World famous nightclub and independent music label Ministry of Sound have been forced to suspend their planned shakedown of tens of thousands of alleged file-sharers. The company had planned to send 25,000 letters demanding hundreds of pounds in compensation to customers of Internet service provider, BT. However, BT has deleted more than 20,000 of those records which now makes the identification of the account holders impossible.

The continuation of a hearing between Ministry of Sound Recordings Ltd (MoS) and ISPs Plusnet / BT went ahead in London’s High Court in last month.

Law firm Gallant Macmillan hoped that the Court would order the ISPs to hand over the identities of tens of thousands of alleged filesharers so that Ministry of Sound can prise cash settlements out of them.

But following the security breach at lawyers ACS:Law, BT and their subsidiary Plusnet refused to cooperate citing data protection concerns. BT’s request for an adjournment of the hearing was granted and was set to resume on January 12th 2011.

However, according to Ministry of Sound, its planned shakedown of file-sharers has been hit with a catastrophic failure. In an announcement today, the label has revealed that BT has deleted most of the records that Ministry of Sound requires for pursuing alleged file-sharers should it have been successful at the January hearing.

In what will be seen as a major and expensive setback for their campaign, the label notes says that it discovered in legal correspondence that BT had failed to preserve over 20,000 of the 25,000 customer records which Ministry of Sound had originally requested.

“Whilst Ministry of Sound were happy to incur substantial legal costs to access 25,000 names it is simply not economic to pursue the 5,000 remaining illegal uploaders,” the company said in a statement.

“It is very disappointing that BT decided not to preserve the identities of the illegal uploaders. Given that less than 20% of the names remain and BT costs have soared from a few thousand pounds to several hundred thousand pounds, it makes no economic sense to continue with this application,” said Ministry of Sound CEO Lohan Presencer.

BT, however, seem puzzled by Ministry of Sound’s announcement.

“We’re surprised at this claim since we provided a similar number of customer details to comply with a court order earlier this year for Ministry of Sound and there was no suggestion then that this was a problem for them,” the company told TorrentFreak in a statement.

“All such information is automatically deleted from our systems after 90 days in accordance with our data retention policy; the Ministry of Sound and its solicitors are well aware of this. Upon request from Ministry of Sound we saved as much of the specific data sought as we reasonably could and any not preserved must have been too old. Our door remains open to Ministry of Sound and any other rights holder who wants to enforce their rights in a fair way through an established legal process.”

Despite the setback, Ministry of Sound CEO Lohan Presencer said the company will persist.

“We are more determined than ever to go after internet users who illegally upload our copyrighted material. We will be making further applications for information from all ISPs. Every time that a track or album is uploaded to the web it is depriving artists of royalties and reducing the money which we can invest in new British talent,” he added.

Although Ministry of Sound endlessly go on about artists suffering and how piracy hinders the nurturing of talent, there is a little known fact about their claims which makes their strategy very unusual indeed – they aren’t claiming for an infringement on music copyrights at all.

Since Ministry of Sound do not own the copyright for the tracks they appear to be requesting cash settlements for, they have presented their case to the court on the basis that they own the ‘intellectual property’ in the album’s tracklisting. That’s right, MoS are claiming copyright infringement on the order of tracks as they appear in their compilation albums.

Of course, not a word of this is mentioned in the settlement offers they send to alleged infringers, the implication all along is that the claim is for music. You couldn’t make it up – but lawyers can and do.

Both Ministry of Sound and their lawyers Gallant MacMillan were subjected to Operation Payback DDoS attacks last month.

Updated: Below is a further statement from BT, sent to TorrentFreak a few minutes ago.

The Ministry of Sound’s decision is clearly a matter for them. It’s a shame though that, in this instance, our concerns over the current process will not be examined by the Court. However, it remains our intention to ensure our broadband customers are adequately protected so that rights holders can pursue their claims for copyright infringement without causing unnecessary worry to innocent people.

BT therefore intends to write to ACS:Law and Gallant MacMillan seeking their agreement to a revised approach to previously granted orders before disclosing any further customer details. Bulk disclosure under these orders was suspended by BT on 29 September. Any rights holder seeking future bulk disclosure of BT or Plusnet’s customers via a court order will be asked to agree to our new approach.

BT believes that with appropriate safeguards to protect customers’ rights, confidence in the Norwich Pharmacal process can be restored so that rights holders can feel able to use it to seek redress for online copyright infringement. The safeguards we aim to establish via the Court are on the security of data handling, a threshold for providing a customer’s details based on a minimum number of separate incidents, the tone of contact with broadband subscribers and a reasonable approach to financial compensation sought.