As the entertainment industries eye the apparent emerging threat of so-called cyberlocker online storage sites, it was inevitable that at some point they would pick a fight with one of them. That unlucky target is Florida-based Hotfile and although it has chosen to settle lawsuits in the past, the company appears to be standing strong and has filed a motion to dismiss.

“Plaintiffs’ (the Studios) Complaint alleges that Hotfile, a web-hosting service, and Mr Titov in his capacity as the ‘guiding spirit’ of Hotfile, are liable for direct and indirect copyright infringement,” begins Hotfile in its recently filed motion to dismiss an MPAA-initiated lawsuit.

“Though long on hyperbole, the Studios’ factual allegations fall far short of the legal mark. They fail to state any claims for copyright infringement upon which relief can be granted and should accordingly be dismissed,” adds the 22-page document.

As previously reported, having apparently overlooked powerful market leaders such as RapidShare and MegaUpload, earlier this year Disney, Twentieth Century Fox, Universal, Columbia and Warner filed a lawsuit against Hotfile, making the Florida-based company the reluctant guinea pig for testing the MPAA’s fledgling anti-cyberlocker legal strategies.

“In less than two years, Hotfile has become one of the 100 most trafficked sites in the world,” said the MPAA when announcing its lawsuit against the company. “That is a direct result of the massive digital theft that Hotfile promotes.”

The MPAA went on to state that Hotfile’s business model relies on the company encouraging its users to upload “illegal copies of motion pictures and TV shows to its servers”, something Hotfile denies.

As speculated earlier by HR reporter Eriq Gardner, Hotfile was probably carefully chosen as a target, not least because it uses the United States for its operational base but because, notably, it has chosen to settle rather than fight earlier lawsuits. This time, however, Hotfile does not appear to be backing down.

In its motion to dismiss dated March 31st, Hotfile denies the studios’ first claim of direct infringement. The company says that since the studios’ allegations are based around Hotfile allegedly facilitating the infringements of their users, this “could only support a claim – if any exists – for secondary infringement.”

On the issue of secondary infringement, Hotfile says the studios’ claim is deficient.

“The Studios do not allege the requisite clear expression or affirmative steps showing that Hotfile has the specific intent to promote infringement,” the company states.

‘Clear expression’ in this instance is a reference to existing case law involving three other file-sharing type services after they were previously deemed to have encouraged or approved of infringement.

In Columbia Pictures v Fung (MPAA v Isohunt), Hotfile quote site admin Gary Fung as saying “they accuse us for [sic] thieves, and they r [sic] right.” In Arista Records v Usenet.com – “Usenet is full of Music and Movies so get your pirate on!” and other more general comments from Arista Records v Lime Group and MGM Studios v Grokster. Hotfile say no such claims have been directed at them.

In response to the studios’ claim that Hotfile is guilty of contributory infringement, the company points firmly back in time to 1984’s Sony Corp. of America v. Universal City Studios, Inc., aka the Betamax case, again stopping off at 2005’s MGM Studios, Inc. v. Grokster, Ltd on the way.

Claims that Hotfile had knowledge of infringement on its systems “effectively rehashes the argument that they lost in the Supreme Court [in the Sony case] in an attempt to stop technological advances in copying equipment.” Furthermore, the 2005 Grokster case only reaffirmed the legality of products that have “substantial non-infringing users”, say Hotfile.

While noting that it is fully DMCA compliant (and that the studios use its notice and takedown services), Hotfile goes on to refute the claims of vicarious liability on the basis that the studios failed to show that the file-hoster had the “practical ability” to “supervise or police infringement” among the millions of files that it hosts.

Interestingly, in contrast to previous cases involving both Grokster, isoHunt and LimeWire (who all had on-site ‘search box’ facilities, a fact used against them by the plaintiffs), in the studios’ case against Hotfile the lack of a search box is used to support a claim of inducement.

“Hotfile does not organize, categorize or otherwise participate in user selection of files to host. Hotfile provides the same basic service as the hundreds, if not thousands, of other bona fide web hosting services that are critical and necessary to enable the full potential of the Internet,” the company states.

“Realizing that the uninterrupted line of active inducement cases all involved sites with built in search capability, the Studios try to twist the absence of a search box into ‘concealment’. Thus, according to the Studios, web hosts are damned if they allow search (as ‘active inducers’) and are damned (as ‘concealers’) if they don’t.”

Everyone involved in a US-based online hosting business will be watching this case unfold with interest. The outcome will shape their future operations and even has the potential to alter the file-sharing landscape.