Copyhype

A company owning domain names that had been seized by ICE as part of its efforts to fight online piracy is seeking their return pending the outcome of the Government’s forfeiture proceeding against them. On Monday, the US filed its memorandum of law opposing the return.

“Rojadirecta.com” and “Rojadirecta.org” were seized on February 1, 2011, as part of ICE’s third phase of Operation in Our Sites. The owner of the domain names, Puerto 80 Projects, and its legal counsel engaged in informal discussions with the government to return them, but Puerto 80 ultimately refused to accept the government’s condition that it stop facilitating copyright infringement in order to get its domain names back.

On March 22, Puerto 80 filed Seized Asset Claim Forms, identifying itself as owner of the domains and giving the US 90 days to file a forfeiture complaint in federal court. The US filed the complaint within the time frame, on June 17.

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A few days earlier, Puerto 80 filed a petition for release of seized property. The petition and memorandum of law in support are available here. The EFF filed an amicus brief as well, available here. ¹I’m curious to know if this is the first time anyone has filed an amicus brief for this type of petition.

On Monday, July 11, the US filed its memorandum of law in opposition to the petition.

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If the court grants the motion, it doesn’t mean Puerto 80 wins, it just means possession of the domain names will be returned to Puerto 80 during the forfeiture proceedings. The court may also enter any order necessary to ensure the property’s value is maintained while the proceeding is pending (like requiring Puerto 80 to post a bond), and the government may place a lien on it to prevent its transfer to another person. ²18 USC § 983(f)(7). If the government eventually wins its forfeiture case, than the domain names are given back to be destroyed.

In many ways, this procedure is similar to a criminal defendant being released on bail after arrest and before trial.

Federal judicial forfeiture actions are governed by Supplemental Rule G of the Federal Rules of Civil Procedure. Those rules state that someone seeking return of seized property pending the outcome of a forfeiture proceeding may petition the court under 18 USC § 983(f). ³FRCP Supplemental Rule G(8)(d)(i).

Section 983(f) lays out five conditions that must be met for a court to release property that is the subject of a forfeiture proceeding. It requires that:

(A) the claimant has a possessory interest in the property;

(B) the claimant has sufficient ties to the community to provide assurance that the property will be available at the time of the trial;

(C) the continued possession by the Government pending the final disposition of forfeiture proceedings will cause substantial hardship to the claimant, such as preventing the functioning of a business, preventing an individual from working, or leaving an individual homeless;

(D) the claimant’s likely hardship from the continued possession by the Government of the seized property outweighs the risk that the property will be destroyed, damaged, lost, concealed, or transferred if it is returned to the claimant during the pendency of the proceeding; and

(E) none of the conditions set forth in paragraph (8) applies.

Paragraph (8) states that release of seized property is unavailable if the property:

(A) is contraband, currency, or other monetary instrument, or electronic funds unless such currency or other monetary instrument or electronic funds constitutes the assets of a legitimate business which has been seized;

(B) is to be used as evidence of a violation of the law;

(C) by reason of design or other characteristic, is particularly suited for use in illegal activities; or

(D) is likely to be used to commit additional criminal acts if returned to the claimant.

In its petition, Puerto 80 says it meets all these requirements. The substantial hardship caused by the continued possession of the domain names that Puerto 80 claims include a reduction in traffic, a loss of business goodwill, and deprivation of its users’ and visitors’ First Amendment rights.

The US responds that Puerto 80 hasn’t shown it satisfies the requirements of 983(f) and doesn’t mince words in doing so:

In attempting to provide justification for granting this extreme remedy, Puerto 80 seeks to characterize the website it operated under the Rojadirecta Domain Names as an online discussion forum and, in so doing, would have this Court decide, on an expedited basis and without a fully developed factual record, a variety of issues that are more properly raised either in a motion to dismiss the Government’s Verified Complaint or following a period of discovery. Indeed, through its petition, Puerto 80 is attempting to use a limited provision of forfeiture law designed to provide relief in only the rarest of circumstances in order to mount a broader challenge to a widely employed tool of law enforcement.

Specifically, the US argues that the hardships cited by Puerto 80 are not the substantial ones Congress intended when it wrote 983(f). Looking at both the case law and legislative history, the US points out that, especially in light of the examples given by the statute — “preventing the functioning of a business, preventing an individual from working, or leaving an individual homeless” — potential loss of goodwill and a 1/3 drop in traffic don’t qualify.

The US states that Puerto 80’s inclusion of the impact on the First Amendment rights of its users as a substantial hardship borne by Puerto 80 “borders on frivolous.” If there’s a First Amendment issue here, Puerto 80 must raise it in the forfeiture proceeding, not shoehorn it into a 983(f) petition.

Finally, the US states says the return of the domain names is likely to result in their further use in committing criminal copyright infringement, since it has no reason to believe Puerto 80 will stop the acts that led to the domain names being seized in the first place.

This portion is worth a read, as the US takes the time to elaborate on its theory of the case against the domain names — why it believes they facilitate criminal copyright infringement. It says “Puerto 80’s attempts to liken itself to an Internet search engine is wholly unavailing. Unlike a search engine or other site that aggregates links to existing content neutral material on the Internet, Rojadirecta organizes links to very specific content in a precise and targeted way.”

The US goes on to argue that even if Puerto 80 isn’t engaged in direct infringement on its website, it “certainly has engaged in contributory infringement, and has aided and abetted the infringement of others.”

My thoughts: this seems like an easy call for the court to make in favor of the US. Courts have read the “substantial hardship” requirement for these petitions strictly. An example given in the statute is “preventing the functioning of a business” — the case law suggests a substantial hardship is closer to completely preventing, ie a business would be forced to declare bankruptcy without the property seized, the functioning than significantly impeding the functioning.

The various substantive issues raised by Puerto 80 are more appropriately raised in the forfeiture proceeding itself. I don’t doubt they’ll do exactly that. But the 983(f) petition is a limited remedy, and I’d be surprised to see a court rule on substantive issues at this point.

Some other thoughts: Puerto 80 and the EFF devote considerable time to arguing that these seizures amount to an improper prior restraint under the First Amendment, and many in the blogosphere have shared this view. Those concerns extend to the pending PROTECT IP Act, since its provisions will largely depend on domain name seizures such as this.

The US disagrees, and its brief remarks on the issue in its memorandum suggest it’s approaching the issue similarly to how I’ve approached it here in previous posts. ⁴See COICA: First Amendment, Domain Name Seizures Don’t Violate First Amendment, ICE Seizures Criticism: Magic Words A Response to ‘Supporters of DHS Domain Name Seizures Undervalue Important Constitutional Protections’, and Responding to Sellars: Copyright and Content-based Regulations. The government notes that the discussion forums remain on Rojadirecta’s site and are still accessible through other domain names, where case law dealing with seizures and the First Amendment have focused on whether or not the seizure actually removes expressive material from circulation.

In a footnote, the US states: “Indeed, it is clear from the record before this Court that the Government’s seizure of the Rojadirecta Domain Names was prompted by enforcement of the criminal copyright laws, and not as regulation of speech or other expressive conduct. As such, the seizure is not properly viewed as a prior restraint. See, e.g., Arcara v. Cloud Books, Inc., 478 U.S.697, 706 n.2 (1986).”

Finally, a word about the Spanish court decision finding Rojadirecta not liable for copyright infringement. The US notes that this doesn’t preclude Rojadirecta for being liable for violating US copyright law. Generally, any business that operates in a country is subject to that country’s laws; you can’t, for example, operate a mail-order marijuana business in a country where that substance is legal and ship to US customers without getting into trouble.

The EFF argues, however, that the district court should give the Spanish court decision preclusive effect under the principle of comity. I don’t find this argument convincing.

A nation’s courts aren’t required to take a foreign court’s decisions into consideration (except when specifically required by a treaty agreement between the two countries). ⁵By contrast, US states are required to recognize judgments made in another state’s courts under the Full Faith and Credit Clause of the Constitution. But they generally will do so under the concept of comity, unless there’s a strong policy reason not to. Comity is based on respect between nations and the presumption that other nations will reciprocate.

Typically, comity shows up when someone asks a court to enforce a foreign court’s judgment. The EFF states, however, that “the principles apply more broadly.” They do, but not in the general sense the EFF suggests.

Giving effect to a foreign court decision means treating it as if it was a US court decision. That means it prevents the relitigation of either the same claim between the same parties that had already been decided (“res judicata”) or the same issue that had already been decided in an earlier case involving one of the parties (“collateral estoppel”).

I don’t think either res judicata or collateral estoppel preclude the forfeiture of these domain names. The parties are different: the Spanish case involved Spanish copyright owner Audiovisual Sport S.L. and the operators of Rojadirecta, this case is between the US government and the Rojadirecta domain names. The issues are largely different too: the primary issue in the Spanish case was whether the website infringed on copyrights, the primary issue here is whether the domain names facilitated the infringement of copyrights. Indeed, the Spanish court even said in its decision, “The actions of making available and advertising the games that are transferred facilitate download”. ⁶Declaration of Igor Seoane Miñán, Exhibit 1.

The court has 30 days to rule on Puerto 80’s petition unless both parties consent to an extension. More on this case as it develops.