People don't often think of law firms as "just another business," but lawyers have business ideas, the same as anybody else.  It's just that our ideas run along the lines of "there's a wrong that could be righted, and I might be able to make some money doing it!"  (You can be sure lawyers across the country are trying to figure out how to help homeowners facing foreclosure, and -- not to put too fine a point on it -- how to get paid for their work.)

So it is that 2010 saw the development of a new type of lawsuit: a sort of class action by movie companies against hundreds or thousands of Internet users, who are alleged to have infringed the movie companies' copyrights by downloading films onto their computers.  Of course, there have always been copyright infringement lawsuits, and the big music companies recently spent several years and hundreds of thousands of dollars suing their customers for downloading music, but these movie downloading suits are a different kind of animal.  But first and foremost, they should be seen as a new type of business in the legal industry.

The business works like this: a lawyer finds a person who owns a movie -- say, a director, producer or studio.  The lawyer offers to help the owner make some extra money from the movie by catching people who "stole" it by downloading it and watching it for free.  The lawyer does all the work, and splits the money with the movie owner.  So far, so good: if somebody really did steal the movie, then they ought to pay for it.  And, thanks to the tireless work of our elected representatives, who spare no effort to protect the rights of commercial entertainment companies, if you steal a movie, you're on the hook for at least $750, and maybe as much as $30,000.  For our movie owner (and for the lawyer), this is looking like a pretty good deal.

Unfortunately, every silver lining has a cloud, and the cloud here is that it's a lot of work to prove that somebody infringed a copyright.  You have to examine the defendant's computer to find the movie, prove that it wasn't some computer virus from Eastern Europe that was part of a big bootlegging operation, and consider whether the next-door neighbor wasn't sneaking Internet access from the defendant.  If only there was some way to get money without doing all that work, the movie company (and, of course, the lawyer) would make much more, much faster.

And this is the new legal-business idea: you file the lawsuit in some out-of-the-way court, then get people's names and addresses from their ISP.  Then, you demand money from those people.  Just skip right over the whole tedious prove-it-in-court part.  People are afraid of lawyers, and the $750-to-$30,000 price is pretty scary too.  If you only demand a few thousand bucks, and are willing to settle for $750 or $1000, it's cheaper for your targets to pay you than to hire their own lawyer to find out whether you even have a case.  So, for a one-time investment of a few hundred dollars in court filing fees, plus some 44¢ stamps, they have a pretty good shot at making a couple grand from each of a few hundred or a few thousand people.  It's like printing money, and no wonder that a bunch of lawyers are getting into it.

On the other hand, if you've received one of these demand letters, you may be feeling like you're squeezed between a rock and a hard place.  And sure enough, you are.  But the bad news doesn't stop there.  Let's say you pony up $1,500 to get out of one of the lawsuits.  Then your IP address shows up on another movie's list.  Well, now the plaintiff knows who you are, and that you have money, and that you'll pay to avoid a fight.  You just qualified for Frequent Harassment status!  Better get your checkbook limbered up -- you're going to have a bunch of new best friends, and they're all going to be lawyers for movie companies.

Now you may be thinking -- or at least hoping -- that this is the bottom.  It turns out, it's not.  There's at least one law firm in Phoenix, Arizona, that's decided there's even more money to be made in this business.  So, for $249, they'll "negotiate" your settlement with the plaintiff.  (If they can't get a better deal than you were offered originally, you don't pay.)  But if you've been following along, you know that the plaintiff makes money any time you agree to pay more than 44¢.  Sure, they're demanding $2,900 or $3,700 or whatever they think they can get based on the movie, but they'll almost certainly take less if you agree to pay right away (i.e., before they have to do any more work, or -- God forbid -- prove that you did anything wrong).  So now you're paying $249 to these other lawyers for the service of them calling the first lawyer and offering the amount in your settlement letter, minus $249.  The plaintiff will take it (because they're not doing this to prove you stole the movie, they're doing it to collect your money), and the Arizona lawyers pocket a couple hundred bucks too.  It's a money tree that keeps on giving!

So, what should you do?

Well, IANYL and TINLA, but if you downloaded the movie, pay up.  It's likely to be cheaper for you in the long run.  You can try negotiating with the plaintiff's lawyer yourself, or you can hire the guys in Arizona.

If you didn't download the movie, hire a proper lawyer and fight.  It's the only way to make this business model work out to anything other than free money for sleazy lawyers.  If nobody fights, then you can count on more and more lawsuits like this, and you can expect to see the same idea applied to other transactions.  Let's face it: all the legal ethics guidelines and oaths to uphold the Constitution in the world aren't going to keep at least some people from going after the quick score, the easy money.

If you're unfortunate enough to have gotten tangled up in one of these suits, and you live in Oregon or California, and you want to fight, This e-mail address is being protected from spambots. You need JavaScript enabled to view it for a free consultation.  With any luck, we'll be able to help you out.