February 28th at 3:03pm
Tomorrow we will be participating in an interesting webinar sponsored by the San Diego County Bar Association: “The Business of Medical Marijuana”. Our role will be to address the intellectual property issues regarding trademarks, copyrights, patents and trade secrets that come into play as the industry grows, morphs and changes.
[For more info or to register, click here ]
It goes without saying that the state’s medical marijuana laws are controversial to say the least. Although the Compassionate Use Act was enacted in 1996, the legal landscape in this area is far from clear. Add to these ambiguities the fact that marijuana remains illegal under federal law and you have a minefield of legal obstacles for attorneys offering legal advice in this area.
Despite these complexities, medical marijuana patients and groups (or collectives) continue to use, possess, cultivate, and distribute marijuana for medical purposes throughout the state. Furthermore, the CUA has survived multiple legal challenges based on federal preemption. In fact, since California voters approved the first medical marijuana law 16 years ago, fifteen other states and the District of Columbia have passed similar laws allowing some form of medical marijuana activity. Today, most cities are attempting to craft some form of regulation that both allows access to medical marijuana for legitimate patients while protecting against diversion to the black market. A recent audit by the San Francisco Controller’s Office revealed the annual gross sales of the city’s two dozen permitted dispensaries to be $41 million. Expanded to the rest of the state, medical marijuana is a $1.9 billion industry. In short, it is apparent that medical marijuana is not going anywhere and has the potential to be a huge boon to the state and local economies.
In light of the reality that medical marijuana is here to stay, the question becomes what role should lawyers play in advising clients in this treacherous legal terrain? This brief webinar presented by two attorneys and a CPA will provide a brisk overview of the medical marijuana laws and potential legal and tax issues that may arise for these businesses in the future. Attorney Lance Rogers will provide a general overview of the medical marijuana laws at the federal, state, and local level. Suzanne Farrand, CPA, will explain some unique tax implications with regard to the operation of a dispensary and how to address these issues. Finally, attorney David Branfman will discuss the possible intellectual property law issues that may arise for dispensaries and the ancillary businesses associated with this industry.
[For more info or to register, click here: ]
February 16th at 2:13pm
In the last two years mainstream movie producers (for example Academy Award winner “The Hurt Locker” and “The Expendables”) and XXX-rated adult porn studios have taken the record industry’s tactic of suing unauthorized file sharers to a whole new level. Instead of suing individual file sharers one at a time, the film producers (actually – their lawyers) have filed dozens – perhaps more – of U.S. District Court copyright infringement lawsuits in federal courts around the country which name anywhere from 20 – 25,000 “John Does” per lawsuit. (The 25,000 number is not a typo). The business model is extremely effective because the film producer only has to pay one $350 court filing fee – regardless of the number of defendants. The producer then has a virtual carte blanche to use the threat of federal court litigation to extract monetary settlements out of the entire group of targeted file sharers. This process has been referred to as “copyright trolling” and the companies behind it are often called “copyright trolls”. The film producers and their lawyers view themselves as anti-piracy advocates. It all depends on which side of the fence you sit on.
How does it work?
The lawyers for the film production company (mainstream or porn) files a copyright infringement lawsuit somewhere in a federal court against numerous “John Does”, claiming illegal downloading or uploading of movie from a BitTorrent file-sharing network. BitTorrent is a peer-to-peer file sharing protocol used for distributing large amounts of data that is similar to (but not identical to) Napster, Kazaa, etc..
The plaintiff’s lawyer then asks (and usually gets) the court to issue subpoena to various Internet Service Providers (“ISPs”) requiring the ISPs to identify the real names and addresses of the Does previously only known by their Internet addresses (e.g., 123.56.38.60). The plaintiff’s lawyer then sends demand letters to targets threatening to seek damages of up to $150,000 plus an award of attorneys fees for “willful” copyright infringement – BUT offers to settle the case quickly for anywhere from $1500 – $3500 so the target can avoid being named in the lawsuit and can avoid the cost of defending. The plaintiff’s lawyer (or a company it has set up) accepts Visa & MasterCard payments via a website. This is especially frustrating – to put it mildly – for the target who is accused of downloading/uploading porn. If the plaintiff’s settlement demand is not accepted right away, the target is advised that the settlement demand will increase dramatically within 5 – 10 days.
Why are the film companies and porn producers doing this?
They claim that their businesses are being destroyed by Internet piracy and the only way to stop it is to sue file sharers en masse. But we believe it is really all about using the threat of federal court litigation to generate quick dollars – especially because of the threat of Copyright Act damages of up to $150,000 and an award of attorneys fees. After all, settling cases for $1500 – $3500 for the downloading a DVD that might sell for $20 or even $60 is a pretty good return on the investment. The porn producers in particular would need to sell a lot of DVDs to make $3500.
But this business model depends on the plaintiff’s ability to name and threaten hundreds or thousands of targets in one lawsuit where the plaintiff has only paid one $350 filing fee to the court. If the plaintiffs have to name each target individually and pay $350 for each individual lawsuit, the costs of litigation would become astronomical and the business model would probably fail.
What’s wrong with what the film producers and their lawyers are doing?
There seems to be little doubt that Internet piracy of movies is rampant and is in fact hurting all kinds of content owners. The copyright law exists in part to protect the rights and investments of content owners. Thus at first blush what the film producers are doing is probably just this side of legal. Where it gets dicey and starts to look like a shakedown is the hardball tactics used by the lawyers and the coercive extortion-like effect of being threatened with an embarrassing public lawsuit — not to mention serious questions about the accuracy of the information the film producers allegedly gather to identify the file sharers. After all, anyone with an unsecured wireless network can have their Internet address spoofed or hacked by a neighbor or a roommate.
Lawyers for the film producers assert that these days it is negligence per se for the owner of a computer to use an unsecured wireless connection. However, we are not aware of any statute or case decision to date that supports that assertion in this context. One or more of the lawyers for the film producers may be hoping to make new law if one of these cases goes far enough.
Is anything being done to challenge this business model?
There is a loose group of lawyers around the country who have started to defend some of the targets in some of these cases. Some judges – but not all – have started to take a dim view of these “shoot first and ask questions later” cases and have dismissed some of the lawsuits for a variety of reasons including misjoinder. But the film producers and their lawyers have not been deterred; they move on to a different court in a different jurisdiction when a particular court starts to dismiss the lawsuits.
Conclusion
Whether the reverse class-action lawsuit model is a shakedown or just good proactive lawyering seems to be subject to some debate. To us the hardball tactics that are often used – especially the coercive threat of being named in an embarrassing lawsuit – seems to tip the scales in favor of this model being more of an abuse of the system than a proactive anti-piracy effort. But while people may differ about whether this is an abuse of the system or not, what we do know for sure is that there are upwards of 100,000+ targets and/or defendants around the country. The effects of this volume of litigation on the already-impacted court system could be dramatic. What is not yet clear is whether the majority of federal court judges around the country are aware of what is happening with this business model and are ready to take steps to prevent abuses of the system.
