Two years ago, in March 2011, I first saw Prenda Law's John Steele in person—and he was getting bawled out by a federal judge in downtown Chicago.

Impeccably dressed, Steele walked into Judge Milton Shadur's wood-paneled courtroom to defend his approach to porn copyright trolling, then in one of its earlier iterations. Steele was representing CP Productions, the unfortunately named Arizona porn producer behind a film (well, a "film") called Cowgirl Creampie. Steele found a long list of IP addresses sharing Cowgirl Creampie using the BitTorrent protocol, so he went to court. He sought subpoena power in order to turn that list of IP addresses into real names. Steele got it, partly by assuring the judge that the case was related to the state of Illinois.

When it became apparent that an Arizona company was actually suing people from all over the US, Judge Shadur got irritated. It emerged that Steele had not actually served all of the anonymous defendants in the case within 120 days of filing it. This further annoyed Shadur. He tossed the case and blasted Steele's “ill-considered lawsuit” that had “abused the litigation system in more than one way.” He wanted to talk to Steele about it.

Steele didn't appear intimidated to be in the courtroom of an angry judge; this was just business. Some judges became upset at his tactics, especially since Steele and his partners showed little interest in actually litigating cases (instead, they requested settlements of a few thousand dollars from defendants). But the courts are full of judges. If one tossed your case, you could just vary the film and/or the IP addresses, file again, and hope to get another judge.

Instead of trying to placate the judge, Steele showed up to the hearing and asked Shadur to reconsider the dismissal. What if Steele added a charge of "conspiracy" to his case, accusing the 300 BitTorrent users at issue of colluding to infringe the rights of CP Productions? Steele also suggested that the real "fraud" here had actually come from the defendants.

This went absolutely nowhere. “I accepted you at your word,” Shadur said. The case was supposed to have a local connection, but instead "I start getting motions to quash” from places like Tennessee, Texas, and New Jersey, from "people that had nothing at all to do with the state of Illinois.” Shadur called the fraud charge "ironic" and said that the facts in the case "were not as asserted." The case filings “did not really comply with the subjective and objective good faith requirement." In other words, Shadur all but called Steele a liar to his face.

Steele walked out, but he would be back soon.

On May 4, he brought a new "alt-porn" case on behalf of a firm called Boy Racer. Most federal cases are assigned by random lottery to a judge, and the case was handed to Judge Shadur the next day. On May 6, Steele dismissed the case. It was a brazen attempt to continue the same tactics, in the same district, that a federal judge had just rejected—and if there's one thing federal judges like less than new items cluttering up their dockets, it is people playing games with them.

Shadur wrote a memorandum a few days later that opened with a dig at Steele. "It seems that attorney John Steele ('Steele') might be well advised to stay away from Las Vegas or other casinos, because his current filing on behalf of plaintiff Boy Racer, Inc. has—despite odds in the range of 25 to 1—been assigned at random to the calendar of this District Court, which had previously been the recipient of another random assignment of a Steele-filed action... This Court had ended up dismissing the CP Productions action for... attorney Steele’s effort to shoot first and identify his targets later."

Refining the business model

You could see just how devoted Steele and his partners were to their new business model, though, because even these kinds of warning shots didn't deter them. Steele's initial operation, which became Prenda Law in November 2011, continued to iterate. It filed cases in other Illinois federal districts downstate. It filed in Illinois state courts, jiggering the charges to match the venue (copyright infringement of this kind is a federal issue). It filed in Florida, attempting to use an arcane procedure called a "true bill of discovery" to obtain IP addresses. It filed in California. It tried out "reverse class actions" suits against alleged downloaders. It formed a company in Las Vegas (hiring a "CEO" named Mark Lutz) and set up trusts located offshore (in Nevis) in order to own porn copyrights. No pesky PR department or tentative CEO could hold up Prenda's litigation pain train if the law firm could simply ditch the client and go into business for itself.

Steele moved to Florida during the summer of 2011, but judges in Florida weren't any kinder to the Prenda approach. In an absolutely surreal November 2012 hearing, a judge spent most of the proceedings simply trying to make sense out of who had shown up in her courtroom and why they were there. We covered the story at the time:

A man named Mark Lutz was in the courtroom as the company's representative. But it turned out that he was a "representative" in only the loosest sense of the term. Under questioning from Judge Scriven, Lutz admitted that he wasn't an attorney, wasn't an officer of [plaintiff] Sunlust, was not "authorized to bind the company to any legal contracts," and couldn't even name any of Sunlust's officers. Lutz said he was not a salaried employee of Sunlust at all. He was an independent contractor whose only role with Sunlust was to show up in court on their behalf. Judge Scriven then spotted another man near the plaintiff's table and asked who he was. "Your Honor, my name is John Steele," he said. "I'm an attorney, but not involved in this case," he said. Indeed, he stressed that "I want to make very clear to this Court I'm not purporting in any way to be an attorney licensed in the State of Florida." Syfert, the defense attorney, then helpfully pointed out that Lutz used to work for Steele. "Mr. Lutz was actually a paralegal and debt collector for Prenda Law when it was a multi-state, multi-jurisdictional law firm between here and Illinois," Syfert told Judge Scriven. The judge grilled Steele about his knowledge of Sunlust, but Steele also pled ignorance about who owns and operates Sunlust Pictures. The exasperated judge told Lutz the court would not consider him a representative of Sunlust. "You're not a corporate representative of anybody if you don't have any information about the corporation," she said. Given that neither Lutz, Steele, nor Torres were able to speak on behalf of Sunlust, that meant there was no one available to speak on behalf of the plaintiff.

The case was tossed "for failure to appear at this hearing, for failure to present a lawful agent, for attempted fraud on the Court." Though judges were using words like "fraud," individual rulings affected only individual cases, and judges showed little interest in following the story further.

Despite the scattered anger of the judiciary, the Prenda craziness worked for years. Settlements rolled in, partly because it was cheaper to settle than to contest the charges and partly because of the "embarrassment factor" of the raunchy porn at issue. A Florida writer apparently bumped into John Steele in December 2011 during a major Miami art fair:

Later, I shared a sandwich with a beefy looking man at Le Sandwicherie on 14th and Collins. “You heard of the one percent? I’m the .3 percent,” he said. He then proceeded to tell me how he’d figured out how to track individuals who download porn with BitTorrent clients, and then sue them on behalf of the porn sites. Invariably, they settle. “This watch doesn’t just look like it’s made of gold,” he said as he walked across the street to Club Deuce. It was 4am, and the bars were still open for at least another hour.

In October 2012, Forbes asked Steele if his tactics had earned the $15 million suggested by the 5,000 settlements Prenda says it has made. “Maybe a little less," Steele replied. "We don’t track the amount we’ve recovered. More than a few million. We’ve done reductions based on people’s situations. We decided we’re not going after people in the military or active service.”

Wright stops a wrong

How could the scheme go on for so long even as federal judges complained about fraud, as "John Doe" defendants complained repeatedly that they had no idea what the cases were about, and as critics complained about the injustice of the entire business model? The answer is that federal judges aren't generally investigators. Prenda had gone to great lengths to obscure what was really going on, who was doing what, and where the money went. Judges want to clear cases off their dockets and in rare cases will entertain sanctions motions, but to unravel something as complex as Prenda's behavior required a real investigation. Yet without more details, actual criminal investigators had very little to go on; most of the judicial complaints dealt with behavior in court, not public crimes.

So Prenda could essentially turn the entire US judiciary into a laboratory for incrementally refining its porn trolling techniques, testing venues, judges, corporate structures, collection procedures, and legal arguments, looking for perfection. And what it arrived at in the end had a certain devious logic to it. Even Otis Wright, the federal judge in Los Angeles who brought down Prenda's principals and referred them all for criminal and tax prosecution this week, had to concede the conceptual beauty of the system.

"Plaintiffs have outmaneuvered the legal system," Wright wrote in his devastating order yesterday. "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."

Wright easily could have let Prenda dismiss the case at issue and walk away, as it had many times before. Only personal interest in the case and judicial tenacity—in which he essentially presided over an investigation of Prenda's activities, ordering the Prenda principals to his courtroom on two occasions before they all eventually took the Fifth—produced this week's outcome. Few judges would have persisted, and even fewer still would have opened their opinion with a Star Trek quote from The Wrath of Khan.

Why did Wright do it? His various orders suggest that the sheer scale of the Prenda operation first aroused his interest. When he looked closer, he saw the law—which he had sworn to uphold in the interests of justice—twisted into a mere instrument of financial gain. (Major credit also goes to defense attorney Morgan Pietz, who made bringing down Prenda's entire operation a personal mission and who showed Wright much of the necessary information).

"Plaintiffs’ filing of cases using the same boilerplate complaint against dozens of defendants raised the Court’s alert," Wright wrote yesterday. "It was when the Court realized Plaintiffs engaged their cloak of shell companies and fraud that the Court went to battlestations."

Of course, lawyers and litigants use the court system every day as a way to make money; entire business models like patent trolling remain legal, and the lawyers involved aren't so much as sanctioned. But with Prenda, the difference in Wright's mind was apparently the target—not companies but individuals, many without much money or court experience. Prenda's plan, Wright said, was nothing less than a scheme "to plunder the citizenry."

Given the judge's $81,319.72 fine, his referral of Prenda principals to the IRS and to the US Attorney, and his complaint to every bar of which they are members, Prenda's plundering days are probably behind it. Could the moment have come sooner? Possibly—but it just as easily might not have happened at all.

As for the porn trolling business model, well, it's not dead yet. But at least it can't be done this way.