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The copyright bully and extortion practices with “confidentiality” clauses

Posted by Steve Vondran | Jun 10, 2016 | 0 Comments

Copyright Bully Nonsense – When the IP law firm crosses legal and perhaps ethical lines

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Introduction

There is an old saying “when you are slaying the dragon try not to become the dragon.”  In civil litigation, this takes on a real life meaning from time to time.  My firm is a civil law firm.  We try to handle serious business disputes such as handling software audits, Bittorent defense cases, willful copyright infringement and other business and real estate matters.  This blog focuses on a recent audit with one of the large software companies (which I will not name for the time being) but the fact pattern and situation could easily arise with any company including possible in an SIIA, adult pornography illegal download case, investigation by the  business software alliance and any other battle with a federal copyright holder.  This blog is informative only, raises some general concepts to be aware of if you are being aggressively pursued by a IP lawyer or collection agency.

Fact pattern hypothetical

Here is a fact pattern that recently arose.  Our firm was in the middle of an audit representing an architect and engineering firm.  We were dealing with one of the well known IP law firms in town.  We had responded to the audit demand letter and submitted to the “voluntary” process.  We provided results, there were a few “shortages” of licensing, and naturally this turned into a demand that there was “willful” copyright infringement and we should be lucky just to be able to negotiate a settlement.  This is the way they make you feel.  So we get down to getting close to finalize a deal, when the opposing counsel tells me she has legal authority to settle the case with confidentiality (meaning no one will find out about the settlement, which is good for the company that wants to protect and defend its reputation), especially with social media.  So we get close to settling and I am told that the authority for confidentiality was given by the client (a large software publisher).  However, if I wanted to get it for my Client, that was going to cost me an extra several thousand dollars.  If not, the implication was that a press release would be issued exposing the settlement (obviously seeking to paint the picture that my client's business was nothing less than a low life software pirate.

I found the offer to be a bit strange and so it caused me to look up the law of civil extortion, and also to wonder what the ethical duties of the lawyer were (not that we threaten any administrative or criminal reporting by us – that is in itself unethical and we would never d0 that), but it did make me wonder and want to look up the law in this area.  Below are some of the various legal citations (and some handy resources below) that shed light on this topic.  In some cases, if not careful, the copyright firm may just wind up violating YOUR LEGAL RIGHTS and giving you leverage to reach a more favorable settlement.  When you are talking about dealing with potentially hundreds of thousands of dollars in demands (some justified, some not), it is important to know just what the law ALLOWS and what it DOES NOT ALLOW.

Vondran Legal Hour Podcast discusses this Topic

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PODCAST:  Click on the picture above to listen to Attorney Steve discuss this important topic.

Attorney Rules of Professional Responsibility in California

  1.  Attorneys are not exempt from these principles in their professional conduct. Indeed, the Rules of Professional Conduct specifically prohibit attorneys from “threaten[ing] to present criminal, administration, or disciplinary charges to obtain an advantage in a civil dispute. See Cal. Rules of Prof. Conduct, rule 5–100(A).  See Flatley v. Mauro, 39 Cal. 4th 299, 327, 139 P.3d 2, 20 (2006).

California Civil Extortion Case Law

Here is some snippets from California case law that may be helpful in keeping an overly aggressive debt collector in check:

1.  Extortion has been characterized as a paradoxical crime in that it criminalizes the making of threats that, in and of themselves, may not be illegal. In many blackmail cases the threat is to do something in itself perfectly legal, but that threat nevertheless becomes illegal when coupled with a demand for money.   See  Philippine Export & Foreign Loan Guarantee Corp. v. Chuidian (1990) 218 Cal.App.3d 1058, 1079, 267 Cal.Rptr. 457.).  See  Flatley v. Mauro, 39 Cal. 4th 299, 326, 139 P.3d 2, 19-20 (2006).

2.  The law does not contemplate the use of criminal process as a means of collecting a debt. See People v. Tufunga (1999) 21 Cal.4th 935, 955, 987 P.2d 168. In Beggs “we explained that because of the strong public policy militating against self-help by force or fear, courts will not recognize a good faith defense to the satisfaction of a debt when accomplished by the use of force or fear”]; Lindenbaum v. State Bar (1945) 26 Cal.2d 565, 573, 160 P.2d 9 [For purposes of extortion “[i]t is immaterial that the money which petitioner sought to obtain through threats may have been justly due him.

California Penal Code Section 518

Under Cal. Penal Code 518 defines extortion under CA law: “Extortion is the obtaining of property from another, with his consent, or the obtaining of an official act of a public officer, induced by a wrongful use of force or fear, or under color of official right.”

Cal Penal Code section 519 defines what wrongful use of fear is:

Fear, such as will constitute extortion, may be induced by a threat of any of the following:

1. To do an unlawful injury to the person or property of the individual threatened or of a third person.

2. To accuse the individual threatened, or a relative of his or her, or a member of his or her family, of a crime.

3. To expose, or to impute to him, her, or them a deformity, disgrace, or crime.

4. To expose a secret affecting him, her, or them. (in software audit cases, if you don't pay the extra $5,000 you get no confidentiality and we will post a press release telling everyone about our settlement with your company)

5. To report his, her, or their immigration status or suspected immigration status.

Cal. Penal Code § 523 – Every person who, with intent to extort any money or other property from another, sends or delivers to any person any letter or other writing, whether subscribed or not, expressing or implying, or adapted to imply, any threat such as is specified in Section 519, is punishable in the same manner as if such money or property were actually obtained by means of such threat.

Civil Extortion Resources

  1.  Great article on civil extortion by inside counsel
  2.  Civil RICO blog
  3. ABA article on making threats
  4. Be careful what you threaten

Contact an intellectual property, software & copyright law firm

Our business, real estate and IP law firm does not allow our clients to get pushed around by overzealous and aggressive lawyers whether a copyright case, or software audit, we will fight for your legal rights.  When handing a settlement, attorneys need to treat each other with respect.  We have called and petitioned for fair treatment in software license disputes.

If you get to the point where the line is crossed and the Plaintiff's lawyer is dangling confidentiality in front of your nose like a carrot (meaning, “if you pay me an extra $20,000 we will keep this confidential”), this may create a counter suit or counter action for Civil Extortion.  Sometimes the dragon-slayer becomes the dragon.  The law is designed to encourage civil behavior and disputes should be handled with respect and dignity, when it crosses the line we will take a very close look at it.  To discuss your case in confidence or speak with a copyright lawyer call us at (877) 276-5084.  We offer a free initial consultation and offer low flat rate fees for many of our non-litigation cases.

About the Author

Steve Vondran

Welcome to the SHORT BIO page for Attorney Steve®  (Yes, I was able to get a trademark for Attorney Steve®) Click here to go to a more COMPLETE BIO. AZ Bar Lic. #025911 CA. Bar Lic. #232337 Introduction I have done a lot of things in my 15 years of law practice and in my life in general.  ...

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