Over the last year a handful of lawyers have sued close to two hundred thousand alleged BitTorrent users in the United States. Many of these cases were launched by so-called "copyright trolls" who have re-engineered piracy into a healthy revenue stream. Today, we reveal a critical part of this legal bullying by taking a closer look at a settlement proposal sent out by John Steele, one of the most active anti-piracy lawyers around.

In recent months we’ve written dozens of articles on copyright trolls and BitTorrent mass-lawsuits. The aim of these cases is to get the suspected copyright infringer to settle for a few thousand dollars, in what we’ve dubbed a “pay-up-or-else” scheme.

The settlement proposals are the core of every single case, and none of the copyright holders intends to proceed with the full jury trial they asked for in court. Today we take a closer look at such a settlement letter to see what tens of thousands of alleged copyright infringers are being offered.

The settlement letter in question comes from the notorious anti-piracy lawyer John Steele. The divorce attorney turned “pirate slayer” is going after thousands of pirates and ostensibly protecting the rights of adult entertainment companies. And he’s a committed man.

In an interview with the Chicago Tribune, Steele claimed that he and a partner spent as much as $250,000 to develop their own BitTorrent tracking tool, a figure that seems unrealistic to say the least. But in return he got the best of the best. Apparently, Steele’s software is error-free.

Steele claims that the thousands of IP-addressed he has gathered thus far contain no “false positives.” An interesting conclusion, especially since it’s impossible to verify. Not only for us, but also for Steele himself.

Unfortunately for Steele and his client, not everyone agrees that his practices are that solid. Last month District Court Judge Harold Baker denied them the right to subpoena the ISPs of alleged copyright infringers, arguing that an IP-address does not equal a person.

However, other judges were less thoughtful and allowed Steele to unfold his masterplan. In those cases where he was allowed to subpoena ISPs, the alleged file-sharers were soon sent a settlement offer, asking them to pay up or face a fine up to $150,000 through a jury trial.

Below we have an example of such a settlement letter, which comes from the case First Time Videos LLC against Does 1-500. The defendant in question is accused of sharing the video “Madeline 3000kbps” for which the copyrights are interestingly enough not registered at the U.S. Copyright Office.

Settlement Letter

Copyrighted or not, Steele claims the defendant infringed on the rights of his client, and demands $2,900 in compensation.

“While it is too late to undo the illegal file sharing associated with your IP address, we have prepared an offer to enable our client to recover damages for the harm caused by the illegal downloading and to allow both parties to avoid the expense of a lawsuit,” Steele writes in the settlement letter.

What follows is a carefully constructed mix of threats and psychological pressure to convince the defendant that a settlement is the best way out.

“In it [sic] least one case where the Copyright Law has been applied to digital piracy ans statutory damages were applicable, juries have awarded over $20,000 per pirated file. During the RIAA’s well-publicized campaign against music piracy, over 30,000 people nationwide settled their cases ranging from an average $3,000 to $12,000,” the lawyer writes.

“More recently, on December 22, 2010, a case in which a defendant was accused of illegally downloading 6 works via BitTorrent, a settlement was reached for $250,000,” Steele adds.

TorrentFreak covered this particular case and it was not a $250,000 settlement at all, something that Steele should be very well aware of. As we originally reported and predicted, this case is the perfect propaganda tool for scaring people into settling.

Nevertheless, to avoid becoming completely bankrupt, Steele and his client are kind enough to offer a ‘reasonable settlement.’

“In light with these factors, we believe that providing you with an opportunity to avoid litigation by working out a settlement with us, versus the costs of attorneys’ fees and the uncertainty with jury verdicts, is very reasonable and in good faith.”

Attached to the settlement proposal is a frequently asked questions section which again stresses that settling the case is the wise choice.

Q: How do I make this go away?

A: Paying the settlement fee will release you from all liability and close the case.

Aside from the straightforward answer below there is also plenty of confusion, especially when it comes to hiring an attorney. While the letter states that consulting with an attorney is advisable, it also stresses that this may be more expensive that the settlement itself.

“The decision to hire an attorney is completely up to you. We cannot give you legal advise, but speaking with an attorney is generally highly advisable. In some cases the settlement offered by us is significantly lower than the costs associated with hiring an attorney,” the letter reads.

Tough choice.

We can only wonder what the judges who handle the dozens of mass-lawsuits think of these practices. They never get to see this part of the case, and many may very well believe that the copyright holders are actually planning to pursue a full trial.

The reality is, however, that no court has ever looked thoroughly at what evidence there actually is, which is a waste of the supposed $250,000 Steele invested in his tracking software. But with the dollars rolling in, we have no doubt that Steele will be comfortable with that.