A UK High Court ruling has just handed Hollywood a defeat in a battle against a now-defunct file-sharing site. The MPA argued that when Usenet indexing site Newzbin2 generated profits from piracy, that money should be handed over to the studios. The MPA argued that copyright infringement is theft but the Court said it was more like trespass, noting that any award would have a "chilling effect on innovation and creativity."

Newzbin was one of the original Usenet indexing sites and the creator of the .NZB file format, the tool that opened up newsgroup downloading to the masses.

Perhaps inevitably, in 2008 the site was eyed by the Motion Picture Association (MPA), the MPAA’s big brother. A threatening letter in 2008 developed into a lawsuit and by February 2010 Newzbin had lost their High Court case after being found liable for copyright infringement.

The site later reincarnated as Newzbin2 but shut down again recently. However, that didn’t deter Hollywood from trying to squeeze money from its ashes and the pockets of its affiliates.

In November 2012 it emerged through information given to TorrentFreak by Newzbin2’s Mr White that the MPA were now suing Newzbin2’s payment processor, a company called Kthxbai Limited. A High Court ruling handed down this week has revealed the extent of that claim.

It transpires that Kthxbai’s sole director is David Harris, a barrister who defended Newzbin in their original trial but stepped down when it was discovered that he was actually the owner of Newzbin. Harris is also named personally in the MPA’s latest claim.

Other defendants were the NZB Foundation, a Panamanian company that apparently owns Harris’ home, and Motors for Movies Limited, a company that owns Harris’ McLaren car. Former Newzbin1 owner Christopher Elsworth was also included.

The studios – Twentieth Century Fox, Universal, Warner, Paramount, Disney and Columbia – obtained freezing injunctions against the defendants in 2012, later seeking proprietary injunctions with the aim of staking claim to revenues generated by Newzbin2 when the site infringed copyright.

Acting for the studios Richard Spearman QC argued that copyright infringement is akin to theft, citing an earlier case where the word “steal” had been used to describe video piracy. Spearman also quoted from another case involving “stolen coins” but Justice Newey found the arguments unconvincing.

“The fruits of an infringement of copyright cannot, as it seems to me, be equated with the stolen coins. While the owner of the coins will have lost title to the coins at law, the copyright owner will have retained title throughout both in equity and at law,” the Judge wrote.

“A copyright infringer is more akin to a trespasser rather than to the thief of the coins. That leads to the next point: that a landowner has no proprietary claim to the fruits of a trespass,” he added.

Justice Newey then put forward a scenario in which a market trader was selling DVDs from a stall (some infringing, others not) on land he was trespassing on.

“The owner of the land could not, as I see it, make any proprietary claim to the proceeds of the trading or even the profit from it. There is no evident reason why the owner of the copyright in the DVDs should be in a better position in this respect,” he wrote.

“On Mr Spearman’s case, a copyright owner’s claim would not even be limited to the infringer’s profits: in principle, the entire proceeds of sale would be held on trust for the copyright owner. That might both be unfair and stultify enterprise,” he explained.

“It might not seem just for even a deliberate wrongdoer to have to pay the copyright owner the amount of his gross receipts, and an infringer need not have known that he was breaching copyright.

“Further, were Mr Spearman’s submissions correct, a person might be deterred from pursuing an activity if he perceived there to be even a small risk that the activity would involve a breach of copyright or other intellectual property rights. As was submitted by Miss Lambert [for the defense], that could have a chilling effect on innovation and creativity.”

Justice Newey concluded by noting Mr Spearman’s “persuasive advocacy” but ultimately ruling that a copyright owner does not have a proprietary claim to the profits generated by piracy.

The MPA is expected to appeal.