ceg tek – Techdirt (original) (raw)

A decade ago, one of the most ridiculous copyright trolling outfits was CEG TEK (which stood for “Copyright Enforcement Group… um… TEK”). It would shake down people like any other copyright troll, but it also had a “CTO”, named Jon Nicolini, who CEG TEK would trot out as a questionable forensic expert in various trolling cases.

It appears that Nicolini has since set out on his own, creating a more modern form of a copyright trolling operation called “Okularity.” We’ve talked recently about how some folks have, instead of using the courts, simply been using social media takedowns via bogus copyright claims as a form of extortion, and that’s become quite popular. However, so far, it seems that this has mostly been done by stupid kids looking to make a quick buck.

Nicolini and Okularity appear to have professionalized the extortion racket.

And they may have picked on the wrong person. In a recently filed lawsuit by Enttech Media Group, the parent company of the famous (and excellent) Paper Magazine, lawyer Richard Tauler lays out in great detail the kind of scam shakedown that Nicolini runs via Okularity:

Defendants are engaged in a scheme to deprive Plaintiff and similar digital media companies of their assets by unlawfully manipulating the take-down notice provisions of the Digital Millennium Copyright Act (?DMCA?). Specifically, Defendants have created software for the express purpose of disabling valuable commercial accounts on social media platforms (in this case Instagram) so that they can then demand extortionate sums (in this case over a million dollars) from the account holders to have the accounts restored.

The scheme operates in the shadows of the Copyright Act and the DMCA. The DMCA provides a rapid procedure (referred to herein as a ?DMCA Notice?) so that copyright owners can protect the widespread proliferation of their content digitally. A DMCA Notice requires a statement under penalty of perjury that the submitting party has a good faith belief that the content identified in the notice is infringing on a copyright and that the submitting party is either the copyright owner or an authorized agent of the copyright owner.

Most social media platforms, including Instagram, have policies whereby accounts are disabled once a certain amount of DMCA Notices have been submitted on a particular account. Once an account reaches this threshold, Instagram will not reinstate the account until the underlying copyright ?dispute? is resolved. Because of the work associated with the identification and investigation of copyright claims, as well the DMCA?s penalties for misstatements, it is generally unlikely that owners of legitimate copyrights would abuse this system.

However, given the massive financial incentives provided to mercenary litigants by the Copyright Act, would-be claimants have leveraged advances in technology to create economies of scale in pursuing claims. Specifically, Okularity has developed software that crawls the internet for images that infringe on allegedly protected works. Through its proprietary software, Okularity automatically generates and submits DMCA Notices to any social media platform, including Instagram, containing an image in Okularity?s database. Okularity does this without any of the investigation, warning, or legal analysis required by the DMCA, let alone any demand letter to the alleged infringer.

Rather, Okularity lies in wait while DMCA Notices accumulate to the point where Instagram disables the account. Only then does Okularity begin to negotiate ?settlement? for the alleged copyright claims. Okularity operates this way because Okularity knows that Instragam is the lifeblood of any digital media company, particularly one like Plaintiff Paper, which primarily is engaged in the business of reporting and commentary of popular culture news and, as such, targets a young demographic that uses Instagram as its primary source of media consumption. Okularity knows that if a business like Paper has its Instagram account disabled, it has a metaphorical gun to the head of the target company, since it also knows that Instagram will not reinstate the account without a resolution of the ?dispute.? With this type of leverage, Okularity (and in turn the Clearinghouse Defendants) can demand sums that they would never be able to demand with a straight face otherwise, putting owners of even large businesses like Plaintiff in a life-or-death situation.

Pretty fucking sketchy, no? As the lawsuit notes, however, this appears to violate the terms of the DMCA regarding what you need to do in filing a notice — making this an interesting test to see whether or not the courts might finally give Section 512(f) of the DMCA (the part that says you can’t file bogus notices) some more teeth. As we’ve noted, courts have been reluctant to care much about 512(f), which has set up a very unbalanced system, in which tons of people and companies regularly abuse DMCA notices. Usually for censorship.

Here it appears to be for extortion.

The specifics of the Paper Mag / Okularity situation detail how this seems to be an entire business built around extortion, with a bunch of unauthorized practice of law built in as well.

Okularity, which is not a law firm, purportedly ?represents? the ?Clearinghouse Defendants? with respect to their Copyright ?claims.? Okularity?s ?CEO? Jon Nicolini, created the software Okularity deploys to file DMCA Notices, and negotiates ?settlements? with victims of the scheme once they contact Okularity. Nicolini, who is not an attorney, implies that he is an attorney to victims by interpreting the application of the Copyright Act to images, engaging in damages analysis regarding ?claims? of his ?clients,? and by negotiating resolution of legal claims on their behalf.

Defendant Backgrid actively solicits members of the public, including persons with whom it has no relationship and about whom it has no knowledge, to upload to it photos which Backgrid will then ostensibly ?license? (for payment) others to display and otherwise exploit. Backgrid then uses software to automatically generate copyright management information (?CMI?) so that it can track whenever an image is used. Since Backgrid conducts no due diligence of images uploaded to its website for exploitation, and the corollary opportunity for abuse, Backgrid itself has been sued by actual copyright holders for copyright infringement.

Defendant Splash is similarly a clearinghouse for photographs with a checkered past. In 2018, Splash was sued by soccer star David Beckham for its ?predatory and distasteful? tactics, which included demanding payment from Mr. Beckham for posting a picture of himself (taken by a paparazzo) on his very own social media account. Beckham v. Splash, Case 2:18-cv-01001-JTM-JCW (E.D. La.). Counsel for David Beckham viewed the $40,000 demand as an attempt to ?extort.?

Okularity?s new business model pre-empts such lawsuits by using DMCA Notices instead of demand letters. However, since the DMCA Notices are automatically generated and submitted without any attorney supervision, Okularity does not engage in any analysis prior to generating and filing DMCA take-down notices as it should.

Rather, Nicolini operates the scheme with the sole objective to disable social media accounts. Not only is no demand letter needed, the scheme makes it so that its victims come to Okularity, often in a state of desperation, once they realize their asset is being held hostage. This is precisely what occurred in the instant case.

It was only after Okularity filed forty-eight (48) DMCA take-down noticesagainst Paper that Instagram disabled Paper?s account. The same day, July 8, Paper was provided with the contact information of Nicolini, who immediately began negotiating the ?claims.?

Nicoloni suggested that Paper was facing $4.65 million in damages under the Copyright Act. Nicolini curiously added that it was not his ?first rodeo.? A screenshot of the email is below:

Sixteen minutes later Nicolini responded, this time with apparent authority to communicate on behalf of his ?clients? under Federal Rule of Evidence 408 to settle for $1.01 million:

However, Nicolini is not an attorney and is therefore unable to assert legal claims on behalf of his ?clients,? and likewise cannot negotiate and enter into agreements on their behalf in the context of a copyright lawsuit.

Needless to say, this offer was unable to be accepted. In further effort to reach a resolution, the undersigned requested Mr. Nicolini provide the DMCA notices so that Plaintiff could assess the claims at issue. Nicoloni has refused to do in the absence of a ?non-disclosure agreement.? When asked why a ?non-disclosure agreement? would be needed, Nicolini had no answer

That’s… pretty fucking sketchy in many different ways. The lawsuit argues that the defendants breached 512(f)… but then also throw in a RICO claim. And that always seems iffy. As we all know, the Popehat rule of “it’s not RICO, dammit” tends to apply. And I’d still lean towards it not applying here, but I have to admit that this is closer to an actual civil RICO claim than you normally would see. You do have a group of individuals / companies, working together in a pattern to shake down businesses. I still don’t expect that claim to last, but this sure does look like a traditional shakedown scheme, using DMCA takedowns for leverage over social media accounts.

Filed Under: 512f, automatic takedowns, copyright, copyright troll, dmca, dmca 512, exotrition, jon nicolini, rico, shakedowns, takedowns
Companies: ceg tek, okularity, paper magazine