help again to raise CAD$55,000+ that must be paid to the plaintiffs in his case after he contested a search warrant.

Bailiffs have already been to Lackman’s home trying to recover the cash (or goods) but left when they could find little of value. TVAddons now say that they’re in a precarious position.

“It seems that the companies suing us (Bell, Rogers, Videotron, TVA) are trying to use this debt to force our founder into bankruptcy and therefore force him to settle with them, even though he did nothing wrong. This way they can avoid the issue being heard in court,” the site explains.

The last sentence in this statement raises a point that is regularly made in David vs Goliath-type copyright cases. The big companies who bring these cases are regularly accused of not wanting to have cases heard on the merits.

Their critics claim that if they can string things out long enough, defendants like Lackman – or indeed Kim Dotcom – will eventually fold under the pressure.

While that doesn’t seem to be on the cards in the Megaupload case, Lackman seems to be dangerously close to the edge. Just like Dotcom, there’s no shortage of people who would be happy to see him go under but that wouldn’t just be bad for him.

Whether they beat Lackman before or during trial, the plaintiffs in the TVAddons case want to create the impression that by “merely hosting, distributing and promoting Kodi add-ons, the TVAddons administrator is liable for inducing or authorizing copyright infringements later committed using those add-ons.”

That analysis is from the EFF, who note that a victory would “create new uncertainty and risk for distributors of any software that could be used to engage in copyright infringement.”

But while a decisive win for the telecoms companies on these grounds would be considered a success, a clear and early capitulation by Lackman would give the public the impression they would’ve won anyway.

Both outcomes would serve the purpose of deterring people from making a business on the back of their content – no matter how remotely nor how many third-parties are involved. It’s not hard to see why this is the end goal.

Lackman informs TF that so far he has spent over CAD$80,000 on legal bills, but “owes significantly more than that” to his own lawyers. That’s on top of the CAD$55,000+ he currently owes the plaintiffs plus anything he may spend at trial, if it even gets there.

In comparison, Kim Dotcom’s $40m is monopoly money to most of us, but whichever scenario one takes, the suffocating financial power faced by defendants in these case means inevitable mismatches.

Whether one thinks of these disrupters as heroes or calculating crooks is a matter of opinion (and there’s no shortage of people on both sides of that fence), but it’s likely that many will agree with the notion that getting a fair trial, on the merits of what has been accused, should be the target society aims for.

The current system doesn’t seem to allow for that.


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