Big Brother is watching…and apparently he’s watching the numerous IP addresses that use BitTorrent to download movies.  While most people aren’t going to squawk about any file sharing of their “Cat Riding Skateboard” video from YouTube, Hollywood takes illegal file sharing seriously.  Now, in what is being hailed as the largest BitTorrent case in U.S. history, the identities of approximately 23,000 individuals who downloaded the Sylvester Stallone movie The Expendables are being subpoenaed in a Washington D.C. federal court.

The Expendables suit is the latest suit brought by the US Copyright Group (“USCG”), a business run by the law firm of Dunlap, Grubb & Weaver.  USCG uses a business model in which a complaint is filed against thousands of “John Doe” defendants.  These defendants are identified by the IP addresses that are suspected of having downloaded a copyrighted movie.  Using the power of the federal courts, USCG then subpoenas Internet Service Providers (ISPs) to disclose the identities of the individuals corresponding to the known IP addresses.  Once it receives the identities of the John Does, USCG writes to each defendant, offering the defendant a chance to settle the lawsuit for a one-time payment (usually between $3,000 and $5,000) and warning that USCG will seek statutory damages if the case progresses to trial (the statutory cap is $150,000).  USCG even sets up websites so that a defendant can make the settlement payment online.  See here for example.  Apparently, many defendants are willing to pay the money to make the suit go away, which in turn makes USCG’s business model quite lucrative.

Although a quick settlement to make the suit go away may be attractive, defendants should first take the time to consult with an attorney to ensure they understand the pros and cons of a settlement.  Although the USCG website offers “Frequently Asked Questions” for recipients of letters (see here), there is important information conspicuously absent from its webpage.  While settlement pros are discussed, USCG fails to identify the detriments for settling.  For example, evidence of voluntarily settling intellectual property infringement claims can be used in future lawsuits against the settling defendant to show a pattern or practice of unfair behavior.  See The Mainstreet Collection, Inc. v. Kirkland’s, Inc., 270 F.R.D. 238, 242 (E.D.N.C. 2010).  Such a practice is relevant to claims of unfair and deceptive trade practices under state law, which are often brought in conjunction with infringement claims. Id.  Thus, a settlement may be used against a defendant if he or she ever becomes engaged in infringement litigation in the future.

Further, a defendant may not wish to settle until exploring its options, such as a motion to dismiss the claims.  One such example is a motion to dismiss for lack of personal jurisdiction, which would in turn require the plaintiff to demonstrate that a district court in Washington DC has personal jurisdiction over the challenging defendant. See Achte/Neunte Boll Kino Beteiligungs Gmbh & Co., K.G. v. Does 1 – 4,577, 2010 WL 4905811 (D.D.C. 2010) (ordering plaintiff to identify those defendants plaintiff reasonably believed the court had personal jurisdiction over in BitTorrent downloading case; following the court’s order, the plaintiff dismissed the majority of the defendants).  As most recipients likely do not live in or have substantial ties to Washington D.C., the “traditional standards of fair play and substantial justice” should preclude suit against those individuals. See Internat’l Shoe Co. v. Washington, 326 U.S. 310 (1945).  In such a situation, a motion to dismiss for lack of jurisdiction may be appropriate and could avoid the detriment of settlement noted supra.

Although all 23,000 defendants are facing the same suit, each defendant’s situation is different.  For some defendants, the best choice may be settling.  For others, the best choice may be to pursue a procedural defense or to attack the suit on the merits.  The best thing any defendant to this suit can do is consult with an experienced copyright litigation attorney to identify all potential courses of action and the ramifications of each, and then make an informed decision.