Filmmakers Win $4.2M in Hacking Damages From Defunct VPN Hosting Company *TorrentFreak

Copyright owners have tried a wide variety of options to fight online piracy over the years, including through direct legal action.

More recently, we’ve seen lawsuits against people who allegedly uploaded and shared pirated content, but pirate service operators and developers have also been sued.

A group of US-based independent film companies has expanded its legal reach by suing third-party intermediaries. The creators of films such as “Hellboy”, “Hunter Killer”, “Rambo V: Last Blood” and “The Hitman’s Bodyguard” have targeted VPN services and their hosting companies.

This legal campaign has already had several successes. Earlier this year, filmmakers won $14 million in damages in their case against VPN provider LiquidVPN. Other companies including Torgarde, Unlimited VPN and vpn.ht settled their differences and agreed to block torrent traffic on US servers.

Hosting companies have not been spared either. Sharktech, for example, initially fought back, but then agreed to adjust and block major pirate sites, including “Pirate Bay”, “YTS” and “RARBG”.

$4.2 million in damages

Last week, another victory was added to the list. In federal court in Colorado, U.S. District Judge R. Brooke Jackson entered judgment against defunct hosting company MICFO, awarding $4,200,000 in damages for contributory copyright infringement.

The judgment is a clear victory for the film company Millennium and its affiliates. For MICFO, which is no longer operational, this only adds to its troubles.

In addition to this civil lawsuit, MICFO finds itself at the center of a criminal case. The hosting company and its owner were indicted by a grand jury in Charleston, South Carolina in 2019, and are accused of a scheme to fraudulently obtaining IP addresses from ARIN.

These IP addresses were sold to big companies like Amazon and Saudi Telecom for millions of dollars. MICFO also used the IP addresses to serve its own customers, which included VPN companies Hide My Ass, NordVPN and Proton.

Hack notices ignored

The filmmakers accused the host of turning a blind eye to hacking activities allegedly committed by subscribers of its VPN clients. In practice, this meant that it did not forward any hack notifications sent.

“Defendant took no action against these customers in response to the notices because he was motivated to receive subscription funds from the customers rather than terminate the service,” Judge Jackson wrote in his order.

MICFO was held liable for copyright infringement by default judgment and after an evidentiary hearing, the court ruled that maximum statutory damages of $150,000 per work were appropriate here. With 28 films up for grabs, that brings the total to $4,200,000.

This compensation is “more than reasonable”, says Judge Jackson, because the film companies have calculated that the actual damages they suffered are much higher.

“The Court finds plaintiffs’ request for maximum statutory damages of $4,200,000 to be more than reasonable in light of plaintiffs’ loss of income of nearly $7,000,000…” the order reads. .

Open ends

MICFO is no longer operational. The company and its CEO pleaded guilty in the criminal wire fraud case and will soon be sentenced. Interestingly, this appears to be good news for the filmmakers, as the US government has seized nearly $17 million in funds and assets in this case.

Part of the seized goods could be used to pay the damages. And indeed, Judge Jackson’s order clarifies that the plaintiffs can execute the judgment immediately to seek restitution in the South Carolina District Court.

Filmmakers are also awarded any third-party breach of contract claims the hosting company has against its customers. This includes any claims against the VPN companies he has served.

MICFO’s terms of service required its customers to indemnify the host in the event of a liability claim. This means filmmakers can use it as a stick to attack the hosting company’s VPN clients.

More legal action

Over the past few years, Millennium Funding and affiliated film companies have set a record for obtaining leverage in court, which can then be used for related cases, both inside and outside outside the courts. It wouldn’t be a big surprise to see this pattern repeat itself.

The only case of active VPN that we are aware of is with VPN provider PIA, which recently defeated direct infringement claims through a motion to dismiss. Claims of copyright infringement by contribution and by proxy remain, however.

Following the partial dismissal, the filmmakers filed a complaint amended complaint against PIA and the case is still ongoing.

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A copy of the monetary judgment against MICFO, issued by United States District Judge R. Brooke Jackson, is available here (pdf). Findings and associated conclusions can be found here (pdf)