(Pete Johnson via Canva)

A maker of “high-end, artistic” pornography is coming after hundreds of New Jersey residents it claims are illegally downloading its adult films.

Strike 3 Holdings LLC, owner of subscription porn sites like Vixen and Tushy, says it sues people in the Garden State and across the country simply to protect its copyrighted content.

Opponents say it’s a shakedown scheme.

Strike 3 is just the latest pornography company to use the prolific litigation strategy to generate income. Adult film company Malibu Media has been doing it for nearly seven years. Together, they’ve filed over 1,000 suits in New Jersey and nearly 10,000 nationwide.

Their M.O. is the same: Find alleged porn pirates on BitTorrent, file thousands of nearly-identical lawsuits and demand damages of at least $150,000. But the companies are eager to settle, often for $10,000 to $20,000, according to defense attorneys who have worked the cases.

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As of Jan. 25, 2019. Source: U.S. District Court data via PACER

The attorneys said some people feel trapped into settling because the cost of defending against a suit may be more than the settlement offer, and they fear their name will get out.

If the person is a government employee, teacher or someone legally required to report lawsuits to their employer, they'll be tripping over themselves to pay, the attorneys said.

“To me it’s kind of like legalized extortion,” said Leslie Farber, a Montclair lawyer who has defended clients in these cases. This, she said, is why companies like Strike 3 Holdings and Malibu Media are called “copyright trolls.”

It’s a title the companies dispute.

Patrick Cerillo, the Flemington attorney who files Malibu Media suits in New Jersey, said any description of the suits as extortion is “malarkey.” People don’t settle because they fear being outed, he said, but because they are guilty, and the evidence is on their computer.

“They know at some point we’ll get the smoking gun,” he said.

Lincoln Bandlow, a partner at Fox Rothschild LLP, the national law firm that handles most of Strike 3 Holdings’ suits, said the company files the suits mainly as a deterrent and the settlement income makes up “a small fraction of revenue” for the company.

“Strike 3’s true revenue comes from its core business model, which is selling subscriptions to its websites,” he said.

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Photo: Getty Images

John Does

These John Doe copyright suits are the new norm in federal court. The companies sue a person only as “John Doe Subscriber” and name the IP address where the downloads allegedly took place, because they don’t have a real name.

Philadelphia attorney Joseph Bahgat said porn companies file the “vast majority” of these suits because unlike other pirated content, people who download porn via BitTorrent, a protocol that allows files to be shared, might download dozens of adult films from one studio. More downloads mean more damages, he said.

Some critics say these companies are overloading and misusing the court system. Royce C. Lamberth, a U.S. District Court judge in Washington, D.C., said in a scathing November decision that Strike 3 “treats this Court not as a citadel of justice, but as an ATM.”

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New Yorker article: https://bit.ly/2rg63EI

How it starts

Strike 3 Holdings and Malibu Media employ a German tech company to seek out the IP addresses of the people they believe are getting their content via BitTorrent, an online network that allows for quick file sharing among anonymous users, according to the lawsuits.

The porn company then files suit against “John Doe” at that IP address and asks a judge to let them subpoena the internet provider to get the subscriber’s name. Judges usually allow it.

The defendant learns about the suit when the internet provider notifies them that the plaintiff is seeking their name. Some defendants may get a lawyer, some will just ignore the notice, and others will try to negotiate a settlement themselves, Farber said.

If a named defendant doesn’t do anything 21 days after being served with the suit, the judge can enter a default judgement. That means the judge orders the defendant to pay damages, and Bahgat said the number could be huge.

Farber, however, said she’s only seen judges order defendants in default to pay the minimum statutory damages of $750 per film.

For instance, a person accused of downloading 35 films might be ordered to pay $26,250 plus attorneys’ fees.

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Who are they suing?

Strike 3 only bothers to sue people who have downloaded “large volumes of its work and have done so over an extended period of time,” Bandlow said.

Many Strike 3 suits in New Jersey target defendants with at least 30 alleged downloads across many months or a year. Malibu Media accuses most defendants of downloads in the double digits, but some are accused of stealing as few as five or six.

Bandlow denied that Strike 3 targets people in certain states or zip codes, but federal court data shows that more than half of the company’s suits were filed against people in California, New York and New Jersey. Malibu Media also files many of its suits in those three states plus Illinois, Pennsylvania and Michigan.

Bahgat believes the companies are aiming for high-income areas. He said a recent client lived in a wealthy New Jersey area and Malibu’s attorney demanded $25,000, far more than Bahgat expected given that the man was accused of only seven downloads.

Farber said she thinks the companies also focus their litigation efforts on states where judges have shown little resistance to granting the subpoenas to get the IP address owner's name.

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In every suit, Malibu Media lists the names of all the X-art films the defendant is accused of downloading, as seen in this screengrab from a lawsuit they filed in New Jersey in 2018.

Is it a negotiation, or is the squeeze?

Attorneys for both companies said they work with the defendants to come up with a settlement that is fair. Strike 3 always asks for a defendant’s financial records as part of the negotiation.

“They want to figure out how much money the client has or how much they can beg, steal or borrow in 30 days. And they’ll ask for that amount or a little bit more,” Bahgat said.

Strike 3’s attorney said that if the financial records show a person really has nothing, the company may drop the suit. Bahgat said he's seen it happen.

But in at least two cases in New Jersey, defendants had to file for bankruptcy after being sued by Strike 3.

One was a 23-year-old Morris County man, who had lost his job and lived with his parents. He was accused of downloading 50 films. The company wanted $10,000 or $15,000, according to his bankruptcy attorney, John A. Lipowski of Morristown.

Lipowski said the man knew a lawyer who tried to negotiate with Strike 3, but the settlement offer “just wasn’t practical” because he had nothing. “They forced him into bankruptcy,” he said.

Bandlow said his firm reviewed the man’s finances and the parties were negotiating accordingly when he filed for bankruptcy. It meant the young man didn’t have to pay them a cent.

Attorneys for Malibu and Strike 3 both said that in negotiations, they never threaten to reveal the defendants’ names. They let them remain “John Doe Subscribers” as long as possible, they said, and most cases resolve that way, without a real name attached to the suit.

“It has nothing to do with embarrassing anyone,” Cerillo said. “My practice is we don’t need to name the defendant if we’re seriously talking about a settlement agreement.”

However, if a defendant in New Jersey does not respond to the suit or negotiations fall through, a name has to be entered in the case in order to seek a judgement, he said.

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Can they prove the cases?

Bahgat and Farber say the cases are designed to settle and most wouldn't succeed at trial, but the companies say they could prove their claims before a jury if necessary.

Strike 3 has never had the chance, but there was a bellwether trial for Malibu Media in Philadelphia in 2013. A man was convicted and ordered to pay a whopping $240,850 in damages and attorneys’ fees, but Farber said it was a unique case because the defendant destroyed evidence on his computer.

Defense attorneys argue the way the companies track copyright infringers is flawed because anyone using the wifi network could have downloaded the movies and there are ways to fake IP addresses. The companies say their methods are sound.

“They say the evidence points to the person. That’s as much proof as they have. The only way to prove you downloaded the movie is to take the computer and find a trace of the file," Bahgat said.

He said that in all of his cases that have gone that far, no files were found.

In one ongoing case, Farber said, Malibu Media is accusing the owner of a North Jersey computer services of downloading their films, but his company offers services that let his clients essentially do business using his IP address. He is fighting the suit, saying one of his clients must have downloaded the movies, because he did not.

“He’s okay with them searching his hard drives,” Farber said.

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Greg Lansky of Strike 3 Holdings accepts the award for best director during the 2017 Adult Video News Awards at left. At right, U.S. District Court Judge Joyce C. Lamberth, who issued a ruling against the company. (Getty Images/Associated Press)

Changes may be coming

There is a big battle looming in the war over John Doe copyright suits.

Currently, most judges grant the subpoenas that allow these companies to get subscribers names. Without them, the companies admit, the suits can't move forward. There is no legal precedent about whether to allow the subpoenas because no cases have ever been appealed to a higher court — until now.

In November, Lamberth, the Washington, D.C. judge, issued a scathing ruling denying a subpoena and dismissing a Strike 3 case. The company appealed in December. A higher court ruling on that appeal would tell judges around the country if they should allow the subpoenas.

Farber said there’s already a feeling that the tide may be turning. Two New Jersey judges in at least seven cases have asked Strike 3 to show cause why they shouldn’t use Lamberth’s reasoning to deny or quash the subpoenas.

Strike 3 has said that Lamberth’s decision is deeply flawed and prejudiced against pornography. Bandlow said no judges who actually heard from Strike 3 attorneys on the matter have ever followed his example.

John C. Atkins, the Fox Rothschild attorney who litigates Strike 3's New Jersey cases, will get a chance to make that case before Judge Cathy Waldor in Newark on Feb. 11.

And unless something changes, attorneys for both companies said they will continue to protect their copyrights in the hopes that people who want to watch will just subscribe.

“If somebody steals something from you, they must compensate you for the loss,” Cerillo said.

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A dozen New Jersey clubs used models' scantily-clad likenesses in ads without their permission, the women say. Posted by NJ.com on Tuesday, November 28, 2017

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Rebecca Everett may be reached at reverett@njadvancemedia.com. Follow her on Twitter

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