DigiProtect has shot itself and its business model in the foot during a recent court hearing. The notorious anti-piracy outfit refused to open its books for scrutiny during a case where it claimed compensation against a file-sharer. The judge consequently ruled that the defendant didn't have to pay the majority of the claim against him.

DigiProtect is a controversial anti-piracy company which also acts as a copyright holder in order to ease civil claims against alleged file-sharers in several countries across Europe. They track IP addresses on popular file-sharing networks, obtain the identities behind them and demand cash settlements.

A ruling by a court in Frankfurt on January 29th could now have put DigiProtect’s “Turn Piracy Into Profit” mass-warning business model into jeopardy.

An individual was sent a letter by the lawyer Udo Kornmeier on behalf of DigiProtect. The letter contained accusations of illicit file-sharing including a customary cash payment demand of around 651 euros to cover legal costs based on an infringement claim of 10,000 euros. It was accompanied by a demand to pay a further 150 euros in order to acquire a license from the copyright holder for the material downloaded.

While the file-sharer didn’t contest the 150 euro license fee, he refused to pay the 651 euros legal bill. DigiProtect’s lawyers countered with an offer for him to pay 450 euros plus the 150 euros license fee. Again the file-sharer rejected the offer.

DigiProtect then went on to sue the man for 651.80 euros and the case went to court.

In court the judge asked DigiProtect and its lawyers to open up their books to show what legal costs were actually incurred (and paid) to perform legal actions against the file-sharer and send him the letters. Both DigiProtect and their lawyer refused to submit the information.

During the hearing the judge discovered that the relationship between DigiProtect and its lawyers was covered by an agreement similar to the one it had previously with lawyers Davenport Lyons for their UK operations. The details of that arrangement were leaked out last year by a disgruntled insider and revealed some embarrassing truths about the operation.

DigiProtect and its German lawyer refused to allow the agreement between them to be shown in court which meant that the true costs of pursuing the file-sharer remained unproven.

The judge said that even if DigiProtect had paid 651.80 euros to its lawyers to pursue the file-sharer, these cannot be considered as involuntary damages since DigiProtect paid this fee to its lawyer voluntarily. Therefore the only involuntary damages in this case was the 150 euros rights holder licensing fee.

Due to this lack of transparency, the judge decided that the file-sharer did not have to pay DigiProtect the claimed 651.80 euros legal action costs, only the 150 euros licensing fee.

Clearly, if the lawyers can’t get their sizable share of the spoils in this “Turn Piracy Into Profit” operation, the whole business plan falls down. There was certainly no profit to be made from this file-sharer – time will tell if this effect ripples on to other cases.