Federal judges question whether copyright lawsuits with Minnesota ties constitute a fraud on the courts.
One federal judge calls it a modern-day “shakedown.’’
A Minnesota attorney says it’s merely an effort to hunt down Internet pirates illegally downloading pornography.
The issue is “copyright trolling’’ — a practice in which lawyers threaten lawsuits to wring millions of dollars in settlements from people suspected of pirating videos online.
Now, defense attorneys have questioned whether a group of men with ties to Minnesota who are behind hundreds of such suits nationwide have used straw men as copyright holders when they asked judges to help them obtain the identities of Internet users.
A federal judge in Los Angeles, concerned about what he called a “possible fraud on the court,” intends to get to the bottom of the dispute at a hearing Monday afternoon. Attorney John L. Steele is among eight key figures ordered to appear before U.S. District Judge Otis D. Wright II to explain themselves or face sanctions that could include fines or jail.
Steele denies any wrongdoing. “If people sit back and let a fact-finder ... hear evidence, these conspiracies always dissipate like fog,” he said in a recent interview.
But late Friday, his attorneys filed a motion challenging the judge’s authority to compel Steele and his associates from Minnesota and Illinois to appear in the California cases, which were handled by an associate in that state.
How the lawsuits arise
The cases arise from one of the latest forms of Internet piracy, in which people use file-sharing programs such as BitTorrent to download copyrighted movies. The computers or wireless routers involved can be identified by their “Internet protocol,” a numerical address, but the identities of the users are not clear.
The Star Tribune has identified more than 660 federal lawsuits filed by more than a dozen entities who have asked judges to help them identify thousands of computer users who may have illegally downloaded copyrighted videos.
Then lawyers send those users a settlement demand — generally ranging from $1,500 to $4,000 — warning that violations can result in penalties of up to $150,000 if they must go to court.
Steele, a 2006 University of Minnesota Law School graduate licensed in Illinois, has built a national reputation by specializing in such cases with his one-time partner and former classmate, Paul Hansmeier of Minneapolis.
“That was an area we thought we could make a big difference in because there weren’t too many types of people who were prosecuting these types of suits,” Hansmeier said.
Hansmeier said criticism of the litigation comes from copyright pirates and their attorneys who “spread conspiracy theories” because they lose in court.
In June 2010, Steele formed Media Copyright Group in Minnesota with Hansmeier as its manager. Hansmeier’s brother, Peter, worked at the firm capturing Internet addresses of suspected copyright infringers. Several months later, the Steele Hansmeier law firm was formed in Minnesota and began filing lawsuits.
Allan Mooney, a Minnesotan who has brokered the sale of Internet-based businesses, said he introduced his friend Paul Hansmeier to some contacts in the porn industry. But he denied knowing that he was listed as the “sole organizer” of MCGIP LLC, a plaintiff in at least 20 lawsuits filed by Steele Hansmeier or contract attorneys.
Mooney also has been listed in court filings — with his name misspelled — as an agent for an entity called Guava LLC, which is registered in the Federation of St. Kitts and Nevis in the West Indies. Guava has been the plaintiff in 21 federal lawsuits since October, including six in Minnesota.
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