LOS ANGELES—Perfect 10, the magazine/website that has sued several adult and mainstream companies including Amazon, Google, Visa/Mastercard, CCBill and even Microsoft for alleged copyright infringement, has been given its comeuppance by U.S. District Court Judge Andre Birotte Jr., who on March 24 ordered the company to pay over $5.6 million in attorney fees and costs to Usenet newsgroup Giganews after Perfect 10 failed to provide evidence of Giganews' infringement of Perfect 10's copyrights. The judgment comes after Birotte's prior ruling on the merits (or lack therof) of Perfect 10's original copyright action.
According to the TorrentFreak.com website, over the past several years, Perfect 10 has made most of its money by suing and settling with companies over their alleged copyright infringement "but has never succeeded in a contested court case."
Perfect 10 originally sued Giganews back in 2011 for failing to police its site for Perfect 10's copyrighted images, and at that time sought $25 million for the alleged infringement. Since then, Giganews has fought back, with the case involving more than 30 pretrial motions and a docket that runs more than 38,000 pages, and last November was granted a pair of summary judgments on the alleged direct and indirect infringements that had the effect of gutting Perfect 10's case.
"A claim for direct copyright liability demands evidence that the defendant had a direct hand in causing the infringement. The undisputed evidence before the Court, however, demonstrates that Defendants had no direct causal role in the alleged infringement," Judge Birotte's November order read.
In the judge's most recent order, however, he notes that, "When it sets a fee, the district court must first determine the presumptive lodestar figure by multiplying the number of hours reasonably expended on the litigation by the reasonable hourly rate," but that given the enormity of the record in this suit, "The prevailing party seeking attorneys’ fees need only 'identify the general subject matter of his time expenditures' to meet its burden of establishing its fee request is reasonable."
Judge Birotte's order awarding the fees and costs, which can be found here, goes into extensive detail regarding Perfect 10's failure to prevail on any of its points, with the court noting that, "This sort of complete victory on the merits is significant."
And while Judge Birotte did not find Perfect 10's original filing to be either frivolous or without merit, he does note in his order that, "Perfect 10 has never been a self-sustaining business, and to date, has lost more than $50 million dollars, if not more. However, this loss appears to be largely intended by Perfect 10’s president and CEO, Norman Zada, who described Perfect 10 to non-party Rebekah Chaney as a 'tax write-off.' Because Perfect 10 is a closely held corporation, Zada testified he is able to deduct Perfect 10’s significant losses on his personal income taxes. In fact, Zada told Ms. Chaney that he 'needed [Perfect 10] to offset money he made in the market' and 'needed the loss to represent how small businesses couldn’t make money because of piracy on the Internet,'" adding, "Rather than bringing suit for the purpose of protecting its copyrights and stimulating artistic creativity, the evidence reveals that Zada’s interest in the copyrights held by his 'tax write-off' is solely in litigation." [Citations omitted here and below]
The judge goes on to detail Perfect 10's dealings with other companies it has sued, and distinguishes many of them from the present litigation by noting that there is direct evidence before the Court that Zada intends for Perfect 10 to operate at a loss for tax purposes."
As part of his method for computing the compensation due Giganews' attorneys, Judge Birotte stated, "Perfect 10 is not a 'starving artist' in need of protection from an award of attorneys’ fees—it is a serial plaintiff operating on a self-proclaimed business model of litigation. Although Mr. Zada admitted to spending eight hours per day, 365 days per year on litigation for Perfect 10, he spends only 40 to 50 hours per year attempting to create new artistic content. Other Perfect 10 employees similarly testified that they spend the vast majority of their time working exclusively on litigation efforts." [Emphasis in original]
Also included is a long explanation of how Judge Birotte calculated the final award, based in part on the hours billed by Giganews' team of attorneys, paralegals and others—11,125.5, of which the judge accepted 90 percent—and on the rates for such services that are common in the Central District of California—rates similar to those quoted by Perfect 10's own legal experts.
"From the beginning, we rejected the veracity of Perfect 10’s allegations and believed strongly in our position," Ron Yokubaitis, co-Chief Executive Officer of Giganews, told TorrentFreak. "As a result, we forced Perfect 10 to litigate this case on the merits. Perfect 10’s response to our approach was to engage in a pattern of systematic abuse of the discovery process and outright disregard of the court’s orders. We are pleased with the magistrate judge’s ruling and we look forward to the Court’s final determination on monetary sanctions to be assessed."
