The Florida-based file-hosting service Hotfile has sued Warner Bros. for fraud and abuse. Hotfile accuses the movie studio of systematically abusing its anti-piracy tool by taking down hundreds of titles they don't hold the copyrights to, including open source software. Among other things, Hotfile is looking for damages to compensate the company for the losses they suffered.

Earlier this year five major Hollywood movie studios sued the popular file-hosting service Hotfile for several copyright-related offenses. The case is ongoing and two weeks ago the MPAA studios scored a victory when Hotfile was ordered to share detailed information on the site’s users and affiliates.

Hotfile, on the other hand, is fighting back hard as expected. Yesterday the company filed a counterclaim accusing movie studio Warner Bros. of fraud and abuse. According to the complaint, Warner systematically misused the anti-piracy takedown tool (SRA) Hotfile had built for them.

Hotfile alleges that Warner has willingly taken down files without holding the copyrights, game demos and even open source software. The false takedowns continued even after the movie studio was repeatedly notified about the false claims.

“Not only has Warner (along with four other major motion picture studios) filed this unfounded and contrived litigation against Hotfile employing overly aggressive tactics, Warner has made repeated, reckless and irresponsible misrepresentations to Hotfile falsely claiming to own copyrights in material from Hotfile.com.”

“Worse, Warner continued to make these misrepresentations even after Hotfile explicitly brought this rampant abuse to Warner’s attention, ruling out any possibility that its wrongful actions were accidental or unknowing,” Hotfile writes in its complaint.

Hotfile explains that Warner’s Special Rightsholder Account (SRA) is assigned to Michael Bentkover, Manager of Anti-Piracy Internet Operations at the movie studio. Hotfile developed this tool to allow rightsholders to remove an unlimited number of files, as long as they hold the rights to them.

“Every time Warner used the SRA tool it expressly certified ‘under penalty of perjury that [it is] the owner or an authorized legal representative of the owner of copyrights’ and it ‘has a good faith belief’ that use of this material is not authorized by the copyright owner,” the complaint explains.

However, Warner also took down files that they didn’t own the rights to, and for many of these they never verified their nature by actually downloading the contents. This, while Warner specifically certified “under penalty of perjury” that it was the rightful owner. In part, these errors seem to originate from an automatic script Warner used to find infringing content.

For example, while claiming to remove files that are copies of the movie The Box, Warner removed several files related to the alternative cancer treatment book “Cancer: Out Of The Box,” by Ty M. Bollinger. Another title deleted by Warner was “The Box that Saved Britain,” a production of the BBC, not Warner.

Hotfile claims that hundreds of files were taken down wrongfully, including open source software.

“The single file deleted by Warner that had been most frequently downloaded by Hotfile users—five times more frequently than any other file—was a freeware software title wrongfully deleted by Warner. The software publisher that uploaded the file used Hotfile.com as a means for distribution of its open source software. Warner was not authorized by the software publisher to delete the file,” the complaint reads.

Hotfile has repeatedly notified Warner about this issues, but instead of improving the takedown system the number of fraudulent takedowns only increased.

Hotfile suspects that the overbroad takedowns were not only an attempt to prevent copyright infringement, but also a scheme to make profits. Warner proposed to Hotfile an affiliate deal where content that was taken down would be replaced with links to movie stores where users could buy Warner movies. More takedowns thus means more potential revenue.

“Warner had an economic motive to make these misrepresentations. As noted above, in early 2010, Warner proposed a business arrangement with Hotfile whereby Warner sought to present ecommerce links to Hotfile users who might purchase a Warner file for Warner’s profit in place of links that Warner had deleted using its SRA.”

“By increasing the number of links it was taking down with Hotfile’s SRA, and indeed falsely inflating these numbers, Warner was increasing the number of times it could present ecommerce links to Hotfile’s users for its own enrichment,” Hotfile argues in the complaint.

Summing up, Hotfile accuses Warner on three counts. Violation of the DMCA, intentional interference with a contractual or business relationship and negligence.

To get to the bottom of the issues Hotfile demands a jury trial, and asks the court to compensate the company for the losses they’ve suffered, including loss of accounts and goodwill. In addition, Hotfile seeks a permanent injunction requiring Warner to individually review all the files they take down.

Definitely a case that will be worth following.