Online Extra: Judge Orders Litigious Adult Website to Pay $5.6 Million

A federal judge has ordered a litigious adult website to pay $5.6 million in attorney fees and costs under the Copyright Act, saying its motives for suing Giganews Inc. and Livewire Services Inc. had more to do with creating a tax write-off for its owner than with protecting its copyrights.

‘All of the evidence before the court demonstrates that Perfect 10 is in the business of litigation, not protecting its copyrights or ‘stimulat[ing] artistic creativity for the general public good,’ wrote U.S. District Judge Andre Birotte Jr. of the Central District of California in an’order‘issued on March 24.

In February, a federal magistrate judge in Los Angeles’blasted Perfect 10‘for ‘pervasive failures’ and ‘numerous violations of court orders’ in the same case, finding the abuses warranted sanctions.

Giganews and Livewire, which help operate Usenet message boards, are represented by a Fenwick & West team led by partner Andrew Bridges. Perfect 10 sued the companies in April 2011 for copyright infringement, trademark infringement, trademark dilution, unfair competition, and violation of Perfect 10′s right of publicity. After a series of incremental victories, the court ultimately dismissed all remaining claims in November.

According to Birotte’s 59-page order, Perfect 10′s president and CEO acknowledged the company has filed between 20 and 30 copyright infringement suits and that half of its revenues have been generated by settlements and default judgments.

‘Perfect 10 has never been a self-sustaining business, and to date, has lost more than $50 million dollars,’ the order states. ‘However, this loss appears to be largely intended by Perfect 10′s President and CEO Norman Zada’ who testified that he is able to deduct the losses on his personal income taxes.

Birotte, who declined to award fees under the ‘exceptional case’ standard included in the Lanham Act, noted that awarding attorney fees under the Copyright Act would help discourage serial litigants from bringing unmeritorious suits.

The judge approved hourly billing rates ranging from $610 to $930 per hour for partners and $350 to $690 per hour for associates, despite arguments from Perfect 10 that the rates were excessive and the lawyers were on a ‘billing frenzy.’ Perfect 10 also pointed out the average attorney fee award in a copyright case is $218,000, suggesting that would be a more appropriate figure. It claimed a larger award on the order sought by the Fenwick lawyers would bankrupt the company.

Birotte was unsympathetic. ‘The court’s decision to award attorneys’ fees under the Copyright Act in this action is driven in part by Perfect 10′s own conduct (as is the size of the fee award), and the court finds nothing inequitable about imposing it.’

Giganews co-CEO Ron Yokubaitis said in a written statement that the company was ‘proud to have stood up to the meritless claims of a serial litigator who was hoping for an easy pay day.’

Perfect 10 is best known in the legal world for a groundbreaking Ninth Circuit ruling that Google had the right to display thumbnail-size images of Perfect 10′s copyrighted images. The company has also sued credit card companies that accept payment for allegedly infringing websites.

Vanessa Blum writes for The Recorder, the San Francisco-based ALM sibling of Internet Law & Strategy. She can be reached at [email protected].

‘