Rightscorp has attracted the attention of the Canadian government just days after a new law was passed requiring ISPs to pass infringement notices to customers. The U.S.-based anti-piracy outfit made false claims in an effort to scare users into cash payments but that practice is now being outlawed by authorities.

Recent changes to Canadian copyright law mean that when rightsholders observe local Internet users infringing copyright online, ISPs must forward any resulting infringement notices to their customers.

The new system has only been in place for just over a week but rightsholders haven’t wasted any time sending notices out. Even smaller ISPs such as Teksavvy are forwarding in excess of 3,000 notices per day.

While notices are one of the more reasonable anti-piracy options available today, there are companies that want to augment those gentle warnings into something more aggressive. Close to day one of the new law, U.S.-based anti-piracy outfit Rightscorp began sending infringement notices to Canadians with cash-settlement threats attached.

“You could be liable for up to $150,000 per infringement in civil penalties,” the notices told alleged music pirates.

Sadly, the claim is completely untrue. Canadian law caps liability for non-commercial infringement at $5,000 for all infringements. This miscalculated eagerness to break the Canadian market could now cost Rightscorp dearly.

Within a day of the company’s bogus threats being made public, Rightscorp attracted the negative attentions of the Canadian government and placed the turn-piracy-into-profit business model under scrutiny.

“These notices are misleading and companies cannot use them to demand money from Canadians,” said Jake Enright, a spokesman for Industry Minister James Moore.

The good news for Internet subscribers is that government officials will contact Internet service providers during the days to come in order to put an end to these threats. However, it’s not clear that will put a complete end to Rightscorp’s activities in Canada.

According to University of Ottawa professor Michael Geist, there is nothing in Canada’s new legislation which restricts the ability of rights holders to include information in notices that goes beyond a simple advisory that copyright law has been breached.

On this basis it seems unlikely that Rightscorp will simply give up. Government comment on the original notices centers around the anti-piracy company’s erroneous citing of U.S. law so modification to reflect the true Canadian position should bring the piracy monetization outfit into line.

It may be, however, that given the government intervention ISPs will choose not to forward Rightscorp notices at all.

Demands for cash aren’t popular with Internet subscribers and there are signs that leading ISPs in the United States don’t like the approach either. While they forward the infringement notices themselves, Comcast, Verizon, AT&T and other major ISPs remove the attached cash settlement demands.

Nevertheless, Rightscorp does work with dozens of smaller ISPs who are happy to assist with the company’s business model. And despite plenty of information being available which advises letter recipients not to pay, many still pay a $20 ‘fine’ to get the company off their back.

Sadly though, sometimes this has the opposite effect. One of Rightscorp’s tactics is to send a bill for $20 for one track from an album and then when people pay, they are subsequently billed for the rest of the tracks at a further $20 each.

Before the notice recipient pays the first $20, Rightscorp has no idea of the person’s identity and would need to spend a lot of money in court to find out – hardly worth it for $20. But having paid $20 and signed a disclaimer, the company now knows the person’s name and address.

At this point the pressure to pay can become overwhelming. Time will tell if Canadians can avoid these tactics.