Anti-Piracy Outfit Rightscorp Hit With $15m Lawsuit After Sale Went Wrong

Rightscorp, whose data supports several major copyright infringement liability lawsuits against ISPs, has been hit with a $15m lawsuit. Plaintiff American Films, which previously claimed to have acquired the US operations of notorious 'copyright troll' outfit GuardaLey, says Rightscorp dangled an acquisition offer and then used confidential information to make bank.

rightscorp logoAfter beginning life as DigitalRights back in 2009, anti-piracy company Rightscorp became known for its cut-price copyright-trolling operations.

Where competitors would attempt to charge hundreds up to multiple thousands of dollars per alleged file-sharing infringement, Rightscorp initially offered to settle cases for around $20. The long game was for every ISP in the United States to forward Rightscorp notices to customers, thereby negating the need for courts, subpoenas, and other legal expenses.

While some ISPs did indeed forward Rightscorp’s notices, the anti-piracy company couldn’t balance the books with its settlement model and lost millions of dollars. In a change of direction, Rightscorp data was later utilized by music publisher BMG to sue Cox Communications for failing to disconnect repeat infringers.

After BMG came out on top, Rightscorp successfully persuaded the RIAA to sue several other ISPs based on the data in its infringement databases.

Rightscorp Allegedly Entered into Acquisition Talks
For many years, Rightscorp’s very existence presented a conundrum. In 2013 the company went public but its accounts revealed that since at least 2011 it had being losing millions every year. With the situation worsening every year thereafter, Rightscorp changed its company status and removed the need to make future accounts public.

Against all the odds, Rightscorp is still alive today, most likely due to perceived value in its repeat infringer database. According to an announcement Monday, Rightscorp’s CEO encouraged a company called American Films, Inc. to acquire Rightscorp but things didn’t go to plan. Through a multi-million dollar lawsuit filed in a Florida court, American Films is hoping to straighten things out.

American Films, Inc. What Does it Do?
In 2019, GuardaLey – the most infamous BitTorrent ‘copyright-trolling’ operation in the world – said it had entered into a joint venture with American Films, Inc. The U.S. company would become the 100% owner of GuardaLey’s U.S. operations, the extent of which were never revealed.

More than three years later, it still isn’t clear what American Films actually does, where, or with whom. It has a website now and describes itself as an “innovative global intellectual property protector” but if the company is involved in a GuardaLey-style settlement business, it’s hiding that very well.

According to Yahoo Finance, “American Films, Inc. does not have significant operations. The company intends to merge or acquire one or more properties or businesses.” At some point it appears that Rightscorp became an acquisition target but after a warm start, things failed to progress and eventually ended up in court.

Filed at the Circuit Court of the 20th Judicial Circuit for Collier, Florida, the American Films lawsuit targets Rightscorp, Inc. and its CEO and chairman, Cecil B. Kyte.

“The lawsuit alleges Rightscorp and Kyte lured [American Films] into a transaction to acquire Rightscorp, and then Rightscorp and Kyte used confidential information from the deal to reap a profit,” the company’s announcement reads.

From the limited court documents we’ve been able to obtain, the claim amount is officially listed as “over $100,000.00” in the category “contracts and indebtedness”. American Films says the lawsuit seeks to recover in excess of $15 million from Rightscorp but what the amount relates to is unknown.

American Films is a Rightscorp Shareholder
American Films further revealed this week that the company owns shares in Rightscorp, a supposed rival. How many of the anti-piracy outfit’s $0.01 shares are held by American Films (AFI) isn’t clear but the company appears to be flexing its muscles, for the benefit of Rightscorp, it insists.

“As a shareholder of Rightscorp, Inc. common stock, AFI is currently reviewing the possibility of initiating a shareholder rights action against Rightscorp, Inc. Any shareholder rights action would be brought for the benefit of all Rightscorp shareholders and the corporation, Rightscorp, Inc., itself,” the American Films statement reads.

It seems unlikely that Rightscorp has $15m lying around so whether it will choose to fight or pay a settlement remains to be seen. In the meantime, American Films failed to mention an interesting detail about its lawsuit in its September 26, 2022 announcement.

According to Collier County Court documents, the lawsuit against Rightscorp was e-filed on March 22, 2021. Why it’s taken 18 months for the big public reveal isn’t clear but that’s largely in keeping with American Films’ activities in general.

American Films may be doing big things in the shadows but right now, we’re unable to highlight anything beyond an 18 month old lawsuit against a company with no money. That being said, Rightscorp does own a massive repeat infringer database, the perfect gift for a company that apparently owns a massive copyright-trolling operation in the United States.