Mimesis Law
19 September 2017

Copyright Trolls Steele & Hansmeier Indicted And Arrested

December 16, 2016 (Fault Lines) – Trolls used to be the things that lived under bridges and tried to eat billy goats. Then they became ugly looking plastic dolls with long, colored hair. Before them, all was Tolkein’s huge, stupid trolls and the Germanic myths from which they were sourced. After hiring a new public relations firm—maybe the one that convinced people to buy Beanie Babies, these goat-eating, long-haired creatures got a new king in David Bowie.

But like video killed the radio star, the internet killed the less-disgusting version of the troll. In particular, the vastness of social media combined with anonymity and outrage culture, gave birth to the internet troll. This led companies like Twitter to attempt to bubble wrap people through banning users and a thought control panel Trust and Safety Council. Because, you know, “safety committees” have an established history of being moderate and thoughtful. In turn, this led to an entire season of South Park lampooning the entire effort to control the trolls.

If you search deeper in the forgotten bowls of the internet, you can find something rarer, but equally offensive and perhaps more dangerous. No, not a balrog, but a copyright troll. Basically, some company, like Getty Images, uses software to crawl the internet, looking for copyright works it owns. It then hires a law firm to send cease and desist letters, along with a bill for using the work. In essence, pay up or get sued.

Understandably, property owners want to make sure that their property doesn’t get used for free. Usually, the “borrower” is not a bad person, just misinformed. Most people don’t understand that just because an image is online does not mean it’s available for you to take and use for whatever reason. One of my personal favorites is when starving artists get uppity about copyright law, while usually grossly violating the rights of others. So, even the people who create for a living don’t understand the law.

In any event, these copyright trolls have no mercy, even sending a bill to the person who actually owned the copyrights before donating the copyrighted material to the public. In most cases, it’s basically a legal shakedown racket, with serious consequences threatened. Because it’s good at making money for the trolls, it wasn’t long before even less reputable intellectual property firms found a way to cash in, without the bother of owning a lot of intellectual property.

Two attorneys, Paul Hansmeier and John Steele, began life as your ordinary, evil copyright trolls. And they found a niche in porn. This netted them a large number of people, perhaps a number of them innocent. But apparently driven to bring in more business, and perhaps getting an idea from the FBI, they decided to create a honeypot. They would upload videos to sharing sites like BitTorrent, suggest they were free to download, then send cease and desist letters to the downloaders. Being even slightly cleverer than the average troll, they used pornographic videos. So, the scam went something like this:

Prenda’s methods exhibit a dark understanding of copyright law and the Internet, as detailed in hundreds of court documents and by the few defendants brave enough to fight back. Typically, Prenda starts by filing preliminary lawsuits against John Does identified only by their IP address, the number assigned to every computer with an Internet connection. Then it asks judges to compel Internet service providers (ISPs) such as Comcast and AT&T to surrender the names of those customers. Next, Prenda says it will sue those people unless they pay to settle the claims.

When it does name someone in a suit, Prenda usually posts his name—defendants are almost always men—on its website, along with a link to the lawsuit. If a spouse or potential employer Googles the defendant, they’ll learn he’s been accused of stealing salacious movies such as Sexual Obsession and Shemale Yum.

This scam netted them millions. Yes, scam. As it turned out, a number of folks were misidentified and some enticed by the seemingly free download. Plus, it was never really about protecting intellectual property; it was about shaming these people to write a check to avoid being named in a public complaint, even if they were innocent. Moreover, it costs people more to hire a lawyer and fight the embarrassing suit instead of just paying the blackmail. This is how one court described the scheme:

Plaintiffs have outmaneuvered the legal system. They’ve discovered the nexus of antiquated copyright laws, paralyzing social stigma, and unaffordable defense costs. And they exploit this anomaly by accusing individuals of illegally downloading a single pornographic video.

Then they offer to settle—for a sum calculated to be just below the cost of a bare-bones defense. For these individuals, resistance is futile; most reluctantly pay rather than have their names associated with illegally downloading porn. So now, copyright laws originally designed to compensate starving artists allow, starving attorneys in this electronic-media era to plunder the citizenry.

Eventually, some people started catching on to the enterprise, including Fault Lines own contributor Ken White. Three years after these attorneys were referred to their bars, the U.S. Attorney and the I.R.S., a few things happened. Hansmeier slowed the copyright trolling, instead filing drive-by ADA suits. What a swell guy. Then the Minnesota Supreme Court suspended his license, but he turned his caseload over to his wife and became a paralegal. All this after filing bankruptcy in 2015. Gots to pay the billz.

Eventually, a U.S. Attorney dropped the boom with an 18-count indictment. All the hits are in there: mail fraud, wire fraud, conspiracy to commit those crimes, money laundering and suborning perjury, and forfeiture allegations. Maybe RICO would have just been piling on.

The indictment lays out the scheme described above and how they used a variety of shell companies to pull this off. And it describes most of the over-arching conduct in about 25 pages, including producing their own pornos and making up hacking allegations. Plus, it describes how, once the federal courts began shutting down their discovery, they would use ‘ruse defendants’ to download the porn and, through their cooperation, get discovery on other downloaders. Clever, but fraudulent way to get around the courts.

Regarding making their own porn and hacking, they attended an adult video convention and got the performers to make short films for them. Instead of releasing these films for profit, they had them uploaded to sites like the Pirate’s Bay, hoping to ensnare people. When they did, they sued them. The indictment describes this as “colluding to violate their copyright.” Shooting stunned fish in a barrel is another way to describe it.

These two claimed an entity known as Guava LLC had been hacked. Through this claim, they could attack more potential profit centers. The fundamental problem here was not only that was this a sham entity, but also that it lacked computers. Oops. Maybe someone should have at least pulled an old Pentium into the phone line with a 56k modem.

For the actual charges, the indictment presumably cherry picks a handful of dates and instances out of a probably much larger scope of known conduct. It certainly has several instances of perjury outlined. Based on their past actions, it’s a fair guess that the defendants will take the charges to trial and perhaps represent themselves. Dylan Roof watch out. So, the prosecutors probably picked the low hanging fruit and a sufficient number, rather than dump every instance into the indictment. Ken White, a former federal prosecutor, calls this a devastating indictment and has updates on their arrests.

Pride cometh before the fall. If they had known when to back off or quit their creative form of plunder, then they might have escaped the worst of it. And with a few million stuffed away in the mattress, they probably could have been alright. But avarice had gotten them so much, they probably thought, why stop? Porn makes money and porn lawsuits definitely make money. The reason to stop, now evident, is it may take years for all the players to perform their role. But when they do, you almost always lose.

3 Comments on this post.

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  • Jim Shepherd
    20 December 2016 at 11:16 am - Reply

    I think you mean “…bowels of the internet…”, not “…bowls…”

  • Jim Tyre
    20 December 2016 at 1:33 pm - Reply

    Based on their past actions, it’s a fair guess that the defendants will take the charges to trial and perhaps represent themselves.

    Hansmeier already has a lawyer. And not just any lawyer, a SUPER LAWYER(tm). Steele, who was arrested in Florida (the charges are in Minnesota) represented himself at the initial hearing there, but there are indications that he’ll have separate counsel in MN as well.

  • Deidrr
    12 January 2017 at 4:42 pm - Reply

    Why should a big company that looks “professional ”
    still escape doing this
    but on a sinister bigger scale though?

    Feel the government got the wrong company, and should have gone for the bigger evil.