Unanimous jury awards usenet provider Giganews $1.2 million

LOS ANGELES -- A unanimous eight-person jury awarded usenet provider Giganews $1.2 million, Wednesday, far less than the $6.6 million it asked for in the case accusing an adult magazine and its CEO of defrauded them of a $5.6 million attorney fee award after losing a copyright-infringement lawsuit.

The jury awarded the online platform $454,000 in actual damages and $746,000 in punitive damages after less than a day of deliberation in case that saw the defendant CEO cry on the witness stand and argue he was the actual victim. His attorney called the verdict a defense win. Giganews Inc. v. Perfect 10 Inc., 17-CV05075 (C.D. filed July 10, 2017).

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, was 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, in an effort to sidestep the fees.

Mathew C. Mickelson

"As Mr. Zada said from the stand, Perfect 10, as a way of life, was always bringing lawsuits to get settlements and Giganews resolved that this was a case that it was going to fight and win," Bridges said after the verdict.

"In winning the earlier case, Giganews got a court ruling as a matter of law that Giganews is not engaged in infringement of any sort. That ruling was important and that ruling was worth investing in that litigation for."

Giganews had sought $2.2 million in actual damages and $4.4 million in punitive damages.

"The other side was restricted to one-sixth of what they asked for. That is a victory for the defense by any stretch of the imagination," said Perfect 10's attorney, Mathew C. Mickelson, shortly after the verdict was read. Eran Lagstein, who also represented Perfect 10, agreed.

Zada, who is known to some as a serial litigant, to others a champion for copyrights, testified during the trial that he sent over 3,000 takedown notices under the Digital Millennium Copyright Act and filed at least 30 lawsuits against companies such as Google relating to allegedly infringed copyrights owned by Perfect 10. While some settled for millions, when Zada and Perfect 10 sued Giganews in 2011, Giganews went to trial in a federal court.

U.S. District Judge Andre Birotte Jr.

The trial resulted in U.S. District Judge Andre Birotte Jr. granting summary judgment in Giganews' favor, 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.

Backed by amicus briefs filed by the Motion Picture Association of America and Recording Industry of America, Zada appealed Birotte's ruling to the 9th U.S. Circuit Court of Appeals but was again denied by a three-judge panel in 2017. Perfect 10 Inc., v. Giganews Inc, 2017 DJDAR 640.

"Perfect 10's business model was getting settlements and settlements don't usually involve landmark decision," Bridges said after the verdict. "If Perfect 10 had gotten landmark decisions, I'm assuming it would have wanted to convert those landmark decisions into settlement leverage. I wouldn't ascribe to Perfect 10 the direct effect of being part of the larger debates about copyright and platforms."

Giganews may still have a hard time collecting the attorney fees, considering Zada was able to remove almost all of Perfect 10's cash and assets before Giganews purchased the company for $500,000.