CEO emotionally explains why he hasn’t paid attorney fees

LOS ANGELES -- Some may call it a reckoning for a well-known serial litigant, some may call it a copyright infringer getting away with profiting from stolen intellectual property.

Whatever the case, when U.S. District Judge Andre Birotte Jr. granted partial summary judgment against adult website Perfect 10 in its copyright infringement lawsuit against usenet access-provider Giganew in 2015, Perfect 10 was ordered to pay over $5.6 million in attorney fees.

And an important precedent in copyright law was set. Internet platforms can only be found directly liable if they themselves made the decision to copy the infringed work. If defendants simply provide the means or services which allow others to make and share copies, they can only be found indirectly liable for copyright infringement, under indirect liability doctrines.

Now, after challenging the court's ruling and failing to overturn it at the 9th U.S. Circuit Court of Appeals in 2017, Perfect 10's sole board member and CEO, Norman Zada, who testified Friday he has filed close to 30 copyright suits in the past, is again before Birotte, accused by Giganews of defrauding them in order to avoid payment of the attorney fees.

Giganews, an internet platform providing an old technology called usenet, which allows paying subscribers access to shared messages in which all types of files can be uploaded and shared, is represented by Andrew Bridges and Todd Gregorian of Fenwick and West LLP. They claim Zada transferred over $1.7 million in cash and assets from Perfect 10's account into his own, shortly after the judgment was upheld at the 9th Circuit, to make it difficult for Giganews to collect the fees.

While the current trial is supposed to determine whether Zada defrauded Giganews, for Zada it seemed to be a platform to continue pleading his case for infringement. In his emotional testimony before the eight-person jury, Zada told Bridges he was entitled to repay himself money from Perfect 10's account because he had poured millions into the company since its inception. Giganews Inc. , v. Perfect 10 Inc., , 17-CV05075 (C.D. filed July 10, 2017).

"I lost $52 million in that company, and the only reason why I lost all that money is because everybody was taking our content, and they weren't paying us a dime," Zada said, while fighting back tears. "All I did was try to defend my company and livelihood of my employees. That's all I did. I don't deserve this."

Perfect 10's attorneys, Mathew C. Mickelson and Eran Lagstein, claim Zada attempted to pay the attorney fees in the form of $2 million in cash and a lien on Zada's home but Giganews rejected the offer.

Giganews' chief financial officer admitted in his testimony that he was aware of the offer but rejected because it came with stipulations he did not want to agree to.

One of the key findings, leading to the court's decision to dismiss Perfect 10's infringement claims, is that Perfect 10 failed to provide Giganews with the information they say was needed to find and take down the infringed material. In the eyes of the court, had Perfect 10 provided Giganews with a message ID number allegedly needed to locate the message containing the intellectual property in question, they would have removed it. By proving this was the case to the courts, Giganews avoided the much harder to prove, "indirect" liability. Perfect 10 Inc., v. Giganews Inc, 2017 DJDAR 640.

"Perfect 10 never attempted to submit a takedown notice in this action that Giganews could actually use, the court said that in its fee award," Bridges said, while examining Zada.

In response, Zada dove into a lengthy rebuttal which Birotte allowed to be stricken from the record immediately.

Zada's statement was: "That decision, with all due respect to Judge Birotte, it was based on false and misleading declaration by you and your clients, and if your clients had told the truth in the related case, we would have won. The fact of the matter is my notices were not only compliant ... they were beautiful notices. ... The message ID thing was just a way for your client to basically stay in business, while it was receiving millions of notices from thousand of copyright holders. It was a complete deception by you and your clients on the court."

Out the presence of the jury, Birotte told both attorneys were litigating issues already decided in the related case and that he would begin injecting his own objection if questioning did not focus on the claims in the suit.

"We are fighting issues that have been litigated ad nauseum," Birotte said.