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Copyright, IP, IP Asset

Righthaven Business Model Exposed – End Of An Era, Or Spawning Of A New IP Licensing Industry?

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Righthaven files a lot of copyright lawsuits, and that’s putting it mildly. From this convenient website, it appears that they’ve filed somewhere in the ball-park of more than 260 copyright lawsuits between March of last year and today.  That’s around three lawsuits every four days, give or take.  That’s a lot. And during that entire time, I’ve somehow managed to remain silent about the whole matter, despite the fact that so many others are outraged.

How outraged? Ars Technica called it a “sordid operation.”  Boing boing referred to it as an “extortion racket.”  Joe Mulllin calls the outfit “controversial.”  That’s hardly an indictment in itself, but he did specifically mention in his latest article that “Righthaven has sued charities, impoverished hobby bloggers, reporters, and the newspaper’s own sources.”  These are all true facts, to be sure.  But with 260 lawsuits, they can’t all fit into these categories, can they?

In fact, they don’t.  Righthaven has sued other newspapers, radio stations, bookmakers (several, actually), news aggregators, and advertising specialists.  Not limiting their lawsuits to those who make their living by both creating, and evidently using, original content, Righthaven has also sued conservatives, liberals, gun nuts (including the female variety), marijuana activists (any non-cash consideration in that settlement?), bootleggers, and engineers. I don’t get the impression Righthaven’s copyright enforcement campaign is based on any ideology other than the aggressive exercise of property rights.

Righthaven’s business model, and partnership with Stephens Media, seems to be fundamentally misunderstood.  Stephens Media’s various employees create original content on a daily basis, and they seek to monetize that content.  They do this in two ways.  First, in the traditional manner, they provide that content at low (or no) cost to an interested audience, and extract value from advertisers for the attention their content draws.  Second, in a less traditional manner, they pay Righthaven to closely monitor the use of their content by others, and insist on compensation by those that seek to copy.  The simple message is that Righthaven owns the content and is willing enforce its rights aggressively.

Or do they?  Judge Roger Hunt called Righthaven’s privacy concerns “feeble” when signing off on an order that unsealed a copy of an agreement between Righthaven and Stephens Media (parent company of 30 newspapers) apparently relevant to Righthaven’s copyright enforcement campaign.  Media reports of the agreement claim that Stephens and Righthaven are to split the proceeds of any enforcement 50/50, that Stephens is largely in control of Righthaven’s litigation strategy, and that Righthaven did not actually receive an assignment of the copyrights it is enforcing.

The 50/50 split appears to be correct, and Stephens does have some specific rights to order Righthaven not to take a specific enforcement action, but the accusation that Righthaven failed to obtain valid assignments of the copyrights does not seem to hold water.  At the very least, I can say that the revealed agreement alone is insufficient to draw the conclusion that Righthaven’s copyright assignments are ineffective.  First, section 3.1 says that Stephens Media “shall assign” copyrights to Righthaven pursuant to procedures in section 7.1.  The latter section again refers to a form assignment document in Exhibit 1 that is to be used to perfect the copyright assignments.  The form agreement contains the magic language “Stephens Media hereby transfers, vests and assigns the work … to Righthaven … all copyrights requisite to have Righthaven recognized as the copyright owner …” and so on.  Sure reads like a copyright assignment to me.

There’s language in the form agreement about the right to sue for past, present and future infringement which is somewhat of a “belt and suspenders” approach that is also common in most patent assignments.  Further, section 7.2 contains an exclusive license for Stephens Media to continue to use and exploit the work.  If anything, this cuts in favor of finding that Righthaven has obtained legitimate assignments.  So, I can’t help but wonder on what basis the media reports claim that “Stephens Media didn’t actually assign any of the rights related to copyright to Righthaven except the right to sue—and that’s arguably illegal under case law.”

Ignoring the facts for a moment, what’s this notion about illegal agreements?  The doctrine they’re probably referring to is an old common law doctrine called champerty.  A decent legal definition (it’s not Black’s, but looks good enough) describes it as:

an agreement between the party suing in a lawsuit (plaintiff) and another person, usually an attorney, who agrees to finance and carry the lawsuit in return for a percentage of the recovery (money won and paid.) In Common Law this was illegal on the theory that it encouraged lawsuits.

Of course, today it’s not illegal. It happens all the time, under a new name: contingent fee litigation.  I’ve seen this doctrine kicked around a little bit in defense to patent litigation, and it has yet to go anywhere to the best of my knowledge.  Getting back to the facts, it seems like these articles are simply accepting a Righthaven opponent’s legal argument at face value, rather than obtaining an objective view of the facts.

Media reports also suggest this could signal the beginning of the end for Righthaven’s business model.  (PaidContent.org’s headline reads “Righthaven’s Secret Contract Revealed: Will Its Strategy Collapse?“, Ars Technica says “Righthaven reeling: secret doc could doom a copyright troll“).  As you might guess, I look at things just a little bit differently.  First of all, the harm to the merits of Righthaven’s case based on this document alone is entirely overblown.  But more importantly, I think these recent events might only embolden and encourage similar business models.

But first, I mentioned above that, despite all of the news and outcry, I have remained completely silent on Righthaven’s enforcement campaign.  Why? Well, at first I wasn’t sure what to make of it.  I didn’t (and don’t necessarily today) think that it would ultimately prove to be a financially successful business model for a variety of reasons.  However, I can understand why someone would find the business model attractive, and I would hardly be quick to begrudge an IP owner from seeking to monetize their IP.  At this point, the whole operation has just gotten too big to ignore, and it occurred to me that every single article and blog post I’ve read simply assumes that there’s something illegal, immoral or otherwise untoward about Righthaven’s licensing operation … as if this is the first one-sided story in the history of mankind.  Well, I may not be nearly as well versed in copyright law as I am in patent law, but I do understand IP as an asset.  More importantly, I understand IP licensing as a business model and it occurred to me that there are probably many similarities between Righthaven’s licensing model, and the patent licensing models I’ve become familiar with.

IP licensing generally centers around two points: intellectual assets and relative values.  In the case of patents, the asset is a novel product or process.  Valuable products are likely to be copied, so investment in valuable patents is reasonable since there are likely to be many possible licensing candidates.  In the case of copyrights, the asset is content.  Similar to products, valuable content is more likely to be copied, so investment in content is tempting.  Nevertheless, there are a few reasons why I’m skeptical of the efficacy of a content-based licensing business model.

First, IP licensing deals depend on an agreement (or in the context of litigation, a compromise) factoring in the value of the asset to the IP owner and the value of using the asset to the IP user.  Many of the users Righthaven has pursued likely place a relatively low value on using Righthaven’s particular content.  Why? For one thing, many of them probably realize very little direct revenue from the content itself (although certainly they enjoy indirect benefits at the least.  For another, primarily Righthaven’s content is factual content, available from multiple sources. If Righthaven tries to exact too high a price, users can simply look elsewhere for comparable content.

Second, the enforcement mechanism (litigation) for copyrights strikes me as being weaker, in general, than enforcement of patents.  Moreover, the news industry particularly has difficulty with enforcement since so much of its original content creation is rooted in reporting un-protectable facts.  Righthaven experienced this exact phenomenon when a judge ruled as a matter of law that a particular defendant’s infringement was excused under the affirmative defense of fair use, despite it being a notoriously fact-specific inquiry.

Finally, an aggressive, litigation-based copyright enforcement campaign far exceeds the prevailing “social norms” for content appropriation.  Aggression is more common for patent litigation, as well as copyright infringement involving issues like bootlegged content, or unauthorized derivative works.  However, in the age of digital media where the ease of copying is confused with the authority to copy, misunderstandings can usually be resolved without lawyers getting involved and without money changing hands.  Thus, Righthaven should have expected that its actions would not be well-received by its contemporaries in the media.

Getting back to the point, however, rather than sound the death knell, the court’s exposure of Righthaven’s agreement will probably only encourage the business model.  Thanks to the publication of this agreement, anyone even remotely interested in IP enforcement now has a blueprint for structuring a deal with content owners.  After all, the 30 newspapers published by Stephens Media can’t be the only ones interested in monetizing their intellectual assets through licensing.  Of course, before you go out and copy Righthaven’s “Strategic Alliance Agreement,” you may want to go ahead and contact them about licensing it …

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Discussion

31 thoughts on “Righthaven Business Model Exposed – End Of An Era, Or Spawning Of A New IP Licensing Industry?

  1. Seems to me that companies are pushing harder than before to compete with competitors without doing the actual work of inventing new things rather just building on the work of others I think as this trend continues so will the cases of patent infringement and patent enforcement increase.

    Posted by Jared | April 20, 2011, 10:36 am
  2. Spoken like a true patent troll.

    Posted by kb | April 20, 2011, 4:17 pm
  3. OK I will make a logical argument. You forget about Every one of Righthaven’s cookie-cutter lawsuits. They make claims that completely contradict their agreement with Stephens Media.

    “Righthaven holds the exclusive right to reproduce the Work.”

    “Righthaven holds the exclusive right to prepare derivative works based upon the
    Work.”

    “Righthaven holds the exclusive right to distribute copies of the Work”

    And the agreement with Stephens Media states the opposite:

    It says Stephens Media shall retain “an exclusive license to exploit the Stephens Media assigned copyrights for any lawful purpose whatsoever and Righthaven shall have no right or license to exploit or participate in the receipt of royalties from the exploitation of the Stephens Media assigned copyrights other than the right to proceeds in association with a recovery.”

    Righthaven also failed to report their 50/50 split with Stephens Media in documents that required them to disclose all parties that stood to benefit from the lawsuit.

    Righthaven is in trouble and I don’t suspect they will be around much longer except as defendants in scores of lawsuits, counter-suits and class-action suits against them and Stephens Media.

    Many of their lawyers have already jumped ship. Their own website is now down. They are exhibiting all behaviors of a company going down.

    They are actually doing a service to copyright and patent trolls as a shining example of how not to do things.

    Your move Patrick.

    Posted by kb | April 20, 2011, 7:34 pm
  4. Patrick

    If you are a lawyer that represents people who own patents and you are simply representing them then I will take the “patent troll” label back, and thank you for your service.

    Patent troll is reserved for lawyers or companies that use patents merely for litigation purposes.

    Posted by kb | April 20, 2011, 9:20 pm
  5. KB,

    That’s really more of an assertion of fact than an argument. Since you didn’t link to any of the complaints, and I’m way too tired to track them down, I’ll take your word that Righthaven made these allegations in its complaints.

    These statements might spell trouble if Righthaven has made false statements of fact in its filings, but it’s completely immaterial to the point I was making.

    The media reports of the Stephens Media agreement claim that Stephens retained ownership of the copyrights while only transferring the right to sue. That is simply false. By the plain language of the agreement, Stephens transferred ownership of the copyright and Righthaven granted back the exclusive license to exploit the works consistent with section 7.2.

    This may seem like a legal “technicality,” but in the eyes of the law it is world’s apart from the language in Silvers v Sony.

    You might be right about Righthaven collapsing as well. As I noted in the post, I have good reason to be skeptical of the business model.

    You claim that the lawyer’s have jumped ship. For all I know, Righthaven fired them for doing a lousy job. If the work is a shoddy and sloppy as you’re suggesting, then I wouldn’t be surprised if that were the case.

    kb – we don’t have to be enemies. You took it upon yourself to come here and engage in name-calling. I think you’ll find that if you make a coherent point, you’ll receive a substantive response.

    Patent troll is a derogatory term that is designed to ellicit an emotional response, not a rational one. It is an appeal to biases, not reason. Granting exclusionary rights to inventors and authors is morally right, and misappropriating inventions and content is morally wrong. You can disagree with this premise if you wish, and I won’t marginalize your opinion because of it.

    Posted by Patrick | April 20, 2011, 11:59 pm
    • Righthaven mainly hires recent graduates from Tier 4 schools, so I doubt they expect much from their lawyers except for signing their names to frivolous filings drafted by Gibson; and for calling defendants to extort settlements. So, no they did not fire them. They left for fear of getting sued for participating in an extortion racket.

      Posted by R.M. | May 3, 2011, 1:36 pm
  6. KB “Righthaven also failed to report their 50/50 split with Stephens Media in documents that required them to disclose all parties that stood to benefit from the lawsuit.”

    I assume you mean the corporate disclosure statement. The rules on those are quite clear.

    You are required to identify “any parent corporation and any publicly held corporation owning 10% or more of” the stock of the party to the lawsuit. Based on just that agreement, Stephens Media does not fit that description.

    http://www.law.cornell.edu/rules/frcp/Rule7_1.htm

    Posted by Patrick | April 21, 2011, 12:03 am
    • You need to read District Court’s local Rule 7.1-1 which states:

      (a) Unless otherwise ordered, in all cases except habeas coiprs cases counsel for private (nongovernmental)
      parties shall identify in the disclosure statement required by Fed. R. Civ. P. 7.1 all persons, associations of persons, firms, partnerships or corporations (including parent coiporations) which have a *direct, pecuniary interest* in the outcome of the case.

      It is undeniable that Stephens Media has a pecuniary interest in the outcome of every case filed by Righthaven in the District Court for Nevada, yet that fact has been intentionally withheld from the court and each defendant.

      Posted by R.M. | May 3, 2011, 1:08 pm
  7. I felt bad about the calling you a patent troll. After reading your ‘about’ section I realized you are on the right side of things regarding Intellectual Property. I too believe in the sanctity of property rights where patents and copyrights are concerned.

    So I apologize to you for my quick judgement.

    Since becoming a Righthaven critic I have actually leaned alot about copyright law and have done some reevaluating my own view of Intellectual property and gained a higher respect for it and am much more aware of my online activities because of it.

    It is easy for people to forget that someone put their heart and soul into a work and deserve to enjoy and benifit from the fruit of their labors.

    My beef with Righthaven is not about the protection of copyrights but their tactics. Their actions have damaged copyright holders already and they risk creating court precedences that will diminish it even further.

    If you would like the source of the information I gave you above here is a link.

    https://www.eff.org/deeplinks/2011/04/why-righthaven-s-copyright-assignment-sham-and-why

    I would be interested in your perspective on it.

    Posted by kb | April 21, 2011, 12:59 am
  8. You already have that link. Here is something you might be interested in. Read the Righthaven lawsuit language and then the agreement.

    This is the court filing for Righthaven vs Sharon Angle. It is basically the same text for all lawsuits:

    http://docs.justia.com/cases/federal/district-courts/nevada/nvdce/2:2010cv01511/75906/

    Righthaven holds the exclusive right to reproduce the Jobs Work, pursuant to 17

    Righthaven holds the exclusive right to prepare derivative works based upon the

    Righthaven holds the exclusive right to distribute copies of the Jobs Work,

    Righthaven holds the exclusive right to publicly display the Jobs Work, pursuant

    Posted by kb | April 21, 2011, 1:15 am
  9. KB,

    I have read that link, I just wasn’t making the connection back to the allegations in the complaint.

    Basically, I think DU’s lawyers have engaged in a very creative interpretation of the Righthavent/Stephens Media contract by basically suggesting that an assignment and grant back of an exclusive license is legally equivalent to transferring only the right to sue.

    It may be functionally equivalent, but the difference is likely enough to differentiate the Silvers case.

    If misleading, false or blatantly dishonest statements are being used in court filings, then obviously it makes RH look like it has something to hide. Whether it actually does, or not, I don’t know.

    I do accept your apology but I would ask you to consider the possibility that no one should be called a patent troll. Some folks reserve the term for a person who sues without any prior investigation or analysis into the defendant’s product, and without any credible infringement theory. First, I believe such cases to be extremely rare, and the overwhelming majority of lawyers I meet would refuse to engage in this type of behavior. Second, we have a better term for this type of behavior: unethical.

    Posted by Patrick | April 21, 2011, 9:54 am
  10. Thank you for accepting my apology. I do agree that Righthaven is an aberration and does not reflect the legal profession as a whole nor does it reflect on lawyers that fight for copyrights and patents. I think the best reason to fight Righthaven is to make sure their tactics do not become more widespread. There are much more productive ways to reduce infringements.

    The Internet is a tricky place because even though people may find it unethical to download a movie or even a song they do not think twice about taking an image because it is such a ubiquitous activity. I think the RIAA to their credit has done a good job in educating people about movies but I think that newspapers and online content providers need to run a similar campaign on images and articles. It would save them a lot in the long run.

    Posted by kb | April 21, 2011, 10:14 am
  11. That’s the MPAA not the RIAA

    Posted by kb | April 21, 2011, 10:46 am
  12. kb,

    Good points. From Righthaven’s perspective, I honestly don’t know if the goal is to “reduce infringement” or to monetize content that is already being appropriated. I suppose doing the latter may accomplish the effect of the former.

    Also, I don’t see a consistent view of what conduct in the newspaper world is/is not appropriate. It is at least arguable that network effects of widespread copying/remixing/derivative works has positive economic impact on the original content owner, but that doesn’t necessarily hold true in every instance.

    Overall, I think newspapers/online content providers have been fairly lax in enforcement of copyright for a long time, which has lulled bloggers, SEO consultants, content farmers and the like into a false sense of security … (ie. that they were free to take what wasn’t expressly locked up).

    Righthaven may have a positive effect in that respect (raising awareness of content owner’s rights), but whether it will be detrimental on balance (for example, because judges find their actions distasteful and develop doctrines to limit copyright enforceability) remains to be seen.

    Posted by Patrick | April 21, 2011, 12:06 pm
  13. Patrick, what is clear is that you are substantially uninformed regarding the history of the filings and sloppiness and contempt Righthaven has shown the court on more than one occasion. One doesn’t have to look too far to see an inattention to detail with many factual errors and purposely erroneous statements. You may be of the opinion the counsel at EFF is using a “creative interpretation” but the judge in another case seems to think otherwise as he has issued an Order to Show Cause and hearing on the issue. It’s an abuse of the judicial system. I’m not going to do the research for you but I assume you have access to PACER and can see for yourself. They aren’t about protecting copyright. They are about making a quick buck and using the courts to just that.

    Posted by Bubba | May 1, 2011, 3:00 am
    • Bubba,

      I didn’t say (or mean to suggest) that Righthaven is about “protecting copyright.” Their goal, as I see it, is monetization of their content by thinking of IP as an asset.

      I’m more interested in the business model than its execution, and as I mention in the article, I am also skeptical of long-term success of the business model.

      Even if the business model was perfect, when the captain crashes the ship into an iceberg, does that mean the shipbuilder is to blame?

      Posted by Patrick | May 2, 2011, 2:38 pm
      • Patrick:
        Under what circumstances would you consider a copyright assignment a “sham”?

        More specifically, what would you want to see in relation to the assignment from Stephens to Righthaven to conclude that the transaction was nothing but a “sham”?

        Posted by R.M. | May 3, 2011, 11:41 am
        • R.M.,

          “Assignment” is a loaded term. There was either an assignment of the copyright or not. As such, there is no such thing as a “sham” assignment.

          People suggesting the RH assignments are a “sham” actually mean that RH is falsely claiming to have an assignment.

          Assuming the form assignment agreement attached as an exhibit to the RH/Stephens contract was used to actually transfer the copyrights, I do not believe the “sham assignment” allegations hold water.

          Posted by Patrick | May 3, 2011, 11:54 am
          • But you haven’t answered my question. Let me put it another way: Is there *any* scenario under which one can reasonably conclude that a transfer of rights from A to B is a “sham transaction” structured for the sole purpose of evading the confines of Silvers?

            Posted by R.M. | May 3, 2011, 12:05 pm
      • They are not monetizing their content. They are leveraging the fear of litigation to exact settlements from bloggers who realize that settling is less costly than fighting to win. I hope you are not suggesting that they could actually generate $4000 (average settlement) by selling an article to a blog publisher with 50 readers. This is nothing but a shakedown racket and the judges are on to them.

        Posted by R.M. | May 3, 2011, 2:41 pm
        • R.M. said “They are not monetizing their content.”

          Actually, that’s exactly what they’re doing. Consider, for example, the operator of the website (http://www.deanmostofi.com/), who is doing nothing more than stealing content from professional news organizations like the Baltimore Sun (compare this and this) and the Washington Post (compare this and this) in order to generate his own revenue.

          If you look closely, the articles are verbatim copies of substantial portions of the original works. This copycat is then using that content to generate adsense ads.

          This is blatant copying for commercial purposes, so if the content had no value, the copyist wouldn’t be using it in the first place. The fact that Righthaven would seek $4000 in compensation has more to do with the fact that copyright owner has to chase down and demand compensation from infringers ex post. Obviously, if aggregators wanted to negotiate rights to make commercial reproductions of content ex ante, the price would necessarily be lower.

          Posted by Publius | May 3, 2011, 4:12 pm
          • You are truly clueless. Why don’t you read the show cause hearing transcript in Righthaven v. CIO and learn what the court considers to be fair use. You can copy an entire article and post it on a site (with ads) without causing any cognizable harm to the copyright holder. Righthaven, so far, has been unable to convince a single judge that it has been harmed as a result of the republications. Every dollar they have generated has come from people who didn’t want to fight back because it was cheaper to pay a few grand to make the leeches go away. That hardly qualifies as monetizing content.

            Next time use a better example of a site that actually competes with the copyright holder and is in the publishing business. A blogger who probably generates less than what it costs to buy a bottle of beer, and does not compete with the copyright holder, is not a very good example of someone who should be placed behind bars for stealing content from a copyright troll. LOL…

            Posted by R.M. | May 3, 2011, 5:37 pm
          • So what do you have to say now that your buddies at Righthaven have been chastised by the chief judge in Nevada and their suit dismissed for lack of standing? They are also getting sanctioned to lying to the court.

            Posted by loanauditor | June 14, 2011, 7:18 pm
          • The fact that you’ve kept the link to this post, waited for this opportunity, and posted under a(nother) pseudonym tells me everything I need to know about your character and intelligence.

            Posted by Patrick | June 14, 2011, 7:38 pm

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