Warner Betrays Hotfile, Hotfile Sues for Fraud

Hotfile, an online locker service, went beyond its legal obligations to accommodate movie studio Warner Bros. to take down infringing content from Hotfile’s site.  Warner is even quoted as praising Hotfile’s efforts and suggesting that Hotfile provide the same service to other content owners.  So what did Hotfile get in return?  Warner wrongfully deleted files it didn’t own and then sued Hotfile with four other major studios, all represented by the MPAA, claiming Hotfile’s service carried out “unabashed theft” of their copyrighted works.  Betrayed Hotfile is now fighting back with a counterclaim against Warner for DMCA violations and fraud.

Hotfile is an online locker service where users upload a file and then post a link elsewhere for other users to find that file and download it.  Hotfile is legal as long as it qualifies for safe harbor protection and complies with the DMCA.  In order to comply with the DMCA, Hotfile must comply with the takedown notices sent by the copyright holder under § 512.  Those notices must, in turn, contain specific references to infringing content to be taken down, certifications that the sender is either the owner of the content or a representative of the owner, and certifications that the content they are requesting be removed is unauthorized and therefore infringing.

Instead of making Warner send a notice each and every time it found infringing content, however, Hotfile created a tool for Warner so that Warner could take down files that infringed its content. And now Hotfile alleges that in return for its good faith efforts, Warner abused this tool and removed content that didn’t even belong to it.

The scene is best set by jumping back a few weeks to the MP3tunes decision from August. MP3tunes, another locker service, was sued for copyright infringement by EMI.  They claimed a defense based in the same DMCA safe harbors at issue in the Hotfile case (PK filed an amicus briefin support of MP3tunes, and Michael Robertson, CEO of MP3tunes, wrote his own blog post about the suit).  The court found that MP3tunes qualified for the safe harbor protections under § 512 of the DMCA.  Its only culpability was that in addition to taking down the public links to infringing songs listed in the takedown notices (which it did) it also had to remove the actual song itself from the users’ lockers (which it didn’t).  The decision suggested that as long as the takedown responses were modified a bit, online file lockers could be legal. 

Hotfile should at least qualify for the same DMCA safe harbor protections as MP3tunes.  But instead of just meeting the requirements of the DMCA takedown procedures that the court outlined in MP3tunes, Hotfile clearly did more than was required of them, and was met with overreaching abuse.

The counterclaim alleges that while using the tool that Hotfile created for it, Warner simply took down anything their search turned up instead of reviewing each link to ensure that it really was its content.  This caused a number of other users’ legal files, not belonging to Warner at all, to be blocked and/or removed.  The theory of the counterclaim is that Warner simply put in a search phrase for content it owned, such as the film The Box from 2009, and any files that contained those words were deleted. Many of those files did not contain any Warner-owned content, such as the audiobook “Cancer: Out Of The Box” by Ty M. Bollinger and “The Box that Saved Britain,” a BBC production.  In fact, according to the counterclaim, the file that had been the most downloaded of any that Warner had removed was an open source freeware file whose owner had placed it on Hotfile as a means of distribution—a file which Warner neither owned nor had any right to remove. 

Hotfile alleges that the tool was set up so that whenever Warner logged in to use the tool, it certified “under penalty of perjury that [Warner is] the owner or an authorized legal representative of the owner of copyrights” in the items being removed, which the DMCA requires for all takedown notices.  Nevertheless, Warner removed of a number of files that it did not own (the counterclaim alleges hundreds), and there was a huge volume of files removed in very short periods of time.  It would certainly appear as though Warner did not verify that the files they were removing actually contained any Warner content.

In an effort to comply with the DMCA and with the movie studios, Hotfile went far beyond what was required of it and bent over backwards to even create a program just for Warner.  In return, Hotfile got both sued and their users’ files wrongfully deleted.  Cloud services and online file lockers like MP3tunes and Hotfile present a potentially great way for users to store their files for remote access, and the MP3tunes decision provided a description of one reasonable framework for takedown procedures within which these types of services can legally operate.  But apparently the studios aren’t interested in playing fair.  In fact, if Hotfile’s allegations are true, the hypocrisy in the studios’ claims of copyright infringement while they themselves violate copyright law by deleting files they don’t own would be hard to ignore. 

In the initial complaint filed by the MPAA against Hotfile it asserts that the DMCA’s regular takedown notices were not making enough of a dent in the files because of the way the Hotfile server system works.  But when Hotfile gave Warner the ability to remove the infringing content itself instead of having to file a separate notice each time, Warner abused that ability.  This suggests that the liability for misrepresentations created in § 512(f) serves a legitimate purpose—content owners clearly cannot always be trusted to exercise reasonable care in removing infringing content themselves, so providing for remedies for misrepresentations allows for infringing content to be removed without stifling legitimate uses of a file locker’s capabilities.

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