Showing closed-circuit events on TV has cost some local taverns dearly.
When Benson Henderson squares off Saturday night against Frankie Edgar in an Ultimate Fighting Championship (UFC) headliner bout in Denver, mixed martial arts fans in Minnesota and nationwide will sidle up to their favorite bar to watch the 155-pounders duke it out live on pay-per-view.
The bar owners had better be certain that they paid promoters the hefty fee required to show the event.
Business owners from Bethel to Rochester have learned the hard way that showing closed-circuit mixed martial arts contests, boxing matches and other sporting events without paying the proper fees can be costly.
In the past two years, distributors and sponsors of these events have filed nearly three dozen federal lawsuits in Minnesota against taverns, restaurants and their owners, seeking damages in excess of $140,000 a pop.
While it costs about $50 to order a UFC event on pay-per-view in a private residence, it costs bars, restaurants and other commercial establishments $750 to $1,500, depending on their size.
While more than 50 businesses in Minnesota have signed up to show Saturday's "UFC 150" card, the event's promoters say other bar owners will try to beat the system by "pirating" it. They might misrepresent the business as a residence when ordering the program, move a residential receiver to a business location, stream the program via broadband, or use a "Slingbox" to relay the program from a home account to a business.
Mingling among the fight fans Saturday will be an army of private investigators and freelance "auditors" armed with smartphones and camcorders who are paid a bounty for finding establishments that show the event without paying the commercial licensing fees.
And for those who get caught, a bevy of lawyers stand ready to extract more than a few pounds of flesh.
J&J Sports of Campbell, Calif., has exclusive distribution rights for closed-circuit boxing matches, Joe Hand Productions of Feasterville, Pa., has exclusive distribution rights for UFC matches, and Zuffa, of Las Vegas, owns the UFC trademark, said Scott Wilson, a Shorewood attorney who has represented both J&J Sports and Joe Hand Productions in Minnesota.
A search of federal court records found thousands of lawsuits nationwide filed by these firms since the early 1990s.
Most suits of this type settle for undisclosed terms. In cases where the owners blow off the lawsuits, though, the plaintiffs have obtained default judgments in Minnesota ranging from $5,000 to $146,000.
There's no telling how many cases are settled in advance of a lawsuit. Proprietors say plaintiffs come in heavy, demanding $20,000 or more, then often offer to settle in the low teens.
"It's criminal, what they're doing," said Jeffrey W. Jensen, co-owner of J.T.'s Hideaway, a small bar in New Prague that got slapped in July with a Joe Hand lawsuit demanding damages of $170,000. "I have nothing. I mean, we're behind on our house. We're behind on our bar payment," he said. "We're not rolling in dough here."
Jensen insists that he didn't mean to do anything wrong in July 2010 when he called his local cable provider, Bevcomm, and ordered up UFC 116 at the request of a customer who wanted to see Minnesota heavyweight Brock Lesnar fight Shane Carwin.
"I didn't know I had to go through a promoter," Jensen said.
Ignorance is no excuse in such cases, though it can soften the blow when it comes to damages.
Tim Maher is a Minneapolis attorney who has negotiated a handful of settlements on behalf of Mexican restaurant owners who were caught showing boxing matches.
"They don't necessarily know that they're doing anything problematic, and then they just get hit out of the blue," Maher said.
Maher found settlements around the country varied tremendously, but averaged about $16,000. In his own experience it has cost defendants $2,500 to $7,500 to keep from going to court, he said.
UFC president Dana White has vowed to go after anyone who pirates the company's events, whether it's a bar or a website.
Big money is at stake. The financial research firm SNL Kagan says UFC delivered $310 million in pay-per-view programming in 2011, maintaining its position as the largest player in the field, ahead of boxing and wrestling.
PiracySurveillanceJob.com has an advertisement offering $100 for verified leads on commercial venues that try to get around the required fees. It pays $100 to $175 to bounty hunters who can produce video evidence and a notarized affidavit.
Ryan Janis, an attorney in Feasterville, Pa., who represents Joe Hand Productions, said his client has no choice but to take a tough stand on piracy.
"I think there is a misconception out there that the piracy and resulting lawsuits create a revenue stream for our client. This is not true," Janis said in an e-mail. "The truth is, after taking into account lost licensing fees, legal fees, private investigator fees, court costs, salaried staff time dedicated to piracy, and other attendant costs, pursuing piracy is not a very profitable activity for our client."
Still, he called it necessary "in the current technological landscape where some feel proprietary information or programming can be had for free, despite federal laws to the contrary."
The law provides up to $10,000 in damages per incident, and up to $100,000 in enhanced damages for willful violations.
Brad Factor, owner of the Little Dandy bar in Le Center, Minn., said the bar came equipped with a satellite dish when he bought it. He ordered a couple of UFC shows and now faces a lawsuit from Joe Hand seeking $170,000 in damages. The previous owner had the dish set up for residential billing, Factor said.
Janis said his client takes a dim view of that common refrain -- blaming the cable or satellite company.
"The proposition that bar and restaurant owners regularly end up getting sued through no fault of their own is ridiculous and unfounded," he said.
Dan Browning • 612-673-4493