I was suspicious several days ago when I heard that Righthaven might be going under, but apparently it’s true:
The Las Vegas copyright-trolling firm Righthaven told a Nevada federal judge Friday it might file for bankruptcy protection, or cease operations altogether.
To prevent that, Righthaven is asking U.S. District Judge Philip Pro to stay his decision requiring Righthaven pay $34,000 in legal fees to an online commenter it wrongly sued for infringement.
Wired has posted Righthaven’s Motion to Stay here (pdf). They are exceptionally candid about the economics of copyright troll litigation:
In Colorado, 35 Righthaven copyright infringement cases have been stayed since May 19, 2011 pending a ruling on whether the company has standing to maintain these actions. Likewise, ten infringement actions, most of which involve an amended version of the SAA that addresses the concerns expressed by this Court in its subject matter decision, have been stayed in this District until a standing determination is made. Thus, Righthaven has been precluded from actively litigating and resolving the stayed cases. Moreover, Righthaven has delayed filing new copyright enforcement actions until a standing determination is made based upon the terms of the currently operative version of the SAA. Throughout this period, and despite a lack of incoming revenue given that numerous pending action are stayed, Righthaven has continued to incur operating expenses.
Clearly, Righthaven is a cash-poor outlet these days. And here’s where things get really interesting: based on its motion, Righthaven seems deathly afraid that they might have to sell some of their assets to satisfy a $34,000 judgment. As they explain to the court:
Righthaven also has significant proprietary rights in its copyright infringement search engine software (the “Software”), which plays an integral role in the company’s operations. If a stay is not granted pending appeal, this valuable Software may be seized and liquidated in an attempt to satisfy the Judgment. Liquidation may result in the Software being sold to a competing organization or entity.
Talk about woeful undercapitalization. A $34,000 judgment is going to force them into selling off their core business assets? Really?
Righthaven always presented defendants in its copyright litigation with an unfair dilemma:
(1) pay out a few thousand in “go away” money now, or
(2) mount an actual legal defense (at an initial, minimum cost of a few thousand, with no guarantees that things would work out well).
It seems that Righthaven now faces a dilemma of its own:
(1) raise enough capital to pay off this $34,000 pending appeal, or
(2) go bankrupt.
The difference, of course, is that the dilemma Righthaven faces is fair. They put defendants to the expense of hiring lawyers. Some of those defendants won. The law says that those winning defendants should have their legal expenses paid by Righthaven. Sounds about right to me. If Righthaven can’t afford to pay without selling assets, perhaps they never should have been filing lawsuits in the first place.