Newzbin, the Internet's premier Usenet indexer, has lost its High Court case against several Hollywood movie studios. Justice Kitchin found the company, which turned over more than £1 million in 2009, liable for copyright infringement and will issue an injunction restricting its activities later this week.

The London High Court showdown between Twentieth Century Fox, Universal, Warner Bros., Paramount, Disney, Columbia Pictures and Newzbin Ltd ended earlier this month.

Mr Adrian Speck represented the claimants, with David Harris and later Ms Jane Lambert representing Newzbin. The case was heard before Mr Justice Kitchin, who this morning delivered his lengthy decision which is summarized below.

The claimants said that Newzbin is a site focused on piracy. It does this by locating and categorizing illicit copies of movies and displays the titles in its indexes, providing users who search for such items a facility to download the items with one click.

Newzbin conversely said that its site is a “content agnostic” search engine very much like Google, and is designed to index all of Usenet. It offers only hyperlinks, meaning that users can access material directly from their Usenet provider, an activity Newzbin plays no part in.

Mr Speck represented the claimants throughout the case but Mr Harris dropped out of defending Newzbin on February 10th when it became apparent he had acquired shares in Newzbin. Ms Lambert took over from him when the trial resumed on 2 March 2010.

The claimants used Andrew Clark, Head of Forensics at Detica Limited, as their expert witness. His description of Usenet was not challenged in court.

Newzbin is run by Chris Elsworth (aka “Caesium”), Thomas Hurst (aka “Freaky”) and Lee Skillen (aka “Kalante”). All three were, until recently, directors and shareholders in Newzbin.

Court documents give a perhaps surprising insight into the size of the Newzbin business. Its accounts for 2009 reveal that it turned over in excess of £1 million, yielded a profit of more than £360,000 and paid dividends on ordinary shares of £415,000. It has around 700,000 members.

Newzbin’s help guides were referred to in the decision. They state that the site can help people find what they’re looking for, “whether that be obscure music, tv shows, games or movies. Think of us as a TV guide, but we’re a guide that applies to Usenet.”

In addition to various features offered by the site, focus was placed on the function and offering of .NZB files – Usenet’s nearest equivalent to .torrent files. Expert witness Mr Clark demonstrated how they could be used to retrieve a copy of a Harry Potter movie via Newzbin with the Usenet client, GrabIt.

The titles of categories used by Newzbin to index content were highlighted, such as Anime, Apps, Books, Consoles, Emulation, Games, Movies, Music, PDA and TV.

Sub-sections of the Movies category were highlighted including CAM, Screener, Telesync, R5 Retail, Blu-Ray, DVD, HD-DVD DivX, XviD. A witness for FACT, the Federation Against Copyright Theft, explained in detail why some of these categories are a “strong indication” of piracy.

Newzbin has members called ‘editors’ who help to compile reports on material to be found on Usenet. Newzbin’s own documentation was used to show that the site encouraged editors to post links to movies. The verdict notes that to assist editors useful links to IMDb and VCDQuality are provided, the latter being useful to provide information about “screeners”.

Referencing rules that Newzbin publishes for the attention of editors, ostensibly to protect the site (i.e not posting NZB‘s which link to warez, movies or music), Justice Kitchin states that these warnings are “entirely cosmetic”, are not intended, nor are they adhered to. Newzbin knew that infringing copies were being made available to users and yet no action was taken against editors, he wrote.

Referring to groups indexed by Newzbin such as alt.binaries.warez, Justice Kitchin said he is satisfied that the term ‘warez’ refers to content protected by copyright from illicit sources. Newzbin, he said, is therefore designed to search newsgroups which contain infringing material, an assertion that Newzbin’s Chris Elsworth had no “satisfactory explanation” for.

Justice Kitchin said Newzbin “encouraged its editors to report and has assisted its users to gain access” to infringing copies of movies.

Newzbin was also criticized for its “delisting” or notice and takedown procedures, which were referred to as a “cosmetic” and “cumbersome” mechanism designed to “render it impractical” for rights holders to have material removed.

Justice Kitchin went on to reject Newzbin’s assertion that an insignificant amount of links in their database relate to infringing content. Around 50,000 reports (.NZBs) were checked and around 97% had a valid link to IMDb (TF: Kitchin apparently assumes that everything on IMDB is not free to share), 0.7% to Amazon and a further 1.5% were otherwise shown to be commercially available. Only 0.3% were not shown to be commercially available, evidence which the court found “extremely powerful”.

The verdict addresses in some detail whether Newzbin had knowledge of infringing material being made available via the site. Newzbin said they did not but would’ve taken action to remove items and take action against any editor posting such material. Justice Kitchen said “a very different picture” emerged when Elsworth was cross-examined.

A transcript of the questioning reveals Elsworth being aggressively cross-examined over the nature of the Blu-Ray category on the site and whether it would contain copyright infringing material.

“I am satisfied that Mr Elsworth well knew that these categories were primarily intended for new commercial films,” wrote Justice Kitchin, while referencing a comment made by Elsworth in January 2007 where he notes that Blu-Ray had “been cracked officially”.

The verdict also states that Newzbin was told that the site is being used to infringe the claimants’ copyrights, yet no action has been taken against those reports (NZBs), the editors that reported them, or users that downloaded them.

Justice Kitchin said that considering the structure of Newzbin, the way they categorize content and the way they have encouraged editors to report movies, he has no doubt that Newzbin knew that “the vast majority of films in the Movies category of Newzbin are commercial and so very likely to be protected by copyright, and that members of Newzbin who use its NZB facility to download those materials, including the claimants’ films, are infringing that copyright.”

For the claimants, Mr Clark gave evidence that it would be straightforward for Newzbin to restrict access to the Movie and TV categories on the site and/or employ a filter based on a list of titles provided by the movie companies. Justice Kitchin said that the Newzbin programmers are skilled enough to implement “an effective content filtering system.”

Justice Kitchin found that:

i) Newzbin operates a site “designed and intended to make infringing copies of films readily available to its premium members”.

ii) The site is structured to promote infringement by guiding members to infringing copies via NZBs.

iii) Use of the NZB feature “inevitably” results in the creation of an infringing copy.

iv) Newzbin encouraged and induced its editors to make reports of movies protected by copyright and assisted users to infringe by providing advice.

v) Newzbin profited from infringement.

Newzbin was found liable to the claimants for infringement of their copyrights because it authorized the copying of their movies, “procured and engaged with its premium members in a common design to copy the claimants’ films” and communicated the claimants’ movies to the public.

The claimants appear to be seeking a broad injunction against Newzbin which would prevent it from including any item which infringes copyright in their index. This would extend to all works, not just those to which the claimants own the copyright.

Justice Kitchin wrote that he will not grant such a broad injunction and would instead impose limits on its scope to restrain Newzbin from infringing the copyrights of those movies to which the plaintiffs own the copyright.

“We welcome the Court’s decision today,” said Ted Shapiro, the Motion Picture Association’s general counsel for Europe.

“Newzbin is a source of immense damage to the creative sector in the UK and worldwide. This is an important decision and it sends a clear message that websites focusing on providing viewers with pirated film and TV programmes infringe copyright and are liable for their actions even where those websites don’t themselves host the content.

“This decision will help to support the continued investment in new legal online services and the creation of new films and television shows for enjoyment by audiences both in the UK and around the world.”

Newzbin was given the opportunity to contribute to this and earlier articles, but did not respond to our requests.

The exact terms of the injunction will be announced later this week.