On Hook for $34K, Righthaven Talks Bankruptcy

A federal judge in Nevada recently ordered copyright enforcement outfit Righthaven to pay around $34,000 to defense attorneys in a case it unsuccessfully brought against Wayne Hoehn, who allegedly posted a Las Vegas Review-Journal article in an online forum. U.S. District Court Judge Philip Pro ruled in the case that Righthaven lacked standing to sue because it never obtained the right to license the material from the Review-Journal; additionally, Pro ruled that Hoehn's post was a fair use.

Now Righthaven is asking Pro to stay his attorneys' fee order while it appeals to the 9th Circuit. The company says in its motion papers that one reason the order should be put on hold is that it could be forced into bankruptcy if Hoehn's defense attorneys attempt to collect the money. "Righthaven faces the very real threat of being forced out of business or being forced to seek protection through bankruptcy if the court does not stay the judgment pending resolution of the company's appeal to the Ninth Circuit," the company argues.

Whether Righthaven is serious about filing for bankruptcy remains to be seem. Certainly the company has seen some recent setbacks in its litigation campaign -- including several courtroom defeats and the loss of a major client, Denver Post parent MediaNews Group. But whether it's really going to go bust is another matter. Even if it does, however, its pending lawsuits against dozens of bloggers and small publishers might continue.

Attorney Warren Agin, a Boston-based bankruptcy and technology expert, tells MediaPost that even if Righthaven declares bankruptcy, the fate of the litigation it filed isn't certain. Much could depend on whether the bankruptcy is a liquidation or reorganization. If Righthaven files to liquidate under Chapter 7 of the bankruptcy law, a trustee would be appointed by the court to wind down matters. Righthaven's contract with Review-Journal parent company Stephens Media would be subject to cancellation by either the trustee or Stephens. But if the deal with Stephens Media remains in place, the trustee could theoretically continue with the lawsuits, though would have to decide whether doing so makes business sense.

On the other hand, if Righthaven attempts to reorganize under Chapter 11, then the defendants it has sued aren't likely to notice much difference in how the cases proceed, Agin says. That's because companies that declare Chapter 11 can pretty much continue with activities in their normal course of business.

Regardless of whether Righthaven files for bankruptcy, the company's business model is looking less and less sustainable. Litigating copyright lawsuits tends to be expensive for all parties. In Righthaven's case, it's already on the hook for around $40,000 in attorneys' fees and could be hit with a substantial award in a separate case it lost, a lawsuit against Democratic Underground.

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