BOB GARFIELD:  Lately we've been following the saga of Righthaven, a group of lawyers that buys copyrights on articles from newspapers and then sues whoever re-posts them or parts of them online without permission. Righthaven then splits the proceeds of the lawsuit or the settlement with the papers. And it’s been a sweet deal. Righthaven sends no warnings or takedown notices, it just skips straight to the lawsuit, usually asking for a $150,000 and for the accused to forfeit the website.

Most of the alleged infringers being small blogs and individuals just settle. But here's the rub. It turns out that Righthaven, which has worked primarily with Stephens Media, the parent company of several newspapers, was only buying the part of the copyright that allowed it to sue for infringement, leaving the rest of the copyright with the newspapers.

Last month the Democratic Underground, a website that decided to fight back, with the help of the Electronic Frontier Foundation, scored a massive win over Righthaven, when Nevada Judge Roger Hunt said that Righthaven simply didn't own enough of the copyright to have legal standing to sue.

Now, Righthaven is scrambling to amend its filings to claim ownership of the entire copyright but, according to Paidcontent.org’s Joe Mullin, the Democratic Underground case may have struck Righthaven a mortal blow.

JOE MULLIN:  They made Righthaven lose standing in not just their case, but probably dozens or even all of their cases because, essentially, the copyrights weren’t truly transferred from Stephens Media to Righthaven. Stephens Media had too much control over the copyright to say that it had truly transferred it.

The judge said that Righthaven in its statements to the court had been, quote, “disingenuous, if not out right deceitful” and that Righthaven had broken local Nevada rules of litigation when it did not explain from the get-go that it had a financial arrangement with Stephens Media. The judge said that was, quote, “the most factually brazen of multiple inaccurate and likely dishonest statements to the court.”

So that's the case that turned this into a real fiasco. It's not hard to imagine a situation in which Righthaven ends up having to make substantial payouts to one or more defendants.

BOB GARFIELD:  Do you have any idea why, from the get-go, Righthaven didn't just establish ordinary legal counsel arrangements with these copyright holders?

JOE MULLIN: First of all, if a newspaper, under its own name, went out and sued more than 200 outlets, mostly small blogs and websites, there would have been bad public relations repercussions from that.

The other reason is that Righthaven thought that it could create a moneymaker by getting copyrights from multiple newspapers and really creating a business out of this. And it appears Stephens Media thought that it could make some money on that too.

Stephens Media invested a significant amount of principal in Righthaven. That number is reportedly $500,000. They, like the lawyers behind Righthaven, hope that this turns into a truly profitable national enterprise that has all kinds of newspaper clients. But it looks like they'll be lucky if they get that $500,000 dollars back.

BOB GARFIELD:  We've been talking about Judge Hunt’s ruling. He is a federal judge in Nevada. His decision doesn't necessarily have any bearing on what other judges should decide in other cases in other courts, but the CEO of Righthaven has talked about appealing to the 9^th Circuit Court of Appeals. What would that mean?

JOE MULLIN:  First of all, we don't know that they'll fare any better on appeal than they did in the lower courts. But also, it might take a year for that process to move ahead. And Righthaven is going to have to support its business during that time.

And there's questions about how they can do that. They aren’t filing more suits. That suggests that the legal resources they have are maxed out. And they have multiple counterattacks.

There's a class action claim against them. There is a claim against them that they're practicing law without a license. People are asking the Nevada State Bar to investigate them. Those counterattacks really might not go anywhere, but they will take more of Righthaven’s time and energy to defend.

BOB GARFIELD:  Steve Gibson, the CEO of Righthaven, who has been on our show, maintains that it is set up to deter people from stealing other people's content. That's a noble motive, isn’t it?

JOE MULLIN:  The real controversy here is in Righthaven’s tactics. There was an industry standard sort of developing. If you're a re-user of content or an aggregator of content, the right way to do it is an excerpt and a link. And if you're a copyright owner and you’re upset about how someone is using your content, the right way to begin that discussion is with a takedown notice. Sue first is really not the industry standard. And it's not clear the case law that they're creating is helping the newspaper industry at all, which was their stated intention. In fact, it might be doing the opposite.

BOB GARFIELD:  All right, Joe. Once again, thank you very much.

JOE MULLIN:  Thanks a lot. It was a lot of fun.

BOB GARFIELD: Joe Mullen covers legal affairs for Paidcontent.org.