New IP licensing model is generating opportunity for content providers and investors; obstacles for file-sharers.

Rightscorp is an IP licensing business model of a different stripe. It monetizes copyrights through widespread enforcement of consumers who download music and movies without paying. While some may consider Rightscorp the first public “copyright troll,” others see it as an important business whose time has come.

Rightscorp (OTCQB:RIHT) is a response to unauthorized music and movie downloading that offers record labels and movie studios an enforcement mechanism to address rampant theft that has plagued those industries. It also provides infringers an inexpensive solution to their transgressions. Like this approach or not, targeting end users through ISPs is bound to ruffle a few feathers, which it already has.

Curbing Digital Crime

It’s been reported that 24% of all Internet traffic is used to distribute copyrighted content without permission or compensation to their creators. If that figure is even remotely accurate, IP theft is rampant and broadly acceptable to consumers, who don’t believe they are doing any real harm.

Rightscorp, whose current market value is about $35 million, provides monetization services to holders of copyrighted intellectual property. The company’s patent pending digital loss prevention technology, says CEO Christopher Sabec, an entertainment industry attorney who has represented the Dave Matthews Band and the Jerry Garcia Estate. It focuses on the infringement of digital content such as music, movies, software, games (and, now, books), and ensures that owners and creators are paid for their work.

Rightscorp is a business model worth understanding. It is a public IP enforcement company that, not unlike patent aggregator RPX, provides a way for large operating businesses to mitigate risk with a market-based solution, in this case by promoting broad enforcement. (It is unclear how frequently have actually sued and collected damages, or shut anyone down.)

Rightscorp implements existing copyright laws to solve infringement by collecting payments from illegal file sharing activities via notifications sent through Internet Service Providers (ISPs). The Company’s technology identifies copyright infringers who are offered a reasonable settlement option (as low as $20) when compared to the legal liability defined in the Digital Millennium Copyrights Act (DMCA).

The company has been working with Hollywood studios such as Warner Brothers and agencies such as BMG Rights Management, which represents such musicians as David Bowie, Kings of Leon, and Will.i.am, to protect intellectual property and copyrights. The company acts on behalf of the studio, artist, or copyright holder, often sending form letters which offer the downloader several options for financial restitution. It is not clear if lesser known artists are represented. 

Typically, Rightscorp sends a settlement notice to the infringing party through their ISP. The settlement notice offers to relieve the legal liability of up to $150,000 per infringement, under the Digital Millennium Copyright Act, the current law. The notice provides a settlement option through Rightscorp for $20 per infringement. If the user chooses not to pay and has repeatedly violated copyright infringements, the ISP may suspend or terminate the subscriber account until a settlement is reached. More than 200,000 people have been sued for copyright infringement on peer-to-peer networks since 2010.

Rightscorp currently represents more than 1,000,000 copyrights with more than 40,000 copyrights in its system, and has received settlements from subscribers of more than 50 ISPs and closed over 60,000 cases of copyright infringement to date. 

Streams on the Internet written by violators who have received letters from Rightscorp, including those responding on Answers/Yahoo and Reddit, have derided the company for threatening to sue or shut them down if they do not comply. Rightscorp provides an innovative business model that will require more education to find broad acceptance. For those who have been file sharing for years asking them to stop or pay up is tantamount to putting a tax on the air they breathe. Many patent infringers are not much different. The abuse is so systematic, it does not seem like anything wrong.

A sample Rightscorp agreement can be found here.

Taking the Innovation Economy Seriously

The United States manufactures very little today. Its economy is based largely on innovation, and relies on inventions, content and know-how to compete. If we expect to continue along these lines we will need to teach people what IP is, how it can be valuable, and why IP laws need to be taken seriously because they not only enrich record labels, rock stars and the like.

Perpetuating IP abuse is non-unlike cheating on your taxes: even if everybody seems to do it, and its easily done, it does not make it right.

IP theft is rampant globally, but especially in the U.S. and directed at U.S. assets. Lack of education is partially to blame. Schools need to teach parents, and parents and schools together need to teach children about the importance of innovation beyond smartphones and hit songs, and the respect it must be afforded.

Headlines that decry patent “trolls” distort the potential impact of a loose IP regulation. For Rightscorp and other IP monetizers to succeed not only will they need to grow by broadly enforcing copyrights and patents, they will need to turn licensing into a high volume enterprise, and to convince the Americans that respect for creative work is good for everyone.

Image source: rightscorp.com