Private Internet Copyright Cop Company Makes Profit From Every “Settlement”

It’s been about 15 years since the heyday of the Napster era made copyright violations and internet piracy the big bugaboo of content publishing industries. For a while, organizations like the RIAA tried suing violators, but nobody benefited from headline-making million-dollar fines. Then the major ISPs all jumped on board with a “six strikes” system to send warnings to suspected violators, but apparently for some content rights owners that’s still not enough. So what is the industry trying now? A private, for-profit digital copyright cop shop. Because that couldn’t possibly backfire in any way.

The outfit is called Rightscorp, as Ars Technica reports. They make money whenever a dastardly song-sharer ponies up a fine for having picked up a new single on the sly.

Here’s how it works: Rightscorp identifies IP addresses sharing files via BitTorrent. The company then sends notices to those internet users via their ISPs. So, for example, if an IP address belongs to a Comcast user, Rightscorp sends the notice to Comcast, to then forward on to the subscriber in question.

The notices are “offers of settlement.” They threaten users with the maximum legal penalty — $150,000 — but say, basically, that if you just click here right now, for $20 per infringement we can just make this all go away.

50% of each settlement goes to Rightscorp, and the other 50% goes to the client who sent them. The biggest clients are record labels, according to Ars, with BMG alone accounting for about a quarter of Rightscorp’s revenue.

Most folks who might have illegally-obtained copies of a new pop album or last week’s Game of Thrones episode don’t have a spare $150k lying around, and when faced with a scary-sounding legal threat are probably more likely to pony up $20 or $100 than to take the (expensive, time-consuming, uncertain) option of trying to defend their case in court. Last year, people who received notices paid up to the tune of about $750,000.

If you think that sounds like an incentive for Rightscorp to cast as wide a net as possible, well, you’re not wrong.

The company claims that they’ve built a proprietary “secret sauce” of a system that allows them to identify “repeat offenders” consistently even when their IP addresses change. Rightscorp co-founder and COO Robert Steele told Ars that it was like CSI finding physical evidence: “When someone has been shot, they want to connect a gun to a slug. They fire a new bullet and say, ‘Judge, there’s a 99 percent chance this bullet out of the gun matches the bullet in the victim.’ We can show a 99 percent chance of the same subscriber account [over two IP addresses].”

Of course, it all relies on ISPs cooperating with Rightscorp. The company’s CEO told Ars that over 70 ISPs do work with them, including “five in the top 10.”

According to the company, their magic user-identifying algorithm legally compels ISPs to forward Rightscorp’s notices to subscribers. Under the Digital Millennium Copyright Act (DMCA), ISP’s have certain protections from liability for the illegal things that their subscribers do with the internet access they provide. If an ISP doesn’t know that Subscriber Joe is using his bandwidth to torrent 300 pirated songs a day, then they aren’t legally responsible for his doing so.

But, says Rightscorp, in order to maintain that legal distance, an ISP must forward a notice they receive from Rightscorp, because Rightscorp has the proof and if the ISP doesn’t play along, then it’s culpable too.

Of course, Rightscorp stands to make a lot of money from that particular interpretation of the DMCA. But, Ars Technica explains, it’s not really that clear-cut. “The law does require terminating the accounts of ‘repeat infringers,'” says Ars, “But there’s a lot of leeway in how that might get done.” Even the definition of a “repeat infringer” has some flexibility in it. And that, of course, is all predicated on Rightscorp’s system being as awesome and accurate as they say it is.

It’s anyone’s guess whether Rightscorp will be a viable business in the long term, Ars reports; so far, it’s still not profitable but its revenues are increasing.

And what of our other, less extortion-based systems? That six-strikes system resulted in 1.3 million warnings last year. By this February, Comcast alone was reportedly sending about 1800 warnings per day, but for the record companies, who send Rightscorp out into the virtual world, apparently that’s still not enough.

“You could be liable for $150k in penalties—settle instead for $20 per song” [Ars Technica]