The deal also requires the company to either shut down within 20 days, or start using digital fingerprinting technology, which could prevent users from uploading infringing material.
The settlement comes a few months after U.S. District Court Judge Kathleen Williams ruled against Hotfile on a key issue in the case -- whether it was protected by the Digital Millennium Copyright Act's safe harbor provisions. The safe harbors say that Web services providers aren't liable for infringement by users, but only if the services comply with a set of rules. One is that they take down material upon request. Another is that they implement a policy for dealing with people who repeatedly infringe copyright.
Williams ruled in August that Hotfile wasn't eligible for the safe harbors because the company didn't have an adequate policy for dealing with users who infringe copyright more than one time. “Regardless of official policies forbidding infringement, Hotfile did not significantly address the problem of repeat infringers,” she wrote. “The scale of activity -- the notices of infringement and complaints from copyright holders -- indicated to Hotfile that a substantial number of blatant repeat infringers made the system a conduit for infringing activity.”
The dispute in the case dates to 2011, when the MPAA sued Hotfile for copyright infringement. Hotfile later fired back with a counterclaim alleging that Warner Bros sent takedown notices for material it didn't own. That counterclaim was dismissed with today's settlement, according to an MPAA spokesperson.