U.S. Movie Studios Launch Lawsuit Against Online Media Locker Service

LOS ANGELES, February 8, 2011 — Five of the major motion picture studios in the United States on Tuesday launched the next phase of their industry’s ongoing campaign against online piracy by filing what will be a closely-watched copyright infringement lawsuit against Hotfile.com, a so-called cyberlocker service that allows its users to share and store large media files on its servers.

The lawsuit, filed in federal district court in the Southern District of Florida, seeks to basically shut the service down by hitting it with crippling damages of the maximum allowable amount of $150,000 per work infringed, as well as attorneys’ fees.

The studios — Columbia Pictures, Disney, Twentieth Centruy Fox, Universal City Studios, and Warner Brothers — charge that Hotfile’s business model is to goad people to upload as much copyrighted content as possible and then to make money off of downloaders by offering them memberships that would provide them faster downloads of the copyrighted material.

Uploaders are paid, and their compensation increases along with the number of downloads of the content they provided the site. The studios also say that Hotfile.com pays other sites to host links to all of this illegal content.

The site’s operator, Anton Titov of Florida, is responsible for the massive piracy of the studios’ copyrighted content because he has taken no action to disable or discourage users’ infringing activities, the studios charge.

Thus he and his company are directly infringing upon the studios’ copyrights by hosting the content, as well as inducing Hotfile’s users to infringe upon their copyrighted works. The studios are also charging Titov with contributory and vicarious infringement.

“In less than two years Hotfile has become one of the 100 most trafficked sites in the world.  That is a direct result of the massive digital theft that Hotfile promotes.  Everyday Hotfile is responsible for the theft of thousands of MPAA member companies’ movies and TV shows – including movies still playing in theaters – many of which are stolen repeatedly, thousands of times a day, every single day,” said Daniel Mandil, general counsel & chief content protection officer for the MPAA in a statement. “The theft taking place on Hotfile is unmistakable.  Their files are indeed ‘hot,’ as in ‘stolen.’ It’s wrong and it must stop.”

Hotfile.com is just one of a whole class of emerging web sites called cyberlockers that make the distribution of large media files easier and faster online. Cyberlockers are growing in popularity as an alternative to BitTorrent, another method of sharing large media files online that uses a specific protocol and requires users to download a program.

Unlike the cyberlocker service, the BitTorrent protocol transfers bits of files between peers or users, and the rate at which file transfers happen is correlated with how many people there are sharing the content — the more the better and faster the transfers.

A recent report commissioned by NBC Universal conducted by Envisional asserts that just over five percent of global internet traffic can be attributed to unauthorized transfers of content to and from cyberlockers.

Envisional says that BitTorrent is still the favorite method for illegally sharing files, making up almost a quarter of global internet traffic.  Its report shows that piracy of movies and television content is worst in areas of the world where access to legitimate forms of online content is limited.

The studios acknowledged in their complaint that there are legitimate uses for such services online, but said that Hotfile isn’t one of them because its promotional materials incentivize people to upload content that other people will want to download.

A search on filestube.com, one of the search sites that enables users to find access to the files on the cyberlocker services, turns up links to lots of popular television shows and movies.

The studios’ complaint contains dozens of examples of movies and television shows that are available without authorization on the site.

And Envisional’s recent analysis of a random sample of 2,000 cyberlocker links found that more than 90 percent of the linked-to material was copyrighted.

An e-mail to Hotfile.com wasn’t returned, but the site clearly displays its intention to abide by US copyright law with a prominent notice on its landing page that users are required to read and agree with before they upload any files.

Large tech firms such as Google will be watching the legal developments in this case closely since they’ve bet their future on providing consumers with services, information and entertainment in “the cloud.”

The standards, if any, developed in this case could establish the boundaries of acceptable business practices by companies offering such services.

An indication of Google’s concern over this subject area has manifested itself through another lawsuit over a music cyberlocker service called MP3Tunes, which allows users to upload, store and access their music in personal lockers in the cloud. The service has been sued by EMI for copyright infringement on behalf of its users.

Mp3tunes argues that it shouldn’t be liable for copyright infringement because it abides by the take-down rules as defined by the Digital Millennium Copyright Act. The law provides intermediaries with a “safe harbor” and shields them from liability if they respond to take-down requests promptly.

Google has filed a friend-of-the-court brief siding with MP3Tunes.com.